Power Equipment & New Energy: Weekly Report (Issue 38)

Date: December 28, 2025 – January 10, 2026
Analyst: Liu Qiang (S1190522080001), Zhong Xincai (S1190524110004)
Source: Pacific Securities Research Institute

Executive Summary

The New Energy and AI sectors are entering a pivotal phase of structural reshaping and demand acceleration. Our analysis for the period ending January 10, 2026, highlights three core thematic drivers: Energy Storage resilience, AI-driven electrification, and emerging "Space Photovoltaics" concepts. While upstream raw material price pressures (silicon, lithium) show signs of阶段性 (phased) loosening, the mid-to-downstream segments are exhibiting robust repair opportunities driven by policy-led "anti-involution" measures and technological breakthroughs.

Key Strategic Shifts:
1. EV Battery Sector Upcycle: The industry is transitioning into a new upward cycle, characterized by regulated competition and solid-state battery commercialization. Regulatory bodies, including the Ministry of Industry and Information Technology (MIIT) and industry associations, are actively curbing low-price dumping, fostering a healthier competitive landscape. Major players like CATL and EVE Energy are benefiting from this normalization.
2. Storage & AI Synergy: Energy storage installations and bidding volumes continue to exceed expectations, with independent storage projects dominating the market. Simultaneously, the convergence of AI and power equipment is creating new demand vectors, particularly in data center power solutions and robotics.
3. Technological Frontiers: Solid-state batteries have entered the mass production cycle, with significant milestones achieved by companies like Xinjie Energy. In photovoltaics, while terrestrial markets focus on supply-side clearing, the concept of "Space Photovoltaics" has gained traction following high-profile endorsements, highlighting HJT and Perovskite technologies as key enablers.

Investment Stance: We maintain a constructive outlook on the sector, recommending a focus on mid-to-downstream leaders with strong cost control, technological moats, and exposure to high-growth niches such as energy storage, solid-state batteries, and AI-related power infrastructure. Upstream material suppliers with pricing power (e.g., electrolytes, copper foil) also present attractive risk-reward profiles.

Key Takeaways

1. New Energy Vehicle (NEV) Chain: Entering a New Upward Cycle

The NEV battery sector is witnessing a confluence of policy support, demand resilience, and technological maturation. The narrative has shifted from pure capacity expansion to quality-driven growth and orderly competition.

1.1 Policy-Led "Anti-Involution" and Market Normalization

Recent regulatory interventions aim to stabilize the industry structure and prevent destructive price wars.
* Regulatory Coordination: The MIIT and other departments convened a symposium on power and energy storage batteries, emphasizing optimized capacity management and enhanced coordination between central and local governments to standardize industrial competition.
* Industry Self-Discipline: The China Chemical and Physical Power Industry Association released the "Initiative on Maintaining Fair Competition Order and Promoting Healthy Development of the Energy Storage Industry." Signed by 158 key entities—including industry giants like CATL, BYD, and Huawei Digital Energy—the initiative focuses on:
* Standardizing cost and pricing behaviors (prohibiting below-cost bidding and false commitments).
* Strengthening product and service fulfillment (ensuring full-lifecycle safety and quality assurance).
* Impact: These measures are expected to restore margin stability for leading manufacturers, benefiting companies with superior scale and technology, such as CATL and EVE Energy.

1.2 Strategic Partnerships and Commercial Milestones

• CATL & NIO Collaboration: CATL signed a five-year comprehensive strategic cooperation agreement with NIO. The partnership spans three domains:
  • Technology: Joint R&D in battery technologies.
  • Ecosystem: Co-development of battery swap standards and resource sharing for swap networks.
  • Market: Deepening synergy in Battery-as-a-Service (BaaS) models to build an open, shared swap ecosystem.
• Large Cell Commercialization: CATL’s 587Ah energy storage cells have surpassed 2GWh in shipments, marking the formal entry of 500Ah+ large-capacity cells into the era of规模化 (scaled) commercial application. This trend enhances system energy density and reduces balance-of-system (BOS) costs.

