2Q beat, large buyback, and optimistic guidance together reinforce CATL's re-rating thesis

Overview

This report is Morgan Stanley's earnings review on Contemporary Amperex Technology Co. Ltd., namely CATL 3750.HK. The core view is that 2Q results slightly beat guidance, with strong sales volume and operating profit performance; more importantly, the company announced a large A-share buyback and share cancellation, while management provided optimistic guidance for next year's earnings growth, reinforcing market confidence in the company's intrinsic value, shareholder returns, and medium-term growth sustainability.

Core views

The report argues that CATL's investment narrative is shifting from short-term earnings delivery toward more visible sustained growth around 2027. EV batteries and energy storage jointly drove strong 1H26 revenue and profit growth; stable margin/Wh on a like-for-like product basis and improvement on the storage side eased concerns over profitability caused by quarterly product mix fluctuations. The Rmb20-40bn A-share buyback and share cancellation are seen as a strong signal of management confidence and could support further valuation re-rating.

Analysis framework

The report uses a combination of earnings reaction and valuation frameworks: first comparing 2Q earnings with company guidance and Morgan Stanley expectations, then analyzing sales volume, margins, product mix, and storage performance; it then evaluates the impact on market expectations, valuation re-rating, and the direction of 12-month forward EPS consensus based on management's guidance for next year's earnings growth, the A-share buyback plan, and shareholder return signals.

Methodology notes

• Valuation methodsEV/EBITDA

  base-case valuation

  Morgan Stanley uses the EV/EBITDA method to maintain consistency with the analytical framework applied to global battery peers; the report assigns a 17x EV/EBITDA multiple to 2027E EBITDA, implying 2027E P/E of 25.4x, and applies a 20% H/A premium to CATL H-shares.

• rating_frameworkMorgan Stanley Stock Ratings

  Overweight

  Overweight means that over the next 12-18 months, the stock's risk-adjusted total return is expected to exceed the average total return of the analyst's industry coverage.

• industry_viewMorgan Stanley Industry View

  In-Line

  In-Line means the analyst expects the industry's performance over the next 12-18 months to be broadly in line with the relevant broad market benchmark.

Asset mapping & comparison

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

• 3750.HK

  Research subject; CATL H-shares

  Strengths

  2Q results beat guidance, sales volume grew 60% YoY, EV batteries and energy storage both grew, management guidance is optimistic, and the Rmb20-40bn buyback with share cancellation strengthens shareholder returns.

  Weaknesses

  Quarterly product mix fluctuations caused temporary softness in margin/Wh; the industry view is In-Line rather than Attractive.

  Comparison

  The report applies a 20% H/A premium in valuing CATL H-shares and uses the EV/EBITDA framework consistent with global battery peers.

  Risks

  EV penetration or energy storage adoption weaker than expected, competition from other battery makers, supply chain decoupling due to geopolitics, and stalled market share gains.

• 300750.SZ

  The same company's A-share security; the buyback plan involves A-shares

  Strengths

  The Rmb20-40bn A-share buyback and share cancellation signal management's confidence in the company's intrinsic value.

  Weaknesses

  Changes in relative A/H valuation and premium may affect the pricing relationship between H-shares and A-shares.

  Comparison

  The report uses a 20% H/A premium assumption for H-shares relative to A-shares.

  Risks

  The pace of buyback execution, market sentiment, changes in the A/H price gap, and the regulatory environment may affect the market response to the shareholder return signal.

Key data

• 2Q earningsRmb22.6bnAbove company guidance of Rmb22bn and slightly below Morgan Stanley's previous estimate of Rmb23bn; the report says operating profit was better than MSe.
• 1H26 revenueRmb276.9bnUp 54.8% YoY.
• 1H26 net profitRmb43.3bnUp 42.0% YoY.
• Sales growth+60% YoYSales volume performed better than expected.
• A-share buyback sizeRmb20-40bnRepurchased shares are planned to be canceled; the report views this as a strong signal of management confidence in intrinsic value and shareholder returns.
• Next year's earnings guidanceSignificantly above 20% YoY growthManagement guidance is optimistic and drives market focus on growth sustainability.
• RatingOverweightIndustry view is In-Line.
• Target priceHK$815.00Implies 31% upside versus the closing price of HK$622.00 on July 24, 2026.
• 2026e EPSRmb20.53The table shows Morgan Stanley's EPS forecast.
• 2027e EPSRmb27.78Further growth versus 2026e, supporting the view of medium-term earnings expansion.

Impact & implications

The report believes that the combination of strong results, a large buyback, and optimistic guidance will reinforce market confidence in CATL's sustainable growth trajectory and could drive valuation re-rating. In the short term, 2Q operating profit and sales volume performance help support earnings expectations; in the medium term, visibility on growth through 2027 and shareholder return arrangements may become more important pricing factors.

Risks

• EV penetration and energy storage adoption may be weaker than expected.
• Potential competitive threats from other battery manufacturers.
• Geopolitical risks may lead to decoupling in the battery supply chain.
• Market share gains may stall.
• Quarterly product mix fluctuations may continue to pressure margin/Wh.

What to watch

• Execution progress of the Rmb20-40bn A-share buyback and share cancellation arrangements.
• The degree to which management delivers on guidance for next year's earnings growth to be significantly above 20% YoY.
• Whether shipment growth in EV batteries and energy storage continues.
• Whether margin/Wh on a like-for-like product basis and storage margin/Wh can remain stable or improve.
• Whether market EPS consensus is revised upward over the next 12 months.
• The impact of geopolitics and supply chain decoupling risks on overseas business and valuation.