Author: Xu Kun

Source: Node Finance

When the stock price of Contemporary Amperex Technology Co. Limited (300750.SZ) fell from a May high of RMB 467 per share to RMB 238 per share, institutional investors holding CATL faced tough choices every day.

For investors, this not only signifies a shrinkage in paper gains but also poses a practical question: when an asset once considered the most certain growth opportunity begins to retreat sharply, should they continue to hold it or seek new targets with greater growth potential?

CATL was once one of the most representative assets in A-share's new energy sector. From surpassing RMB 1 trillion in market value in 2021 to becoming the leading company in the ChiNext market value ranking, CATL was seen as a direct beneficiary of the high growth in the new energy industry and a core holding for public funds.

However, the market is now re-evaluating this power battery giant. The 'king' of the new energy sector is undergoing a valuation test.

On October 20, CATL released its third-quarter report for 2026, showing growth in revenue and net profit for the first three quarters. However, net profit growth slowed significantly in the third quarter, and the overall gross profit margin declined for two consecutive quarters. While earnings continued to grow, the stock price fell sharply, reflecting not just market concerns over single-quarter profits but also a shift in investment logic.

Beyond financial reports, another change warrants attention: downstream automakers are restructuring their battery supply chains. Companies like Li Auto, Xiaomi, Leapmotor, and XPeng are increasing in-house battery development or diversifying their supplier base.

Some securities analysts believe that with intensifying global competition in the new energy vehicle industry and domestic manufacturers potentially diversifying supply chain risks, CATL may face greater competitive pressure, affecting its gross profit margin.

From a market share perspective, on October 21, Nomura Oriental International Securities stated that CATL's leading global market share remains solid, and the overextended stock price highlights its valuation appeal.

Capital 'Retreat'

On October 21, CATL's A-shares and H-shares plummeted. The A-shares opened about 5% lower and continued to decline, closing down 12.03% at RMB 227.90 per share, evaporating over RMB 140 billion in a single day—a new low since May 2025. The H-shares fell 11.41%.

Despite announcing a buyback plan, the stock price did not rebound significantly. In less than six months, CATL's stock price has 'halved,' reflecting a shift in market capital's valuation logic.

As of October 26, CATL's total market value had fallen to RMB 1.10 trillion, evaporating about RMB 1 trillion from its May 2026 peak.

Additionally, Wind data shows that as of the third-quarter report for 2026, 45 mainland institutional investors held a combined 2,183.0595 million shares of CATL. In the third quarter of 2025, 190 mainland institutional investors held a cumulative 2,528.3779 million shares. This indicates shrinking institutional allocation to CATL.

Recalling CATL's heyday in 2021, as new energy vehicle penetration continued to rise and demand for power batteries grew rapidly, CATL, with its leading technological accumulation, expanding production capacity, and partnerships with mainstream automakers, gradually became a core asset in A-share's new energy sector. Its market value once surpassed RMB 1 trillion and reached new heights.

Under the market logic of the time, CATL was not just a power battery company but a high-certainty growth target in the new energy vehicle supply chain. As long as the new energy vehicle market expanded, demand for power batteries was expected to grow; as long as technological and scale advantages were maintained, the company would continue to benefit from industry expansion.

This logic once supported CATL's high valuation. However, as the new energy vehicle industry enters a new competitive phase, capital markets are re-evaluating the growth potential of this power battery giant.

Slowing Earnings Growth

From a financial perspective, CATL's long-term growth expectations are becoming a focal point for the market.

On the evening of October 20, CATL released its third-quarter report for 2026. In the first three quarters, the company achieved revenue of RMB 442.137 billion, up 56.19% year-on-year, and net profit attributable to shareholders of RMB 64.530 billion, up 31.60% year-on-year. In the third quarter alone, revenue was RMB 165.221 billion, up 58.58% year-on-year, and net profit attributable to shareholders was RMB 21.246 billion, up 14.54% year-on-year.

This data reveals a notable trend: revenue growth is accelerating, but profit growth is slowing quarter by quarter.

In the first quarter of 2026, CATL's net profit attributable to shareholders grew by 48.55% year-on-year; in the second quarter, growth slowed to 36.4%; and in the third quarter, it further declined to 14.54%. In contrast, revenue growth rates for the same periods were 52.46%, 56.9%, and 58.58%, respectively.

Additionally, from a gross profit margin perspective, based on financial report data, CATL's consolidated gross profit margins for the first three quarters of 2026 were approximately 24.82%, 23.15%, and 20.69%, respectively, declining for two consecutive quarters.

Source: Morgan Stanley

Morgan Stanley's latest research report notes that CATL's net profit in the third quarter was RMB 21.246 billion, up 14.54% year-on-year but 12% below Morgan Stanley's own forecast. The core pressure came from a significant decline in unit net profit margin, from RMB 0.10 per watt-hour in the first half to RMB 0.08 per watt-hour. Morgan Stanley expects meaningful downward revisions to market consensus earnings forecasts following this earnings release.

Moreover, Morgan Stanley judges that if incremental tax burdens cannot be passed on to downstream customers, they will gradually be absorbed by ongoing cost reductions, forming a natural hedge to some extent. However, this process takes time and is unlikely to fully offset the impact of margin compression in the short term.

Regarding changes in unit profitability in the third quarter, CATL stated that several factors contributed: first, changes in product mix, as fluctuations in a single quarter's product mix do not represent long-term trends; second, the impact of consumption tax and export tax rebates. The company is actively communicating with customers to share these impacts while promoting the launch of new technologies and products to mitigate effects on profitability.

