Asia Pacific Equity Research 15 April 2025 This material is neither intended to be distributed to Mainland China investors nor to provide securities investment consultancy services within the territory of Mainland China. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. CATL Overweight 1Q25 a solid result; management sees strong demand despite US tariffs ▲ 1Q25 results were at the high end of JPMe. Management reaffirmed that order dem ...

Summary of CATL Conference Call Company Overview - **Company**: Contemporary Amperex Technology Co. Ltd (CATL) - **Industry**: Electric Vehicle (EV) and Energy Storage System (ESS) Battery Market Key Points and Arguments 1. **Earnings Estimates Revision**: CATL's 2025E EPS has been cut by 10% due to recent global policy updates affecting sales volume and gross profit margin [2][9][19] 2. **Sales Volume Reduction**: Expected sales volume for 2025 is revised down to 580 GWh, reflecting a 5% reduction, primarily due to the complete removal of US EV sales and slower sales in Europe [9][19] 3. **Gross Profit Margin Impact**: A reduction of 1.7 percentage points in gross profit margin is anticipated, attributed to decreased VAT tax rebates and increased import tariffs [9][19] 4. **Operating Profit and Net Profit**: Projected net profit for 2025 is approximately Rmb 59.58 billion, reflecting a 10% decrease from previous estimates [19] 5. **Valuation Adjustments**: Price target for December 2025 has been lowered from Rmb 400 to Rmb 320, based on a revised P/E multiple of 20x for 2026E [10][15][26] 6. **Market Share Dynamics**: CATL's market share in China is expected to have bottomed out post-3Q23, with anticipated share gains in the European market [14][25] 7. **US Tariff Impact**: The recent US tariff hike poses challenges, as approximately 10% of CATL's volume is exposed to exports to the US [14][25] 8. **ESS Revenue Recognition**: Revenue from ESS sales is recognized only after the system connects to the grid, which can delay revenue recognition for 1-2 years, impacting reported sales figures [20][21] 9. **Future Sales Projections**: For 1Q25, sales volume is expected to be between 130-140 GWh, with a net unit profit of Rmb 0.10 per watt-hour [9][19] 10. **Investment Thesis**: CATL is viewed favorably due to its technology leadership and ability to maintain resilient profits despite market challenges [14][25] Additional Important Information - **Financial Metrics**: - Revenue for FY25E is projected at Rmb 435.93 billion, with a growth rate of 20.4% year-over-year [10][19] - Adjusted EBITDA for FY25E is estimated at Rmb 98.03 billion, with an EBITDA margin of 22.5% [10][19] - **Risks**: Potential risks include a slowdown in global NEV sales, while upside catalysts may arise from CATL's factory developments in the US and new contract announcements [27][25] - **Stock Performance**: The stock has experienced a year-to-date decline of 17.6%, with a 52-week price range of Rmb 300.06 to Rmb 166.00 [13][10] This summary encapsulates the critical insights from the conference call regarding CATL's financial outlook, market dynamics, and strategic positioning within the EV and ESS battery industry.