CBAK Energy Technology, Inc. Q3 FY2023 earnings call

• Battery business showed strong growth in Q3 2023 with increased revenues and profitability.
• Key client initiatives: Collaboration with PowerOak totaling ~RMB43.2 million, JinPeng Group ~RMB63.59 million, Viessmann Group ~EUR116.5 million from early 2023 to Nov 1, 2023, and Anker Innovations ~RMB58.35 million.
• Production capacity: Dalian and Nanjing facilities reached 1 gigawatt hour in Q3 2023; R&D on new battery models like 46115 and 46157.
• Sodium ion batteries: CBAT is the only Chinese company mass producing sodium ion batteries, planning a 10 gigawatt hour production capacity plant.

In the third quarter of 2023, CBAT Energy's battery business generated revenues of $44.33 million, a year-over-year increase of 71.51%. Revenues from batteries used in energy storage applications were $42.81 million, up 73.5% YOY; from electric vehicles were $0.4 million, up 19.5 times YOY; and from light electric vehicles were $1.11 million, down 2.8% YOY. For the first nine months of 2023, battery business revenues were $96.16 million, up 44.43% YOY.

• Expect robust performance and profit growth in upcoming periods.
• Order volume continues to rise with ~RMB900 million in unfulfilled orders as of Nov 1, 2023.
• Plan to expand lithium battery production capacity to 15 gigawatt hours at Dalian and 6 gigawatt hours at Nanjing Phase 2, and sodium ion battery capacity to 10 gigawatt hours.

• Forward-looking statements involve inherent risks and uncertainties; actual results may differ from expectations. Further risks are in public filings with the SEC.

Q: Good afternoon, gentlemen. Really impressive performance in light of a challenging operating environment. If I could drill down a little bit more on the power in the - on uninterruptible power business, do you feel like that was principally in the third quarter, driven by new customer wins or higher volumes with your existing customer base? And it sounds like going forward, some of the new customers are going to contribute a larger portion of that growth.

A: [Foreign Language] Okay. So in response to your first question, yes indeed, the growth in our third quarter, partly due to the existing customers that we have. For example, our customers of Dalian and Nanjing have substantially increased their orders. And that also lead to the growth of our sales volume and because that we also have developed some new customers who also contribute to the growth of our sales. So this is the situation that you can see in the third quarter. And because that, for example for our models 321400, that we have already passed the certification. So the – in terms of our production we have started from a small log production and gradually transformed into a big show mass production. And we also believe that this will all contribute to our further sales growth. And in the meantime, we are also expanding our production lines, as well as our production capacity for the 26 series of products. So we also believe that this will bring in more sales volumes in the future.

Q: And could I, if I could just ask a question about the raw material business, I know in the past, there's been some interest from outside investors. Is that’s something you're still exploring? Or I guess, just an overall general update on the raw material business and where that stands today?

A: [Foreign Language] Okay, Brian. I will respond to your questions. As you can see, the industry, the raw material industry is experiencing a slowdown, almost all the raw material producers are suffering declines in sales volume same adheres to Hitrans solid raw material units, but Hitrans actually has a very, very decent and good kind of structure subsidiaries from CHL is also their kind. So we believe that once the industry recovers, Hitrans will improve their financial performance sharply. And moreover, we didn't actually integrate Hitrans business into our battery business. We act on the as a financial investors. Their team is completely independent from our team. That's why in our Form 10-Q and in our press release, we always separate the financial performance from Hitrans from our battery business. That's much more reasonable. So, as you can say, as you can say there are a lot of investors getting interested in Hitrans and we believe that once industry recovers, they will be good. So we encourage a lot of the private equity investors we will also refer a lot of the private equity investors to Hitrans for the purpose of funding them and to expand their capacity and also to see we'll be able to get with you from more of those investors.

Q: Okay. So I would like to pose a question concerning the sodium ion batteries. I'd like you know just in your speech, you mentioned that you have all have been engaged in the preparation and the construction of sodium ion battery. And I’d like to know if you can give us more update about the technology that the company has with the sodium ion battery. And if we talk about the project investment in segmentation stage, at what stage is this project getting progressed? Could you give me also another update?

A: [Foreign Language] Okay. Okay. So, in response to first question we aim for sodium ion battery in June this year, we released the first sodium ion battery product. And this is, we can say that in China, we are the first company to realize the mass production of the sodium ion battery. And although in the markets, some of the competitors also announced that they are doing the research or production of these sodium ion battery products. However, we are the company that really can realize a mass production. And this year, we also - we also achieved installation of this sodium iron battery in the vehicle. And in fact, to not to be really satisfactory and for our battery products, it can realize 2000 to even more than 3,000 rounds. So we can say, we have already have a stable product system in place. And talking about the production line construction, where we can say our company and our products is very popular in the markets, there were some other competitors. But they are only at the very early stage. For example, they only have startup teams or they only have some samples. However, for us, for our company CBAK have managed to come up with product with 0.5 gigawatts and the production capacity will be extended in the future. So at present, four partners have approached us and we are trying to select one – one place, what we can say for local governments have approached this is – we are going to select one place for the construction of the production line and we're trying to select the best from the four. And then in the next year, we have even going to expand our production capacity to be as high as 10 gigawats. And in that case, it will put us in a better position to cater to the demand of our customers.

Q: And in your introduction, you mentioned about – you mentioned that CBAK has become a business partner of Anker Innovation and we’d like to know how big of the order volume of Anker will be? And could you also share with us your expectation for your partnership with Anker?

A: [Foreign Language] So at present Anker has already finished the opening of models here with our factory and seven to eight products of Anker will use our battery. And actually they started their pilot production here and the results turned out to be great. That is why we are excited to export further to Europe, United States, Japan and India. And we already have been in depth communication with Anker talking about future cooperation and talking about deepen our future of cooperation. And because that, if we have a look at the exception for the order volumes, at present it’s about 500,000 items with a order value of about RMB20 million. And in the future, it will be increased to – it’s expected to be increased to 800,000 to 1.2 million items. And that is with an order value of about RMB14 million.