Bernstein raises CATL earnings forecasts and target price, bullish on strong 1Q26 volume growth

Overview

This report is Bernstein's preview of CATL's 1Q26 results and valuation update. The report expects the company to release 1Q26 earnings after the April 15 close, and its core view is that although China's NEV sales slowed at the start of the year, CATL can still deliver steady growth in battery shipments and profitability thanks to a strong customer mix, surging ESS demand, European market expansion, and cost advantages.

Core views

The core views are as follows: first, 1Q26 revenue is expected to grow 35% YoY to RMB114.4bn, and net profit is expected to grow 30% YoY to RMB18.1bn; second, total battery sales are expected to grow 40% YoY to 168GWh, with unit net profit of about US$15/kWh and unit operating profit of about US$14/kWh; third, 2026 revenue and EPS forecasts are raised to 43% YoY and 34% YoY growth, respectively, mainly because the FY26 power battery market share assumption is raised from 36% to 38%; fourth, energy storage, electric heavy-duty trucks, European LFP penetration, and technology licensing are medium-term growth drivers; fifth, short-term margins face pressure from metal prices, price competition, and slower demand for passenger EVs in China, but the report believes these pressures can be partially offset by cost advantages and pass-through capability.

Analysis framework

The report combines high-frequency installation and sales tracking, company quarterly shipment and unit profitability estimates, regional market demand analysis, industry price and metal cost observations, peer profitability comparisons, and a DCF valuation model to revise earnings forecasts and the target price.

Methodology notes

• Valuation methodsDCF

  discounted cash flow valuation

  The report applies a DCF model with a 9.6% WACC and a 3% perpetual growth rate to CATL A-shares, based on annual free cash flow forecasts through 2050 and terminal value estimates, arriving at a target price of RMB620; for CATL H-shares, it applies a DCF model with a 10.4% WACC and a 3% perpetual growth rate, arriving at a target price of HKD600.

• Earnings forecasthigh-frequency shipment tracking

  battery sales and unit profit estimation

  Based on high-frequency tracking, the report estimates 1Q26 total battery sales at around 168GWh, up 40% YoY, and derives revenue and net profit forecasts using assumptions for average selling price changes, unit operating profit, and unit net profit.

• Relative comparisonpeer profitability comparison

  unit economics and margin advantage

  The report compares CATL's operating margins and unit profit with those of second-tier Chinese battery makers and Korean battery makers, and concludes that CATL's advantages mainly come from its cost structure, capacity utilization, vertical integration, and scale economies.

Asset mapping & comparison

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

• CATL A-shares 300750.SS / 300750.CH

  Core coverage asset

  Strengths

  The global battery leader, with strong demand for power batteries and energy storage batteries, plus clear advantages in cost structure, scale economies, capacity utilization, and technology leadership.

  Weaknesses

  Slower demand for passenger EVs in China, price competition, and rising metal prices may weigh on short-term unit profit.

  Comparison

  The report says CATL's 2025 operating margin was 16.7%, about 10 percentage points above domestic peers, and by early 2026 it had about 42% market share and captured more than 90% of the industry's profit pool.

  Risks

  Excess battery capacity in China, geopolitical constraints on market share, and intensifying competition from automakers' vertical integration.

• CATL H-shares 3750.HK

  Hong Kong-listed share class of the same company

  Strengths

  Benefits from the same global electrification, energy storage, and cost-advantage logic.

  Weaknesses

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

  Comparison

  The H-share DCF uses a 10.4% WACC and a target price of HKD600; the A-share DCF uses a 9.6% WACC and a target price of CNY620.

  Risks

  Downside risks include excess battery capacity in China, geopolitical constraints on market share, and intensified vertical integration by automakers; upside risks include better unit profitability and stronger-than-expected EV battery demand.

• European EV and LFP battery market

  Growth driver

  Strengths

  European EV sales grew 21% YoY in February 2026 and about 20% year to date, while low penetration, emissions targets, and energy-security concerns support continued demand.

  Weaknesses

  The European market is still affected by macro and policy conditions.

  Comparison

  The report says CATL's European market share has risen from nearly zero in 2019 to about 40% currently.

