How does the profit equation change when moving from selling cells to system integration?

  • Goldman Sachs expects CATL’s energy storage shipments to shift toward integrated solutions from 2026 to 2030, driving up gross profit per kilowatt-hour of energy storage products. This adds another dimension to the growth thesis: alongside larger shipment volumes, an upgraded product mix can increase gross profit per unit shipped.
  • The transition into an alternating-current (AC) solution integrator is a key reason Goldman Sachs expects CATL’s competitive position in energy storage to strengthen. Considering its quality premium alongside its integration capabilities, the bank believes CATL could reinforce its leading position in the energy storage market.

Beyond energy storage, how should the core power battery business be assessed?

  • Goldman Sachs believes renewed concerns about automakers moving away from CATL are overdone and expects the company to retain its leading position in power batteries. Its reasoning is that CATL’s power battery market share has proved resilient, and many automakers’ previous attempts to diversify battery suppliers were later scaled back or reversed.
  • These form two distinct sources of support alongside the energy storage transition: power batteries focus on defending the competitive position, while energy storage focuses on improving gross profit per unit through integrated solutions. Goldman Sachs therefore values the two businesses separately rather than applying a single multiple to all operations.

How is the price target upside of more than double calculated?

  • The report puts CATL’s A-share forward price-to-earnings ratio at approximately 12 times for the next 12 months and its dividend yield at approximately 5%, with the valuation close to lows seen during the previous period when automakers adjusted their battery suppliers. This is Goldman Sachs’s starting point for discussing re-rating potential.
  • The A-share valuation uses a sum-of-the-parts approach: power batteries and other businesses are valued at 11 times expected 2027 EBITDA; energy storage is valued at 15 times expected 2030 EBITDA, then discounted back at 9.5%. The higher multiple for energy storage also extends the valuation basis to more distant earnings.
  • The corresponding H-share multiples are 17 times and 20 times, respectively. Goldman Sachs explains its valuation framework by reference to return on capital, global leadership and scarcity. The resulting A-share and H-share price targets are 507 yuan and 777 Hong Kong dollars, respectively, implying upside of 113% and 118% from the share prices on 23 October 2026 used in the report.

What conditions could directly weaken this re-rating thesis?

  • The progress of system integration is the most direct constraint: if the transition is slower than Goldman Sachs expects, the pace at which the product mix shifts toward integrated solutions will be affected, weakening support for improved gross profit per unit and a re-rating of the energy storage business.
  • Goldman Sachs also lists slower growth in global electric vehicle and energy storage demand, unexpected increases in raw material costs, intensifying competition, and execution and trade policy risks in overseas expansion. These factors constrain demand, profitability and overseas business development, respectively.
  • The price targets themselves have also been lowered: the historical table shows the A-share target falling from 559 yuan on 11 October 2026 to 507 yuan on 20 October, while the H-share target fell from 859 to 777 Hong Kong dollars. Thus, substantial upside to the price targets exists alongside recent target cuts.