CATL Earnings: Revenue Missed Due to Price Competition, but Margin Continued to Expand

Contemporary Amperex Technology, or CATL, reported 8% revenue growth year over year and 11% growth for net profit in the third quarter. The results trailed our expectation as revenue and net profit for the first three quarters only accounted for 67% and 70% of our previous full-year forecasts, respectively. However, the margin recovery trend since the trough level last year continued, with a 0.5-percentage-point gain in the quarter’s gross margin from last quarter. We cut our financial forecasts and reduce our fair value estimate to CNY 240 per share from CNY 257, which implies a 2024 price/earnings ratio of 20 times. At the current level, we view shares as undervalued.