CATL 2Q26 results in line with expectations, demand and buyback jointly support Buy rating

Overview

This report is Goldman Sachs' review of CATL's 2Q26 results. The report notes that the company posted 2Q26 revenue of Rmb147.79bn, up 57% YoY, and net profit of Rmb22.55bn, up 36% YoY, overall in line with expectations. Although gross margin came under some pressure due to product mix changes and rising raw material costs, operating expense control, investment income, and strong cash flow supported earnings quality. Management remains positive on demand in 2H26 and 2027, and believes long-term electrification, energy storage, and overseas market expansion will continue to drive growth.

Core views

Goldman Sachs' core view is that CATL remains the world's leading battery manufacturer, with the power battery business providing a solid earnings foundation, while energy storage systems, system integration, AIDC power supply solutions, and the commercialization of sodium-ion batteries will become new sources of value. The report believes the company's advantages in scale, technology, cost, and global customer resources will help it consolidate share amid industry competition, while its expansion from battery cells to integrated energy solutions should enable higher project value, service revenue, and valuation re-rating potential.

Analysis framework

The report analyzes earnings breakdown, shipment and profit-per-Wh trends, segment growth, management earnings call takeaways, cash flow and shareholder returns, capacity planning, and valuation framework. For valuation, it uses a sum-of-the-parts approach to distinguish the growth and valuation characteristics of the power battery and BESS businesses, and provides different target prices for the A-share and H-share listings.

Methodology notes

• Valuation methodsSoTP sum-of-the-parts valuation

  Value power batteries, BESS, and ecosystem investments separately based on different growth and valuation characteristics, then sum them.

  For CATL-A, the report uses 11x 2026-27E EBITDA for the power battery business, and for BESS adopts a discounted 2030E EV/EBITDA approach with an exit multiple of 18x; for CATL-H, it uses a global framework, applying 20x EV/EBITDA for the power battery business and a 25x 2030E exit multiple for BESS.

• Investment factorGS Factor Profile

  Compare stocks based on growth, financial returns, valuation multiples, and composite factors.

  Goldman Sachs' factor profile uses analyst forecasts and normalized rankings to compare a stock's growth, returns, and valuation characteristics relative to the market and industry peers.

• M&A probabilityM&A Rank

  Use a score of 1 to 3 to assess the probability of a company becoming an acquisition target.

  The report discloses CATL's M&A Rank as 3, indicating a low acquisition probability, which is typically not included in the target price.

Asset mapping & comparison

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

• 300750.SZ

  The main A-share stock covered by the report.

  Strengths

  A global battery leader, recovering share in power batteries, rapid growth in energy storage shipments, ample net cash, and a large buyback plan announced.

  Weaknesses

  Gross margin and net profit per unit are affected by rising raw material costs and changes in product mix.

  Comparison

  The target price of Rmb565.00 implies 47.5% upside versus the current price of Rmb383.01.

  Risks

  Global EV demand below expectations, ESS demand below expectations, rising raw material costs, slower-than-expected BESS integration progress, overseas expansion and trade policy execution risks, and intensified industry competition.

• 3750.HK

  The report also provides a target price and rating for CATL's H-shares.

  Strengths

  Goldman Sachs believes the H-shares use a global valuation framework that can reflect the company's global leadership, scarcity value, and higher ROIC.

  Weaknesses

  Also exposed to industry demand, cost, overseas policy, and competition risks.

  Comparison

  The target price of HK$947.00 implies 52.3% upside versus the current price of HK$622.00, and implies a 54% H-share premium relative to the A-shares.

  Risks

  If overseas expansion, energy storage integration, or global battery demand fall short of expectations, the valuation re-rating potential for the H-shares could come under pressure.

Key data

• 2Q26 net profitRmb22.55bn, up 36% YoYIn line with Goldman Sachs estimates and market expectations of Rmb22-23bn.
• 2Q26 revenueRmb147.79bn, up 57% YoYA record high, 3% above Goldman Sachs estimates.
• 1H26 revenueRmb276.92bn, up 55% YoYUp 15% QoQ.
• 1H26 battery shipmentsAbout 435GWh, up about 60% YoYEnergy storage accounted for about 25% of total shipments.
• 2Q26 implied shipmentsAbout 235GWh, up about 60% YoYContinuing the strong growth of about 60% since 4Q25.
• Net profit per unitRmb97/kWhDown 7% QoQ from Rmb104/kWh in 1Q26, mainly reflecting raw material cost inflation and an unfavorable product mix shift.
• 2Q26 gross margin23.2%Down 2.4 percentage points YoY, 1.2 percentage points below Goldman Sachs estimates.
• 2Q26 EBITRmb25.48bn, up 55% YoY8% above Goldman Sachs estimates, with the operating expense ratio falling to a historical low as one of the supporting factors.
• 2Q26 operating cash flowRmb26.54bn, up 3% YoYAbout 1.2x net profit.
• 2Q26 free cash flowRmb13.88bn, down 13% YoYCapital expenditure was Rmb12.66bn, up 28% YoY.
• Net cashRmb226.38bnStill strong, versus Rmb228.19bn in 1Q26.
• Buyback planRmb20-40bnFor repurchasing and cancelling A-shares, reducing registered capital and enhancing EPS.
• Interim dividendRmb6.49bn, Rmb1.41/shareReflects shareholder returns.
• Capacity under construction764GWhMost capacity is expected to come online in the next 1-2 years, but not all is certain to be operational before 2027.
• Long-term shipment growth expectation20%-30% CAGR over the next five yearsManagement reiterated long-term demand expectations, with higher near-term growth expectations.
• 2026E EPSRmb20.19Goldman Sachs said forecasts were fine-tuned after the results, with 2026E-2028E EPS basically unchanged.

Impact & implications

The report's investment implication for CATL is positive overall: in the short term, 2Q26 results in line with expectations, a strong demand outlook, tight capacity, and a large buyback reinforce signals on earnings and shareholder returns; in the medium to long term, power batteries remain the earnings anchor, while energy storage system integration, overseas orders, AIDC power supply solutions, and the commercialization of sodium-ion batteries could drive the company to evolve from a battery manufacturer into an integrated energy solutions platform. The main constraints are pressure on gross margin, raw material costs, the pace of global EV and ESS demand, and overseas execution and trade policy risks.

Risks

• Global EV demand growth comes in below expectations.
• Global ESS demand growth comes in below expectations.
• Unexpected increases in raw material costs, especially battery metal prices.
• BESS integration progresses more slowly than expected.
• Overseas expansion faces execution risk and trade policy risk.
• Competition intensity in power batteries and energy storage batteries is higher than expected.
• Gross margin continues to face pressure from product mix changes and cost inflation.

What to watch

• Order realization and capacity utilization changes in 2H26 and 2027.
• The commissioning pace of the 764GWh capacity under construction over the next 1-2 years.
• The share of energy storage business shipments, system integration revenue, and overseas order growth.
• The progress of scaled commercial deployment of AIDC customized power supply solutions over the next 1-2 years.
• Order delivery, cost reduction, and mass-production scale of sodium-ion batteries.
• Whether the metal cost pass-through pricing mechanism can effectively transmit cost pressure downstream.
• The execution pace of the Rmb20-40bn A-share buyback and cancellation plan.