Contemporary Amperex Technology Co. Ltd.

The stable outlook on CATL reflects our view that the company will maintain its competitive market position, higher than peers' profitability, and very low leverage as electrification accelerates over the next 12-24 months. We would lower the rating on CATL if: The company's debt-to-EBITDA ratio weakens to above 1.5x for a sustained period, possibly as a result of significantly more aggressive capacity expansion than expected, or much weaker operating cash flow generation from lower-than-expected NEV demand; or The company's market share substantially declines leading to its EBITDA margin falling and staying below 15%, potentially due to loosening of technology grip or intensifying market competition in China. We believe an upgrade is less likely in the next 12-24 months, given the

...Contemporary Amperex Technology Co. Ltd. (CATL) will maintain its leading global market position and strong R&D capabilities. The company was the world's largest lithium-ion motive battery supplier by shipment volume over 2017-2019, and ranked second with 23.5% market share in the first half of 2020, according to SNE Research. In China, CATL maintained its leadership with 48% market share in the first seven months of 2020, even as global peers entered the domestic market after the sector opened to foreign battery suppliers in 2019. CATL's technology edge underpins its solid market position. Despite largely comparable battery performance and quality with global peers', CATL is one of the pioneers of commercial high nickel batteries and launch cell-to-pack (CTP) technology. This technology largely enhances energy densities of batteries and lowers production costs. We believe CATL's continual product innovation with extensive research and development (R&D) investment will help it sustain its...

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