Morgan Stanley: VAT Refund Adjustment — Bad or Good?
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Morgan Stanley asserts that China's reduction in the battery VAT export refund rate—from 9% in 2025 to 6% in 2026, effective April 26—will have a limited earnings impact on CATL (300750.SZ) while significantly challenging second-tier battery manufacturers. CATL possesses multiple buffers to mitigate the policy shift, including robust pricing power, aggressive overseas capacity expansion, and financial reserves earmarked for warranties and customer rebates.
The report explicitly warns against simplistic calculations that multiply future overseas revenue by the 3% rate cut, as this methodology fails to account for CATL's ongoing global localization efforts. The estimated earnings drag from the reduced refund is approximately -2% (RMB 1.865 billion) in 2026, an improvement from the -5% impact (RMB 3.244 billion) experienced in 2025. Furthermore, Morgan Stanley does not anticipate a surge in pre-April export front-loading, as pulling forward shipments would likely trigger cost inflation and margin pressure.
Conversely, smaller competitors who previously leveraged high refund rates to win energy storage orders through aggressive low-price strategies will face severe margin compression. This dynamic is expected to accelerate industry consolidation, ultimately bolstering CATL's pricing power in the global energy storage market. Consequently, CATL's domestic export revenue is projected to remain relatively flat at RMB 74.937 billion in 2026, while revenue from localized overseas production surges. Morgan Stanley maintains an Overweight rating on CATL with a target price of RMB 490, based on 17x 2026 EV/EBITDA.