Morgan Stanley: Significant Acquisition to Enhance Powering AI Capability; CATL Transitions to Direct Data Center Solutions Provider
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Morgan Stanley maintains an Overweight rating on CATL with a target price of RMB 530, representing 35% upside. On April 8, CATL agreed to acquire a 17.4% stake in Zhongheng Electric for RMB 4.1 billion. This strategic acquisition marks a pivotal transformation for CATL, transitioning it from an indirect energy storage supplier into a direct, customer-facing solutions provider for data centers.
Zhongheng Electric brings leading technological capabilities in high-voltage direct current (HVDC) power systems, electric vehicle charging infrastructure, and smart grids. This integration vertically enhances CATL's footprint across power infrastructure and grid connection, enabling direct engagement with hyperscale data centers and AI operators. Consequently, CATL can shorten the value chain and capture significantly greater system-level value amid surging AI electricity demands.
The firm projects CATL's EPS at RMB 19.59, RMB 24.18, and RMB 28.59 for 2026 through 2028, accompanied by approximately 20% EBITDA growth. The valuation remains attractive, based on 17 times 2026 EV/EBITDA, underpinning a projected 20% earnings compound annual growth rate from 2026 to 2030. Key downside risks include intensifying global battery competition, market share stagnation, and geopolitical supply chain decoupling.