CGS International
May 28, 2025
CATL-H: Global Expansion on Track – Initiation with Add Recommendation
CATL (3750.HK) has successfully raised HK\$40.6 billion from its Hong Kong listing, earmarking 90% of the net proceeds to bolster the power and ESS battery capacities at its Hungarian plant. This strategic move underscores CATL’s commitment to global expansion, which we believe is well on track. Continued market share gains in overseas markets are expected to significantly enhance the company’s margin profile.
We initiate coverage on CATL-H with an Add rating and a target price of HK\$391, reflecting a 5% discount to our A-share target price. This valuation is based on 12.8x FY26F EV/EBITDA.
Global Expansion on Track
CATL’s recent IPO on the Hong Kong Stock Exchange, which raised HK\$40.6 billion, marks a significant milestone. The company plans to allocate 90% of these funds to the construction of Phases I and II of its Hungarian plant. These phases are designed to achieve annual capacities of 34GWh and 38GWh, respectively. Phase I is slated to commence production in 2H25F, with Phase II beginning construction during the same period, aligning with our forecasts.
Robust Power Battery Shipments in 4M25
CATL has maintained its leading position in China’s EV power battery installations for the first four months of 2025, capturing a 42.7% market share (56.9% excluding BYD), according to CABIA. While this represents a slight decrease compared to the 44% share in 2024, it is primarily attributed to increased sales of lower-end EV models in the domestic market.
- Examples include the XPeng Mona M03 (MSRP Rmb120k-156k, battery supplied by BYD).
- XPeng P7+ (MSRP Rmb187k-209k, battery supplied by EVE).
- Leapmotor C-series (MSRP of Rmb123k-206k, battery supplied by CALB and EVE).
We remain optimistic about CATL’s power battery shipments in 2025F, driven by upcoming mid- to high-end models such as Li Auto’s i8 and Xiaomi’s YU7. The increasing electrification of specialized vehicles is also expected to boost CATL’s shipments.
Continued Market Share Gains in Europe
CATL’s overseas market shipments have shown substantial growth, with its market share increasing to 29.5% in 4M25 (compared to 27.5% in 2024), as reported by SNE Research. European markets have been particularly strong, supported by robust BEV and hybrid sales. We estimate that CATL’s market share in Europe exceeded 40% in 1Q25, up from 38% in 2024. The anticipated commencement of production at its Hungarian plant is likely to further solidify its presence in the European market.
More Favorable Environment for ESS Battery Segment
Recent easing of trade tensions between China and the US has led to a reduction in US tariffs on energy storage system (ESS) batteries, from 145% to 40.9%. This more favorable macro environment is expected to support robust ESS shipments, projected at 127/164/207GWh, representing year-over-year growth of 36%/30%/26%.
Initiate with Add and Target Price of HK\$391
We anticipate that CATL-H shares will trade at a narrow discount to its A-shares, reflecting its large market capitalization, high trading liquidity, solid ROE, and strong asset quality. Our target price for CATL-H is HK\$391, a 5% discount to its A-share target price, based on 12.8x FY26 EV/EBITDA. Potential catalysts for a re-rating include faster penetration of new products, removal or reduction of US tariffs, and breakthroughs in battery technology. Key downside risks include slower EV penetration overseas and faster technological advancements by competitors.
