Damo: The concerns of the Ningde era (03750) seem to have been exaggerated and stock prices do not reflect improvements in fundamentals

The Zhitong Finance App learned that Morgan Stanley released a research report saying that the Ningde Era (03750, 300750.SZ) was traded at a yield of about 6.2% in the A-share market, including repurchases, which seemed to reflect a highly pessimistic situation; the market still focused on known risks and generally ignored fundamental improvements. The bank believes that the concerns surrounding the reduction in profit forecasts have been exaggerated and regards it as the preferred stock.

The bank pointed out that even if the profit for the third quarter fell at about 24 billion yuan to 25 billion yuan, which is similar to the expectations of some sellers, it is still fully in line with the bank's profit forecast of about 95 billion yuan for the whole year. The pessimistic view assumes that the market is expected to reach 26 billion yuan or more in a single quarter, corresponding to about 100 billion yuan for the whole year (up about 40% year on year), but if buyers actually use this as an anchor, the stock price performance should be far better than the current situation since April; continuing weakness indicates that market expectations have clearly declined from the scenario of about 100 billion yuan.

The bank believes that recent positive fundamentals have not been reflected in stock prices, including the re-acceleration of energy storage deployment, strong tendering and the implementation of capacity electricity price policies, the acceleration of truck electrification at a high level of diesel prices, and China's “anti-domestic roll” push for industry integration; Geely's sale of battery assets to the Ningde Era has also weakened automakers' battery self-sufficiency investment logic. The bank also indicated that the company has a return on equity of about 30% and a return on invested capital of about 50%. The current price valuation seems to suggest a sharp decline in profit next year, in contrast to management's guidance of increasing profits by more than 25% in 2027; driving factors such as the acceleration of European electric vehicle penetration, the electrification of commercial vehicle fleets, and global demand for energy storage are also improving rather than worsening.

Regarding potential battery consumption tax, the bank's basic situation is still that as long as industry demand continues to increase by more than 20% year on year, battery manufacturers can generally transfer it downstream; if it is completely absorbed by itself, more than 30% of the industry's production capacity may fall into negative cash profit. In the context of tightening supply and loss of production capacity, industry conditions should support the transfer.