SOURCE: Titanium Media

Under the background of "double carbon", the energy storage industry is quietly rising. Capital from all walks of life has poured into the energy storage industry, and enterprises related to the energy storage industry chain have also ushered in a wave of IPO boom in the past two years. Following the listing of Paneng Technology (688063.SH), another "household energy storage" provider, Wotai Energy Co., Ltd. (hereinafter referred to as "Wotai Energy") submitted a prospectus in December last year to launch an impact on the board. Recently, Wotai Energy handed over the first round of inquiries and replies.

Looking through the prospectus, we can see that thanks to the growth of market demand for energy storage products, Wotai Energy's revenue grew rapidly in 2019-2021 and the first half of 2022 (hereinafter also referred to as the "reporting period"), with the expansion of overseas (accounting for more than 60% of revenue in the first half of 2022) being the most obvious. On the flip side, however, revenues have increased while accounts receivable have been pushed up sharply. By the first half of 2022, Wotai Energy's accounts receivable reached 364.5214 million yuan, exceeding the level of the whole year of 2021.

titanium media APP noted that in order to balance the risk of excessive overseas income, Wotai Energy is also exploring the domestic market. Despite the increase in domestic revenue during the reporting period, the gross margin of the domestic business has been declining, falling to 9.75 per cent in 2022, well below the level of overseas business in the same period. And Wotai Energy is good at doing business with "acquaintances". In the first half of 2022, the largest customer, Goodway (688390.SH), opened a joint company with it in 2019. Yiwei Lithium Energy (300014.SZ), which ranks first in the current purchase amount, is the third largest shareholder with a 9.71 percent stake in Wotai Energy.

Revenue and accounts receivable rose, with 90% of revenue coming from household energy storage systems

Thanks to the continuous global attention to renewable energy and clean energy and the successive introduction of support policies for the energy storage industry in various countries around the world, the market demand for energy storage products has achieved rapid growth, and the performance of Wotai Energy has ushered in an explosion.

The prospectus shows that from 2019 to 2021, Wotai Energy's operating income continued to grow. In 2020 and 2021, its operating income increased by $121.513 million and $434.5719 million, respectively, to 48.99 per cent and 117.59 per cent, respectively, from a year earlier. From 2019 to 2021, the compound growth rate of Wotai Energy's main business revenue will reach 80.08. From January to June 2022, Wotai Energy has achieved operating income of 685.6386 million billion yuan, and the main business income for the current period has reached 85.27 of the full year 2021. In 2019-2021 and the first half of 2022, Wotai Energy's net profit was 10.042 million yuan, 30.1382 million yuan, 56.5858 million yuan and 48.7613 million yuan, respectively.

The prospectus shows that since its establishment, Wotai Energy has focused on the research and development, production and sales of energy storage products. The main products include household energy storage systems and components and industrial and commercial energy storage systems and components. Components are the main business segment and the main thrust of revenue growth.

From 2019 to 2021, Wotai Energy's sales of household energy storage systems and components increased from 67.24MWh to 313.22MWh, a compound growth rate of 115.83. In terms of performance, in 2019-2021 and the first half of 2022, Wotai Energy's sales revenue from household energy storage systems and components was 201.1227 million yuan, 315.6467 million yuan, 685.406 million yuan and 628.4849 million yuan, respectively, accounting for 81.12 percent, 85.43 percent, 85.25 percent and 91.67 percent of the main business revenue for the same period. Although the revenue of industrial and commercial energy storage systems and components also increased year-on-year during the reporting period, the current revenue ratio cannot match that of household energy storage systems and components.

In the view of industry insiders, household energy storage systems account for more than 90% of revenue, which also means that when Wotai Energy's household energy storage system no longer meets market demand, it will face a greater risk of performance decline. On the other hand, when upstream suppliers raise the price of raw materials, Wotai Energy will lack bargaining power and is extremely vulnerable to fluctuations in raw material prices.

The large increase in revenue was accompanied by a sharp increase in Wotai Energy's accounts receivable. In 2019, Wotai Energy's accounts receivable will be 52.7052 million yuan, which will gradually increase to 73.1585 million yuan and 304.0056 million yuan in 2020 and 2021. In the first half of 2022, Wotai Energy's accounts receivable reached 364.5214 million billion yuan, exceeding the level of the whole year of 2021. Accounts receivable accounted for 28.71 per cent, 25.89 per cent, 29.77 per cent and 23.88 per cent of current assets, respectively.

Correspondingly, Wotai Energy's accounts receivable turnover rate decreased from 6.59 times/year in 2019 to 4.1 times/year in the first half of 2022.

Wo Tai Energy suggests that if the company fails to implement effective collection and management of accounts receivable, or if there are significant adverse changes in the customer's operating conditions, resulting in slow recovery of accounts receivable or even bad debts, the company's production and operation will be adversely affected.

60% of the revenue comes from overseas, and the gross profit margin of domestic business is low

Wotai Energy's products are mainly sold abroad, mainly to Germany, Australia, the United Kingdom and other countries and regions. During the reporting period, the company's main business income from overseas was 228.6306 million yuan, 299.203 million yuan, 580.692 million yuan and 444.46 million yuan respectively, accounting for 92.21, 80.98, 72.23 and 64.83 of the main business income of the same period respectively. Among them, Europe and Oceania are the main markets for the company's overseas sales. During the reporting period, the sales revenue realized in Europe and Oceania accounted for about 60% of the company's total revenue.