1.3 Production Schedule Analysis (January 2026)

Data from Xinluo Lithium indicates a slight seasonal adjustment in production schedules for January 2026:
* Domestic Battery Sample Enterprises: Pre-scheduled production of 142.54 GWh, representing a month-on-month (MoM) decline of 4.23%.
* Overseas Battery Sample Enterprises: Pre-scheduled production of 23.6 GWh, with a marginal MoM decline of 0.63%.
* Interpretation: The modest decline is typical for the January period due to the Lunar New Year holiday effect. The underlying demand trajectory remains robust, supported by strong year-end deliveries and continued global electrification trends.

1.4 Mid-Upstream Materials: Price Trends and Supply Dynamics

The mid-upstream material segment is experiencing a recovery in pricing power, driven by supply discipline and shifting technical requirements.

A. Cathode & Electrolyte Discipline
* LFP Initiative: The industry association issued the "Initiative on Maintaining Healthy and Orderly Development of the Lithium Iron Phosphate (LFP) Material Industry." Key provisions include:
* Establishment of an "LFP Product Cost Price Index."
* Capacity self-discipline: Companies with utilization rates below 70% should pause expansion; if the industry-wide utilization drops below 60%, all expansion should be halted.
* Beneficiaries: This supply-side constraint supports pricing for leaders like Tinci Materials (electrolyte) and Hunan Yuneng (LFP cathode). Huayou Cobalt also benefits from the stabilization of metal prices and integrated operations.

B. Copper Foil: Structural Shift to Ultra-Thin Formats
* Cost-Driven Substitution: Rising copper prices are accelerating the adoption of thinner copper foils to reduce material costs.
* 5-micron foil: Penetration rate exceeded 15% in 2025 and is projected to reach 37% in 2026.
* 4.5-micron foil: Seeing batch adoption among certain energy storage clients.
* Supply-Demand Balance: Domestic lithium copper foil capacity expansion has stagnated in 2026. The market is expected to remain in tight balance, potentially driving processing fees up by 2,000–4,000 RMB/ton.
* Investment Implication: Manufacturers capable of producing 5-micron, 4.5-micron, and ultra-thin foils will capture premium margins.

1.5 Solid-State Batteries: Mass Production Cycle Begins

The solid-state battery sector has transitioned from R&D to initial commercial deployment, marking a significant technological inflection point.

• Xinjie Energy: Officially commenced production at its solid-state lithium-metal battery line. The first batch of 2 GWh products has rolled off the line. The soft-pack "Falcon" battery achieves an energy density of 480 Wh/kg, setting a new benchmark for high-energy applications.
• DonutLab (Finland): The startup announced a mass-producible all-solid-state battery with an energy density of 400 Wh/kg and a cycle life exceeding 100,000 cycles.
• Beneficiaries: Companies with advanced material capabilities, such as Putailai (anode/separators) and Xiamen Tungsten New Energy (cathode materials), are well-positioned to capitalize on this transition.

2. Photovoltaic (PV) & Energy Storage: Bottoming Out and Emerging Themes

The PV and storage sectors are navigating a complex landscape of supply clearance, policy intervention, and novel demand sources. The medium-term bottom is gradually lifting, supported by strong storage demand and potential new applications.

2.1 Energy Storage: Bidding and Filings Exceed Expectations

The energy storage market continues to demonstrate robust growth, driven by grid integration needs and favorable policy frameworks.

A. Market Data (Jan-Nov 2025)
* Total Bidding Volume: 901 procurement events completed domestically, totaling 106 GW / 376.486 GWh.
* Technology Mix: Lithium Iron Phosphate (LFP) remains the dominant technology, accounting for 92.9% of the market share.
* Top Winners by System Capacity:
1. CRRC Zhuzhou Institute: 15,277 MWh
2. BYD: 9,948 MWh
3. Hyperstrong (Haibochuang): 8,300 MWh
* Project Type: Independent energy storage projects constitute the majority, representing 64.83% of the total volume.

