Jefferies: CATL Margin Concerns Overdone, Reiterates Buy
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Jefferies argues that market concerns over CATL's margin pressure are overdone, reiterating a Buy rating with a target price of RMB 521, implying roughly 50% upside from the current RMB 347. The firm highlights CATL's one-month price pass-through mechanism for EV battery contracts signed after 2021, which insulates the company from upstream cost inflation and may even benefit unit margins. While energy storage systems lack a formal pass-through, short project cycles in China allow flexible pricing adjustments.
Looking ahead to 2026, Jefferies expects CATL's market share to recover as capacity bottlenecks ease, supported by a planned 50% increase in capital expenditure that adds roughly 400 GWh of capacity. Storage demand is projected to grow at least 50% year-over-year, increasing its revenue mix from 20% to 25%. The company maintains a 20% EV battery growth target for 2026, driven by larger battery packs, over 20% growth in Europe, and robust heavy-truck demand.
Technological advancements also underpin the thesis. The recently launched Tianheng 2nd-generation sodium-ion battery offers 4C fast charging and 800 km range. Costs are expected to fall below LFP by 2027. Long-term lithium prices are projected at RMB 70,000-90,000 per ton, posing little concern. The firm's 25% stake in CMOC is expected to contribute RMB 7-8 billion in profit during 2026.
For CATL's A-share (300750 CH) and Hong Kong (3750 HK) listings, Jefferies targets RMB 521 and HKD 688, respectively.