Q226 results exceed expectations, with improvements in separator shipments and unit net profit

Overview

This report is UBS's review of Yunnan Energy New Material's Q226 results. The company released preliminary H126 results, reporting recurring attributable net profit of Rmb760~930m, with the midpoint implying Q226 net profit of approximately Rmb610m, up 115% quarter over quarter and exceeding UBS and market expectations. The company's main businesses include lithium-ion battery separators, printed products, and packaging products, with wet-process base films and coated films serving as the core revenue sources.

Core views

UBS believes the key drivers of the earnings beat were separator shipments above guidance and a marginal recovery in unit profitability. The company's Q226 separator shipments reached 4.1bn square meters, above previous guidance of 3.8~4.0bn square meters; reported unit net profit is estimated at Rmb0.15 per square meter, an improvement from Q126. Although the company did not update its guidance, market expectations for a 7%~8% increase in separator prices constitute a potential positive factor, leading UBS to expect a positive investor reaction.

Analysis framework

The report analyzes the earnings guidance breakdown, shipment volumes and unit profitability, price negotiation expectations, and the 12-month rating framework, while applying a P/BV valuation methodology to derive the target price.

Methodology notes

• Valuation methodologyP/BV

  Price-to-book valuation

  UBS states that it uses the P/BV methodology to value Yunnan Energy New Material, with the target price based on a 12-month investment horizon.

• Earnings trackingQuarterly earnings breakdown

  Estimating Q226 earnings from H126 guidance

  The report uses the midpoint of the H126 recurring attributable net profit guidance range, together with the previous quarter's performance, to estimate Q226 net profit at approximately Rmb610m and determine that it is above expectations.

• Short-term factor assessmentQuantitative Research Review

  Assessment of short-term industry, regulatory, trend, and EPS surprise factors

  UBS's quantitative research review assigns scores of 4 for industry structure, 3 for the regulatory environment, 4 for the stock's trend over the past 3~6 months, and 4 for the next update relative to consensus EPS expectations.

Asset mapping & comparison

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

• 002812.SZ

  Research subject, Yunnan Energy New Material A-share stock

  Strengths

  Q226 net profit exceeded expectations, separator shipments surpassed guidance, unit net profit improved marginally, and UBS maintained its Buy rating.

  Weaknesses

  The company's previous profitability was affected by industry pricing and cyclicality; EBIT and net profit were negative in 2024, and the business is sensitive to separator prices and demand recovery.

  Comparison

  UBS's 2026E EPS is Rmb2.41, above the table's consensus estimate of Rmb1.70; its 2027E and 2028E estimates are also above consensus.

  Risks

  The electric-vehicle battery materials industry faces risks from commodity prices, exchange rates, government EV regulations, and changes in global climate policies.

Key data

• H126 recurring attributable net profit guidanceRmb760~930mThe preliminary H126 results range released by the company.
• Implied Q226 net profit midpointApproximately Rmb610m, up 115% quarter over quarterAbove UBS and market expectations.
• Q226 separator shipments4.1bn square meters, up 58% year over year and 17% quarter over quarterAbove previous guidance of 3.8~4.0bn square meters.
• Estimated Q2 unit net profitRmb0.15 per square meterA marginal improvement from Rmb0.13 per square meter in Q126.
• 12-month target priceRmb85.00Implies estimated share-price upside of 43.3% from the July 9, 2026 share price of Rmb59.33.
• Estimated total return44.1%Includes 43.3% estimated share-price upside and a 0.8% estimated dividend yield.
• 2026E EPSRmb2.41UBS forecast; consensus EPS in the table is Rmb1.70.
• 2027E EPSRmb3.74UBS forecast; consensus EPS in the table is Rmb3.17.
• 2028E EPSRmb4.61UBS forecast; consensus EPS in the table is Rmb4.48.

Impact & implications

The earnings beat and shipments above guidance reinforce the company's earnings sensitivity to a recovery in the lithium battery separator cycle. If price-increase negotiations between mainstream separator manufacturers and leading downstream battery customers are successful, unit profitability could continue to improve, supporting market expectations for a recovery in the company's earnings in 2026 and beyond.

Risks

• Commodity prices and exchange rates may deviate significantly from expectations, affecting the battery materials industry and the company's profitability.
• Changes in government EV regulations and global climate policies may materially affect the company or industry performance.
• If expectations for separator price increases are not realized, the improvement in unit profitability may fall short of expectations.
• The research report notes that past performance is not indicative of future results and that the target price and rating may change with events.

What to watch

• Whether price negotiations between mainstream separator manufacturers and leading battery customers are ultimately concluded.
• Whether separator shipments can sustain year-over-year and quarter-over-quarter growth.
• Whether unit net profit can continue improving from the Rmb0.15 per square meter level.
• Whether the company subsequently issues new operating guidance or earnings revisions.
• Whether the market confirms the potential for upward revisions to 2026E EPS relative to consensus expectations.