CITIC Construction Investment: The profit center for the first time to “buy” rating units to Zhengli Xinneng (03677) is expected to gradually move upward

The Zhitong Finance App learned that CITIC Construction Investment released a research report saying that Zhengli Xinneng (03677) 2024 and 2025H1 achieved positive net profit returns to mother and operating profit respectively, and profits have reached an upward inflection point. The estimated revenue for 2025, 2026, and 2027 is 80.28, 128.05, 18.215 billion yuan, and net profit of 5.44, 12.37 billion yuan, and 1,730 billion yuan, corresponding to PE 38, 17, and 12 times. The 2026 and 2027 valuations are lower than the industry average. Considering that the company's profit growth is strong, the shipping and profit growth rate far exceeds the industry, and the first coverage gives a “buy” rating.

CITIC Construction Investment's main views are as follows:

Performance: The company achieved total revenue of 4.16 billion yuan in 2024, +10.8% year-on-year, and net profit of 90 million yuan to mother, turning a loss into a profit for the first time. 2025H1 revenue was 3.17 billion yuan, +71.9% year-on-year, and net profit to mother was 220 million yuan. Among them, the 2025H1 operating profit was 887.3 million yuan, which was corrected for the first time.

Volume: Targeted model release, shipment growth rate continues to be higher than that of the industry

1) Shipments: New targeted customers continued to increase the volume, driving the company's shipments in the first half of this year to 99.2% year-on-year increase to 7.82 GWh, and the market share increased from 0.03% in 2022 to 2%.

Looking ahead to 2025H2 and 2026, the bank expects the volume of models such as Zero Run and Guangzhou Automobile to continue to grow. Shipments of 18.89 and 30.04 GWh are expected to be achieved throughout 2025 and 2026, up 59% and 59% year on year, far higher than the bank's expectations for global electric vehicle sales to increase 17% year on year next year.

2) Production capacity: The estimated operating rate increased to 76.2% in 25 years to guarantee customer shipments, and production is expected to be at full capacity during the peak season. In 2026 and 2027, it is expected that 10 and 15 GWh will be added to undertake new designated projects.

Profit: Scaling up and increasing utilization rates will continue to drive the profit center of the company unit to continue to rise

The bank reviewed the company's battery unit profit correction process, and believes that the decline in amortization of R&D and management expenses brought about by large-scale expansion is the core factor, followed by the decline in unit depreciation due to the increase in operating rate. Looking ahead to 2025H2 and 2026, shipments are expected to increase far higher than the industry's growth rate, and it is expected that large-scale distribution of R&D and management expenses will continue to decline; considering the imminent commissioning of 10 GWh of additional production capacity in 2026, the bank expects the mobility rate to increase from 62.9% of 25H1 to 76.2% and 86.3%. Depreciation and amortization is expected to decline further, and unit profit is expected to expand further.

Second growth curve: Aviation batteries have achieved mass production and delivery, and the increase in quantitative profit is expected to create a second growth curve

The company is the first power battery company in the Chinese power battery industry to simultaneously obtain AS9100D aerospace quality management system certification and the China Civil Aviation Administration (CAAC) airworthiness certification. It is also one of the first low-altitude economic pioneers in Suzhou. Three high and one fast batteries have achieved mass production and delivery of power batteries for fixed-wing manned electric aircraft. Aviation batteries require high energy density and safety. The value and profit level of batch delivery is expected to be higher than that of automotive power batteries, and is expected to become the second growth curve for the company's profit.