CATL Reaches New Highs Twice in a Week; Morgan Stanley Says Core Strengths Defy Imitation

TradingKey - On Wednesday, September 17, CATL's Hong Kong-listed shares (3750.HK) surged past HKD 500, with gains exceeding 6% at one point, setting a new record since its May listing. Its A-shares (300750.SZ) also rose nearly 8%.

The rise coincides with the World Energy Storage Conference 2025 held this Wednesday, where CATL's founder and chair, Zeng Yuqun, addressed the audience, highlighting the achievements and challenges of China's energy storage industry. Several key outcomes and future industry plans were announced at the event, likely boosting investor confidence.

Earlier, on September 12, China's National Development and Reform Commission and the Energy Bureau unveiled the "Special Action Plan for the Scalable Construction of New Energy Storage (2025-2027)," aiming to increase the nationwide installed capacity of new energy storage. This announcement fueled CATL's strong rally on Monday, with both A-shares and Hong Kong shares reaching new highs.

Morgan Stanley's recent report offers insights into CATL's strong performance this week. The investment bank stresses CATL's formidable core competencies, particularly its nearly inimitable self-designed production lines that continually build barriers, yielding quality premiums and cost competitiveness. Morgan Stanley maintains an "Overweight" rating, setting the A-share target price at RMB 425, which is approximately 20% above the closing price of RMB 353 on the 16th.

The report points out that one significant advantage CATL holds is that its competitors find it nearly impossible to replicate its production lines through equipment suppliers, as most lines are designed in-house and are highly complex, comprising up to 25,000 component units.

Additionally, CATL has established a cost advantage, with its factories achieving a daily cell production capacity of 2.2 million units, supported by over 6,800 real-time quality control points, ensuring a high yield rate and quality premium. The company is dedicated to creating "smart factories" with data processing capabilities reaching 340,000 transactions per second, leveraging smart methods to reduce costs and enhance efficiency.

Morgan Stanley emphasizes these advantages as key factors that set CATL apart from other manufacturers, building significant core barriers. Data reveals that in the energy storage system (ESS) business, CATL's products deliver approximately a 14% internal rate of return (IRR) premium globally compared to other battery manufacturers, and a 7%-8% premium in the Chinese market.

Morgan Stanley remains optimistic about CATL's future. The company's capacity utilization rate has surpassed 90%, with ongoing capacity expansion. CATL reports strong current orders, with plans to build an additional 250 GWh of new capacity, aiming to reach 1 TWh next year, potentially meeting demand in the coming years. Moreover, its overseas capacity expansion plans are advancing, with the company suggesting that its overseas factories might be even more profitable than domestic operations.