Key Statistics
- Current Price: HK\$312.0
- Target Price: HK\$391.0
- Up/Downside: 25.1%
- Market Cap: US\$161,516m (HK\$1,265,997m)
- Average Daily Turnover: US\$493.0m (HK\$3,525m)
- Current Shares O/S: 4,559m
- Free Float: 61.0%
Major Shareholders:
- Zeng, Yuqun: 22.5%
- Huang, Shilin: 10.3%
- Ningbo United Innovation New Energy Investment Management Partnership: 6.2%
Financial Summary
| (Rmbm) |
Dec-23A |
Dec-24A |
Dec-25F |
Dec-26F |
Dec-27F |
| Revenue |
400,917 |
362,013 |
441,494 |
538,409 |
639,067 |
| Operating EBITDA |
66,596 |
77,155 |
91,320 |
114,931 |
139,693 |
| Net Profit |
44,490 |
50,950 |
67,262 |
83,623 |
99,959 |
| Normalised EPS (Rmb) |
10.14 |
11.57 |
14.75 |
18.34 |
21.92 |
| Normalised EPS Growth |
44.1% |
14.1% |
27.5% |
24.3% |
19.5% |
| FD Normalised P/E (x) |
28.27 |
24.71 |
19.08 |
15.62 |
13.06 |
| DPS (Rmb) |
5.03 |
5.76 |
7.38 |
9.17 |
10.96 |
| Dividend Yield |
1.76% |
2.01% |
2.58% |
3.20% |
3.83% |
| EV/EBITDA (x) |
16.71 |
14.06 |
11.80 |
8.99 |
6.69 |
| P/FCFE (x) |
14.55 |
21.45 |
12.00 |
12.08 |
7.56 |
| Net Gearing |
(75.3%) |
(74.1%) |
(81.0%) |
(82.3%) |
(94.2%) |
| P/BV (x) |
6.36 |
5.11 |
4.52 |
3.85 |
3.29 |
| ROE |
24.6% |
22.9% |
25.1% |
26.6% |
27.2% |
Valuation
Our target price for CATL is HK\$391. We believe CATL deserves a 30% premium valuation over its domestic peers and 8% above LG Energy Solutions due to its continued market share gains in the international EV battery markets and ROE of 25% in FY25F, which is significantly higher than its domestic peers’ average of 11% and LGES’s 1.6%. We believe H shares will trade at a narrow discount to its A shares given the large market cap, high trading liquidity, solid ROE, and strong asset quality. In our view, this is supported by its superior profitability in battery products thanks to its leading technology in EV batteries and overseas capacity expansion. Our H-share target price is HK\$391, a 5% discount to its A share target price, based 12.8x FY26F EV/EBITDA (-0.5 s.d. below its historical average since listing).
Robust Power Battery Shipments in 4M25
Resilient Shipments in the Domestic Market. CATL maintained its top position in the China market in terms of power battery installations in 4M25, with a market share of 42.7%, according to China Automotive Battery Innovation Alliance (CABIA). Excluding BYD, CATL’s market share registered 56.9%. We note that the 4M25 market share of 42.7% was a slight decline from 44% in 2024, likely due to increased sales of low-end EV models in the domestic market.
We also see increasing penetration into electrified special vehicles (vehicles excluding passenger vehicles and buses) in 2025F, especially heavy-duty trucks (HDT), with the new energy penetration rate reaching 23% in Apr 2025 (vs. 13% in 2024), according to CVWorld (data provider for the auto industry). CATL had 65% market share in the China special vehicle market in 4M25, according to CABIA.
Strong Relationship with OEMs in Mid- to High-End Markets. Apart from the M8, i8 and YU7, several other notable high-end models were launched recently. According to Gaogong Industry Research Institute (GGII), Beijing Auto Group (BAIC, unlisted) saw increasing power installations due to the launch of Stelato in Aug 2024. CATL has also started to ramp up shipments to Maxetro , which we expect to be launched at end-May 2025F. We believe CATL’s domestic share will be strengthened after these long-awaited models begin shipments.
Special Vehicles to Become New Growth Driver Amid Rising Electrification Ratio. Power battery installations for special vehicles accounted for 22% of CATL’s total power installations in 4M25 (vs. 15% in 2024); the company had a 65% share of the special vehicles market in China in terms of power battery installations in 4M25 according to CABIA. We also note that the company has allocated considerable resources to this field since the beginning of the year, including the introduction of heavy duty truck (HDT) battery swaps on 18 May. We believe special vehicles will be another growth driver for CATL, coupled with portfolio expansion by the company.
