Aluminum Prices Pressure Kedali's Near-Term Profit, While Price Pass-Through and Robotics Support a Subsequent Recovery

Overview

The report assesses Kedali's 1H26 results, raw material cost pass-through, demand for lithium battery structural components, and progress in the robotics business. Nomura believes rising aluminum prices have created near-term earnings pressure, but expects price pass-through in 2H26 to drive a sequential gross margin recovery. Strong demand for energy storage and power batteries, together with expansion of the robotics business, provides support for medium-term growth. Based on lower earnings and valuation multiples, the report maintains its Buy rating while cutting the target price.

Core views

Kedali's 1H26 revenue increased 38.6% YoY to CNY9.21bn, while net profit rose 22.6% YoY to CNY0.94bn. Revenue was broadly in line with the report's expectations, but net profit fell short, primarily because higher aluminum prices squeezed margins for lithium battery structural components. Wind data show that the average monthly LME aluminum price in June 2026 was 10% higher than in January; over the same period, the company's gross margin for lithium battery structural components declined 2.4 percentage points YoY to 20.9%. This indicates that revenue growth has not yet fully offset the impact of rising raw material costs. According to the company's investor relations activity record dated August 14, 2026, raw material prices increased in 2Q26, and the company will continue negotiating with customers and dynamically adjusting product prices. The report expects price pass-through to support a sequential gross margin recovery in 2H26. However, because the timing and magnitude of pass-through remain uncertain, it lowers its 2026F gross margin forecast from 22.7% to 21.7%. Assuming raw material costs and selling prices gradually rebalance, the report maintains its 2027F and 2028F gross margin forecasts of 24.6% and 25.1%, implying that the margin recovery will be concentrated more in subsequent years rather than occurring immediately. The company's core products are precision structural components, with downstream exposure mainly covering power batteries, energy storage batteries, and automobiles, while humanoid robot components are positioned as a future growth area. Capacity at its domestic harmonic reducer production base is ramping up steadily, and the Thailand plant is expected to scale production gradually from 2027. As 2026F robotics revenue will still come mainly from the domestic market, the report maintains its 2026-28F robotics revenue forecasts of CNY100mn, CNY350mn, and CNY700mn. These forecasts reflect annual expansion in robotics revenue, although the pace of commercialization remains an important variable in determining the valuation discount and assessing risks. Lithium battery demand remains the main basis for growth in the core business. SNE Research data show that global shipments of energy storage batteries and power batteries increased 71% and 20% YoY, respectively, in 1H26, leading the report to conclude that industry demand remains strong. The company is also optimistic about demand for lithium battery structural components from 2H26 through 2027. The report further expects global energy storage construction for AI data centers to generate incremental demand. It therefore raises its 2026F, 2027F, and 2028F revenue forecasts by 0.5%, 0.6%, and 1.6%, respectively, resulting in new revenue forecasts of CNY20.446bn, CNY23.572bn, and CNY27.437bn. The revenue upgrades do not fully offset near-term gross margin pressure. After incorporating the revenue and margin adjustments, the report lowers its 2026F net profit forecast by 6.4% to CNY2.291bn, while raising its 2027F and 2028F net profit forecasts by 0.6% and 1.6% to CNY3.241bn and CNY3.911bn, respectively. The new fully diluted normalized EPS forecasts in the table are CNY7.90, CNY11.21, and CNY13.55, respectively; the 2026F EPS used to calculate the target price is lowered from CNY8.55 to CNY8.00. The report expects free cash flow to increase from CNY1.283bn in 2026F to CNY2.508bn in 2027F and CNY3.307bn in 2028F, and forecasts that the company will maintain a net cash position throughout the forecast period. On valuation, the report lowers its target P/E multiple from 33x to 30x. Although the peer group's average 2026E P/E also declines from 76x to 68x, Kedali's target multiple remains significantly below that of its peers. The report explains that the discount reflects the possibility that the company's earnings growth may lag peers, uncertainty surrounding the near-term gross margin recovery, and the as-yet-unproven pace of commercialization for new businesses. Based on 2026F EPS of CNY8.00 and a target P/E of 30x, the target price is lowered from CNY282.15 to CNY240; compared with the CNY200.56 closing price used in the report, this implies 19.7% upside. The current share price corresponds to 25.1x 2026F P/E, and the report therefore maintains its Buy rating. Beyond operations, the report cites the company's 2025 annual report, stating that it is evaluating energy conservation and consumption reduction projects, encouraging subsidiaries to build photovoltaic power stations, and conducting greenhouse gas emissions and product carbon footprint assessments. The company has also launched a green supplier program that prioritizes suppliers with environmental certifications to promote coordinated emissions reductions across the value chain.

Analysis framework

The report first compares 1H26 revenue and net profit performance with expectations, then combines changes in LME aluminum prices and segment gross margins to identify the cause of weaker-than-expected profitability. It subsequently uses the company's investor relations records to assess price pass-through and progress in ramping robotics capacity, while evaluating demand through global energy storage and power battery shipment data. Finally, the report incorporates its demand, revenue, and gross margin assumptions into its 2026-28 earnings forecasts and derives the target price using 2026F EPS and a target P/E discounted relative to peers.