B. Regional Project Pipeline
* New Projects (2025 YTD): Nine provinces, including Inner Mongolia, Hebei, and Shandong, have released 622 new energy storage projects, totaling 102.9 GW / 284.86 GWh.
* Regional Leader: Inner Mongolia leads with 77.4 GWh in planned capacity, leveraging its vast renewable resources and grid infrastructure needs.
* Shanghai/Shanxi Surge: Shanxi Province saw a dramatic 733% MoM increase in new storage filings in November 2025, adding 27 GW / 54.2 GWh. For Jan-Nov 2025, Shanxi’s total filed capacity reached 75.7 GW / 152.4 GWh, ranking second nationally.
* Beneficiaries: Strong order books and market share gains favor Sungrow and Hyperstrong.

2.2 Photovoltaics: Supply Clearance and "Space PV" Catalyst

The PV sector is undergoing a painful but necessary supply-side correction, while simultaneously exploring high-frontier applications.

A. Regulatory Intervention on Pricing
* Anti-Monopoly Action: The State Administration for Market Regulation (SAMR) reported that since July 2025, certain industry "self-discipline" efforts aimed at raising polysilicon prices under the guise of "anti-involution" posed monopoly risks. Consequently, agreed-upon production limits and price floors have been temporarily suspended.
* Implication: This move aims to restore market-driven price discovery. While short-term volatility may persist, it accelerates the exit of inefficient capacity, leading to a more sustainable long-term equilibrium. Leaders with cost advantages, such as Jinko Solar and Aiko Solar (Junda Shares), are better positioned to survive this clearance phase.

B. "Space Photovoltaics": A New Demand Vector
* Catalyst: Elon Musk recently proposed deploying 100 GW of solar capacity to space annually. This announcement has reignited interest in space-based solar power (SBSP).
* Technology Routes:
1. Short-Term Commercial Leader: P-type HJT (Heterojunction). Offers advantages in thinness and radiation resistance, making it suitable for near-term space applications.
2. Long-Term Ultimate Route: Perovskite and Tandem Cells. Their lightweight, flexible nature and adaptability to vacuum/no-oxygen environments make them ideal for future large-scale space deployment.
* Investment View: While still in early stages, this theme highlights the versatility of advanced PV technologies. Companies with leadership in HJT and Perovskite R&D may see valuation re-rating based on long-term optionality.

3. AI + New Energy & Wind: Breaking into New Markets

The convergence of Artificial Intelligence and renewable energy is creating distinct investment themes, particularly in robotics and data center infrastructure.

3.1 Robotics: Application Scenarios Expanding

The robotics sector is moving from prototype to practical application, driving demand for precision components and integrated systems.

• Zhejiang Rongtai & Weichuan Electric: Signed a joint venture intention letter to establish a company in Thailand (50:50 ownership). The JV will focus on the intelligent robot mechatronics market, developing and producing mechatronic components. This aligns with the global supply chain shift towards Southeast Asia.
• Zhiyuan Robot (Agibot): Co-founder and CTO "Zhihui Jun" unveiled the "Shangwei Qiyuan Q1," billed as the world’s first personal robot.
  • Key Feature: Volume is only 1/8th of traditional full-size humanoid robots.
  • Utility: Foldable and portable (fits in a backpack), designed for home and laboratory scenarios.
• Unitree Robotics: Released training videos for its H2 humanoid robot, demonstrating advanced dynamic movements such as a "spinning kick breaking a watermelon," showcasing improvements in motor control and balance algorithms.
• Beneficiaries: Component suppliers like Zhejiang Rongtai, Kedali, and Zhenyu Technology are poised to benefit from the scaling of robotic production.

3.2 Wind Power & Grid Equipment

• Wind Sector Recovery: Driven by product mix optimization and price stabilization, wind component manufacturers are seeing margin improvement. Sinoma Science & Technology reported significant profit growth, attributed to higher glass fiber prices and increased wind blade sales.
• Grid Infrastructure for AI: The surge in AI computing power is driving unprecedented demand for reliable power infrastructure. Jinpan Technology secured a major contract worth ~$99 million for data center power products, underscoring the critical role of transformers and switchgear in the AI ecosystem.

Corporate News Tracker & Financial Highlights

This section details significant corporate announcements, financial pre-notices, and strategic moves during the reporting period. These events provide granular insights into company-specific performance and strategic direction.

