Since December 3, 2021, when CATL's stock price touched a high of 692 yuan per share, it began a sharp decline. As of now, CATL's stock price has been hovering around 530 yuan, with a significant pullback.

Like last year's Moutai stock price, CATL has also shifted from being a market darling to being doubted by everyone.

In fact, CATL's report card is still eye-catching. Data shows that its global market share in 2021 was 32.6%, an increase of eight percentage points from the previous year, with an installed capacity of 96.7 gigawatt-hours (GWh), ranking first for five consecutive years. However, the stock market is a market of expectations. Does CATL still have investment value?

01 Overvaluation is the main reason for CATL's stock price pullback

Benefiting from the favorable "dual carbon" policy, photovoltaic and new energy sectors performed well in 2021, with the photovoltaic index and new energy index rising by 57.8% and 59.1% respectively.

Among them, the sales volume of new energy vehicles far exceeded market expectations, and the income and profits of related companies soared, with the sector's price-to-earnings ratio also breaking through upward. According to CITIC Securities' estimate on February 14, CATL's PE ratio in 2021 was 73 times.

Advertisement

The market always overvalues and undervalues. In 2021, no matter how high the valuation given to new energy, the market did not feel it was expensive. But once the market calms down, it will re-evaluate the risks.

Overvaluation (price-to-earnings ratio) has two risks: on the one hand, the company's growth must be able to digest the valuation; on the other hand, the company's net profit growth rate must exceed 20% to quickly eliminate high valuation.

However, can the new energy sector maintain a high-speed growth of 20%?

Against the backdrop of the market's risk reflection, CATL's stock price trend in 2022 showed a sharp decline, similar to Moutai's market environment at that time, that is, due to a series of benefits and being sought after by the market, the stock price was overvalued, but the logic of the rise was challenged, and external news triggered a decline.For the correction trend of the new energy sector represented by CATL, the excessively high stock prices in the early stage is a very important reason.

02 How will CATL's future trend be?

After this round of bottoming and rebounding, many securities firms still look good on CATL's future trend. The report from CITIC Securities stated that since its listing, the average historical PE of CATL has been 59 times. According to the current market value, CATL's PE for 2022 and 2023 are 41 times and 29 times, respectively, which are in the bottom range of historical valuations.

In addition, the new energy sector also has a strong political backing: as early as the United Nations General Assembly in September 2020, China proposed a long-term strategic goal of striving to reach the peak of carbon emissions before 2030 and striving to achieve carbon neutrality before 2060. After the goals of carbon neutrality and carbon peak were clarified, domestic related policies have continued to intensify in recent years.

With such a policy background, it is a high probability event for the new energy sector to develop rapidly for another 3-5 years. Even if the valuation level of the sector is high, it is ultimately cost-effective under the hedge of high growth.

We must also understand that in the long run, the penetration rate of new energy vehicles is still at a relatively low level, and in terms of policy, both European and American countries and the Chinese government firmly support it. There is no doubt about the long-term growth of the new energy sector in the market.

Of course, after entering 2022, the market will pay more attention to the implementation of the performance of new energy companies, and will no longer be "hearing the wind is rain". The leaders of high-growth sub-tracks will receive more attention, and CATL is naturally one of the best.

In conclusion:

The risk of investing in individual stocks is very high. For ordinary investors, on the one hand, CATL is too expensive, and both increasing and decreasing positions require a large amount of capital support; on the other hand, the development of CATL also faces hidden worries, facing challenges from competitors at home and abroad, and there is uncertainty in growth.

Personally, I am more inclined to invest in the new energy sector index. Although the increase may not be astonishing, it is more fragrant to steadily earn profits, isn't it?