Expanding in Europe as Expected
CATL’s overseas shipments increased in 2025, with its market share climbing to 29.5% in global power battery installations in 4M25 (vs. 27.5% in 2024), according to SNE Research. Compared to other regions, there is strong demand for power battery in European markets, thanks to the strong battery electric vehicle (BEV) and hybrids sales.
We estimate that CATL’s market share in Europe exceeded 40% in 1Q25 in terms of power battery installations, vs. 38% in 2024. We think the momentum in European markets will sustain given OEMs’ increasing adoption of LFP batteries, which Korean battery players cannot supply currently. Additionally, with the majority of the funds raised from the HK IPO allocated to its Hungarian plant, we expect commencement of production in 2H25F as we previously forecast. As such, we believe the European markets will act as a strong catalyst for CATL this year.
Overall, we forecast CATL’s power battery sales growing 27%/24%/16% yoy to 485/602/701 GWh in FY25F/26F/27F, respectively.
More Favorable Environment for ESS Battery Shipments
The demand for energy storage system (ESS) batteries remains solid in the US. According to US Energy Information Administration (EIA), renewable energy capacity for power generation has seen rapid growth in recent years, picking up to 357GW and accounting for 30% of total power generation capacity in 2023. Of this, wind and solar outperformed and accounted for 67% of total renewable electricity generation capacity.
We believe ESS shipments will remain resilient given more favorable environment. On 12 May 2025, China and the US said in a joint statement that the two countries have agreed to significantly reduce bilateral tariffs following high-level negotiations in Geneva. The talks provided an offramp for both sides to de-escalate trade tensions – ending the exceptionally high tariffs that had essentially functioned as a trade embargo – and established a mechanism for continued communication.
Given the above-market-expected 90-day tariff pause between China and US, and more favorable macro environment, we forecast CATL’s ESS battery sales growing 36%/30%/26% yoy to 127/164/207 GWh in FY25F/26F/27F, respectively.
Financials
Revenue
Solid revenue growth outlook in FY25-27F. CATL’s revenue came in at Rmb362bn in FY24, registering a 41% CAGR over FY21-24, thanks to strong NEV sales in China and increasing demand for ESS batteries from power grids and power generation. We believe the growth momentum for EV batteries and ESS batteries will sustain amid global efforts towards carbon neutrality.
We forecast its revenue in FY25F/26F/27F to grow by 22%/22%/21% yoy to Rmb441bn/Rmb538bn/Rmb651bn, driven by increased power battery shipments in the domestic and overseas markets, as well as stable shipments growth for ESS products.
Gross Profit Margins and Net Profit Margins
Likely Sustainable GPM Expansion in FY25-27F. CATL’s gross profit margin (GPM) slipped to its lowest level in FY23 to 19.2% amid surging lithium carbonate prices, but picked up to 23.7% in FY24, thanks to increasing sales proportion of higher margin products and increasing overseas sales. Going forward, we believe CATL’s higher ASPs for EV batteries and ESS battery cells in overseas markets will partially help to offset the pricing pressures in the China market amid fierce competition.
CATL has adopted quite conservative accounting principles, with 0% capitalised R&D inputs. The company also adopts higher depreciation rates for its buildings and machinery. Despite its conservative accounting policies, CATL has delivered relatively strong net profit results, with net profit at Rmb51bn in FY24, a CAGR of 47% over FY21-24, likely thanks to its strong supply chain management and SG&A discipline, in our view.
Ample Cash on Hand and High Dividend Payout Ratio
Strong Balance Sheet Supports a High Dividend Payout Ratio. CATL’s net cash was Rmb203bn as at end-Dec 2024, with Rmb304bn in cash on hand and Rmb20bn/Rmb81bn in short-term/long-term borrowings. Net gearing ratio was -82% in 2024 due to ample cash on hand. Its strong cash position and solid profitability have allowed CATL to pay decent dividends, equivalent to 20%/50%/50% of its 2022/2023/2024 net profits.
