In Q2 of this year, Nenglian Smart Energy's revenue reached RMB 91.7 million, an increase of 89% year-on-year. At the same time, Nenglian Smart Energy's profitability was affirmed, with both net loss and net loss rate significantly reduced to a historical low. The company's gross profit in the reporting period reached RMB 30.5 million, a YoY increase of 59%.

Capital markets have given positive feedback on this. On July 24th, despite the lackluster performance of the US stock market, Nenglian Smart Energy soared more than 26% that day, with its volume and price rising throughout the day and finally rising against the trend by 6.14%.

Next, we can explore the fundamentals and future prospects of Nenglian Smart Energy by looking at its development path and valuable clues revealed in its financial report.

The first thing that caught the author's attention is that Nenglian Smart Energy achieved monthly operating profit for the first time in June this year. This is another important milestone for the company after achieving a positive turnaround in order side in January this year.

The reason why profitability has been continuously improved is the trend of shifting the strategic focus of Nenglian Smart Energy, that is, from "expanding scale" to "prioritizing profitability". During the reporting period, Nenglian Smart Energy's charging service business achieved positive network effects, with the proportion of orders with positive NTR reaching 70%, once again creating a new historical record.

Why did this change happen?

From the perspective of the industry, high-quality development is a consensus among the industry and capital markets under the current market environment. Currently, the entire industry has entered the stage of refined operation and quality improvement, and needs to rely on precise operation for quality improvement and expansion of new development space.

After years of development, the operation of charging piles has entered the second half, and the industry has gradually shifted from focusing on quantity to focusing on quality, from focusing on assets to focusing on operation. After cultivating the market in the early stage, user awareness has been formed, and there is no need to seize user awareness through large-scale marketing and subsidies as before. The company's marketing expenses in Q2 of this year were RMB 51.86 million, a YoY decrease of 40%.

In addition to making precise strategic adjustments in line with the trend of industrial development, the tactical adjustments of Nenglian Smart Energy are also important. It pays more attention to internal efficiency, optimizes internal operation processes, improves daily business operation efficiency, and significantly reduces operation costs through the construction of operation and management capabilities. The company's total operating costs in Q2 reached RMB 1.24 billion, a YoY decrease of 65%.

Looking at the trend over time, it is inevitable that the penetration rate of new energy vehicles will continue to increase. According to forecasts by the China Association of Automobile Manufacturers, China's total auto sales are expected to exceed 31 million in 2024, an increase of more than 3%. In 2024, the sales of new energy vehicles will be 11.5 million, a YoY increase of about 21%. In addition, according to data from the Ministry of Public Security, as of the first half of 2024, the total number of new energy vehicles in the country has reached 24.72 million, accounting for only 7.18% of the total number of vehicles.

With only a single-digit percentage of ownership, Nenglian Smart Energy's operational side has already entered the profitable stage. If we extrapolate based on the rapid growth trend of new energy vehicle sales, it is not difficult to see that the problem of the proportion of new energy vehicle ownership exceeding 15% by 2025 is minor, and the long-term growth space of the charging service business will also increase. By seizing user awareness in advance, coupled with refined operation and diversified service capabilities, and continuously releasing scale effects, the company's profitability should logically climb to a new level.

In addition, this financial report also reveals a key piece of information.

Breaking down the company's business structure, in Q2 of 2024, Nenglian Smart Energy's charging service revenue was RMB 44.77 million, accounting for 48.8% of the total revenue; energy solutions revenue was RMB 43.98 million, accounting for 48.0% of the total revenue; and innovative business revenue was about RMB 2.95 million.

Since the third quarter of last year, Nenglian Smart Energy's business classification has changed from online, offline, and innovative business to charging services, energy solutions, and new business revenue. This also means that Nenglian Smart Energy's business structure has shifted from the previously emphasized online aggregation business revenue to the dual-drive of charging services and solutions. From this quarter's financial report, the proportion of the company's various businesses has become more evenly balanced and stable.

If 2023 is a turning point for value upgrading, Nenglian Smart Energy is no longer just a pure charging service provider, but is gradually growing into a role of energy asset operator. Today, Nenglian Smart Energy has become a mature energy asset operator with its two main businesses gradually entering the right track supporting the company's growth, its business structure has become healthier, and its risk resistance has been further enhanced. It seems that Nenglian Smart Energy is steadily moving towards its self-set strategic goal of steady progress towards profitability and then comprehensive profitability.

In the current market environment, achieving profitability and maintaining good cash flow is crucial. They are the foundation for the survival and development of enterprises and ensure that they can maintain competitiveness and sustainable development in the fiercely competitive market. During the reporting period, Nenglian Zhidian's operating cash flow also turned positive for the first time in history, reaching 13.1 million yuan, while it was -56.2 million yuan in the same period last year. Looking at this report card, Nenglian Zhidian did it, and did it pretty well. Product structure, operating income of 10-30 billion yuan products were 401/1288/60 million yuan respectively.

This financial report also revealed a heavyweight information: the company has reached an important turning point for high-quality development, and the goal is to maintain profitability in the second half of the year.

