Date of Report
Thursday, 03 October 2024
Broker Name
UOB Kay Hian
Earnings Growth Driven by EV Sales
CATL’s earnings are expected to benefit from the projected 20% compound annual growth rate (CAGR) in global electric vehicle (EV) sales from 2023 to 2030. This impressive growth in EV sales volume will be a key driver of CATL’s financial performance in the coming years. The company is well-positioned to capitalize on the expanding EV market due to its strong product portfolio and leadership in battery technology.
New Battery Products and Declining Lithium Carbonate Prices
CATL is also set to launch new battery products, further enhancing its competitive edge in the market. In addition, the recent decline in lithium carbonate prices is anticipated to positively impact CATL’s 3Q24 results, driving better profitability for the company.
Valuation and Target Price
The report highlights that CATL is trading at 19 times the estimated 2025 price-to-earnings (PE) ratio, which is below its three-year historical average of 27 times. As a result, UOB Kay Hian has maintained a “BUY” rating for CATL, with an increased target price of RMB 350.00, up from RMB 250.00. This target price is based on a discounted cash flow (DCF) model with a 10-year outlook, incorporating a lower weighted average cost of capital (WACC) of 11% compared to the previous 14%, and a terminal growth rate of 4%.
Catalysts for Share Price Growth
Several key events are expected to catalyze CATL’s share price growth in the near term, including:
- Growth in monthly EV battery shipments
- Continued decline in lithium carbonate prices
- Strong performance in 3Q24 results
Timeline for Growth
Investors can expect significant developments for CATL during the October to November 2024 period, as the company’s 3Q24 results are released and battery shipments continue to expand. These factors are expected to support CATL’s sustained earnings growth and market leadership.
Investment Outlook
CATL remains a strong buy recommendation due to its leadership position in the growing EV market, the introduction of new battery products, and the favorable pricing environment for raw materials. With a potential upside driven by robust demand and a well-managed cost structure, CATL offers a compelling investment opportunity.
