CALB, China’s Third-Largest Battery Maker, Playing Catch-Up; Initiate With HKD 20 FVE; Fairly Valued

We initiate coverage on CALB, with a no-moat rating and a fair value estimate of HKD 20 per share. As the third-largest lithium-ion battery producer in China, we believe CALB will benefit from the vehicle electrification trend. However, we think the company will face increasing pricing pressure to acquire new automobile customers, which leads to low profitability in the next few years. Our fair value implies a forward price/earnings ratio of 11 times. At the current share price, we prefer a larger risk buffer before buying.