Is there still a chance for the battery sector to fall and adjust again?

In recent trading days, the new energy sector has been in a correction, with the battery ETF (561910), which passively tracks the CSI battery theme index, being negative for four consecutive days. As of today's announcement, it has fallen by 1.09%. So, is there still a chance for a rebound in the future?

From the perspective of composition, the CSI Battery Theme Index covers battery manufacturing, core materials, lithium battery equipment, and core targets of energy storage inverters, with over 50% of the weight being the concept of new energy vehicles.

China Merchants Fund believes that although the sector has recently entered a period of adjustment, the trend of electrification may not have changed, and the global penetration rate of new energy vehicles is still in the early stage of an S-shaped growth curve. With the continuous guidance and incentives of policies and the continuous improvement of product supply, overseas markets such as the United States and Southeast Asia are expected to rapidly rise in demand, becoming a new driving force for industry growth. At the same time, the accelerated iteration of technologies such as fast charging will accelerate the process of oil and electricity parity. As a core link in the new energy vehicle industry chain, power batteries will continue to benefit from the growth of the industry chain and will continue to maintain a stable growth trend in the future.

China Merchants Fund believes that the core problem of the current sector still lies in oversupply, and the fundamentals are still in the bottoming stage in the short term. The speed of industry expansion has significantly slowed down, and downstream competition is becoming increasingly fierce. Coupled with the tightening of industry refinancing policies, the pressure on the funding end of various enterprises continues to increase. The industry is expected to accelerate into the tail clearance stage, and the supply and demand pattern is expected to experience marginal improvement. The current low volatility and limited downward space of lithium carbonate prices provide certain support for the decline in industrial chain prices. In the pattern of stable growth on the demand side and gradual clearance of the supply side, the overall profitability of the sector may improve, and the fundamentals are expected to enter a turning point. It is recommended to seize the opportunity of performance bottoming out and stabilizing before returning.

At present, the valuation of the CSI Battery Theme Index is at the historical bottom range and is in the final stage of liquidation. The allocation value is high, and there is a great opportunity to obtain excess returns. Currently, it may be the best time to layout.

Data source: Wind