Sturgis Bancorp Q2 2023 Earnings Call Transcript

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Provided by Quartr
September 8, 2023

There are 5 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the NAS Second Quarter and First Half 2023 Earnings Conference Call. At this time, all participants are in listen only mode. I must advise you that this conference is being recorded. I would now like to turn the conference over to your first speaker today, Ms. Cynthia Tang, Senior IR Director.

Operator

Thank you. Please go ahead.

Speaker 1

Thank you, operator. Hello, everyone, and welcome to NAND's second quarter and first half twenty twenty three earnings conference call. The company's results were issued earlier today and are posted online. Joining me on the call today are Ms. Cathy Wang Yang, our Chief Executive Officer and Mr.

Speaker 1

Alex Wu, our President and Chief Financial Officer. For today's agenda, Ms. Wang will provide an overview of our recent performance and highlights, and Mr. Wu will discuss our operating and financial results. Before we continue, I refer you to our Safe Harbor statement in the earnings press release, which applies to this call as we will make forward looking statements.

Speaker 1

Also, please note that this call includes discussion of certain non IFRS financial measures. Please refer to our earnings release, which contains a reconciliation of non IFRS measures to most comparable IFRS measures. Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in RMB terms. I'll now turn the call over to our CEO, Ms. Kathy Wang Yang.

Speaker 1

Kathy, please go ahead.

Speaker 2

Okay. Hello, everyone. I'm Naa's CEO, Cathy Wang. It's my pleasure to share our 2nd quarter 2023 earnings results with all of you and to discuss our recent development. In the Q2 of 2023, we continue to deliver solid operating and financial performance with revenue margin doubled and a significant loss reduction.

Speaker 2

Thanks to our continued network expansion, growing client base of station owners across various stage of charging station construction, operation and upgrades, as well as improving operating efficiency. Our strategic partnerships also continued to deepen and expand with leading enterprises such as Hyundai Motor Group, PICC Real Estate Investment and CR Capital, MGMT attracted to our innovative solutions and one stop services. We are excited about collaborating with these partners to further propel the development of EUA charging industry. This year, new energy storage facilities experienced broad based exponential growth according to the NEA newly commissioned installations in the first half of this year alone exceeded the past 10 years' total installation to reach 8.63 gigawatts, taking capacity in operation to 17.7 gigawatt hours. China's energy storage demand is also growing rapidly.

Speaker 2

It's expected to exceed 70 gigawatt hours by 2025 with the market size reaching over RMB 100,000,000,000. In September 2023, we signed a RMB 204 1,000,000 energy storage order in cooperation with several companies providing over 380 charging stations with energy storage equipment and comprehensive solutions, boosting energy storage capability of over 100 and 30 Megawatt hours in total. This initiative shows our strength and innovation in station integrated energy storage technology, making a crucial step forward in our integrated photovoltaic storage charging contract. This order further boosted our confidence to deliver our full year revenue guidance. Furthermore, our total fundraising year to date to US91 $1,000,000 significantly enhancing our financial stress and filling our growth initiatives.

Speaker 2

Internationally, we are actually accelerating our global expansion into we acquired an 89.99 percent stake in Sinopower, a leading rooftop solar energy developer in Hong Kong on August 22. We also entered into a decision agreement to acquire ChargeM, a leading European provider of EV charging service solutions, capitalizing on their strong market presence and the channel capability as well our extended product and service portfolio and the financial stress, we will further strengthen the standing of solar power and charge amps in their respective regions, while promoting the global expansion of our product and service offerings. Looking ahead, we will leverage the supporting policies worldwide and increasing market demand, actually exploring the integrated development of charging stations, the new energy system and the smart IoT devices, while elevating both user experience and service quality. Aiming for a 20% market share in the global new energy asset operation and management services market in long term. Now, I will turn the call over to Alex, our President and CFO, for a closer look at our operating and financial performance.

Speaker 2

Thank you.

Speaker 3

Thank you, Cathy. Hello, everyone, and thank you for joining our call today. In the Q2 of 2023, we delivered solid operating and financial performances. By offering diversified service offerings, while leveraging the industry leading scale of our charging network, we continued to solidify our leadership in the charging services industry. We have also made significant progress in our transformation journey toward becoming an integrated new energy services provider, highlighted by our achievements in energy storage among others.

Speaker 3

In the Q2, we more than doubled our revenue year over year, while achieving a significant loss reduction. Specifically, our revenues grew 121 percent year over year to reach RMB48,600,000, driven by our ongoing network expansion and our growing station owner client base across the construction, operating and upgrade stages for charging stations. Our gross margin reached 39%, representing a notable increase of 22 percentage points quarter over quarter. This improvement highlights our unwavering commitment to innovative business practices that drive favorable revenue mix changes. Additionally, we reduced our net loss by 94% year over year to RMB334 point 7,000,000.

