UOB Kay Hian has issued a research report maintaining its "Buy" rating on CATL (3750.HK), while cutting its H-share target price by 40.7% from HK$675 to HK$400.
At the same time, the brokerage lowered its A-share target price for CATL (300750.SZ) by 41.4% from RMB585 to RMB343.
UOB Kay Hian noted that the target price adjustments are based on a revised forward price-to-earnings ratio of 15 times for next year, which represents one standard deviation below the historical average.
The report stated that CATL's net profit for the third quarter of 2026 fell 5.8% quarter-on-quarter to RMB21.25 billion, falling short of expectations. This underperformance was primarily due to the company absorbing an increase in export value-added tax and a 2% consumption tax without passing those costs downstream during the quarter.
Although some of these tax costs are expected to be resolved through subsequent price increases, which would drive a recovery in fourth-quarter margins, the phasing out of tax incentives in 2027 will still weigh on profit margins.
UOB Kay Hian assumes the tax burden will be split "50:50" between CATL and its customers, and has accordingly revised down its net profit forecasts for 2026 to 2028 by 5%, 10%, and 16% respectively, to RMB89.121 billion, RMB104.895 billion, and RMB116.37 billion. Gross margin forecasts have also been lowered correspondingly to 22.7%, 22.1%, and 21.3%.
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