CBAT Energy Technology has announced robust growth in the fourth quarter and full year of 2023, with a particular surge in their energy storage battery segment and sustained orders from key clients.
The company's fourth-quarter earnings call highlighted a historic high gross margin in their battery business and a net income of $6.62 million. CBAT Energy is actively pursuing strategic partnerships and is in discussions with private equity investors to bolster its business development, particularly in its sodium ion battery and Hitrans ventures.
Key Takeaways
- CBAT Energy Technology's revenues from energy storage batteries soared by 84.3% year-over-year.
- The battery business's gross margin hit a historic peak at 36%.
- Full-year revenues reached $133 million, marking a 40.4% increase from the previous year.
- CBAT Energy is forming partnerships with industry leaders and exploring collaborations in Canada and India.
- Orders worth $107 million are pending fulfillment.
- The company is advancing in R&D, focusing on sodium ion batteries and new lithium-ion models.
- CBAT Energy is negotiating with private equity investors for financing support.
- The company anticipates revealing more client names in 2024.
Company Outlook
- CBAT Energy is optimistic about future growth, planning to increase investments in R&D and production capacity.
- Partnerships with Viessmann Group, Anker Innovations, and Hello Tech have been established.
- Plans are in place to partner with a leading scooter manufacturer in India in 2024.
Bearish Highlights
- Revenues from batteries used in electric vehicles have declined.
- The total operating loss for the company was $5.9 million.
- A net loss attributable to shareholders of $4.8 million was reported, although this is an improvement from the previous year.
Bullish Highlights
- The company holds a strong client base and expects to continue receiving sustained orders.
- CBAT Energy is exploring new market opportunities in Canada's electric vehicle industry.
- There is a strong belief in the potential of sodium ion batteries, with plans to expand production capacity.
Misses
- Despite the overall growth, specific segments like electric vehicle batteries saw a decline in revenue.
Q&A Highlights
- CBAT Energy is in discussions for private placement financing to support business development.
- The company believes that private equity investors value its individual businesses higher than the current market capitalization.
- Positive announcements regarding outside investment are expected in the first half of 2024.
- Three major factories are under construction to meet client demand, with one production line expected to be operational in 2024.
CBAT Energy Technology (ticker: CBAT) remains committed to balancing growth and profitability, leveraging its solid fundamentals. With a strategic focus on research and development and the pursuit of new partnerships, CBAT is positioning itself to capitalize on the growing demand for energy storage solutions and advanced battery technologies.
The company's proactive approach to financing and capacity expansion signals a forward-looking strategy aimed at maintaining its upward trajectory in the competitive battery market.
InvestingPro Insights
CBAT Energy Technology's recent announcements have stirred interest among investors, and current data from InvestingPro provides a deeper look into the company's financial health and market performance. As of the last twelve months ending Q3 2023, CBAT has a market capitalization of $94.86 million, indicating its size within the industry. Despite a challenging period, the company has shown a significant return over the last week, with a total return of 10.38%.
InvestingPro Tips suggest that while analysts anticipate a sales decline in the current year, they also predict that the company will be profitable this year. This dichotomy highlights the dynamic nature of CBAT's market position and the importance of strategic moves such as the ones CBAT is undertaking in R&D and partnerships.
A notable metric for investors is the price-to-earnings (P/E) ratio. CBAT's P/E ratio, as of the last twelve months ending Q3 2023, stands at a high 433.08, which could suggest that the market has high expectations for the company's future earnings growth. This is further emphasized by the company's gross profit margin of 11.26%, which, while not robust, indicates that CBAT is still able to retain a portion of its sales as gross profit.
For investors looking for more comprehensive analysis and additional insights, InvestingPro offers a range of tips, including information on the company's valuation multiples and stock price volatility. With 13 more InvestingPro Tips available, subscribers can get a well-rounded view of CBAT's financial and market performance. To access these insights and refine your investment strategy, consider using the promo code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at https://www.investing.com/pro/CBAT.
Full transcript - CBAT Energy Technology (CBAT) Q4 2023:
Operator: Good day, ladies and gentlemen. Thank you for standing by. Welcome to CBAT Energy Technology's Fourth Quarter and Full-Year of 2023 Earnings Conference Call. Currently, all participants are in listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time. Now, I will turn the call over to Thierry Li, CFO and Secretary of the Board of CBAK Energy. Mr. Li, please proceed.
