CATL again beat expectations in 1Q26, with H-shares upgraded to Overweight
AI summary card
CATL again beat expectations in 1Q26, with H-shares upgraded to Overweight
Backed by stronger earnings, EV and ESS delivery growth, earnings resilience, and H-share scarcity, JPMorgan raised CATL earnings forecasts and target prices, and upgraded CATL-H from Neutral to Overweight.
- 1Q26 EV and ESS shipments exceeded 200 GWh in total, with ESS accounting for around 25%; EV growth was near 50% year-on-year and ESS growth near 130% year-on-year.
- Management said scheduling was strong in April and May, capacity utilization remained at 85–90%, and demand/order visibility stayed high.
- JPMorgan raised 2026/27E earnings estimates by 6%/8%, lifted CATL-A target price to RMB 520 and CATL-H target price to HK$725.
- The report believes CATL-H should trade at a 15–25% premium to CATL-A, driven by global investor demand, H-share scarcity, liquidity, and index-weighting differences.
Report interpretation
Overview
This report is a JPMorgan company research and rating-change report on CATL. The core conclusion is that the company again beat expectations in 1Q26, with strong EV battery and ESS battery demand and resilient gross margin despite higher raw-material costs. CATL-H is seen as deserving a valuation premium due to scarcity and global asset-allocation demand, so JPMorgan maintains CATL-A at Overweight and upgrades CATL-H from Neutral to Overweight.
Core views
JPMorgan views CATL as the preferred name in China’s battery value chain. The report highlights three pillars: first, 1Q26 shipment and earnings performance outpaced expectations, with EV and ESS shipments exceeding 200 GWh in total and ESS share rising; second, the impact of higher raw-material prices on unit profits is limited, with scale effects, product design, cost pass-through mechanisms, and supply-chain integration supporting margin stability; third, CATL-H has the characteristics of a scarce global EV and ESS value-chain asset, and limited H-share supply combined with global investor demand gives it a reasonable premium versus the A-share counterpart.
Analysis framework
The report combines 1Q26 results, management call minutes, shipment and market-share trends, raw-material price and ASP changes, A/H valuation differences, cross-market premium comparisons with peers, and a P/E valuation approach to update ratings and target prices for CATL-A and CATL-H.
Methodology notes
Earnings and revenue forecasts are raised based on stronger ESS demand and improved EV battery market share.
JPMorgan raised CATL's 2026/27E earnings forecasts by 6% and 8%, respectively, to reflect stronger volume growth, stronger ESS demand, and improved EV battery market share.
Derive Dec-26 target prices using 2026E PE multiples.
The CATL-A target price of RMB 520 is based on 25x 2026E PE; the CATL-H target price of HK$725 is based on 30x 2026E PE. The H-share multiple is above prior assumptions, mainly reflecting strong demand and scarcity premium.
Using TSMC ADR/TW and China Merchants Bank A/H spread as references to determine a reasonable CATL-H premium range versus CATL-A.
The report believes CATL-H can trade at a 15–25% premium to CATL-A, supported by global investor demand, limited H-share supply, index-weighting differences, and CATL’s leadership in the global EV and ESS battery value chain.
Validate earnings resilience using management-call disclosures on capacity utilization, order book, costs, overseas plants, and resource footprint.
Management said scheduling in April and May was active, order book was abundant, capacity utilization was 85–90%, and raw-material cost inflation is buffered through Resource Group integration, cost pass-through, and product design.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- CATL-A / 300750.SZCore A-share coverage name; rating remains Overweight.
- Strengths
- Technology leadership, high global EV and ESS battery market share, strong earnings resilience, and strong supply-chain integration capability.
- Weaknesses
- A-share investors benchmark primarily against domestic battery peers, so valuation-premium sensitivity is weaker compared with H-shares.
- Comparison
- CATL-A target price is RMB 520, based on 25x 2026E PE; the report believes CATL-H can command a 15–25% premium versus CATL-A.
- Risks
- Sales or gross margins below expectations, and U.S.-China geopolitical risk.
- CATL-H / 3750.HKRating for CATL-H upgraded from Neutral to Overweight.
- Strengths
- Strong global investor demand, relatively limited H-share free float, and index weight and investability differences support a scarcity premium.
- Weaknesses
- Already trading at a meaningful premium to A-shares; if financing rumors, sentiment, or capital flows change, the premium may fluctuate.
- Comparison
- Using TSMC ADR/TW and China Merchants Bank A/H premium as references, the report views a reasonable CATL-H premium to CATL-A at 15–25%.
- Risks
- Potential H-share placings are expected to cause less than 2% dilution, but could affect sentiment in the short term; also exposed to sales, gross-margin, and geopolitical risks.
Key data
- 1Q26 EV+ESS deliveries>200GWhESS accounted for around 25%, and shipment mix improved notably.
- 1Q26 sales growthEV up nearly 50% year-on-year; ESS up about 130% year-on-yearEven with a relatively weak Chinese domestic new-energy vehicle market in Q1, EV battery deliveries still exceeded expectations.
- 1Q26 gross margin25%Despite raw-material price pressure, unit profitability remained stable on a month-over-month basis.
- Capacity utilization85–90%Management said production scheduling in April and May was strong and orders were very full.
- 2026/27E earnings revision+6% / +8%The revision was driven by stronger ESS demand and improved EV battery market share.
- CATL-A target priceRMB 520.00Previously RMB 500.00; based on 25x 2026E PE.
- CATL-H target priceHK$725.00Previously HK$650.00; rating upgraded from Neutral to Overweight.
- Reasonable CATL-H A/H premium15–25%Benchmarking against TSMC ADR/TW and China Merchants Bank A/H valuation differences.
- Global EV battery share39% in 2025; up to 42% in 2M26According to SNE Research, up 1 percentage point year-on-year in 2025.
- ESS market share30% in 2025Basically flat versus 2024.
Impact & implications
The investment implication is broadly positive: near term, 1Q26 earnings outperformance, Super Technology Day on April 21, and strong shipment scheduling are catalysts; mid term, stronger ESS demand, AI data-center storage, rising new-energy vehicle penetration, and overseas market-share expansion support growth; on valuation, H-share scarcity and global allocation preferences may continue to support the premium versus A-shares.
Risks
- Sales below expectations.
- Gross margin or unit profits below expectations.
- Raw-material price increases exceeding the offset range of cost pass-through mechanisms.
- U.S.-China geopolitical risk.
- Potential H-share placements or financing arrangements triggering short-term stock-price and valuation-premium volatility.
- Overseas capacity ramp costs exceeding expectations, especially if Hungary plant costs remain above China.
What to watch
- CATL's Super Technology Day on 21 April 2026 at 19:00 HKT, including new technology, product, and ecosystem announcements.
- Whether scheduling, order saturation, and capacity utilization in April and May can remain at 85–90%.
- ESS demand, especially AI data-center storage and the assumption of 15–20 GWh ESS demand for 1GW data centers.
- Whether CATL-H premium versus CATL-A returns to or stays within the reasonable 15–25% range.
- The transmission effect of lithium, sulfuric acid, and other raw-material price movements through contractual cost pass-through mechanisms.
- Hungary plant ramp-up progress, cost trajectory, and European market-share gains.
- China EV market recovery, new model launches, and policy support in driving battery deliveries.