CATL shares tumbled 5.04% during intraday trading on Tuesday, as investors focused on the battery maker’s declining gross margin despite a robust earnings report. The stock came under selling pressure after the company’s first-half results revealed a 1.7 percentage point quarter-over-quarter drop in gross margin to 23%, marking the second consecutive quarterly decline and missing market forecasts.

The margin compression was attributed to intense downstream price competition, with cost pass-through failing to materialize in the second quarter. While revenue surged 54.80% year-on-year to RMB 276.9 billion and net profit grew 41.98% to RMB 43.28 billion, the erosion in profitability metrics prompted CLSA to cut its H-share target price from HK$820 to HK$770 and lower net profit forecasts for the current year through 2028 by 1% to 4%.

In a move to shore up confidence, CATL announced a record A-share buyback program of RMB 20–40 billion for cancellation, which several analysts viewed as supportive of valuations at current levels. However, the near-term margin concerns outweighed the buyback news, driving the stock sharply lower.