China EV/ESS battery: Fundamentals hold; 2Q earnings are the key

Research evidence excerpt

China EV/ESS battery: Fundamentals hold; 2Q earnings are the key

6 July 2026

China EV/ESS battery EquitiesAutomobiles

Fundamentals hold; 2Q earnings are the key China

◆ Recent share price weakness has diverged from resilient

fundamentals. 2Q earnings should be next key catalyst Yuqian Ding*

Head of China Technology & Autos Research

◆ Second half of the upcycle is where earnings quality and next The Hongkong and Shanghai Banking Corporation Limited

yuqian.ding@hsbc.com.hk

growth driver visibility matter more than beta exposure +852 2288 5108

◆ CATL (H/A Buy/Buy; TP HKD790/RMB547) is our preferred ElaineAnalyst,Chen*China(Reg.AutosNo. S1700524030001)

pick in the battery sector HSBC Qianhai Securities Limited elaine.chen@hsbcqh.com.cn

+86 010 5795 2364

What happened? Price correction has outpaced fundamental changes.

The battery sector has materially underperformed despite resilient operating

* Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is

fundamentals. Over the past two months, the China battery index has declined 13%, not registered/ qualified pursuant to FINRA regulations

while CATL A-shares have fallen 17%. In contrast, industry demand has remained

robust, with China’s battery sales (including exports) growing 43% YoY in both April

and May. Production schedules for June and July continue to point to sequential

growth, while lithium carbonate prices have stabilised within the RMB150k–200k/t

range rather than moving into another extreme cycle. We therefore believe the recent

correction reflects profit-taking after the sector’s strong rally in the first five months

(+21% vs. CSI300 +4% in the first five months of the year) and market rotation, rather

than weakening fundamentals. Against a backdrop of resilient demand and stabilising