Zenergy (03677) Report Interpretation

Overview

This conference-takeaways report covers Zenergy’s growth outlook across power batteries and energy-storage systems (ESS). Goldman Sachs highlights strong first-half shipment growth, a planned utilization-led margin recovery in 2H26, and capacity additions intended to support further growth in 2027.

Core views

Management characterized power batteries as Zenergy’s core revenue engine. In 1H26, total revenue grew 57% year on year, driven primarily by a 66% increase in shipments to 13GWh. Direct and indirect exports together accounted for about 25% of revenue. Power-battery revenue rose 53% year on year to Rmb4.58bn, while shipments increased 45% to 11.13GWh. Management linked the company’s passenger-vehicle battery-installation ranking improvement, from seventh last year to fifth this year, to broad customer coverage. Indirect exports contributed 14% of revenue, up from 10% last year. ESS remains small relative to power batteries but is entering an expansion phase. ESS revenue was about Rmb600mn in 1H26 and shipments were 1.88GWh, more than eight times the prior-year level. Residential ESS customers were the principal first-half driver. Management is expanding this customer base and developing large-format ESS cells ranging from 684Ah to 2,700Ah, which it expects to support incremental growth. It also said key residential ESS customers plan to sign guaranteed-supply agreements. Sodium-ion battery cumulative shipment value exceeded Rmb100mn over the past three years, mainly into Europe, with early progress in data-center backup-power applications. Capacity plans are intended to follow demand visibility rather than lead it. Effective 2026 capacity is estimated at 35GWh, and an additional 35GWh—20GWh for ESS and 15GWh for power batteries—is expected to come online in 4Q26 and reach full utilization by the end of 1Q27. Management reiterated a 30GWh full-year 2026 shipment target, implying 50% year-on-year growth and an 85% capacity-utilization rate. It expects capacity to double year on year in 2027, citing relatively high demand visibility. Potential expansion in Changshu could ultimately reach 120GWh, with centralized production expected to improve management and cost-control efficiency. Profitability weakened in 1H26 because of raw-material pressure and the ramp-up of new capacity, although net margin remained comparatively resilient due to expense discipline. The first-quarter new-line ramp-up had a meaningful effect, while the second and third quarters were operating at full utilization. Management therefore expects unit profitability and gross margin to improve half on half in 2H26 as utilization improves. However, it cautioned that returning to last year’s margin level may be difficult because battery-consumption-tax pass-through must be negotiated with customers. Goldman Sachs values Zenergy through a sum-of-the-parts approach: it applies an 11x EV/EBITDA multiple to average 2026E–2027E EBITDA for the core business, benchmarked against the historical mid-cycle average of H-share peers CALB and Rept. The report assigns a slight premium for Zenergy’s fast-growth phase and ROIC above WACC, while valuing its long-term equity investment, primarily the Toyota battery-pack joint venture, at book value. The report shows a Buy rating, a 12-month target price of HK$13.00, a price of HK$4.86 as of the 3 September 2026 close, and 167.8% upside.

Analysis framework

The report combines management comments from the Asia Leaders Conference with reported first-half operating data, shipment and capacity guidance, and a profitability bridge focused on raw-material costs, new-line utilization and expense control. Its valuation uses a sum-of-the-parts framework based on peer-benchmarked EV/EBITDA for the core business plus book value for the long-term equity investment.

Methodology notes

• Valuation methodsSOTP (Sum-of-the-Parts) Valuation

  Sum-of-the-parts valuation using an 11x EV/EBITDA multiple on average 2026E–2027E core-business EBITDA, plus book value for the long-term equity investment.

  This separates Zenergy’s core battery operations from its long-term equity investment, using a peer-referenced earnings multiple for the operating business.

• Corporate Fundamentals and FinanceROIC–WACC spread

  Above-WACC ROIC as support for a slight valuation premium.

  The report uses returns above the cost of capital as one reason Zenergy may merit a modest premium to the historical mid-cycle valuation of selected H-share peers.

Asset mapping & comparison

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

• Zenergy (03677.HK)

  Primary covered company; expected to benefit from power-battery customer expansion, ESS customer growth and improving utilization.

  Strengths

  Strong shipment growth, improved passenger-vehicle installation ranking, expanding exports, and new ESS capacity and product capability.

  Weaknesses

  1H26 gross margin contracted under raw-material pressure and new-capacity ramp-up.

  Comparison

  Goldman Sachs benchmarks the core-business valuation against the historical mid-cycle average of H-share peers CALB and Rept, with a slight premium for Zenergy’s growth phase and above-WACC ROIC.

  Risks

  China EV demand, ESS demand, raw-material costs, domestic competition, and ESS execution and capacity-ramp risk.

Key data

• 1H26 revenue growth+57% yoyManagement attributed growth mainly to shipment expansion.
• 1H26 total shipments13GWh, +66% yoyCore driver of first-half revenue growth.
• Power-battery revenueRmb4.58bn, +53% yoyPower-battery shipments rose 45% yoy to 11.13GWh.
• ESS shipments1.88GWh, more than 8x yoyResidential ESS customers remained the principal driver in 1H26.
• 2026 shipment target30GWhImplies 50% yoy growth and 85% capacity utilization.
• New capacity35GWh20GWh ESS and 15GWh power-battery capacity expected online in 4Q26 and fully utilized by end-1Q27.
• Valuation multiple11x EV/EBITDAApplied to average 2026E–2027E core-business EBITDA.

Impact & implications

The report’s investment case rests on continued power-battery volume growth, a rapid ESS ramp-up and better second-half utilization supporting margin recovery. The planned capacity additions could extend growth into 2027, but the pace of ESS demand, customer commitments, raw-material costs and tax pass-through discussions remain important constraints.

Risks

• China EV demand could be slower than expected.
• ESS demand could be milder than expected.
• Upstream raw-material costs could be volatile.
• Competition in China’s domestic power-battery market could intensify.
• ESS execution and capacity ramp-up could be softer than expected.