Yunnan Energy New Material's Q226 preliminary results exceeded expectations, with improvements in separator shipments and unit profitability

Overview

This report is UBS's earnings review of Yunnan Energy New Material. The company released preliminary H126 results, with recurring attributable net profit of Rmb760~930m, implying Q226 net profit of approximately Rmb610m at the midpoint, up 115% QoQ and above UBS and market expectations. The report positions the company as a Chinese supplier of lithium-ion battery separators, printed products, and packaging products, with wet-process base film and coated film as its core businesses.

Core views

The core view is positive. First, Q226 separator shipments reached 4.1bn sqm, up 58% YoY and 17% QoQ, above previous guidance of 3.8~4.0bn sqm. Second, unit profitability improved sequentially, with UBS estimating Q2 unit net profit at Rmb0.15/sqm, above Rmb0.13/sqm in Q126. Third, although the company did not update its guidance, industry pricing negotiations are nearing completion, and the market expects major separator manufacturers may secure price increases of 7-8%. Fourth, UBS maintains its 12-month Buy rating and Rmb85.00 target price and expects a positive investor reaction.

Analysis framework

The report evaluates the company's near-term earnings sensitivity and potential investor reaction through a preliminary-results breakdown, tracking of shipment volumes and unit profitability, industry pricing negotiation information, and a 12-month target price framework. For valuation, UBS uses a P/BV approach to value Yunnan Energy.

Methodology notes

• Valuation methodP/BV

  Price-to-book valuation

  UBS uses a P/BV approach to value Yunnan Energy, which is appropriate for assessing company value in conjunction with the balance sheet and industry cycle.

• Return calculationForecast Stock Return

  Forecast stock return

  The report defines forecast stock return as the expected share price appreciation over the next 12 months plus the total dividend yield; in this report, forecast share price appreciation is 43.3%, forecast dividend yield is 0.8%, and forecast stock return is 44.1%.

• Short-term factor assessmentQuantitative Research Review

  Quantitative research review

  UBS disclosed analysts' quantitative responses regarding industry structure, the regulatory environment, recent share performance, and risks to the next EPS update over the next six months; this time horizon differs from the 12-month stock rating.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Yunnan Energy New Material / 002812.SZ

  Company covered by the report and core investment target

  Strengths

  Q226 preliminary results exceeded expectations; separator shipments were above guidance; unit net profit improved sequentially; potential price increases could support earnings recovery.

  Weaknesses

  Earnings performance was under pressure in 2024, with the table showing negative EBIT and net profit for 2024; the company remains exposed to the battery materials cycle and price volatility.

  Comparison

  UBS's 2026E EPS is Rmb2.41, above the consensus estimate of Rmb1.70; 2027E is Rmb3.74, above the consensus estimate of Rmb3.17; 2028E is Rmb4.61, slightly above the consensus estimate of Rmb4.48.

  Risks

  Commodity price and exchange-rate volatility, changes in EV regulations and global climate policies, downstream battery companies achieving less favorable pricing outcomes than expected, and weaker-than-expected industry supply-demand dynamics and price recovery.

Key data

• H126 recurring attributable net profit guidanceRmb760~930mImplying Q226 net profit of approximately Rmb610m at the midpoint.
• Q226 midpoint net profit QoQ+115% QoQAbove UBS and market expectations.
• Q226 separator shipments4.1bn sqm+58% YoY, +17% QoQ, above previous guidance of 3.8~4.0bn sqm.
• Estimated Q2 unit net profitRmb0.15/sqmA modest improvement from Rmb0.13/sqm in Q126.
• Potential separator price increase7-8%, approximately Rmb0.05~0.06Based on market expectations for pricing negotiations between major separator manufacturers and leading downstream battery companies.
• 12-month target priceRmb85.00The share price was Rmb59.33 on July 9, 2026.
• Forecast stock return44.1%Including 43.3% forecast share price appreciation and 0.8% forecast dividend yield.
• 2026E EPS (UBS)Rmb2.41The table shows 2027E at Rmb3.74 and 2028E at Rmb4.61.
• 2026E revenueRmb21,019mBased on UBS estimates.
• Market capitalizationRmb58.3b / US$8.58bDisclosed in the trading data and key metrics table.

Impact & implications

The earnings beat, shipments above guidance, and improvement in unit profitability together reinforce the market's view that the company's earnings are recovering. If industry price increases materialize, separator business margins could benefit further. The target price implies a high forecast return, supporting UBS's Buy rating; however, investment decisions should also consider the cycle of the EV battery materials industry, commodity prices, exchange rates, and policy risks.

Risks

• The electric vehicle battery materials industry faces commodity price and exchange-rate volatility, and actual results may differ materially from expectations.
• Changes in government EV regulations and global climate policies could significantly affect the company's or industry's performance.
• Separator price increases still depend on pricing negotiations with downstream battery companies; if price increases do not materialize or are below expectations, earnings recovery could be constrained.
• A deterioration in industry supply-demand dynamics and the competitive landscape could weigh on shipment growth and unit profitability.

What to watch

• Whether separator price negotiations are ultimately concluded and whether the actual price increase reaches 7-8%.
• The difference between Q226 reported results and the midpoint of the preliminary-results range.
• Whether separator shipment growth can continue both YoY and QoQ.
• Whether unit net profit continues to improve from Rmb0.15/sqm.
• Changes in policy, demand, and the competitive landscape of the EV battery materials industry.