Margin Recovery Expected To Be on Track for CATL in Q4; Raising FVE to CNY 433

Narrow-moat Contemporary Amperex Technology, or CATL, will report fourth-quarter and full-year results after market close on March 9. We forecast the company to report 51% year-over-year growth in fourth-quarter net profit, driven by electric vehicle, or EV, battery sales and margin recovery from the trough-level first quarter last year. We estimate net profit to grow by 88% year over year for 2022. With faster capacity expansion partially offset by slightly lower EV battery price and margin assumptions, we lift our 2023-24 net profit forecasts by 4%-8%. We raise our fair value estimate to CNY 433 per share from CNY 424. Our fair value implies a forward price/earnings ratio of 25.8 times, which is justified by 49% three-year net profit CAGR.