As lithium carbonate prices dropped from 200,000 yuan per ton toward 100,000 yuan per ton, profits across the lithium battery industry have generally declined, yet as the downstream leader in lithium batteries, CATL (03750) has seen both revenue and profit surge significantly.
According to Zhitong Finance APP, on October 20, CATL released its 2026 third-quarter report, showing that third-quarter revenue and non-GAAP shareholder profit grew by 58.58% and 14.86% respectively, while revenue for the first three quarters reached 442.137 billion yuan, up 56.19% year-on-year, with shareholder net profit of 64.53 billion yuan, up 31.6% year-on-year.
Additionally, in the first three quarters, the company's net cash flow from operating activities reached 61.625 billion yuan.
Earning 239 million yuan per day, CATL has profited enormously during this lithium carbonate-driven cycle, and with its comprehensive industry chain layout, even as lithium carbonate prices fell sharply in the third quarter, the company still achieved dual growth in performance, highlighting its resilience as an industry leader.
Data shows that from January to August 2026, domestic power battery installations totaled 489.1GWh, with the company holding over 40% market share at the top, roughly double the share of the second-place competitor.
However, affected by falling lithium carbonate prices and recent panic selling triggered by a sharp decline in global indices, CATL's market value has continued to retreat, with its current PE (TTM) at 15.7 times.
So, is the company worth picking up at a bargain?
"Dual-Wheel Drive" Sustains Quarterly Growth in Both Revenue and Profit
According to Zhitong Finance APP, on a quarterly basis, from the first quarter to the third quarter of 2026, CATL's revenue growth rates were 52.46%, 56.90%, and 58.58%, while shareholder net profits were 20.738 billion yuan, 22.546 billion yuan, and 21.246 billion yuan, with year-on-year growth rates of 48.55%, 36.40%, and 14.54% respectively.
The company's quarterly profit margin performance has been relatively stable, with a shareholder net margin of 14.6% in the first three quarters.
The company has two core businesses: power battery systems and energy storage battery systems, with strong quarterly sales growth.
In the third quarter, the company's combined sales of power batteries and energy storage batteries exceeded 260GWh, up about 58% year-on-year, of which energy storage batteries accounted for about 65GWh, or one-quarter of the total.
Driven by sales volume, both businesses maintained high growth levels, with revenue shares of 72.72% and 20.16% respectively in the first half of the year.
Data source: publicly disclosed data
However, growth expectations exist for both businesses.
From January to September, China's cumulative sales of power and energy storage batteries reached 1,681.7GWh, up 57.6% year-on-year, with power battery sales up 38.2% year-on-year and energy storage battery sales up 111.8%, accounting for 64.6% and 35.4% of total sales respectively.
CATL firmly holds the industry's top position, with power battery installations of 253.68GWh in the first three quarters, a market share of 44.16%, up 1.41 percentage points year-on-year.
Notably, the energy storage battery business has become a highlight of the company's overseas market expansion.
The company exclusively supplies energy storage systems for the largest operational battery storage project in Australia's National Electricity Market (NEM), with project storage scale exceeding 3GWh; signed a 2GWh Tianheng sodium-ion battery energy storage cooperation agreement with Solarpro, a leading renewable energy company in Eastern Europe; and signed a memorandum of understanding with Alfen N.V., a leading European new energy integrator, planning to deploy 5GWh of Tianheng sodium-ion battery energy storage systems in the Netherlands and other Western European countries starting from 2027.
CATL's profitability remains stable, with a gross margin of 22.7% in the first three quarters of 2026.
Expense ratios have fluctuated, but the core administrative expense ratio declined to 2.1% during the period, down 0.8 percentage points year-on-year.
The company continues to increase R&D investment, with R&D expenses growing 22.89% and an R&D expense ratio of 4.19%.
In the first three quarters, the company's ROE was 16.68%, annualized at 22.24%.
As of September 2026, the company's cash and equivalents reached 369.814 billion yuan.
R&D and Capacity Support: Growth Highlights Across Three Major Product Lines
CATL is positioned downstream in the lithium battery industry chain, with most battery orders under long-term agreements, and has also invested in upstream lithium mines, making it less sensitive to upstream lithium carbonate prices and giving it higher performance resilience.
From the data, sales volume and revenue grew in tandem, with average prices showing no significant change.
The company's dual-wheel drive strategy, with power batteries as the base, has three major product lines as growth highlights: solid-state batteries, sodium-ion batteries, and energy storage systems.
