Two Brokerages Slash CATL Targets as Battery Margins Erode

JPMorgan cut its rating on CATL's Hong Kong-listed shares from "Overweight" to "Neutral" on October 20, according to media reports, and trimmed its price target to HK$500 from HK$725. The bank pointed to a faster-than-expected deterioration in profitability across the battery sector. Its stance on CATL's A-shares was left untouched at "Overweight."

Two days later, UOB Kay Hian took an even sharper knife to its own target, reducing it by 40.7% to HK$400. The brokerage cited the company's disappointing quarterly results and a lag in passing higher taxes through to customers. It also lowered its net profit forecasts for 2026 through 2028 by 5%, 10% and 16% respectively — an adjustment that reaches well beyond the current fiscal year.

Revenue gallops, profit crawls

The downgrades landed roughly a week after CATL reported third-quarter 2026 revenue of RMB 165.221 billion, up 58.58% year on year. Net profit attributable to shareholders came in at RMB 21.246 billion, a gain of 14.54% over the prior-year period but a decline of 5.77% from the second quarter. Reuters noted that both profit and revenue growth fell short of analyst expectations, with earnings expanding at their slowest pace in nearly two years.

That gap between top-line expansion and bottom-line momentum is the crux of the bear case. Whether new projects can close it is the crux of the bull case.

Australia: interest, not yet investment

CATL aims to convert Australian interest in sodium-ion batteries into concrete project investments, Bloomberg reported, citing the company's regional head. For investors, that represents an opening rather than a secured business win — the decisive question is whether interest translates into actual investment decisions. Technological promise alone does not answer what economic contribution new projects might make.

The company has been stacking up agreements that show the various routes it intends to pursue. On October 22, CATL and BAIC Group signed a strategic cooperation deal covering vehicles with battery-swap technology, battery supply and swap networks, with a target of one million vehicles. The scope stretches beyond battery deliveries: in the optimistic scenario, vehicles, supply and infrastructure interlock. What matters for investors is whether the partners actually execute — a target figure is not the same as delivered cars.

Heavy trucks offer another concrete angle. CATL presented its Tianxing II battery solution on October 20 and announced an expansion of its Qiji swap system, with initial agreements covering 13,000 units according to company statements. By the end of 2026, CATL plans 900 battery-swap stations for heavy trucks in China.

A joint venture is signed; a profit contribution is not

Some initiatives carry more binding force than others. An investment interest is not a founded joint venture, and an agreed target volume says nothing about actual progress or later earnings contribution. Those distinctions deserve to be preserved in any assessment.

On October 19, CATL and Chery Automobile established the joint venture CATL Chery (Wuhu) New Energy Technology, with registered capital of CNY 1 billion — CATL holding 51% and Chery 49%. The entity exists. A profit contribution cannot yet be derived from it.

The bear scenario is straightforward: activities expand while profit keeps growing markedly slower than revenue. The latest quarterly comparison makes that risk relevant without cementing it as a trend.

What would change the picture

The immediate catalyst would be tangible progress on Australian project investments. A longer-dated marker is the small-series production of solid-state batteries in 2027, which CATL said on Tuesday it expects, as told to investors. That, too, remains an expectation rather than a completed production start. Both themes pose the same demand to investors: technological and commercial prospects must harden into deliverable execution.