Resurgence of "CATL Inside"

Investment Rating - The report upgrades the investment rating for Contemporary Amperex Technology Co. Ltd. from Equal-weight to Overweight [2][3] - The price target is raised from Rmb184.00 to Rmb210.00, implying a 34% upside potential [2][4] Core Insights - Price competition in the battery market is nearing an end, allowing CATL to enhance cost efficiency and return on equity (ROE) [3][10] - The company is expected to restore EBIT growth year-over-year after a slowdown in the first quarter of 2024 [3][23] - CATL's new generation mega production lines are anticipated to significantly improve cost advantages and ROE [3][12] Financial Performance - Revenue estimates for 2024 and 2025 are raised by 11% and 21%, respectively, to Rmb390.8 billion and Rmb49 billion [23][24] - The report projects a free cash flow yield increasing from 6% in 2024 to 10% in 2026 [4][28] - CATL's market capitalization is currently Rmb779.949 billion, with a share price of Rmb158.00 as of March 8, 2024 [7] Market Share and Competitive Position - CATL maintains a stable market share of approximately 46% in China and 37% globally as of 2023 [10][82] - The company is expected to account for 63% of new models launched in 2024, up from 45% in 2023, indicating strong demand for "CATL Inside" models [58][77] - CATL's market share in the EU rose to 36% in 2023, driven by strong sales from Tesla and other OEMs [60][62] Cost Efficiency and Production Capacity - CATL's new mega production lines are projected to reduce capital expenditures by over 40% while increasing production capacity significantly [12][44] - The company is expected to achieve unit operating expenses of US$55/kWh and capital expenditures of US$30/kWh in the coming years, which are substantially lower than global competitors [12][44] - CATL's R&D expenses are approximately US$3 billion annually, significantly higher than other global battery manufacturers, contributing to its competitive edge [36][37] Future Outlook - The report anticipates a robust growth trajectory for electric vehicle (EV) battery demand, projecting a 22% compound annual growth rate (CAGR) to approximately 3 TWh by 2030 [15][21] - CATL is expected to maintain a market share of 45% in China and 35% in the EU by 2030, with potential growth in the US market if technology licensing opportunities arise [15][72] - The company's bull case scenario values the stock at Rmb320, reflecting its potential as a cash cow or contract manufacturer in the EV supply chain [25][26]