CATL (03750) saw its shares climb close to 5% during the afternoon session. By the time of writing, the stock had advanced 4.86% to HK$505, with a trading turnover of HK$969 million.
According to analysis from Soochow Securities, while rising lithium prices are negatively impacting demand for mid- to low-end products, CATL is experiencing a smaller impact. The firm's calculations indicate that for domestic medium-scale energy storage projects, a cell price increase of 2-3 cents/wh leads to a 1 percentage point decline in IRR. At current cell prices, IRR has dropped by approximately 4 percentage points, causing delays for projects with lower returns. CATL's batteries, however, are more commonly used in high-return projects and overseas markets.
In the power battery segment, CATL holds a higher market share in premium vehicle models, where cost sensitivity is lower, resulting in limited demand impact. The securities firm maintains its forecast for the company's production schedule this year at 1.1 TWh, a 50% year-on-year increase, with projected shipments of 900 GWh.
Morgan Stanley had previously indicated an expectation that CATL's share price would rise relative to the industry average over the next 15 days, with a probability estimated between 70% and 80%. The bank noted that the recent pullback in CATL's stock price has made its short-term valuation more attractive.
Analysts at Morgan Stanley believe the market is overly concerned about the pressure of cost inflation on the company's profit margins, arguing that these costs will ultimately be passed through. CATL has demonstrated its ability to pass on costs during the previous lithium price upcycle, and the bank anticipates its lithium mining operations will resume production in the near term.
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