We forecast CATL’s capital expenditure will gradually decrease from Rmb32bn in FY24 to Rmb30bn/Rmb30bn/Rmb25bn in FY25F/FY26F/FY27F given the absence of major capacity expansion plans in China, although the company is building two factories in Europe. As such, we believe its dividend payout ratio could sustain at 50% in FY25F, with a net gearing ratio of -90% in FY25F, supported by its cash position.
Investment Thesis
Riding on China’s EV Expressway
Positioned to Capitalize on China’s Fast-Growing EV Battery Market. We expect China’s sales of new energy vehicles (NEV), including passenger vehicles (PVs) and commercial vehicles (CVs), to reach 16.5m/18.8m units in 2025F/2026F, with overall penetration rates of 49%/53%. Based on data provided by the China Automotive Battery Innovation Alliance (CABIA), CATL was the no.1 EV battery supplier in China in terms of EV battery installations, with a 45% market share in 2024. We expect CATL to maintain its dominant position, with market share ticking up to c.46.5% in 2025F.
Top EV Battery Supplier with Cutting-Edge Technology
Global Leader in EV Battery Technology. In 2024, CATL had a 60% share (excluding BYD, as BYD’s EV batteries are mainly for its own EVs) in China’s EV battery installations (including BYD, CATL’s share was 45%), based on data from CABIA. We believe its dominant position in the China EV battery market is mainly supported by its rich product portfolio and leading battery technology.
Growing EV Battery Demand from Markets Outside of China
Huge Growth Potential for LFP Batteries in the Overseas Market, Particularly in Europe. We see strong potential for growth overseas for CATL due to the low EV penetration rate outside of China – 10% in 2023, according to International Energy Agency (IEA). In 2024, CATL accounted for 27% of total EV battery installations outside of China, placing it at the top of EV battery makers globally, according to SNE Research.
Lithium-Ion Battery for ESS Becoming Second Growth Pillar
ESS Batteries to Become Second Growth Pillar. ESS has become CATL’s second-largest downstream market for lithium-ion batteries (accounting for 16% of total sales in FY24) due to the rising demand for power generation and power grid applications globally. With its technology accumulation in the battery sector, CATL sits in first place in terms of global ESS battery shipments as well, with a 37% global market share in 2024, according to SNE Research.
Re-Rating Catalysts
- Faster Penetration of New Products: CATL’s new products can enjoy price premiums (20% above industry average), thanks to its better-than-peers’ battery performance, such as higher energy density, longer lifecycle, and fewer safety concerns.
- Removal or Tempering of US Tariffs: CATL is impacted by US tariff hikes, limiting upside potential for its ESS battery sales in the US.
- Faster-Than-Expected Breakthrough in Emerging Technology Paths: If CATL manages to mass produce sodium-ion battery, condensed battery or all-solid-state battery earlier than expected, this will further solidify its market presence.
Downside Risks
- Competition in Next-Generation Battery Technology: If international or domestic peers see faster-than-expected breakthroughs in battery technology, this could erode CATL’s market share and profitability.
- Potential Further Tariff Threats from the US Government: Although there has been easing of trade relations between China and the US recently, there is still risk that tariffs will return to the previous 145% level after the 90-day pause.
- Battery Capacity Buildup by OEMs: Some auto OEMs are developing in-house battery capacity to secure supply, alleviate production costs as well as reduce reliance on third-party battery makers.
ESG in a Nutshell
LSEG ESG Scores
According to its FY24 ESG report, CATL remains committed to developing innovative battery production technology and to battery recycling. CATL also strengthened its carbon emission reduction efforts with newly installed capacity of distributed photovoltaic reaching 92.4MW and the proportion of zero-carbon electricity has reached 74.51% in FY24. As at end-FY24, CATL had nine zero carbon manufacturing plants (vs. four zero carbon plants in FY23).
