Where will the next growth for "King Ning" come from?

CATL is focusing on technological innovation and market expansion to consolidate its position as a global leader in the battery industry.

According to news from the Chasing Wind Trading Platform, Morgan Stanley analysts Jack Lu, Adam Jonas, and Stephen C Byrd pointed out in their latest research report that benefiting from technological iterations, increased battery capacity per vehicle, and accelerated electrification of trucks, CATL is expected to achieve an average annual compound growth rate (CAGR) of over 20% in profits over the next three years.

Additionally, the report emphasizes that CATL's continuous expansion of its market share in the European electric vehicle market and its strategic layout in high-value markets will support its long-term growth and withstand industry competitive pressures.

Morgan Stanley stated that CATL's battery technology is gradually expanding into the AI field, with promising prospects in ultra-large-scale data centers, humanoid robots, and eVTOL.

Driven by Technological Iteration, ROIC Expected to Continue Improving Over the Next Three Years

Morgan Stanley emphasized that the essence of CATL's business model is return driven by technological upgrades, rather than simple manufacturing operations.

The report shows that the company's R&D expenditure accounts for 44% of the total global R&D expenditure for electric vehicles/storage batteries, far exceeding its competitors. The technological R&D system covers two core areas: materials science and powertrain solutions, forming a comprehensive chemical system layout from NCM, LFP to sodium-ion batteries.

Although battery prices have declined, the company's return on invested capital (ROIC) continues to improve, reaching over 50% in 2024. The report predicts that this trend will continue until 2025-26 with the introduction of new technologies such as second-generation sodium batteries and anode-free technology.

The report mentions that similar to Moore's Law in the semiconductor industry, thanks to continuous breakthroughs in chemical formulations, structural design, and system integration, CATL's battery energy density increases by over 20% every two years.

Morgan Stanley expects that this technological advancement will bring faster charging speeds, longer cycle life, and higher safety, directly benefiting electric vehicles, energy storage systems (ESS), and other application fields, enhancing CATL's value proposition to global customers.

Multiple Factors Supporting Market Expansion

Morgan Stanley predicts that benefiting from increased battery capacity per vehicle, growth in European market share, and accelerated electrification of trucks, CATL's electric vehicle battery sales will achieve a 24% average annual compound growth rate between 2025 and 2027.

Specifically, the driving factors mainly include the following aspects:

Increase in battery capacity per vehicle: The battery capacity of pure electric vehicles in the Chinese market is expected to increase from 57kWh in 2024 to approximately 65kWh in 2027, while plug-in hybrid models will increase from 25kWh to 35kWh

Rapid Penetration of Electric Trucks: The penetration rate of electric light trucks in China is expected to rise rapidly from 5% in 2024 to 10%/25%/38% in 2025/2026/2027.

Continuous Increase in Market Share in Europe: CATL's 70% sales in the domestic market are concentrated in the high-end electric vehicle sector priced over $35,000, while its market share in Europe has been steadily increasing since 2021.

Its factory in Hungary and joint ventures with automakers like Stellantis will further consolidate this trend.

Strong Growth in Energy Storage Business: ESS sales are expected to achieve a compound annual growth rate of 21% from 2025 to 2027.

AI Empowerment to Explore New Growth Spaces

In the report, Morgan Stanley is particularly optimistic about CATL's prospects in the AI application field.

The report states that CATL's battery technology is surpassing traditional transportation fields and entering AI-related markets, such as hyperscale data centers, humanoid robots, and eVTOL.

In the eVTOL (electric vertical takeoff and landing) field, CATL's condensed battery technology has entered the testing phase for non-defense aircraft, and its anode-free technology is expected to further enhance energy density.

The report predicts that demand for eVTOL batteries will reach 20GWh by 2030 and surge to 6,800GWh by 2050.

Similarly, the humanoid robot market is expected to generate a battery demand of 650GWh by 2050, and CATL's technological advantages position it to take the lead in these emerging fields.