This article first appeared on GuruFocus.
CATL just lit a match under the entire battery complex. The stock ripped higher after Contemporary Amperex Technology Co. inked a blockbuster 200-gigawatt-hour energy-storage order with Beijing Hyperstrong Technology, a move that could be signalling how tight high-end supply has become worldwide. CATL jumped 7.6% in Shenzhen to a new closing high and added 3.2% in Hong Kong, while Hyperstrong locked in a 20% surge in Shanghai. Morgan Stanley’s team suggested the scale of the deal could be tied to strengthening global energy-storage demand, and under these conditions CATL might be positioned for some form of price or margin premium. Even after a 56% rally this year, shares trade at about 22 times forward earnings a far cry from the above-80 multiple seen during the late-2021 peak.
What grabbed investors even more was the order’s duration. Spread over three years, Morgan Stanley estimated the volume could be equivalent to half of CATL’s projected 2025 energy-storage-system sales. In a market where supply may be tightening, they said peers such as Tesla (NASDAQ:TSLA) and Sungrow Power Supply could be tempted to secure similar long-term arrangements, potentially lifting battery-materials demand across the chain. Analysts pointed out that the deal reinforces CATL’s standing in the value chain at a moment when the broader storage market could be shifting into a more aggressive phase of growth.
The wave didn’t stop at CATL. Battery-materials names ripped higher as Shenzhen Capchem Technology climbed 17%, Shenzhen Senior Technology Material added 15%, and Eve Energy advanced 9.2%. Lithium giants joined the surge, with Ganfeng Lithium up 12% in Hong Kong and Tianqi Lithium rising nearly 10%. For investors watching the energy-storage cycle, Hyperstrong’s order could be hinting at a supply-demand balance that is tightening faster than expected an environment that may introduce more volatility, and possibly more upside, as companies compete to lock in capacity.