Executive Summary / Key Takeaways

• NaaS Technology Inc. is undergoing a significant strategic pivot, focusing intensely on its high-margin core charging services, leveraging advanced AI and an asset-light business model to drive sustainable profitability.
• This strategic shift has yielded tangible results, with the company achieving its first positive non-IFRS monthly net profit in June 2024 and a landmark positive non-IFRS quarterly net profit of RMB20.6 million in Q3 2024, alongside a record 57% gross margin in the same quarter.
• NaaS is deploying its proprietary NAAS Energy Fintech (NEF) platform and autonomous charging robot technology to enhance operational efficiency, optimize resource allocation, and provide dynamic pricing solutions for both charge point operators and EV drivers.
• The company is expanding its market reach through extensive partnerships with over 80% of China's EV OEMs and more than 4,000 charge point operators, while also initiating global expansion into European and Southeast Asian markets.
• Despite significant accumulated losses and a working capital deficit as of December 31, 2024, management is confident in achieving monthly EBIT breakeven by the end of 2024 through disciplined cost control and a focus on high-margin services.

China's Electrification Frontier: NaaS's Strategic Ascent

China's electric vehicle (EV) market is experiencing explosive growth, with new energy vehicle sales surpassing 50% of new car sales in September 2024. This rapid adoption fuels an immense demand for public charging infrastructure, a segment expected to dominate the charging landscape due to the scarcity of private facilities and the efficiency of public options. Industry projections suggest the charging volume will grow at a compound annual growth rate (CAGR) of approximately 50% over the next seven to eight years, leading to a 16-fold market expansion by 2030. Within this dynamic environment, NaaS Technology Inc. ($NAAS) is strategically positioning itself as a pivotal player, evolving from a charging service provider to a comprehensive energy solution enabler.

NaaS's core business revolves around its platform, which connects EV drivers with charging stations and offers a suite of energy solutions to asset owners. The company's overarching strategy prioritizes profitability, scale, and technological leadership, underpinned by an asset-light model designed for efficient expansion. This approach is critical in a competitive market characterized by increasing fragmentation, where the market share of the top five operators has significantly declined from 87% in 2018 to around 16% in 2023. This fragmentation presents a substantial opportunity for platform providers like NaaS to aggregate demand and supply, offering enhanced value across the ecosystem.

A Journey Forged in Growth: NaaS's Evolution and Strategic Realignment

NaaS commenced its journey in the EV charging sector in 2019, rapidly expanding its offerings to include full station operations, hardware procurement, and electricity services by 2020. A significant corporate restructuring in early 2022 saw the company consolidate its operations under NaaS Technology Inc., following a merger with RISE Education Cayman Ltd. This period also marked the transfer of its Kuaidian mobile application and associated data to a third-party service provider, with whom NaaS subsequently entered into crucial business cooperation agreements for mobility connectivity services. This restructuring was instrumental in shaping NaaS's current asset-light operational model.

Post-merger, NaaS continued its strategic expansion, venturing into photovoltaic-related businesses and energy storage services in 2023. However, a critical strategic pivot has since taken hold: a deliberate transition away from lower-margin, capital-intensive energy solution projects to concentrate on its core, high-margin charging services. This shift is exemplified by the divestiture of 90% ownership in Sinopower Holdings International Co. Limited in August 2024 and a planned sale of its energy storage solutions business in September 2024. This realignment is designed to unlock greater profit potential and establish a more sustainable growth foundation.

Technological Edge: The AI-Powered Core of NaaS

NaaS's competitive differentiation is deeply rooted in its advanced technological capabilities, particularly its AI-powered analytics. The company's proprietary NAAS Energy Fintech (NEF) platform is a cornerstone, leveraging artificial intelligence to achieve intelligent matching of EV charging supply and demand. This technology provides real-time insights that enable charge point operators (CPOs) to optimize operations dynamically, predict maintenance needs, and implement strategic pricing adjustments. For EV drivers, the NEF platform facilitates instant charger location and optimized pricing, ensuring a seamless and efficient charging experience.

The tangible benefits of this technology are evident in improved operational efficiency, boosted station utilization, and enhanced profitability for CPOs. NaaS's R&D initiatives extend to cutting-edge developments like autonomous charging robots, first prototyped in 2023 and since upgraded with sophisticated path-finding, vehicle control, and obstacle avoidance features. These robots are designed for driverless scenarios, anticipating a revolution in autonomous driving and the need for unmanned charging solutions. The company's commitment to innovation is further demonstrated by over 250 patent applications across more than 10 countries and regions as of March 31, 2024, and its membership in the Open Invention Network (OIN). This technological leadership forms a significant competitive moat, contributing directly to NaaS's ability to drive a sustainable revenue model and maintain its market position.

Financial Transformation: From Losses to Profitability

NaaS's strategic pivot and operational efficiencies are translating into a notable financial transformation. The company achieved a significant milestone in Q3 2024, reporting its first positive non-IFRS quarterly net profit of RMB20.6 million. This follows the achievement of a positive non-IFRS monthly net profit in June 2024. The core charging services business was a primary driver, with revenues reaching RMB42.37 million in Q3 2024, a 36% year-over-year increase. This strategic concentration on high-growth, high-margin offerings has propelled the overall gross margin to an all-time high of 57% in Q3 2024, marking four consecutive quarters of improvement.

