Shares of Chinese supplier Tesla are falling. Why do analysts advise buying them?
Shares of Contemporary Amperex Technology (CATL), one of the key suppliers of batteries for Tesla, were down nearly 5.4% on the Shenzhen exchange in trading on Nov. 17.
The sell-off was caused by the news that the third largest shareholder of the company, Huang Shilin, decided to reduce his stake by selling 1% of his securities to institutional investors, Bloomberg writes. This intensified traders' concerns amid pressure from U.S. lawmakers: Republicans in the U.S. House of Representatives are urging the Commerce Department to tighten control over imports of solar and grid components manufactured in China. In an appeal to U.S. Commerce Secretary Howard Lutnick, lawmakers for the first time named battery inverters as a risk factor for power grid security, Morgan Stanley analysts said. According to them, this may weaken interest in shares of companies working with energy storage systems.
CATL shares in Hong Kong, traded since Ma, fell by 4.8%. Investors are waiting for the end of the lockup period - the ban on selling 77.5 million securities by early investors will expire on November 19, the agency notes.
What the analysts are saying
Despite the fact that CATL Shenzhen shares have risen 56% since the beginning of the year, analysts advise investors not to rush to lock in profits. Chinese investment firm Changjiang Securities, on the contrary, recommended taking advantage of the drawdown: in its opinion, Huang's sale of shares will have only a limited impact on quotations because it will not take place on the open market.
"Against the backdrop of strong fundamentals, this drawdown could be a buying opportunity given that lithium demand is expected to grow by 30% in 2026," Changjiang Securities said in a note.
JPMorgan Chase on November 14 recommended investors to buy CATL shares traded in Shenzhen and sell the company's securities placed in Hong Kong, Bloomberg reported. The recommendation is related to the end of the ban on the sale of the company's securities by key investors. According to JPMorgan estimates, the end of the lockup could lead to a decrease in the premium of Hong Kong shares relative to Shenzhen shares and bring to the market about 50% of all outstanding these securities. At the same time, JPMorgan Chase advises to buy CATL securities in Shenzhen because investors have increased confidence in the prospects of demand in the battery sector, especially in the segment of energy storage systems, Bloomberg writes.
Now CATL shares in Hong Kong are trading about 20% more expensive than in Shenzhen, even taking into account the exchange rate difference, Bloomberg data show. This is a rare situation, as usually the situation is the opposite, the agency notes.
This article was AI-translated and verified by a human editor
