Net profit plummeted by 707.55%. Can Narada Power Source, an “industry veteran,” trade losses for market share?

01

The former new energy leader, Narada Power Source, presented a loss-making performance report in the first half of the year.

Recently, Narada Power Source released its semi-annual report. The data shows that the company's revenue in the first half of the year was 3.923 billion yuan, a year-on-year decline of 31.67%; the net profit was a loss of 232 million yuan, a significant year-on-year decrease of 225.48%. After deducting non-recurring gains and losses, the net profit was a loss of 250 million yuan, a year-on-year plunge of 707.55%.

It is reported that this is another performance decline report of Narada Power Source after a huge annual loss of 1.497 billion yuan in 2024.

Financial data shows that since 2020, Narada Power Source has started to make losses. From 2020 to 2023, the net profits of Narada Power Source were -281.1 million yuan, -1.37 billion yuan, 332.7 million yuan, and 35.98 million yuan respectively. The company's cumulative losses have reached 3.011 billion yuan. Looking at it quarterly, Narada Power Source's revenue in the first quarter was 1.139 billion yuan, a year-on-year sharp drop of 61.81%, and the loss was 266 million yuan. In contrast, the revenue in the second quarter was as high as 2.784 billion yuan, a more than 200% increase from the previous quarter. However, the profit in the second quarter was only 33.85 million yuan. Although the loss was reduced, it was still 67.0% lower than the same period last year.

Information shows that Narada Power Source, which started with communication backup power supplies, was established in 1994 and is headquartered in Hangzhou, Zhejiang. At the beginning of its establishment, it focused on lead-acid batteries, which were mainly used in fields such as backup power supplies for communication operators. Subsequently, it successively explored fields such as lithium-ion batteries, resource recycling, and energy storage. It was listed on the Growth Enterprise Market of the Shenzhen Stock Exchange in 2015. Before listing, its communication backup battery market had the third highest domestic market share, and its overseas market share ranked first among domestic enterprises.

Subsequently, it became a leading enterprise in the field of lead-acid backup power supplies for domestic data centers. Together with Shuangdeng and Shengyang, it occupied more than 80% of the market share in the industry, forming a competitive pattern of "three powers standing side by side".

From the time of listing to 2019, Narada Power Source's revenue maintained stable growth. However, affected by the fluctuation of lead prices, the gross profit margin and net profit margin had certain fluctuations. By 2020, with the fierce competition in the power battery market for electric bicycles, Narada Huayu and Changxing Narada, which were heavily acquired by Narada Power Source before, had been in long-term losses. The lead-acid battery business became a bleeding point dragging down its financial report.

Facing the continuously bleeding civilian battery business, Narada Power Source accelerated its transformation to new energy in 2021, strengthened the layout of lithium battery and energy storage businesses, and at the same time divested the civilian lead-acid business, concentrating resources on the energy storage battlefield. At present, Narada Power Source has formed three core sectors of "energy storage + resource recycling + solid-state batteries" and built a product matrix covering both domestic and overseas markets.

In fact, transformation is the main theme of Narada Power Source at present, and its performance losses are also closely related to its business transformation.

Since 2021, in less than four years, from making money easily to "losing money to gain popularity" now, the energy storage industry has experienced a roller-coaster ride. As a bettor in the energy storage track, Narada Power Source cannot get rid of the influence of the industrial cycle. In recent years, its performance has declined rapidly, and it is expected to lose 1.2 billion to 1.56 billion yuan in 2024.

Currently, with overcapacity and price cuts, the energy storage industry is deeply trapped in an elimination race of "survive by competing or die". In this situation, as a bettor in the energy storage track, Narada Power Source also cannot get rid of the industrial cycle. Therefore, the company is accelerating its transformation to lithium batteries and has established the development direction of large-capacity lithium batteries.

This transformation strategy is also reflected in the financial performance.

The semi-annual report shows that in the first half of the year, the company's main revenue did not come from the power energy storage business, but from the communication and data center energy storage business, with the revenue reaching 1.89 billion yuan, a year-on-year increase of 34.09%. However, the gross profit margin decreased by as much as 10.21% to 12.32%.

In contrast, the revenue of Narada Power Source's power energy storage business decreased by 18.46% to 947 million yuan. But in terms of gross profit margin, it was the highest among all its businesses, reaching 27.11%, a year-on-year decrease of 3.77%.

In addition to the above businesses, the company's resource recycling business had a 65.74% decrease in revenue and was in a state of negative gross profit margin, specifically -5.52%, a year-on-year decrease of 2.58%. However, overall, the company's gross profit margin increased slightly, a year-on-year increase of 1%, but it was only 11%.

