By Brian Lantier, CFA
NASDAQ: CBAT
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CBAK Energy Technology (NASDAQ: CBAT) released its first-quarter 2026 results shortly after the market opened on Monday, May 18th, which demonstrated a meaningful year-over-year increase in customer demand and strong pricing for the company's battery raw materials business. As anticipated, the company's new supply capacity at Dalian and Nanjing is experiencing strong demand across several markets. The company ramped its capacity meaningfully in the fourth quarter. As of the first quarter of 2026, we believe that the company is now operating at least 8.3 GWh of capacity across 3 facilities.
The significant expansion of the Nanjing facility (growing from 1.5 GWh to 4.5 GWh) will likely take longer to fully come online, and we are now forecasting that this expansion will last into early 2027, though management indicated it expects the ramp-up to be substantially complete by the second half of 2026. The success of this first meaningful expansion by CBAK is important because the company's management continues to have ambitious growth plans, aiming to reach a total capacity of 38 GWh.
Total battery sales were about 16% above our forecast at $37.5 million for the quarter, with almost all of the outperformance driven by significant demand for Light Electric Vehicle cells, which topped $15 million for the first time.
Demand for the company's 32140 cells produced at the Nanjing facility remains robust, and by focusing on markets such as India, Vietnam, and Africa, the company has been able to avoid some of the global trade challenges that continue to affect the market.
The market for battery raw materials continues to outperform as battery inputs remain in very high demand. The sharp turnaround in the raw materials business continued in the first quarter of 2026, as supply remained constrained worldwide, but demand remained very strong. CBAK reported raw material sales of roughly $32 million in the fourth quarter, about $5 million below our aggressive forecast.
We are adjusting our 2026 EPS estimate to a ($0.11)/share loss, largely as a result of the Q1 results, and our 2027 estimate to $0.24/share. Our 2027 forecast assumes that the raw material business remains profitable and that margins in the battery business return to historical norms once pricing increases are passed along to customers and production lines achieve operating efficiency after full installation.
We are not adjusting our target valuation, which remains $1.50/share, but we believe CBAK continues to have a very compelling valuation while both of its business lines are on the verge of major upswings. Patient investors may have to wait through another quarter or two to see results, but the upside from these levels is significant if CBAK hits our goals in late 2026 and 2027.
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