CATL's third quarter sees continued profit growth but stagnant revenue.

On the evening of the 20th, CATL, a leading company in the power battery industry, released its third-quarter financial report for the year. The report shows that in the third quarter of this year, CATL's operating income decreased by over 7% year-on-year to 105.4 billion yuan, but the net profit attributable to the parent company increased by nearly 11% to 10.4 billion yuan, earning over 1.1 billion yuan per day. In terms of non-operating profit, CATL's third-quarter profit increased by 4.9% year-on-year to 10.4 billion yuan.

This profit-increasing but revenue-decreasing business situation has been the keynote for CATL since the beginning of this year. In the first three quarters, CATL's operating revenue was . billion yuan, down % year-on-year; while net profit increased by .% to . billion yuan.

According to data released by a South Korean research institution, CATL's global power battery installations did not decline in the first few months of this year, but instead showed a continuous growth trend, with a year-on-year increase of .% to ..

The decline in Contemporary Amperex Technology's (CATL) revenue this year is primarily due to the impact of the industry price war. Against the backdrop of a significant drop in the price of raw material lithium carbonate and a slowdown in global demand for new energy vehicles, the price war in the power battery industry has persisted. Public data shows that the average prices of domestic lithium iron phosphate cells (power type) and ternary cells (power type) have recently dropped to approximately . yuan/ and . yuan/, respectively, with a decline of over % compared to the beginning of the year.

In addition to the ongoing price war affecting revenue, CATL also experienced significant asset impairment in the third quarter of this year. On the night of the earnings report release, CATL also issued an announcement titled "Announcement on Provisioning for Impairment for the First Three Quarters of the Year." The announcement showed that CATL had made a total provision for credit and asset impairment of . billion yuan for the first three quarters of the year. This included . billion yuan for bad debt provisions on receivables; . billion yuan for inventory devaluation provisions; over billion yuan for fixed asset impairment provisions; and over billion yuan for intangible asset impairment provisions.

Compared to the financial report for the first half of this year, CATL's third quarter had two provisions for impairment that were rather unusual: one was the increase in impairment loss on fixed assets by . billion yuan, and the other was the increase in impairment provision on intangible assets by over billion yuan. CATL's impairment loss on assets also saw a significant year-on-year increase in 2022, rising from . billion yuan in 2021 to . billion yuan. Clearly, CATL's impairment loss on assets for the first three quarters of this year has already surpassed the total for the entire year of 2022.

The asset impairment provision exceeding RMB 1 billion for the first three quarters of this year at CATL is expected to reduce its net profit attributable to the parent company for the first three quarters of the year by RMB . billion, and will also correspondingly reduce the owner's equity attributable to shareholders of the listed company for the same period by RMB . billion. In this regard, CATL did not provide a specific explanation in its financial report, only stating that the significant increase in asset impairment losses was mainly due to the impairment provision for intangible assets and fixed assets where the recoverable amount was lower than the book value, as well as the provision for inventory write-down where the cost of inventory was higher than its net realizable value.

However, it is worth noting that shortly before the announcement of this large impairment loss, on the day of the month, a fire broke out at CATL's base in the Dongqiao Economic and Technological Development Zone of Ningde City, covering an area of approximately 10,000 square meters.

However, neither the price war nor the significant provision for asset impairment affected CATL's profitability. According to the financial report, the enhancement of CATL's profitability is mainly due to better control over operating costs. In the first three quarters of this year, CATL's operating costs decreased by .%, higher than the decline in operating income of .%.

In addition, in terms of research and development, it is evident that CATL has become more cautious with its investments this year. In the first three quarters of this year, CATL's R&D expenses amounted to . billion yuan, a decrease of % year-on-year, which is roughly in line with the decline in its revenue.