CATL 1H26 results were in line with expectations, and the RMB40bn buyback reinforces the positive signal

Overview

This report is Bernstein's quick-take commentary on CATL's 1H26 results. The report believes that the company's first-half revenue, net profit, and shipment growth were strong and broadly in line with expectations, with energy storage demand and EV battery market share continuing to support growth. Although gross margin was pressured by metal costs, lower export tax rebates, and changes in consumption tax, unit profitability remained stable. The A-share buyback plan of up to RMB40bn is viewed as a key signal of management confidence and attractive valuation.

Core views

The core view is to maintain an Outperform rating on CATL. Positive factors include: 1H26 shipments of about 435GWh, up about 60% year over year; energy storage mix rising to about 25%; domestic passenger vehicle battery share increasing to 46.7%; ternary battery share reaching 75.2%; capacity utilization at 94.9%; stable unit net profit; and progress in sodium-ion batteries, Shenxing fast-charging batteries, and overseas capacity reinforcing long-term technology and scale advantages. Negative or watch items include declining gross margin, rising metal costs, lower export tax rebates, consumption tax impact, softer China EV demand, supplier diversification by automakers, and weaker cash conversion due to inventory.

Analysis framework

The report analyzes 1H26 financial results, operating data, key takeaways from management's conference call, unit profitability, capacity expansion, technology roadmap, overseas plants, and capital return plans, and uses a DCF valuation framework to derive target prices for A-shares and H-shares.

Methodology notes

• Valuation methodsDCF

  Discounted cash flow valuation

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

• Earnings analysisActual vs. Estimates

  Actual results versus expectations

  The report compares 1H26 revenue, gross profit, operating profit, net profit, and other metrics against Bernstein forecasts and market consensus expectations to assess whether results beat or missed expectations.

• Operating qualityPer-unit profitability

  Per-unit profitability

  The report focuses on tracking gross profit, operating profit, and net profit per kWh, and believes that despite the decline in gross margin, unit net profit of about US$14.7/kWh shows that underlying profitability remains relatively stable.

Asset mapping & comparison

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

• 300750.CH

  Core covered A-share

  Strengths

  Strong revenue and net profit growth, stable unit profitability, capital return support from a buyback of up to RMB40bn, and a DCF target price of RMB800.

  Weaknesses

  Declining gross margin, weaker cash conversion, and potentially slowing domestic EV demand.

  Comparison

  The report believes CATL is superior to most battery peers in scale, cost, technology mix, and customer relationships.

  Risks

  Battery overcapacity in China, geopolitical restrictions, vertical integration by automakers, and supplier diversification.

• 3750.HK

  H-share listing of the same company

  Strengths

  Shares CATL's fundamentals, technology leadership, and long-term growth logic, with a DCF target price of HKD770.

  Weaknesses

  Also affected by gross margin, policy costs, and industry competition pressures.

  Comparison

  Similar valuation framework to A-shares, but the H-share DCF uses a 10.4% WACC.

  Risks

  Battery overcapacity in China, geopolitical restrictions, vertical integration by automakers, and supplier diversification.

• Global battery supply chain

  Related industry direction benefiting from CATL's capacity expansion and technology leadership

  Strengths

  Energy storage demand, fast charging, sodium-ion batteries, and overseas localized manufacturing support long-term demand.

  Weaknesses

  Upstream metal prices, lower export tax rebates, and the capacity cycle may pressure margins.

  Comparison

  The report draws parallels with clean technology industries such as wind and solar, believing the battery industry may gradually consolidate around a few global leaders.

  Risks

  Industry overcapacity, price competition, and policy and trade restrictions.

Key data

• 1H26 revenueRMB276.9bnUp 55% year over year, broadly in line with Bernstein estimates.
• 1H26 net profitRMB47.0bnUp 45% year over year, about 2% below Bernstein estimates.
• Net profit attributable to shareholdersRMB43.3bnUp 42% year over year.
• 1H26 total shipments435GWhUp about 60% year over year; energy storage about 100GWh, EV batteries about 335GWh.
• Gross margin23.9%Below 25.0% in 1H25, mainly due to rising metal costs.
• Operating profitRMB45.4bnUp 70% year over year, with an operating margin of 16.4%.
• Unit net profitUS$14.7/kWhIn line with Bernstein expectations, showing stable unit profitability.
• Operating cash flowRMB60.2bnUp 2.6% year over year; cash conversion was weaker than expected, reflecting increases in working capital such as inventory.
• Free cash flowRMB35bnAbout a 4% free cash flow yield, expected to support buybacks.
• A-share buyback planRMB20-40bnTo be implemented within 12 months; repurchased shares will be canceled and reduce share capital.
• Domestic passenger vehicle market share46.7%CATL's share in the domestic passenger vehicle battery market increased.
• Ternary battery share75.2%The company maintains a leading position in China's ternary battery market.
• Capacity under construction764GWhMost is expected to come online in the next 1 to 2 years.
• A-share target priceCNY800Based on DCF valuation.
• H-share target priceHKD770Based on DCF valuation.

Impact & implications

The report expects the market to react positively to the results and the buyback plan. For investors, CATL's main attractions are high shipment growth, stable unit profitability, incremental opportunities in energy storage and sodium-ion batteries, overseas localized capacity, and the capital return capability supported by a strong balance sheet. From a valuation perspective, the A-share target price implies significant upside relative to the closing price, supporting the maintained Outperform rating.

Risks

• Overcapacity in China's battery manufacturing industry.
• Geopolitical factors restricting CATL's overseas market share.
• Intensifying competition from vertically integrated automakers.
• Soft China EV demand and supplier diversification by automakers.
• Cost pressure from the phased reduction of export tax rebates from 13% to 0% and the new consumption tax.
• Rising metal costs pressuring gross margin.
• Higher inventory leading to weaker-than-expected cash conversion.

What to watch

• Whether 2H26 revenue and EBIT can achieve about 40% growth in line with the full-year target.
• Whether shipment growth in 2027 can exceed management's 20%-30% five-year CAGR guidance.
• The shipment mix of energy storage and the sustainability of AI-driven overseas energy storage demand.
• The execution pace and cancellation progress of the A-share buyback of up to RMB40bn.
• Mass production and order conversion for TENER Sodium, Naxtra, and Changan's first sodium-ion passenger vehicle.
• The impact of the restart of the Jianxiawo lithium mine on internal lithium supply and lithium prices.
• The commissioning progress, cost levels, and localization advantages of the Hungary and Spain plants.
• Whether the reduction in export tax rebates and changes in consumption tax can be smoothly passed through to customers.