Citigroup: After examining China's battery supply chain, production capacity plans are expected to be lackluster in the next few months, and China Airlines (03931) “buy” rating target price of HK$33.1

The Zhitong Finance App learned that Citi released a research report saying that according to ZE Consulting data, the actual battery production capacity plan for October was about 3% lower than the mid-October channel survey; the November capacity survey showed that the production capacity plans of the five major battery manufacturers are expected to be reduced by another 2% to 187.5 gigawatt-hours on a monthly basis. The bank estimates that the lackluster trend will continue in the coming months. The reasons include that the export tax rebate rate will be reduced from 6% to 0% in 2027, the early export window is expected to gradually narrow until the end of the year, and the Lunar New Year off-season is approaching.

Citi pointed out that with the recent introduction of new battery production capacity, the average short-term battery sales price and profit margin will face double pressure. Furthermore, China Airlines (03931) is expanding its market share with Ideal Automobile-W (02015) and Xiaomi Group-W (01810), partially offsetting the impact of weak demand for electric vehicle batteries.

The bank gave China Innovation Airlines a “buy” rating, with a target price of HK$33.1. The valuation is based on a 2026 forecast price-earnings ratio of 18 times, which is comparable to the current average of global battery producers.