Thierry Li: Thank you, operator. And hello, everyone. Welcome to CBAT Energy's fourth quarter and full-year of 2023 earnings conference call. Joining us today are Mr. Yunfei Li, Chief Executive Officer of CBAT Energy, myself, Chief Financial Officer and Secretary of the Board; and Jennifer, our interpreter. [Technical Difficulty] Before we continue, please note that today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties as such, the company's actual results may be materially different from the expectations expressed today. Further information regarding these and other risks and uncertainties is included in the company's public filings with the SEC. The company doesn't assume any obligations to update any forward-looking statements except as required under applicable laws. Also, please note that, unless otherwise stated, all figures mentioned during the conference call are in U.S. dollars. With that, let me now turn the call over to our CEO, Mr. Yunfei Li. Mr. Li will speak in Chinese and I will translate his comments into English. Go ahead, Mr. Li.
Yunfei Li: [Foreign Language] [Interpreted] Hello, everyone, thank you for joining our fourth quarter and full-year 2023 earnings conference call. We are pleased to announce another quarter of solid growth, routing off fiscal year 2023 on a high note. With sustained orders from key clients including Viessmann Group, Anker Innovations and Hello Tech. Our battery business maintained its growth momentum from the previous quarter with fourth quarter revenues, up 30.9% year-over-year to reach $36.83 million. Of these revenues $34.93 million came from batteries used in energy storage applications, a surge of 84.3% year-over-year, while $0.52 million came from batteries used in electric vehicles, down 88.8% year-over-year. Moreover revenues from batteries used in light electric vehicles were $1.38 million, a decline of 69.5% year-over-year, primarily attributable to [Technical Difficulty] 12 month. Accordingly, we will strategically monitor both sectors, while further expanding our sales in energy storage sector. In terms of profitability, our battery business's gross margin rose to a historic high of 36% in the fourth quarter of 2023, up 27.7 percentage points year-over-year. Moreover, we achieved a second consecutive quarter of net income from battery business. Recording a net income of $6.62 million in the fourth quarter of 2023, a notable improvement compared to a net loss in the same period last year. In full-year 2023, our battery business generated revenues of $133 million, soaring by 40.4% year-over-year. We delivered a full-year operating income of $10.44 million with a net income of $13.37 million from the battery business based on addition. In 2023, we made significant strides in our business operations on all fronts, achieving progress at various stages. Through consistent requirement of battery technologies and production ramp-up, we effectively fulfill customer orders and have nurtured a lower, stable client base. We have fostered deep and robust partnerships with industry leaders worldwide, including Viessmann Group, a leading provider of residential energy storage application in Europe and one of the world's largest manufacturers of heating and cooling systems. Anker Innovations, the largest third-party accessory supplier for Apple (NASDAQ:AAPL) Incorporated products. Hello Tech, the largest supplier of outdoor portable energy storage globally and parent company of Jackery. PowerOAK, the world's leading portable power station manufacturer and the parent company of top-rated portable power supply brand, Blue TTI and India-based NSURE Energy, among others. We have also forged a partnership with the largest battery manufacturer in Europe. However, due to confidential [Indiscernible] obligations, we cannot disclose their identity for now. In addition, we have been negotiating with key stakeholders in Canada's electric vehicle industry, exploring potential collaborations with the intention of formalizing agreements. We will keep our shareholders and investors in form of these developments after securing consent from our clients. Furthermore, we expect to establish a partnership with a leading India-based scooter manufacturers in 2024. These partnerships and potential alliances demonstrate the broad recognition of our battery technologies and product excellence by top-tier players in the global battery sector. Moving forward, we will remain committed to technological innovation to bolster our product competitiveness, delighting customers with safe and reliable products. Turning to our order demand. As of March 8, 2024, we have recorded RMB771 million or approximately $107 million in the combined value of orders we have received, but have yet to fulfill across our two main production facilities in [Technical Difficulty] and Nanjing and [Technical Difficulty]. Additionally, we have made substantial strength in our previously disclosed client initiatives. As of March 8, 2024, our collaboration with PowerOAK has brought us orders amounting to roughly RMB61.6 million or approximately $8.57 million. Our partnership with Viessmann Group has generated orders totaling EUR213 million or approximately $195 million. Furthermore, our [Technical Difficulty] Next, let me walk you through our latest R&D developments. In the second quarter of 2023, we successfully commenced mass production of large surgical sodium ion batteries, emerging as one of the few companies worldwide with the capacity to mass-produce sodium ion batteries. Our sodium ion battery production lines are currently located at our Nanjing facility, which features a 0.5 gigawatt hour capacity. Since we commenced mass production demand for our sodium ion battery has out straight supply. As a result, we have been actively engaging with PE investors to ramp up sodium ion battery production capacity. In the meantime, we have also been developing large synergical lithium ion battery models, including model 40140 and 46120. Model 40140 is in prototype A sample stage and model 46120 is already in prototype B sample stage. We expect model 46120 to complete prototype B sample stage and become ready for mass production by the latter half of 2024. We will continue to finetune these models in response to market demand dynamics, potentially leading to modifications before the start of production. We have also strategically optimized our production capacity with a well-coordinated production line layout, currently at our Dalian facility, we operate three production lines, primarily manufacturing model 26650 lithium-ion phosphate batteries with a total annual production capacity of 1 gigawatt hour, to better address customer