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Wanbang Digital Energy Reports Surging Revenue but Declining Net Profit: Gross Margin Slides, Spins Off Xingxing Charging Ahead of Filing

$Wanbang Digital Energy Co., Ltd. (811045.HK)$

Earlier this year, Wanbang Digital Energy Co., Ltd. (hereinafter referred to as 'Wanbang Digital Energy') submitted its listing application to the Hong Kong Stock Exchange, which has been accepted. JPMorgan, Guotai Junan International, and CMB International are acting as joint sponsors.

Public records show that in September 2020, Wanbang Digital Energy signed a guidance agreement with Guotai Junan Securities, planning an A-share listing, but voluntarily terminated the process in June 2023. At the beginning of 2024, the company planned a Hong Kong listing, but the plan was shelved due to failure to formally file. In October 2024, the company restarted A-share guidance with Guotai Junan Securities as the sponsor. In November 2025, it terminated A-share listing guidance once again.

The energy charging and energy storage sector, in which Wanbang Digital Energy operates, is becoming increasingly competitive, and the company's earnings quality faced certain challenges during the period. Not only did it experience revenue growth without corresponding profit growth and a decline in gross margin, but its accounts receivable also surged sharply. Moreover, just before its listing, the company completed a major business restructuring, spinning off its well-known Xingxing Charging operation—a move that raises the question: will this adjustment bring positive effects to the company?

Revenue growth without profit growth, and a significant decline in gross margin

According to Tianyancha, Wanbang Digital Energy was founded in 2014 and is a globally leading supplier of intelligent charging equipment, specializing in the intelligent charging equipment sector.

According to data from Frost & Sullivan, Wanbang Digital Energy was the first Chinese supplier of intelligent charging equipment to receive certification from premium international automakers, offering highly compatible products and services that meet stringent requirements set by original equipment manufacturers (OEMs) for charging infrastructure.

The aforementioned data indicates that, based on revenue and unit sales in 2024, the company is the world's largest supplier of intelligent charging equipment. In 2024, Wanbang Digital Energy sold over 470,000 units of intelligent charging equipment globally, capturing a market share of 5.3%.

During the historical reporting period, Wanbang Digital Energy’s revenue primarily came from intelligent charging equipment and services, microgrid systems, and large-scale energy storage systems. Intelligent charging equipment and services specifically include DC charging equipment, AC charging equipment, installation services, and others (primarily comprising customized equipment development, out-of-warranty repair services, spare parts sales, and other technical services).

For the fiscal years 2023 and 2024, and for the nine months ended September 2025 (hereinafter referred to as the 'Reporting Period'), revenue from intelligent charging equipment and services amounted to RMB 3.209 billion, RMB 3.257 billion, and RMB 2.183 billion, respectively, accounting for 92.4%, 77.9%, and 71.1% of total core business revenue in each respective period.

Although revenue from intelligent charging equipment and services increased slightly in 2024, its proportion of total revenue declined significantly compared to 2023, primarily due to the growth of the company’s microgrid systems and large-scale energy storage systems segments.

During the Reporting Period, revenue from microgrid systems amounted to RMB 265 million, RMB 516 million, and RMB 608 million, representing 7.6%, 12.3%, and 19.8% of total revenue in each respective period.

Wanbang Digital Energy stated: 'The increase in microgrid system revenue in 2024 was primarily driven by rising market demand and enhanced supply capabilities, which garnered greater customer recognition and led to an increase in the number of customers purchasing our microgrid systems.'

From January to September 2025, on the back of an increasing number of customers purchasing microgrid systems, Wanco Digital Energy launched an upgraded microgrid system featuring enhanced configuration and performance, as well as optimized energy utilization efficiency, which contributed to revenue growth in this segment.

The utility-scale energy storage systems segment remains in an early stage of development. Revenue from this segment amounted to RMB 4.09 billion in 2024 and RMB 2.81 billion for the first nine months of 2025, representing 9.8% and 9.1% of total revenue during the respective periods. Notably, revenue from utility-scale energy storage systems in the first nine months of 2025 declined by 31.3% year-over-year, primarily due to the timing of revenue recognition.

