Risk Reward Update

Research evidence excerpt

Risk Reward Update

UpdateM

RiskRisk RewardReward– GEM Co- GEMLtd (002340.SZ)Co Ltd (002340.SZ)

Slower-than-expected high nickel penetration; rising market competition

PRICE TARGET Rmb6.00 UNDERWEIGHT THESIS

Our price target is derived using a discounted cash flow model, which discounts earnings ▪Overall the penetration rate of high-nickel

forecasts through 2030e, using a cost of equity of 12.2%. We apply a risk-free rate of 2.85%, lithium-ion batteries has been slower than

risk premium of 8% and a beta of 1.2. Our terminal growth rate is 3%. expected. In addition, overall market

competition within the ternary precursor Rmb8.47

space has risen notably, resulting in further

Consensus Price Target Distribution Rmb6.00 Rmb9.80 price discounts, and thus margin contraction.

MS PT

progress in upstream nickelSource: Refinitiv, Morgan Stanley Research Mean Morgan Stanley Estimates ▪GEM's

projects is comparatively slower than its

peers, which may make it less competitive

amid market competition.

RISK REWARD CHART

Consensus Rating Distribution

CNY

50% Overweight

25% Equal-weight

Rmb9.00Rmb9.00(+21.95%)Rmb9.00(+21.95%)(+21.95%)

10 25% Underweight

MS Rating

7.5 Rmb7.38Rmb7.38Rmb7.38 Source: Refinitiv, Morgan Stanley Research

Rmb6.00Rmb6.00(-18.70%)Rmb6.00(-18.70%)(-18.70%)

5 Risk Reward Themes

Secular Growth: Positive

Rmb4.30Rmb4.30(-41.73%)Rmb4.30(-41.73%)(-41.73%) View descriptions of Risk Rewards Themes here

2.5

JUN '25 DEC '25 JUN '26 JUN '27

Key: Historical Stock Performance Current Stock Price Price Target

Source: Refinitiv, Morgan Stanley Research

BULL CASE Rmb9.00 BASE CASE Rmb6.00 BEAR CASE Rmb4.30

21.4x 2026e P/E 14.3x 2026e P/E 10.2x 2026e P/E

Our bull case value is derived from our bull Our price target is also our base case We assign bear case values to the more