CBAK Energy Technology Inc (CBAT) 2024 Q4 法說會逐字稿

Good day, ladies and gentlemen. Thank you for standing by and welcome to CBAK Energy technologies, fourth quarter and full-year 2024 earnings conference call. Currently, all participants are in a listen-only mode. Later, we'll conduct the question and answer session and instructions will follow at a time.

As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time. Now, turn the call over to [Yi Xian Tian], IR Specialist of CBAK Energy. Ms. Tian, please proceed.

Thank you, operator, and hello, everyone. Welcome to CBAK Energy earning conference call for the fourth quarter and full-year 2024. In joining us today, Mr. Zhiguang Hu or Jason, Chief Executive Officer of CBAK Energy; Mr. Jiewei Li, Chief Financial Officer and Company Secretary. Our General Engineer, Mr. Xiujun Tian; and [Yven], who will help with our integration, will join us for the Q&A section.

We released our result earlier today. The press release is available on the company's IR website at ir.cbak.com.cn, as well as from the news world services. A reply of this call will also be available in a few hours on our website.

Before we continue, please note that today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the US Private Security Litigation Reform Act of 1995. Forward-looking statements involve in human risks and uncertainties. As such, the company's actual results may be materially different from the expectation expressed today.

Further information regarding this and other risks and uncertainties is included in the company's public filings with the SEC. The company does not assume any obligations to update any forward-looking statements, except as it required under the applicable laws. Also, please note that unless otherwise stated, all figures mentioned during the conference call are in US dollars.

With that, let me now turn the call over to our CEO, Mr. Zhi Guanghu. Please go ahead, Jason.

Hello, everyone, thank you for joining our earning conference call for the first quarter and a full year of 2024. I'm pleased to present the performance of our battery business for the fourth quarter and the full year of 2024. Net revenues for the battery segment increased modestly by 2.7% reaching $136.59 million for the year. Despite the moderate growth in revenue, our growth profited for the battery segment surged by 37.58% rising from $31.58 million to $43.05 million.

The gross profit margin of the battery segment expanded significantly to 31.5 percentage, compared to 23.75% in 2023, marking an impressive increase of 7.7 percentage points year over year. We reported a net income of our battery segment of $19.43 million for the year 2024 compared to $13.97 million in 2023. Marking an impressive increase of 39.08% as we have consistent emphasized over the past few quarters. This is exceptionally outstanding group’s profit and net income figures are particularly noteworthy. Given the prevailing challenge and downturn in the broader new energy sector.

Well, many of our competitors, including prominent Chinese battery manufacturers are experiencing declining profit. Our performance stands in stark contrast. As communicated in previous price release, demand for battery, especially the model 32140 large [cyrindical] cell remain exceptionally strong. Our current production capacity in Nanjing is fully booked, which means net revenue are likely to remain steady, unless additional capacity become available.

To address this demand, we are in the process of commissioning two new production lines for the model 32140 in Nanjing expected to be operational by the end of 2025. So expansion will add 3 gigawatt hours of production capacity.

Additionally, we are upgrading our Dalian facilities, we currently manufacture the older model [2650] since 2006. A new product line will be introduced to produce the larger model 40135 in battery. Adding another 2.3 gigawatt hours of capacity. This upgrade is also [and] headed to be completed by the end of 2025. With this expansion and upgrades, we are confident in our ability to achieve substantial revenue growth starting in 2026.

I would also like to provide our investor and shareholder with an overview of our current and future product portfolio. We have two primary product line manufactured at our Dalian and Nanjing facilities. The model 26650 along with is -- (inaudible) model 26700 and the model 32140. Both the model 26650, 26700, and the model 32140 are the phosphate cylindrical cells. The model 26650, 26700 series developed in 2006 as the world's first develop for sales continue to hold a significant position in the market. Well, this model may be considered outdated in certain aspects.

They remain popular in specific segments, particularly in the home energy storage and portable power supply market across Europe and the United States. We anticipate a gradual decline in sales for this model. However, they are expected to contribute to a portion of our net revenues.

Additionally, we foresee a shift among major customers from this legacy model to larger sale format, such as the model 32140 and the oncoming model 40135, the models 32140, our flagship product manufactured and our Nanjing facilities. Is widely utilized in the portable power supply sector and is rapidly gaining traction in the LEV sector, particularly for two and three wheeler vehicles.