Wanco Digital Energy sells its products in mainland China, the Asia-Pacific region, Europe, the Americas, and other countries and regions. During the reporting periods, revenue from mainland China accounted for approximately 80%, specifically 74.8%, 83.5%, and 81.4% respectively. Revenue generated overseas amounted to RMB 8.74 billion, RMB 6.92 billion, and RMB 5.73 billion, representing 25.2%, 16.5%, and 18.6% of total revenue in the respective periods.

In terms of overall financial performance, Wanco Digital Energy reported revenue of RMB 34.74 billion, RMB 41.82 billion, and RMB 30.72 billion during the reporting periods, with net profits of RMB 4.93 billion, RMB 3.36 billion, and RMB 3.01 billion, corresponding to net profit margins of 14.2%, 8.0%, and 9.8%, respectively.

Despite steady growth in revenue, Wanco Digital Energy’s net profit did not rise in tandem as expected. In 2024, the company’s net profit declined by 31.85% year-over-year, and its net profit margin fell by 6.2 percentage points compared to the prior year, reflecting a notable deterioration in profitability.

Meanwhile, regarding the rapid growth in revenue, the company also noted that its operating performance during the reporting periods may not be indicative of future results. For the first nine months of 2025, the company recorded a one-time gain of RMB 1.96 billion from asset disposals, accounting for 58.4% of its pre-tax net profit during the same period. This gain primarily arose from the transfer of assets related to a joint venture to Schneider eStar.

During the reporting periods, Wanco Digital Energy’s gross profit margins were 33.4%, 29.2%, and 24.6%, respectively, showing a continuous decline across periods, with an aggregate decrease of 8.8 percentage points—a significant drop.

Accounts receivable surged sharply, with a debt-to-asset ratio of 96%.

In its ordinary course of business, Wanco Digital Energy is also exposed to credit risk arising from trade receivables and bills receivable from downstream customers.

At the end of each reporting period, the company’s trade receivables and bills receivable stood at RMB 16.99 billion, RMB 24.76 billion, and RMB 27.32 billion, respectively, with average days sales outstanding (DSO) of 186.4 days, 182.1 days, and 228.9 days. Not only has the scale of accounts receivable soared, but collection efficiency has also markedly slowed during the periods, with the collection cycle exceeding seven months.

The company stated that the increase in days sales outstanding (DSO) for trade receivables and notes receivable was primarily due to the fact that most customer payments are typically settled in the fourth quarter. As customers in the smart energy industry usually initiate their accounts reconciliation process only after receiving payments from their own customers, the company’s turnover of trade receivables and notes receivable has been affected accordingly.

Additionally, at the end of each reporting period, Wanshun Digital Energy’s inventory and contract costs amounted to RMB 860 million, RMB 978 million, and RMB 10.53 billion, respectively, rising significantly during the period. Inventory turnover days were 130.3 days, 113.3 days, and 118.3 days, respectively.

Yuan Shuai, Deputy Secretary-General of the Zhongguancun Internet of Things Industry Alliance, commented: 'Based on the typical operational patterns of the energy services sector, Wanshun Digital Energy exhibits high receivables, high inventory levels, and significant cash flow occupation. First, among its customer base in energy digitalization services, grid companies, local urban investment platforms, and large industrial and commercial parks represent a very high proportion. These clients have stringent budget approval and payment procedures, often requiring three to six months—or even longer—from project completion and acceptance to final payment settlement. As the company rapidly expands its business scale, newly generated project revenues naturally correspond to rising receivables. Moreover, due to economies of scale, the growth rate of total receivables temporarily outpaces revenue growth—a typical financial characteristic of B2B energy service companies during their growth phase.'

Second, the high inventory levels are closely tied to the company’s strategic business direction. As a service provider deeply engaged in EV charging and battery-swapping infrastructure and energy management systems, the company must proactively stockpile core components such as charging pile modules, energy storage cells, and industrial control hardware. This is partly to hedge against upstream supply chain volatility in pricing and capacity, thereby avoiding disruptions to project delivery schedules when critical components like chips or cells become scarce.

