The Investor's Podcast 对 $CATL 的判断变化

Being the biggest makes them the cheapest. Being the cheapest makes them the most profitable. And with the scale CTL has, they have been pushing upstream into mining with stakes in the mining company. So they control the raw materials. And they have gone downstream by designing their sales straight into the car platform.

The company I'm talking about is CL, Contemporary Amprodex Technology Limited, the largest battery maker in the world. And as of the most recent stock price, its market cap is about $280 billion, which means they are roughly the size of Shell.

I think it is fast becoming the backbone of the energy infrastructure. It powers EVs. It stores to enable power and now increasingly it's becoming the core power infrastructure player in the AI data centers.

He gathers a group of Chinese investors led by himself and his deputy and spun off ATL's EV battery division into a brand new Chinese controlled company called CL. Robin Zang and his co-investors took 85% equity in the company and TDK kept the remaining 15%. And that's how CL came into existence.

CL did not enter Tesla's supply chain roughly a decade later around 2020 when Tesla entered China and started sourcing batteries from CL and that's when the growth of CL went vertical.

So in 2020 CL's revenue was roughly about $7 billion and in 2025 just 5 years later their revenue jumped by more than eight times to more than $60 billion.

Today, Robin Zang is sometimes called the invisible king of the global battery supply chain. He still owns about 22% of the company and the founding team holds over 35%.

And a month later, CL came out with a competing product that goes from 10% to 98% in under 7 minutes. So, this isn't a close race. Uh, CL is about two and a half times larger than the nearest rival.

if you look at CL and you see a checklist like they are the cheapest producer, they have the biggest R&D budget, the best technology and you might assume that the mo is one of those. But I think the moat is that these advantages feed each other and create a flywheel. Being the biggest makes them the cheapest. Being the cheapest makes them the most profitable. That profit funds a large R&D budget which helps them build the best technology and win more customers which makes them bigger still and with the scale CTL has they have been pushing upstream into mining with stakes in the mining companies so they control the raw materials and they have gone downstream by designing their sales straight into the car platforms. So for a competitor, it isn't about trying to catch up on one thing. They are chasing a flywheel that just keeps spinning faster every year.

And CL has the broadest set of customers in the industry. Tesla, BMW, Mercedes, Volkswagen and nearly every Chinese EV maker except DYD.

So the competitive advantage that we have discussed are pretty well understood by the market. But what I think is underappreciated are two new growth engines that are still in the early stage of their life cycle and I believe the market hasn't fully underwritten them.

That's the gap that CL batteries fill in. They sit in between this spiky compute loads and the steady power grid. They absorb these surges in power in between.

Yeah, it's it's quite mindboggling for sure and CL is already the world's number one energy storage supplier and I think that two things make it even more attractive play. First is that the storage segment carries higher margins for CL than the core EV battery business because of the complexity and the durability requirements that we talked about.

And the second point which I find more interesting is that CL isn't just selling batteries to these data centers. It is now systematically assembling a full stack energy ecosystem for the storage through power distribution inside the data center. They are even buying into the power equipment makers and servicing the entire energy stack.

This I think uh has the potential to transform CL from just an energy storage supplier to a strategic infrastructure partner for the entire AI compute buildout. So CL is effectively locked out of owning a factory in the US for geopolitical reasons. So rather than fight it out, they have found a workaround where they get into a licensing deal with an American company and it's the American partner that builds, owns and runs the manufacturing plant while CL just provides the license of its technology and collects a royalty fee.

CL hasn't disclosed the economics of the licensing fee. But if it is in the 3 to 4% range that these deals are typically u done at then that's a very high margin capital light income and that framework can extend beyond EV batteries to even data storage uh for the AI data storage compute that we talked about.

