J.P. Morgan: Wuxi Lead's new orders rise 56% in the first three quarters, but overseas costs weigh on third-quarter gross margin

Where is order growth coming from?

New orders in the third quarter of 2026 were approximately 9.4 billion yuan, up 68% year over year and 4% quarter over quarter. Orders for the first three quarters totaled approximately 28 billion yuan, up 56% year over year. Management expects orders to continue growing quarter over quarter in the fourth quarter.
Domestic lithium battery equipment orders accounted for slightly more than 50% of total orders in the first three quarters, while overseas orders accounted for nearly 20%. Starting in the third quarter, energy storage orders grew faster than EV battery orders. Management expects energy storage to account for a larger share of full-year 2026 orders than EV batteries.

Third-quarter revenue was 4.68 billion yuan, up 22% year over year and 4% quarter over quarter. Net profit was 632 million yuan, up 42% year over year and 15% quarter over quarter, but slightly below JPMorgan's expectations, mainly because of a lower-than-expected gross margin and higher operating expenses.
Quarterly gross margin was 29.5%, down 1.1 percentage points quarter over quarter. Management attributed the pressure mainly to higher raw material and freight costs for overseas projects amid the situation in the Middle East; gross margin on domestic lithium battery equipment was stable to improving.
Despite the decline in gross margin, third-quarter net margin rose 1.3 percentage points quarter over quarter to 13.5%, mainly driven by a lower tax rate and higher other income. Management said overseas gross margins began to recover from October and hopes the net margin will gradually return to its historical range of 15%–16%.

Management expects order growth to continue into 2027, driven by capacity expansion at leading domestic battery makers, gains in the company's market share, and overseas energy storage demand. Although regulatory scrutiny of industry capacity expansion is tightening, leading domestic customers are still receiving expansion approvals.
Orders for sodium-ion battery equipment accelerated from the third quarter of 2026, with orders from several leading customers exceeding 1 billion yuan. For solid-state batteries, overseas customers plan to use them in automobiles in 2027, while domestic customers are also accelerating capacity expansion.
Per GWh of production capacity, solid-state battery equipment costs about 10% more than conventional lithium battery equipment. Solid-state and sodium-ion battery capacity expansion is also not subject to the same expansion restrictions, creating additional opportunities for equipment orders.

JPMorgan recognizes the company's position and technology in the global lithium battery equipment market, but worries that policy restrictions on capacity expansion and profit-sharing across the battery supply chain, amid reduced export tax rebates and consumption tax pressure, could depress the company's margins.
The bank maintained its neutral rating and its June 2027 price target of 28 yuan, based on 15 times forecast 2027 earnings. The target multiple is below the historical trading average, reflecting uncertainty over downstream capacity expansion plans and valuation normalization at the cycle peak.