According to the market research, our 32140 sales per month 19% of global market share with demand for outpacing our current production capacity. As previously mentioned, we are preparing to launch a new lay cell, the model 40135. The model is designed to serve the portable power supply and home energy storage sectors. We expected a number of our existing customers for the model 26650 to transition to this new model.

Once more 40135 enters mass production by the end of this year, we NDC paid a substantial increase in net revenue for our Dalian facilities. Looking ahead, our production portfolio will consist of small cylindrical cells, model 26650, 26700 from Dalian. And the large syndical cells model 40135 from Dalian and the model 32140 from '19, enabling us to meet the diverse needs of our customers effectively.

As always, we will also provide an update on our announced decline as of March 10, 2025. The total value of orders received but not yet delivered at our major production base in Dalian and Nanjing has reached RMB126.96 million, approximately $17.54 million. Our accumulated order volume with power o now stands at approximately RMB87.05 million, about $12.03 million.

Well, our total orders with the with my group has reached EUR23 million, approximately $231.2 million. Additionally, our order value with Jingang Group has grown to RMB75.55 million, about $10.44 million.

Notably, our key clients anchor has placed an order totaling RMB148 million, approximately $61.82 million. Since the beginning of our collaboration, we believe that the demand from some of these customers in 2025 will likely increase significantly.

I would also like to provide a summary of our current production capacity and the planned intention to offer our investor and shareholder a clearer perspective at present our dining facility have an annual rural capacity of 2 gigawatt hours for the model 2650 and the 26700. Well our landing facility have a capacity of 1.3 gigawatt hours for the model 32140.

As previously reported, we are in the process of expanding our capacity by adding 2.3 gigawatt hours for the model 40135 at our Daian facility and the 3 gigawatt hours for the model 32140 at our Nanjing facilities. By the end of 2025, our total production capacity for cylindrical cells is expected to reach 7.6 gigawatt hour. However, it is important to know that it will take time for the newly added production lines to ramp up to full capacity.

This means that we may not achieve the full unemployment. This year. Nonetheless, the design of this is bounded capacity underscores the substantial potential for growth and the scalability, offering our investor a promising outlook for the future.

Overall, we have successfully sustained strong momentum in our battery business by maintaining a higher growth, gross profit margin, and outperforming most of our competitors in the term. In terms of net profitability, we are confident that the battery segment will remain profitable in 2025.

In addition, we are actively upgrading our product portfolio. And expanding production capacity to address the surging demands with new capacity coming online. We anticipate other phase of significant growth in 2026. Now, let me turn the call to our CFO, Jiewei Li.

Thank you, Jason, and thanks everyone for making time to join our earnings conference call today. As Jason has presented the net revenues growth and gross profit figures for our battery segment, I will now provide an overview of our consolidated financial results, which include the performance of hydrants, our raw materials production unit.

In the interest of time, I will focus only on the key metrics rather than discussing the figures in detail. For a comprehensive breakdown of our financial performance, we encourage you to refer to our press release issued earlier today. For the full year, our consolidating net revenues declined by 13.61%, falling to $176.61 million from $204.44 million in 2023.

Despite this decrease, consolidated gross profit rose significantly by 31.68%, reaching $41.75 million compared to $31.72 million in the previous year. The gross profit margin improved substantially to 23.7%, an increase of 8.18 percentage points from 15.52% in 2023.

We achieved a net income attributable to shareholders of CBAK Energy of $11.79 million for 2024. A remarkable turnaround from the net loss of $2.45 million reported in 2023. This performance demonstrates our ability to generate higher gross profits and achieve positive net income despite lower net revenues.

The decline in consolidated net revenues and the lower consolidated net income, especially when compared to the significantly higher net income of our battery segment can be primarily attributed to the performance of our raw materials production unit high chances.

The raw materials industry, particularly for those related to lithium ion batteries, has faced a declining prices over the past few years, which have since stabilized at relatively low levels. Additionally, the industrial-wide capacity expansion that began in 2021 has led to an oversupply. Intensifying com competition and creating operational challenges for Hitrans.