According to the "Energy Storage Industry Research White Paper 2022" issued by the Zhongguancun Energy Storage Industry Technology Alliance of the Energy Storage Special Committee of the China Energy Research Association, in 2021, Wotai Energy ranked third in the overseas market shipments of China's energy storage system providers. According to a report issued by IHS Markit, a world-renowned market research firm, Wotai Energy ranks sixth in the global household energy storage market in 2021 in terms of shipping capacity, with competitors including global new energy giants such as Tesla and LG Energy Solution.

The expansion of offshore revenue has pushed Wotai Energy's performance to a high point. However, with the increase of market participants, industry competition will inevitably become white-hot, and the operational risk of relying on overseas income will also increase at the same time.

In the past two years, Wotai Energy has also been exploring the domestic market and balancing its share of income. Wotai Energy's domestic sales revenue increased from 19.3016 million yuan in 2019 to 241.1021 million yuan in the first half of 2022.

However, the gross margin of the domestic market of Wotai Energy is far less than that of the overseas market. During the reporting period, the gross profit margin of the Company's main domestic business was 23.74, 17.13, 14.47 and 9.75, respectively, down 13.99 percentage points in the first half of 2022 compared to 2019.

wotai energy explained that the company has been deeply engaged in overseas markets for many years and has stronger bargaining power in the market, while in domestic markets, the company's overall sales amount in 2019 and 2020 is relatively small. since 2021, the company has sold household energy storage system components for key domestic self-use customers such as Goodway. in the process of rapid expansion of sales scale, the premium is relatively small and the gross profit margin is low.

The concentration of customers and suppliers is high, and large orders come from "partners"

Titanium Media APP noted that Wotai Energy's dependence on downstream major customers has further deepened.

The prospectus shows that in 2019, Wotai Energy's sales from the top five customers were $120.2371 million, accounting for 48.47 percent of current operating income. Sales from the top five customers in 2020, 2021 and the first half of 2022 will gradually increase to 212.6806 million yuan, 405.069 million yuan and 480.8093 million yuan. By the first half of 2022, Wotai Energy's sales to the top five customers accounted for 70.13 percent of revenue.

Among the top five customers, the deal between Wotai Energy and Goodway has attracted much attention. In 2021 and the first half of 2022, Goodway was promoted to be the second and first largest customer of Wotai Energy. In the first half of 2022, 30% of its revenue came from Goodway, while in 2020, Goodway ranked only 24 of Wotai Energy's customers.

It is understood that in July 2019, Goodway and Wotai Energy jointly established Anhui Gutai, when Wotai Energy held 51% of the shares and Goodway 49% of the shares, and the company led the production, operation and management of the relevant decisions. After the capital increase of Wotai Energy in 2021, Goodway holds 9.8 percent of Anhui Gutai and Wotai Energy holds 90.2 percent of Anhui Gutai.

However, Wotai Energy expects the company's full-year sales to Goodway in 2023 to be lower than in 2022. Is there a risk of loss of major customers? Does it have a negative impact on the company's operations?

Wo Tai Energy told titanium media APP that in June 2022, Goodway disclosed a refinancing plan to invest in the construction of an energy storage battery production base to meet the rapidly growing market demand. In view of the fact that Goodway intends to establish its own energy storage battery production base and put it into production, the two sides negotiated that the company will purchase the remaining minority stake in Anhui Gutai by reference to the evaluation price. In January 2023, the company has completed the above-mentioned equity acquisition, so far, the company holds a 100 per cent stake in Anhui Gutai.

"If Goodway's self-produced energy storage battery system can gradually meet its production and operation needs in the future, it may reduce its cooperation with the company and reduce the scale of related products purchased from the company. During the reporting period, the Company's sales revenue, excluding revenue from Goodway and its subsidiaries, was $366.8923 million, $688.8475 million and $1456.7446 million., The average annual compound growth rate is 99.26, the revenue volume is large and maintains a rapid growth, the company does not have the relevant situation that the revenue and performance growth mainly depends on Goodway, and the sales changes to Goodway will not have a significant impact on the company's production and operation, "said Wotai Energy.

Not only customers, but also Wotai Energy is highly dependent on the top five suppliers. In the first half of 2022, its top five suppliers together accounted for 60.59 per cent of total purchases. Yiwei Lithium Energy, which ranks first in the current purchase amount, is also the third largest shareholder with a 9.71 per cent stake in Wotai Energy. Is the pricing of the related transaction fair between the two parties?

In response, Wotai Energy replied that in 2020 and 2021, the price at which the company purchases cells from Yiwei Lithium Energy is not significantly different from that of other major cell suppliers. In 2022, due to the increase in battery cell prices, the company's purchase prices from major battery cell suppliers will increase simultaneously. among them, the company will mainly purchase battery modules from Xiamen xineneng technology co., ltd. and dongguan xineneng technology co., ltd., LF50(3.2 * 50Wh) battery cells from Jiangsu haisida power co., ltd. and LF280(3.2 * 280Wh) high-capacity battery cells from yiwei lithium energy. due to relatively low average cost per hour, therefore, the purchase price from Yiwei Lithium Energy is relatively low, the price is fair and reasonable. During the reporting period, the purchase price of the Company's lithium energy from Yiwei was also relatively close to the selling price of the products publicly disclosed by other major battery core manufacturers in the market, which was fair. (This article started on Titanium Media APP, by Liu Fengru)

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