EVE Energy’s third-quarter shipments grow and profit per watt remains stable, but JPMorgan remains concerned about tax pressures

Where did third-quarter growth come from?

EVE Energy’s net profit for the third quarter of 2026 was 1.94 billion yuan, up 60% year on year and near the midpoint of the 1.77 billion to 2.05 billion yuan range implied by its earlier earnings guidance.
Combined shipments of power and energy storage batteries reached 53 GWh in the third quarter, up 16% quarter on quarter. Energy storage shipments were 32 GWh, up 30% quarter on quarter, while power battery shipments were 22 GWh, flat quarter on quarter. The increase came mainly from energy storage.
JPMorgan estimates that, after excluding consumer batteries, Smoore’s profit contribution, share-based compensation expenses and a one-off gain from the sale of a stake in a separator joint venture, third-quarter net profit per unit for power batteries was approximately 0.02 yuan per watt-hour, stable quarter on quarter. The company plans to increase output by a further 15%–20% quarter on quarter in the fourth quarter.

Management targets approximately 100% year-on-year growth in power battery shipments in 2027, with customers including BMW, Mercedes-Benz and domestic passenger and commercial vehicle customers. Driven by stronger-than-expected demand from BMW, the company expects large cylindrical battery deliveries to rise to more than three times the approximately 10 GWh expected in 2026.
The 2027 shipment target for domestic commercial vehicle batteries is 80–90 GWh, nearly three times the prior-year level, based on expanded customer coverage and confirmed orders.
Management expects energy storage battery shipments to grow by more than 50% in 2027, with overseas markets accounting for at least 40% of total energy storage deliveries. Deliveries to Fluence in 2027 are expected to be approximately 16 GWh, as part of the two parties’ long-term supply agreement for 2027–2031.

The company’s overall gross margin rose by approximately 0.2 percentage points quarter on quarter in the third quarter. JPMorgan attributed this to an improved customer mix, cost optimization and a smaller drag from new factory ramp-ups; energy storage batteries saw the largest gross margin improvement.
Management expects an improved customer and product mix, a higher share of overseas business and cost optimization to drive a further recovery in margins in 2027, and hopes gross margins for power and energy storage batteries will gradually reach 18%–20%. Margins on overseas energy storage deliveries are higher than those for some domestic customers.
Shipment and profit improvements also come with cost pressures. Management said that, as of September, most of the additional costs from the consumption tax had been borne or shared by customers. The additional cost of lower export tax rebates has been incorporated into pricing for new energy storage projects, but negotiations are more difficult for power battery projects that have already been priced.

Although management is relatively confident about demand and passing on costs, JPMorgan remains concerned that lower export tax rebates and the consumption tax will put pressure on margins. It maintains its Underweight rating and has a June 2027 price target of 33 yuan, equivalent to 10 times forecast 2027 earnings.
The bank lists better-than-expected battery shipments, less pressure on prices and margins than expected, and better-than-expected regulatory policy for the e-cigarette industry as potential upside factors for the rating.