CBAK Power Know-how (NASDAQ:CBAT) is a producer of high-power lithium batteries, primarily producing gross sales from the Chinese language market. Regardless of stumbling up to now few months, CBAT inventory is up a whopping 1,217% up to now 12 months. A whole lot of it’s right down to the corporate’s hype as a bona fide participant within the electrical automobile revolution.
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Nonetheless, buyers are seemingly unaware that EV battery gross sales symbolize solely a small fraction of its enterprise. Regardless, CBAT inventory’s rally has it buying and selling greater than 10 occasions this yr’s anticipated gross sales.
It’s true that CBAK has been investing closely in its EV battery enterprise. It’s increasing manufacturing capability and forming strategic partnerships in growing its competencies. If it might set up a foothold within the trade, it might take pleasure in a whole lot of success down the street.
Nonetheless, it’s robust to say whether or not it might accomplish that at this stage, contemplating how its EV enterprise contributes such a minuscule portion of gross sales. The inventory has shot as much as a market capitalization of over $464 million within the course of. That put CBAT inventory within the “overvalued” class and never a play on the rising EV market at this level.
Gross sales Focus and Monetary Positioning
Opposite to standard perception, CBAK Power is hardly an EV firm at this level. Again in 2019, gross sales from its EV enterprise amounted to 20% of its total revenues. Within the 9 months ended Sept. 30, 2020, it solely amounted to roughly 3% of total revenues.
Uninterruptible provides fashioned the best portion of the corporate’s complete gross sales. It contributed roughly 80% of its complete revenues in 2019, and that share elevated dramatically in 2020. According to Verified Market Research, the trade is predicted to develop at a meager 4.3% from 2021 to 2028.
Furthermore, it solely reported 26% gross sales development on an general foundation. It’s up against some big players in its industry all with strong observe information of rising gross sales. Subsequently, if it desires to lift a considerable quantity of capital, it wants to indicate higher income development.
Moreover, development in its complete asset base has been sluggish as effectively, expanding by only 7% throughout the 9 months ended Sept. 30, 2020. Moreover, the corporate’s money steadiness dropped by 20%. Furthermore, the demand for its shares has additionally been low, regardless of the huge enhance in its share worth.
Wannabe EV Play
CBAK isn’t an EV play, however there’s no denying its efforts to turn into one within the close to future. This Chinese language firm not too long ago introduced its partnership with an unnamed, main European hydrogen energy group “with 100 years of operation history.”
It is going to help the group within the growth of hydrogen gas cells. Moreover, its subsidiary in Nanjing, CBAK New Power Know-how, will eventually supply battery systems for 10.5 million buses manufactured by Sichuan Guohong Vehicle. The product framework was value $1.4 million, and it’ll provide 30 battery units to Sichuan within the subsequent 12 months.
Furthermore, it has plans to considerably increase its capability in its Chinese language manufacturing crops. That Nanjing manufacturing plant is predicted to succeed in a total capacity of 8 GWh/year to supply lithium batteries. Along with this, the corporate expects to spend RMB 50 million $7.6 million) so as to add a manufacturing line in its Dalian facility. Subsequently, it reveals promise so far as its EV enterprise is worried, however there may be nonetheless a protracted option to go earlier than it makes some vital inroads.
Backside Line on CBAT Inventory
CBAT inventory had been on fire for the better part of last year. Buyers have believed that it might be a major participant within the fast-growing EV charging enterprise. Nonetheless, this enterprise varieties a tiny a part of its operations at this level. Although it might turn into a participant sooner or later, the proof of its success is scant presently.
On prime of that, it’s overvalued, which additional limits the incentives to spend money on it presently.
On the date of publication, Muslim Farooque didn’t have (both immediately or not directly) any positions within the securities talked about on this article.
Muslim Farooque is a eager investor and an optimist at coronary heart. A life-long gamer and tech fanatic, he has a specific affinity for analyzing expertise shares. Muslim holds a bachelor’s of science diploma in utilized accounting from Oxford Brookes College. He doesn’t immediately personal the securities talked about above.
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