CITIC Construction Investment: The new lithium battery cycle is mainly driven by energy storage, which may lead to total surplus in 2027

The Zhitong Finance App learned that CITIC Construction Investment released a research report saying that the significant excess in the lithium battery sector since September '25 is mainly due to the double increase in industry profits due to the energy storage explosion. Later, the sector trend strengthened under the logic of clear domestic energy storage capacity subsidies and higher international oil prices benefiting from new energy sources. However, since May, with the opening of the Strait of Hormuz and the decline in international oil prices, market expectations have begun to converge and question demand in 2026-27. The core contradiction is ① What is the relationship between demand growth rate and supply and demand in '27? ② When will this kind of expectation form a consistent expectation? The bank believes that expectations that are excessively pessimistic for 27 years will see lithium carbonate prices stabilize in ① July-November; ② will be revised as energy storage tenders, 27-year orders, and commodity guidelines are gradually confirmed, and the sector will also usher in opportunities for restoration.

CITIC Construction Investment's main views are as follows:

This new lithium battery cycle is mainly driven by energy storage

The fundamental logic of energy storage demand is the resonance between the increase in the penetration rate of new energy generation and the reduction in the cost of energy storage systems. The core driver is that Document No. 136 promotes the full entry of new energy into the market, widens the price gap between peaks and valleys, and the introduction of Document No. 114 clarifying electricity prices for energy storage capacity, giving stable income expectations for energy storage. Judging from the revenue model, the price of capacity electricity is based on the stable guaranteed income of the project. Combined with peak and valley arbitrage, independent energy storage can obtain 5%-20% of the full investment IRR. The bank expects to add 510 GWh of energy storage capacity in 26 years, +69% over the same period last year.

Demand in '26 increased by about 100 GWh compared to the beginning of the year, mainly from commercial vehicles, European passenger cars, vehicles exported from China, European energy storage, etc.

Global demand for lithium batteries is expected to be 3153 GWh in 2026, an increase of 37% over the previous year. Compared with the beginning of the year, improvements mainly came from: ① With the help of both models and policies, European trams maintained a high growth rate; ② The economy of electric commercial vehicles showed that in 26 years, pure electric heavy trucks/light trucks/vans saved 33.5/10.9/118,000 yuan in fuel vehicles compared to the 5-year TCO, and the cumulative sales volume of electric heavy trucks in January-May was 104,000 units (upper risk caliber), exceeding expectations by +69% over the same period; ③ The total export of electric passenger cars in January-June was 2.231,000, which greatly exceeded expectations at the beginning of the year; ④ European energy storage, especially household storage, industrial and commercial storage Expectations. The above required repairs lead to an overall battery upgrade of 100 GWh.

Looking ahead to 27, the industry's growth rate is expected to fall in the 24%-32% range (actually may be pivotal). The current pricing forecast of the market may be lower than 20%, and there is a gap in expectations

Currently, the market is pessimistic about domestic large storage demand in '27, mainly due to concerns about the pace of installation connections to the grid, the narrowing trend of peak and valley price differentials, and the sustainability of future demand in the 25-year strong installed capacity provinces. In fact, the current recruitment and bid data still show a year-on-year growth rate of more than 100%. Document No. 114 pushes the three provinces of Xiaxi, Northeast China, Yunguichuan, and the eastern coastal provinces to bring wave-like growth momentum. Energy storage in Europe, Germany, Poland, Spain and other places has become a new infrastructure trend. The bank believes that energy storage in '27 will still achieve the conservative/neutral battery demand of 1365/1490 GWH. After adding power, the bank expects lithium battery demand to fall between 3920-4167GWH, +24%-32% compared to the same period, with a probability of falling between 28%-32%.

The supply chain is fragmented, and some links continue the trend of tight balance, but the current market's pricing for lithium battery energy storage may become completely excessive in 2027

Looking at the relationship between supply and demand, if the lithium battery growth rate exceeds 20% next year, the diaphragm, copper foil, and aluminum foil will remain tight; if it exceeds 28%, the anode and lithium carbonate may also enter a tight balance. Currently, the unit profit of the lithium battery materials sector is basically within the 30% fraction of history, with 15-20xPE as the anchor. The unit profit included in the current stock price is generally lower than the current actual profit level, which means that the stock price will become excessive in 2027. It is expected that after future demand is clarified, the market will revise this pricing

Investment advice

After demand expectations are clarified, the sector will usher in significant repair opportunities. On the left, Ningde Era, Helen Zhe, and Dingsheng New Materials, which are undervalued targets with definitive performance, followed by sector opportunities in the process of revising overall expectations. Recommended ① Materials: Dingsheng New Materials, Helen Zhe, Enjie Co., Ltd., Tianci Materials, Polyfluoride, Xinbang, Kodali, Shangtai Technology, Zhongke Electric, Betray, Hunan Yuneng, Fulin Precision, Zhenyu Technology ② Lithium Carbonate (Metal Group Coverage)), Tianqi Lithium (metal group coverage), Yongxing Materials (metal group coverage), Ganfeng Lithium (metal group coverage) ), Salt Lake Co., Ltd. (metal group coverage) ③ Battery: Ningde Era, Penghui Energy, Everweft Lithium Energy, Haopeng Technology, Zhengli New Energy, Guoxuan Hi-Tech, and Sunwoda.