CLSA maintained its High Conviction Outperform rating on CATL with an H-share target price of HKD770. The broker cited the 2Q gross margin miss and sodium-ion battery ramp-up uncertainty as key factors, while noting the A-share trades at 16 times forward earnings, 0.5 standard deviation below its historical average.
CLSA kept CATL at High Conviction Outperform with a HKD770 H-share target, as 2Q gross margin miss raised 2H26 profit concerns.
CLSA said the margin shortfall, combined with the early stages of sodium-ion battery mass production, makes it harder for investors to gauge whether profitability will recover in the second half of 2026.
CATL's Shenzhen-listed A-share trades at a forward price-to-earnings ratio of about 16 times, roughly 0.5 standard deviation below its historical average. The broker said a further pullback to 13 times would mark the valuation floor and could offer an entry point for investors. CATL H-shares rose 2.1 percent on Tuesday, with short selling at HK$295.13 million, a 16 percent ratio.
CATL is the world's largest EV battery maker, and its margin trajectory is closely watched across the supply chain. The company reported quarterly revenue of HK$140.63 billion and net profit of HK$23.17 billion for the period ending December 31, up from HK$102.97 billion and HK$14.74 billion a year earlier. Analyst consensus on the stock is a Strong Buy with an average price target of HK$667.06.
The 2Q gross margin miss marks a departure from the company's recent profitability trend. CATL has begun mass production of sodium-ion batteries, a technology that could lower costs and reduce dependence on lithium, but the ramp-up phase typically pressures margins before scale benefits materialize. The transition is being watched closely by investors who had expected margin expansion as lithium prices stabilized.
The A-share also gained 2.4 percent on Tuesday, tracking the H-share move. The maintained rating and identified valuation floor at 13 times forward earnings suggest limited downside for long-term investors. CLSA's target of HKD770 implies meaningful upside from current levels, even as the near-term margin picture remains uncertain.
CATL competes with BYD and LG Energy Solution in the global EV battery market, where it holds the largest share. The company's dual listing on the Hong Kong and Shenzhen exchanges gives investors two ways to access the stock, with the H-share typically trading at a premium to the A-share.
The sodium-ion battery ramp-up is the key event to watch in 2H26, as mass production scale and cost trajectory will determine whether margins can recover. Investors will also monitor CATL's next earnings release for updated margin guidance and any commentary on sodium-ion battery economics.
This article is for informational purposes only and does not constitute investment advice.
