Rooted in its Origins:

CBAK Energy's journey began in 1999 when it was incorporated as Medina Copy, Inc. in the state of Nevada. The company quickly changed its name to Medina Coffee, Inc. on October 6, 1999. In 2005, the company underwent another name change to China BAK Battery, Inc. and embarked on a strategic path to become a prominent player in the Chinese battery market. This transformation was preceded by a significant event in November 2004, when BAK International, a non-operating holding company with substantially the same shareholders as Shenzhen BAK Battery Co., Ltd., entered into a share swap transaction with the shareholders of Shenzhen BAK for the purpose of a reverse acquisition of CBAK. This transaction was accounted for as a reverse acquisition of Shenzhen BAK, with no adjustment to the historical basis of the assets and liabilities of Shenzhen BAK.

On January 20, 2005, the company completed another share swap transaction with the shareholders of BAK International, which was accounted for as a capital-raising transaction. This led to the consolidation of Shenzhen BAK's historical financial statements and operations using historical carrying amounts. Through a series of acquisitions and partnerships, the company strengthened its foothold in the industry, eventually rebranding itself as CBAK Energy Technology, Inc. in 2018 to better reflect its diversified product offerings and geographic reach.

Diversifying the Product Portfolio:

Over the years, CBAK Energy has continuously expanded its product portfolio to cater to the growing demand for high-power lithium-ion batteries. A significant shift in the company's focus occurred in June 2014 when it disposed of its former subsidiaries, BAK International and its subsidiaries. Following this divestment, the company concentrated its efforts on the manufacture, commercialization, and distribution of high-power lithium-ion rechargeable batteries. These batteries were designed for use in various applications, including cordless power tools, light electric vehicles, hybrid electric vehicles, electric cars, electric buses, residential energy supply uninterruptable power supplies, and other high-power applications. In 2021, the company took another significant step forward by acquiring a majority stake in Hitrans, a leading developer and manufacturer of ternary precursor and cathode materials. This strategic move allowed CBAK Energy to vertically integrate its operations and strengthen its position in the supply chain.

Financials:

Despite the challenges posed by the COVID-19 pandemic and industry-wide headwinds, CBAK Energy has demonstrated financial resilience. In the first nine months of 2024, the company reported net revenues of $114 million, an 18.4% increase compared to the same period in the previous year. This growth was primarily driven by the strong performance of the company's battery business, which saw a 25% increase in net revenues from batteries used in the energy storage sector and a 341% surge in net revenues from batteries for light electric vehicles.

For the full fiscal year 2023, CBAK Energy reported revenue of $204.44 million and a net loss of $2.45 million. However, the company demonstrated strong cash flow generation with operating cash flow of $46.51 million and free cash flow of $15.37 million for the year.

In the most recent quarter (Q2 2024), CBAK Energy's performance improved significantly. The company reported revenue of $47.79 million, up 13% year-over-year, and net income of $6.02 million, compared to a net loss of $2.94 million in Q2 2023. Operating cash flow for the quarter was $10.39 million, while free cash flow reached $16.55 million.

The company operates in two main product segments: high-power lithium batteries and materials used in the manufacturing of lithium batteries. In Q2 2024, the high-power lithium batteries segment generated net revenues of $35.60 million, representing 74.5% of total net revenues and a 60.0% increase compared to the same period in 2023. This growth was driven by strong demand for batteries used in residential energy supply and uninterruptible power supply applications, which grew 60.0% year-over-year to $33.57 million. Sales of batteries for light electric vehicles also increased by 59.0% to $1.83 million. However, revenues from electric vehicle batteries declined 46.0% to $199,000 during the quarter.

The materials used in lithium battery manufacturing segment, operated through CBAK's subsidiary Hitrans, generated net revenues of $12.20 million in Q2 2024, representing 25.5% of total net revenues. This reflected a 39.7% decrease compared to the same period in 2023, primarily due to a continued decrease in raw material prices, which led to significant downward pressure on the pricing of CBAK's battery material products.

Despite the challenges in the materials segment, CBAK Energy's overall gross profit margin improved significantly to 26.6% in Q2 2024 from 9.2% in the prior year period. Operating income for the quarter was $5.95 million compared to an operating loss of $3.77 million in Q2 2023. These improvements were driven by the strong demand and pricing for CBAK's high-power lithium battery products, as well as its continued focus on cost control measures.

