CATL's 1Q26 performance was strong, and its growth resilience is likely to continue for longer

Overview

This report is a quick take by Bernstein on CATL's 1Q26 results. The core conclusion is that despite China EV demand being temporarily softer and metal prices rising since late 2025, CATL still delivered stronger-than-expected revenue, profit, and shipment performance, with unit profitability remaining resilient. The company's long-term competitiveness in EV batteries, energy storage, fast-charging technology, upstream resource strategy, and overseas capacity remains supported.

Core views

The report argues that CATL's strength may persist for longer. In the near term, 1Q26 revenue of RMB1291bn, net profit of RMB207bn, and total battery shipments of about 200GWh were all significantly above expectations, potentially supporting an upward revision of consensus EPS and stock appreciation. In the medium term, rising energy per EV, faster electrification of commercial vehicles, clearer domestic energy storage policy, and overseas AI-driven demand for storage underpin management's 20% to 30% CAGR shipment outlook. Over the long term, economies of scale, lower-cost manufacturing, technology leadership, and upstream resource integration should help sustain competitive advantage.

Analysis framework

The report combines earnings decomposition with shipment and pricing data, unit profitability, management guidance, industry trends, and DCF valuation. Financial analysis covers revenue, gross margin, operating profit, net profit, asset impairments, investment income, government subsidies, cash flow, and capex. Operational analysis covers EV and ESS shipment mix, capacity utilization, overseas revenue, fast-charging technology, upstream resources, and Hungary plant progress.

Methodology notes

• Valuation methodsDCF

  Discounted cash flow valuation

  The A-share target price of RMB620 is based on free cash flow forecasts through 2050, a WACC of about 9.6% to 9.8%, and a 3% terminal growth rate; the H-share target price of HKD600 is based on a WACC of 10.4% and a 3% terminal growth rate.

• Performance assessmentActual vs Consensus

  Comparing actual results to consensus

  The report compares 1Q26 revenue, gross margin, and net profit with Bernstein estimates and market consensus to assess the degree of beat and potential EPS upward revisions.

• Operational analysisUnit Profitability

  Unit profitability

  The report measures battery business profitability resilience using per-kWh gross margin, operating profit, and net profit, with focus on profit transmission under higher metals prices and changing mix.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• 300750.CH

  Core covered security, A-share

  Strengths

  Revenue and profit materially beat expectations, strong resilience in unit operating profit, and clear technology and scale advantages, with robust net cash and a DCF target price of RMB620.

  Weaknesses

  Some Chinese installation data weakened, and shares of CV battery installations and xEV/LFP monthly shares declined.

  Comparison

  The report sees the company’s growth and scale advantages as superior to most battery peers, with scale economies delivering lower costs and higher margins.

  Risks

  Excess battery production capacity in China, geopolitical constraints on market share, and intensified vertical-integration competition from OEMs.

• 3750.HK

  Same company A/H-share linked security

  Strengths

  Benefits from the same company fundamentals, DCF target price of HKD600, and clear long-term demand and technology advantages.

  Weaknesses

  Rated Market Perform, which is more neutral than the A-share equity rating.

  Comparison

  H-share valuation uses 10.4% WACC and 3% terminal growth; target price is HKD600.

  Risks

  Downside risks include overcapacity, geopolitical share constraints, and OEM competition; upside risks include unit profit improvement and better-than-expected EV battery demand.

• EV battery business

  Core business driver

  Strengths

  Shipment growth is strong, passenger vehicle share in China reached 47.8%, commercial EV penetration is accelerating, and fast-charging technology leadership is solid.

  Weaknesses

  Chinese EV demand is temporarily soft, and product mix and pricing competition may pressure profits.

  Comparison

  CATL has advantages in scale, cost, and technology relative to many peers.

  Risks

  Demand volatility, intensifying competition, and customer in-house development or vertical integration.

• Energy storage battery business

  Growth business driver

  Strengths

  Energy storage accounted for 25% of total 1Q26 shipments, with clearer domestic policy support and overseas AI demand increasing storage demand visibility.

  Weaknesses

  Greater share of the China energy storage market may create product-mix pressure.

  Comparison

  Technologies such as sodium-ion batteries could strengthen the company’s opportunities in China’s storage segment.

  Risks

  Pricing pressure, policy changes, and volatility in storage project returns.

Key data

• 1Q26 revenueRMB129.1bnYear-over-year growth was 52%, about 11% above consensus.
• 1Q26 net profitRMB20.7bnYear-over-year growth was 49%, 15% above Bernstein estimates and 16% above consensus.
• 1Q26 total battery shipmentsaround 200GWhYear-over-year growth was 67%, with energy storage accounting for 25%.
• 1Q26 gross margin24.8%Up from 24.4% in 1Q25 and roughly in line with consensus at 24.7%.
• 1Q26 operating profitRMB22.1bnYear-over-year growth was 87%, with an operating margin of 17.1%.
• Unit operating profitUS$15.6/kWhYear-over-year growth was 12%, above Bernstein's estimate of US$13.8/kWh.
• Net cashRMB264bnUp from RMB242bn at end-2025 as of 1Q26.
• Operating cash flowRMB33.7bnUp 3% year-over-year in 1Q26.
• Capital expendituresRMB12.4bnUp 20% year-over-year in 1Q26.
• Target priceA-share RMB620; H-share HKD600Both are based on a DCF valuation framework.

Impact & implications

The report expects CATL's strong 1Q26 results to push the market toward upward revisions of earnings forecasts, providing positive support for the stock. At the industry level, CATL's demand resilience in both EV and energy storage, capacity expansion, and technology leadership enhance its long-term compounding ability, while upstream resource integration helps reduce raw-material volatility risk. From a valuation perspective, the report argues that the A-share 16x forward P/E still underestimates the company's long-term compounded growth potential.

Risks

• Excess battery manufacturing capacity in China could depress industry prices and margins.
• Geopolitical factors may limit CATL’s ability to expand share in certain overseas markets.
• Vertical integration competition from OEMs could intensify, weakening the bargaining power of third-party battery suppliers.
• The temporary weakness in Chinese installation data creates short-term pressure on CV battery, xEV battery, and LFP shares.
• Metals price volatility and changes in product mix may affect unit profitability.

What to watch

• Whether consensus EPS is revised upward due to 1Q26 results beating expectations.
• Whether China xEV, CV, and LFP installation shares stabilize over the coming months.
• Whether 1H26 capacity utilization remains in the 85% to 90% range.
• The impact of rising energy-storage shipment share on unit profitability.
• New product launches at Super Tech Day and the Beijing Auto Show, especially progress on sodium-ion and solid-state batteries.
• Shidai Resources Group and the restart of the Yichun lithium mine, including re-listing progress.
• Commissioning timing, cost curve, and Phase II progress of the Hungary plant.