Promising upward integration potential; higher industry barriers not priced in We think the market is too pessimistic about the electrolyte industry and has not fully considered the industry barriers from market leaders building their own capacity of electrolyte intermediates (LiPF6, solvent and additive). We believe electrolyte has good upward integration potential as raw materials typically account for 80% of electrolyte’s total costs and are mainly produced via chemical processes. The capital, technological and environmental barriers from upward integration could improve the market landscape. We think upward integration would enable leaders to gain market shares and cope with potential risks, such as those from solid-state batteries (SBB). We initiate coverage on Tinci and Capchem with Buy ratings.