CATL shares fall as profit growth trails rising sales
CATL’s Hong Kong shares fell 11.41 percent after third-quarter profit missed analysts’ estimates. Revenue grew faster than earnings as the battery maker’s gross margin narrowed. Management identified a shift toward lower-value projects as the main pressure and said negotiations over passing a new battery tax to customers were continuing. Operating cash flow also declined over the first nine months.
Economics & Markets··Midday
The share decline follows slower profit growth
Shares in CATL fell on October 21 after third-quarter profit growth lagged rising revenue. Net profit increased from a year earlier but declined from the preceding quarter.[1], [2]
The Hong Kong shares closed down 11.41 percent at 364.80 Hong Kong dollars. Attributable net profit reached 21.25 billion yuan, an annual increase of 14.54 percent and a quarterly decline of 5.77 percent. Revenue grew 58.58 percent to 165.22 billion yuan. Bernstein had estimated profit of 22.9 billion yuan, Goldman Sachs 24 billion yuan and CLSA 25–26 billion yuan.[1]
Product mix and tax negotiations weigh on margins
Gross margin fell to 20.69 percent from 23.15 percent in the preceding quarter. Management identified a larger contribution from lower-value projects as the main reason. China introduced a 2 percent battery consumption tax on September 1. Chief financial officer Zheng Shu said passing it to customers required price negotiations, which were continuing. Taxes and surcharges rose from 597 million yuan to 2.21 billion yuan.[1]
Cash flow falls as inventories grow
Nine-month operating cash flow declined 23.60 percent to 61.63 billion yuan. Management pointed to shorter supplier payment terms and higher prepayments. Inventories reached 144.77 billion yuan at the end of September, up 53.15 percent from year-end. An export value-added-tax rebate had also been reduced from 9 percent to 6 percent in April; delayed revenue recognition made that effect more visible in the third quarter.[1]
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