CATL 1Q26 results were strong and exceeded expectations, with momentum sustained

Overview

This report is Bernstein’s quick take on CATL’s 1Q26 results. The report argues that despite a temporarily weaker Chinese EV demand environment and rising metal prices, CATL delivered strong results: revenue, gross margin, operating profit, and net profit all grew significantly and surpassed expectations. Management continues to guide to 20%–30% CAGR in total battery sales over the next five years and expects total battery demand to reach 4TWh or more by 2030.

Core views

The core view is “stronger and more durable.” CATL benefited from EV and energy storage demand support, higher energy per vehicle, faster commercial EV electrification, clearer domestic energy-storage policy, and overseas AI-driven demand for storage. The company is maintaining unit profitability through a metal-price pass-through mechanism and strengthening its upstream resource footprint through Shidai Resources Group, reducing raw-material volatility risk. However, in the near term, some Chinese installations data and market-share metrics have weakened, so demand and competitive developments still need to be monitored.

Analysis framework

The report analyzes 1Q26 financial results, operating metrics, pricing and unit profitability, management outlook, technology roadmap, upstream resource strategy, overseas capacity, and DCF valuation. On valuation, A-shares are valued with a 2050 DCF using WACC of roughly 9.6%–9.8% and a terminal growth rate of 3%, leading to a RMB620 target price; H-shares use WACC of 10.4% and a 3% terminal growth rate, resulting in a HKD600 target.

Methodology notes

• Valuation methodsDCF

  2050 discounted free cash flow valuation

  Bernstein uses DCF valuation to set the CATL target price, with key assumptions including long-term free cash flow forecasts, terminal value, WACC, and a 3% perpetual growth rate.

• operating_analysisunit_profit_analysis

  Operating profit per kWh

  The report uses gross profit per unit, operating profit per unit, and net profit per unit to assess battery segment profitability resilience, with focus on metal-cost pass-through and product mix changes.

• earnings_reviewactual_vs_estimate

  Actual performance versus estimates and consensus expectations

  The report compares 1Q26 actual revenue, gross margin, operating profit, and net profit with Bernstein’s forecasts and consensus expectations to assess the degree of earnings surprise.

Asset mapping & comparison

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

• 300750.CH

  Core covered name; A-share

  Strengths

  Earnings beat, strong unit-profit resilience, and strong scale and cost advantages, with technology leadership and a DCF target price implying substantial upside.

  Weaknesses

  Short-term share pressure in the China installation market, monthly EV demand fluctuations, and potential margin pressure from energy storage mix shifts.

  Comparison

  The report believes that only a few battery leaders will ultimately dominate the industry, and CATL has leading scale and cost advantages.

  Risks

  Chinese battery overcapacity, geopolitical constraints on market share, and intensified competition from vertically integrated OEMs.

• 3750.HK

  H-share of the same company

  Strengths

  Benefiting from CATL’s long-term growth, technology leadership, and globalization, with a target price of HKD600.

  Weaknesses

  The rating is Market Perform, with a relatively more neutral risk-reward framing versus A-shares.

  Comparison

  Shares the same fundamentals as the A-share, while H-share valuation uses a DCF framework with WACC of 10.4%.

  Risks

  Downside risks include Chinese battery overcapacity, geopolitics, and OEM competition; upside risks include improved unit profitability and EV battery demand exceeding expectations.

• Shidai Resources Group

  Vehicle for upstream resource positioning

  Strengths

  Registered capital of RMB30bn, helping to integrate resources and reduce the impact of metal-price volatility.

  Weaknesses

  Resource integration and mine restart progress still require time.

  Comparison

  Compared with a pure manufacturer, stronger upstream positioning can improve long-term supply security.

  Risks

  Uncertainty around lithium mine restarts, regulatory requirements, and global resource and metal price instability.

Key data

• 1Q26 RevenueRMB129.1bnUp 52% year-over-year, 11% above consensus expectations.
• 1Q26 Net profit attributable to parentRMB20.7bnUp 49% year-over-year, 15% above Bernstein forecasts and 16% above consensus expectations.
• 1Q26 total battery deliveriesabout 200GWhUp 67% year-over-year; energy storage represented 25% of total.
• 1Q26 gross margin24.8%Higher than 1Q25’s 24.4%, broadly in line with consensus expectation of 24.7%.
• 1Q26 operating profitRMB22.1bnUp 87% year-over-year, with operating margin of 17.1%.
• Operating profit per kWhUS$15.6/kWhUp 12% year-over-year, above Bernstein’s estimate of US$13.8/kWh.
• Net cashRMB264bnAbove RMB242bn at end-2025; cash balance is RMB352bn.
• Operating cash flowRMB33.7bnUp 3% year-over-year.
• Capital expenditureRMB12.4bnUp 20% year-over-year.
• A-share target priceRMB620Based on DCF valuation; current price is CNY431, implying about 44% upside.

Impact & implications

The report expects the 1Q26 earnings beat to lead to consensus EPS upgrades and continue supporting share performance. If CATL maintains stable unit profitability, executes expansion smoothly, and demand grows as management expects, the company’s scale advantage, technology leadership, and cost advantages in power batteries and energy storage should further strengthen the long-term compounding thesis.

Risks

• Chinese battery manufacturing overcapacity.
• Geopolitical factors limiting CATL’s market share.
• Heightened competition from vertically integrated OEMs.
• Recent weakening of China’s installations and share in certain subsegments.
• Shift in product mix toward Chinese energy storage may pressure unit profitability.
• Uncertainty in upstream resources, metal prices, and mine restarts.

What to watch

• Whether consensus EPS is revised up due to 1Q26 earnings beat.
• Progress on delivering management’s 20%–30% CAGR sales guidance over five years.
• Whether 1H26 capacity utilization can stay at 85–90%.
• Unit profitability stability as the energy storage share rises.
• Changes in Chinese passenger EV, commercial EV, and LFP installation market share.
• Super Tech Day and new products at the Beijing Auto Show, including progress on sodium-ion and solid-state batteries.
• Commissioning of the Hungary plant, cost curve, and Phase II progress.
• Restart and re-licensing progress of Yichun lithium mine and other mines.