CATL's Valuation Potential: A Case for Undervaluation Amidst Global Expansion

Contemporary Amperex Technology Co. Ltd. (CATL) has surged to a market capitalization of ¥1.68 trillion as of September 2025, reflecting a 119.76% annual increaseChina battery giant CATL is expanding globally: Here’s why it matters^[1]. Despite this meteoric rise, a closer examination of its valuation metrics—coupled with its strategic positioning in the global EV battery market—suggests the stock remains undervalued relative to its growth potential.

Financial Performance and Valuation Metrics

CATL's first-half 2025 results underscore its resilience. Revenue reached ¥94.18 billion, up 8.26% year-over-year, while net income grew 33.17% to ¥16.55 billionContemporary Amperex Technology Co Ltd (SZSE:300750) P/B ratio^[4]. Earnings per share (EPS) rose 41.67% to ¥3.48, outpacing operating expense growth of 12.33%Contemporary Amperex Technology Co Ltd (SZSE:300750) P/B ratio^[4]. Yet, its trailing twelve-month (TTM) P/E ratio of 21.47China battery giant CATL is expanding globally: Here’s why it matters^[1] lags far behind its 10-year average of 52.08P/E Ratio & Earnings by Sector/Industry | Siblis Research^[2]. This discrepancy hints at a disconnect between current pricing and historical expectations for high-growth tech firms.

Comparing CATL's valuation to industry benchmarks further strengthens the case for undervaluation. The "Specialty Industrial Machinery" sector, a proxy for EV battery manufacturers, trades at an average P/E of 28.65China battery giant CATL is expanding globally: Here’s why it matters^[1], while the broader "Information Technology" sector commands a P/E of 40.65P/E Ratio & Earnings by Sector/Industry | Siblis Research^[2]. CATL's P/E of 21.47 implies investors are discounting its future cash flows at a rate inconsistent with its market leadership and technological edge.

The company's price-to-book (P/B) ratio also warrants scrutiny. At 5.7Contemporary Amperex Technology Co Ltd (SZSE:300750) P/B ratio^[4], CATL's P/B exceeds the 2.22–6.35 range typical of energy and industrial sectorsPrice to Book Ratios - New York University^[3]. However, this premium is justified by its aggressive R&D spending (¥12.6 billion in operating expensesContemporary Amperex Technology Co Ltd (SZSE:300750) P/B ratio^[4]) and its pivot toward high-margin innovations like battery swapping and recycling.

Strategic Expansion and Market Dynamics

CATL's dominance in the EV battery sector—38% global market shareChina battery giant CATL is expanding globally: Here’s why it matters^[1]—is underpinned by its geographic diversification. The company's €7.6 billion battery plant in Hungary, set to begin production in 2025, and its joint venture with Stellantis in SpainChina battery giant CATL is expanding globally: Here’s why it matters^[1], signal a deliberate shift away from China's price-war-driven domestic market. These projects, alongside a planned Indonesian plant (production starting March 2026China battery giant CATL is expanding globally: Here’s why it matters^[1]), diversify supply chains and insulate CATL from regional volatility.

Moreover, CATL's recent $5.2 billion Hong Kong IPOChina battery giant CATL is expanding globally: Here’s why it matters^[1] has funded its global ambitions, enabling it to outpace rivals in capacity expansion. Its battery-swapping technology, already deployed in China, could disrupt European markets by addressing range anxiety and reducing upfront EV costs. Analysts at CNBC note that such innovations position CATL to capture incremental market share in regions where EV adoption is still nascentChina battery giant CATL is expanding globally: Here’s why it matters^[1].

Risks and Counterarguments

Critics may argue that CATL's valuation does not account for near-term risks, including raw material price volatility and intensifying competition from South Korean and U.S. battery firms. However, CATL's vertical integration—spanning lithium extraction to recycling—mitigates material cost risksChina battery giant CATL is expanding globally: Here’s why it matters^[1]. Additionally, its focus on Europe and Southeast Asia, where EV adoption is accelerating, provides a buffer against China's saturated market.

Conclusion: A Compelling Long-Term Case

While CATL's P/E and P/B ratios appear modest compared to peers, its financial performance, strategic expansion, and technological leadership justify a re-rating. The company's ability to scale operations in high-growth regions, coupled with its innovation pipeline, positions it to deliver outsized returns. For long-term investors, CATL's current valuation represents an opportunity to capitalize on its transition from a Chinese champion to a global energy infrastructure leader.