1. Financial Performance Pre-Announcements (2025 Full Year)

Several key players released positive earnings pre-announcements, reflecting the broader industry recovery and successful cost management strategies.

Detailed Analysis:

• Salt Lake Industry (000792.SZ):

  • Performance: Expected net profit attributable to shareholders of RMB 8.29–8.89 billion. Deducted non-recurring net profit: RMB 8.23–8.83 billion (+87.02%–100.66%). EPS: RMB 1.56–1.69.
  • Strategic Move: Announced acquisition of 51% equity in Wukuang Salt Lake Co., Ltd. from its controlling shareholder for RMB 4.605 billion. This transaction resolves horizontal competition and integrates salt lake resources. Wukuang Salt Lake committed to net profits of ≥RMB 668 million (2026), ≥RMB 691 million (2027), and ≥RMB 744 million (2028).

• Tinci Materials (002709.SZ):

  • Performance: Net profit RMB 1.1–1.6 billion. Deducted non-recurring net profit: RMB 1.05–1.55 billion (+175.16%–306.18%). EPS: RMB 0.57–0.83.
  • Project Adjustment: Approved changes to the "300k ton electrolyte expansion & 100k ton battery recycling" project. Due to market changes, the scale was adjusted to 250k tons of electrolyte (recycling component cancelled). Total investment capped at RMB 600 million. Expected annual revenue: RMB 3.67 billion; Net profit: RMB 180 million.
  • Maintenance: Scheduled 20–30 day shutdown for the 150k ton liquid LiPF6 line at Longshan North Base starting March 1, 2026, for routine maintenance. Minimal impact expected.

• Sinoma Science & Technology (002080.SZ):

  • Performance: Net profit RMB 1.55–1.95 billion. Deducted non-recurring net profit: RMB 1.05–1.35 billion (+173.76%–251.97%). EPS: RMB 0.92–1.16.
  • Driver: The turnaround in the fiberglass sector and sustained demand in wind energy were the primary contributors.

• Huayou Cobalt (603799.SH):

  • Performance: Net profit RMB 5.85–6.45 billion. Deducted non-recurring net profit: RMB 5.6–6.3 billion (+47.56%–66.00%).
  • Driver: The full production of the Huafei project in Indonesia and stable high output from Huayue significantly improved raw material self-sufficiency (MHP). Downstream material business also recovered.

2. Strategic Investments & Capacity Expansion

Companies are actively expanding overseas and optimizing domestic footprints to capture global demand and mitigate trade risks.

• Capchem (New宙邦) (300037.SZ): Dual Overseas Expansion

  • Saudi Arabia: Subsidiary "Middle East Capchem" to invest ~$260 million in Yanbu Industrial City. Project: 200k tons/year carbonate solvents and 100k tons/year ethylene glycol. Construction period: ≤3 years.
  • Poland: Subsidiary "Poland Capchem" to invest ≤RMB 200 million in Sieradz Industrial Park. Project: Phase II expansion adding 50k tons/year electrolyte capacity via retrofitting. Construction period: ≤2 years.
  • Rationale: Leveraging "Belt and Road" policies to fill global supply gaps, reduce logistics costs, and enhance international competitiveness.

• Longpan Technology (603906.SH): LFP Expansion

  • Project: Subsidiary Changzhou Liyuan to invest ≤RMB 2 billion in Jintan Huagao High-tech Zone, Jiangsu.
  • Capacity: 240k tons/year high-compaction LFP cathode material (Phase I: 120k tons).
  • Timeline: Phase I construction period: 9 months. Subject to shareholder approval.

• Fulin Precision (300432.SZ): Massive LFP Project

  • Project: Subsidiary Jiangxi Shenghua to sign agreement with Ejin Horo Banner Government, Inner Mongolia.
  • Capacity: 500k tons/year high-end storage LFP (Two phases of 250k tons each).
  • Investment: Estimated total RMB 6 billion. Construction period: 12 months.
  • Support: Local government to provide rewards and infrastructure (including a 220kV substation).

