CATL’s revenue and profit both rose in the first half of the year, yet its stock price plunged sharply—how will automakers’ ‘de-CATL-ization’ affect its future?

If CATL were so far ahead in technological capability that automakers couldn’t survive without its batteries, they’d have no choice but to endure. But this is no longer the case. As lithium-ion battery technology matures, performance gaps are narrowing. Automakers can now shift their focus to second- and third-tier suppliers to secure lower-cost partnerships—survival, after all, is their top priority. This is because overall new-energy vehicle (NEV) sales growth has already slowed, turning China’s once-blue ocean market rapidly into a red ocean. During periods of high industry growth, everyone rides the wave of tailwinds—some just capture more than others. But once the industry enters a phase of slow growth, those tailwinds fade. If one player continues grabbing a disproportionately large share, others are left with nothing. For China’s NEV makers, outsourcing battery procurement has already carved away too much of the pie—threatening even basic survival. The only remaining option is to bring battery production in-house. Under these circumstances, even if CATL maintains its technological lead and retains leverage over automakers, its ecosystem advantage will inevitably weaken—because it signals that its domestic market share has likely peaked. When a manufacturer hits a ceiling on market share, it essentially becomes a ‘cash cow’: profits remain stable, but raising prices risks losing share, leaving little room for further upside. So CATL’s real growth levers now boil down to overseas expansion and energy storage. Overseas expansion is straightforward: building factories abroad to serve global markets. So far, progress has been relatively smooth—CATL holds a 34% share of the overseas动力电池 market, growing faster than the overseas market as a whole, sustaining continued share gains.

Its P/E ratio plunged from 150x to 19x, yet its net profit for a single quarter exceeds the combined net profit of the top seven automakers—so is CATL truly overvalued?

Second, consensus earnings expectations are not pessimistic. Analysts forecast net attributable profit of RMB 96.46 billion (+33.6% YoY) for 2026 and RMB 121.09 billion (+25.5% YoY) for 2027, implying forward P/E ratios of 16.9x and 13.6x, respectively. Valuation compression hinges on actual earnings delivery. Third, the valuation logic has fundamentally shifted. Its P/E ratio has fallen from 150x in 2021 to 19x today; active equity fund holdings dropped from 4.49% to 3.50%—the market no longer prices CATL as a ‘growth stock’, but rather as a ‘leading manufacturing company’. A telling divergence: its H-shares trade at a ~48% premium to A-shares, indicating foreign investors are buying while domestic funds are exiting. Per regulatory requirements, we refrain from advising on entry/exit timing—only offering an analytical framework: today’s valuation implicitly prices in a ‘growth slowdown + peak profitability’. If energy storage volume ramps up and overseas operations deliver higher margins to offset declining power battery margins, this pricing appears conservative; otherwise, it’s reasonable. VI. The Real Problem: Its Profit Model Is Being ‘Backfired’ CATL’s biggest challenge isn’t competition or policy—it’s structural: its ~17% net profit margin rests atop an auto manufacturing sector where gross margins have shrunk to just 1.5%. When a battery maker earns more than the combined net profit of the top seven automakers, downstream resistance ceases to be emotional—it becomes existential. Pushback is already underway: Huawei’s Aito M6 BEV version switched to Guoxuan High-Tech; Li Auto’s L8 adopted Sunwoda batteries; Xiaomi’s extended-range models use dual sourcing from Sunwoda and CALB; and XPeng’s top battery supplier has become CALB. The numbers tell the story: unit net profit per Wh has declined for three consecutive quarters—0.112 → 0.103 → 0.101 → 0.098 RMB/Wh; gross margin in Q2 2026 stood at 23.15%, down 2.42 percentage points YoY. In short: CATL is selling more batteries—but doing so in an increasingly unprofitable way. Yet the other side of the scale carries significant weight: Na-ion II batteries enter mass production in Q4 2026 (cost ~30% lower than LFP, plus exemption from consumption tax until end-2028); 88.4 GWh of energy storage orders in hand; Hungarian, Spanish, and Indonesian plants nearing commissioning; and an A-share cancellation-style buyback program of RMB 20–40 billion approved by shareholders. Over the next six months, monitor just five signals: ① Whether unit profitability stabilizes in Q3 (0.098 RMB/Wh has declined for three straight quarters); ② Whether its RMB 130.8 billion inventory gets absorbed during the peak season; ③ Lithium carbonate prices (RMB 75,000/ton at end-2025 → RMB 200,000/ton by May 2026); ④ Resumption timeline of its Hungarian plant (currently halted for rectification due to nickel exposure issues—a linchpin for European capacity); ⑤ Buyback execution—though approved over a month ago, zero action as of August 31; actual purchases would signal strong confidence in valuation, while continued inaction suggests management still sees room for further downside. VII. Conclusion: It Won’t Lose—but Must Re-Prove It Can Earn ‘Dignified Profits’ Returning to the opening question: Is the 19x P/E a mispricing—or a justified value correction? Our answer: The market isn’t punishing CATL’s competitiveness—it’s rejecting its profit model. Its moat remains real: costs ~RMB 0.02–0.03/Wh lower than peers, selling prices 5–10% higher, and a consistent unit net profit of ~RMB 0.11/Wh across the full lithium price cycle—from RMB 600,000/ton down to RMB 60,000/ton and back up to RMB 150,000/ton—while global market share continues rising.

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CATL’s Valuation Gap Highlights Investor Divide as Earnings Near

CATL’s Valuation Gap Highlights Investor Divide as Earnings Near

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