The potential of CATL's sodium-ion batteries has been severely underestimated by the market.

Morgan Stanley believes that the strategic value of CATL’s sodium-ion battery is being systematically underestimated by the market. According to Chase Wind Trading Desk, on May 6, the Jack Lu team at Morgan Stanley released a research report, pointing out that **investors’ objections to sodium-ion batteries are centered on their limited short-term contribution**. The report emphasizes that this logic framework is flawed, **ignoring the speed at which sodium-ion battery commercialization can open up incremental markets, as well as its key role in energy security strategies**. Morgan Stanley expects CATL's earnings per share from 2026 to 2028 to grow from 20.53 RMB to 34.15 RMB, with revenue increasing from 584 billion RMB to 899.2 billion RMB in the same period, and EV/EBITDA valuation decreasing from the current 14.1x to 7.8x, making the valuation attractive. It should be noted that Morgan Stanley has an investment banking relationship with CATL, having managed or co-managed public offerings for CATL in the past 12 months and received investment banking compensation. Sodium-ion batteries create incremental demand, not replace existing products Morgan Stanley emphasizes that the core value of CATL’s Naxtra sodium-ion battery products is to explore new demand, rather than cannibalize the market share of its own lithium iron phosphate (LFP) batteries. **In the entry-level passenger vehicle market, CATL's current penetration is limited. This segment is mainly dominated by non-CATL LFP manufacturers and internal combustion vehicles, so Naxtra’s entry will directly bring net new market share**. In the light truck sector, electrification penetration was only about 10% last year and is still at an early stage. Naxtra’s excellent low-temperature reliability directly addresses a key bottleneck in this market, and together with the continued improvement of electric truck economics, it is expected to accelerate electrification. Morgan Stanley also references the history of China's ride-sharing market, which rapidly climbed from 10% penetration to 90%-100% in about three years, with the core driver being an attractive payback period. The bank believes that these multiple scenarios collectively support the "convexity" characteristic of sodium-ion batteries’ scaling—**once commercialization accelerates, the release speed of incremental demand may exceed linear expectations**. Energy security role remains underestimated by the market Morgan Stanley points out that another key logic supporting accelerated adoption of sodium-ion batteries comes from China's energy and mineral security strategy considerations, but this dimension still has not been sufficiently priced in by the market. New energy vehicles and energy storage are at the core of China's industrial transformation and energy shift agenda, and avoiding the “stranglehold” risk with key material supply chains is of vital strategic importance. Morgan Stanley notes in the report that recent geopolitical changes in Venezuela and Iran further underscore the urgency of diversifying China’s supply chains. **Sodium-ion batteries offer a viable “de-risking” path, helping to enhance supply chain resilience**. Based on the above strategic logic, Morgan Stanley expects the Chinese government will launch supportive policies to accelerate the construction of sodium-ion supply chains, similar to the rapid ecosystem formation of lithium batteries propelled by EV subsidies around seven years ago. **It is noteworthy that the bank believes policy does not need to expand the overall subsidy pool, but may reallocate existing subsidies toward sodium-ion applications to serve strategic priority goals**. ~~~~~~~~~~~~~~~~~~~~~~~~ The above wonderful content comes from [Chase Wind Trading Desk](https://mp.weixin.qq.com/s/uua05g5qk-N2J7h91pyqxQ). For more detailed interpretation, including real-time commentary and frontline research, please join [Chase Wind Trading Desk ▪ Annual Membership](https://wallstreetcn.com/shop/item/1000309).  Risk Warning and Disclaimer The market has risks and investment requires caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are appropriate for their particular situation. Invest accordingly at your own risk.