On October 21, CATL (ASX: 300750) shares suffered a sharp decline. The A-share dropped more than 10% during intraday trading, while the H-share fell more than 9%, bringing the combined A+H market capitalization down to 1.1 trillion yuan with turnover exceeding 16 billion yuan. Since reaching a historic high on May 7, 2026, the company's share price has cumulatively retreated by more than 50%.

One day earlier, CATL released its third-quarter report: revenue for the first three quarters totaled 442.137 billion yuan, up 56.19% year-on-year; net profit attributable to shareholders reached 64.530 billion yuan, up 31.60% year-on-year. However, third-quarter net profit growth was only 14.54% year-on-year, lower than revenue growth, while operating cash flow declined 23.60% year-on-year, triggering market concerns.

In response to multiple doubts behind the sharp share price drop, CATL issued a flurry of responses on the morning of October 21, stating that "industry demand is not as pessimistic as feared, and capacity utilization will remain at a relatively high level going forward." Additionally, the 23.60% year-on-year decline in third-quarter operating cash flow was attributed to the company's proactive adjustment of payment arrangements to suppliers, which the company said will not affect its cash profitability in the long run.

Demand Outlook: 2027 "Still Worth Looking Forward To"

Regarding investor concerns about next year's new energy industry demand, CATL stated, "From the company's perspective, industry demand in 2027 is still worth looking forward to."

The company broke down each market individually: although overall domestic passenger vehicle sales have declined somewhat, the electrification rate is rising rapidly and battery capacity per vehicle is also growing quickly, meaning "the growth rate of power batteries for domestic new energy passenger vehicles has still achieved positive growth"; the electrification rate of domestic new energy commercial vehicles is also climbing rapidly; Europe's electrification trend shows continuity with continuously competitive new models being launched; and the electrification potential of other markets "may be underestimated by the market."

In terms of energy storage, the company said both domestic and international markets are maintaining solid growth rates, "especially with energy storage demand in certain overseas markets being quite robust."

The company concluded, "Global demand for power and energy storage batteries may not be as pessimistic as the market expects, and still has considerable growth potential."

Capacity Utilization: Operating at High Levels, in Healthy Condition

On the question of capacity utilization, CATL stated that utilization in the first half of the year was "extremely saturated."

With new capacity gradually coming online this year, capacity tightness has eased somewhat. However, the company also noted that market demand continues to grow, adding that "overall, capacity utilization will remain at a relatively high level going forward, maintaining a fairly healthy state."

Operating Cash Flow Decline: Due to Proactive Supply Chain Support

The 23.60% year-on-year decline in third-quarter operating cash flow was one of the core metrics that drew market attention in this earnings report.

CATL offered its explanation: in recent years, upstream companies in the lithium battery supply chain have faced significant cash flow pressure, so the company proactively adjusted payment arrangements to suppliers starting from the third quarter, "prioritizing support for partners with R&D capabilities, an innovative spirit, and active cooperation in the company's capacity expansion." Specific measures include shortening payment cycles, making advance payments, and providing R&D funding support.

The company stated that these measures "may continue for some time," with the goal of "promoting a healthier and more sustainable development of the industry chain."

Regarding the impact that the market cares about most, the company made its position clear:

Operating cash flow may experience a phased impact, but in the long term, it will not affect the company's cash profitability and will return to a relatively healthy level in the future.

Inventory Increase: Mainly Goods Shipped, Normal Turnover

The quarter-on-quarter increase in third-quarter inventory also drew attention. CATL explained that the increase in inventory amount is "brought about by the company's business scale development," but "in recent quarters, the company's inventory turnover days have remained relatively stable, with no situation of poor sales or sluggish shipments—this is normal inventory turnover."

From a structural perspective, the main growth was in goods shipped, which "will gradually be reflected as company revenue in the future."

The company also added that its energy storage business is extending from selling battery cells and DC-side products to providing AC-side and system products, with more diverse product forms, but "the corresponding delivery and revenue recognition cycle has been extended compared to before," which is also one reason for the phased increase in inventory.