It is worth noting that although the gross profit of the energy storage business declined slightly, the gross profit margin of 27.11% is still eye-catching and comparable to that of many industry leaders.

In fact, this is related to the strategic choices actively implemented by Narada Power Source in the energy storage business.

Since 2022, Narada Power Source has repeatedly emphasized the strategy of "strategically screening orders" in its performance reports. By actively giving up energy storage system integration projects with low profits, it has instead focused on high-value-added lithium battery products and solutions. It also further emphasized the strategy of "selectively giving up low-margin orders" in the performance bulletin of 2024.

This change in business strategy has directly led to a phased contraction of the revenue scale, but significantly optimized the overall profit structure.

However, currently the company is promoting a lithium battery production expansion project. Narada Power Source said that during the reporting period, the construction of the 4GWh lithium battery cell production capacity of Phase II of Huatuo and the construction of the 10GWh integration production line in Yangzhou were progressing in an orderly manner.

Gao Xiubing, the Executive President and Director of Narada Power Source, also revealed in a previous media interview: "After Narada focused on the large-scale energy storage market, it is currently building its own industrial chain closed-loop around the principle of 'lithium batteries as the mainstay and lead batteries as a supplement'. In terms of energy storage applications, the company mainly invests in building cell bases with the lithium iron phosphate technology route. The current production capacity of lithium battery cells is about 11GWh, and the under-construction production capacity of lithium battery cells is 6GWh; in the field of new power energy storage, the company's current production capacity is 14GWh, and the under-construction production capacity is about 30GWh."

In the long run, on the energy storage track, whether Narada Power Source can balance market scale and profit optimization still needs to be further observed in combination with the industry's competitive situation and the company's subsequent actions.

02

Meanwhile, Narada Power Source is also betting on solid-state batteries to seek new growth points and has keenly captured the new trend spawned by the AI computing power revolution. It is accelerating its position in the global data center energy storage track.

"The data center business has full orders, and the mass production cost of solid-state batteries is expected to be less than 1 yuan/Wh." Gao Xiubing, the Executive President of Narada Power Source, revealed in a media interview in March this year.

Power batteries are known as the "heart" of new energy vehicles. Compared with liquid lithium batteries, solid-state batteries have revolutionary breakthroughs in energy density, safety, and cycle life. Although it will take some time for solid-state batteries to achieve true industrialization, the industry's expectations for the industrialization of solid-state batteries are gradually becoming unified. According to GGII's prediction, the global solid-state battery market scale will exceed 200 billion yuan in 2030.

Narada Power Source's solid-state batteries follow the oxide technology route. Currently, it is developing small-capacity solid-state lithium batteries with a soft-pack product structure. The energy density can reach 350Wh/kg, and the cycle life is 2000 times. It has currently passed safety performance tests such as extrusion and short-circuit, all meeting national standard requirements.

Currently, there are mainly three technology routes for solid-state batteries: oxide, sulfide, and polymer. Among the A-share listed companies deploying solid-state batteries, in addition to Narada Power Source, representatives of the oxide technology route also include Ganfeng Lithium, Shanghai Xiba, etc.; companies such as CATL, BYD, Enjie Co., Ltd., EVE Energy Co., Ltd., and Guoxuan High-Tech Co., Ltd. adopt the sulfide technology route.

Although the industry generally has a positive outlook on the prospects of solid-state battery technology, it will still take time for the technology to mature and for the market to generate revenue. Moreover, Narada Power Source is not the only one betting on this track. Under the trend, it is still unknown who will take off.

It is worth noting that since this year, Narada Power Source has repeatedly stated on the investor interaction platform that the solid-state battery business will not have a significant impact on the company's performance in 2025. "Solid-state batteries will only have commercial value on the investment side, and only then will large-scale applications be possible." In the aforementioned media interview, Gao Xiubing once said that the industry's development progress of solid-state battery products should be about the same, and the large-scale development of the industry requires the joint efforts of the upstream and downstream of the industrial chain. Currently, the company needs to find cooperative application scenarios in combination with customer needs.

At the same time, Narada Energy is also continuing to make efforts in the field of data center energy storage.

In the semi-annual report, Narada Power Source revealed that in response to the pain points of high energy density and high safety requirements for backup power supplies in data centers, it has developed and designed the third-generation high-voltage lithium battery products. These products use the immersion liquid-cooling method, which can ensure that lithium batteries will not catch fire or explode 100% in high-density backup power application scenarios in data centers. In response to the increasing energy consumption of data centers due to the surge in computing power, it provides an "energy storage + backup power" solution to solve the energy consumption dilemma of data centers and promote the construction of green computing power.