Liquidity:

CBAK Energy's financial resilience is further supported by its strong liquidity position. As of June 30, 2024, the company had cash and cash equivalents of $20.13 million. The company's debt-to-equity ratio stood at 0.198, indicating a relatively low level of leverage. CBAK Energy has access to various bank credit facilities totaling $82.35 million, of which $71.81 million was utilized as of June 30, 2024. The company's current ratio of 0.846 and quick ratio of 0.691 suggest that while its short-term liquidity position could be improved, it is still capable of meeting its near-term obligations.

Operational Excellence:

CBAK Energy's success can be attributed to its focus on operational excellence. The company operates production facilities in Dalian, Nanjing, and Zhejiang, all of which have been strategically positioned to capitalize on the growing demand for high-power lithium-ion batteries. The Dalian facility has long been a consistent contributor to the company's profitability, while the Nanjing factory, which started operations in 2021, has quickly become a profitable production center ahead of schedule.

Technological Advancements:

Innovation is at the heart of CBAK Energy's business model. The company has consistently invested in research and development to enhance the performance and efficiency of its battery products. In 2024, the company unveiled a breakthrough in fast-charging technology with its upgraded model 32140 battery, which can now achieve a full charge in just 35 minutes, a significant improvement from the previous 75-minute charging time. Additionally, CBAK has successfully developed and started mass production of the tablet model 26650 cylindrical battery at their Dalian facility. This battery boasts an impressive 25C discharge rate and can be charged from 0 to 100% in just 15 minutes, showcasing the company's commitment to pushing the boundaries of battery technology.

Geographical Expansion:

CBAK Energy's footprint extends beyond China, with the company actively exploring opportunities for international expansion. While the majority of its revenues are derived from the domestic Chinese market, the company has been making significant inroads in international markets, particularly in Europe. In the first half of 2024, approximately 45% of CBAK Energy's total revenues came from exports to Europe, underscoring the company's growing global presence.

Navigating Industry Challenges:

Like any industry leader, CBAK Energy has faced its share of challenges. The company weathered the COVID-19 pandemic, which disrupted supply chains and production schedules across the battery industry. Additionally, the company has had to contend with fluctuations in raw material prices and ongoing geopolitical tensions. However, CBAK Energy's diversified product portfolio, operational agility, and financial discipline have enabled it to navigate these obstacles and maintain its position as a leading player in the lithium-ion battery market.

Commitment to Sustainability:

Sustainability is a key focus for CBAK Energy, as the company recognizes the importance of environmental stewardship in the battery industry. The company has implemented various initiatives to reduce its carbon footprint, including the use of renewable energy sources and the development of more efficient battery recycling processes.

Outlook and Future Prospects:

As the global demand for high-power lithium-ion batteries continues to grow, driven by the expanding EV and energy storage markets, CBAK Energy is well-positioned to capitalize on these opportunities. The company's recent technological breakthroughs, strategic acquisitions, and geographical expansion efforts suggest a promising future. With a strong order book and a relentless focus on innovation, CBAK Energy is poised to solidify its position as a premier provider of lithium-ion battery solutions both in China and abroad.

CBAK Energy's future growth trajectory is supported by a robust order pipeline. As of November 1, 2024, the company had received orders totaling RMB 59.61 million (approximately $8.38 million) that were not yet delivered from their major production bases in Dalian and Nanjing. Furthermore, CBAK Energy has secured significant orders from key clients:

• Accumulated orders with PowerOAK reached approximately RMB 80.55 million (about $11.35 million)

• Orders with Viessmann Group amounted to €213 million (about $233 million)
• Orders with Jinpeng Group totaled approximately RMB 67.01 million (about $9.42 million)
• Orders from Anker, an important client, have totaled RMB 321 million (approximately $45.12 million) since the start of their collaboration

To meet this growing demand, CBAK Energy is planning to add a new production line at their Nanjing factory. This expansion will enable compatible production of model 32140 and 40135 batteries, with an estimated capacity of approximately 1.5 GWh for each model. The equipment installation is expected to be completed in the first half of 2025, with mass production scheduled to commence in the second half of the year.

In conclusion, CBAK Energy Technology, Inc. (NASDAQ:CBAT) has evolved from its humble beginnings to become a leading player in the lithium-ion battery industry. The company's commitment to technological innovation, operational excellence, and geographical diversification has enabled it to navigate the challenges of the industry and emerge as a trusted partner for a wide range of customers. With its strong financial performance, robust order book, and ongoing expansion plans, CBAK Energy is well-positioned to capitalize on the growing demand for high-power batteries and deliver long-term value for its shareholders.