Cost efficiency has been central to this turnaround. Selling and marketing expenses as a percentage of revenue dramatically decreased to 67% in Q3 2024 from 160% in Q3 2023. Total operating expenses fell by 70% year-on-year in Q3 2024, with sales expenses down 81% and administrative expenses seeing a 15.5% quarter-over-quarter reduction. For the full year 2023, total revenue reached RMB320.1 million, a 245% year-over-year increase, with gross profit surging 14-fold to RMB89 million and the gross profit margin expanding from 6.6% in 2022 to 27.7%. The connectivity business, a significant component of NaaS's operations, boasts a gross profit margin "north of 80%." The company's Net Take Rate (NTR) turned positive in January 2024 and reached 0.75% in February 2024, reflecting improved operational efficiency and optimized user subsidies.

Despite these positive trends, NaaS faces liquidity challenges. As of December 31, 2024, the company reported a net loss of RMB914.40 million and a net operating cash outflow of RMB179.10 million, resulting in accumulated losses of RMB8,251.70 million and a working capital deficit of RMB910.90 million. Management is actively addressing these concerns through cost reduction, extending existing bank borrowings, and seeking new equity financing of US$15 million to US$20 million.

The company believes its cash on hand, coupled with unutilized borrowing facilities of RMB113.80 million as of December 31, 2024, will be sufficient to meet its general corporate purposes for at least the next 12 months.

Competitive Landscape: Differentiating in a Fragmented Market

The EV charging market is intensely competitive, yet NaaS has carved out a distinct position. The market's fragmentation, with the top five operators' market share significantly declined, creates an environment where NaaS's platform-centric approach can thrive by aggregating a vast network of over 4,000 CPOs. NaaS's competitive advantages are multifaceted. Its AI-powered analytics provide real-time insights for dynamic pricing and optimized site selection, enhancing efficiency and profitability for CPOs. Strong partnerships with over 80% of China's EV OEMs, including major players like Geely, Hyundai, ZEEKR (ZK), and Great Wall Motors, provide extensive market reach and user acquisition channels. The company's asset-light model enables scalable growth without heavy capital investments, contributing to a streamlined cost structure and profitability. Furthermore, the synergy with its parent company, NewLink Group, offers a significant advantage, with 68% of NaaS users overlapping with NewLink's gas-fueling app users, facilitating organic traffic conversion.

Comparing NaaS to its direct competitors highlights its unique positioning. Against ChargePoint (CHPT), NaaS excels in localized partnerships and regulatory compliance within China, potentially offering greater operational efficiency in its domestic market, though ChargePoint has a broader international presence. Versus Blink Charging (BLNK), NaaS's software-driven platform approach provides greater operational efficiency and ecosystem integration, contrasting with Blink's hardware-heavy model. When compared to EVgo (EVGO), NaaS's platform offers faster software integration and user adoption in China, while EVgo focuses on fast-charging hardware. Against the formidable Tesla (TSLA), NaaS differentiates itself as a neutral, multi-brand platform, offering greater accessibility for non-Tesla users, whereas Tesla prioritizes its integrated ecosystem. NaaS's primary competitive disadvantages include its smaller scale compared to global giants, which can lead to higher customer acquisition costs, and potential technological gaps in hardware integration. The company also faces challenges from CPOs developing their own user ecosystems and OEMs building proprietary charging networks, as seen in late 2023 when three major operators terminated collaboration, disconnecting a meaningful percentage of NaaS's network. NaaS's strategic response involves deepening partnerships, continuous R&D, and optimizing user subsidies to maintain its competitive edge.

Outlook and Guidance: A Clear Path to Sustainable Value

NaaS's management has articulated a clear forward-looking strategy focused on sustained profitability. The company aims to achieve monthly EBIT breakeven by the end of 2024 and expects to sustain this positive trend by expanding its high-margin services. This outlook is supported by the anticipated continued rapid growth of China's EV market, with charging volumes projected to increase significantly. Management also believes there is substantial upside for charging prices in China, given the lower cost per mileage of EVs compared to internal combustion engine vehicles and the higher charging prices observed in developed markets.

The company's technological roadmap, particularly its R&D in AI-powered analytics and autonomous charging solutions, is central to its future growth and efficiency improvements. NaaS is also actively pursuing global expansion, collaborating with Chinese EV OEMs to enter European and Southeast Asian markets and partnering with overseas CPOs. The CE-certification of NaaS-branded DC and AC chargers in January 2024 further supports this international ambition. NaaS's commitment to ESG, evidenced by its participation in the UN Environment Assembly and a B-level climate change rating, aligns with global sustainability trends and enhances its brand appeal.

Conclusion

NaaS Technology Inc. is at a pivotal juncture, transforming its business model to capitalize on China's booming EV market. The strategic shift towards high-margin core charging services, underpinned by advanced AI technology and an asset-light operational framework, is demonstrably yielding positive financial results, as evidenced by its recent non-IFRS quarterly net profit and record gross margins. While the company confronts significant liquidity challenges and intense competition, its robust partnership ecosystem, technological differentiation, and clear roadmap for cost control and market expansion position it for sustained growth. Investors should closely monitor NaaS's continued execution of its profitability targets, its ability to leverage AI for operational excellence, and its strategic expansion both domestically and internationally, as these factors will be critical in determining its long-term value creation in the evolving global energy transition.