The core logic of sustained profitability not only includes strategic adjustments mentioned earlier, but also lies deeper in the fact that Nenglian Zhidian continues to expand its ecosystem, improve service quality, and build a long-term moat. Further analysis needs to focus on two key points.

One is to focus on automatic driving energy supply.

This is a new business area that Nenglian Zhidian has rapidly landed on based on its technical reserves. It reflects its deep cultivation of the charging scene and is also an important growth point in the future.

A landmark event is that in July of this year, Nenglian Zhidian and Baidu's high-end intelligent automobile robot brand Ji Yue Cooperate to provide car owners with a "rechargeable everywhere" experience. This means that Nenglian Zhidian will achieve advanced development in convenience and intelligence. According to the plan, you can enjoy a "one-click pile finding, one-click charging, one-click payment" service by simply scanning the code, which can greatly improve the efficiency of finding piles; the cooperation itself also reveals Nengelian Zhidian's landing capability in automatic supplementing.

In addition to the brands that have established cooperation such as "Wei Xiaoli", Ji Hu, and Lan Tu, as well as the internet and vehicle networking platforms such as Tencent Smart Travel and Green Smart Alliance, Nenglian Zhidian has basically achieved coverage of the mainstream new energy host plants in China and built a huge and perfect service ecosystem, providing strong impetus for future automatic driving and smart charging.

Compared with imagination, automatic driving comes earlier and faster.

Since this year, unmanned taxis such as Carrots Running have accelerated their landing and trial operation, and have continuously expanded their service coverage and user scale. In terms of Carrots Running, the single-day peak order volume of unmanned taxis in Wuhan in July exceeded 20 orders, which is already comparable to the order volume of traditional taxis.

Also in July, 20 cities including Beijing, Shanghai, and Shenzhen launched intelligent networked automobile application pilots, promoting the acceleration of intelligent driving from small-scale testing and verification to large-scale landing.

This shows that the convenience and intelligence of charging services are imperative and need to be transformed urgently. Nenglian Zhidian has and continues to consolidate its first-mover advantage, and can continue to realize incremental increases in the new trend.

Second, explore the AI technology to empower the industry.

As mentioned earlier, the huge market potential of public charging piles in China is beyond doubt, but problems such as low efficiency of supply-demand matching and insufficient high-quality supply still plague the industry's development. These problems not only affect the charging experience of users, but also limit the further expansion of the market. Especially with the continuous increase of the penetration rate of new energy vehicles, it is about to reach a critical point, and the market demand for charging facilities will further increase, and it also puts forward higher requirements for the construction and optimization of charging infrastructure.

In such a context, AI technology, with its powerful data processing and analysis capabilities, can just solve this pain point and "escort" the long-term development of the industry.

Based on this understanding, Nenglian Zhidian launched the NEF (NAAS Energy Fintech) system last year, which achieved comprehensive intelligence of charging station location selection, revenue evaluation, operation scheduling, and operation and maintenance through artificial intelligence algorithms, greatly improving operational efficiency.

In short, the application of the NEF system can help charging station operators optimize resource allocation, improve service quality, and enhance user loyalty. This not only helps to enhance the value of the company's open platform, but also contributes to the construction of an intelligent, efficient, and sustainable energy ecosystem in the context of the integration and interaction of new energy vehicles and power grids. This deep service capability not only fills a key gap in the charging industry chain, but also brings the company more opportunities for cooperation and market expansion.

Of course, the advanced nature of any theory needs to be verified by practical applications.

In March of this year, Nenglian Zhidian reached a cooperation with Jurun New Energy, a leading charging operator in central China, and through the NEF system, realized the intelligent location selection, hardware supply, construction and operation of charging stations, predictable charging volume, intelligent matching of supply and demand, and guaranteed investment return.

This is the first large-scale landing application of AI models in actual business. Nenglian Zhide expects the project to be completed and delivered in the third quarter of this year. At that time, it may bring new demonstration effects to the industry, and the new energy asset service market will also usher in growth dividends.

In addition, in July of this year, the "Zhejiang Province Charging Infrastructure Governance and Supervision Platform", which Ninglian Zhide participated in the construction of, was officially launched. Based on real-time model guidance, the platform makes the layout of charging facilities more scientific and reasonable, and the operation efficiency higher. It is an important upgrade of the existing charging infrastructure and a positive exploration of the future development of the industry.

In June, it achieved monthly operational profitability, continuous improvement of gross margin rate, and charging service revenue higher than the industry average growth rate. These are the specific manifestations of Nenglian Zhide's business model and strategic layout.

As the famous economist Joseph Schumpeter pointed out, "Economic development depends not on the accumulation of resources, but on the accumulation of innovation." Nenglian Zhide constantly innovates and optimizes, cooperates with major brands, continuously expands the coverage of customers, improves the convenience of charging services, and relies on AI technology to empower and solve industry pain points, while taking into account the dual improvement of profitability and business quality.

Therefore, we have reason to believe that Nenglian Zhide may continue to realize incremental benefits in the new trend. As the ownership and penetration rate of new energy vehicles increase, the market's understanding of the entire charging service industry gradually deepens, and the understanding of Nenglian Zhide's investment value will also become deeper.