After an on-site inspection of CATL, Morgan Stanley's conclusion: the core competitiveness is too strong, and the production capacity will reach 1TWh next year, with great energy storage potential

Morgan Stanley released a report after an on-site visit to CATL, stating that the company's self-developed manufacturing lines have extremely high complexity and intelligence levels, combined with advanced molecular-level materials science, which will continue to build high barriers, creating quality premiums and cost competitiveness.

According to the Morgan Stanley report, the factory produces 2.2 million battery cells per day, with over 6,800 real-time quality control points, processing 340,000 data transactions per second, creating a smart factory. CATL currently has sufficient orders, with a capacity utilization rate exceeding 90%, and is constructing new capacity of 250GWh, aiming for a total capacity of 1TWh next year.

In the energy storage system (ESS) business, CATL's products can bring customers approximately a 14 percentage point IRR (internal rate of return) premium in the global market and a 7-8 percentage point premium in the Chinese market. Morgan Stanley believes that CATL has significant energy storage potential.

Morgan Stanley maintains an "Overweight" rating on CATL, with a target price of 425 RMB, based on a 15 times EV/EBITDA valuation of expected EBITDA for 2026, indicating a 20% upside from the current level.

Intelligent Manufacturing Builds Core Barriers

Morgan Stanley pointed out after the on-site visit that the manufacturing efficiency of CATL's factory sets a high standard. The capacity of producing 2.2 million battery cells per day, combined with over 6,800 real-time quality control points, ensures high yield rates and quality premiums. The ability to process 340,000 data transactions per second creates a truly smart factory.

The report emphasizes that this is a key difference between CATL and other manufacturers: while creating cost advantages, it also possesses advanced materials science at the molecular level.

When asked whether competitors could replicate CATL's production line through equipment suppliers, Morgan Stanley believes this would be extremely difficult, as the production line contains over 25,000 component units, with a high level of complexity, most of which are self-designed.

Capacity Expansion Secures Future Orders

CATL currently has a capacity utilization rate exceeding 90% and is constructing new capacity of 250GWh.

According to the Morgan Stanley report, the company's goal is to reach a capacity of 800GWh by 2025 and 1TWh by 2026. With this scale of capacity, the company is expected to meet order demands in the coming years.

Overseas capacity expansion is progressing as planned, with projects in Hungary and Indonesia set to start production in 2026, and the project in Spain planned for production in 2027. Company management stated that the profitability of overseas factories is comparable to or even better than that of the domestic market.

In addition, the company expects to achieve small-scale production of solid-state batteries by 2027. Management holds a constructive attitude towards the deployment of electric vehicles and energy storage systems next year.

Energy Storage Business Welcomes Product Upgrades

In the competitive landscape of energy storage systems, CATL's products help customers enhance project economics with first-class decay control and energy efficiency performance. In the global market, compared to other battery manufacturers, it can create approximately a 14 percentage point IRR premium, while in the Chinese market, it has a 7-8 percentage point advantage. **

With the improvement of the distribution capability of system products, the company plans to enhance the product structure of its energy storage business in the coming years, including AC system products with higher gross margins