During the conference call after the release of the financial results, the company's management emphasized that the goal is to achieve sustained profitability in the third and fourth quarters of this year.
In just 10 trading days from July 8th to July 19th, NAAS.US's share price, with a maximum increase of 583%, has attracted the attention of global investors. Its announcement on the second quarter of 2024 earnings on July 24 that it achieved monthly operating side profitability for the first time, made the market aware that NAAS.US may really have reached a turning point.
According to the announcement, NAAS.US's revenue for the second quarter of 2024 was 91.7 million RMB, an increase of 89% year-on-year, and revenue continues to maintain high growth. At the same time, the adjusted net loss under Non-IFRS accelerated sharply from a loss of 10.8 million RMB in the same period of 2023 to a loss of about 40 million RMB, with a significant decrease from the loss of 12.6 million yuan in the first quarter of 2024.
Behind the significant loss reduction, it can be clearly felt that after experiencing two years of rapid expansion, NAAS.US's strategic focus this year has begun to shift towards greater profitability. During the conference call after the release of the financial results, the company's management emphasized that the goal is to achieve sustained profitability in the third and fourth quarters of this year. After all, real profit-making ability is one of the key factors that can more objectively reflect the true value of a company.
If we use a "surgical" approach to analyze NAAS.US's financial report, we can have a clearer understanding of the potential changes in its business operations and the company's true value.
What happened behind the first monthly profit?
As we all know, the most common way for Internet platform companies to operate is to quickly expand their networks through subsidies, cultivate user habits, and form economies of scale. This process often lasts for several years, or even longer. Whether it is Meituan, Didi, Pinduoduo or other companies, they are no exception. However, since this year, NAAS.US has begun to shift its strategic focus to greater profitability, and has clearly reduced its reliance on subsidies. This is also a significant difference between NAAS.US and other competitors in terms of commercial realization path.
When platform companies begin to show signs of profitability, it means that the two core advantages they possess—their market share and operational capabilities—have begun to work together, driving them towards a turning point in profitability. We see that NAAS.US is precisely at such a turning point.
First, the market size is expanding rapidly. The latest data from the Ministry of Public Security shows that as of the end of June, the number of new energy vehicles in the country reached 24.72 million, an increase of more than 50% year-on-year, accounting for 7.18% of the total number of automobiles, of which the new energy vehicle's new registered registration volume accounted for 35.41% of the new registered registration volume of automobiles, which is more than one-third. In Shenzhen, this growth rate is even more amazing, with the new car penetration rate increasing to 72.6% in the first half of the year, and reaching 77.4% in June.
From the perspective of the charging service industry, during the special period of the past three years, the charging service industry has undergone a wave of reshuffling, accelerating the elimination of weak competition of small and medium-sized service providers, and the market competition is gradually entering a more benign state; at the same time, with the rapid increase in the number of new energy vehicles, user habits are gradually forming, and charging station gun efficiency is also gradually improving. However, the construction of charging and swapping facilities has certain requirements for parking space resources and power increase, and the construction growth rate is slightly lower than that of new energy vehicles. Operators and service providers are gradually shifting from pursuing scale competition through subsidies to improving operational efficiency. Improving the gun efficiency has gradually become the most critical factor in the current competition among leading charging operators.
From the information disclosed in the company's financial report, NAAS.US has established a diversified business model, formed three major business lines including charging services, energy solutions, and new businesses, and has set its current strategic focus on focusing on profitability while significantly reducing reliance on subsidies, which is also a significant difference between it and other partners in terms of commercial realization paths.
There are concerns in the market that after subsidies are reduced, NAAS.US's charging service may be difficult to maintain its expansion momentum, but from the financial report, such concerns are clearly redundant.
In the first half of the year, NAAS.US's charging and order volumes reached 2.352 billion kWh and 100.3 million, respectively, and the proportion of profitable orders rose to 64%, and the proportion of profitable orders in June was as high as 70%. This drove charging service revenue to grow by 73% year-on-year, continuing to maintain high growth, which also confirms the feasibility and effectiveness of NAAS.US's high-quality expansion strategy.
At the same time, the energy solution business, which took shape in 2023, has continued to play a pivotal role in NAAS.US's business structure. Thanks to the continuous delivery of energy storage projects and EPC projects, the revenue of energy solution services increased by 105% year-on-year to 44 million yuan, accounting for 47.99% of total revenue, with a slower growth rate than the first quarter mainly due to seasonal reasons. In addition, although innovative business accounts for a relatively low proportion, it recorded revenue of 2.945 million yuan, a year-on-year increase of 138.85%, showing considerable growth potential.
Secondly, the three expenses have significantly decreased, the profit-making ability has greatly improved, which has led to the acceleration of the narrowing of losses, and the monthly adjusted net profit has become positive.
The sharp improvement in NAAS.US's profitability first manifested in its gross profit margin. After reducing the loss orders, NAAS.US's gross profit margin in the second quarter of 2024 rose to 33.21%, an increase of nearly 7 percentage points from the first quarter's 25.3%.
