Jinan Shengquan Group "Valuation turning fair; downgrade to Neutral" (Neutral)

Research evidence excerpt

Jinan Shengquan Group "Valuation turning fair; downgrade to Neutral" (Neutral)

b)

and Japan). Also, we expect PPO/OPE sales to remain flattish in Q425/Q126. While we

From To % ch Cons.

remain confident in Shengquan's ability to gain market share, near-term visibility has 12/26E 1.62 1.41 -13 1.62

fallen; we trim our forecasts of CAGR for PPO/OPE/CH from 80% to 70% over 2024- 12/27E 2.01 1.86 -7 1.95

28E, with sales volume reaching 2,200/900/180 tons in 2028E. This implies a combined 12/28E 2.31 2.15 -7 2.28

sales/gross profit contribution of 12%/25% in 2028E. That said, there are upside risks to

our forecast, driven by potential temporary PPO/OPE price hikes. Gus Huang, CFA

Analyst

S1460522090006Battery materials: long-term volume driver yet to materialise

gus.huang@ubs.com

Near term, we haven't spotted signs of mass adoption of SiC anodes in the EV supply +86-21-3866 8541

chain, probably due to the subdued sales outlook and intensified price pressures.

Sky Hong

Meanwhile, instead of selling only porous carbon, Shengquan is penetrating into SiC

anode production as well, investing Rmb2.5bn to ramp capacity. Ultimately, we view this S1460520010001

segment more as a volume growth driver than margin driver, due to the price-for- sky.hong@ubs.com

volume nature of EV supply chain. Shengquan forecasts ASPs for SiC anodes/porous +86-21-3866 8856

carbon to drop c60% within 10 years of production, leading to a GM of 22-24%, per its

Mandy Liu

convertible bond prospectus, in line with its commoditised synthetic resins but lower Analyst

than that of its AI PCB resins. We turn cautious on the segment's outlook, cutting 2024- S1460521110001

28E gross profit CAGR from 79% to 64%, primarily on lower GM of porous carbon. mandy.liu@ubs.com

+86-21-3866 8831