UOB Kay Hian cuts CATL target 9% as PE multiple compresses to 23x

UOB Kay Hian cut CATL's A-share target price 9% to 585 yuan and slashed its valuation multiple to 23 times from 31 times, citing margin compression that is outpacing volume growth for the world's largest battery maker.

The brokerage maintained its "buy" rating on both the A-share and H-share listings but lowered the H-share target to 675 Hong Kong dollars, according to a research note dated July 28. The valuation benchmark was rolled forward to 2027 from 2026.

CATL's second-quarter net profit rose 36.5% year-over-year to 22.55 billion yuan, bringing first-half earnings to 43.3 billion yuan, up 42% — in line with expectations. However, per-gigawatt-hour gross profit declined to 147 million yuan and per-GWh net profit to 97 million yuan, reflecting eroding unit economics as the company scales.

UOB Kay Hian raised its 2026 through 2028 volume forecasts to 1,000 gigawatt-hours, 1,230 gigawatt-hours and 1,450 gigawatt-hours respectively, but cut gross margin estimates to 23.4%, 23.7% and 23.9%. The firm reduced its net profit projections for the three years by 1%, 7% and 12%, to 93.64 billion yuan, 116.39 billion yuan and 139.1 billion yuan.

The sharp compression in valuation — from 31 times forward earnings to 23 times — signals that analysts expect margin pressure to persist even as CATL dominates the battery market with accelerating production. The stock's next catalyst will be third-quarter earnings, due in late October, when investors can assess whether per-unit profitability has stabilized.

This article is for informational purposes only and does not constitute investment advice.