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Citi Raises Earnings Forecast for CATL Amid Strong Battery Demand

05/06 11:45

Citi has updated its financial model for CATL following the company's first-quarter results, raising its earnings forecasts for the fiscal years 2026 to 2028 by 9%, 9%, and 7% to RMB 103 billion, RMB 126 billion, and RMB 149 billion, respectively. According to Jin10, despite a decrease in unit gross profit forecasts, Citi has increased its battery sales projections, expecting CATL's battery production and sales to reach milestones of 1.2 and 1.0 terawatt-hours (TWh) in fiscal year 2026, representing annual growth of 61% and 54%, respectively. Citi anticipates that CATL's battery production and shipments will remain strong in the second half of the year, with energy storage systems (ESS) demand being a highlight. The bank also noted that short-term lithium carbonate prices above RMB 200,000 per ton will not destroy demand; instead, higher lithium prices will be a testament to solid demand. Citi forecasts that CATL's net profit for the second quarter of fiscal year 2026 will reach RMB 24.3 billion, with battery sales of 260 gigawatt-hours, reflecting a 77% year-on-year increase and a 29% quarterly rise. Citi has raised its target price for CATL's H-shares from HKD 621 to HKD 888, maintaining a 'buy' rating and continuing to list it as the 'top pick' in the sector. The new target price for H-shares corresponds to a projected price-to-earnings ratio of 34.3 times and a price-to-book ratio of 8.7 times for fiscal year 2026.

Bullish

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