So the important point here that I want to do highlight is that this is still in the early phase. The model is under scrutiny by the US lawmakers. So CL obviously feels that this is a win-win solution for both parties but the geopolitics has many dimensions and it's not yet a shortsh short win but if CL can scale this LRS framework in the US the high margin royalty revenue can provide a big boost to the stock price

Recall I'm a forensic accountant in that pun I intended. Uh, in a recent fiscal period, CATL reported a 21.8% 8% growth and shipped gigawatt v hour volume. Yet the topline revenue contracted by 9.7%. This price deflation acted as a massive 130% drag on growth. This happened because CATL's long-term agreements utilize raw material indexation. The company is contractually obligated to pass manufacturing efficiency gains and commodity savings directly to their OEMs.

Last year, CATL reported almost two times as much cash flow as profit. This two times delta exists because CAT uses its dominant position to squeeze suppliers by holidays payable outstanding. Essentially, it's an interest free loan from its supply chain like you said at Amazon. However, the Chinese authorities have already now demanding mandating that large firms paymemes faster. As this interestf free loan is called in, CATL's CL's funding model will face a painful readjustment, stripping away the cash used for buybacks and dividends.

Although yours truly believes that the energy storage system is a cyclical buffer to slowing EV sales, the ESS, the energy storage system, is sensitive to utility capital budgets, to global interest rates, and to AI spend.

This ESS buffer can be viewed as a high beta on the global micro environment. uncontested expansion may slow. Being the largest, they're the biggest target for all the competitors. They may be the slowest mover towards solid state disruption. And they have the most to lose from the next generation chemistry, unless of course they invent it.

With subsidies from the Chinese government gone, recall the pig in the win, CO faces a gravitational pull not seen since 2011.

Some of those gravitational pulls include one a utilization risk with new plants in Hungary and Germany. CL has a massive fixed overhead. Any minor slowdown in European EV adoption due to subsidy cliffs will leave this capacity unabsorbed turning growth assets into margin anchors.

Despite the vertical integration, CAT remains a shadow commodity trading house. Its stock price may be viewed by bears as a proxy for lithium and nickel volatility, not a reflection of R&D prowess.

The European protectionist wall, the EU carbon border adjustment mechanism, CBAMP, acts as a targeted tax on Chinese cells and a key founder, key man.

CL is inextricably tied to Robert Zing's personal standing with a 22% ownership, deep ties to Beijing. Any shift in his political standing represents an existential unhedable risk for shareholders.

I think these are valid risk especially the geopolitical risk linked to European protection and anybody investing in China has to be comfortable with taking on the geopolitical risk that's something which is always there

so the first one is the utilization risk linked to the fixed overheads at these overseas plants in Hungary and Germany so it is true that a slowdown put on in the European EV industry will have some impact on CL. But I would also say that being the lowest cost producer, CL might be better placed in managing the downturn compared to the competition.

I mean we have seen subsidies getting removed in China resulting in overall EV slowdown but the dominance of CL in China has continued. Now with regards to your point about commodity price volatility linked to the lithium prices basically so the company is actively developing new battery chemistries such as the sodium ion batteries as a response to this very risk.

So sodium as opposed to lithium is widely available. The issue currently with sodium batteries today is that the energy density is lower compared to the lithium based batteries. But again as that technology improves this could be a good hedge for CL against the commodity price volatility

and uh finally on your point about keyman risk that again is a very real risk. Robin Zen has been the key driver behind the company and is the largest shareholder. I am less worried about a shift in the political standing because um first of all CL operates in a sector that China wants to grow. So they have a strong mutual alignment on that and secondly Robin Zang maintains a low profile and really speaks in public. So the chances of him rubbing the regulators or the state authorities the wrong way is quite low.

But again, it's a valid risk and something I would categorize as low probability but with potentially high impact and very difficult to hedge. Today with the current stock price for shares trading in Shenzhen, CL's market cap is around $280 billion. And with the cash sitting on the balance sheet, the enterprise value, which is what you actually pay for the operating business, is close to $250 billion.

Now against a $14 billion of operating profit over the last four quarters that's about 18 times multiple EB2 bit and if you look at the P multiple that's roughly trading at about 21 times which I think for a global leader like CL is neither demanding nor cheap.

