CATL reports massive growth in 2022
CATL released its latest figures, based on 2022 revenue of ¥328.6 billion, an increase of 152% over the base period, in line with analyst forecasts. CATL's main power battery business, which generated the bulk of the company's revenue in 2021, achieved a 17.2% margin, in line with market estimates.
CATL's share price rose 3.3% on Friday.
CATL also reported a strong performance in the fast-growing energy storage segment, which achieved revenues of ¥45 billion, exceeding expectations. This is an area of business in which the company's chairman, Zeng Yuqun, has shown growing interest and recently called for stricter regulation - which could benefit his company at the expense of smaller rivals.
Among others, the company, also known as Tesla's supplier, on Thursday reported a net profit of ¥30.72 billion for 2022, an increase of 92.9% from a year earlier. This both beat analyst consensus of ¥28.8 billion and was in line with CATL's preliminary forecast in January, which predicted earnings of between ¥29.1 billion and ¥31.5 billion.
In 2022, CATL had a 37% share of the global EV battery market, demonstrating the popularity of cheaper-to-manufacture lithium-ferrous phosphate (LFP) batteries. In a joint second place, with 13.6% each, are South Korea's LG Energy Solution and the Warren Buffett-backed Chinese car maker BYD, according to SNE Research. CATL's size and dominance have caught the attention of Chinese President Xi Jinping, who told an annual parliamentary session in Beijing earlier this week that he was "pleased and concerned" about the company's leadership.
CATL is facing increasingly fierce competition in the battery sector. This dynamic is partly being driven by CATL itself, which is reportedly offering discounts to some Chinese car makers due to falling prices for raw materials such as lithium, where it has direct investments. On Friday, the battery maker clarified that the discounts to some carmakers were aimed at sharing lithium mineral raw materials with long-term strategic partners.
According to Bloomberg Intelligence, the profitability of CATL's batteries could improve further in 2023 due to falling material costs and economies of scale. CATL's battery sales volume is expected to rise another 40-50% following last year's more than doubled growth, thanks to strong momentum in the EV market, according to BI automotive analysts Steve Man and Joanna Chen.
Analysts at Citibank, who continue to recommend CATL shares as a buy, pointed out that at the investor briefing after the flash report, CATL communicated that its competitive advantage over its peers is growing.
We prefer battery leader CATL with strong pricing power and access to overseas customers,
the team wrote in an analysis on Friday.
Jefferies' Johnson Wan (who downgraded CATL) remains unhappy with the battery business' margins and predicted pressure on the company in his analysis on Friday. As a giant in the industry, CATL is particularly exposed to geopolitical risks, especially as the US seeks to limit dependence on Chinese companies in the EV supply chain and encourage automakers to manufacture in North America.
The recent agreement between CATL and Ford under which Ford will license CATL's LFP battery technology for use in a new $3.5 billion Michigan battery plant has prompted scrutiny from Beijing, people familiar with the matter told Bloomberg, as officials worry that competitive aspects of CATL's technology could be obtained or accessed by the U.S. automaker.
Meanwhile, CATL is expanding globally and has 13 manufacturing bases worldwide, according to its website. Part of this expansion is the Debrecen factory, which represents the largest ever investment in the history of Hungary.
Cover photo: Getty Images
