As green hydrogen production technology matures and the proportion of renewable energy such as wind power increases, electricity costs decrease. In the future, hydrogen energy and hydrogen-based fuels are expected to play a crucial role in the energy system, with global hydrogen demand expected to reach 0.15 billion tons by 2030.

Although the industry has broad prospects, hydrogen energy companies, especially those in the hydrogen fuel cell sector, do not currently show optimistic performance. The two concept stocks of hydrogen fuel cell companies listed last year, Yihuatong (02402) and Guohong Hydrogen Energy (09663), both incurred losses in the first half of the year, with losses of 0.141 billion yuan and 0.2 billion yuan respectively.

As the two hydrogen fuel cell companies face profitability challenges, another player in this field is attempting to re-enter the Hong Kong Stock Exchange market.

According to the Hong Kong Stock Exchange disclosure on September 2nd, Shanghai Reshuffle Energy Group Co., Ltd. (referred to as Reshuffle Energy) has once again submitted an application to the Hong Kong Stock Exchange main board, with China International Capital Corporation as its sole sponsor. The company had previously submitted an application to the Hong Kong Stock Exchange on February 29th this year. It is worth noting that the Hong Kong Stock Exchange is not the first choice for Reshuffle Energy's listing. As early as March 2021, Reshuffle Energy had submitted a listing application to the Star Market with plans for an IPO.

Accumulated losses of 2.2 billion yuan over the past three and a half years.

According to the prospectus, Reshuffle Energy is a leading Chinese hydrogen energy technology company. During the reporting period, Reshuffle Energy focused on the design, development, manufacturing, and sales of hydrogen fuel cell systems, hydrogen equipment, and related components, while providing hydrogen fuel cell engineering development services to meet customer needs, enabling them to provide one-stop solutions for hydrogen production and end-use applications.

From 2021 to May 31, 2024 (referred to as the reporting period), the company's revenues were 0.524 billion yuan, 0.605 billion yuan, 0.885 billion yuan, and 12.521 million yuan respectively, showing an overall upward trend. However, during the same period, the company faced significant losses, with losses of 0.654 billion yuan, 0.546 billion yuan, 0.578 billion yuan, and 0.409 billion yuan, accumulating to 2.2 billion yuan in losses over the past three and a half years.

In terms of business segments, the sales of fuel cell systems and components are the company's main business. The revenue for the period was 51.4 billion yuan, 57.4 billion yuan, 85.7 billion yuan, and 8.987 million yuan, accounting for 98%, 94.9%, 95.8%, and 71.8% of total income respectively. The income from providing fuel cell engineering development services was 7.251 million yuan, 26.473 million yuan, 23.444 million yuan, and 0.966 million yuan, accounting for 1.4%, 4.4%, 2.6%, and 7.7% of total revenue. The sales of hydrogen equipment and related components contributed only 7.681 million yuan in revenue in 2023, accounting for approximately 0.9% of total revenue. Overall, the sales of fuel cell systems and components are the company's revenue growth engine and significantly increased in 2023, driving a year-on-year revenue growth of 49.5%.

The continuous increase in revenue while being deeply mired in losses is due to the observations of costs, gross margin, and expenses.

Firstly, the company's sales costs have expanded with the growth of revenue. From 2021 to 2023, the company's sales costs were 46.2 billion yuan, 55.5 billion yuan, and 71.6 billion yuan, with year-on-year growth of 20.1% and 29%, accounting for 88.2%, 91.8%, and 79.9% of revenue respectively. During the same period, the proportion of raw material costs to sales costs was 87.0%, 83.2%, and 88.5%.

According to the Securities Times app, such high raw material costs are not common in manufacturing companies. Generally, the proportion of raw materials in manufacturing companies does not exceed 50%. High raw material costs have led to significant inventory impairment losses. For example, from 2021 to 2022, the company's inventory impairment amounts were 47.671 million yuan and 82.113 million yuan. For a company with an annual income of only 0.6 billion yuan, a inventory impairment of over 80 million yuan is considered high.

Secondly, from a gross profit perspective, during the reporting period, the company's gross profit was 61.785 million yuan, 49.823 million yuan, 180 million yuan, and -24.202 million yuan, with gross profit margins of 11.8%, 8.2%, 20.1%, and -193.3% respectively. Overall, the company's gross profit performance has been quite volatile. After reaching a new high in gross profit alongside revenue in 2023, the first 5 months of 2024 recorded a loss.

In a horizontal comparison, the company's profit level is significantly lower than its peer Yihuatong. The gross profit margins of Yihuatong in the past three years were 37.9%, 38.4%, and 32.5% respectively.

From the perspective of expenses, high administrative and sales expenses have led to high overall expenses. From 2021 to 2023, the company's administrative expenses were approximately 21.8 billion yuan, 24.3 billion yuan, and 34 billion yuan, showing a significant upward trend and accounting for approximately 41.6%, 40.1%, and 37.9% of current revenue. During the same period, research and development expenses showed a fluctuating decrease, amounting to 23.1 billion yuan, 19.9 billion yuan, and 22.1 billion yuan, accounting for approximately 44.1%, 32.9%, and 24.7% of current revenue, respectively. Sales and marketing expenses were approximately 90.475 million yuan, 103 billion yuan, and 135 billion yuan, accounting for approximately 17.3%, 17.0%, and 15.1% of current revenue. According to the Securities Times app, the continuous increase in administrative expenses of Rongsheng Energy is due to the increase in employee compensation caused by the stock incentive plan.

In summary, poor performance in costs, gross margin, and expenses led to the company's sustained losses.