Speaker 3

Our net loss margin narrowed by 3 85% quarter over quarter, and our operating loss margin narrowed by 3 73% quarter over quarter, benefiting from greater economies of scale. Our network experienced significant growth during the quarter, with total charging volume increasing by 112% year over year, reaching 12 28 gigawatt hour. This accounted for 21.7% of all charging volume completed through public charges in China in the same period. Moreover, the gross transaction value conducted through our network rose to RMB1.2 billion, reflecting a 109% year over year increase. Simultaneously, our total number of orders rose by 110 percent to 53,800,000 from 25,600,000 in the Q2 of 2022.

Speaker 3

In the Q2, revenues from off line EV charging solutions increased by 153% year over year, accounting for a higher share of total revenues compared with the Q1. The robust growth of our revenues from off line EV charging solutions was mainly driven by the increasing number of clients attracted to our full suite one stop EV charging solutions that cover end to end station construction, operation and upgrades. On August 28, we celebrated the commencement of operations of the 1st integrated energy port in Anhui province, for which we were deeply involved in construction. Working closely with We Energy Group, we offer vehicle owners straightforward, efficient and environmentally friendly one stop energy services. In addition, we signed strategic collaboration agreements with Hyundai Motor Group China Limited, PICC Real Estate Investment and China Resources Capital Management to further expand our partnership roster.

Speaker 3

With Tianda, we are enhancing charging infrastructure and mobility connectivity tailored for their PUE models. With PICC, we're building a top notch new energy charging service system, incorporating integrated infrastructure, co branded stations, online connectivity and comprehensive insurance services. With China Resources Capital Management, we are working on integrated energy port construction, innovative securitization of new energy assets and everything from incubating and investing into operating digital and intelligent applications within the realm of new energy, together promoting green and low carbon energy development. In addition, we're excited to have received a RMB204 1,000,000 energy storage order to be executed in the upcoming few months, signifying a solid step forward in propelling the integrated PV storage charging station development and further boosting our confidence in achieving our full year revenue target of RMB500 1,000,000 to RMB600 1,000,000. We will outfit over 380 charging stations with 580 integrated cabinets and matching comprehensive energy storage management systems, complemented by intelligent site selection services and supervisory and development services.

Speaker 3

The benefits of energy storage are threefold. First, there has been a lack of effective means to take advantage of the peak to valley price spreads and ensure operations during power outages. With energy storage integration, charging stations can earn incremental revenues from on off peak price differentials, while maintaining uninterrupted operations. 2nd, to accommodate high power fast charging, the conventional approach involves costly grid upgrades to increase base load, which can be effectively replaced with much more cost effective energy storage solutions. 3rd, energy storage can also ensure power grid safety.

Speaker 3

In cases of fast charging, charging power in the local grid could exceed 1,000,000 watts, potentially causing multiple points in the grid to collapse. Energy storage provides an effective solution to address the challenges of managing peak loads. Moving to our capital market endeavors, I'd like to take a moment to highlight some accomplishments that have bolstered our financial strength.

Operator

Ladies and gentlemen, this is the conference operator. We've temporarily lost connection with the speaker line. Please hold while and the conference will begin momentarily. Please go ahead, Alex.

Speaker 3

Sorry, I just got disconnected. Let me continue. Now let's delve into our global expansion strategy. Our agreement to acquire Charge Amps in August marked an important milestone in our globalization endeavors. We are pleased to welcome the Charge Amps brand and team to our NAS platform.

Speaker 3

As a pioneer in the integrated EV charging solutions industry, specializing in home, work and destination AC charging solutions. Sweden based charge amp has a strong reputation throughout Europe. For over a decade, ChargeM's broad portfolio of intelligent, sustainable, user friendly and particularly pleasing product offerings has been satisfying customers. As proven by its 22% local market share with an established international footprint in 13 markets. Charxiang's commitment to sustainability is manifested throughout its entire production chain and reflected by its participation in the U.

Speaker 3

N. Global compact. There are significant synergies between NAS and charge amps. 1st, charge amps can leverage NAS's relationship network to expand its sales channels, while NAS can utilize charging amps existing channels to launch affordable AC, DC and household storage products to enrich its product portfolio. In addition, we can reduce Chargem's cost of revenue and improve its margin through our advantages in the domestic supply chain and procurement as well as resource consolidation.

