Divergent views on domestic energy storage demand dominate market expectations; CATL Buy reiterated

Overview

This report summarizes investor feedback following Goldman Sachs' initial coverage of China batteries. Over the past month, Goldman Sachs engaged with approximately 150 onshore, offshore, and Western investors and found significant divergence in views on battery demand, with domestic energy storage demand at the center of the debate. Goldman Sachs maintains Buy ratings on CATL-A and CATL-H.

Core views

The market broadly agrees that high growth in power batteries will be difficult to sustain, but views on domestic energy storage differ: onshore investors are concerned about demand peaking in 2026, weak first-half installations, and the durability of capacity-tariff policies; overseas investors focus more on low penetration in developed markets and growth opportunities in emerging markets. Goldman Sachs judges that pessimistic demand expectations may be excessive and expects 4Q26 to provide key validation. CATL has relative advantages in scale, share consolidation, global leadership, energy storage, and sodium-ion batteries, although its system-integration competitiveness still needs validation.

Analysis framework

The report is mainly based on investor surveys after coverage initiation and comparisons of demand scenarios, combined with assessments of domestic and overseas energy storage, power batteries, and CATL's business progress; for valuation, it uses a sum-of-the-parts approach and applies different power-battery and BESS valuation parameters to A-shares and H-shares.

Methodology notes

• Valuation frameworkSum-of-the-parts (SoTP)

  Values power batteries, BESS, and ecosystem investments separately according to their differing growth and valuation characteristics.

  CATL-A's power-battery business is valued at 11x expected 2026–2027 EBITDA, while BESS is valued by discounting expected 2030 EV/EBITDA using an 18x exit multiple; CATL-H uses a global valuation framework, with power batteries at 20x EV/EBITDA and BESS using a 25x 2030 exit multiple.

• Market comparisonA/H-share scenario pricing comparison

  Compares the differing pricing of demand and industry-leader premiums by A-share and H-share investors.

  Goldman Sachs believes A-shares more strongly reflect cautious views on 2026 battery demand, while H-shares more fully price in long-term growth and CATL's market-leader premium.

• Factor analysisGS Factor Profile

  Compares stocks with peers and the market using growth, financial returns, valuation multiples, and composite metrics.

  Growth, financial-return, and valuation metrics are converted into percentiles based on standardized rankings, while the composite metric combines growth, financial-return, and inverse-valuation percentiles.

Asset mapping & comparison

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

• CATL-A（300750.SZ）

  Core covered stock

  Strengths

  Industry-leading position, room to further consolidate market share, dual exposure to power batteries and BESS, and expectations for margin recovery in 2H26.

  Weaknesses

  A-share pricing more strongly reflects cautious expectations for 2026 battery demand and is more affected in the near term by the debate over domestic energy storage demand.

  Comparison

  Compared with CATL-H, A-shares incorporate less of the premium for long-term global growth and industry-leader scarcity value.

  Risks

  Global EV or energy storage demand below expectations, rising raw-material costs, BESS integration progress below expectations, and risks related to overseas expansion execution and trade policy.

• CATL-H（3750.HK）

  Core covered stock

  Strengths

  Pricing led by overseas investors places greater emphasis on global leadership, higher ROIC, scarcity value, and long-term growth potential.

  Weaknesses

  The valuation premium depends on delivery of long-term growth; if overseas demand or globalization progress weakens, the premium may narrow.

  Comparison

  The report believes H-shares imply a 54% premium to A-shares and more fully reflect positive long-term demand and industry-leader scenarios.

  Risks

  Slowing global energy storage demand, changes in overseas trade policy, intensified competition, and a decline in the valuation premium.

Key data

• Number of investor engagementsApproximately 150Covering onshore China, offshore, and Western investors.
• CATL-A target priceRmb56512-month target price.
• CATL-H target priceHK$94712-month target price.
• H-share premium relative to A-shares54%Implied H-share premium based on the report's valuation framework.
• Key validation window for domestic energy storage4Q26Focus on seasonal installations, policy clarity, and supply-chain channel data.
• Overseas energy storage demandExceeded China in 1H26The report states that investors generally remain constructive on the outlook for overseas energy storage.

Impact & implications

If domestic energy storage installations rebound seasonally in 4Q26, policy support becomes clearer, and supply-chain indicators improve, market expectations for 2027 demand could be revised upward, supporting a recovery in CATL's valuation and earnings expectations. Conversely, if demand fails to materialize or policy return mechanisms weaken, current concerns about domestic energy storage may persist. CATL-H is more influenced than CATL-A by overseas investors' pricing of long-term growth and scarcity value, and the A/H-share valuation gap remains an important variable to watch.

Risks

• Global EV demand growth falls below expectations.
• Global energy storage demand growth falls below expectations.
• Unexpected increases in raw-material costs such as battery metals.
• BESS system-integration business progresses more slowly than expected, while CATL faces competition from established integrators such as Sungrow and BYD.
• Execution risks in overseas expansion and trade-policy risks.
• Competition in power batteries and energy storage batteries is more intense than expected.
• Uncertainty around domestic energy storage policies, including capacity tariffs, could depress project internal rates of return.

What to watch

• Whether domestic energy storage installations see a seasonal surge in 4Q26.
• Whether domestic energy storage policies, capacity-tariff mechanisms, and follow-up support measures become clearer.
• Early guidance from supply-chain channel data on 2027 energy storage demand.
• CATL's margin recovery in 2H26 and changes in product mix.
• Whether CATL's energy storage market share rises as capacity constraints ease.
• Progress of AIDC BESS projects and the valuation catalyst from sodium-ion battery commercialization.
• CATL-A and CATL-H valuation premiums and changes in investor composition.