Environmental Implications
In FY24, CATL continued to implement its zero carbon strategy for core operations. According to its FY24 ESG report, CATL’s carbon emission reduction measures implemented in FY24 led to its GHG intensity declining to 4.56m tonnes of CO2e/MWh (-21% yoy). The electricity generated by photovoltaic climbed up to 350GWh in FY24, +45% yoy. The newly installed capacity of distributed photovoltaic reached 92.4MW and the proportion of zero-carbon electricity reached 74.51% in FY24. The company established five more zero carbon emission plants in FY24.
Social Implications
According to its ESG reports, CATL provides an equal and inclusive working environment for employees. It also proactively engages in social charity projects and voluntary activities. In FY24, its proportion of women employees in revenue generating divisions was 21.8% (vs. 16.6% in FY23), and the proportion of employees aged over 30 years old reached 54% (vs. 53% in FY23). In FY24, CATL continued to contribute to social charities with total donation registering Rmb238m (+40% yoy). Additionally, its employees attended 2,500 voluntary activities in FY24 (vs. 1,499 in FY23).
Governance Implications
CATL has built a solid and efficient governance structure consisting of shareholders, board directors and management team, based on its ESG reports. CATL has implemented effective internal control and risk management measures to ensure efficient and effective daily operations, in our view. The company has also set up a Code of Conduct Committee with the goal of creating a working environment that is compliant, honest and has integrity.
By The Numbers
| (Rmbm) |
Dec-23A |
Dec-24A |
Dec-25F |
Dec-26F |
Dec-27F |
| Total Net Revenues |
400,917 |
362,013 |
441,494 |
538,409 |
639,067 |
| Gross Profit |
76,935 |
88,494 |
111,124 |
141,192 |
172,374 |
| Operating EBITDA |
66,596 |
77,155 |
91,320 |
114,931 |
139,693 |
| Depreciation And Amortisation |
(21,217) |
(22,578) |
(25,370) |
(28,560) |
(31,751) |
| Operating EBIT |
45,379 |
54,577 |
65,950 |
86,370 |
107,942 |
| Financial Income/(Expense) |
4,875 |
5,624 |
6,540 |
8,440 |
8,440 |
| Pretax Income/(Loss) from Assoc. |
3,746 |
3,743 |
5,037 |
6,003 |
6,907 |
| Non-Operating Income/(Expense) |
283 |
(557) |
6,792 |
4,000 |
2,000 |
| Profit Before Tax (pre-EI) |
54,283 |
63,387 |
84,319 |
104,812 |
125,288 |
| Taxation |
(7,153) |
(9,175) |
(12,658) |
(15,722) |
(18,793) |
| Profit After Tax |
47,130 |
54,212 |
71,661 |
89,090 |
106,495 |
| Minority Interests |
(2,640) |
(3,262) |
(4,399) |
(5,468) |
(6,536) |
| Net Profit |
44,490 |
50,950 |
67,262 |
83,623 |
99,959 |
| Recurring Net Profit |
44,490 |
50,950 |
67,262 |
83,623 |
99,959 |
| Fully Diluted Recurring Net Profit |
44,490 |
50,950 |
67,262 |
83,623 |
99,959 |
| Normalised Net Profit |
47,130 |
54,212 |
71,661 |
89,090 |
106,495 |
| Fully Diluted Normalised Profit |
