Summary of CATL (300750 CH/3750 HK) Equity Research Report Company Overview - **Company**: CATL (Contemporary Amperex Technology Co., Limited) - **Ticker**: 300750 CH (A-shares), 3750 HK (H-shares) - **Industry**: Battery manufacturing, specifically for electric vehicles (EV) and energy storage systems (ESS) Key Points Stock Performance - CATL's A/H stock prices increased by 36% and 34% over the past three months, outperforming CSI300 (up 12%) and HSCI (up 7%) [3][10] - Strong demand for batteries, particularly from ESS segments and overseas markets, has driven this performance [3] Financial Results - CATL reported a net profit of RMB 18.5 billion for Q3, reflecting a 12% quarter-over-quarter and 41% year-over-year increase, aligning with expectations [3][37] - Revenue estimates for 2025-27 have been raised by 2%-10% due to strong ESS demand and overseas EV battery market share gains [37][40] Capacity Expansion - CATL is expected to exceed 1 TWh of effective capacity by 2026, up from 676 GWh in 2024 [4][22] - Growth drivers include European EV batteries, domestic commercial vehicle (CV) batteries, and ESS batteries, with ESS expected to be the primary growth driver from 2026 onwards [4][27] Earnings Estimates - Net profit estimates for 2025-27 have been increased by 4%-7% due to higher revenue expectations and economies of scale [5][37] - Target prices for A/H shares have been raised to RMB 450 and HKD 594, implying upside potential of approximately 23% and 13%, respectively [5][41] Market Dynamics - Domestic ESS battery demand has grown by 52% year-over-year from June to September, supported by favorable policies [3] - ESS battery exports increased by 33% year-over-year during the same period [3] Risks and Challenges - Potential risks include ASP and margin pressure due to new rebate programs, unfavorable regulatory environments overseas, and execution challenges in international markets [48] - Quality and intellectual property disputes may also pose risks, particularly in global markets [48] Valuation Metrics - CATL's H-shares currently trade at a 32% premium to A-shares, reflecting market confidence in the company's growth prospects [42] - The company is valued using a DCF methodology with a WACC of 6.0% and a perpetual growth rate of 2.5% [40][45] Competitive Position - CATL's share in the overseas EV battery market has grown to 30% as of July 2025, with a 45% share in the European market [34][35] - The company maintains a strong competitive advantage through continuous product innovation and attractive valuations compared to international peers [47] Conclusion - CATL is positioned for robust growth driven by increasing demand for EV and ESS batteries, supported by significant capacity expansion and favorable market conditions. The company maintains a "Buy" rating with revised target prices reflecting positive earnings outlooks and market confidence.