Quarterly results continue to show double growthhas Contemporary Amperex Technology (03750) fallen into a "golden pit"?

Title context: Quarterly results continue to show double growthhas Contemporary Amperex Technology (03750) fallen into a "golden pit"? Text: As lithium carbonate prices fall from 200,000 yuan/ton toward 100,000 yuan/ton, profits across the lithium battery industry have declined, but as the downstream leader in lithium batteries, Contemporary Amperex Technology (03750) has seen both revenue and profit surge. It is understood that on October 20, Contemporary Amperex Technology released its Q3 2026 report. Third-quarter revenue and non-recurring net profit attributable to shareholders grew 58.58% and 14.86%, respectively, while revenue for the first three quarters was 442.137 billion yuan, up 56.19% year on year, and net profit attributable to shareholders was 64.53 billion yuan, up 31.6% year on year. In addition, in the first three quarters, the company's net cash flow from operating activities reached 61.625 billion yuan. Earning 239 million yuan a day, Contemporary Amperex Technology has made a fortune in this lithium carbonate-driven cycle. Moreover, the company has a comprehensive industrial chain layout. Even though lithium carbonate prices fell sharply in the third quarter, the company still achieved double growth in performance, highlighting its resilience as a leader. Data show that from January to August 2026, domestic power battery installations totaled 489.1GWh, and the company ranked first with a market share of over 40%, about double the share of the second place. However, affected by the decline in lithium carbonate prices and compounded by the recent global index slump that triggered panic selling, Contemporary Amperex Technology's market value has continued to retreat. Its current PE (TTM) is 15.7x. So, is the company worth bargain-hunting? "Two-wheel drive," quarterly results continue to show double growth It is understood that, on a quarterly basis, from Q1 to Q3 2026, Contemporary Amperex Technology's revenue growth was 52.46%, 56.90%, and 58.58%, respectively, while net profit attributable to shareholders was 20.738 billion yuan, 22.546 billion yuan, and 21.246 billion yuan, with year-on-year growth of 48.55%, 36.40%, and 14.54%, respectively. The company's quarterly profit margin performance has been relatively stable, with a net margin attributable to shareholders of 14.6% in the first three quarters. The company has two core businesses, namely power battery systems and energy storage battery systems. Quarterly sales growth was strong. In the third quarter, the company's combined sales of power batteries and energy storage batteries exceeded 260GWh, up about 58% year on year, of which energy storage batteries were about 65GWh, accounting for one quarter. Driven by sales volume, both businesses maintained high growth levels. In the first half, the two businesses accounted for 72.72% and 20.16% of revenue, respectively. Data source: publicly disclosed data However, both businesses have growth expectations. From January to September, China's cumulative sales of power and energy storage batteries were 1,681.7GWh, up 57.6% year on year. Among them, cumulative sales of power batteries grew 38.2% year on year, while energy storage batteries grew 111.8%, accounting for 64.6% and 35.4% of total sales, respectively. Contemporary Amperex Technology firmly holds the industry's No. 1 position. In the first three quarters, its power battery installations were 253.68GWh, with a market share of 44.16%, up 1.41 percentage points year on year. It is worth noting that the energy storage battery business has become a highlight of the company's overseas market expansion. The company exclusively supplies the energy storage system for the largest operating battery energy storage project in Australia's National Electricity Market (NEM), with a project storage scale exceeding 3GWh; it signed a 2GWh TENER sodium-ion energy storage cooperation agreement with Solarpro, a leading renewable energy company in Eastern Europe; and it signed a memorandum of understanding with Alfen N.V., a leading European new energy integrator, planning to deploy 5GWh of TENER sodium-ion energy storage systems in the Netherlands and other Western European countries starting in 2027. Contemporary Amperex Technology's profitability is stable. In the first three quarters of 2026, its gross margin was 22.7%. Expense ratios fluctuated somewhat, but the core administrative expense ratio declined, standing at 2.1% during the period, down 0.8 percentage points year on year. The company continued to increase R&D investment, with R&D expenses up 22.89% and an R&D expense ratio of 4.19%. In the first three quarters, the company's ROE was 16.68%, or 22.24% annualized. As of September 2026, the company's cash and equivalents amounted to as much as 369.814 billion yuan. Supported by R&D and capacity, three major product lines are growth highlights Contemporary Amperex TechnologyContemporary Amperex Technology is in the downstream of the lithium battery industry chain. Most battery orders are long-term agreements, and it has also invested in upstream lithium mines, so its sensitivity to upstream lithium carbonate prices is relatively low and its performance resilience is high. From the data, sales volume and revenue grew in tandem, with no obvious change in average prices. Under the company's two-wheel drive strategy, with power batteries as the foundation, there are three major product lines as growth highlights: solid-state batteries, sodium-ion batteries, and energy storage systems. In solid-state batteries, the company disclosed