JPMorgan Chase: Battery Stocks Correcting is a Good Time to Invest
N.R. Finch
Chinese battery stocks have pulled back 10%–20% since early May. J.P. Morgan says fundamentals haven't broken — this is a mispriced entry window.
Why did battery stocks fall so hard?
Battery supply-chain stocks have dropped 10%–20% since early May, while the CSI 300 fell just 2% over the same period.
J.P. Morgan pins the sell-off on two factors: fears that rising lithium prices will suppress demand, and a capital rotation out of batteries into AI names.
In plain terms = batteries are still selling — the money just chased AI first, and battery stocks got caught in the crossfire.
How is this cycle different from the 2021 super-cycle?
The 2021 super-cycle ran on a single driver — Chinese passenger EV demand. Lithium carbonate surged over 1,300%, and valuations hit 40–80× P/E.
Today is structurally different: the Fed funds rate sits at 3.75%, capping multiple expansion. The sector trades at 15–25× 2027E P/E, and most stocks remain 30%–80% below their 2021 peaks.
This means → the 2021 playbook of "buy the rally" does not apply. Returns in this cycle come from earnings delivery, not from multiples re-rating.
How has the demand mix fundamentally shifted?
Chinese passenger EVs accounted for 45% of global battery demand in 2022; that share has fallen to 24%. Energy storage has surged to roughly 42%.
J.P. Morgan raised its 2026 global EV + storage battery demand forecast to 2.6 TWh and 2027 to 3.3 TWh — up 18% and 22% from prior estimates.
Within that, 2026 global storage demand was lifted to 1,136 GWh, up 78% year-on-year, with the Chinese storage market as the core upside surprise.
In plain terms = the biggest battery buyer is no longer "electric cars" — it is "energy-storage plants." That is a wholesale shift in the industry's growth thesis.
Could the storage boom hit a sudden wall?
China's NDRC has set a 180 GW storage installation target for end-2027. Project developers typically procure batteries six months ahead.
J.P. Morgan estimates actual installations could exceed 320 GW, but front-loaded procurement will cause a temporary slowdown in storage battery shipments in H2 2027.
This reflects a classic pull-forward hangover — orders bunch early, then inventories digest. The long-term trajectory is unchanged: China's storage penetration is projected to rise from 7% today to 18% by 2030.
Who does J.P. Morgan like most?
CATL (宁德时代) remains the top sector pick. Stripping out government subsidies, its unit recurring net profit held steady at ¥0.09–0.10/Wh from 2022 to 2025 — far above peers.
CALB (中创新航) was tactically upgraded to overweight with a HK$40 target, implying roughly 13× 2027E P/E. It ranks second industry-wide in storage and commercial-vehicle battery exposure, with storage shipments reaching 43% of its mix in 2025.
Key customer wins stand out: CALB is expected to become Xiaomi's lead cell supplier for its new SUV with over 50% share; it exclusively supplies Huawei's HarmonyOS-linked Stelato S9 and Luxeed models; and its Xpeng LFP share jumped from 30% to 70%.
Putailai (璞泰来) was upgraded to overweight at a ¥42 target. The market still treats it as an anode-materials company, but its separator business — specifically coated separator, a process that applies a thin layer to battery film to prevent short circuits — now contributes over 90% of profits and 85% of 2025E net income.
Can you trust the "book profits" of second-tier battery makers?
After stripping out government subsidies, the gap is stark: EVE Energy's unit recurring net profit fell from ¥0.04/Wh to ¥0.02; CALB's stood at just ¥0.01 in 2025; Gotion High-Tech has lingered at ¥0.002–0.004 for years.
Sunwoda's power division and Rept Battero are at or near operating losses once subsidies are removed.
Depreciation policies widen the divide further: CATL depreciates equipment over just 5.1 years, BYD even faster at 3.9 years, with 100% of R&D expensed. Gotion, by contrast, stretches depreciation to 12.3 years and capitalises 28% of R&D spending.
This means → the leaders' reported profits carry no accounting cushion. Second-tier players lean on longer depreciation and capitalised R&D to prop up earnings — and face significant asset-impairment risk the moment technology turns over.
Content is for reference only, not financial advice.