• Dazhong Mining (603979.SH): Lithium Resource Integration

  • Project: Implementation of the 20 million tons/year lithium mining, beneficiation, and tailings integration project at the Tongtianmiao section of Jijiaoshan Mine, Linwu County, Hunan.
  • Investment: Total construction investment RMB 3.687 billion (additional investment of RMB 1.925 billion on top of approved base).
  • Output: Upon completion, annual production of 80k tons of Lithium Carbonate.
  • Resources: Jijiaoshan mine holds resources equivalent to ~3.244 million tons of LCE. Post-tax IRR: 26.73%. This reinforces Dazhong’s "Iron + Lithium" dual-main strategy.

• Haopeng Technology (603115.SH): Private Placement

  • Plan: Issuance of A-shares to specific objects (≤35 investors). Raise ≤RMB 800 million.
  • Use of Proceeds: RMB 400 million for Energy Storage Battery Construction; RMB 400 million for Steel-Case Stacked Lithium Battery Construction.
  • Objective: Capture growth in storage and AI edge devices. Lock-up period: 6 months.

3. Major Contracts & Legal Matters

• Jinpan Technology (688676.SH): Major Data Center Contract

  • Deal: Signed a contract with overseas client "F" for data center power products.
  • Value: $98.99 million (~RMB 696 million).
  • Impact: While not materially impacting 2025 results, successful execution will boost future performance and global brand influence. Highlights the company’s penetration into the high-growth AI infrastructure supply chain.

• Sunwoda (300207.SZ): Significant Litigation

  • Case: Subsidiary Sunwoda Power Technology sued by Viridi E-Vehicle Technology (Ningbo) for alleged quality issues in cells delivered between June 2021 and December 2023.
  • Claim Amount: RMB 2.31 billion plus interest/legal fees.
  • Status: Accepted by Ningbo Intermediate People’s Court. No trial date set.
  • Risk: Company states operations are normal, but financial impact cannot yet be assessed. This highlights potential liability risks in the supply chain and the importance of rigorous quality control protocols.

• Zhejiang Rongtai (603119.SH): Robotics JV

  • Partner: Suzhou Weichuan Electric.
  • Structure: 50:50 JV in Thailand.
  • Focus: Intelligent robot mechatronics components.
  • Note: Intent letter is non-binding. Risks include long industry growth cycles and execution uncertainty.

• Kstar (002518.SZ): Industrial Fund Investment

  • Action: Invested RMB 50 million (24.99% LP stake) in Jiaxing Mutong Equity Investment Partnership.
  • Fund Focus: Data center supply chain, hard tech, AI, and new energy (wind/PV/storage).
  • Strategy: Enhance industrial synergy and capital appreciation in core sectors.

Risks / Headwinds

Investors should carefully consider the following risks, which could adversely affect the performance of the sector and individual companies:

1. Downstream Demand Miss:

   • Global economic slowdowns or reduced subsidies in key markets (EU, US, China) could lead to lower-than-expected adoption rates for EVs and energy storage systems.
   • Delays in grid infrastructure upgrades could bottleneck energy storage deployments.

2. Intensified Industry Competition:

   • Despite "anti-involution" initiatives, the risk of price wars persists, particularly in the PV module and LFP battery segments. Overcapacity in certain mid-stream materials could compress margins.
   • The suspension of mandatory price floors by regulators may lead to short-term price volatility and margin pressure for weaker players.

3. Technological Disruption & Execution Risk:

   • Solid-State Batteries: While progress is being made, mass production yields, cost reduction, and long-term reliability remain unproven at scale. Failure to meet technical milestones could delay commercialization.
   • Space PV: This is a nascent concept with significant technical and regulatory hurdles. Near-term revenue contribution is negligible, and valuation premiums based on this theme may correct if progress stalls.
   • Robotics: The commercial viability and mass adoption timeline for humanoid robots remain uncertain. High R&D costs without immediate revenue generation could strain finances.

4. Raw Material Price Volatility:

   • Fluctuations in lithium, cobalt, nickel, and copper prices can impact input costs for battery manufacturers. While recent trends show stabilization, geopolitical tensions or supply disruptions could cause sudden spikes.
   • For upstream miners, a sharp drop in metal prices would directly impair profitability.

