EVE Energy management guides to shipment growth of more than 50% in 2027, but valuation and demand visibility keep the rating at Neutral

Overview

The report reviews EVE Energy's 2Q26 results, shipment mix, unit profitability, overseas capacity expansion, and 2027 growth guidance. J.P. Morgan recognizes the structural growth generated by large cylindrical batteries, commercial vehicle electrification, and overseas energy storage, but believes the risk-reward profile has become more balanced given industry demand visibility and valuation, and therefore maintains its Neutral rating and Rmb60 target price.

Core views

EVE Energy reported its 2Q26 results after the market close on August 19, with earnings at the high end of its previous guidance range. Quarterly battery shipments reached 46GWh, up 71% YoY and 32% QoQ, bringing 1H26 shipments to 80GWh. By application, 2Q EV battery shipments were approximately 22GWh, up 98% YoY and 55% QoQ; energy storage system shipments were approximately 24GWh, up 53% YoY and 22% QoQ. The report therefore concludes that quarterly growth was not driven solely by a single customer or short-term fluctuations, but by multiple structural opportunities. EV battery growth is mainly supported by three drivers. First, commercial vehicles account for approximately half of EVE Energy's EV battery shipments, and the company essentially covers all of China's top ten commercial vehicle customers, positioning it to benefit from accelerating commercial vehicle electrification. Second, its European large cylindrical battery business has entered the volume ramp-up stage, with continued production ramp-up of 46-series products at the Jingmen plant and deliveries to BMW increasing significantly from the previous year. Third, the company has acquired new customers and increased its share among existing passenger vehicle customers: it maintains a stable primary-supplier share at XPeng, while Geely and Leapmotor have begun contributing incremental volume. Together, these factors support management's expectation that EV battery shipments will grow by more than 60% YoY in 2027, with passenger vehicle battery shipments potentially doubling and demand for large cylindrical batteries expected to reach approximately 40GWh, with BMW contributing most of the incremental demand. One-off factors need to be excluded when assessing profitability. EVE Energy recognized a one-off investment gain of more than Rmb400mn from disposing of its equity interests in Yancheng and Jinneng in connection with an SK On transaction. After excluding government subsidies and this investment gain, J.P. Morgan estimates that 2Q26 power battery unit profit was approximately Rmb0.02/Wh, broadly stable QoQ. The report believes that beginning in 3Q26, the commencement of bulk deliveries to overseas energy storage customers should gradually improve unit profit. These orders mainly use a customer pickup model, under which EVE Energy does not bear costs related to logistics, tariffs, or export VAT rebates, giving them better unit profitability than ordinary export orders. The rising overseas share of energy storage shipments is an important mechanism for improving profitability. Management expects overseas markets to account for approximately 20% of energy storage shipments in 2026 and nearly 50% in 2027; two to three international customers are expected to contribute more than 40% of 2027 energy storage deliveries. As the share of highly profitable overseas orders increases, the energy storage business still has room for margin expansion. Meanwhile, management expects energy storage shipments to grow by 40% to 50% YoY in 2027, mainly supported by incremental demand from core overseas customers. The pass-through of policy-related costs remains in progress. Regarding the consumption tax taking effect on September 1, the company has reached cost pass-through arrangements with more than 70% of its customers, while negotiations with the remaining customers are ongoing. Regarding the reduction in export VAT rebates, the company has incorporated the additional cost into quotations for new projects and new customers, but passing through costs for existing projects is more challenging due to low acceptance among existing customers. This means that whether shipment growth translates into profit improvement will also depend on negotiations with the remaining customers and the pace of price adjustments for existing projects. Management remains optimistic about the overall shipment outlook for 2027 and expects total battery shipments to grow by more than 50% YoY. In addition to growth of more than 60% in EV batteries, energy storage shipments are expected to grow by 40% to 50%. In terms of capacity, Phase II of the Malaysia plant has entered trial production, with a target of reaching 10-15GWh of capacity in 2027; the Hungary project is progressing as planned and is expected to begin mass production in mid-2027. Regarding new businesses, the company expects BBU deliveries to begin in 2H26 and is expanding into AIDC backup power supplies and sodium-ion batteries, with the initial commercialization of sodium-ion batteries focused on energy storage applications. The company's current businesses also include consumer batteries, and it holds an approximately 31% stake in Smoore (6969 HK), which it plans to reduce to 28%; Smoore contributes approximately 8% to 10% of the company's net profit. J.P. Morgan ultimately maintains its Neutral rating based on valuation and sets a Jun-27 target price of Rmb60, corresponding to 15x 2027E P/E; its previous Dec-26 target price was Rmb70, corresponding to 21x 2026E P/E. The lower target valuation multiple reflects the report's view that the current risk-reward profile is more balanced and that visibility into industry demand growth in 2027 has weakened. Within China's battery value chain, J.P. Morgan names CATL as its top pick.

Analysis framework

The report first breaks down quarterly shipments and YoY and QoQ changes by EV batteries and energy storage, then traces structural drivers such as commercial vehicles, large cylindrical batteries, and customer share. It subsequently excludes government subsidies and asset disposal gains to estimate unit profit on a comparable basis and analyzes the impact of overseas energy storage order models, the business mix, and policy-related cost pass-through on profitability. Finally, it combines management's 2027 shipment guidance with overseas capacity and new business progress, using 2027E P/E to determine the target price and assess the risk-reward profile.

