CATL's 58.6% Revenue Leap Masks a Thinner Bottom Line as Citi and JPMorgan Cut Targets

CATL can sell more batteries than almost anyone expected. Turning those shipments into profit is proving harder. That gap sat at the centre of a bruising session for the stock, which fell 12% after Citi trimmed its earnings forecasts and price target in the wake of a disappointing quarterly report.

The Chinese battery giant grew revenue 58.58% year on year, yet net profit attributable to shareholders advanced just 14.54%. Sequentially, that profit slipped 5.77%. The numbers landed yesterday, and by today the sell side had moved.

Two downgrades, one theme

Citi cut its price target to RMB 479 from RMB 500, citing a gross margin that came in below expectations, higher expenses and larger write-downs. The broker also lowered its profit forecasts for the years ahead — a revision that goes beyond how the stock is valued and touches the expected trajectory of the business itself.

That followed JPMorgan's move a day earlier, which downgraded CATL's Hong Kong-listed shares to Neutral from Overweight and slashed its target to HK$500 from HK$725. The US bank pointed to profitability in the battery sector fading faster than anticipated. Reuters added that intensifying competition in the battery market and slower growth in Chinese car sales are weighing on earnings.

The tax bill behind the margin squeeze

A pair of fiscal changes is doing much of the damage. Since 1 September, batteries have carried a consumption tax of 2%, making the fourth quarter the first full period affected. That rate is scheduled to double to 4% on 1 September 2027.

Export relief is shrinking at the same time. The export tax rebate on battery products was cut from 9% to 6% on 1 April, with full abolition planned from 1 January 2027. Even if demand keeps climbing, the burden grows.

CATL confirmed during today's earnings call that it is negotiating with customers over how to split the cost of the tax changes. Management also intends to ease the pressure through new technologies and products. No relief has yet been agreed.

Storage growth cuts both ways

Product mix sharpens the problem. A larger share of lower-margin energy storage products weighed on profitability, and Morgan Stanley has warned of margin pressure from price competition in that segment. Energy storage accounted for roughly a quarter of drive and storage battery sales volumes in the third quarter, according to company figures.

CATL still expects worldwide demand for both battery types to grow 20–30% in 2027. That outlook speaks to market potential, not to earnings. Higher volumes help only so much when mix, taxes and price competition erode profit per battery sold.

A product pipeline running alongside the downgrades

Against the lowered profit expectations, CATL is pushing ahead on the commercial side. Yesterday it unveiled Tianxing II, its heavy-duty truck battery platform, according to a Reuters report. The company is targeting 900 battery-swap stations for heavy trucks in China by year-end, rising to 2,000 by 2027.

Whether that technical progress and the customer talks translate into steadier margins is now the question that matters for the shares. The analyst cuts make one point plain: strong growth on its own will not be enough.