CATL's Quarterly Profit Rose, but Margins Remain Under Pressure

Dow Jones
10/21
 
 

Contemporary Amperex Technology's third-quarter net profit rose but rising operating costs weighed on margins at the world's largest battery maker.

Net profit rose 14.5% to 21.25 billion yuan, equivalent to $3.18 billion, the company said late Tuesday. Revenue climbed 58.6% to 165.22 billion yuan.

Jefferies analysts said the company's weaker unit profitability offset strong shipment growth. The battery maker's net profit was weighed down by a higher energy-storage system sales mix, tax headwinds, increased spending on research and development, as well as inventory impairments, the analysts said.

The results come as CATL seeks to sustain earnings growth amid intensifying competition in China's electric-vehicle market, where price pressures and slower demand have raised questions about battery makers' profitability.

CATL supplies batteries to global automakers, including Tesla, BMW and Volkswagen, and competes with Chinese rivals such as BYD.

For the January-September period, net profit rose 31.6% to 64.53 billion yuan. Revenue increased 56.2% to 442.14 billion yuan, while operating costs rose 61.6% to 341.70 billion yuan.

CATL has been ramping up its energy storage system business, an increasingly important growth driver as the artificial-intelligence data center buildout scales up.

According to SNE Research data, the Fujian-based company held more than a 39% share of the global EV battery market at the end of August, with installations up 25% in the first eight months of 2026 from the same period last year.

Despite solid market share and battery shipments, growth concerns have continued to weigh on its stock. Investors are questioning whether the battery giant can maintain its industry-leading profitability as Chinese automakers start to produce their own batteries.

To support its stock price, CATL has turned to share buybacks. In July, the company announced plans to repurchase between $3 billion and $6 billion worth of shares.

"The accelerated pace of repurchases demonstrates management's strong conviction that the current share price materially undervalues the company's long-term earnings potential and industry leadership," Bernstein analysts said.

The company is also pushing ahead with overseas expansion to sustain growth. It is boosting production at its Hungary plant, expanding battery-swapping infrastructure in Europe and advancing the commercialization of sodium-ion batteries.

"We expect the next window period for the stock to outperform could be the first quarter of 2027 after all the negative news is priced in," Citi analyst Jack Shang said in a note. The bank lowered the stock's target price to HK$732.0 from HK$765.0 while maintaining a buy rating.

CATL's shares were down 7.8% in Hong Kong trade early Wednesday, taking its year-to-date decline to about 25%.

 
 

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