2Q26 Margins Under Pressure; Kedali Expected to Improve Sequentially in 2H

Overview

This report focuses on Shenzhen Kedali's 2Q26 results and management discussions. The company maintained high revenue growth in the first half, but net profit was slightly below Morgan Stanley's expectations, mainly due to gross margin pressure from rising aluminum prices and higher R&D expenses associated with robotics business development.

Core views

The core view is that short-term margin pressure does not alter the demand and growth thesis. Demand from energy storage, AI data centers, and commercial vehicles remains strong, and the company is operating at full capacity while expanding capacity; management expects revenue to continue growing rapidly sequentially in the second half, with gross margin likely to improve in 3Q as the impact of raw material price disruptions normalizes. The robotics business remains in an investment and ramp-up phase but is viewed as a source of growth optionality in 2027.

Analysis framework

The report assesses the company by combining quarterly financial performance, management growth guidance, China battery industry production trends, capacity progress, and business segment outlooks, and uses a discounted cash flow model to establish its valuation framework.

Methodology notes

• Valuation methodsDiscounted Cash Flow Model

  Base-case valuation

  The explicit forecast period extends through 2035, using a 12.2% cost of equity, a beta of 1.3, a 2.7% risk-free rate, a 7.3% equity risk premium, and a 2% perpetual growth rate.

• Earnings ForecastMorgan Stanley ModelWare

  Financial forecasts and valuation metrics

  Forecasts for EPS, revenue, net profit, and valuation multiples in the report are based on the Morgan Stanley ModelWare framework.

Asset mapping & comparison

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

• 002850.SZ

  Covered company

  Strengths

  Demand for battery structural components is driven by energy storage, AI data centers, and commercial vehicles; the company is operating at full capacity, actively expanding capacity, and has potential incremental contributions from its robotics business and Thailand plant.

  Weaknesses

  Rising aluminum prices pressure gross margin; robotics business development increases R&D expenses.

  Comparison

  Analysts expect the company's risk-adjusted total return over the next 12 to 18 months to outperform the average across their industry coverage universe.

  Risks

  China EV battery sales growth falling short of expectations and a decline in the value of battery structural components per GWh.

Key data

• 1H26 net profitRmb943mn, up 23% YoYSlightly below analyst expectations.
• Implied 2Q26 net profitRmb483mn, up 4% QoQ and 26% YoYMargins were affected by raw material prices.
• 1H26 revenueRmb9.2bn, up 39% YoYWithin management's 30% to 40% YoY growth guidance range.
• 2Q26 gross margin20.4%Down 0.8ppt QoQ and 3ppt YoY.
• 2026 to 2027 sales growth target30% to 40% YoY growthManagement reiterated the target and set a net margin target of above 10%.
• 2026 forecast revenueRmb19,694mnMorgan Stanley forecast.
• 2027 forecast revenueRmb25,516mnMorgan Stanley forecast.
• Target priceRmb216.00Approximately 17.7% upside versus the Rmb183.56 closing price on 2026-08-14.

Impact & implications

If strong sequential revenue growth materializes in the second half and gross margin recovers, the company's earnings growth could accelerate again and support its valuation thesis. Full-capacity operations and capacity expansion indicate strong demand from existing customers; progress in robotics mass production and overseas capacity expansion could provide medium- to long-term incremental growth, although they may continue to add pressure to R&D and capital expenditures in the near term.

Risks

• China EV battery sales growth weaker than expected.
• Declining value of battery structural components per GWh.
• Aluminum and other raw material prices remain elevated, causing gross margin recovery to be slower than expected.
• Robotics business mass-production progress, customer adoption, or revenue realization falls short of expectations.
• Capacity expansion progress and overseas capacity utilization fall short of expectations.

What to watch

• Whether 3Q and 4Q revenue can achieve 10% to 20% sequential growth.
• Whether 3Q gross margin improves after aluminum price disruptions normalize.
• Sustainability of demand from energy storage, AI data centers, and commercial vehicles.
• New capacity ramp-up, full-capacity operations, and Thailand plant expansion progress.
• Achievement of the approximately Rmb100mn 2026 revenue target for robotics-related business and 2027 growth.
• Progress toward achieving the net margin target of above 10%.