GF Securities has released a research report stating that, as the lithium battery cycle emerges from its bottom and leading downstream battery manufacturers show strong willingness to expand production, the firm is optimistic about the growth potential of lithium battery equipment in the new cycle. The firm recommends focusing on: (1) equipment manufacturers with full-line delivery capabilities; and (2) equipment manufacturers set to benefit from incremental demand related to solid-state and dry electrode processes. Iterations in new technology are expected to bring a new wave of equipment demand. The main views of GF Securities are as follows:
The lithium battery cycle is gradually recovering, and capacity utilization rates at leading lithium battery manufacturers have reached historically high levels. After a recovery period in 2025, the revenue levels of leading lithium battery companies have further improved, and the capacity utilization rates of their production lines have quickly returned to high levels. According to CATL's Q1 2026 report, the company achieved revenue of 129.13 billion yuan in Q1 2026, a year-on-year increase of 52.4%; it achieved a net profit attributable to shareholders of 20.74 billion yuan, up 48.5% year-on-year, maintaining high growth. According to CATL's 2025 annual report, as of the end of 2025, CATL's total battery production capacity was 772 GWh, with an output of 748 GWh. The capacity utilization rate for 2025 reached 96.9%, exceeding the previous cycle's high (the 2021 utilization rate was 95.0%) and setting a new historical record. Sustained high capacity utilization indicates that existing production lines are near full capacity, creating an urgent need for expansion.
The potential losses from insufficient capacity far outweigh the costs of idle production lines, suggesting a more optimistic outlook for lithium battery equipment demand. From an investment perspective, based on the environmental impact report for CATL's Huidong Power Battery Phase II project, the current unit production line investment for liquid batteries is approximately 100 million yuan per GWh. Furthermore, according to CATL's 2025 annual report, the company's equipment depreciation period is about 3-10 years, with a residual value of 0-5%. Using a median depreciation period of 6 years and a residual value rate of 5%, the corresponding annual depreciation rate is approximately 16%, and the annual depreciation cost per GWh of production line is about 16 million yuan. From a return perspective, in 2025, CATL achieved revenue of 423.7 billion yuan and a net profit of 76.8 billion yuan, with lithium battery sales of 661 GWh. This corresponds to revenue of 641 million yuan and a net profit of 116 million yuan per GWh. The payback period for a production line is only about one year, meaning expanded production line investment does not pose a significant burden for leading manufacturers like CATL, which have ample orders. However, according to CATL's investor relations record dated March 9, strong market demand in 2025 led to some order spillover due to short-term capacity constraints. GF Securities believes that for manufacturers like CATL, the potential losses from insufficient capacity already far exceed the idle costs associated with overcapacity. With continued growth in downstream demand, low equipment idle costs, and high production line returns, the motivation for lithium battery manufacturers to expand production in this cycle will be stronger, and expectations for lithium battery equipment demand can be more optimistic.
Risk warnings include new energy vehicle sales falling short of expectations, a slower-than-expected pace of lithium battery capacity expansion, slower-than-expected development of solid-state battery technology, and intensifying industry competition.
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