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The ticker 3750 is the stock that foreigners can buy on the Hong Kong exchange. The other ticker 300750 is traded in Shenzhen. The Hong Kong shares trade at a 60% premium to the Shenzhen shares, but I still think they’re cheap relative to the fundamentals.
CATL is the world’s top battery maker — with about 40% of global EV battery installs, roughly the same as the next five competitors combined, and 30% of the grid storage battery market, the top supplier of grid storage batteries for five straight years.
They have an absurdly low defect rate. Prior to CATL and BYD, defect rates for lithium batteries were in the parts per million range. CATL batteries have a defect rate of one part per BILLION. They have managed to improve quality massively while scaling incredibly fast.
There’s an interesting acceleration in revenue growth:
2024: −10%
2025: +17%
Q4 2025: +37%
Q1 2026: +52%
CATL’s grid storage battery growth was 120% in Q1 2026. That’s an absurd growth rate.
Storage was 2% of CATL’s sales five years ago; it’s \~25% today, and management’s stated target is 50% by 2030.
China curtailed \~9.6 TWh of renewables last year for lack of storage.
The EU added 27 GWh of storage in 2025 (+45%). COP29’s pledge is to 6x global storage by 2030.
Storage gross margins are somewhat higher than EV gross margins, roughly 27% vs 24%.
The EU has strict trade barriers for EV battery imports but not for grid storage battery imports. The U.S. does have stricter trade restrictions on finished grid storage batteries, but again they are nowhere near as strict as for EVs or EV components.
Even with the tariff (let’s say 35-40% for the full battery) it’s still worthwhile to get CATL’s batteries because the quality is so high and the differential in pricing is getting very wide in some local markets, like Nevada.
There is a lot of new solar being built out in the U.S. and some local grids are going to negative pricing during the day because the solar output is so high, which is a function of solar capacity far outpacing grid storage.
Another thing we have been seeing is that US companies, like Ford, are licensing the tech from CATL for US energy storage projects to get around the trade barriers.
With the AI data centers putting stress on the grid, on site battery storage is also getting more attractive.
It looks like the PE based off the Hong Kong share price is around 35X trailing earnings. The Shenzhen shares are much cheaper at about 22X earnings but foreigners can’t buy those.
Okay, so the Hong Kong shares are not cheap, but the revenue growth rate was 52% and ACCELERATING last quarter, and the grid storage business is 25% of revenue and it’s growing at 120%. As it grows to a larger share of the business the overall revenue growth rate should continue to pick up.
The company continues to ramp up capacity, but it comfortable finances its growth out of its own cash flow, and it has a net cash position of $40 billion.
The company has become massive and has a huge supply chain in China. It finances the supply chain by generating huge trade payables. They don’t pay their suppliers until they collect from their customers, generating cash from their working capital over time. This reduces their reliance on traditional debt to grow - their supply chain finances their growth.
The return on equity is great, well over 20%, and this is understated because the balance sheet is not that levered and they have a big cash pile. They pay a dividend but the yield is pretty low at 1.6%. They buy back some shares but lately they have been diluting to take advantage of the high premium of the Hong Kong shares to fund more capex.
The margins have gone up over time and are now near 20% on the operating line which is great for an industrial company. They somehow manage to undercut everyone in the world in batteries, with the lowest defect rate in the world, and somehow have come away with margins that are massive and much larger than everyone else’s. BYD, while it is not a pure battery maker but rather a full EV producer, has a 4-5% operating margin for example.
There is china geopolitical risk which is difficult to hedge out. Im not an expert in this geopolitical risk and if you think all China stocks are a dealbreaker this isn’t the investment for you. Personally I’m willing to invest in truly great companies wherever they are and I think in the current political environment it is very unlikely that frictions between the U.S. and China escalate in the near future (6-18 months).