Good times coming too quickly is also a risk. Morgan Stanley pointed out in its latest research report that the valuations of some lithium battery material companies have reached their peak.
According to the Chasing Wind Trading Desk, Jack Lu and his team, equity analysts for the Asia-Pacific region at Morgan Stanley, released a research report on January 8, downgrading the ratings of TINCI and Senior from &#34;overweight&#34; to &#34;equal weight.&#34; The core logic behind this decision is that the market has fully priced in the profit recovery expectations brought about by the industry reversal, and current valuations are no longer attractive.
For TINCI, although Morgan Stanley raised the target price from previous levels to 49 yuan, the current stock price is 44 yuan per share. According to preliminary calculations, the average price of lithium hexafluorophosphate (LiPF6) in the fourth quarter of 2025 is expected to exceed 100,000 yuan/ton, with the unit net profit of the electrolyte reaching 4,000 yuan/ton, indicating an investment payback period of less than one year. High profit realization means that &#34;the valuation method at the cycle peak needs to change,&#34; with Morgan Stanley shifting its valuation method from P/B to P/E.
For Senior, Morgan Stanley maintained the target price at 16 yuan, believing that the stock price has &#34;reached its peak.&#34; Although the industry as a whole is expected to see a 35%-40% increase in sales in 2026, Senior's guidance is only about 30%, significantly underperforming the industry average.
It is worth mentioning that this research report conveys a clear signal: it is not &#34;bearish,&#34; but rather &#34;the valuation method at the cycle peak needs to change.&#34; The logic of the cycle reversal has been fully priced in by the market, and reasonable profit levels have come earlier than expected, indicating that the subsequent upside potential may have been exhausted.
<h2>TINCI: High Profit Realization Triggers Change in Valuation Method</h2>
Morgan Stanley pointed out that TINCI's performance in the fourth quarter of 2025 has exceeded expectations. The average price of lithium hexafluorophosphate (LiPF6) has exceeded 100,000 yuan/ton, with the unit net profit of the electrolyte reaching 4,000 yuan/ton. Such a high return rate is difficult to sustain in the currently competitive chemical industry.
The report emphasizes that when the payback period for new investments in a segment is as short as less than one year, it naturally induces supply expansion and competition, thereby compressing the sustainability of excess profits. The top three LiPF6 producers in China—TINCI, Dongfang Shunfeng, and Tianji New Energy—still hold significant production capacity that can be released at any time, with an expected additional capacity of 80,000 tons in the second half of 2026, accounting for about 20% of the industry's total capacity.
&#34;We believe that the current stock price level or market consensus is more based on speculative bets on whether leading companies can control production rather than based on reasonable long-term profit levels,&#34; the report stated. &#34;Given that the payback period has been compressed to less than one year, whether viewed through P/B or P/E, the valuation logic needs to be reconstructed.&#34;
Morgan Stanley raised TINCI's target price to 49 yuan, based on a 20 times price-to-earnings ratio for 2026, indicating that the valuation method is shifting from growth-oriented to cycle-oriented.
<h2>Senior: Sales Growth Rate Below Industry Dragging Expectations</h2>
Compared to TINCI's &#34;profit overheating&#34; issue, Senior faces a structural dilemma in sales growth.
Morgan Stanley acknowledges that membrane prices may rise, but is skeptical about its sales growth. The report shows that although the industry as a whole is expected to see a 35%-40% increase in sales in 2026, Senior's guidance is only about 30%, significantly underperforming the industry average
The reason behind this is its high proportion of overseas customers, as well as the industry's transition from dry separators to wet separators, with dry separators still accounting for over 40% of Senior's total sales. The report predicts that domestic separator demand growth may outpace overseas by 2026, especially supported by domestic energy storage demand, which poses a disadvantage for Senior, which has a higher proportion of overseas customers.
&#34;Although separator prices may rise, considering that sales guidance is below peers and the stock price has already reached a reasonable valuation under our required 15% long-term capital return model, the current upside has been filled,&#34; the report points out.
Morgan Stanley maintains the target price for Senior at 16 yuan but downgrades the rating to &#34;Equal-weight&#34; as the stock price has reached the target price. In the context of industry price increase expectations, the market is more willing to give a premium to targets that are &#34;stronger in volume and more favorable in structure.&#34;
<h2>Valuation Logic Shift: From Growth Premium to Cyclical Pricing</h2>
The deeper logic behind this dual downgrade is a fundamental shift in valuation methodology, from a growth-oriented P/B to a more cyclical P/E.
Morgan Stanley has raised its LiPF6 price assumptions for 2026/27 (from 75,000 yuan to 100,000 yuan/ton), acknowledging that short-term prosperity may be stronger; on the other hand, it emphasizes that because the payback period is very short, valuations should use mid-to-low cyclical price-earnings ratios to price &#34;peak profits,&#34; rather than using P/B, which is more growth or asset expansion-oriented.
This seemingly contradictory operation actually reflects Wall Street's classic logic for investing in cyclical goods: When the industry's profit recovery speed exceeds expectations, the concern is not about &#34;not making money,&#34; but about &#34;the restart of a capacity arms race under the temptation of excessive profits.&#34;
For investors, the materials side is regaining profits, but the higher the profits, the more it resembles a cyclical peak. A LiPF6 payback period compressed to less than a year will bring about capital impulses, and there is already capacity reserve in the industry that can be activated at any time. Once demand weakens slightly or capacity is released, prices may revert to mid-cycle levels.
The report suggests that investors pay attention to three key variables:
<blockquote>
<ul>
<li>LiPF6 and electrolyte price paths: The report has raised the 2026/27 LiPF6 assumption to 100,000 yuan/ton and emphasizes that the most critical aspect in a three-month perspective is the spot prices of electrolytes and LiPF6.</li>
<li>Whether capacity expansion is released as planned: In the second half of 2026, an additional 80,000 tons, about 20% of industry capacity, may be added—any advance or delay will change the price slope.</li>
<li>Gross profit realization strength: In TINCI's model, the gross profit margin of electrolytes is expected to significantly recover from the low point in 2024 to 2026e/2027e, which is the core of whether the valuation can hold.</li>
</ul>
</blockquote>
In addition, two key time points are worth noting:
<blockquote>
<ul>
<li>2026 long-term contract negotiations: This will determine the transmission of &#34;price increases from spot to contracts.&#34;</li>
<li>2H26 capacity startup window: This will determine the actual arrival time of the &#34;supply rebound.&#34;</li>
</ul>
</blockquote>
The current lithium battery materials sector may be in an awkward range where &#34;the best expectations are already priced in,&#34; with only concerns about supply-side discipline remaining

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002709

Morgan Stanley believes that TINCI's performance in Q4 2025 has exceeded expectations, with the net profit per ton of electrolyte reaching 4,000 yuan. This extremely high return rate is difficult to sustain in the highly competitive chemical industry. The realization of high profits means that "the valuation method at the peak of the cycle needs to change," and Morgan Stanley's valuation method shifts from P/B to P/E. Senior's sales growth guidance significantly lags behind the industry average, and the industry's transition from dry membranes to wet membranes also poses unfavorable factors

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Senior

TINCI

The stock price has reached its peak! On the same day, Morgan Stanley downgraded TINCI and Senior ratings for the two major lithium battery industry chain giants