But just like betting on solid-state batteries, Narada Power Source is not the only company seizing the AI trend.

For example, the veteran battery enterprise Shengyang Co., Ltd. is also increasing its data center business. It has won bids for third-party data center projects of Century Internet, Zhonglian Big Data, Heying Data, etc., and has been shortlisted for the battery white list of Alibaba's data center, achieving a rapid increase in market share in the data center market. In addition, the company is also actively promoting its internationalization strategy. It has successfully been shortlisted for the shortlists of 4 well-known global telecom operators and tower companies and has started supplying goods. Its high-voltage UPS lithium battery products have also won bids for multiple Southeast Asian data center projects.

Another example is Shuangdeng Co., Ltd., which is about to be successfully listed on the Hong Kong Stock Exchange. Its energy storage products have been cumulatively applied in hundreds of data centers such as Alibaba, JD.com, Baidu, GDS Holdings Limited, and Qinhua Data. Its overseas products have also been applied to international customers such as Safaricom in Kenya, Telenor in Norway, and the National IDC of Mongolia Summit. According to Frost & Sullivan's statistics, in 2023, Shuangdeng Co., Ltd. ranked first in terms of shipment volume among global communication and data center energy storage battery suppliers, with a market share of 10.4%.

The financial report shows that in the first half of the year, although the revenue of Narada Power Source's communication and data center energy storage business reached 1.89 billion yuan, a year-on-year increase of 34.09%, the gross profit margin decreased by as much as 10.21% to 12.32%.

Obviously, the competition in this field is intensifying.

After all, the AI trend has indeed brought great opportunities to energy storage enterprises, but how to firmly grasp this great fortune is indeed a problem.

03

In addition, although Narada Power Source has been shrinking its recycling business for many years, the transformation of this sector will not happen overnight.

Data shows that in the first half of this year, the gross profit margin of Narada Power Source's recycled lead business has dropped to -11.02%, compared with -4.53% in the same period of 2024. This means that for every ton of recycled lead products sold, Narada Power Source has to bear a loss of more than 10%. Narada Power Source's recycled lead product business seems to be gradually changing from the initial operation to "stop-loss".

Some industry analysts pointed out that "the recycled lead industry is currently under the dual pressure of the policy and market environment: the increase in environmental protection tax burden and the reduction of recycling subsidies have significantly pushed up the cost of compliant operation; at the same time, the continuous low price of primary lead has also greatly squeezed the profit level of recycled lead."

On the other hand, the financial report also reflects that Narada Power Source still faces relatively high debt pressure. As of the first half of this year, the company's total liabilities reached 14.59 billion yuan, and the asset-liability ratio was 80.04%. Among them, short-term borrowings accounted for a relatively large proportion, and the liquidity pressure was obvious. Although the cash flow from operating activities has improved, the problem of debt structure still exists.

In addition, in the face of huge losses and debt pressure, Narada Power Source is planning to list in Hong Kong.

In April this year, Narada Power Source officially announced its plan to list on the Hong Kong Stock Exchange, aiming to become another A+H company in the energy storage industry. The purpose of Narada Power Source's move is to raise funds through the capital market to support the company's transformation. However, considering the company's current loss-making state and high debt, there are still considerable doubts about whether it can successfully list in Hong Kong.

In addition, even if the company raises funds by listing in Hong Kong to relieve financial pressure and support future development, whether it can successfully raise funds and achieve long-term profitability is still a huge unknown.

Currently, Narada Power Source's energy storage, lithium battery, and recycled lead businesses are all facing different degrees of pressure. Especially, although the lithium battery and energy storage businesses have increased, the decline in gross profit margin has affected the overall profit level. At the same time, the sharp decline of the recycled lead business has also brought considerable challenges to Narada Power Source.

Generally speaking, the transformation challenges faced by Narada Power Source are still severe, but its potential in the fields of energy storage and lithium batteries cannot be ignored. If it can effectively cope with short-term difficulties, make breakthroughs in technological innovation and market expansion, and successfully list on the Hong Kong Stock Exchange to obtain a sum of funds to expand its competitive businesses, then the future of Narada Power Source is still worth looking forward to.

This article is from the WeChat official account "Foreseeing Energy". Author: Foreseeing Energy. Republished by 36Kr with authorization.