On September 15th, the Hong Kong lithium battery sector delivered a remarkable performance with strong upward momentum, while CATL (03750) took center stage with its record-breaking rally. Specifically, the Hong Kong lithium battery sector opened sharply higher from the opening bell, surging over 7% during intraday trading. By market close, the sector gained 5.63%, ranking among the top performers. CATL surged over 9% intraday, hitting an all-time high, and closed up 7.44% at HK$465. Other concept stocks also posted significant gains, with BYD COMPANY (01211) closing up 3.44% at HK$108.1, while Chilwee Power, Ganfeng Lithium, and Tianqi Lithium all rose over 2%.

The lithium battery sector has previously undergone a deep correction, leaving sector valuations in a significantly undervalued state. According to statistics, as of September 2, 2025, lithium battery and ChiNext valuations stood at 25.94x and 43.12x respectively. Since 2022, the current lithium battery sector valuation is significantly below the industry median level of 44.41x since 2013.

So what's driving this significant sector rebound? How will future market trends develop?

**Three Key Factors Drive Market Demand Beyond Expectations**

Looking at policy support and market demand factors, this substantial rally in lithium battery stocks is clearly not without foundation.

First, favorable policies are emerging frequently, supporting high-quality industry development. On September 5th, the Ministry of Industry and Information Technology and the State Administration for Market Regulation jointly issued the "Electronics Information Manufacturing Industry Stable Growth Action Plan for 2025-2026," clearly stating "from 2025 to 2026, the average growth rate of value-added for computer, communication and other electronic equipment manufacturing above designated size will be 7%, and with the addition of lithium batteries, photovoltaics and component manufacturing, the annual revenue growth rate of electronics information manufacturing will reach over 5%." This policy provides clear development targets and policy support for the lithium battery industry, undoubtedly enhancing market confidence in the industry's long-term development.

Recently, eight departments including the Ministry of Industry and Information Technology jointly issued the "Automotive Industry Stable Growth Work Plan (2025-2026)," proposing to strive for annual automobile sales of approximately 32.3 million units in 2025, including approximately 15.5 million new energy vehicles, providing broad market space for the lithium battery industry. Additionally, the China Association of Automobile Manufacturers released "Automotive OEM Supplier Payment Specification Initiative," requiring payment terms not to exceed 60 days from acceptance date, stabilizing lithium battery companies' order expectations and facilitating capacity planning and raw material procurement.

Second, market demand growth exceeds expectations, with the energy storage market becoming an important growth driver. Looking at three segments, current demand in the power battery market, energy storage market, and new energy vehicle market is growing beyond expectations, providing a solid foundation for the lithium battery industry.

In power batteries, demand growth is very strong. According to China Automotive Battery Innovation Alliance data, China's power and other battery sales reached 134.5GWh in August 2025, up 5.7% month-over-month and 45.6% year-over-year. Among these, power battery sales were 98.9GWh, accounting for 73.5% of total sales, up 8.5% month-over-month and 44.4% year-over-year. From January to August, national power and other battery cumulative sales reached 920.7GWh, up 58.2% year-over-year cumulatively. Power battery cumulative sales were 675.5GWh, accounting for 73.4% of total sales, up 49.7% year-over-year cumulatively.

Explosive growth in the energy storage market has become an important industry driver. In August 2025, other battery sales (mainly energy storage batteries) were 35.6GWh, accounting for 26.5% of total sales, up 49.0% year-over-year. From January to August, other battery cumulative sales were 245.2GWh, accounting for 26.6%, up 87.6% year-over-year cumulatively. This data shows that energy storage market growth far exceeds power batteries, becoming an important growth point for the lithium battery industry.

According to industry data, energy storage tender volume reached 69GWh in August 2025, up 517% year-over-year and 169% month-over-month, hitting a historical high. Global energy structure transformation, with wind and solar renewable energy proportions continuously rising, is driving increasingly strong demand for energy storage. The energy storage market explosion brings new growth momentum to the lithium battery industry.

The new energy vehicle market also continues its high-growth trajectory. According to China Association of Automobile Manufacturers data, China's new energy vehicle sales reached 6.937 million units in the first half, up 40.3% year-over-year. This growth directly drives power battery market prosperity. Industry data shows first-half domestic power battery shipments were 477GWh, up 49% year-over-year. Continued new energy vehicle market growth provides stable support for power battery demand.

