CATL Shares Slide Sharply After Weaker-Than-Expected Quarterly Earnings

what happened

Shares of Contemporary Amperex Technology (CATL), the world's largest battery maker, dropped sharply after third-quarter results came in below expectations, according to Dow Jones Newswires. By midday Wednesday the stock was down 10% in Hong Kong, which would be a record decline for the company if it held through the close. In Shenzhen the shares also fell 10%, trading at 232.33 yuan, on course for their biggest one-day drop in about a year and a half.

Citi analysts linked the disappointment to a lower gross margin, higher expenses and greater impairment losses. They cut their target price to 479 yuan from 500. CATL's gross margin fell to 19.3% in the quarter, weighed down by product-mix changes and a higher tax surcharge after a reduced export tax rebate and the reinstated battery consumption tax. Nomura cut its target to 408 yuan from 632, warning of near-term pressure on the unit's profitability.

On Tuesday the company reported a 14.5% rise in quarterly net profit to 21.25 billion yuan, equivalent to $3.18 billion, while revenue climbed 59% to 165.22 billion yuan.

why it matters

For markets, the key question is margins in battery production rather than the headline growth: strong revenue gains can still be undermined by weaker profitability, which weighs on valuations. Nomura nonetheless expects battery demand to stay resilient over the long term, supported by electric-vehicle adoption in Europe and emerging markets and strong growth in energy-storage systems.

market impact

Battery makers: lower margins weigh on CATL shares and could pressure the wider battery sector

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