JPMorgan upgrades Nari Tech stock rating to Overweight on policy tailwinds

JPMorgan has upgraded Nari Tech (SHA:600406) to Overweight, raising its price target to RMB26.00, citing significant policy tailwinds from China's renewable energy and grid investment targets. The firm anticipates Nari Tech's earnings growth to accelerate to approximately 14% in 2026-27, following a period of underperformance, and notes the company trades at an attractive valuation one standard deviation below its historic P/E average, despite strong growth in its small energy storage segment.

Analysis

JPMorgan has upgraded Nari Tech (SHA:600406) to Overweight from Neutral, increasing its price target to RMB26.00 from RMB21.50. The basis for this upgrade is a combination of attractive valuation following recent underperformance and significant policy-driven catalysts. Year-to-date, Nari Tech's shares have declined 10%, lagging competitors Sieyuan and Huaming, which saw average gains over 20%, and the broader Shanghai Composite Index's 15% rise. This underperformance has resulted in the company trading at a price-to-earnings ratio one standard deviation below its historical average. The positive outlook is primarily fueled by Chinese government initiatives, including the 2035 renewable capacity target and the goal to double energy storage capacity by 2027. While Nari’s direct exposure to energy storage systems is currently small at less than 10% of FY24 revenue, the segment is exhibiting a robust growth rate of over 50% year-over-year. JPMorgan anticipates these tailwinds will accelerate Nari Tech's average earnings growth from 8% per annum in 2023-25 to approximately 14% in 2026-27, with the forthcoming 15th Five-Year Plan on power grid investment serving as a potential near-term catalyst.

Key Decisions for Investors

• Given the stock's 10% year-to-date underperformance and discounted valuation relative to its history, investors could consider the JPMorgan upgrade a signal of a favorable entry point for a potential mean-reversion and growth play.
• Investors should closely monitor China's upcoming 15th Five-Year Plan for specific details on power grid investment, as this is cited as a key potential catalyst that could validate the thesis and drive share price upside.
• While the long-term outlook is positive, it is important to weigh the high-growth energy storage segment's current small contribution (less than 10% of revenue) against the forecast for accelerated earnings, recognizing that the investment thesis is contingent on future execution and market expansion.