NASDAQ:CBAT
READ THE FULL CBAT RESEARCH REPORT
CBAK (NASDAQ:CBAT) has made a number of announcements recently which may not be fully appreciated by the market and which we believe that the shares currently provide an opportunity for patient investors seeking growth at a reasonable price.
• In late December, CBAK noted that its relationship with Anker Innovations (SZ:300866) continued to grow in 2024 and Anker has become one of the company’s top five customers since the companies began working together just two years ago. CBAK indicated that in 2024, Anker placed orders for battery cells – principally 32140 cells – that had a total value of $30 – $35 million in 2024. It is worth noting that Anker’s annual revenues for the past 12 months exceed $3 billion and while not all of its products include battery cells, many do use cells provided by partners like CBAK and we believe there is ample opportunity to grow this relationship further.
While Anker built its brand reputation in the US as a supplier of small portable chargers, cables, and wall chargers, the company has expanded in recent years to include rechargeable appliances like vacuum cleaners and home security cameras under the Eufy brand. We are encouraged by the fact that Anker, which has a very strong reputation for delivering high quality, affordable, reliable products, has elected to make CBAK one of its key battery cell partners.
The majority of the company’s cells likely find their way into Anker’s portable power supply products but Anker continues to expand its offerings into larger home energy storage solutions and we think the company’s 32140 or 40135 cylindrical cells could be well suited for these applications as well.
Management indicated that it expects the value of its orders from Anker in the coming year to be at or above the value of orders received in 2024 ($30-$35 million).
• In January, CBAK announced that it had received purchase orders from Ather Energy for the company’s 32140 cylindrical cells for use in Ather’s line-up of electric scooters.
Ather is one of the top five producers of electric two-wheel scooters in India. After a flat economic performance in FY 2024, Ather reportedly saw its market share spike in the September 2024 quarter to 14.3% (up from 7.9% previously) and the total number of units shipped totaled almost 34,000 in the quarter as a result of a strong reception for the company’s new family line of scooters.1
We are currently projecting the company’s LEV battery business (principally scooters) to grow from just $8 min in 2023 to over $45 million 2026 so it will be important for the company to sign additional customers in these markets.
The electrification of India’s two-wheeled scooter market is going to be a multi-year process as customers gain increased confidence in the country’s grid and the reliability of electric scooters. It is currently estimated that there are over 270 million two-wheeled vehicles in India2 but just 1 million of them are electric vehicles (0.4%).3 As the penetration rate of two-wheeled vehicles in India grows, the opportunity for battery cell providers like CBAK will grow as well.
• Finally, on December 30th, CBAK announced that it had signed procurement agreements with suppliers of production equipment and utilities to complete the first two production lines of the company’s Phase II expansion of its Nanjing facility. As a reminder, the company’s expansion plans call for 27 GWh of capacity to be added to its production facilities in two phases – phase 1 began in 2021 with the addition of 1.3 GWH of capacity at Nanjing. The company recently indicated that it is operating these production lines at full capacity as a result of strong demand for the company’s battery cells. As a result of this strong demand, the company has accelerated the phase II expansion plan at Nanjing and now anticipates having the first two production lines of the phase II expansion enter trial production in May 2025 and full production by the end of 2025.
Importantly, these new production lines are expected to add approximately 3.0 GWh of production capacity for the company, increasing the total production capacity for CBAK by more than 100% during 2025.
Currently our model has anticipated some portion of this expansion as battery revenues are expected to grow to $274 million in 2026 (up roughly 50% over our 2025 estimate) but we think the robust demand for the company’s cells could accelerate expansion plans even further which could result in significant upside to our current estimates.
While it is too early to make meaningful adjustments to our long-term forecasts, it is important for investors to recognize that while we project that CBAK will have in excess of $140 million of battery sales in 2024, installed capacity is likely less than 10% of the company’s ultimate goal and thus, the company’s real growth curve is just about to accelerate.Â
We are maintaining our twelve-month valuation target to $2.00/share based on our current estimates for earnings in 2026 however, we think this valuation target could be revised upward if the Nanjing expansion happens sooner than anticipated or if margins increase when new cell formats are released.
SUBSCRIBE TO ZACKS SMALL CAP RESEARCH to receive our articles and reports emailed directly to you each morning. Please visit our website for additional information on Zacks SCR.Â
DISCLOSURE: Zacks SCR has received compensation from the issuer directly, from an investment manager, or from an investor relations consulting firm, engaged by the issuer, for providing research coverage for a period of no less than one year. Research articles, as seen here, are part of the service Zacks SCR provides and Zacks SCR receives quarterly payments totaling a maximum fee of up to $40,000 annually for these services provided to or regarding the issuer. Full Disclaimer HERE.
________________________
2 https://www.marklines.com/en/report/rep2681_202406#
3Â https://www.statista.com/statistics/1029829/india-two-wheeler-electric-vehicles-sales-number/