44,490 |
50,950 |
67,262 |
83,623 |
99,959 |
Cash Flow
| (Rmbm) |
Dec-23A |
Dec-24A |
Dec-25F |
Dec-26F |
Dec-27F |
| EBITDA |
66,596 |
77,155 |
91,320 |
114,931 |
139,693 |
| Change In Working Capital |
25,875 |
15,235 |
14,129 |
(5,489) |
33,306 |
| Other Operating Cashflow |
3,802 |
8,479 |
10,278 |
8,738 |
4,721 |
| Net Interest (Paid)/Received |
(3,447) |
(3,879) |
(3,811) |
(5,037) |
(5,037) |
| Cashflow From Operations |
92,826 |
96,990 |
111,915 |
113,142 |
172,682 |
| Capex |
(33,625) |
(31,180) |
(30,000) |
(30,000) |
(25,000) |
| Disposals Of FAs/subsidiaries |
13 |
75 |
0 |
0 |
0 |
| Other Investing Cashflow |
4,424 |
(17,770) |
0 |
0 |
0 |
| Cash Flow From Investing |
(29,188) |
(48,875) |
(30,000) |
(30,000) |
(25,000) |
| Debt Raised/(repaid) |
22,800 |
10,568 |
25,000 |
25,000 |
25,000 |
| Proceeds From Issue Of Shares |
3,324 |
2,560 |
0 |
0 |
0 |
| Dividends Paid |
(9,481) |
(25,807) |
(25,372) |
(33,631) |
(41,811) |
| Other Financing Cashflow |
(1,927) |
(1,845) |
0 |
0 |
0 |
| Cash Flow From Financing |
14,716 |
(14,524) |
(372) |
(8,631) |
(16,811) |
| Total Cash Generated |
78,355 |
33,591 |
81,543 |
74,511 |
130,871 |
| Free Cashflow To Equity |
86,439 |
58,683 |
106,915 |
108,142 |
172,682 |
| Free Cashflow To Firm |
67,085 |
51,994 |
85,726 |
88,180 |
152,719 |
Balance Sheet
| (Rmbm) |
Dec-23A |
Dec-24A |
Dec-25F |
Dec-26F |
Dec-27F |
| Total Cash And Equivalents |
264,307 |
303,512 |
385,055 |
459,566 |
590,437 |
| Total Debtors |
65,772 |
64,266 |
80,883 |
96,128 |
113,976 |
| Inventories |
45,434 |
59,836 |
66,882 |
107,241 |
97,337 |
| Total Other Current Assets |
74,275 |
82,529 |
82,529 |
82,529 |
82,529 |
| Total Current Assets |
449,788 |
510,142 |
615,349 |
745,464 |
884,279 |
| Fixed Assets |
140,400 |
142,344 |
136,974 |
133,413 |
121,662 |
| Total Investments |
0 |
0 |
0 |
0 |
0 |
| Intangible Assets |
15,676 |
14,420 |
23,665 |
27,684 |
31,554 |
| Total Other Non-Current Assets |
111,304 |
119,752 |
119,752 |
119,752 |
119,752 |
| Total Non-current Assets |
267,380 |
276,516 |
280,391 |
280,850 |
272,969 |
| Short-term Debt |
15,181 |
19,696 |
29,696 |
39,696 |
49,696 |
| Total Creditors |
194,554 |
198,334 |
236,126 |
286,242 |
327,492 |
| Other Current Liabilities |
77,266 |
99,142 |
99,142 |
99,142 |
99,142 |
| Total Current Liabilities |
287,001 |
317,172 |
364,964 |
425,080 |
476,330 |
| Total Long-term Debt |
83,449 |
81,238 |
96,238 |
111,238 |
126,238 |
| Total Other Non-Current Liabilities |
126,835 |
114,792 |
114,792 |
114,792 |
114,792 |
| Total Non-current Liabilities |
210,284 |
196,030 |
211,030 |
226,030 |
241,030 |
| Total Liabilities |
497,285 |
513,202 |
575,994 |
651,110 |
717,360 |
| Shareholders’ Equity |
197,708 |
246,930 |
288,820 |
338,811 |
396,959 |
| Minority Interests |
22,175 |
26,526 |
30,925 |
36,393 |
42,928 |
| Total Equity |
219,883 |
273,456 |
319,745 |
375,204 |
439,888 |
Key Ratios
