CATL (300750.SZ): Earnings Review: 3Q26 margin miss on largely temporary mix and tax headwinds; maintain Buy (on CL)

CATL reported 3Q26 results after market close on October 20. Revenue hit a quarterly record and beat expectations, with shipments broadly in line, but net profit grew only modestly yoy, fell qoq and missed GSe by double digits. The miss was driven by an unfavorable product mix (higher domestic ESS sales and lower system integration) and consumption tax, alongside lower export tax rebates; unit net profit weakened qoq. Inventory impairment rose sharply on lithium carbonate price volatility, which management expects may reverse, while operating cash flow fell on proactive prepayments and shorter payment terms for upstream suppliers and capex accelerated, turning free cash flow temporarily negative though net cash remained strong. Management views most pressures as temporary and expects unit margins to stay healthy over the long term, reiterating a 20-30% global battery volume CAGR over the next five years, a rising share of AC-side ESS solutions, and progress in battery swapping and over