What's worse, reshaping energy has weak industry discourse power, and the accounts receivable and contract assets (net of impairments) amounts to 1.2 billion yuan, 1.5 billion yuan, 2 billion yuan, and 1.9 billion yuan respectively, accounting for 47.8%, 36.7%, 50.0%, and 51.4% of the total assets of the same period. It can be seen that the expansion of its business scale has not been converted into real money and silver on the books, resulting in the highlight of its liquidity crisis.

During the reporting period, the operating cash flow of reshaping energy has been continuously negative, with approximately -0.768 billion yuan, -0.728 billion yuan, -0.718 billion yuan, and -0.144 billion yuan respectively. In order to maintain its livelihood, the company can only rely on borrowing to survive. From 2021 to 2023, the company raised a total of 2.637 billion yuan in funds through financing activities. During the same period, the interest-bearing bank and other loans ranged from 0.654 billion yuan to 0.934 billion yuan.

As of May 31, 2023, the company's cash and cash equivalents amounted to only 0.436 billion yuan. Judging from the company's cash usage during the reporting period, the funds of 0.436 billion yuan can only sustain the operation of reshaping energy for about six months. The company's determination to go public can be described as urgent.

The '1+N' policy system for hydrogen energy is gradually improving, and the promotion process of fuel cells is expected to accelerate significantly.

In recent years, our country has attached great importance to the development of the hydrogen energy industry and has issued a series of support policies, providing strong guarantees for the rapid rise of the hydrogen energy industry.

In March 2022, the 'Long and Medium-Term Development Plan for the Hydrogen Energy Industry (2021-2035)' (referred to as the 'Plan') was released, providing strategic guidance and action guidelines for the development of the hydrogen energy industry; proposing to accelerate the construction of the '1+N' policy system. Looking at the domestic hydrogen energy policy landscape in 2024, we can see two highlights: first, the level of top-level attention has increased, and the national policy system continues to improve; second, local top-level designs have been successively introduced, and supporting policies are being rapidly promoted.

For example, at the national policy level, in March, the National Energy Administration issued the 'Guidance Opinions on Energy Work in 2024', proposing to formulate relevant policies to promote the high-quality development of the hydrogen energy industry and pay attention to the implementation of follow-up policies. Local top-level designs have been successively introduced, and supporting policies are being rapidly promoted.

More importantly, the 'Plan' points out that the target for fuel cell vehicle ownership will reach 0.05 million vehicles by 2025. Public data shows that the cumulative sales volume of fuel cell vehicles in China from 2015 to 2023 was 18,494 and 18,096 vehicles, respectively. If the target is achieved, the sales volume in 2024 and 2025 will need to reach 15,952 vehicles per year, indicating a clear upward trend.

From the perspective of enterprises, the decrease in the cost of hydrogen fuel cell systems and fuel cell stacks will significantly reduce the cost of hydrogen fuel cell vehicles, thereby accelerating the commercialization of downstream hydrogen applications.

In recent years, fuel cell companies have achieved rapid cost reductions. For example, Yihuatong's fuel cell system cost decreased from 0.0103 million yuan/kW in 2019 to 0.0025 million yuan/kW in 2023, with a compound annual decrease of 30.1%; Guohong Hydrogen's cost compound decrease from 2019 to 2023 was 25.0%. The increase in system unit power cost in 2022 was mainly due to the product structure. If only the unit power cost of the stack is considered, it continues to decrease, with a decrease of 26.2% in 2022, and compound decreases in costs from 2020 to 2023 were 18.4%. It is expected that with the gradual increase in fuel cell vehicle production in the future, economies of scale will further drive cost reduction.

CICC pointed out that by 2025, the first planning milestone will be reached, and the promotion process of fuel cells is expected to accelerate significantly.

In terms of reshaping energy, the company is the first enterprise in the hydrogen fuel cell field in China to independently develop and mass-produce fuel cell stacks, membrane electrodes, and bipolar plates. Reshape Energy has PEM and ALK electrolysis products. As of May 31, 2024, Reshape Energy's hydrogen fuel cell systems have powered over 5900 fuel cell vehicles in China. As of the same date, these vehicles have accumulated a total mileage of about 210,000,000 kilometers and reduced carbon emissions by approximately 116,851 tons.

Reshape Energy has established business relationships with several well-known international companies in the hydrogen fuel cell industry, such as Schaeffler Group from Germany and Toyota Motor from Japan. In addition, Reshape Energy, together with Great Wall Motor, Weichai Power, State Energy Group, and China Petroleum & Chemical Corporation, has become one of the first Chinese companies to join the International Hydrogen Council.

According to the data from Frost & Sullivan, Reshape Energy ranks first in the Chinese hydrogen fuel cell system market in terms of sales output power of hydrogen fuel cell systems in 2023, with a market share of 23.8%. According to the total sales output power of hydrogen fuel cell systems carried by heavy-duty trucks in 2023, Reshape Energy ranks first in the Chinese hydrogen fuel cell system market, with a market share of 42.4%. According to the total sales revenue of hydrogen fuel cell systems carried by heavy-duty trucks in 2023, Reshape Energy ranks first in the Chinese hydrogen fuel cell system market, with a market share of 29.4%. According to the total sales revenue of hydrogen fuel cell systems in 2023, Reshape Energy ranks third in the Chinese hydrogen fuel cell system market.

It is worth noting that Yihuatong and Guohong Hydrogen are currently both trading below their IPO prices. Especially Yihuatong's current stock price is only 23.7 Hong Kong dollars, down 61% from the issue price. In terms of performance comparison, Reshape Energy currently does not have an advantage. If the company successfully goes public, how to gain favor from investors is also a major challenge.