By Yi Wei Wong


Contemporary Amperex Technology Co. shares are on pace for their biggest one-day fall since listing in 2018 after first-quarter profit sharply missed estimates.

Shares of China's largest electric-vehicle battery maker fell as much as 14% early Thursday to 353.00 yuan ($53.42) in their first day of trading since the company reported a 24% on-year drop in net profit. CATL attributed the decline in profit to higher operating costs, thanks to the rise in prices of raw materials.

Analysts from UOB Kay Hian, Nomura and Citi said the results fell short of expectations.

UOB Kay Hian cut its target price for CATL shares to CNY670.00 from CNY740.00, but kept its buy rating, partly due to expectations the company will be able to adapt to higher costs. "Going forward, CATL's gross margin will probably recover, with lithium compound prices stabilizing and the higher-priced new contracts kicking in from the second quarter," UOB Kay Hian analyst Ken Lee said in a note.

Analysts from Japanese investment bank Nomura wrote in a note that the earnings decline was "worse than the market expectation" and cut their 2022 profit estimates by 2.0% to factor in the impact of higher raw-material prices.

Nomura cut its target price to CNY536.00 from CNY722.00, but also kept its buy call, citing the rising adoption rate for electric vehicles in China and expectations that battery shipments should pick up in the second half of the year. The bank cited data from the China Automotive Battery Innovation Alliance showing that the number of batteries installed in electric vehicles more than doubled in the first quarter.

Nomura analysts said they expected CATL to gradually offset the pressure on its gross margins by raising prices, and forecast battery sales volumes to gradually rise in the second half.

Analysts from Citi also cut their target price to CNY653.00 from CNY759.00, while maintaining a buy call, as they expect profit margins to gradually improve for the rest of the year. However, they expect the first-quarter result miss to gradually lead to consensus earnings downgrades.


Write to Yi Wei Wong at yiwei.wong@wsj.com


(END) Dow Jones Newswires

05-04-22 2330ET