High 1Q26 Shipment Growth but Gross Margin Under Pressure; UBS Maintains Neutral Rating on EVE Energy

Overview

This report is UBS's review of EVE Energy's 1Q26 results. The core conclusion is that rapid growth in EV and ESS battery shipments drove significant increases in revenue and net profit; however, 1Q26 gross margin came under pressure due to higher raw material prices, relatively lower gross margin in the energy storage battery business, and business mix adjustments. UBS keeps its 2026-2028E earnings forecasts broadly unchanged and maintains its Neutral rating and Rmb75.80 target price.

Core views

UBS believes EVE Energy's growth momentum mainly comes from three areas: first, deepening cooperation with domestic EV OEMs such as Xpeng, Leapmotor, and Geely, which supports power battery shipments and continued order wins; second, ramp-up of large cylindrical battery orders, with a related 2026E shipment target of more than 13GWh; third, strong domestic energy storage demand and growth in overseas energy storage orders. At the same time, the main earnings risk comes from gross margin pressure, especially as it takes time to pass rising raw material prices on to downstream customers.

Analysis framework

The report evaluates the company's fundamentals using a combination of earnings breakdown, shipment tracking, gross margin attribution, capacity expansion, and order outlook, and uses the PE valuation method to set the target price. UBS bases its Rmb75.80 target price on 19x 2027E PE, while also referencing forecast stock return, market return assumptions, and its 12-month rating framework.

Methodology notes

• Valuation MethodPE Valuation Method

  Target price based on price-to-earnings ratio

  UBS uses the PE method to value EVE Energy and maintains its Rmb75.80 target price, which is based on 19x 2027E PE.

• Rating FrameworkForecast Stock Return

  Forecast stock return

  UBS defines forecast stock return as the expected price appreciation over the next 12 months plus total dividend yield; in this report, forecast stock return is 4.8%, below the assumed market return of 6.8%.

Asset mapping & comparison

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

• EVE Energy / 300014.SZ

  Covered Target

  Strengths

  Rapid growth in EV and ESS battery shipments, continued customer expansion, 2026E shipment target above 200GWh, and accelerating capacity expansion.

  Weaknesses

  1Q26 gross margin fell to 14.0%; passing through higher raw material costs takes time; ESS business has relatively lower gross margin.

  Comparison

  2026E, 2027E, and 2028E EPS are Rmb3.02, Rmb4.00, and Rmb4.95, corresponding to 2026E PE of 24.1x, 2027E PE of 18.2x, and 2028E PE of 14.7x.

  Risks

  Weak EV demand, sharp increases in raw material costs, declines in lithium battery prices, and order acquisition or capacity ramp-up slower than expected.

• EV Battery Business

  Core Growth Driver

  Strengths

  1Q26 shipments of 14.34GWh, up 40.9% YoY, benefiting from new orders and new customers.

  Weaknesses

  Affected by demand fluctuations in the EV industry.

  Comparison

  Growth is slower than ESS batteries but still remains rapid.

  Risks

  EV industry demand below expectations and slower-than-expected customer order releases.

• ESS Battery Business

  Core Growth Driver

  Strengths

  1Q26 shipments of 20.38GWh, up 60.8% YoY, supported by strong domestic demand and growth in overseas orders.

  Weaknesses

  Relatively lower gross margin, and a higher mix may drag overall gross margin.

  Comparison

  Shipment growth is faster than EV batteries and is an important source of growth in 2026E.

  Risks

  Declines in energy storage battery prices, or overseas orders or domestic demand below expectations.

Key data

• 1Q26 EV Battery Shipments14.34GWhUp 40.9% YoY, benefiting from new order wins and new customer expansion.
• 1Q26 ESS Battery Shipments20.38GWhUp 60.8% YoY, driven by strong downstream demand.
• 1Q26 RevenueRmb20.68bnUp 61.6% YoY.
• 1Q26 Net ProfitRmb1.45bnUp 31.3% YoY.
• 1Q26 Recurring Net ProfitRmb1.11bnUp 36.3% YoY.
• 1Q26 Gross Margin14.0%Down 3.1 percentage points YoY and 2.7 percentage points QoQ.
• 2026E Shipment Target200GWh+Management guidance.
• Capacity Expansion Announced Year to Date230GWhIncluding 60GWh expansions each in Huizhou and Jingmen, plus 50GWh of new capacity in Qidong and 60GWh in Shanghang.
• Target PriceRmb75.80Maintained unchanged, based on 19x 2027E PE.
• Current PriceRmb72.81As of April 24, 2026.
• 2026E EPSRmb3.02Cut by 2% from the previous Rmb3.08, below consensus of Rmb3.52.
• 2027E EPSRmb4.00Slightly adjusted from the previous Rmb4.01, below consensus of Rmb4.58.

Impact & implications

The report remains constructive on the company's revenue and shipment growth, but the investment implication is neutral: high shipments and large-scale capacity expansion support long-term growth, yet short-term increases in raw material costs, delayed cost pass-through, and a higher mix of lower-margin ESS business may weaken margin performance. The implied price upside to the target price is only 4.1%; adding a 0.7% dividend yield brings forecast stock return to 4.8%, below the assumed market return of 6.8%.

Risks

• Weak demand in the EV industry.
• Significant increase in raw material costs.
• Decline in lithium battery prices.
• The company's order acquisition and capacity ramp-up are slower than expected.
• Gross margin pressure lasts longer than expected.

What to watch

• The progress and effectiveness of passing rising raw material prices on to downstream customers.
• The pace of achieving the 2026E shipment target of over 200GWh.
• The ramp-up of large cylindrical battery orders and progress toward the 13GWh+ shipment target.
• Production launch and utilization rates of capacity expansion projects in Huizhou, Jingmen, Qidong, Shanghang, and other locations.
• Deepening cooperation with EV OEM customers and new order developments.
• Whether strong domestic ESS demand and growth in overseas orders can continue.