On a positive note, since acquiring Hitrans in 2021, we have chosen not to integrate its products into our battery segments supply chain. We also retain Hitrans' core investment team to ensure its independence. Moreover, we have fully met our financial obligations to Hitrans, meaning its financial performance doesn't directly impact our battery segments results.

This strategic separation is why we have focused exclusively on reporting the financial performance of our battery segment during our earnings conference calls. This approach provides our investors and shareholders with a clear and more accurate understanding of our company's core performance.

Next, I'd like to provide an update on our overseas capacity deployment plan. In response to current geopolitical risks and at the request of our major customers, we are actively exploring solutions to mitigate existing and potentially higher tariffs.

In recent months, we have conducted extensive visits to Southeast Asia to evaluate potential sites for establishing our overseas factory, which we plan to proceed with in the coming months. We're still assessing whether to relocate part of our existing equipment and production lines or to invest in new equipment as part of an expansion strategy. Our goal is to begin supplying sales from the overseas facility to our major customers by 2026.

Encouragingly, these customers have already expressed a strong interest in placing substantial orders accompanied by a higher percentage of pre-payments. We are currently in the process of finalizing terms with them. Further information will be disclosed once formal agreements are reached.

In summary, the underwhelming financial performance of Hitrans. It has impact our consolidated results, making them less favorable compared to those of our battery segment. However, we successfully achieved higher growth profits and a positive net income despite lower net revenues.

Additionally, we are actively pursuing the establishment of overseas production capacity to meet the demands of our major customers who have expressed interest in placing substantial orders under favorable terms. We remain optimistic and look forward to sharing more positive developments in coming months.

Thank you. We will now open the floor for the Q&A section. Operator, please go ahead.

(Operator Instructions) Brian Lantier, Zack’s.

Good evening. Thank you for all that color. It's really interesting to see the progress and have a vision for where the company will be 24 months from now. So I appreciate that. I guess as you're getting ready to expand the product lines, what are you seeing as you're speaking to equipment suppliers in the market?

Are you getting any better pricing on some of the equipment that could be coming in? And do you think that could ultimately lead to, maybe faster implementation of some of these production lines given some of the challenges that exist in the battery market today?

Thank you, Brian, I will translate your question to our team. Brian (spoken in Chinese) Sorry, I mute myself. Sorry, Brian, let me directly respond to your question in English. I would say as for our expansion plan in Nanjing domestically. For the terms and the pricing we get from the suppliers, it's almost the same as that for our competitors. But certainly, we get much more favorable terms with respect to the payment connection and the payment schedule.

They allow us to delay a great portion of the payments much later than our competitors can get. And we have already completed the first pre-payments and certain equipment has already been sent to our Nanjing. As I just discussed in our prepared remarks, we are still assessing if we are going to relocate part of this equipment to our overseas factory. Or we're just going to simply invest in new equipment. That has not yet been determined. I think that I already answered your question.

Okay, great, thank you. You have customers around the globe. Are you hearing anything from them regarding concerns about the global economy?

We do not hear -- please. [Yven], please.

(spoken in Chinese)

We do not hear any specific concerns about the global economy from our customers. But we do feel the concerns on the potential and current existing geopolitical risk. Actually, as we just disclosed, we are actually being pushed by our major customers to set up an overseas factory in order to avoid the existing tariffs.

And we also hear the concerns from our major customers about their decline of sales in their applications caused by the kind of economy. But in general, we are still very positive about the future of the new energy industry as especially in Europe and in the United States, a huge potential to replace existing units. I think the concern is more placed on the tariffs and geopolitical risks.

Okay, great. And lastly, on Hitrans. Obviously it's a difficult market right now, are you still exploring any, possible divestiture of that business?

(spoken in Chinese)

As we have already expressed, Hitrans industry, the industry Hitrans was in is now experience is experiencing a downturn. So we would not extend any new investments in Hitrans (technical difficulty) --

Okay. Right, thank you. I'll let someone else go.

(Operator Instructions)

Sorry, I just dropped the line.

Thank you, Mr. Thierry Lee. We are still waiting for questions. (Operator Instructions) I see no more questions in the queue. Let me turn the call back to Jason for closing remarks.

Thank you, operator, and thank you all for participating in today's call and for your support. We appreciate your interest and look forward to reporting to you again that quarter on our program.

Thank you all again. This concludes the call. You may now disconnect.