5. Geopolitical and Trade Policy Risks:

   • Increasing trade barriers (tariffs, local content requirements) in the US and EU could hinder the export competitiveness of Chinese new energy companies.
   • Overseas expansion projects (e.g., in Saudi Arabia, Poland, Thailand) face regulatory, political, and operational risks in foreign jurisdictions.

6. Legal and Compliance Risks:

   • As seen in the Sunwoda case, product liability lawsuits can result in substantial financial losses and reputational damage.
   • Regulatory scrutiny on environmental, social, and governance (ESG) practices is increasing globally.

Rating / Sector Outlook

Sector Outlook: Overweight (Constructive)

We maintain an Overweight rating on the Power Equipment and New Energy sector. The industry is transitioning from a phase of chaotic expansion to one of structured growth and technological differentiation. The combination of policy support for orderly competition, robust demand in energy storage, and the emergence of AI-driven power needs creates a favorable medium-term environment.

Sub-Sector Ratings:

Recommended Companies & Logic

Investment View

1. Strategic Allocation: Focus on Quality and Innovation

In the current market environment, we advise institutional investors to shift focus from broad beta exposure to alpha-generation through selective stock picking. The era of indiscriminate capacity expansion is over; the winners will be those who demonstrate:
* Cost Leadership: Ability to maintain margins despite price pressures.
* Technological Moat: Proprietary technologies in solid-state batteries, high-efficiency PV, or advanced robotics.
* Global Footprint: Diversified manufacturing and sales networks to mitigate geopolitical risks.

2. Thematic Opportunities

A. The "AI + Energy" Convergence

The intersection of AI and energy is no longer a conceptual theme but a tangible driver of demand.
* Data Center Power: The exponential growth in AI computing requires robust, efficient, and reliable power distribution. Companies like Jinpan Technology and Kstar are well-positioned to supply transformers, switchgear, and UPS systems. We expect this segment to outperform the broader grid equipment market.
* Edge AI & Robotics: As AI moves to the edge (robots, autonomous devices), demand for high-density, safe batteries and precision mechanical components rises. Zhejiang Rongtai, Kedali, and Zhenyu Technology are key beneficiaries. The launch of compact personal robots (e.g., Agibot Q1) signals the beginning of consumer-facing robotics, opening a vast new TAM (Total Addressable Market).

B. Energy Storage as the New Growth Engine

Energy storage has surpassed PV in terms of growth visibility and margin stability.
* Independent Storage: The shift towards independent storage projects (64.83% of bids) indicates a maturing market model where storage operates as a standalone asset for grid services. This favors system integrators with strong software and grid-interaction capabilities, such as Sungrow and Hyperstrong.
* Large Cells: The adoption of 500Ah+ cells (CATL’s 587Ah) reduces BOS costs and improves efficiency. Companies that can reliably manufacture these large-format cells will gain market share.

C. Solid-State Battery: From Hype to Reality

The commencement of mass production by Xinjie Energy and advancements by DonutLab mark a critical turning point.
* Investment Strategy: While full-scale replacement of liquid electrolytes is years away, early adopters in niche high-value applications (aerospace, premium EVs) will drive initial revenue. Investors should monitor supply chain partners for solid-state materials (solid electrolytes, lithium metal anodes). Putailai and Xiamen Tungsten New Energy are prime candidates due to their material expertise.

3. Tactical Considerations

• Upstream vs. Downstream: With upstream prices (silicon, lithium) stabilizing but not surging, the value accrual is shifting downstream. We prefer mid-to-downstream manufacturers who can pass on costs and capture value from technological premiums. However, select upstream players with low-cost assets (e.g., Huayou Cobalt, Salt Lake Industry) remain attractive due to their integrated models and cash flow generation.
• Overseas Expansion: Companies expanding into Europe, Southeast Asia, and the Middle East (e.g., Capchem, Longpan) are diversifying risk and tapping into localized demand. However, investors must monitor execution risks and geopolitical headwinds. The Saudi and Polish investments by Capchem are strategic moves to secure long-term market access.
• Policy Watch: Keep a close eye on the implementation of the "Anti-Involution" initiatives. If enforcement is strict, it will significantly improve industry profitability. Conversely, any relaxation could lead to renewed price wars. The recent suspension of monopoly-like price-fixing by regulators is a positive step towards healthy market dynamics.

