JP Morgan: Downgrades Contemporary Amperex Technology (03750) to "Neutral"; Automakers' Profitability Already Under Pressure

JPMorgan released a research report downgrading Contemporary Amperex Technology's (03750, 300705.SZ) H-shares to "Neutral," maintaining an "Overweight" rating on its A-shares, and cutting Contemporary Amperex Technology's earnings forecasts while keeping Contemporary Amperex Technology's A-shares as the only "Overweight"-rated stock among the battery stocks covered by the bank. Contemporary Amperex Technology is set to announce its third-quarter results after market close today (the 20th), and the stock fell today, hitting an intraday low not seen in more than a year since late August last year. JPMorgan said it is increasingly concerned that industry profitability is deteriorating faster than expected, with profits across the electric vehicle supply chain undergoing a broader redistribution. Battery consumption tax, cuts to export tax rebate rates, and rising trade barriers have followed one after another, and automakers' profitability is already under pressure. The bank noted that Contemporary Amperex Technology may be hit first but could ultimately emerge as a bigger winner, because whether it passes on cost pressures or absorbs part of the burden itself, the end result may be stronger customer stickiness and so on. The bank said Contemporary Amperex Technology's H-shares trade at a premium to its onshore A-shares, which likely reflects onshore investors' more cautious stance on policy uncertainty, while global funds appear to have bet on strong long-term potential growth.