CLSA has released a research report adjusting its target price for CATL (03750.HK) downward from HK$820 to HK$770, while also reducing its target for the A-share Contemporary Amperex Technology Co., Limited (300750.SZ) from RMB 570 to RMB 535. The firm reiterates a "High Conviction Outperform" rating on the stock.

Net profit for the second quarter rose 36% year-on-year and 9% quarter-on-quarter to RMB 22.5 billion, bringing first-half earnings to 45% of the bank's full-year forecast, which broadly met market expectations. However, the gross margin fell 1.7 percentage points quarter-on-quarter to 23%, marking the second consecutive quarterly decline, which underperformed expectations. The margin miss was attributed to intense downstream price competition, preventing cost pass-through from materializing in the second quarter, and is expected to pressure the stock's short-term performance.

The company has also announced a share buyback program worth between RMB 20 billion and RMB 40 billion. CLSA anticipates that as CATL starts production of sodium-ion batteries in the second half of this year, the lower cost structure will help it regain cost competitiveness. Additionally, current valuations, which trade at 18 times and 15 times forecasted earnings for this year and next, respectively, may provide support for the stock. The firm has lowered its net profit forecasts for CATL from 2024 through 2028 by 1% to 4% to reflect the lower margin expectations.