Methodology notes

• Industry/Sector Analysis FrameworkVolume-price decomposition

  Breaking down operating performance by shipment volume, application mix, and unit profit

  The report separately examines shipment growth for EV batteries and energy storage and uses profit per Wh to assess whether growth is translating into improved profitability.

• Company Fundamentals and Financial FrameworkEarnings Quality Analysis

  Unit profit excluding government subsidies and one-off investment gains

  The report excludes asset disposal gains of more than Rmb400mn and government subsidies from reported profit, using comparable unit profit of approximately Rmb0.02/Wh to measure the underlying profitability of the power battery business in 2Q26.

• Valuation MethodologyP/E and PEG Valuation

  Target price valuation based on 2027E P/E

  J.P. Morgan sets a Jun-27 target price of Rmb60 based on 15x 2027E P/E and compares it with the previous Rmb70 target price based on 21x 2026E P/E.

Asset mapping & comparison

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

• EVE Energy (300014.SZ, 300014 CH)

  Subject of the report; EV batteries, energy storage, and overseas capacity expansion are the main sources of growth.

  Strengths

  Broad commercial vehicle customer coverage, ramping large cylindrical battery volumes, and continued expansion of overseas energy storage customers and capacity.

  Weaknesses

  After excluding one-off factors, 2Q26 power battery unit profit was only broadly stable QoQ, while passing through costs for existing projects remains difficult.

  Comparison

  J.P. Morgan maintains its Neutral rating on EVE Energy and names CATL as its top pick in China's battery value chain.

  Risks

  Battery shipments falling short of expectations, greater pricing and margin pressure, and e-cigarette regulatory policies being less favorable than expected.

• Smoore (6969 HK)

  EVE Energy holds an approximately 31% stake and plans to reduce it to 28%; Smoore contributes approximately 8-10% of EVE Energy's net profit.

  Strengths

  Provides EVE Energy with profit contributions from its e-cigarette device ODM business.

  Weaknesses

  Related earnings are exposed to changes in e-cigarette industry regulations.

  Risks

  E-cigarette regulatory policies may be more or less favorable than expected.

• CATL - H (3750.HK)

  J.P. Morgan's top pick in China's battery value chain.

  Comparison

  Compared with Neutral-rated EVE Energy, CATL is named the top pick in the value chain.

Key data

• 2Q26 battery shipments46GWhUp 71% YoY and 32% QoQ
• 1H26 battery shipments80GWhDriven by strong shipment growth in 2Q26
• 2Q26 EV battery shipmentsApproximately 22GWhUp 98% YoY and 55% QoQ
• 2Q26 energy storage shipmentsApproximately 24GWhUp 53% YoY and 22% QoQ
• Commercial vehicle shipment shareNearly half of EV battery shipmentsThe company essentially covers all of China's top ten commercial vehicle customers
• One-off investment gain related to SK OnMore than Rmb400mnFrom the disposal of equity interests in Yancheng and Jinneng
• 2Q26 comparable power battery unit profitApproximately Rmb0.02/WhBroadly stable QoQ after excluding government subsidies and the one-off investment gain from the SK On asset transaction
• 2027 total battery shipment growth guidanceMore than 50% YoY growthManagement guidance
• 2027 EV battery shipment growth guidanceMore than 60% YoY growthPassenger vehicle shipments may double, mainly driven by the ramp-up of large cylindrical batteries
• 2027 large cylindrical battery demandApproximately 40GWhBMW is expected to contribute most of the incremental demand
• 2027 energy storage shipment growth guidance40-50% YoY growthSupported by continued overseas expansion and incremental demand from core overseas customers
• Overseas share of energy storage shipmentsApproximately 20% in 2026 and nearly 50% in 2027Two to three international customers are expected to contribute more than 40% of 2027 energy storage deliveries
• Consumption tax cost pass-through coverageMore than 70% of customersRegarding the consumption tax taking effect on September 1, negotiations with the remaining customers are ongoing
• Malaysia Phase II capacity target10-15GWh in 2027The project has entered trial production
• Hungary project production commencementMid-2027Mass production is expected to begin
• Smoore stake and profit contributionApproximately 31% stake, planned reduction to 28%; contributes approximately 8-10% of net profitSmoore's ticker is 6969 HK
• Target price and valuationJun-27 Rmb60, 15x 2027E P/EThe previous Dec-26 target price was Rmb70, based on 21x 2026E P/E

Impact & implications

The report believes that large cylindrical batteries, commercial vehicle electrification, and overseas energy storage can support total shipment growth of more than 50% for EVE Energy in 2027, while the customer pickup model and a higher overseas energy storage mix should improve unit profit beginning in 3Q26. However, the difficulty of passing through policy-related costs for existing projects, combined with weaker visibility into industry demand growth in 2027, means that the growth outlook is not yet sufficient to change J.P. Morgan's Neutral rating.

Risks

• Battery shipments may fall below expectations.
• Pricing and margin pressure may be greater than expected.
• Regulatory policies related to the e-cigarette industry may be less favorable than expected.

What to watch

• Monitor whether core overseas energy storage customers commence bulk deliveries as planned beginning in 3Q26 and whether unit profit improves accordingly.
• Monitor the remaining negotiations on consumption tax cost pass-through and progress in passing through export rebate costs for existing projects.
• Monitor approximately 40GWh of large cylindrical battery demand in 2027 and the ramp-up of deliveries to BMW.
• Monitor whether the overseas share of energy storage shipments rises from approximately 20% in 2026 to nearly 50% in 2027.
• Monitor progress on Malaysia Phase II, the Hungary project, BBU deliveries, and commercialization of sodium-ion batteries for energy storage.