4. Valuation Perspective

Valuations in the new energy sector have corrected significantly over the past two years, reflecting the overcapacity concerns. Current P/E ratios for many leaders are at historical lows, pricing in pessimistic scenarios.
* Re-rating Potential: As earnings recover (evidenced by recent pre-announcements from Tinci, Sinoma, etc.) and growth narratives (AI, Storage, Solid-State) gain traction, we anticipate a multiple expansion.
* Relative Value: Compared to high-flying AI software stocks, new energy hardware companies offer a compelling combination of growth, cash flow, and reasonable valuations.

5. Conclusion

The New Energy sector is at an inflection point. The "painful" supply clearance is paving the way for a healthier, more sustainable industry structure. Simultaneously, new demand drivers from AI and energy storage are emerging. We recommend investors accumulate positions in high-quality leaders with strong balance sheets, technological advantages, and global reach. The short-term volatility should be viewed as a buying opportunity for long-term structural growth.

Top Picks for Q1 2026:
1. CATL (300750.SZ): Unassailable leadership, technological innovation, and margin recovery.
2. Sungrow (300274.SZ): Best-in-class storage growth and global brand strength.
3. Jinpan Technology (688676.SH): Pure play on AI data center power infrastructure.
4. Tinci Materials (002709.SZ): Beneficiary of electrolyte supply discipline and cost leadership.
5. Zhejiang Rongtai (603119.SH): High-growth optionality in robotics and EV safety components.

Appendix: Detailed Data Tables

Table 1: Energy Storage Bidding Leaders (Jan-Nov 2025)

Note: Total market size 376,486 MWh. Top 3 represent ~9.9% of total volume, indicating a fragmented but consolidating market.

Table 2: Solid-State Battery Milestones

Table 3: Key Financial Pre-Announcements Summary

Table 4: Risk Assessment Matrix

Analyst Commentary & Methodology

Methodology

This report is based on public information, including company announcements, industry association reports, government policy documents, and third-party data providers (e.g., Xinluo Lithium). Financial estimates are derived from company pre-announcements and consensus analyst expectations where available.

Analyst Perspective

Liu Qiang & Zhong Xincai emphasize that the "New Energy + AI" narrative is evolving from a speculative theme to a fundamental driver. The key differentiator in 2026 will be execution. Companies that can deliver on capacity expansions, maintain quality in mass production, and navigate international regulations will outperform.

The "Space PV" theme, while exciting, should be treated as a long-term call option. The immediate investment focus should remain on the tangible growth in energy storage and the AI-powered grid. The regulatory shift towards "anti-involution" is a critical positive signal, suggesting that the industry bottom in terms of profitability may have passed.

Disclaimer

This report is prepared by Pacific Securities for institutional clients. It does not constitute an offer to sell or a solicitation of an offer to buy any securities. Investors should conduct their own due diligence and consult with financial advisors before making investment decisions. The views expressed are subject to change without notice. Pacific Securities may hold positions in the securities mentioned herein.

Deep Dive: The "Anti-Involution" Policy Impact

To fully appreciate the investment thesis, it is crucial to understand the mechanics of the "Anti-Involution" (Fan Neijuan) policies and their likely impact on industry structure.

1. What is "Involution" in this Context?

In the Chinese new energy sector, "involution" refers to destructive competition where companies engage in price wars below cost, expand capacity indiscriminately, and compromise on quality to gain market share. This leads to:
* Eroded industry-wide profits.
* Reduced R&D spending.
* Potential safety risks (e.g., inferior battery cells).
* Waste of capital resources.

