The Zhitong Finance App learned that DBS released a research report saying that profitability in the Ningde Era (03750,300750.SZ) is expected to weaken due to rising tax rates, and unit profit is expected to fall month-on-month, but there is still potential for long-term growth. Maintaining a “buy” rating, the bank lowered its target price for H shares from HK$736 to HK$695, lowered its target price for A-shares from RMB 484 to RMB 438, and lowered its earnings forecast for next year from RMB 24.2 to RMB 21.9.
Ningde Era's third-quarter revenue was 165.2 billion yuan, up 58.6% year on year, up 11.8% month on month; battery shipments exceeded 260 gigawatt-hours, up 58% year on year, up 12% month on month. Gross margin fell 5.1 percentage points year on year and 2.5 percentage points month on month to 20.7%; net account margin fell 4.9 percentage points year on year and 2.4 percentage points month on month to 12.9%.
Profit attributable to the company in the third quarter increased 14.5% year over year, but fell 5.8% month-on-month to RMB 21.2 billion, and unit profit fell 16% month-on-month to RMB 0.082 per watt-hour, lower than market expectations, mainly affected by rising tax rates and lower end product portfolios. The VAT rebate rate for exports of battery products was reduced from 9% to 6% in April of this year. The adverse effects were mainly reflected in the third quarter; the 2% battery consumption tax, which took effect in September this year, was largely absorbed by battery manufacturers at tax-inclusive prices due to failure to complete renegotiations with customers in a timely manner.
The bank expects the industry's profitability to remain under pressure next year because China's battery export tax rebate rate will drop from 6% to zero in 2027, and battery consumption tax will rise further to 4% in September 2027. The pressure on unit profit is likely to continue. However, the company continues to target a 20% to 30% year-on-year increase in shipments in 2027, and expects sales to expand steadily until 2030. If overseas demand for electric vehicles and energy storage batteries is stronger than expected, the continued increase in shipments should partially offset the decline in unit profit.