CATL(SZ:300750)2024-05-20 02:02Investment Rating - The report initiates a "Buy" rating for CATL (300750.SZ) with a 12-month target price of 304 CNY, indicating a potential upside of 49.8% from the current price of 203 CNY [3][17][20]. Core Insights - CATL's high-quality batteries offer superior energy density and reliability, positioning the company at the low end of the cost curve and supporting its industry-leading unit profit margin, which is approximately double that of its peers [5][17]. - The report forecasts CATL to maintain resilient global market share, with domestic market share expected to expand, despite facing pressure on free cash flow due to capital expenditure slowdown [5][17]. - Long-term profitability and market share for CATL are deemed reasonable, with an expected compound annual growth rate (CAGR) of 26% for EPS from 2024 to 2030, and production growth projected at around 50% [5][20]. - The current price-to-earnings (P/E) ratio of 17 times reflects concerns over industry overcapacity; however, a recovery in utilization rates could serve as a short-term catalyst for CATL's stock price in the second half of 2024 [5][20]. Summary by Sections Investment Summary - CATL is positioned as a key player in the global energy transition, with strong profit prospects in its battery division [17]. - The proprietary "dual-sided" battery profit framework predicts unit profits to expand from 188 CNY/kWh in 2024 to around 200 CNY/kWh by 2026-2030, outperforming market expectations [17][39]. - The report anticipates CATL's global market share to slightly decline from 40% in 2023 to 37% by 2030, with domestic market share increasing from 48% to 53% during the same period [17][18]. Financial Analysis - CATL's financial metrics indicate a robust growth trajectory, with a projected EPS CAGR of 26% from 2024 to 2030 and a production growth rate of approximately 50% [5][20]. - The report highlights that CATL's unit profit margins are expected to benefit from higher energy density batteries, which are projected to command a price premium [39]. Valuation - The report notes that CATL's valuation is at a cyclical low, with a target price of 304 CNY based on a P/E ratio of 17 times, suggesting significant upside potential [5][20]. - The expected P/E ratios for 2024-2026 are projected at 30x, 20x, and 15x, respectively, compared to a historical average of 33x [5][20]. Market Dynamics - The report discusses the limited impact of electric vehicle price competition on CATL's profitability, with potential EPS declines estimated at 13-14% due to price pressures [18][39]. - CATL's strong bargaining power is expected to mitigate the impact of cost pressures from battery price reductions [18][39].