We are a leading provider of fuel cell systems in China, focusing on the design, development and manufacture of fuel cell systems and stacks (a key component of the system) mainly for commercial vehicles, such as buses and trucks. According to the CIC Report, we ranked first in the PRC fuel cell system market in terms of the total power output of fuel cell systems sold in 2021, with a market share of 27.8%; and in 2021, fuel cell systems accounted for approximately 0.8% of the total sales volume of new energy systems for commercial vehicles, while lithium battery systems accounted for the rest of the total sales volume. As of June 30, 2022, our fuel cell systems were installed on 80 models of fuel cell vehicles that are featured in the MIIT New Energy Vehicle Catalogs, ranking us first in the industry.
We generate revenue primarily from the (i) sales of fuel cell systems, (ii) sales of fuel cell components, and (iii) provision of technology development services. Our products cover a wide power output spectrum from 30kW to 240kW, enabling us to meet various customer demands and multiple application scenarios. Our products are mainly used by commercial vehicles such as city buses, intercity buses and cold chain logistics vehicles. We established solid long-term partnerships with commercial vehicle manufacturers in China such as Beiqi Foton, Yutong Bus and Geely Commercial Vehicles. We also participate in international collaborations and codeveloped with Toyota and Beiqi Foton transit buses using our fuel cell systems which are designated as the official transport vehicles at the Beijing 2022 Olympic Winter Games. Since the launch of our first commercialized product in 2016, we have sold an aggregate of over 2,900 units to over 20 commercial vehicle manufacturers in China. Our fuel cell systems are installed on commercial vehicles operating across various PRC cities, including Beijing, Zhangjiakou, Shanghai, Chengdu, Zhengzhou and Zibo. As of the Latest Practicable Date, our fuel cell systems have powered over 2,700 fuel cell vehicles on the road in China. These vehicles had an average mileage of around 40,000 kilometers per vehicle, accumulating over 103.0 million kilometers and 2.3 million hours of operations, which built an industry leading record.
We were initially listed on the NEEQ in 2016 and raised an aggregate amount of RMB790 million through equity financing. In August 2020, we became listed on the SSE STAR Market, and since then we have raised an aggregate amount of RMB1.55 billion through equity financing. We believe our equity financing capabilities reflect the recognition of the capital markets and investors of us, which gave us more flexibility in making substantial capital investments, putting us in a more advantageous position than our peers.
During the Track Record Period, although we have experienced net losses since 2020, our revenue grew from RMB553.6 million in 2019 to RMB572.3 million in 2020 and further to RMB629.4 million in 2021, and from RMB117.8 million in the six months ended June 30, 2021 to RMB269.1 million in the same period in 2022. Going forward, we believe that we can grow our revenue and gradually improve our operating leverage as we continue to implement our strategies. This is based on the assumptions that the future growth of the fuel cell vehicle industry and the fuel cell system industry is in line with our anticipation and PRC government’s supportive policies and planning toward the fuel cell vehicle industry remained unchanged and in line with our anticipation. However, considering that (i) the fuel cell vehicle industry in China is still at an early stage, (ii) we may face difficulties and unexpected risks in the process of exploring the large-scale commercialization of our products, and (iii) the outbreak of COVID-19 may continue to have an adverse impact on our business operations, we expect to continue to record net losses until at least 2025.
Our Industry. The fuel cell industry in China is largely driven by the PRC government policies. In recent years, the PRC government has implemented policies and development plans favorable to the development of hydrogen energy. In particular, in March 2022, the NDRC issued the Medium- and Long-term Development Plan for Hydrogen Industry (2021–2035) 《( 氫能產業發展中長期規劃（2021–2035年）》), proposing to (i) promote the diversified hydrogen energy applications including fuel cell systems, (ii) improve the core technologies of fuel cell systems, (iii) accelerate the construction of hydrogen energy infrastructure, and (iv) support enterprises with strong innovative capabilities. The favorable government policies will directly benefit the manufacturers of core fuel cell components, key raw materials for fuel cell stacks, fuel cell systems and fuel cell vehicles. See ‘‘Regulatory Overview — Government Policies Relating to Fuel Cells’’. According to the CIC Report, the PRC government has long considered fuel cell technologies as key to new energy vehicles in China and has made strategic plans since early 2000s. We believe as China proceeds to achieve carbon emissions peak and carbon neutrality, the central and local governments are expected to continue to promote the development of fuel cell vehicles. For example, the Shanghai government has issued policy initiatives which, among others, (i) reward manufacturers that produce fuel cell vehicles or core fuel cell components, such as fuel cell stacks, MEA, bipolar plates and PEM; (ii) provide incentives to the operators of fuel cell trucks and buses; (iii) increase subsidies to the building of hydrogen refueling stations; and (iv) subsidize hydrogen sale. The PRC government usually reviews or updates the subsidy policy for fuel cell vehicles at the beginning of each year. Given that China’s fuel cell vehicle industry is still developing, it will continue to be affected by government subsidies and the annual periodicity of automobile production in the foreseeable future.
According to the CIC Report, the implementation of the favorable government policies would strongly increase the demand for hydrogen energy applications especially hydrogen fuel cell vehicles and propel the development of the fuel cell vehicle industry. In particular, the annual sales volume of the fuel cell vehicles in China increased from approximately 1,300 in 2017 to approximately 1,600 in 2021, and is expected to increase significantly to 48,200 in 2026, representing a CAGR of 97.7% for the period from 2021 to 2026. Meanwhile, the annual sales volume of fuel cell systems is expected to increase from approximately 2,200 units in 2021 to approximately 52,900 units in 2026, representing a CAGR of 89.5%. In addition, the China Society of Automotive Engineers also projected that there would be over one million fuel cell vehicles on the road in China by 2035. We believe such expected increasing demand in the industry will benefit our business development, including retaining and increasing our customer basis, increasing our sales volume and strengthening our supply chains. According to the CIC Report, the total hydrogen production from fossil fuels represented by coal and natural gas accounts for 81%, industrial by-product gas accounts for 18%, and electrolyzed water accounts for approximately 1% in 2021. In the medium-to-long term, blue hydrogen (hydrogen produced with fossil energy combined with carbon capture technology) and green hydrogen (hydrogen produced from renewable energy sources) will be the key direction of the development of China’s hydrogen production industry.
Fuel Cell System. A fuel cell system combines hydrogen and oxygen in the fuel cell stack, converting chemical energy into electricity without combustion and producing water as by-product. Compared to the internal combustion engine, a fuel cell system is also quiet in operation because the electrochemical reaction requires few movements of components. In general, a fuel cell system in operation produces zero carbon emissions and is durable under low temperature, highly efficient and quiet.
A fuel cell system is composed of the fuel cell stack, electrical system, hydrogen supply system, air supply system and cooling system. The system maintains proper internal temperature, pressure and humidity through a controlling unit.
Source: SinoHytec (02402) Prospectus (IPO Date : 2022/12/29) |