Furthermore, nationwide deployment of localized projects requires pre-positioning inventory across multiple regional warehouses to shorten delivery lead times and capture market share. This practice keeps inventory levels elevated as the business scales. The resulting heavy cash flow occupation is precisely the combined effect of high receivables and high inventory: upstream component procurement often demands advance payments or deposits, while downstream client settlements involve extended credit terms. In addition, inventory stocking and project execution require upfront capital outlays. Energy service projects also typically entail substantial upfront R&D and construction expenditures with long payback periods. The convergence of these factors inevitably leads to cash flow pressure—a common phenomenon among growing companies in the new energy and energy digitalization sectors, reflecting a transitional financial profile during aggressive market expansion and long-term capacity building.

Due to elevated levels of trade receivables, notes receivable, and inventory, a significant amount of working capital was tied up during the period. At the end of each reporting period, Wanshun Digital Energy’s net cash flow from operating activities amounted to RMB 11.51 billion, RMB 2.72 billion, and RMB 10.43 billion, respectively.

In 2024, the company generated net cash inflow from operating activities of RMB 2.72 billion, which primarily included pre-tax profit of RMB 3.57 billion, adjusted for certain non-cash or non-operating items, including RMB 600 million in depreciation of property, plant, and equipment and a net RMB 581 million provision for inventory impairment.

Impacted by changes in working capital, the company recorded a net operating cash outflow during the period, primarily driven by an increase of RMB 7.95 billion in trade payables and notes receivable and a decrease of RMB 1.3 billion in contract liabilities, partially offset by an increase of RMB 8.21 billion in trade payables and bills payable.

Specifically, at the end of each reporting period, trade payables and bills payable amounted to RMB 13.1 billion, RMB 21.11 billion, and RMB 20.87 billion, respectively, with trade payable turnover days of 185.9 days, 210.8 days, and 244.6 days—also indicating relatively long payment cycles.

In addition, other payables and accrued expenses amounted to RMB 2.87 billion, RMB 4.38 billion, and RMB 4.11 billion, respectively.

After selling its products, Wanbang Digital Energy also incurred certain customer advances. At the end of each reporting period, contract liabilities amounted to RMB 334 million, RMB 204 million, and RMB 388 million, respectively.

As of the end of each reporting period, Wanbang Digital Energy’s interest-bearing bank borrowings were RMB 9.04 billion, RMB 9.53 billion, and RMB 6.82 billion, respectively. The increase in interest-bearing bank borrowings in 2024 was primarily due to business expansion, while the decrease during January–September 2025 was mainly attributable to repayments made in the ordinary course of business. The company’s interest-bearing bank borrowings carry interest rates ranging from 2.0% to 3.8%.

As of the end of each reporting period, the company’s cash and cash equivalents amounted to RMB 474 million, RMB 10.9 billion, and RMB 7.75 billion, respectively.

During the same periods, Wanbang Digital Energy’s debt-to-asset ratios were 85.9%, 119.4%, and 96.0%, respectively. In 2024, the company’s debt-to-asset ratio significantly exceeded 100%, resulting in a situation of negative net assets. Although the ratio improved slightly as of the end of September 2025, the company continues to face substantial debt repayment pressure overall.

Stripped core business 'Star Charge' prior to filing the listing application

As of the latest practicable date, Shao Danwei, Executive Director, Chief Executive Officer, and Chairman of the Board, together with Ding Feng, Non-Executive Director and spouse of Shao Danwei, collectively held voting rights representing approximately 87.16% of the company. This includes 122.256 million shares directly held by Shao Danwei (representing approximately 1.36% of the company’s voting rights), 122.256 million shares directly held by Ding Feng (representing approximately 1.36% of the company’s voting rights), and 7.6 billion shares held by Wanchuang Investment Group, an entity in which Shao Danwei and Ding Feng each hold a 50% interest (representing approximately 84.44% of the company’s voting rights). Shao Danwei and Ding Feng are the company’s actual controllers and act in concert.

From its inception until prior to the business restructuring, Wanbang Digital Energy primarily engaged in two distinct business segments. The first segment involved energy equipment manufacturing and related services (the Energy Equipment Manufacturing Business), primarily including the manufacturing and sale of electric vehicle (EV) charging equipment along with installation services, as well as the manufacturing and sale of microgrid systems and large-scale energy storage systems.

