CATL's 2Q26 results met expectations, with demand outlook and buyback jointly strengthening the Buy thesis

Overview

This report is Goldman Sachs' commentary on CATL's 2Q26 results. The company posted 2Q26 revenue of Rmb147.79bn, up 57% YoY, a record high and 3% above Goldman Sachs' expectation; net profit was Rmb22.55bn, up 36% YoY, within the market expectation range of Rmb22-23bn. During the earnings call, management confirmed strong demand in 2H26 and 2027, and announced an Rmb20-40bn A-share buyback plan to enhance shareholder returns.

Core views

Goldman Sachs believes CATL remains the world's largest battery manufacturer, leading in scale, technology, and cost competitiveness. The power battery business continues to provide a stable earnings anchor, while the energy storage systems business opens a new growth curve through system integration, project value capture, service revenue, and potential valuation re-rating. In the short term, strong sales growth, tight capacity, and overseas energy storage orders support the upcycle; in the medium term, 764GWh of capacity under construction, commercialization of sodium-ion batteries, and AIDC power solutions are incremental highlights.

Analysis framework

The report uses earnings breakdown, segment revenue, sales volume, net profit per unit, cash flow, key points from the management call, and the valuation framework as the main line to assess CATL's earnings resilience, demand sustainability, capacity expansion, and the value of energy storage integration. Valuation adopts an SoTP framework, distinguishing power batteries, BESS, and ecosystem investments, and provides separate target prices for A-shares and H-shares.

Methodology notes

• Valuation frameworkSOTP

  Sum-of-the-parts valuation

  Goldman Sachs values CATL's power battery business, BESS growth curve, and ecosystem investments separately to reflect the growth profile and valuation re-rating potential of different businesses. For A-shares, power batteries use 11x 2026-27E EBITDA, while BESS uses discounted 2030E EV/EBITDA with an exit multiple of 18x; for H-shares, the global framework is used, with power batteries at 20x EV/EBITDA and BESS at a 2030E exit multiple of 25x.

• Factor profileGS Factor Profile

  Growth, financial returns, valuation multiples, and composite percentile

  Goldman Sachs' factor profile compares a stock's position relative to the market and sector coverage universe across growth, financial returns, valuation multiples, and composite metrics, serving as investment context rather than a standalone rating basis.

• M&A probabilityM&A Rank

  M&A target probability ranking

  Goldman Sachs ranks a company's M&A probability from 1 to 3. CATL's M&A Rank is 3, representing low probability and limited impact on the target price.

Asset mapping & comparison

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

• CATL A-shares 300750.SZ

  Core asset covered by the report

  Strengths

  Global battery leader, recovering power battery market share, fast energy storage growth, strong cash flow and net cash position, and a buyback plan that enhances shareholder returns.

  Weaknesses

  Net profit per unit declined QoQ, gross margin is affected by product mix and raw material costs, and capacity constraints limit short-term delivery capability.

  Comparison

  Relative to Goldman's China battery, machinery, and advanced materials coverage, CATL has advantages in scale, ROIC, technology, and cost.

  Risks

  Global EV and ESS demand weaker than expected, rising raw material costs, slower-than-expected progress in BESS integration, overseas expansion and trade policy risks, and intensified industry competition.

• CATL H-shares 3750.HK

  The same company's H-share asset

  Strengths

  Benefits from global scarcity value and higher valuation multiples under Goldman Sachs' global valuation framework, with the target price implying a 54% H-share premium versus A-shares.

  Weaknesses

  Subject to the same fundamental risks and may also be affected by Hong Kong market liquidity, market risk appetite, and cross-market valuation differences.

  Comparison

  Goldman Sachs uses a global framework for H-shares, with higher valuation multiples for both power batteries and BESS than in the A-share framework.

  Risks

  Same as CATL's fundamental risks, while also requiring attention to Hong Kong market volatility and changes in cross-market premium.

Key data

• 2Q26 revenueRmb147.79bn, up 57% YoYA record high, 3% above Goldman Sachs' expectation.
• 2Q26 net profitRmb22.55bn, up 36% YoYIn line with the market expectation range of Rmb22-23bn, and 2% below Goldman Sachs' expectation.
• 1H26 battery salesAbout 435GWh, up 60% YoYEnergy storage accounted for about one-quarter of total sales; implied 2Q26 sales were about 235GWh.
• Net profit per unitRmb97/kWhDown 7% QoQ from Rmb104/kWh in 1Q26, affected by rising raw material costs and product mix changes.
• 1H26 power battery revenueRmb192.13bn, up 46% YoYSales volume rose 50% YoY, with domestic market share expanding by 5.6 percentage points.
• 1H26 energy storage revenueRmb53.26bn, up 88% YoYSales volume nearly doubled YoY, with overseas order growth faster than domestic.
• 2Q26 operating cash flowRmb26.54bn, up 3% YoYAbout 1.2x net profit.
• 2Q26 free cash flowRmb13.88bn, down 13% YoYMainly affected by Rmb12.66bn in capital expenditure.
• Net cashRmb226.38bnThe balance sheet remains strong.
• Buyback planRmb20-40bnThe company plans to repurchase and cancel A-shares to reduce registered capital and enhance EPS.
• 12-month target priceA-shares Rmb565; H-shares HK$947Corresponding upside is 47.5% and 52.3%, respectively.

Impact & implications

The report's implication is positive: earnings show CATL maintained strong profitability and cash flow amid high sales growth; on demand, management's optimistic guidance for 2H26/2027 and the long-term 20-30% sales CAGR provide support; on capital returns, large-scale buybacks and medium-term dividends reinforce the case. If BESS system integration and AIDC power solutions scale up as expected, the company's valuation may be re-rated from a pure cell manufacturer to an integrated energy solutions platform.

Risks

• Global EV demand growth is slower than expected.
• Global ESS demand growth is weaker than expected.
• Unexpected increases in raw material costs such as battery metals.
• BESS system integration progresses more slowly than expected.
• Execution risks in overseas expansion and trade policy risks.
• Competition in power batteries and energy storage batteries is stronger than expected.

What to watch

• Order visibility and changes in capacity utilization in 2H26 and 2027.
• The commissioning pace of the 764GWh capacity under construction over the next 1-2 years.
• Changes in overseas energy storage orders, the share of system integration revenue, and profit margins.
• Large-scale order deliveries for sodium-ion batteries, cost declines, and production line switching efficiency.
• Commercialization of AIDC customized power solutions over the next 1-2 years.
• Whether rising raw material prices can be passed through downstream via the metal cost pass-through mechanism.
• Execution progress of the Rmb20-40bn A-share buyback and the impact of share cancellation.