Swapping aluminum for copper will maintain China’s resources, group says
China depends on overseas imports for 60% of its aluminum resources as opposed to 70% of its copper resources.
Chinese battery maker Contemporary Amperex Technology Co. Ltd.’s quarterly profit soared, powered by rising electric-vehicle sales globally and stabilizing prices of key materials like lithium.
Net income rose 63% to 10.9 billion yuan ($1.5 billion) in the three months through June, based on a Bloomberg calculation of the company’s first-half results released Tuesday. Revenue increased 56% to 100 billion yuan. Both figures beat analyst estimates.
Record quarterly sales for top customer Tesla Inc., which accounts for 12% of CATL’s revenue, according to supply-chain data compiled by Bloomberg, helped propel the Fujian-based company’s profit growth.
CATL, which also counts Ford Motor Co., Volkswagen AG, Hyundai Motor Co. and Nio Inc. among its customers, has tightened its grip on the global EV battery market as it ramps up output. Its share in the first five months of 2023 was 36.3%, up 1.7 percentage point from the same period last year, according to SNE Research. Shenzhen-based BYD Co. had a 16.1% share, producing batteries used in its expanding lineup of clean cars.
The Chinese price of lithium carbonate, a refined form of the metal used in EV batteries, has halved from last year, easing CATL’s cost pressures.
CATL’s shares fell as much as 1.2% in the opening minutes of trade in Shenzhen on Wednesday, before paring some of the losses. The stock rose 3.4% on Tuesday, the biggest gain since June 15. Prior to Tuesday’s gain, the shares were little changed this year.
CATL is poised to sustain strong sales growth through 2H while lower lithium costs and greater scale economies give margins a bulwark against falling battery prices. Domestic demand remains robust as China’s EV sales are speeding up on new-model rollouts and the extended zero purchase tax. The battery maker’s growing presence overseas — where supply-demand and battery pricing dynamics are more favorable than in China — can also buttress sales and profitability.
Joanna Chen and Steve Man, BI auto and industrial analysts
Jefferies reacted to the earnings, upgrading the stock to a buy from a hold, and raising its price target to 291 yuan from 271 yuan, pointing to management’s post-earnings comments expressing confidence in a better, more premium product mix that will help improve profitability.
The company said its first-half net income was 20.7 billion yuan on revenue of 189 billion yuan. Gross margins also continued to grow, reaching 21.6% for the period, up almost three percentage points from the same period a year earlier.
CATL’s core power battery business, which makes cells for EVs, generated 139 billion yuan of sales to deliver 74% of first-half revenue. The contribution was 4 percentage points higher compared to a year earlier. The fast-growing energy storage business contributed 28 billion yuan to the top line.
The company’s broader ambitions include a $7.6 billion, 100 gigawatt hour battery factory in Hungary, and a more contentious $3.5 billion deal with Ford Motor Co. to run a production site based on its licensing and technology in the US. That deal is facing congressional scrutiny as pressure ramps up on Ford and CATL over Chinese involvement.
Overseas revenue at CATL jumped to 35.5% in the first-half compared with 25% in the same period last year, indicating its international reach is bearing fruit.
(By Danny Lee, with assistance from Charlotte Yang)
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