needs and mitigate supply shortages at our Dalian facility caused by excessive demand. In 2023, we leased a battery plant located in Changzhou Hunan for producing model 26700 batteries. Today, our Changzhou facility is equipped with a production capacity of 0.5 gigawatt hour sufficient to fulfill part of our customer demand. This strategic move further boosted our production capacity, ensuring a more stable and reliable supply of products to clients. Regarding our Nanjing facility, the Nanjing Phase 1 project consists of two production lines, one dedicated to [Technical Difficulty] product model 32140 synergical lithium ion batteries and the other outfit should produce either synergical lithium batteries or synergical sodium ion batteries. The project's capacity is up to 2 gigawatt hours when both lines are producing lithium ion batteries or up to 1.5 gigawatt hours when one production line is dedicated to sodium ion battery production. Furthermore, construction of our Nanjing Phase 2 project is in full swing with three large factories in the pipeline. Once all three are completed and operational, the total capacity of Nanjing Phase 2 project is expected to be up to 18 gigawatt hours. Thus far, the first factory has been routed and interior decoration is underway. We will determine whether to outfit this factory with production lines for sodium ion or lithium-ion batteries based on customer demand. Moving forward, we will further optimize our production line layout to enhance production efficiency, ensuring that we can respond swiftly to market shifts and order fluctuations. In summary, despite the tepid macroeconomic environment and downward pressures across the battery sector, our battery business consistently demonstrated robust growth momentum and resilience in the full-year 2023. The vitality was reflected both in our strong financial metrics and in the stability of our client base and the wealth of orders in our pipeline. More importantly, the company's industry leadership and technological age have been fully acknowledged by across the industry evidenced by the adoption of our products by the most advanced battery facility in Europe. As a pioneer in the sodium ion battery production, we possessed the immense potential and competitive advantages in the renewable energy field. Looking ahead to 2024, we will further increase our investments in research, development and production capacity. Also, by fostering more and deeper collaborations with global renowned clients, we will further augment our market share and elevate the company's global influence and visibility. We are confident that these synchronized endeavors will segment our position as a frontrunner in the competitive industry for years to come. Now, let me turn the call over to our [CFO] (ph), Mr. Li, who will provide details on our financial performance.
Thierry Li: Thank you, everyone, for making the time to join our earnings conference call today. As our CEO mentioned earlier, we concluded the year with a robust fourth quarter financial performance from our battery business, where we achieved a double-digit increase in net revenues and positive income for the second consecutive quarter. We are pleased to see continued growth momentum in our battery business. Building on our solid fundamentals, we remain confident in our growth transitory through 2024 and anticipate a full-year net profit for our battery business. We will provide more details on our net income guidance at the appropriate time. Turning now to Hitrans, our current battery material unit, which we strategically acquired in 2021, at the time of the acquisition, Hitrans boosted a strong client base and a higher level of revenue. Following the acquisition we maintain Hitrans core management team and refrain from interfering in its day-to-day operations. We have no addition, no financial obligations to Hitrans and its financial health will not materially affect the financial standing of our [Technical Difficulty] as is only reflected in our consolidated financial statements. That's why we have focused on reporting financial results solely from our battery business in our earnings release and earnings conference call to provide investors and shareholders with a clear understanding of our performance. We are currently talking with private equity investors for Hitrans and sodium ion battery business, and we hope to complete a private placement financing to support the development of our business. These investors, whether they are interested in Hitrans or the sodium ion battery business, a consistently valuing the individual businesses materials and sodium ion batteries and more than the current market capitalization of our entire public company. Notably, their valuations do not take into account our core lithium battery business, indicating that our market value is currently significantly underestimated. I will now provide an overview of our 2023 fourth quarter financial results. In the interest of time, I will be presenting abbreviated highlights only. We encourage you to refer to our press release issued earlier today for complete details. In the fourth quarter, our total net revenues increased by 3.2% year-over-year to $56.2 million. Net revenues from sales of batteries reached $36.8 million, a year-over-year increase of 30.9%. Our total gross profit grew 235.3% year-over-year to $12.7 million resulting in a gross margin of 22.6%, compared to 7% in the prior year period. Gross profit for the battery business increased by 470.8% year-over-year to $13.2 million, with gross margin climbing to 36% from 8.3% in the prior year period. Our total operating loss amounted to $5.9 million, compared to an operating loss of $8.8 million in the prior year period. Net loss attributable to shareholders of CBAK Energy after deducting the change in the fair value of warrants was $4.8 million, compared to a net loss of $11.7 million in the prior year period. Net income from the battery business was $6.6 million, compared to a net loss of $6.4 million in the same period of 2022. As we mentioned earlier, we have a large number of prestigious clients around the world. However, due to confidentiality of agreements, we cannot disclose their names without their consent. Going forward, we will actively communicate with them as part of our customer disclosure. We hope to be able to disclose more client names to our shareholders in 2024. In conclusion, our solid fundamentals will continue to provide a solid foundation for our business going forward, enabling us to strike a healthy balance between growth and profitability. That concludes our prepared remarks. Let's now open the call for questions. Operator go ahead.
Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions] First question comes from Brian Lantier from Zacks Small Cap Research. Please go ahead.
Brian Lantier: Good evening, gentlemen. I just wanted to hone in a little bit on the gross margin. Do you feel like the gross margin in the fourth quarter was -- is that going to be a sustainable gross margin going forward? And was it principally driven by pricing on your products and some of the new contracts or was it more on the input side as costs have come down for some of your inputs?
Unidentified Company Representative: [Foreign Language]
Thierry Li: Let me respond to your question, Brain. I think as you may be aware that the current competition in the battery market is very intense and key players in this industry keep lowering down their price to gain much more orders and customers. We are completely different our batteries boosted a feature of highly stable and high safe characteristics and our biggest clients up to three years testing completely satisfied by the performance of our battery products. That's why they're willing to keep us a high price at this market condition. Coming back to your question, we believe that being affected by the current market condition, the price will also go down in the long-term, but we are still confident that the gross margin that we will present to you in the coming reporting period will still be higher than the market average. Thanks.
Brian Lantier: Great. Thank you. And I know we've talked in the past about long-term capacity goals, and I know that's a little bit influx right now, because it will be based upon whether you're producing lithium batteries or sodium batteries. But do you have any long-term capacity goals for 2024, 2025 that you can share with us at this point?
Unidentified Company Representative: [Foreign Language]
Thierry Li: [Foreign Language]
Yunfei Li: [Foreign Language] [Interpreted] Yes. Well, so in terms of capacity growth, well, we have steadily increased our capacity based on our cooperation with our clients and also we increase it according to the needs of our clients. So that is why in the past years, we have steadily ramped up our capacity in different production facilities. And as you can see from our 2024 to 2025 reports, we have introduced a lot of big customers in the past year and the introduction of the big customers will also boost our -- will require us to boost our production capacity, so that we can well meet their demand. So in the future, we are going to continue to increase our production capacity. And when it comes to the sodium battery, well, I have to say this is a battery that enjoys a great future. For sodium ion battery, it has some good features that lithium ion battery cannot compete. For example, it is suitable to be used in low temperature condition [Indiscernible]. So in the future, we believe that we will also substantially increase and expand the production capacity of sodium ion battery, and we have a good expectation for that.
Thierry Li: Let me add one point. As we mentioned in our report that we have three major factories under construction for Nanjing Phase 2 and the first factory has been ruled. So we are doing interior construction at this moment, if everything goes well, we will have one production line for this factory in 2024. But if it's -- we cannot determine if it will be producing a sodium ion batteries or lithium ion batteries is up to client demand. And also, we are also talking to private equity investors about financing on the sodium ion project. So that would also affect our decision-making. So it's a decision that we will make in this year and a lot of the factors affect this decision-making.
Brian Lantier: Great. I appreciate that. The last question I have is, I guess on outside investment. If you could give us some sort of idea as to how advanced these negotiations are? Do you think this is a -- we could hear something in the first-half of 2024 or the back half of 2024, either regarding high trends or a sodium investment?
Unidentified Company Representative: [Foreign Language]
Thierry Li: Well, let me respond to this question. We hope that we can announce something really positive in the first-half of 2024, but it's really depending on the private equity investors. I can -- the information I can share is that a lot of the investors from China are very interested in our sodium ion batteries, because we are almost the only one that can mass produce the largest synergical sodium ion batteries. But we're also doing a lot of the math with them right now, because investing in a new battery plant is very expensive and we need to discuss with them about how much financing we need from them and what structure, which should the best need from ours and also doable for them. [Technical Difficulty] negotiation, but everyone is very interested.
Brian Lantier: Great, thank you.
Operator: Thank you for the questions. [Operator Instructions] Seeing no more questions in the queue. Let me turn the call back to Mr. Yunfei Li for closing remarks.
Yunfei Li: [Foreign Language] [Interpreted] Thank you. 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 next quarter on our progress.
Operator: Thank you all again. This concludes the call. You may now disconnect your lines.
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