In "The Big Banks," Citigroup: CATL's potential $5 billion H-share fundraising has many positive factors, reiterating the "highly confident of outperforming the market" rating

Citi published a research report regarding Bloomberg's report that CATL (03750.HK) is considering a placement of H shares of up to $5 billion. The bank believes that if the fundraising does occur, the positive factors are likely to outweigh the negatives. The potential $5 billion fundraising would only dilute existing issued shares by 1.2%, which is not significant; however, the circulation of H shares would increase by approximately 33%, representing a substantial improvement and providing investors with the opportunity to increase their positions to capture the growth story of energy storage systems (ESS) over the years.

Citi pointed out that from a fundamental perspective, CATL is expected to have cash of $49 billion (RMB 334 billion) by the end of 2025, with a balance sheet in a net cash position, indicating that there is no urgent need for funds in the short term. However, additional funds could provide greater flexibility for capital expenditures and R&D, especially in future battery technologies such as solid-state batteries.

Based on the sum-of-the-parts (SOTP) valuation method, the target price for CATL A shares (300750.SZ) is set at RMB 505; the target price for H shares is set at HKD 710, reaffirming the "High-Conviction Outperform" rating. (hc/)