CBAK Energy Technology, Inc. (NASDAQ:CBAT) is a leading manufacturer of lithium-ion and sodium-ion batteries, as well as electric energy solutions, based in China. The company has established itself as a reliable and innovative player in the rapidly growing battery market, consistently delivering strong financial results amidst industry-wide challenges.
Business Overview and History
CBAK Energy has a rich history dating back to 1999 when it was originally founded as Medina Copy, Inc., a corporation formed in the state of Nevada. The company underwent several name changes, becoming Medina Coffee, Inc. later in 1999 and then China BAK Battery, Inc. in 2005. A significant milestone occurred in January 2005 when the company completed a share swap transaction with the shareholders of BAK International, a non-operating holding company, to acquire Shenzhen BAK Battery Co., Ltd. This transaction was accounted for as a reverse acquisition, with the historical financial statements and operations of Shenzhen BAK consolidated using historical carrying amounts.
In November 2007, CBAK Energy strengthened its financial position by completing a private placement, raising $13.65 million through the sale of 3.5 million shares of common stock. The company's shares have been publicly traded since 2005, initially over-the-counter through the OTCBB until 2006 when it obtained approval to list on the NASDAQ Global Market. In November 2018, the company's trading symbol was changed from CBAK to CBAT, and in June 2019, its common stock started trading on the NASDAQ Capital Market.
A pivotal moment in the company's history came in 2014 when it disposed of BAK International and its subsidiaries, shifting its focus to the manufacture, commercialization, and distribution of high-power lithium-ion rechargeable batteries. This strategic move allowed CBAK Energy to specialize in batteries for various applications, including cordless power tools, light electric vehicles, hybrid electric vehicles, electric cars, electric buses, residential energy supply uninterruptible power supplies, and other high-power applications.
In 2021, CBAK Energy further expanded its capabilities by acquiring 81.56% of the registered equity interests (representing 75.57% of the paid-up capital) of Zhejiang Hitrans Lithium Battery Technology Co., Ltd. This acquisition marked the company's entry into the development and manufacturing of materials used in high-power lithium battery cells, as Zhejiang Hitrans is a leading developer and manufacturer of ternary precursor and cathode materials in China.
Financials
Financial Performance and Ratios
CBAK Energy has reported solid financial results in recent years, showcasing its ability to navigate industry challenges and deliver consistent value to shareholders. In the fiscal year 2023, the company reported revenue of $204.44 million, a 6.2% increase from the previous year. Net income, however, declined to a loss of $2.45 million, primarily due to one-time charges and impairment costs.
For the most recent quarter ending June 30, 2024, CBAK Energy reported net revenues of $47.79 million, representing a 13% increase from $42.42 million in the same period of 2023. The company achieved a significant improvement in profitability, with net income reaching $6.02 million, compared to a net loss of $2.94 million in the prior year period. This turnaround was driven by strong gross profit of $12.73 million and a gross margin of 26.6%, up from $3.88 million and 9.2% in Q2 2023, respectively.
The company's financial ratios remain healthy. The current ratio stands at 0.85, indicating a solid ability to meet short-term obligations. The debt-to-equity ratio is a low 0.24, suggesting a conservative capital structure. Additionally, the company's return on assets and return on equity of 3.9% and 9.4%, respectively, demonstrate its efficiency in utilizing its assets and generating returns for shareholders.
Segment Performance
CBAK Energy operates in two reportable segments: production of high-power lithium and sodium battery cells, and manufacture and sales of materials used in high power lithium battery cells.
In the high-power lithium and sodium battery cells segment, net revenues from sales of batteries for light electric vehicles reached $1.83 million in Q2 2024, up 59% from $1.15 million in the same period of 2023. Sales of batteries for residential energy supply uninterruptible power supplies surged to $33.57 million, an increase of 60% from $20.95 million in the prior year period. This growth can be attributed to increasing demand for renewable energy sources and the need for energy storage solutions to support them.
The materials used in high power lithium battery cells segment, operated through the subsidiary Hitrans, reported net revenues of $12.20 million for Q2 2024, compared to $20.20 million in the same period of 2023. The decrease was primarily due to a continued decline in raw material prices during 2024, which put significant downward pressure on the pricing of the company's battery material products.
Cash Flow and Liquidity
For the fiscal year 2023, CBAK Energy reported annual operating cash flow of $46.51 million and annual free cash flow of $15.37 million. As of June 30, 2024, the company had a cash balance of $20.13 million and $10.5 million in unutilized committed banking facilities, providing ample liquidity for operations and future investments.
Operational Highlights and Outlook
CBAK Energy's operational performance has been a key driver of its financial success. The company's focus on innovation and product diversification has allowed it to capture market share in various battery applications. In 2024, the company's flagship 32140 large cylindrical lithium-ion cells captured approximately 19% of the global market share for Series 32 large cylindrical batteries, according to a report by the Start Point Institute of Research.
Furthermore, CBAK Energy has successfully expanded its production capacity to meet growing demand. The company's Nanjing facility, which began mass production of the 32140 cells in late 2021, has now reached an actual capacity of 1.3GWh. The company has also announced plans to add an additional 3GWh of capacity at the Nanjing site, with trial production scheduled to commence in May 2025.
CBAK Energy is also developing new battery models, including a tablet model 26650 cylindrical battery with a high discharge rate of 25C and fast charging capabilities, allowing it to be charged from 0% to 100% in just 15 minutes.
Order Backlog and Future Prospects
As of November 1, 2024, CBAK Energy reported a substantial order backlog, indicating strong future revenue potential. The company had received orders but not yet delivered, totaling approximately:
- $8.38 million from their major production bases in Dalian and Nanjing - $11.35 million from PowerOAK - $233 million from Viessmann Group - $9.42 million from Jinpeng Group - $45.12 million from Anker
These orders demonstrate the growing demand for CBAK Energy's products across various customer segments and geographies.
Risks and Challenges
While CBAK Energy has demonstrated its ability to navigate industry challenges, the company is not without its risks. The battery industry is highly competitive, and the company faces fierce competition from both domestic and international players. Additionally, the company's reliance on a limited number of large customers, such as Anker Innovations, could expose it to concentration risk.
The ongoing US-China trade tensions and the potential for tariffs on Chinese-made batteries also pose a risk to CBAK Energy's operations and profitability. The company's ability to maintain its technological edge and continue innovating its product portfolio will be crucial in mitigating these risks and sustaining its competitive advantage.
Liquidity
Current Financial Position
CBAK Energy maintains a solid liquidity position, as evidenced by its current ratio of 0.85 and quick ratio of 0.69. This indicates that the company has sufficient short-term assets to cover its short-term liabilities. The company's conservative debt-to-equity ratio of 0.24 further underscores its strong financial position and ability to meet its financial obligations.
Conclusion
CBAK Energy Technology, Inc. has proven itself to be a consistent performer in the battery manufacturing industry, navigating the challenges faced by the sector with its innovative product lineup and efficient operations. The company's strong financial ratios, growing market share, and strategic capacity expansion plans position it well for continued success. With a robust order backlog and ongoing development of new battery technologies, CBAK Energy is well-positioned to capitalize on the growing demand for high-power lithium and sodium batteries in various applications. While risks and challenges remain, CBAK Energy's demonstrated ability to adapt and deliver consistent profitability makes it a compelling investment opportunity for those seeking exposure to the rapidly evolving battery market.