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On Wednesday, Macquarie initiated coverage on Contemporary Amperex Technology Co Ltd (3750:HK), commonly known as CATL, with an Outperform rating and a price target of HK$360. The research firm’s optimistic stance is based on the company’s recent H-share listing and its plans to use the capital raised to expand battery production in Hungary.
The expansion is strategically aimed to cater to the battery demands of major European Original Equipment Manufacturers (OEMs) such as Mercedes-Benz (OTC:MBGAF). Macquarie supports the view that CATL is well-positioned to increase its battery market share internationally, given the company’s management rationale and investment plans.
Despite the positive outlook, Macquarie acknowledges potential early share price volatility due to the limited availability of H-shares, which resulted in a 7.4% premium over A-shares at the close on May 20. The firm also notes that the inclusion of CATL’s H-shares in major benchmark indices like FTSE, MSCI, and Hang Seng could provide additional support to the stock in the medium term and improve the company’s visibility among global investors.
CATL’s focus on expanding its production capabilities in Europe is a strategic move to align with the region’s growing demand for electric vehicle batteries. The investment in Hungary is expected to strengthen CATL’s relationship with key automotive manufacturers in the European Union, ensuring a steady demand for its battery products.
The research firm’s analysis suggests that the technical factors, including share availability and index inclusion, may currently have a more significant impact on CATL’s stock price than the company’s fundamentals. Nevertheless, Macquarie’s coverage initiation with a strong price target reflects confidence in CATL’s future performance and its ability to capitalize on the opportunities presented by the expanding electric vehicle market.
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