Morgan Stanley: Gotion’s third-quarter revenue rises 75%, while net margin falls to break-even

Why do profits remain weak despite surging revenue?

In the third quarter of 2026, Gotion’s revenue rose 75% year on year, supported mainly by growth in battery installations; however, its net margin fell to around break-even, and earnings were significantly below market consensus expectations.
The company reported a net loss for the quarter, mainly due to losses from changes in the fair value of financial assets and adverse exchange-rate effects. Morgan Stanley also noted that the company’s underlying profitability remained thin, so sales growth alone has yet to solve its profitability problem.

Morgan Stanley believes that CATL’s rising market share has intensified competition in the low-end battery market. Competition could reduce sales volumes or average selling prices, weakening Gotion’s ability to turn growth in scale into profits.
The bank is watching two conditions: whether continued expansion in scale and greater overseas penetration can significantly improve profit per unit, and whether additional taxes can be passed on to customers. If they cannot be passed on, Morgan Stanley expects profitability to deteriorate further.
Stronger-than-expected overseas battery sales, greater cost reductions from capacity ramp-up and technology upgrades, or faster cost pass-through could all improve the outcome; conversely, cost reductions below expectations would also weigh on earnings.

Morgan Stanley assigns Gotion a forecast 2027 price-to-earnings ratio of 15 times, in line with the industry average, implying a target price of 18.15 yuan and an equal-weight rating. The target price is below the previous target of 19.8 yuan on 14 September.
The closing price on 29 October 2026 listed in the report was 23.13 yuan, making the target price about 22% lower. Morgan Stanley also expects market consensus earnings-per-share forecasts to be revised down significantly over the next 12 months.