CICC has initiated coverage on SHUANGDENG (06960), a leading player in China's communication and data center energy storage sector. The company's energy storage business serves data centers and power storage markets, with clients including top domestic cloud service providers (CSPs) and major overseas power equipment manufacturers. CICC assigns an "Outperform" rating with a target price of HK$22.90. Key insights include:
1. **Expanding Energy Storage Market**: The global surge in computing investments presents new opportunities for energy storage development, driven by declining battery costs and supportive policies. Data center energy storage, including backup power and regulation storage, is expected to see rapid demand growth due to increased computing capital expenditures. High discharge rates, safety, and compact designs are accelerating the shift from lead-acid to lithium and ternary-to-LFP batteries.
2. **Power Storage Upturn**: The power storage sector is entering an upcycle, supported by improved economics for standalone storage in China and overseas energy transition policies. Industry supply-demand dynamics are expected to reach an inflection point by 3Q25, with leading battery manufacturers facing capacity shortages and smaller players benefiting from order spillovers. Battery prices are recovering amid improving supply-demand conditions.
3. **SHUANGDENG's Strategic Focus**: The company dominates the data center energy storage segment, securing partnerships with top domestic CSPs and global power equipment leaders. According to Frost & Sullivan, it holds the top market share in China and globally for data center backup power in 2024. Overseas expansion through new factories is poised to unlock further growth.
4. **Market Differentiation**: While some view SHUANGDENG's overseas progress as slow, the firm has already penetrated international supply chains and secured key clients, signaling strong future potential. Catalysts include: - Continued outperformance in CSP computing investments. - Progress in securing orders from mainstream CSPs globally.
5. **Earnings and Valuation**: CICC forecasts 2025–26 EPS at RMB 0.65 and RMB 1.29, respectively, with a 24.8% CAGR (2024–26). At 10.1x 2026 P/E, the target price of HK$22.90 (16.0x 2026 P/E) implies 58.0% upside.
**Risks**: Weak downstream demand, intensifying competition, raw material price volatility, and geopolitical/trade conflicts.