The second segment comprised operational services and energy management services for EV charging stations, large-scale energy storage systems, and microgrids (the Energy Operations Business), primarily including charging services provided through the company’s own EV charging stations; operational platform services offered to third-party EV charging stations; and operational platform and energy management services for large-scale energy storage systems and/or microgrids.

In July 2025, Wanbang Digital Energy restructured its business through a statutory spin-off, enabling the company to focus exclusively on its Energy Equipment Manufacturing Business. Regarding the primary rationale for the restructuring, the company stated that it aimed to align with the industry trend toward specialization and high-quality development in the energy sector, streamline business priorities, enhance management efficiency and resource integration, and better align with its strategic growth objectives.

Specifically, in September 2025, Wanbang Digital Energy established Wanbang Taiyi, together with its subsidiaries collectively referred to as the Wanbang Taiyi Group.

Pursuant to a statutory spin-off agreement, Wanshun Digital Energy transferred all nine entities engaged in energy operations (including eight wholly owned direct or indirect subsidiaries and one entity in which Wanshun Digital Energy holds a 35% equity interest) to Wanshun Taiyi Group for total consideration of approximately RMB 47.4 million. Separately, Star Charge Technology (a member of Wanshun Taiyi Group) transferred its 18% equity interest in the National Innovation Center to the company for consideration of RMB 9 million.

According to Wanshun Taiyi Group’s management accounts, revenue from the energy operations business was negligible, accounting for no more than one-fifth of the company's total revenue in either 2023 or 2024.

Nevertheless, some observers have pointed out that Wanshun Digital Energy’s divestiture of this core business stems largely from prolonged losses in its charging operations, which have weighed heavily on its financial performance.

Additionally, there are related-party transactions between Wanshun Digital Energy and Wanshun Taiyi. As of the end of each reporting period, Wanshun Taiyi was among Wanshun Digital Energy’s top five customers, contributing revenue of RMB 2.78 billion, RMB 2.03 billion, and RMB 1.71 billion respectively, representing 8%, 4.9%, and 5.6% of total revenue in each respective period.

Regarding the pre-IPO divestiture of its core business, Star Charge, Yuan Shuai believes this move should be viewed within the broader context of the company’s overall strategic planning and capital market valuation logic.

First, Star Charge—a consumer-facing EV charging and battery-swapping operations business—is inherently capital-intensive with long payback periods. Substantial ongoing investments are required for station construction and equipment deployment, and profitability varies significantly across cities. Stations in lower-tier markets often require extended ramp-up periods before reaching breakeven. Including this business within the listed entity could materially depress overall profit margins and negatively impact how capital markets value the listing vehicle. By spinning it off, the listed entity can focus instead on lighter-asset, higher-margin businesses such as digital energy solutions and the R&D and sales of charging and swapping equipment—segments more likely to command premium valuations.

Second, the spin-off also serves as a risk mitigation measure. Consumer-facing charging and swapping operations face uncertainties such as lease expirations, electricity price volatility, and intensifying industry competition. Removing this segment from the listed entity helps prevent these risks from spilling over to the public company, thereby safeguarding earnings stability. More fundamentally, this separation may reflect a strategic decision to enable independent development paths for distinct business units. Star Charge has already amassed a large user base and extensive charging infrastructure; operating independently, it could pursue separate financing rounds or even a standalone IPO. Running both tracks in parallel may ultimately maximize the value of each business segment. Thus, the pre-listing divestiture is not an abandonment of core assets but rather a strategic reallocation of resources aligned with capital market expectations and long-term corporate strategy—aimed at ensuring each business finds the optimal growth trajectory and capital support to achieve maximum aggregate value.

According to Heimao Complaints, as of May 26, a search for the keyword 'Star Charge' yielded 319 complaints, of which 283 have been resolved. Consumer complaints include issues such as unauthorized charges, inflated electricity metering, excessive billing, failure to refund account balances, and frequent charger malfunctions.

According to Tianyancha, as of the same date, Wanshun Digital Energy was involved in 453 legal cases, with causes of action including disputes over sales contracts, general contract disputes, contract-for-work disputes, construction project construction contract disputes, and construction contract disputes. (Produced by Harbor Financial)

Harbor Business Observer, reporter Zifu Shi

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