Date: 3 October 2024
Broker Name: UOB Kay Hian
Overview of CATL’s Performance
CATL is positioned as a key player in the electric vehicle (EV) battery industry, with robust growth driven by increasing global demand for EVs. According to the report, CATL is expected to benefit from the rapid expansion in EV sales globally, which is projected to have a 20% compound annual growth rate (CAGR) from 2023 to 2030.
Key Growth Drivers
EV Battery Shipments and New Product Launches
CATL has witnessed strong growth in its monthly EV battery shipments, and this trend is expected to continue. The company is also launching new battery products, which are anticipated to contribute positively to its future earnings.
Decline in Lithium Carbonate Prices
Another significant factor benefiting CATL is the drop in lithium carbonate prices. The reduction in costs is expected to enhance the company’s profitability and improve its earnings in the upcoming quarters, especially in 3Q24.
Earnings Forecast and Valuation
CATL’s stock is currently trading at 19 times its 2025 forward price-to-earnings (PE) ratio, which is lower than its three-year historical average forward PE of 27 times. The company’s target price has been raised to RMB 350.00, supported by a lower weighted average cost of capital (WACC), which was reduced from 14% to 11%. This results in an implied PE ratio of 26 times for 2025, aligning with its historical mean forward PE ratio.
Upcoming Catalysts
CATL is expected to release its 3Q24 results soon, which are anticipated to reflect strong earnings growth due to increased battery shipments and lower raw material costs. These results are likely to drive positive market sentiment and further stock appreciation.
Target Price and Recommendation
The report maintains a BUY recommendation for CATL, with a target price of RMB 350.00. This represents a potential upside of 38.9% from the current stock price of RMB 251.89 as of 2 October 2024.
Key Share Price Catalysts
- Growth in Monthly EV Battery Shipments: Sustained momentum in battery production and deliveries.
- Drop in Lithium Carbonate Prices: Expected to positively impact profit margins.
- 3Q24 Earnings Results: Anticipated to reflect these growth drivers, potentially boosting the share price.
Conclusion
CATL remains a top pick for investors looking to capitalize on the booming EV market and declining input costs. With strong fundamentals and favorable market conditions, the company is well-positioned for continued growth in the near term.
