Why did Citi sharply raise its near-term earnings forecasts?
- Following third-quarter results and the latest management guidance, Citi raised its earnings forecasts for 2026 and 2027 by 123% and 22%, respectively, and lowered its 2028 forecast by 4%. The revisions reflect recent price increases, efforts to raise capacity utilization and stronger-than-expected demand for energy-storage batteries.
- Based on the latest management guidance, Citi raised its sales-volume forecasts for 2026 through 2028 by 7%, 10% and 2%, respectively. The bank also observed that industry supply had been relatively disciplined over the past few quarters and that battery demand, particularly for energy storage, had remained resilient.
What underpins the improvement in profitability?
- The company primarily produces lithium-ion battery separators for electric vehicles and energy-storage systems. Citi recalibrated its unit selling-price and cost assumptions based on the actual product mix and pricing performance in 2025, lowering both assumptions for 2026 while forecasting an expansion in the gross margin.
- Citi’s model forecasts that the company’s overall gross margin will rise from 18.0% in 2025 to 34.2% in 2026; net profit attributable to the parent will rise from 143 million yuan in 2025 to 2.789 billion yuan in 2026, and further to 4.157 billion yuan in 2027.
What conditions underpin the valuation assessment?
- Citi maintained its buy rating and raised its target price from 81.9 yuan to 85.7 yuan per share, implying approximately 86.1% upside from the closing price of 46.05 yuan on 29 October 2026.
- The target price is based on a forecast 2026 price-to-book ratio of 2.98 times, 0.4 standard deviations below the historical average; Citi applies the discount to reflect execution and utilization risks during the capacity ramp-up. Weaker-than-expected demand for energy-storage batteries, higher-than-expected raw-material costs or a prolonged capital-expenditure cycle in the separator industry would also affect the bank’s assessment.