Methodology notes

• Industry/Sector Analysis FrameworkSupply-demand framework

  Battery Shipment and Structural Component Demand Analysis

  The report uses the growth rates of global energy storage battery and power battery shipments to assess downstream demand strength and adjusts Kedali's 2026-28 revenue forecasts accordingly.

• Industry/Sector Analysis FrameworkVolume-price decomposition

  Raw Material Costs, Customer Price Adjustments, and Gross Margin Pass-Through

  The report separately examines revenue growth, rising aluminum prices, and price pass-through to customers to explain why 1H26 profit fell short of expectations and how gross margins may recover from 2H26 onward.

• Valuation MethodPE/PEG valuation

  Target P/E Valuation

  The report derives its CNY240 target price by multiplying 2026F EPS of CNY8.00 by a target P/E of 30x. The target multiple is below the peer average to reflect uncertainty regarding earnings growth, gross margin recovery, and commercialization of new businesses.

Asset mapping & comparison

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

• Shenzhen Kedali Industry (002850 CH)

  The company faces near-term headwinds from rising aluminum prices and delayed cost pass-through, but the report believes lithium battery demand, subsequent price adjustments, and expansion of the robotics business can support medium-term growth.

  Strengths

  The company has a leading global customer base and technological capabilities in battery and automotive structural components; demand for power and energy storage batteries is strong; and capacity at its domestic harmonic reducer production base is ramping up steadily.

  Weaknesses

  Near-term gross margins are being squeezed by rising raw material costs, earnings growth is expected to lag peers, and commercialization of new businesses will still take time.

  Comparison

  The target P/E of 30x is below the peer group's 2026E average of 68x. The report believes the discount reflects lower earnings growth and uncertainty surrounding gross margins and new businesses.

  Risks

  Weaker-than-expected lithium-ion battery demand, escalating trade friction, and slower-than-expected commercialization of humanoid robots.

Key data

• 1H26 RevenueCNY9.21bnUp 38.6% YoY, broadly in line with the report's expectations
• 1H26 Net ProfitCNY0.94bnUp 22.6% YoY, below the report's expectations
• Change in LME Aluminum Price+10%The average monthly price in June 2026 increased versus January 2026
• Gross Margin of Lithium Battery Structural Components20.9%Down 2.4 percentage points YoY in 1H26
• Gross Margin Forecast2026F 21.7%; 2027F 24.6%; 2028F 25.1%2026F lowered from 22.7%, with 2027-28F unchanged
• Global Battery Shipment GrowthEnergy storage batteries +71%; power batteries +20%1H26 YoY growth rates reported by SNE Research
• Robotics Revenue Forecast2026F CNY100mn; 2027F CNY350mn; 2028F CNY700mnForecasts unchanged, with 2026F revenue still mainly from the domestic market
• Revenue Forecast Adjustments2026F +0.5%; 2027F +0.6%; 2028F +1.6%Adjusted to CNY20.446bn, CNY23.572bn, and CNY27.437bn, respectively
• Net Profit Forecast Adjustments2026F -6.4%; 2027F +0.6%; 2028F +1.6%Adjusted to CNY2.291bn, CNY3.241bn, and CNY3.911bn, respectively
• Fully Diluted Normalized EPS Forecast2026F CNY7.90; 2027F CNY11.21; 2028F CNY13.55New estimates in the forecast table
• Free Cash Flow Forecast2026F CNY1.283bn; 2027F CNY2.508bn; 2028F CNY3.307bnThe report expects free cash flow to grow continuously over the forecast period
• Target Valuation30x 2026F P/EPreviously 33x; the peer group's average 2026E P/E declined from 76x to 68x
• EPS Used for Target Price CalculationCNY8.002026F EPS, previously CNY8.55
• Target PriceCNY240Previously CNY282.15, with 19.7% upside based on the report's estimates
• Current Valuation25.1x 2026F P/EBased on the current share price used in the report

Impact & implications

The report believes that rising aluminum prices and delayed cost pass-through will pressure margins in 2026, prompting it to lower its profit forecast and valuation multiple for the year. If customer price adjustments are gradually implemented, gross margins may begin to recover sequentially from 2H26. Demand for energy storage and power batteries, energy storage construction for AI data centers, and expansion of the robotics business support the 2027-28 revenue and profit forecasts, leading the report to modestly raise its earnings estimates for the latter two years and maintain its Buy rating.

Risks

• Lithium-ion battery demand may be weaker than expected.
• Trade friction may intensify further.
• Commercialization of humanoid robots may progress more slowly than expected.

What to watch

• Monitor the timing and magnitude of customer price adjustments in 2H26 and the sequential recovery in gross margins.
• Monitor whether global energy storage battery and power battery demand can sustain strong growth.
• Monitor the capacity ramp-up at the domestic harmonic reducer base and the realization of robotics revenue.
• Monitor whether the Thailand plant can gradually scale production from 2027 as planned.