that its sulfide solid-state battery has an energy density of 500Wh/kg. Its condensed-matter battery (a type of semi-solid-state route) has already been launched first, and all-solid-state batteries are planned to enter small-batch production in 2027. In September 2026, the Ministry of Industry and Information Technology and six other departments issued the "15th Five-Year Plan for the Development of the New Battery Industry," specifying that preliminary large-scale application of all-solid-state batteries will be achieved by 2030. In addition, the IEC international standard for solid-state batteries led by China has also been officially approved. For Contemporary Amperex Technology, the dual implementation of standards and policies means that its accumulation in sulfide material systems is expected to transform from "laboratory leadership" into "industrialization leadership." In sodium-ion batteries, since 2026, the company has disclosed 18 energy storage orders with a total scale of 96.96GWh, of which sodium-ion energy storage orders are about 70GWh, accounting for more than 70%. In April 2026, the company launched the "Naxtra" passenger vehicle power battery, with an energy density of 175Wh/kg, capacity retention of more than 90% at minus 40C, and a cycle life exceeding 10,000 cycles, and it plans to achieve large-scale mass production in the fourth quarter. The first model equipped with it, the Changan Qiyuan A06, achieves a range of more than 400 kilometers with a 45-degree battery pack, directly entering the mainstream price band of 100,000 to 130,000 yuan. Meanwhile, energy storage systems are moving from "selling cells" to "selling systems." The company's 314Ah cells have iterated to 587Ah large cells, and the share of AC-side shipments is rising rapidly. In the battery swap ecosystem, more than 2,500 Chocolate battery swap stations have been built cumulatively, with more than 3,000 expected for the full year. Overseas is the "ballast stone" of profit. The German 14GWh plant has been put into production, the first phase of 39GWh of the Hungarian Debrecen plant (planned total capacity of 100GWh) started trial production on September 22, and the Spanish 50GWh plant is progressing steadily. Supporting all of this is Contemporary Amperex Technology's continued high-intensity R&D and capacity investment. In the first three quarters, the company's R&D expenses were 18.517 billion yuan, up 22.89% year on year. As of the end of the first half, about 1,050GWh of capacity had been built, 764GWh was under construction, and total planned capacity exceeded 1.8TWh. However, the depreciation brought by capacity ramp-up, the upfront costs of overseas projects, and the cost dilution in the early stage of commercialization of new technologies all mean that the second curve, before it takes over, still has to go through a ramp-up period of "investment first, returns later." Falling into a "golden pit," valuing shareholder returns offers a high probability of reward In the capital market, since the second half of this year, Contemporary Amperex Technology's market value has fallen sharply due to lithium carbonate prices, but based on performance resilience and the three major growth points, the company has valuation appeal. As of now, the company's PE (TTM) is 15.7x, while the lithium battery sector is at 18.76x. It should be noted, however, that the lithium battery sector, especially upstream companies, is highly sensitive to lithium carbonate prices. As lithium carbonate prices continue to fall, fourth-quarter profits are expected to decline further, and the sector's dynamic PE is far higher than CATL's. Of course, CATL's market value will still be suppressed by the sector and needs to be repaired by information such as performance growth and dividends and buybacks. The company values shareholder returns. In terms of buybacks, an A-share cancellation-style buyback plan of 20 billion to 40 billion yuan is underway. As of September 30, 3.303 billion yuan had been executed, and cumulative buybacks since September have exceeded 3.7 billion yuan. In terms of dividends, it has implemented a high dividend payout ratio every year, and the current dividend yield is 2.8%. As of the end of the third quarter, the company's monetary funds and trading financial assets totaled more than 430 billion yuan, indicating ample cash reserves. From the perspective of investment banks, there is some divergence, but the proportion that are bullish is relatively high. CICC maintains an "Outperform Industry" rating, with an H-share target price of HK$580 to HK$650; CLSA is optimistic about its long-term development path, believes it can overcome short-term challenges and maintain its dominant position, and maintains a "High Conviction Outperform" rating on Contemporary Amperex Technology with a target price of HK$770. The target prices given by the above two investment banks are 92.1% and 127.5% higher than the current price, respectively. Overall, Contemporary Amperex Technology achieved double growth in both revenue and profit for three quarters. The two-wheel drive + industrial chain layout + industry giant status make its performance more resilient, and the three major product lines as growth highlights drive performance growth expectations. However, the decline in lithium carbonate prices has affected the entire lithium battery sector, causing the company's valuation to continue to retreat, and it has fallen into a "golden pit." Under performance growth expectations, undervaluation + buybacks + dividends, combined with most investment banks being bullish, give Contemporary Amperex Technology a relatively high probability of reward.