Shenwan Hongyuan Q1 2026 Electric Power and New Energy Industry Performance Outlook: The lithium battery energy storage cycle inflection point is obvious, and wind power demand drives continuous profit improvement

Shenwan Hongyuan released a research report stating that, looking ahead to Q1 2026 in the electrical and new energy industry, the lithium battery industry chain’s prices continue to recover, and demand remains strong despite the off-season. Overall, profits in the downstream battery segment remain stable, with high profitability elasticity in the upstream materials segment. Due to the later-than-usual Spring Festival holiday compared to the same period last year, project start-ups in the wind power industry in Q1 2026 are delayed, compounded by the提前备货 of components in Q1 2025, resulting in a relatively high base. Therefore, the sector’s overall performance in Q1 2026 is expected to remain steady year-on-year, with some component segments experiencing slight declines. However, the export chain remains highly active, with shipment volumes and performance expected to grow significantly year-on-year. Additionally, key energy storage companies in Q1 2026 have achieved notable increases in revenue and shipment volumes, demonstrating a “not dull” characteristic during the off-season.

Shenwan Hongyuan’s main viewpoints are as follows:

Lithium batteries: Demand remains strong in Q1 2026, with both volume and price rising, leading to impressive profitability

Industry production in Q4 2025 increased significantly month-on-month. According to Shanghai Nonferrous Metals Network, since the beginning of 2026, production in the industry chain has increased substantially year-on-year. In January-February 2026, domestic production of ternary cathodes/iron lithium cathodes/anodes/separators/electrolytes/lithium batteries was 150k tons/740k tons/490k tons/5.1 billion square meters/400k tons/363 GWh, respectively, representing +48%/+55%/+47%/+45%/+44%/+49% YoY. Meanwhile, lithium battery industry chain prices continued to recover in Q1 2026. Despite the off-season, demand remains robust, and profits in the downstream battery segment are stable, with high elasticity in the upstream materials segment.

Photovoltaics: Cancellation of export tax rebates and rising silver prices drive simultaneous increases in PV module prices and volumes

In Q1 2026, the expiration of export tax rebates(effective from April 1) prompted a surge in overseas orders, leading to a significant increase in module shipments. Meanwhile, sharp fluctuations in silver prices pushed up cell costs, forcing a series of price hikes for modules since the beginning of the year. From the performance guidance, Canadian Solar’s parent company CSIQ expects Q1 module shipments of 2.2-2.4 GW, with gross margins rebounding to 13%-15%, showing a clear quarter-on-quarter improvement. Companies with non-silver technology advantages have cost benefits that become more prominent, increasing profit elasticity. Overall, the photovoltaic sector’s Q1 performance is expected to see a recovery in profitability.

Wind power: Overall stable in Q1, with high growth potential in the export chain

Due to the later Spring Festival holiday compared to the same period last year, project start-up in Q1 2026 was delayed, combined with提前备货 of components in Q1 2025, resulting in a relatively high base. Therefore, the sector’s overall performance in Q1 2026 is expected to remain steady year-on-year, with some component segments experiencing slight declines. However, the export chain remains highly active, with shipment volumes and performance expected to grow significantly YoY. Additionally, the mainframe segment’s prices have steadily stabilized and rebounded, as the period from bidding to delivery involves a certain cycle. Low-priced orders from 2025 have been largely cleared, and profitability bottomed out in Q4. Higher-priced orders are expected to be delivered more in 2026, and wind turbine manufacturing is likely to see significant profit elasticity, with a potential turning point in profitability in Q1 2026.

Energy storage: Industry delivery volumes exceeded expectations in Q1 2026, with grid-connected technology and long-duration storage becoming new growth drivers

In Q1 2026, key companies achieved significant year-on-year increases in revenue and shipment volumes, demonstrating a “not dull” off-season. Domestically, bidding and grid connection scales increased substantially YoY, with grid-connected energy storage in high renewable penetration regions like Northwest and North China seeing notable penetration. Looking ahead to Q2 2026, as the peak installation season begins, large storage orders in the Middle East and Southeast Asia are expected to accelerate, and after the inventory replenishment cycle in Europe and the US, demand resilience continues to show. Domestically, energy storage profitability models are expected to expand from “peak-valley arbitrage” to “multiple revenue streams,” supporting steady growth in global energy storage markets and entering a new cycle of prosperity.

Investment analysis opinions: The new cycle of renewable energy has started, with profits entering an upward phase. Focus is recommended on three main lines:

1)Cycle growth: CATL(300750.SZ), EVE Energy(300014.SZ), Hunan Yune(301358.SZ), JINLEI(300443.SZ), SHANTAI Technology(001301.SZ), Enjie(002812.SZ); 2)Technological innovation: Tongsheng Technology(300073.SZ), Tungsten W New Energy(688778.SH), Aiko Solar(600732.SH), Risen Energy(300118.SZ), Jinko Solar(601778.SH); 3)Expanding AIDC’s second main business: Sungrow(300274.SZ), Shenghong Co., Ltd.(300693.SZ).

Risk warnings:

Electric vehicle sales fall short of expectations; sharp fluctuations in raw material prices; risks of deepening overseas trade barriers