Maintain Buy: Separator Pricing and Margin Recovery Are Materializing

Overview

This report is an earnings review of Yunnan Energy Ltd (002812 CH). HSBC believes the company is benefiting from improving supply-demand conditions in the separator industry, rapid shipment growth, and recovering prices, with a clear path to margin recovery. Despite continued market concerns over sentiment across the lithium battery supply chain and progress on the Hungary project, the company's fundamentals are expected to improve further in 2H26.

Core views

The core view is that tightening supply of high-quality separators will support continued price increases, while the company's full-capacity operations and economies of scale will drive a material improvement in profitability. The ramp-up timeline for overseas plants remains uncertain, but their contribution to 2026 shipments is low and their near-term earnings impact is limited. Leveraging its global leadership, customer relationships, product quality, and cost competitiveness, the company remains well positioned to secure overseas orders.

Analysis framework

The report adjusts earnings forecasts by incorporating 2Q26 earnings guidance, industry supply-demand and capacity additions, shipment and pricing assumptions, economies of scale, and overseas capacity execution progress, and determines the target price using DCF valuation.

Methodology notes

• Valuation methodsDiscounted Cash Flow Model

  DCF

  Valuation based on discounted future cash flows; the report uses a 7.5% weighted average cost of capital and a 2.5% perpetual growth rate to derive a RMB65.90 target price.

• Earnings ForecastingRevenue and Margin Sensitivity Analysis

  Shipments, Pricing, and Economies of Scale

  Revenue and operating margin assumptions are raised based on strong demand, improved pricing, and economies of scale, thereby increasing net profit forecasts.

Asset mapping & comparison

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

• Yunnan Energy Ltd (002812.SZ)

  Directly Covered Company

  Strengths

  Full-capacity operations, tightening separator supply, strong shipment growth, recovering pricing and margins, cost and product-quality competitiveness, and ability to secure overseas orders.

  Weaknesses

  Sensitive to lithium battery demand and separator pricing cycles; overseas projects remain in execution and ramp-up stages.

  Comparison

  Compared with overseas peers with weaker cost competitiveness, the company is considered better positioned to compete for overseas orders; compared with certain domestic peers, it offers superior product quality and cost performance.

  Risks

  Battery demand falling short of expectations, aggressive price cuts by peers, substitution by solid-state battery technology, and risks related to overseas plant ramp-up and trade conditions.

Key data

• 2Q26 Net Profit GuidanceRMB480 million to RMB640 millionCompared with a net loss of RMB120 million in 2Q25; mainly driven by over 60% YoY shipment growth and improved pricing.
• 2026 Net Profit ForecastRMB2.292 billionRaised by approximately 97% from the previous forecast.
• 2027 Net Profit ForecastRMB3.547 billionRaised by approximately 76% from the previous forecast.
• 2026 Revenue ForecastRMB19.972 billionRaised by 11% from the previous forecast.
• 2027 Revenue ForecastRMB23.863 billionRaised by 17% from the previous forecast.
• 2026 Operating Margin Forecast15.8%Raised by 7.2 percentage points from the previous forecast.
• 2027 Operating Margin Forecast19.1%Raised by 6.5 percentage points from the previous forecast.
• Target PriceRMB65.90Previously RMB60.10; implies approximately 16.5% upside.
• Valuation AssumptionsWACC 7.5%; Perpetual Growth Rate 2.5%WACC was previously 7.6%, while the perpetual growth rate is unchanged.

Impact & implications

If separator price recovery continues and industry supply additions remain disciplined, the company's revenue growth and economies of scale will jointly support margin and earnings forecast delivery. Market concerns regarding the Hungary project and overseas trade conditions may cause short-term volatility, but the report believes these factors are insufficient to alter the medium- to long-term overseas expansion thesis.

Risks

• Battery demand may fall short of expectations, particularly as energy-storage battery demand may experience quarterly volatility.
• Peers may adopt more aggressive pricing strategies to win orders, compressing industry margins.
• If solid-state batteries are commercialized, their potential lack of need for separators could weaken long-term demand for separator products.
• Overseas expansion faces execution risks from global trade frictions, exchange rates, labor costs, production efficiency, and yield ramp-up.
• Lower-than-expected overseas EV penetration could affect overseas orders, plant capacity ramp-up, and profit performance.

What to watch

• Order strength and shipment growth during the 2H26 peak season.
• Quarter-on-quarter improvement in separator pricing, gross profit per unit, and net profit per unit.
• The degree to which the 3Q26 earnings recovery materializes.
• Higher overseas-order contribution and the resulting improvement in product mix and margins.
• Commissioning, yield ramp-up, and capacity-release pace at the Hungary plant.
• Industry separator capacity additions and competitors' pricing behavior.
• The impact of a higher proportion of self-developed equipment on expansion speed and margins.