CATL 1H26 net profit rose 42% YoY, buyback plan brings a positive surprise

Overview

This report is Citi's company research earnings review on CATL's 1H26 results. The company reported 1H26 net profit of Rmb43.3bn, up 42% YoY, and core net profit of Rmb39bn, up 43.4% YoY, reaching 42%/45% of Citi's and Bloomberg's full-year forecasts, respectively. 2Q26 net profit was Rmb22.5bn, up 36.5% YoY and 8.7% QoQ. The company also announced an interim dividend of Rmb1.411/share and proposed an Rmb20bn-40bn A-share buyback and cancellation plan.

Core views

Citi's core view is to maintain CATL as a Top Pick. Supporting factors include: 1H26 results were in line with expectations; battery sales volume and capacity utilization were strong, with 1H26 battery output at 498GWh, up 61% YoY, and utilization at 94.9%; energy storage battery gross profit rose 76% YoY, becoming a growth highlight; management remains optimistic on 2H26E and 2027E demand, especially supported by commercial EVs and global energy storage demand; and the buyback cancellation plan enhances expectations for shareholder returns.

Analysis framework

The report evaluates the company's fundamentals from the perspectives of profit performance, sales volume and capacity utilization, gross profit mix of power batteries and energy storage batteries, cash flow and balance sheet, inventory changes, valuation multiples, and risk factors, and links the target price to 2026E EV/EBITDA, P/E, and P/B valuations.

Methodology notes

• Valuation methodsEV/EBITDA

  CATL A-shares are valued at 17.5x 2026E EV/EBITDA.

  Citi chooses the EV/EBITDA method because it can reduce the impact of capital structure changes on valuation; the target price of Rmb603/share corresponds to 26.8x 2026E P/E and 6.8x 2026E P/B.

• RatingCiti Research investment rating system

  A Buy rating is typically based on expected total return and risk over the next 12 months.

  The report maintains Buy and Top Pick, and discloses the current price, target price, expected share price return, dividend yield, and expected total return.

Asset mapping & comparison

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

• CATL A-shares 300750.SZ

  Covered stock in the report; Buy/Top Pick maintained.

  Strengths

  Strong net profit growth, rapid improvement in energy storage gross profit, robust battery output and utilization, negative net debt ratio, and a large buyback plan enhancing shareholder returns.

  Weaknesses

  2Q26 gross margin declined both YoY and QoQ, free cash flow declined YoY, and inventory continued to rise.

  Comparison

  Currently trading at about 17x 2026E P/E; the target price corresponds to 26.8x 2026E P/E and 6.8x 2026E P/B.

  Risks

  New energy vehicle demand below expectations, intensified competition in power batteries leading to lower-than-expected market share, and raw material costs above expectations.

Key data

• 1H26 net profitRmb43.3bn, up 42% YoYEquivalent to about 42%/45% of Citi/Bloomberg full-year forecasts.
• 1H26 core net profitRmb39bn, up 43.4% YoY2Q26 core net profit was Rmb20.9bn, up 36.1% YoY and 15.6% QoQ.
• 2Q26 net profitRmb22.5bn, up 36.5% YoY and 8.7% QoQ2Q26 gross margin was 22.7%, below 24.3% in 1Q26 and 27.5% in 2Q25.
• Buyback planRmb20bn-40bnThe company plans to buy back and cancel A-shares within 12 months after shareholder meeting approval.
• Interim dividendRmb1.411/sharePayout ratio was 15%, flat YoY versus 1H25.
• 1H26 battery output498GWh, up 61% YoYCapacity utilization was 94.9%, above 89.9% in 1H25.
• Estimated 2Q26 battery sales volume230GWhExpected to rise 12% QoQ and 56% YoY; including 57.5GWh energy storage and 172.5GWh power batteries.
• 1H26 power battery gross profitRmb39.6bn, up 34% YoYAccounted for 60% of total gross profit, with gross margin of 20.6%.
• 1H26 energy storage gross profitRmb12.8bn, up 76% YoYAccounted for 19% of total gross profit, with gross margin of 24%.
• 1H26 free cash flowRmb35.1bn, down 9% YoY2Q26 free cash flow was Rmb13.9bn, down 13% YoY and 35% QoQ.
• Net debt ratio-55%As of the end of 1H26, the company remained in a net cash position.
• Target priceRmb603/shareBased on 17.5x 2026E EV/EBITDA.

Impact & implications

The report has positive implications for CATL's A-shares: earnings growth, high growth in the energy storage business, a strong demand outlook, and a large buyback plan together support valuation and expectations for shareholder returns. At the current roughly 17x 2026E P/E, Citi believes the target price still implies significant upside.

Risks

• New energy vehicle demand falls short of expectations.
• Competition in the power battery market intensifies, causing CATL's market share to come in below expectations.
• Raw material costs are higher than expected.
• Reduced export tax rebates and higher battery consumption tax may create cost pressure, although management expects the impact to be limited.
• Continued inventory increases may add pressure to future demand realization.

What to watch

• Approval and execution progress of the Rmb20bn-40bn A-share buyback and cancellation plan at the shareholder meeting.
• Whether demand for commercial EVs and global energy storage batteries in 2H26E can materialize.
• Whether 2027E battery demand growth will exceed the 20-30% CAGR expected over the next five years.
• Whether gross margins for power batteries and energy storage batteries can stabilize.
• Utilization and pricing competition after the 764GWh of battery capacity under construction comes online over the next 1-2 years.
• Trends in free cash flow, capital expenditure, and inventory changes.