Additionally, accelerated solid-state battery industrialization also brings new growth points to the lithium battery industry. Currently, domestic solid-state battery industrialization is significantly accelerating, entering the "technical verification period," with multiple automakers planning to achieve mass production around 2027. Related pilot line construction will drive industry technology upgrades, with companies like CATL achieving technology breakthroughs (pilot line yield rates exceeding 90%) accelerating industrialization processes.

Solid-state batteries, as next-generation battery technology, have significantly higher per-unit lithium consumption than traditional liquid batteries. This characteristic will directly drive structural growth in high-end lithium resource demand, especially as installation volumes accelerate in 2026, bringing broader development space for the lithium battery industry.

**Performance Inflection Point Established, Sector Welcomes Recovery "Golden Opportunity"**

Numbers provide the best evidence. The lithium battery industry chain recovery performance clearly provides sufficient confidence for sector gains. According to securities research, the lithium battery industry chain achieved revenue of 503.23 billion yuan in the first half of 2025, up 11.78% year-over-year; net profit attributable to parent companies was 40.105 billion yuan, up 29.08% year-over-year, significantly reversing the continuous decline in net profit during the same period over the past two years.

Except for separators, all other sub-segments achieved year-over-year net profit growth, with growth rates as follows: cathode materials (164.02%) > other materials (129.91%) > anode materials (35.32%) > lithium batteries (27.60%) > electrolytes (24.68%) > lithium battery equipment (24.34%) > separators (-98.63%).

Looking at single quarters, the lithium battery industry chain achieved revenue of 267.864 billion yuan in Q2 2025, up 11.05% year-over-year and 13.81% quarter-over-quarter; net profit attributable to parent companies was 21.765 billion yuan, up 30.49% year-over-year and 18.68% quarter-over-quarter, achieving rapid year-over-year and quarter-over-quarter net profit growth for two consecutive quarters.

Except for separators, all other sub-segments achieved profitability. Lithium batteries, cathode materials, anode materials, other materials, and lithium battery equipment all showed significant Q2 net profit improvements both year-over-year and quarter-over-quarter.

Strong lithium battery demand combined with slowing industry chain price declines are the main factors supporting industry chain performance growth. First, lithium battery demand maintained rapid growth in the first half of 2025. According to industry data, China's lithium battery shipments were 776GWh in the first half of 2025, up 68% year-over-year. Strong lithium battery demand drove rapid upstream material shipment growth. Second, lithium battery industry chain overall price declines slowed in the first half of 2025, with ternary materials, anode materials, and dry separator prices even stabilizing and recovering.

With significant performance improvements, multiple institutions believe the lithium battery sector may be welcoming a Davis double-click opportunity of "prosperity improvement + valuation recovery." Investment banks believe the lithium battery sector has realized the logic of 2025 market demand exceeding expectations, and a second wave of sector performance may appear at any time as energy storage tenders and other conditions improve. This view provides positive expectations for investors, driving stock price increases.

Securities research indicates that in 2025, driven by trade-in and other consumption incentive policies, China's new energy vehicle production and sales are growing rapidly. Combined with stable global energy storage installation growth, lithium battery industry chain demand continues rising, profitability is significantly recovering, and leading company competitive advantages are strengthening. This view enhances market confidence in leading enterprises.

Morgan Stanley expressed particular optimism about CATL. On September 11th, Morgan Stanley released a report pointing out that CATL's leading advantages will continue, its valuation has significant attractiveness among peers, becoming "the cheapest in the industry." This rating clearly had a positive impact on CATL and the entire lithium battery sector's performance today.

In summary, with the global interest rate cutting cycle beginning, foreign capital inflow is a major trend. Sectors like lithium batteries that have undergone deep corrections but are seeing fundamental inflection points often become priority allocation targets for smart money. This will provide continuous capital support for the lithium battery sector. Additionally, current sector valuations are in historical low ranges. Combined with peak season effects and dual technology breakthrough catalysts, leading enterprises with strong performance certainty will likely continue benefiting.