China Battery: Profit-pool rebalancing: CATL may take the first hit, but gain the most; downgrade CATL-H, CALB, EVE, Wuxi-A/H and Putailai

J.P. Morgan cuts earnings forecasts across China's battery value chain and downgrades several covered names, arguing the key issue is industry profitability rather than battery demand. While it still forecasts global EV and ESS battery demand growth of 20-25% in 2027, above market expectations, weaker OEM profitability, new battery consumption tax and lower export VAT rebates (combined impact estimated at over Rmb100bn in 2027) plus rising trade barriers are driving a reallocation of profits across the EV value chain. The firm views this as profit-pool rebalancing rather than a traditional price war. CATL may take the first hit but ultimately emerge stronger: even if it absorbs the full tax impact, 2027 net unit profit is conservatively estimated at ~Rmb0.08/Wh (above Rmb0.10/Wh under tier-2 accounting), with financial resilience becoming the next competitive moat;