What needs to be noticed more is that the three major expenses of Nenglian ZhiDian have been significantly reduced during the period. The marketing expense during the reporting period was 0.124 billion yuan, a significant decrease of 65.43% YoY. Among them, management expense decreased to 61.017 million yuan, compared to 0.261 billion yuan in the same period of 2023. The sum of the three expenses for a single quarter has dropped to the historically lowest level, while the company continues to achieve high growth in total revenue, confirming the effectiveness of Nenglian ZhiDian's profit-focused strategy.
Thanks to the significant increase in gross margin and the significant reduction in the three expense items, the adjusted net loss of Nenglian ZhiDian during the reporting period has been reduced to about 40 million yuan, and the company has claimed that the adjusted net income has recorded a positive value in June, demonstrating Nenglian ZhiDian's profit potential.
The dual logic of value revaluation.
During the early development stage of electric vehicles when the ownership is still low, the difficulty in making a profit due to a single cash-out mode has always been a pain point problem for charging operators. This has also led to a significant compression of the valuation of charging operators in the capital market. However, Nenglian ZhiDian, which entered 2024, obviously broke this "shackles," demonstrating not only the potential to realize profits but also significant results in diversified cash-out.
Based on the significant improvement in the company's business operations, zhitoong finance app believes that the value of Nenglian ZhiDian in the capital market will be revalued from two dimensions: diversified expansion and growth space as well as profit expectations.
As for growth space, the creation of an energy solution growth curve by Nenglian ZhiDian has enabled it to expand from the C-end to the B-end, not only achieving diversified cash-out modes, but also further opening up the company's growth space. With the deep exploration of the incremental market in the industry through synergies, the company has completed the diversified cash-out mode and opened up its growth space further.
Relying on its independently developed NEF (NaaS Energy Fintech) energy brain, the energy solution has rapidly become Nenglian ZhiDian's new growth engine and is expected to continue to grow.
Zhitoong finance app has learned that NEF energy brain locates and analyzes charging station locations and, combined with experience data and regional traffic data, can scientifically calculate investment return rates, effectively reducing investment risks for operators to set up stations. By combining strong traffic guidance and operational support capabilities to provide comprehensive charging station solutions to operators.
The business model of the energy solution has been validated by Nenglian Holdings' refined oil business, which has now achieved overall profitability. Nenglian ZhiDian has reused this logic in the charging field, achieving significant results.
Currently, Nenglian ZhiDian has landed several energy solution benchmark projects. It has announced that cooperation projects with regional leading charging operators will be completed and delivered in the third quarter of this year, which is the first time Nenglian ZhiDian's AI model has been applied in actual business on a large scale.
Based on the scientific and reasonable profitability calculation of the energy solution based on AI model, it can plan investment tempo more reasonably, reduce investment risks, and improve operational efficiency, which has strong attraction to operators. This has also laid a solid foundation for Nenglian ZhiDian to form large-scale cooperation with regional operators. In the future, with the increasing number of industry players and the expansion of business scale, the scale effect is expected to help Nenglian ZhiDian's profitability continue to improve.
From the perspective of the industry logic, we can have a clearer understanding of the future growth space of Nenglian ZhiDian. With the creation of the energy solution, Nenglian ZhiDian has entered the 2.0 era of charging services, constructing a charging service ecology that is not only connected with mainstream vehicle manufacturers such as "wey thereon", Geely, and Guangqi, but also linked to hundreds of thousands of charging guns, while also providing APIs for map providers such as Amap and Baidu. This means that under the increasingly close interaction with all industry ecosystem partners, Nenglian ZhiDian will be more widely recognized by market parties, thus having the potential to enjoy higher valuation premiums.
As for profit expectations, there are two major catalysts for charging services in the second half of the year: first, the proportion of profitable orders in the second quarter has risen to 70%, highlighting the effectiveness of Nenglian ZhiDian's operating strategy, and with the continuous growth of ownership, the company still has room to improve its profitability. Second, with operational efficiency becoming a key industry concern, charging operators can rely on high-quality services to increase service fee income for orders, and there are already cases of operators raising prices in the market. The continuation of this trend will accelerate its profitability. Nenglian ZhiDian achieved positive operating-side profitability in June and set a goal of continuing profitability in the third and fourth quarters of this year. With the continuous release of Nenglian ZhiDian's performance in the second half of this year and next year, its share price is expected to see excess returns driven by value revaluation, and now may be a good time to lay out.
With the continuous improvement of Nenglian ZhiDian's charging service profitability and the continued efforts of the energy solution, the profit expectations presented in this financial report have eliminated the biggest factor suppressing Nenglian ZhiDian's valuation premium.
With the continuous release of Nenglian ZhiDian's performance in the second half of this year and next year, its share price is expected to see excess returns driven by value revaluation, and now may be a good time to lay out.