(Nov 13): Chinese battery stocks surged as Contemporary Amperex Technology Co’s (CATL) deal with an energy storage-system manufacturer stoked investor excitement about the sector.
CATL rallied 7.6% in Shenzhen to a fresh closing high on Thursday, after Beijing Hyperstrong Technology Co said it had locked in an order of 200 Gigawatt hours of energy storage system batteries from the firm. CATL rose 3.2% in Hong Kong while Hyperstrong gained its 20% limit in Shanghai, also to a record.
“The deal confirms strong energy storage system demand globally and a shortage of high-end products, as well as CATL’s championship in the value chain,” Morgan Stanley analysts including Jack Lu wrote in a note. While no prices were disclosed, it’s likely that CATL would receive a price or margin premium to allow this large order lock-in under the tight supply-demand conditions, they added.
CATL’s gain helped solidify its status as China’s fourth-largest stock onshore by market capitalisation. Despite the stock’s 56% rally this year, it trades at a multiple of 22 times forward earnings according to Bloomberg estimates, far below the levels above 80, where it was when shares hit a peak in late 2021.
The sale, which would be completed over the course of three years, means the annual order would be equivalent to 50% of CATL’s energy-storage-system 2025 sales volume, according to Morgan Stanley. Peers like Tesla Inc and Sungrow Power Supply Co might soon seek arrangements to nail down supply, hence boosting CATL’s demand for battery materials, the firm said.
Battery materials makers surged, with Shenzhen Capchem Technology Co jumping 17%, Shenzhen Senior Technology Material Co 15% and Eve Energy Co 9.2%. Ganfeng Lithium Group Co advanced 12% in Hong Kong while Tianqi Lithium Corp gained nearly 10%.
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