Speaker 3

Furthermore, as Cathy mentioned, we acquired 89.99 percent of Sinopower HK in June, another critical component of our expanding global layout. Final Power is Hong Kong's largest one stock solar panel service provider, boasting a significant 35% market share in rooftop solar PV development in Hong Kong. Through the Final Power acquisition, we entered the distributed solar power market in Hong Kong, which broadened our boundaries from charging services to upstream power plant services, opening a new chapter for energy asset management. We're working on integrating the technology, products, capital and the markets of both parties. With ChargeDance and Sinopower as our home bases for the European and Southeastern Asian markets, we will accelerate the global expansion of our services, while integrating PV and energy storage products in charging solutions and other facilities to drive innovation and sustainability in the new energy industry.

Speaker 3

Moving to our Q2 financial results. Our total revenues reached RMB48.6 million in the 2nd quarter, up 121% year over year. The rapid increase was mainly the result of the increased network order volumes and additional capabilities in our EPC business established and acquired through the first half of twenty twenty three. Our total operating costs were RMB388.6 million in the 2nd quarter, decreasing by 82% year over year. This was primarily due to our significant business expansion.

Speaker 3

Our net loss attributable to ordinary shareholders was RMB334 point 7,000,000 for the Q2 of 2023, compared with a loss of RMB 5,302 200,000 for the same period of 2022. Based on our current and preliminary view of our business situation and market conditions, which are subject to change, we are reaffirming our guidance that full year 2023 revenues will be in the range of RMB500 1,000,000 to RMB600 1,000,000, increasing by 5 times to 6 times from 2022. To summarize, through expanding our 1 stop charging services, advancing integrated energy systems and strategic acquisitions, we are well on our way to becoming a leading global new energy asset operation and management service provider. As we move forward, we remain committed to providing sustainable new energy solutions, while continuously exploring new avenues for expansion and propelling the industry's ongoing evolution. This concludes our prepared remarks for today.

Speaker 3

Operator, we are now ready to take questions. Thank you.

Operator

Thank Hello.

Speaker 4

Yes. Firstly, congratulations about the second quarter, the story now. I have two questions. Firstly is, can you please discuss the progress of the your Sino Power acquisition? How about the integration after the acquisition closed in June?

Speaker 2

Share more color about the

Speaker 4

progress of this project. And secondly, the question is, can you please talk more about the strategic partnership you recently developed and how did this fit in with your long term strategic goals of your business?

Speaker 3

Got it. Thank you. So the two questions, one is about solar power integration. The other one is about the strategic promise, right? So let me address them 1 by 1.

Speaker 3

So for Final Power, I'm very excited now we finished the acquisition of Sinopower Hong Kong in June. Since then, Sinopower has strategically leveraged NaaS strength to strengthen its presence in both EV and PV and have made significant progress in both of those two areas. On the PV side, Sinopower completed a 2.6000000watt rooftop solar project in Hong Kong, which is expected to generate 31,000,000 kilowatt hour annually. It has also secured contracts for 9 most projects. General Power has over 50 projects under construction currently, totaling 10,200,000 watts in capacity.

Speaker 3

On the EV side, Center Power has qualified as a contractor for the Hong Kong Government sponsored EV Charging at Home Subsidy Scheme or EHSS, currently advancing over 40 EHSS projects aiming to cover around 6,200 parking slots upon completion. In addition to that, SunPower has also integrated into the VAS ecosystem, expanding its business both in Mainland China and in Southeast Asia. Sinopower are actively involved in the PV project in Angie County, which is currently under construction and the industrial and commercial PV project in Vietnam. So I'm very excited about this acquisition. I think the integration is well underway.

Speaker 3

And as I mentioned before, Sino Power now has a very, very healthy pipeline of projects that you will deliver over the coming months and will generate healthy revenue and EBITDA for the whole group. That's my answer for your first question. The second question regarding the partnership. We are very excited with these new 3 new partnerships. There are 3 partnerships that we achieved in the quarter.

Speaker 3

The first one is with Hyundai, where we aim to unface our charging infrastructure and the mobility services tailored for hand raised EV models. Partnership with PICC, which is one of the biggest insurance companies in China, will work towards building a top notch new energy charging service system, including integrated infrastructure and co branded stations and also insurance services. With China Resource Capital Management, which is an investment fund that's backed by China Resource, We will incubate and invest in to operate new energy infrastructure projects and also looking at potential to securitize new energy assets. We'll be able to leverage our investor expertise and China Resources' capital market capabilities. These partnerships, if you put them together, right, you can see we are working with 1 major OEM, 1 insurance company and 1 major commercial real estate developer and investor.

