JPMorgan Reaffirms Overweight on CATL with HK$725 Price Target Following Strategic Acquisition

Deep News
09/16

JPMorgan has published a research report indicating that CATL (03750) has received approval to acquire the equity of Chongqing Yaoning New Energy Technology Co., Ltd., a subsidiary of GEELY AUTO (00175), which owns a nearly completed 24 GWh battery production project. The report suggests this transaction represents more than simple capacity expansion—it could serve as an early indicator of consolidation within China's battery sector, reflecting the challenges faced by original equipment manufacturers (OEMs) in self-building battery capacity, while highlighting the strategic value of approved production assets.

The firm states that CATL remains its top pick in the Chinese battery value chain, maintaining an "Overweight" rating with a target price of HK$725. JPMorgan notes the transaction is structurally positive for the industry, as it does not introduce another independent battery supplier into an already competitive market, but rather places the assets under the operational control of the industry leader. The bank believes this move could help reduce fragmented competition, improve capital discipline, and support healthier industry profitability over the long term.

The report points out that Chongqing Yaoning was originally developed within the Geely ecosystem as part of its battery self-supply strategy, but it appears it will be transferred to CATL before reaching commercial production. JPMorgan believes this reinforces the significant operational, technical, and capital requirements associated with battery cell manufacturing. Furthermore, the firm suggests investors may continue to overestimate the speed and scale of automakers' battery self-sufficiency, while underestimating the manufacturing advantages of industry leaders like CATL.

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