Nomura reiterates Buy on CATL and raises target price to CNY632

Overview

This report is Nomura's 2Q26 earnings review and rating update on Contemporary Amperex Technology Co Ltd (CATL, 300750.SS). The company reported 1H26 net profit up 42% YoY to CNY43.3bn, while 2Q26 net profit rose 36% YoY and 9% QoQ to CNY22.5bn, broadly in line with the report's view of market expectations. The report also highlights that the company's announced large-scale A-share buyback plan may improve shareholder returns and boost market sentiment.

Core views

The core view is that CATL's near-term results are in line with expectations, mid-term demand remains resilient, the impact of cost inflation is manageable, and the share buyback is positive for sentiment. Nomura expects FY26F battery shipments of about 1TWh, up 51% YoY, with another 19-22% growth in FY27-28F, mainly driven by rising global EV penetration and growth in domestic and overseas ESS installations. Although gross margin forecasts were lowered due to revenue mix and material cost pressure, revenue and earnings forecasts were still revised upward, supporting the Buy rating and a higher target price.

Analysis framework

The report combines earnings review, segment-level shipment and ASP forecasts, revisions to revenue and gross margin forecasts, and valuation multiple and PEG checks. The analysis focuses on 2Q26 profit and revenue performance, EV/ESS battery shipments, material cost inflation, changes in revenue mix, the scale of the share buyback, and changes in FY26-28F earnings forecasts.

Methodology notes

• Valuation methodsP/E multiple and PEG

  The target price of CNY632.00 is based on 25x FY27F EPS of CNY25.26 and corresponds to 1.25x FY27F PEG.

  This method derives the 12-month target price using forward EPS and a target P/E multiple, and checks the match between valuation and growth using FY26-28F earnings CAGR of 20%.

• Relative performanceBenchmark index comparison

  The benchmark index is CSI300.

  Nomura's stock rating is a relative rating, and Buy means the analyst expects the stock to outperform the benchmark over the next 12 months.

• Fundamental forecastSegment-level shipment and gross margin forecast

  Forecasts revenue, shipments, ASP, and GPM by segments such as EV battery, ESS battery, and materials and mining.

  The report updates FY26-28F revenue and earnings forecasts by adjusting assumptions for battery shipments, non-battery revenue growth, and gross margins.

Asset mapping & comparison

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

• Contemporary Amperex Technology Co Ltd (300750.SS)

  Core covered name; A-share listed company.

  Strengths

  A global leading lithium-ion battery manufacturer, with EV and ESS demand growth supporting shipments; FY26F battery shipments are expected to reach about 1TWh, and the buyback plan should help improve shareholder returns and market sentiment.

  Weaknesses

  Material cost inflation and changes in revenue mix are pressuring gross margins, with 2Q26 GPM declining both YoY and QoQ.

  Comparison

  The stock is trading at 18/15x FY26/27F P/E, which the report believes is not expensive relative to growth; the rating is benchmarked against CSI300.

  Risks

  Higher-than-expected raw material prices, weaker-than-expected shipments to global OEMs, and intensified competition in China and overseas markets.

• EV battery segment

  Main driver of revenue and shipment growth.

  Strengths

  1H26 revenue rose 46% YoY, supported by rising global EV penetration.

  Weaknesses

  ASP and gross margin are affected by material costs and competition.

  Comparison

  The report forecasts FY26F EV battery revenue of CNY456.4bn, FY27F CNY524.9bn, and FY28F CNY581.2bn.

  Risks

  Global OEM demand or shipment pace may come in below expectations.

• ESS battery segment

  High-growth business segment.

  Strengths

  1H26 revenue rose 88% YoY, supported by growth in domestic and overseas energy storage installations.

  Weaknesses

  Gross margin forecasts were lowered, reflecting business mix and pricing pressure.

  Comparison

  The report forecasts FY26F ESS battery revenue of CNY124.9bn, FY27F CNY177.5bn, and FY28F CNY234.8bn.

  Risks

  Intensified competition in the energy storage market and fluctuations in project demand.

Key data

• 2Q26 net profitCNY22.5bnUp 36% YoY and 9% QoQ, in line with the market expectation range of CNY22-23bn.
• 1H26 net profitCNY43.3bnUp 42% YoY.
• 1H26 revenueCNY277bnUp 55% YoY; 2Q26 revenue was CNY148bn, up 57% YoY and 14% QoQ.
• 2Q26 gross margin23.2%Down 2.4ppt YoY and 1.7ppt QoQ, which the report attributes to material cost inflation and changes in revenue mix.
• 1H26 EV battery revenueCNY192bnUp 46% YoY.
• 1H26 ESS battery revenueCNY53bnUp 88% YoY.
• Estimated 1H26 battery shipments430-440GWhUp about 60% YoY; 2Q26 was about 230GWh, up 10-15% QoQ.
• FY26F battery shipment forecastabout 1TWhUp 51% YoY; FY27-28F are expected to grow 19-22%.
• Share buyback planCNY20-40bnPlanned to be implemented within 12 months after shareholder approval, equivalent to about 1.1-2.3% of the latest A-share market capitalization.
• FY26-28F revenue forecast revision+5.7% to +8.6%Reflecting stronger-than-expected battery shipments and non-battery revenue growth.
• FY26-28F earnings forecast revision+3.3% to +5.3%Despite a 0.6-1.4ppt cut to GPM forecasts, earnings forecasts were still revised upward.
• Valuation18/15x FY26/27F P/EThe report considers the valuation undemanding.

Impact & implications

If the report's assumptions materialize, CATL is expected to benefit from rising global EV penetration and growth in ESS installations, while the share buyback may also improve expectations for shareholder returns and support market sentiment. The target price implies +65.0% upside from the current price, reflecting Nomura's positive view on earnings growth and valuation rerating.

Risks

• Raw material prices rising more than expected could further compress gross margins.
• Shipments to global OEMs coming in below expectations could affect revenue and earnings growth.
• Intensified competition in China and overseas markets could put pressure on ASP and profitability.
• Achievement of the target price could be affected by market and macro trends, as well as company earnings deviating from expectations.

What to watch

• Shareholder approval of the A-share buyback plan, execution pace, and actual repurchase price.
• Whether FY26F battery shipments can approach the forecast of about 1TWh.
• Whether EV and ESS battery ASPs remain stable, and the impact of material costs on GPM.
• Whether global EV penetration and domestic and overseas ESS installation growth continue in FY27-28F.
• The impact of the competitive landscape on market share, pricing, and margins in China and overseas markets.