CATL Earnings: Net Profit in Line; Gross Margin Above Expectations Despite Price Competition

Contemporary Amperex Technology reported 7% net profit growth year over year in the fourth quarter. Thanks to the lower lithium price, the gross margin recovery trend remains intact, with a 5 percentage point gain in the quarter from a year ago. Given the low seasonality for electric vehicle sales during the period, we consider CATL’s first-quarter net profit, accounting for 20% of our original full-year forecast, in line with our expectations. We fine-tuned our forecast and slightly raised fair value estimate to CNY 242 per share from CNY 240, which implies a forward price/earnings ratio of 20 times. At current levels, we view shares as undervalued, with stocks trading in 4-star territory.