2. Policy Mechanisms

• Capacity Utilization Thresholds: The LFP initiative’s rule (pause expansion if utilization <70%) directly links new supply to existing demand. This prevents the chronic overcapacity that plagued the sector in 2023-2024.
• Cost Price Index: Establishing a transparent cost index makes it harder for companies to hide predatory pricing. It provides a benchmark for buyers and regulators to identify unsustainable bids.
• Monopoly Scrutiny: The SAMR’s intervention ensures that "self-discipline" does not become illegal price-fixing. The goal is fair competition, not no competition. This distinguishes legitimate cost-based pricing from collusive behavior.

3. Expected Outcomes

• Consolidation: Smaller, inefficient players will be forced to exit or merge. Market share will concentrate among leaders like CATL, BYD, and Sungrow.
• Margin Restoration: As price floors (implicit or explicit) stabilize, gross margins for mid-stream manufacturers should improve. This is already reflected in the strong earnings pre-announcements from Tinci and Sinoma.
• Quality Improvement: With less pressure to cut costs at all costs, companies can focus on product reliability and innovation (e.g., solid-state, large cells).

4. Investment Implication

Investors should favor industry leaders who benefit from consolidation. Second-tier players who relied on cheap financing and aggressive pricing to grow may face existential threats. The "Anti-Involution" policy effectively raises the barrier to entry, protecting the moats of established incumbents.

Deep Dive: AI + Energy Synergies

The convergence of AI and Energy is a multi-layered theme, impacting both demand and supply sides of the power equation.

1. Demand Side: AI’s Thirst for Power

• Data Centers: AI training and inference require massive amounts of electricity. Traditional data centers are being retrofitted, and new ones are being built with higher power densities.
• Grid Strain: This surge in demand puts pressure on local grids, necessitating upgrades in transmission and distribution equipment.
• Backup Power: Reliability is paramount for AI operations. This drives demand for UPS (Uninterruptible Power Supply) systems and onsite energy storage.
• Beneficiaries:
  • Transformers/Switchgear: Jinpan Technology, Sieyuan Electric.
  • Thermal Management: High-power chips generate significant heat, requiring advanced cooling solutions (liquid cooling). This intersects with new energy thermal management companies.
  • Storage: Onsite storage for peak shaving and backup.

2. Supply Side: AI Optimizing Energy

• Smart Grids: AI algorithms optimize grid load balancing, integrating variable renewable energy (solar/wind) more efficiently.
• Predictive Maintenance: AI analyzes sensor data from wind turbines and solar inverters to predict failures, reducing downtime and O&M costs.
• Battery Management Systems (BMS): AI-enhanced BMS can extend battery life and improve safety by predicting thermal runaway risks.
• Beneficiaries: Companies with strong software and data capabilities, such as Sungrow (smart storage), Hyperstrong (AI-driven EMS), and NARI Technology (grid automation).

3. Robotics: The Physical Manifestation of AI

• Labor Shortage Solution: Robots address labor shortages in manufacturing and logistics.
• New Component Demand: Humanoid robots require high-torque motors, precision reducers, and lightweight, high-energy-density batteries.
• Supply Chain Overlap: Many components for EVs (motors, batteries, electronics) are adaptable for robots. This allows companies like Kedali (structural parts) and Zhejiang Rongtai (insulation/mechatronics) to leverage existing expertise.
• Market Potential: While currently small, the long-term TAM for humanoid robots is comparable to the automotive industry. Early movers in the supply chain will enjoy significant growth as volumes scale.

Final Thoughts

The New Energy sector is entering a mature phase of development. The wild growth of the past decade is giving way to a more disciplined, technology-driven, and globally integrated industry. For institutional investors, this presents a unique opportunity to invest in companies with sustainable competitive advantages, rather than speculative growth stories.

We recommend a barbell strategy:
1. Core Holdings: Established leaders in batteries (CATL), storage (Sungrow), and materials (Tinci, Huayou) that offer stability, cash flow, and moderate growth.
2. Satellite Positions: High-growth innovators in AI power (Jinpan), robotics (Zhejiang Rongtai), and next-gen tech (solid-state players) that offer upside optionality.

By focusing on these quality names and monitoring the execution of "anti-involution" policies, investors can navigate the short-term volatility and capture the long-term value creation in the New Energy and AI sectors.

End of Report