Morgan Stanley believes the strategic value of Contemporary Amperex Technology Co.,Ltd.'s (CATL) sodium battery is being systematically underestimated by the market. According to analysis, a Morgan Stanley team led by Jack Lu published a report on May 6th, pointing out that investor skepticism towards sodium-ion batteries primarily focuses on their limited near-term contribution. The report emphasizes that this logical framework is flawed, as it overlooks the speed at which sodium battery commercialization can unlock new market segments and its critical role within energy security strategy. Morgan Stanley forecasts that CATL's earnings per share will grow from RMB 20.53 to RMB 34.15 between 2026 and 2028. During the same period, revenue is projected to increase from RMB 584 billion to RMB 899.2 billion, while the EV/EBITDA valuation multiple is expected to drop from the current 14.1 times to 7.8 times, presenting an attractive valuation. It should be noted that Morgan Stanley has an investment banking relationship with CATL, having acted as manager or co-manager for its public offerings within the past 12 months and receiving compensation for these services.

Sodium-ion batteries are seen as creating incremental demand rather than simply replacing existing products. Morgan Stanley stresses that the core value of CATL's sodium battery product, Naxtra, lies in generating new demand, not in cannibalizing the market share of its own Lithium Iron Phosphate (LFP) batteries. In the entry-level passenger vehicle market, where CATL's current penetration is limited and the segment is dominated by non-CATL LFP manufacturers and internal combustion engine vehicles, the introduction of Naxtra is expected to directly contribute net new market share. In the light-duty truck sector, electrification penetration was only about 10% last year, indicating it is still in early stages. Naxtra's superior low-temperature reliability directly addresses a key constraint in this market. Combined with ongoing improvements in the economics of electric trucks, this is anticipated to accelerate the pace of electrification. Morgan Stanley also cited the historical experience of the shared mobility market in China, where penetration rapidly increased from approximately 10% to 90-100% within about three years, with the core driver being an attractive return on investment cycle. The firm believes these multiple scenarios collectively support a "convex" characteristic for the scaling of sodium-ion battery production – meaning that once commercialization accelerates, the release of incremental demand could exceed linear expectations.

The energy security role is perceived as being consistently undervalued by the market. Morgan Stanley indicates that another key rationale supporting the accelerated adoption of sodium batteries stems from China's energy and mineral security strategy, a dimension that the market has yet to fully price in. New energy vehicles and energy storage are central to China's industrial and energy transition agendas. Mitigating risks of supply chain disruptions for critical materials holds significant strategic importance. The report notes that recent geopolitical developments involving Venezuela and Iran have further intensified the urgency for China to diversify its supply chains. Sodium-ion batteries offer a viable "de-risking" pathway, helping to enhance supply chain resilience. Based on this strategic logic, Morgan Stanley anticipates the Chinese government will introduce supportive policies to accelerate the development of the sodium-ion supply chain, similar to the path taken approximately seven years ago when subsidies for electric vehicles spurred the rapid formation of the lithium battery ecosystem. Notably, the firm suggests that such policy support would not necessarily require expanding the overall subsidy pool, but could involve reallocating existing subsidies towards sodium-ion applications to serve strategic priority objectives.