(Yicai Global) June 8 -- Shares of Contemporary Amperex Technology stopped sliding after Chinese brokerages released upbeat outlooks on the battery giant that is rumored to be at risk of losing its largest client Tesla amid tightening competition that prompted Morgan Stanley to lower its target price for the stock.

CATL [SHE:300750] closed 0.3 percent up at CNY208.01 (USD29.20) after slumping for three straight days by around 9 percent in total. 

Analysts at Chinese firms, including Tianfeng Securities, Changjiang Securities, and Haitong International Securities, predict the supplier will report good business performance this year whereas New York-based Morgan Stanley recently downgraded its forecast due to an expected narrowing market share of new energy vehicle batteries.

CATL will increase its annual net profit by 50 percent to CNY46 billion (USD6.4 billion) from last year, TF Securities wrote in a recent research note. Next year, the firm's net profit is set to increase by 35 percent to CNY62 billion, and in 2025, it will rise by 26 percent to CNY78 billion, it added. 

The gap between CATL and other manufacturers is expanding and the entry barriers cannot be ignored, so TF Securities holds onto its evaluation of CATL stock as a 'buy', it said.

Morgan Stanley wrote a note to investors on June 6 to downgrade its outlook for the Chinese firm to suggest a target price of CNY180 (USD25) for the stock on concerns that CATL could lose market share as well as some of its margins.

Market observers have been excessively pessimistic about the recent issue of CATL and Tesla, according to Changjiang Securities. Investors have been concerned that CATL may lose its largest client Tesla in the United States as the Chinese company has no factories in the States whereas the 2022 Inflation Reduction Act requires local production of car parts in order to qualify for federal tax credit, a discrepancy that could increase the prices. 

It is not very likely that investors' concerns will come true, Jack Shang, metals and mining analyst at Citi Research, wrote in a report. Despite investors' worries about potential changes in the composition of Tesla's battery suppliers, car dealers in the US confirmed no change has happened to the configuration of the battery of Model 3.

"The US NEV industry chain has an objective demand for China manufacturing sector," Changjiang Securities said. In the last two years, CATL exported parts for US carmakers such as Tesla, Ford Motor, and Fisker Automotive, and it has agreed with Ford on technical cooperation in 2025 or 2026 so pessimism on CATL's US exports is unnecessary, and "we continue to be optimistic on that."

There is broad room for the global NEV penetration ratio to widen, and CATL will continue to outperform on cost control and technical advantages, Haitong Securities said, adding that the manufacturer could be a long-term industry leader in delivery growth, distributing global capacity and increasing its energy storage business strongly.

Editor: Emmi Laine