By Brian Lantier, CFA
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CBAK Energy Reports Full Year 2024 Results
On Monday, March 17th, CBAK Energy Technology (NASDAQ:CBAT) released its full-year results which saw many of the trends of 2024 continue into the fourth quarter including profound weakness in the raw material business. While we will have to wait for the full 10-K to be filed for a full review of the business we can discuss some 2024 highlights:
• We estimate that battery revenues in Q4 were roughly $34.1 million which appears to be about 12% below our estimate of $38.9 million. However, we would note that the company’s largest product line – uninterruptable supplies – likely generated the substantial majority of these revenues and were roughly in line with forecasts. Uninterruptable supplies accounted for $124 million of total revenue in 2024 (flat versus 2023) despite industry-wide weakness which speaks to the strong demand for the company’s cylindrical cells and the strength of the company’s customer relationships. It does appear as though Light Electric Vehicle sales (mostly to two-wheeled scooter manufacturers) while nearly doubling to $10.3 million in 2024 underperformed our forecast in Q4 significantly. Since we are currently projecting robust growth in this business line by 2026 it will be important to monitor this business throughout 2025.
• The company’s raw material business remains a significant drag on the overall performance of CBAK and we estimate that the raw material business had a gross loss for all of 2024 while sales in this division tumbled sharply to just over $40 million in 2024. Most industry forecasts indicate that the excess capacity in the battery raw material market is likely to continue through 2027 or 2028 and we anticipate very weak pricing and margins will continue to plague this market. Management indicated that given the weak pricing in the market, strategic alternatives are limited at this time and thus, consolidated results for CBAK will likely continue to be impacted by the weak performance of the raw material business.
• We believe 2025 will be the “make or break” year for CBAK as the company ramps up efforts to expand its battery cell capacity at its Nanjing and Dalian facilities. CBAK’s management indicated again that it intends to add 3GWh of capacity at the Nanjing facility and highlighted a new plan to add 2.3 GWh of capacity at the Dalian facility which should enter production in 2026. Given the company currently operates 2.3 GWh combined at both facilities the prospect of adding 5.3 GWh or 7.6 GWh total capacity in 2026 is significant. The prospect of increasing the company’s capacity by more than 200% even as margins compress should be enticing to long-term, value investors but if the company is unable to achieve these expansion targets the company may struggle to regain investor confidence.
Expansion of Production Lines
The company further discussed its planned capacity expansion at the Dalian and Nanjing facilities on the year-end conference call which is being driven by strong demand from its customers for cylindrical cells.
Nanjing – The company has already announced an accelerated expansion of the Nanjing facility focused on production of the 32140 which should enter full production by the end of 2025 and add up to 3.0 GWh of capacity at this facility. As a reminder, the company currently has 1.3 GWh of capacity at Nanjing so this expansion will take the company’s capacity to 4.3 GWh at Nanjing.
Dalian – The company announced a new expansion at the Dalian facility which currently operates 1.0 GWh of capacity focused on the production of 26650 and 26700 cells. The new expansion – expected to be 2.3 GWh focused on the production of 40135 cells – is roughly equivalent to the company’s total current capacity and is a significant expansion of the Dalian facility.
With $136.6 million in battery sales in 2024 derived from 2.3 GWh of capacity, if the company reaches 7.6 GWh of capacity in 2026 our revenue estimate of $258 million from battery sales is likely to be revised significantly higher. We would caution that CBAK’s expansion plans have been slow to evolve in the past but there appears to be a new urgency that should be encouraging to investors.
We are maintaining our twelve-month valuation target at $2.00/share based on our current estimates for earnings in 2026 of $0.19/share however, we think this valuation target could be revised upward if the Nanjing expansion happens sooner than anticipated. There remains significant headline risk associated with any news on tariffs from the US. If the company’s expansion plans are delayed or deferred, we will have to revisit our target valuation.
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