Huaan Securities: Maintaining China Innovation Airlines (03931) “Buy” Rating and Maintaining Key Recommendations

The Zhitong Finance App learned that Huaan Securities released a research report stating that China Airlines (03931) continues to invest in high-rate energy storage and data center power supplies. On October 29, the Global Ecological Conference launched a 120AH high-power battery cell and 768kW energy storage product solution for AIDC, further extending it to high-power and high-reliability power supply scenarios. The investment proposal in 2026 will mainly benefit from the introduction of new domestic models and share growth. In 2027, overseas designated passenger vehicles and energy storage projects will enter the expansion period, and profit levels will continue to rise. At the same time, considering consumption tax transmission, the company is expected to achieve net profit of 22.9/55.7/8.17 billion yuan in 2026-2028 (previous value was 30.6/67.1/9.69 billion yuan), corresponding to PE10/4/3x, maintaining a “buy” rating and maintaining key recommendations.

The main views of Huaan Securities are as follows:

Q3 revenue increased 56% year over year, and net profit to mother increased 73% year over year.

Using Chinese corporate accounting standards and consolidated statement caliber estimates, 2026Q1-Q3 achieved revenue of 45.949 billion yuan, +61.01% year-on-year; net profit to mother of 1,366 billion yuan, +99.54% year-on-year. Q3 achieved revenue of 18.865 billion yuan in a single quarter, +55.66% year over year and +23.46% month on month; net profit to mother was 418 million yuan, +73.42% year over year, and revenue scale continued to increase.

In terms of profitability, the gross profit margin for the Q3 quarter was 15.49%, -0.04pct year over year and -0.18pct month-on-month. Overall, it remained relatively stable. R&D expenses during the same period were 783 million yuan, +29.07% year-on-year; financial expenses were 389 million yuan, a year-on-year increase, and asset impairment losses were about 293 million yuan, mainly due to the short-term impact of falling lithium carbonate prices.

Operational quality: Cash flow improved markedly month-on-month, and investment to expand production remained high.

The net cash flow from the company's operating activities in the first three quarters of 2026 was 5.466 billion yuan, +2.83% year over year; of this, Q3 was 2,790 billion yuan in a single quarter, a significant improvement over Q2. The company paid 22,946 billion yuan in cash for the purchase and construction of fixed assets and intangible assets in the first three quarters, about double the previous year, indicating that the company's production capacity continues to expand and technology investment continues to advance.

Power batteries: Domestic installed capacity is at the top, and commercial vehicles and overseas customers continue to expand.

According to statistics from the Power Battery Industry Innovation Alliance, from January to September 2026, the company loaded 37.02 GWh of power batteries in China, with a market share of 6.44%, ranking third; in September, it loaded 6.04 GWh in a single month, with a market share of 6.97%. The company continues to deepen cooperation with passenger car customers while expanding into market segments such as commercial vehicles.

Energy storage business: High-capacity products are being iterated at an accelerated pace, and overseas projects and AIDC applications continue to advance.

On the energy storage side, the company continues to promote the layout of high-capacity batteries and liquid-cooled energy storage systems above 600 Ah. In March and June 2026, the company disclosed Japan's 380 MWh and 220 MWh energy storage project cooperation respectively, totaling 600 MWh, reflecting the development progress of overseas projects.

Risk Alerts

Raw material prices fluctuate greatly; downstream demand falls short of expectations; industry competition intensifies