Morgan Stanley flags CATL: Third-quarter revenue surged 59% year over year, but earnings were held back by “mix fluctuations”
CATL’s third-quarter revenue grew 59% year over year, with both shipment volume and global market share posting strong gains. However, changes in its product mix exceeded expectations, weighing on profitability. Morgan Stanley’s calculations show that net profit per unit fell by about RMB29/Wh quarter over quarter, mainly due to lithium inventory losses, foreign-exchange losses, reduced consumption tax and VAT rebates, customer rebates, and product mix adjustments. Even so, after excluding one-off or reversible items, third-quarter net profit per unit remained fairly resilient.
The bank cut its 2024 net profit forecast by 6% to RMB89.4 billion, and lowered its forecasts for 2027 and 2028 by 7% and 10%, respectively. Despite this, Morgan Stanley remains optimistic about the long-term outlook: excluding the U.S., the global addressable market for electrification could double over the next five years; the commercialization of sodium-ion batteries is getting underway; and progress on battery-swapping alliances is proceeding smoothly. In the near term, however, CATL’s H shares are expected to remain volatile over the next three months, and the H-share/A-share premium may continue to narrow.
Accordingly, Morgan Stanley downgraded CATL’s H shares from “Overweight” to “Equal-weight” and slashed its target price by 44.7%, from HK$705 to HK$390. It cut its A-share target price by 33%, from RMB500 to RMB335, and removed the A shares from its list of top picks, while maintaining its “Overweight” rating.
CATL’s third-quarter revenue grew 59% year over year, with both shipment volume and global market share posting strong gains. However, changes in its product mix exceeded expectations, weighing on profitability. Morgan Stanley’s calculations show that net profit per unit fell by about RMB29/Wh quarter over quarter, mainly due to lithium inventory losses, foreign-exchange losses, reduced consumption tax and VAT rebates, customer rebates, and product mix adjustments. Even so, after excluding one-off or reversible items, third-quarter net profit per unit remained fairly resilient.
The bank cut its 2024 net profit forecast by 6% to RMB89.4 billion, and lowered its forecasts for 2027 and 2028 by 7% and 10%, respectively. Despite this, Morgan Stanley remains optimistic about the long-term outlook: excluding the U.S., the global addressable market for electrification could double over the next five years; the commercialization of sodium-ion batteries is getting underway; and progress on battery-swapping alliances is proceeding smoothly. In the near term, however, CATL’s H shares are expected to remain volatile over the next three months, and the H-share/A-share premium may continue to narrow.
Accordingly, Morgan Stanley downgraded CATL’s H shares from “Overweight” to “Equal-weight” and slashed its target price by 44.7%, from HK$705 to HK$390. It cut its A-share target price by 33%, from RMB500 to RMB335, and removed the A shares from its list of top picks, while maintaining its “Overweight” rating.