CATL's 1H26 results were in line with expectations, with the RMB40bn buyback as the biggest positive surprise

Overview

This report is Bernstein's quick take on CATL's 1H26 results. The report believes the company's revenue, EBIT, and net profit were broadly in line with expectations, with strong growth quality; the biggest upside surprise came from the RMB20-40bn A-share buyback plan. Although gross margin is under pressure from metal costs, lower export tax rebates, and potential consumption tax impacts, unit profitability remains stable, while energy storage demand, fast-charging technology, sodium-ion batteries, and overseas capacity provide medium- to long-term growth support.

Core views

The core view is that CATL still offers a combination of high growth, strong scale, technology leadership, and solid capital returns. In 1H26, revenue grew 55% YoY, shipments grew about 60% YoY, and operating profit grew 70% YoY; management maintained guidance for 20-30% shipment CAGR over the next five years and said 2027 growth could be above that range. The report expects the market to interpret these results and the buyback plan positively and continues to be constructive on the company's long-term competitive position.

Analysis framework

The report uses comparisons of actual results versus Bernstein and consensus expectations, breakdowns of shipments and unit profitability, analysis of capacity utilization and capacity under construction, assessment of technology roadmap and overseas plant progress, and a DCF valuation framework to derive A-share and H-share target prices, while also referring to global battery makers' valuations and operating metrics for peer comparison.

Methodology notes

• Valuation methodsDCF

  Discounted cash flow

  Bernstein uses annual free cash flow forecasts through 2050 plus a terminal value to estimate the company's value. The A-share DCF uses a WACC of about 9.6%-9.8% and a 3% terminal growth rate to derive a target price of RMB800; the H-share uses a 10.4% WACC and a 3% terminal growth rate to derive HKD770.

• Operating analysisUnit economics model

  Profitability per kWh

  The report uses per-kWh metrics for gross profit, operating profit, and net profit to assess the impact of changes in pricing, costs, and product mix on earnings quality. It believes the decline in gross margin is mainly due to metal costs and denominator effects, while underlying unit profitability remains stable.

• Comparable companiesGlobal battery maker peer comparison

  Comparison of P/E, EV/Sales, EV/EBITDA, and capacity value

  The report compares CATL with battery makers such as LGES, Samsung SDI, Panasonic, BYD, SK Innovation, Gotion High Tech, EVE, and CALB to assess growth, profitability, and valuation positioning.

Asset mapping & comparison

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

• 300750.CH

  Core covered A-share

  Strengths

  Strong shipment growth, stable unit profitability, ample net cash, large buyback scale, and leading technology roadmap.

  Weaknesses

  Gross margin declined YoY, and cash conversion was weaker than expected due to higher inventory.

  Comparison

  Compared with most battery makers, CATL has a stronger combination of scale, cost, and technology, with valuation supported by expectations of high growth and industry consolidation.

  Risks

  Battery manufacturing overcapacity in China, geopolitical restrictions, and intensified competition from vertically integrated OEMs.

• 3750.HK

  H-share listing of the same company

  Strengths

  Benefits from the same fundamentals, technology, and global capacity layout, and the report assigns a target price of HKD770.

  Weaknesses

  H-share valuation is more noticeably affected by overseas investor risk appetite and geopolitical factors.

  Comparison

  The H-share target price is based on a DCF valuation using a 10.4% WACC, consistent with the A-share valuation framework but with a different discount rate.

  Risks

  Battery manufacturing overcapacity in China, geopolitical restrictions, and intensified competition from vertically integrated OEMs.

• Global battery supply chain

  Industry comparison and demand backdrop

  Strengths

  EV penetration, commercial vehicle electrification, and AI-driven energy storage demand provide long-term growth room.

  Weaknesses

  Metal prices, changes in export tax rebates, and product mix may pressure gross margin.

  Comparison

  The report believes the battery industry may follow wind and solar toward consolidation, with a small number of global leaders ultimately dominating.

  Risks

  Demand slowdown, price competition, and overseas policy and trade restrictions.

Key data

• 1H26 revenueRMB276.9bnUp 55% YoY, broadly in line with the RMB278bn consensus expectation.
• 1H26 net profitRMB47.0bnUp 45% YoY, broadly in line with Bernstein's expectation.
• Net profit attributable to shareholdersRMB43.3bnUp 42% YoY.
• 1H26 total shipments约435GWhUp about 60% YoY; ESS about 100GWh, EV about 335GWh.
• Gross margin23.9%Below 1H25's 25.0%, mainly due to rising metal costs.
• Operating profitRMB45.4bnUp 70% YoY, with an operating margin of 16.4%.
• Net profit per unit约US$14.7/kWhIn line with Bernstein's expectation, indicating stable unit profitability.
• Free cash flowRMB35bnOperating cash flow minus capital expenditures, corresponding to about a 4% FCF yield.
• Net cashRMB249bnNet cash at the end of 1H26 increased from RMB242bn at YE25.
• A-share buyback planRMB20-40bnTo be executed within 12 months, with repurchased shares to be canceled; the upper limit is about 1.5% of share capital.
• Capacity utilization94.9%Above about 90% in 1Q26, still indicating that capacity rather than demand is the constraint.
• Capacity under construction764GWhMost of it is expected to come online over the next 1-2 years.
• A-share target priceRMB800Based on DCF valuation.
• H-share target priceHKD770Based on DCF valuation.

Impact & implications

In terms of investment implications, the results themselves were in line with expectations but of strong quality, while the buyback plan enhances signals of shareholder returns and management confidence. Energy storage demand, rising domestic passenger vehicle share, progress in fast charging and sodium-ion technology, and expansion of localized European capacity all support medium- to long-term growth. In the short term, investors need to weigh factors such as gross margin pressure, weaker-than-expected cash conversion, reduced export tax rebates, new consumption tax, and slowing China EV demand.

Risks

• Overcapacity in China's battery manufacturing may pressure prices and margins.
• Geopolitical factors may limit CATL's share expansion in overseas markets.
• Vertically integrated OEMs increasing in-house supply or supplier diversification may weaken CATL's pricing power.
• Rising metal costs, lower export tax rebates, and new consumption tax may create additional cost pressure.
• Weak China EV demand and increased OEM rebates are short-term risks to monitor.
• Inventory increases have led to weaker-than-expected cash conversion, which could affect free cash flow quality if sustained.

What to watch

• Whether 2H26 revenue and EBIT can achieve about 40% growth to meet the full-year target.
• The actual execution pace, average repurchase price, and cancellation progress of the RMB20-40bn A-share buyback.
• Whether shipment growth in 2027 will indeed exceed the 20-30% five-year CAGR guidance range.
• The net impact of a higher ESS mix on gross margin and unit profitability.
• How costs are passed through as export tax rebates fall from 13% to 9%, and later to 4% and 0%.
• The actual ramp-up in orders, cost curve, and delivery pace of sodium-ion batteries in Europe and China.
• The start-up progress, cost performance, and customer order conversion at the Hungary and Spain plants.
• The impact of the Jianxiawo lithium mine restart on internal lithium supply and market lithium prices.