Speaker 3

These are the 3 pillars that we have volatile in mind as the important partners that we need to work with in the new energy ecosystem. We will continue to build more partnerships in these spaces and build a strong ecosystem that we can work in. Thank you.

Operator

Thank you. Your next question comes from Will Liao with Tian. Please go ahead.

Speaker 4

Hi, this is Will. Congratulations for our great performance in Q2 and first half twenty twenty three. I have two questions. First, can you discuss more details on the acquisition of charge ends and your strategy in Europe market? My second question is about the energy storage.

Speaker 4

Can you share more color on your energy storage in the charging station business? These are my questions. Thank you very much.

Speaker 3

Thank you. Thanks for asking these questions. So the first question is to do with the charge offs acquisition. As that I know you elaborate on our strategy on acquisition. The second question is to do with energy storage, right?

Speaker 3

Okay. So let me address your first question first. The acquisition of charging is a strategic step that we take in Europe. Europe is the world's 2nd largest new energy market, new energy vehicle market. It's currently 8,100,000 EV in 2023.

Speaker 3

The projection is by 2025, there will be 16,000,000 EUV in Europe and by 2030, there will be 55,000,000 EUV. And from a penetration perspective, the penetration rate in the EU countries, European Union countries has reached 53% in 2023, which forecasts to 80% by 230. As a comparison to that, the on the spot China EV penetration rate is about 36% in 2023. The 2 countries that have highest UV penetration rate are both in North Europe, Norway has the highest, it's over 80% and Sweden just closely following is somewhere between 65% to 70% to 70%. So we are acquiring a brand that is in a very well developed market and a fast growing market.

Speaker 3

And ChaDian has a decade of experience in creating some of the best quality and best design products in the charging industry. It holds a very strong market position in Sweden and has established its presence in certain countries. For the acquisition, our objective is to have access to this Yiding brand and also have access to the sales channels and AC products. The sales channels in Europe is something that we feel particularly exciting to have access to because those channels will enable us to launch new products through. So we currently have plans to launch products like DC charging products, like energy storage products and PV products through the same channels.

Speaker 3

We have created a strategic approach for our European market entry. We've also created a very clear integration plan for this acquisition. We have completed a 180 plan 180 day plan for the integration to happen. And we will have a small team of what we call the Chief Transformation Office to be present in Sweden to help charge ramps to be integrated into the NAS system. We're very excited that there are a lot of opportunities that we can potentially take from this acquisition.

Speaker 3

The first step we take is we establish our presence with chargem's leading brand and sales channels, as I mentioned before. And second step is we'll integrate energy storage products and PV products and aiming to offer a comprehensive integrated solution in Europe. And our last step is we want to be facilitating energy transactions at the household level, which means we will be grouping households together and then engaging in potential energy trading with the power grid. So these are the 3 steps and we are now very happy that we finished our first step. And we will continue our development and growth in Europe through organic growth and through acquisition to achieve our strategic growth.

Speaker 3

With that now, I'll turn to your first question. The second question regarding energy storage in charging stations. Energy storage for charging station is an interesting and trusted market. First of all, the market is very big. Today, there are about 140,000 public charging stations in China.

Speaker 3

We are connected to about 55,000,000. Optimize, we've identified over 13,000 stations that are in cities where the peak and value power prices can generate enough commercial benefit for the energy storage to be commercially feasible. If we can capture this, there is a lot of opportunities that we can take. We just announced that we're going to roll out 580 sets of energy storage solutions, meaning 380 stations, with a total of RMB 130 1,000,000 of energy storage capacity. That's an aggregate contract value of over RMB 200,000,000.

Speaker 3

With support of the government policies and the growing number of chargers and charging stations, we expect by 2024, 5,000 charging stations would be suitable for energy storage, up from 1880 today. This will potentially translate to a RMB 2,000,000,000 to RMB 3,000,000,000 worth of opportunity in CapEx that we can potentially take. I've just talked about the 3 models of low energy storage solutions are important in the charging context. We can further enhance these systems with our robust analytics and intelligent technology capabilities, and we aim to become one of the largest asset operators of energy storage network for charging stations. Thank you.

Operator

Thank you. As there are no further questions, now I'd like to turn the call back over to the company for closing remarks.

Speaker 1

Thank you all for joining us today. If you have any further questions, please always feel free to contact us. Good night.

Operator

This concludes the conference call. You may now all disconnect your line. Thank you.

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Earnings Conference Call
Sturgis Bancorp Q2 2023
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