  Risks

  Geopolitical factors, trade policy, and local supply-chain requirements may affect the pace of expansion.

• U.S. market technology licensing opportunity

  Potential incremental option value

  Strengths

  Through the Ford Michigan project and Tesla Nevada LFP plant, technology and equipment licensing can reduce direct regulatory pressure from entering the U.S. market.

  Weaknesses

  The report remains cautious about CATL's direct near-term entry into the U.S. market.

  Comparison

  The Ford Michigan plant involves about US$2bn of investment, and Tesla's Nevada LFP plant has initial capacity of about 10GWh.

  Risks

  Geopolitical factors, weaker policy support, regulatory review, and uncertainty around project execution.

• Energy storage battery business

  Structural growth driver

  Strengths

  Rising energy-security concerns are boosting demand, and both China and global ESS battery production more than doubled in 1Q26, positioning CATL to benefit as an ESS leader.

  Weaknesses

  Industry capacity expansion may create later supply-demand and pricing pressure.

  Comparison

  China ESS battery production rose 115% YoY in 1Q26, while global ESS battery production rose 117% YoY.

  Risks

  Price competition, project delivery cycles, overseas policies, and the pace of grid investment.

Key data

• 1Q26 revenue forecastRMB114.4bn, up 35% YoYSupported by 40% YoY growth in total battery sales and changes in average selling price.
• 1Q26 net profit forecastRMB18.1bn, up 30% YoYThe body also mentions a 34% earnings growth figure, but the core stated metric is 30% YoY net profit growth.
• 1Q26 total battery sales forecast168GWh, up 40% YoYCABIA data shows CATL battery sales up 66% YoY, while Bernstein's own tracking estimate is 40%.
• Unit net profitabout US$15/kWh to US$15.2/kWhThe report believes short-term metal cost pressure exists, but unit profit is overall stable.
• Unit operating profitUS$14/kWhFlat YoY and down 18% QoQ, reflecting seasonal weakness and the impact of metal costs.
• 2026 revenue growth forecastup 43% YoYThe report says this forecast is above Bloomberg consensus.
• 2026 EPS growth forecastup 34% YoYThe upgrade to earnings forecasts is the main reason for the target price increase.
• FY26 power battery market share assumption38%, previously 36%Reflects stronger-than-expected installation momentum and improving relative competitiveness.
• China ESS battery productionup 115% YoY in 1Q26Global ESS battery production rose 117% YoY, making energy storage an important support.
• Valuation multipleabout 20x forward P/EThe report views this as attractive given near-term earnings growth of about 34% and the long-term demand outlook.

Impact & implications

The investment implication for CATL is positive: strong shipments, robust energy storage demand, European expansion, and technological leadership support earnings upgrades; if unit profit remains stable, the current valuation could have room for re-rating. At the same time, investors should watch the impact of slower Chinese EV demand, price competition, metal prices, and geopolitics on margins and overseas expansion.

Risks

• Excess battery manufacturing capacity in China could depress prices and margins.
• Geopolitical factors may limit CATL's overseas market share and its way of participating in the U.S. market.
• Vertical integration by automakers could intensify competition and weaken battery makers' bargaining power.
• China's EV demand slowed in the first two months of 2026, and the decline in purchase-tax support could further weigh on end demand.
• Lithium, copper, and other metal prices rose in 1Q26, which may pressure short-term margins.
• Price wars in China's battery and auto industries could compress unit profits.

What to watch

• Actual 1Q26 revenue, net profit, and unit profit after the April 15 post-close release.
• Whether total battery sales in 1Q26 are close to 168GWh, and the gap between CABIA data and company disclosure.
• Whether unit net profit can stay around US$15/kWh and unit operating profit remains stable.
• Whether FY26 power battery market share continues to validate at 38% or higher.
• European EV sales, LFP model penetration, and progress on European OEM orders.
• Growth in China and global energy storage battery production, as well as CATL ESS orders and capacity utilization.
• Electric heavy-duty truck penetration, battery-swap station construction, and progress on standardized #75 battery-swap packs.
• Progress on the Ford Michigan project, the Tesla Nevada LFP plant, and other U.S. technology licensing agreements.
• Changes in lithium, copper, and other metal prices and CATL's ability to pass through costs.