In solid-state batteries, the company disclosed that its sulfide solid-state battery has an energy density of 500Wh/kg, its condensed matter battery (a type of semi-solid-state route) has already been launched, and its all-solid-state battery is planned to enter small-batch production in 2027.
In September 2026, the Ministry of Industry and Information Technology and six other departments issued the "15th Five-Year Plan for the Development of New Battery Industry," clearly aiming to achieve initial large-scale application of all-solid-state batteries by 2030.
Additionally, the IEC international standard for solid-state batteries led by China has been officially approved.
For CATL, the dual implementation of standards and policies means that its accumulated expertise in sulfide material systems is expected to transform from "laboratory leadership" to "industrialization leadership."
In sodium-ion batteries, since 2026, the company has disclosed 18 energy storage orders totaling 96.96GWh, of which sodium-ion battery energy storage orders account for about 70GWh, over 70% of the total.
In April 2026, the company launched the "Naxin" passenger vehicle power battery with an energy density of 175Wh/kg, capacity retention of over 90% at minus 40 degrees Celsius, and a cycle life exceeding 10,000 times, and plans to achieve large-scale mass production in the fourth quarter.
The first equipped model, Changan Qiyuan A06, achieves over 400 kilometers of range with a 45-degree battery pack, directly entering the mainstream price range of 100,000 to 130,000 yuan.
Energy storage systems are shifting from "selling battery cells" to "selling systems." The company's 314Ah cells have iterated to 587Ah large cells, with AC-side shipment proportion rising rapidly.
In the battery swap ecosystem, the Chocolate battery swap stations have cumulatively built over 2,500 units, with an expected total of over 3,000 for the year.
Overseas markets serve as the "ballast stone" for profits.
The German 14GWh factory has been put into production, the first phase of 39GWh at the Hungarian Debrecen factory (planned total capacity of 100GWh) started trial production on September 22, and the Spanish 50GWh factory is steadily advancing.
Supporting all of this is CATL's sustained high-intensity R&D and capacity investment.
In the first three quarters, the company's R&D expenses were 18.517 billion yuan, up 22.89% year-on-year.
As of the end of the first half of the year, approximately 1,050GWh of capacity had been built, with 764GWh under construction and total planned capacity exceeding 1.8TWh.
However, depreciation from capacity ramp-up, preliminary expenses for overseas projects, and cost dilution in the early stages of new technology commercialization all mean that the second growth curve will still need to go through a ramp-up period of "investment first, returns later" before taking over.
Fallen into a "Golden Pit": High Value in Emphasizing Shareholder Returns
In the capital markets, since the second half of this year, CATL's market value has retreated significantly due to lithium carbonate prices, but based on performance resilience and three major growth points, the company has valuation appeal.
As of now, the company's PE (TTM) is 15.7 times, while the lithium battery sector is at 18.76 times.
However, it should be noted that the lithium battery sector, especially upstream companies, is highly sensitive to lithium carbonate prices.
As lithium carbonate prices continue to fall, fourth-quarter profits are expected to decline further, and the sector's dynamic PE is much higher than CATL's.
Of course, CATL's market value will still be suppressed by the sector and needs to be repaired by performance growth and information such as dividends and buybacks.
The company values shareholder returns.
In terms of buybacks, a 20 billion to 40 billion yuan A-share cancellation-style buyback plan is underway, with 3.303 billion yuan executed as of September 30, and cumulative buybacks exceeding 3.7 billion yuan since September.
In terms of dividends, the company has implemented high-ratio dividends every year, with a current dividend yield of 2.8%.
As of the end of the third quarter, the company's monetary funds and trading financial assets totaled over 430 billion yuan, with ample cash reserves.
From the perspective of investment banks, there is some divergence, but the proportion of bullish views is relatively high.
CICC maintains an "outperform industry" rating, with H-share target prices of HK$580 to HK$650.
CLSA is optimistic about its long-term development path, believes it can overcome short-term challenges and maintain its dominant position, and maintains a "high conviction outperform" rating on CATL with a target price of HK$770.
The target prices given by these two investment banks are 92.1% and 127.5% higher than the current price, respectively.
In summary, CATL achieved dual growth in revenue and profit for three consecutive quarters.
Its dual-wheel drive plus industry chain layout plus industry giant status make its performance more resilient, and the three major product lines' growth highlights drive performance growth expectations.
However, falling lithium carbonate prices have affected the entire lithium battery sector, causing the company's valuation to continue to decline, and it has fallen into a "golden pit."
With performance growth expectations, undervaluation plus buybacks plus dividends, and most investment banks being bullish, CATL offers a relatively high value proposition.
Comments