Automakers 'Diversifying Away from CATL'

Some private fund managers believe that, from a long-term perspective, new energy automakers are accelerating the construction of diversified supply chains, gradually reducing reliance on single suppliers. CATL's future market share may face pressure from diversification.

This judgment is not unfounded but is gradually materializing in downstream automakers' strategies.

While earnings changes affect CATL's short-term profit expectations, downstream automakers' supply chain adjustments test its long-term competitive barriers.

As competition in the new energy vehicle market intensifies, automakers' requirements for batteries are evolving. More automakers are attempting to master battery technologies or introduce multiple suppliers to reduce reliance on single suppliers.

Li Auto is a prime example. On August 26, at its second-quarter earnings call, Li Auto Chairman and CEO Li Xiang stated that starting from the second half of 2026, Li Auto's in-house batteries will be gradually deployed across all models. In September, Li Auto participated in a capital increase of a domestic power battery company and introduced CALB into its in-house battery supply chain.

Xiaomi Auto is also accelerating its Layout (layout). On September 4, at the Dragon Scale Battery launch event, Xiaomi Auto announced that its Pengpai series models would exclusively use in-house Dragon Scale Batteries and launched a battery safety assurance program. Simultaneously, Xiaomi Auto formed strategic partnerships with CALB and Sunwoda.

On September 16, Leapmotor emphasized its full-stack in-house battery system development capabilities at its 2026 Technology Day. XPeng, following the launch of the G9L, stated that starting this year, all its batteries will be self-produced.

From Li Auto and Xiaomi to Leapmotor and XPeng, automakers are significantly accelerating their battery autonomy, making the industry-wide trend of supply chain restructuring increasingly clear. Different automakers are taking varied approaches—some starting with in-house cell development, others diversifying their supplier base, and some betting on full-stack self-production—but the direction is consistent: finding answers to 'reduce single dependency.'

On one hand, automakers hope to gain more technological initiative through in-house battery development, forming differentiated advantages in product design, cost control, and battery safety. On the other hand, introducing suppliers like CALB and Sunwoda helps increase procurement options, improve supply chain bargaining power, and reduce reliance on single suppliers.

As automakers shift from 'passive Layout (layout)' to 'active strategizing,' the dynamic between battery suppliers and automakers is quietly reshaping. Whether CATL can maintain its existing share will depend on its ability to continue providing irreplaceable value in this supply chain transformation.

CATL has been steadfast in defending its 'moat.' Not only does it possess core technological advantages and forward-looking R&D Layout (layouts) in battery materials, battery systems, and battery recycling, but it is also extending its deep expertise in lithium batteries to other chemical systems like sodium batteries, forming a comprehensive and advanced product matrix applicable to passenger vehicles, commercial vehicles, front-of-the-meter energy storage, behind-the-meter energy storage, and emerging applications such as ships, aircraft, and data centers.

Long-Term Valuation Restructuring

Looking back at CATL's capital market journey over the past few years, its valuation changes have been closely tied to the development of China's new energy vehicle industry.

During the rapid rise in new energy vehicle penetration, CATL, with its leading position in power batteries, became a core asset pursued by capital markets. For public funds, allocating to CATL was not just a bet on a single company but an important way to share in the growth of the new energy vehicle supply chain.

During the industry's rapid expansion phase, the market was willing to assign higher valuations to leading companies because investors believed that demand growth, economies of scale, and technological progress could jointly drive sustained profit increases.

However, as the industry enters a new phase, the factors determining CATL's valuation are changing. First, slowing profit growth is no longer sufficient to support continued valuation increases. In the third quarter of 2026, profit growth slowed to 14.54%, and gross profit margins declined for two consecutive quarters, indicating a widening gap between revenue and profit growth.

Second, competitive barriers need to be repriced. While automakers' increased in-house R&D efforts and introduction of more suppliers do not mean CATL has lost its technological edge, they signify that customers are no longer solely focused on a single supplier's product capabilities but also place greater importance on cost, supply chain security, and autonomy.

This is not a change unique to CATL but a valuation transition that growth companies may experience as industries mature. Companies can still maintain growth, but if the market believes their future growth rates, profit margins, or competitive advantages are lower than previously expected, the growth premium embedded in their valuations may contract.

In this sense, CATL's valuation restructuring is not just a stock price decline from highs but a re-evaluation by the market of its competitive landscape and profit outlook.

From a market share perspective, CATL remains the absolute industry leader. According to its half-year report, in the power battery sector, data from market research firm SNE Research shows that from January to May 2026, CATL's global market share in power battery usage was 40.2%, up 2.2 percentage points year-on-year. In energy storage, data from CINNO Research shows that from January to June 2026, CATL ranked first globally in energy storage battery shipments.

Additionally, CATL is expanding demand in overseas markets. On October 21, CATL stated in its investor relations activity record that its overseas Layout (layout) is the most competitive in the industry. Phase one of its Hungarian plant has officially commenced trial production, and its Spanish plant is steadily progressing. With solid technological foundations, strict quality management, and deepening customer relationships, the company's overseas local production can better meet customer and market demands.

Xiangcai Securities believes that the company's overseas capacity Layout (layout) offers significant advantages. Phase one of the Hungarian plant has officially entered trial production, and the Spanish plant is also steadily advancing. Localized production close to end markets not only enables more efficient responses to overseas customer delivery demands and effectively mitigates the impact of international logistics and policy disruptions but also lays the hardware foundation for subsequent global market share expansion and profit realization.

Regarding long-term industry demand, CATL responded that while some investors recently expressed concerns about next year's industry demand, the company believes that demand in 2027 remains promising. Overall, global demand for power and energy storage batteries may not be as pessimistic as market expectations, still offering significant growth potential.

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