The company has a high return on invested capital of around 17%. And a return on equity of about 25%. So there is a good enough chance that the operating business roughly doubles in value over the next 5 years. And if the multiples remain where they are, you can expect about 15% annual return before you add a dividend yield of another point or two.

So to summarize, it's a dominant cash generative bondled business with high returns on capital that can potentially double the value of the business in 5 years. There are obviously both upside and downside cases. We discuss about the growth engines around AI data centers and the licensing model. If they surprise on the upside, then the returns can be even more meaningful.

And the downside case is that the domestic price war intensifies and the LRS model doesn't scale in the US due to geopolitical tension.

Yeah, that's correct Roth. So CL is dual listed. The A shares trade in China with the ticker 3000750 and the edge shares trade in Hong Kong with the ticker 3750. So same company, same one share, one vote, same dividend per share.

But if you look at the stock price and after adjusting for the FX rate, you will notice that the Hong Kong shares trade at a big premium of roughly 30 to 35%. to the mainline China shares and that's actually opposite to the norm. Normally for a dual listed Chinese company is the mainland Asia that trade at a premium because Chinese domestic investors face capital controls and they cannot really buy in Hong Kong. So their demand gets concentrated into the local listing. But for CL it's the opposite case and the reason is pure supply and demand.

So the Hong Kong float is relatively small and the demand from global investors is quite high. The Hong Kong and Chinese shares are not funible meaning that you can't buy in one market and really convert and sell it in the other market.

So if an international investor if you have access to the Chinese shares then that is a cheaper way to get access to this business. Some brokers provide access to domestic Chinese listings using something called the northbound stock connect but this is usually limited to the institutional investors. For smaller retail investors, Hong Kong shares are the only option. These are freely accessible to everyone, but you will have to pay a premium to own them.

Now, CL has been widening the Hong Kong float. So, after the Hong Kong IPO in 2025, they did a follow on placement in 2026. And yet, the global demand was so high that the premium hasn't compressed much.

My personal view is that in the long run, Hong Kong shares should trade at a premium of about 10 to 20% range using TSMC as the reference. So TSMC has averaged at around 15% premium, but how and when that gap will compress is hard to say.

CL is not just an EV battery play. It has the potential to become the backbone of the future energy infrastructure and increasingly for the AI data centers. It is not without risks. You have to be comfortable with the geopolitical friction. And if the AI storage growth continues and the LRS licensing model proves scalable, then there is a very real compelling story for this business.

I don't want to get here too much up between a bull and a bear. I have to say still like reading up on CSL, I was more excited about batteries that were not for vehicles, but really for stabilizing power grids and AI data centers.

So you're looking at a company like CL that would benefit from the underlying tailwind, no pun intended.

what is amazing about the CL batteries is that they sit between the data center and the grid and it absorbs those thoughts and an AI data center is to you could say it's even worse than a football stadium because you might get a few goals throughout those like 90 minutes but then whenever you train a model it will take you weeks to train a model and then you have this cheering and then steady hum like and it happens every second or two so it's incredible tiresome for the grit to work with

It doesn't prove that it's going to be CL necessarily is going to be the winner. Now the storage market is growing faster than CTL's storage shipment. So competitors are taking their share right now.

Even though CL is the number one player in energy storage space and the segment grew installations by roughly 30% last year, but that was below the overall industry growth rate of close to about 80% if I'm not wrong.

I believe one key reason why this segment did not grow at a faster rate for CL last year was because of capacity constraints. So CL's utilization rate last year was around 97%. Meaning that they sold pretty much what they could produce.

Now this year some of those constraints should ease up as new manufacturing capacity comes online. So it will be important to see if CL can start regaining market share in this segment.

In fact, if you look at the latest quarterly result, CL's energy storage sales for the first half of 2026 grew by about 88% year on year and the storage volume nearly doubled year on year. So this gives some data point around the CL's potential market share position in the energy storage space.