As the "third pillar" of batteries, separators are the most competitive segment of the lithium battery supply chain. In 2026, energy storage took over from power batteries as the largest incremental source of demand in the lithium battery industry chain. SNE data shows that in the first half of the year, global energy storage lithium battery shipments reached 461.3GWh, up 71% year-on-year, with China accounting for nearly half at 202.5GWh, up 49% year-on-year. Upstream separators became one of the benefiting tracks. CITIC Securities expects that wet-process separator capacity utilization rates will rise to 88% and 98% in the third and fourth quarters respectively.
According to Zhitong Finance APP, lithium-ion battery separator leader Senior Material (ASX: 06067) recently released its 2026 third-quarter report, with revenue and shareholder net profit growing 73.57% and 972.41% respectively, a marked acceleration from the first half. For the first three quarters, revenue reached 4.492 billion yuan, up 51.85% year-on-year; shareholder net profit was 354 million yuan, up 209.28% year-on-year; non-GAAP net profit was 317 million yuan, up 1,900.22% year-on-year; and net margin stood at 7.06%.
The company's return on assets remains relatively low, with annualized ROA and ROE of 1.63% and 4.32% respectively for the first three quarters. However, its cash flow is ample, with monetary funds of 4.257 billion yuan as of September 2026.
Revenue Maintains Double-Digit Growth, Overseas Market Ramps Up
According to Zhitong Finance APP, Senior Material's separators mainly include wet-process separators, dry-process separators, coated separators and various functional films, with products widely used in new energy vehicles, energy storage stations, electric bicycles, power tools, aerospace, 3C digital devices and medical environments.
The company's performance is impressive, with revenue maintaining double-digit growth every year, while net profit began to reverse its declining trend this year. The high revenue growth is driven by a "domestic + overseas" dual-engine strategy. Based on the first half of this year, domestic revenue grew 39.9% while overseas revenue surged 233.3%, accounting for 68.8% and 31.2% of revenue respectively, showing that overseas markets have become a core growth engine.
The company's products are supplied in bulk to first-tier overseas customers including LG Energy Solution, Samsung SDI, Envision AESC, SK On, Murata, and the power battery subsidiary of Volkswagen Group.
Data source: Company financial reports. Strong overseas customer demand is underpinned by Senior Material's self-developed capabilities. In the first three quarters of 2026, its R&D expenses were 267 million yuan, up 32.64% year-on-year, with an R&D expense ratio of 5.94%.
The company simultaneously masters key equipment technology for dry-process, wet-process and coating production. Supporting equipment for separator production lines, including raw material handling equipment, extrusion casting equipment, stretching equipment, extraction equipment, recovery systems, slitting equipment, coating equipment and testing and analysis equipment, are all independently developed and designed.
Its globally first-launched fifth-generation super wet-process line has a width exceeding 8 meters and single-line capacity of 250 million square meters, more than doubling single-line capacity compared to the fourth-generation wet-process line, setting a new industry standard for production efficiency. In addition, its products have gained customer recognition, such as repeatedly receiving the "Quality Excellence Award" from top customer LG Energy Solution.
In terms of profitability, Senior Material's gross profit grew in tandem with revenue. In the first three quarters of 2026, gross profit accelerated, with gross margin rising 6 percentage points to 28.72%. Shareholder net profit improved significantly. On a quarterly basis, in Q1-Q3 2026, the company's shareholder net profit was 29 million yuan, 175 million yuan and 150 million yuan respectively. The first quarter still carried the industry chill from last year, while the second quarter began to reverse and grow substantially. The shareholder net margin for the first three quarters was 7.88%, up 4.03 percentage points year-on-year.
Industry Leadership Remains Solid, Valuation Retreats but Earnings Still Have Expectations
From an industry perspective, structural changes in demand bring opportunities. The rising penetration of large-capacity energy storage cells places higher demands on separator strength and consistency, with the wet-process share rising from 76.9% in 2024 to 80.7% in 2025. Leading battery manufacturers have begun large-scale procurement of 5-micron ultra-thin base films, and only a few manufacturers including Enjie, Senior Material, Zhongcai and Jinli have stable supply capability. Coating has shifted from "optional" to "standard," driving "volume and price increases" this year.
Moreover, separators account for about 10% of battery costs but represent the segment with the highest technical barriers and longest certification cycle among the four main materials: a wet-process production line typically requires more than two years from equipment ordering to stable mass production, and from sample submission to entering a leading battery manufacturer's qualified supplier list takes another year and a half.
The other side of the barrier is stickiness. Once customers complete verification, they rarely switch suppliers. This is the confidence behind Senior Material's coverage of over 100 battery manufacturers globally and cooperation with all top ten manufacturers including CATL, BYD, LG Energy Solution and Samsung SDI.
According to Frost & Sullivan, in 2025 the company held 11.6% global battery separator share, ranking second; 21.5% dry-process separator market share, ranking first globally; and 9% wet-process separator market share, ranking fourth globally.
Leveraging its scale advantages, it is noteworthy that battery solid-state evolution has spawned new categories such as rigid skeleton films and solid electrolyte films. The company's "Gurui" series rigid skeleton film was the first globally to enter mass production in 2025, compatible with multiple routes including semi-solid, quasi-solid and all-solid-state.
Beyond its core business, the company has entered the semiconductor materials business. In February 2026, it acquired a 13.5% stake in Bangci Electronics, and in August announced it would further increase its holding to 73.48% through transfer, building a second growth curve. As one of the few domestic enterprises with multi-layer piezoelectric ceramic mass production capability, Bangci is expected to accelerate the domestic substitution process.
Senior Material's strong performance has also gained recognition from major investment banks. For example, a research report by Guolian Minsheng Securities believes that the recovery in power battery and energy storage demand as well as improved separator prices and profitability mean the company's core business is entering a repair window. As a leading global lithium battery separator company, considering the profitability improvement in the separator core business and semiconductor materials layout, it maintains a "Recommended" rating. A research report by Soochow Securities believes the company's price increases have landed and product structure has improved, with a unit profitability inflection point already apparent, and semiconductor materials empowering a second growth curve, maintaining a "Buy" rating.
Overall, Senior Material's performance accelerated this year, with all three quarters performing well. On one hand, revenue maintained a high growth trend, driven by "volume and price increases" plus overseas revenue ramp-up. On the other hand, profitability improved significantly, with both gross margin and net margin increasing, though return on assets remains low. The company's industry leadership position is solid, structural industry opportunities bring growth space, and the acquisition of Bangci is expected to create a second growth curve. Affected by market conditions, the company's stock price has retreated substantially, but earnings still have expectations. After high growth in the first three quarters, whether fourth-quarter gross margin can rise with the improved structure of newly signed orders, and whether overseas premiums from the Malaysia base after production can be realized, still require further attention to the company's development dynamics.
Comments