READ THE FULL CBAT RESEARCH REPORT
CBAK Energy Technology (NASDAQ: CBAT) has highlighted efforts over the past few months to position its business as broadly serving a variety of markets, including some new opportunities that present interesting potential upside. In June, the company redomiciled its business in the Cayman Islands, which does not impact the company’s day-to-day operations but reduces some of the reporting requirements for a public company and should lower the cost and operational burden of being public. We are adjusting our presentation of our revenue and earnings estimates to reflect this change, as the company will now report six-month and full-year results.
The company has highlighted several opportunities for its cells in new and emerging markets, but the AI/Data center backup power market seems to be garnering the most investor interest, which seems appropriate given the size of the market that seems to grow daily. There will be several challenges for CBAK entering this market, but the company’s long track record in delivering cells to the uninterruptible power supplies market should open some doors in the industry.
In late June, CBAK previewed its next-generation 26650 cells built for battery backup units at AI data centers. While there is some caution warranted whenever a company pivots to offer a new product in a large, rapidly growing market like data centers, this is a clear need in the market, and it appears that CBAK has been working to develop a product for this market for over a year, which gives us confidence that this move is more than just a press release.
The extreme power demands inside advanced data centers, with frequent and rapid starting and stopping, create significant swings in energy demand and strain energy distribution systems. These swings can shorten the useful life of existing battery backup systems. Additionally, data center racks are packed with increasingly advanced processors that have high power needs, causing data centers to reconfigure their power distribution networks and consider the space requirements of backup systems.
With this in mind, CBAK began working on new formulations and designs that would better manage the power fluctuations and deliver constant voltage during switching.
In particular, the company noted that the two new cells are built to provide four key advantages for backup use cases in data centers:
Managing AI Workload Surges
Backup power systems need to respond quickly when demand spikes to avoid interrupting AI Compute processes in the data center. The company noted that its two cells have roughly 2.5 times the discharge rate of standard cells, which delivers needed power faster during demand surges.
Reduce Interruptions
There are rare but potentially troublesome events in data centers during system switching or certain workload synchronization activities that can cause large power surges leading to disruption of the computing process or even a complete reset of the GPU. The company indicated that in test conditions its cells supported up to 100C pulse discharge (100x the battery’s capacity), which the company characterized as acting like a shock absorber for the power system.
Reduced Thermal Stress
The company indicated that the new cells offer ultra-low internal resistance that reduces energy loss and heat generation. Ultimately, this is expected to lead to a more reliable backup system.
Increased Power Within Less Space
The company indicated that its new cells could have an output of 260 – 310 watts, which is 30-50% greater than standard cells in the market today with the same footprint. For data center operators, this means having more backup power without sacrificing precious rack space and requiring fewer overall cells.
At this point, CBAK has not announced any major contract wins or commercial installations of these cells, but given the market opportunity, this is certainly worth monitoring. With at least 100 GW of Data Center capacity under construction and our projection that every 20 MW of data center capacity could be a $1-$3 million revenue opportunity, it is clear that the addressable market for an advanced cell like CBAT’s in the data center market is eye-popping. The company will be highlighting this opportunity through its participation in a virtual conference at the end of August, and the announcement of this presentation appears to have sparked renewed interest in CBAT.
Corporate Structure Update
As we noted earlier, the company completed a redomiciliation from Nevada to the Cayman Islands in June, with each common share converted into one share of the Cayman Islands entity. The company continues to trade on Nasdaq under the CBAT symbol, and as a result of this change, we believe that the company will shift to reporting half-year and full-year results only. We have updated our published estimates to reflect half-year results through June 2026 and through December 2026.
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. The stock has experienced a sharp rebound, jumping roughly 50% in the last week, as speculation has grown around its new cells for data centers. We think investors can look for selective opportunities to add to positions as this market develops.
SUBSCRIBE TO ZACKS SMALL CAP RESEARCH to receive our articles and reports emailed directly to you. Please visit our website for additional information on Zacks SCR.
DISCLOSURE: Zacks SCR has received compensation from the issuer directly, from an investment manager, or from an investor relations consulting firm, engaged by the issuer, for providing research coverage for a period of no less than one year. Research articles, as seen here, are part of the service Zacks SCR provides and Zacks SCR receives payments totaling a maximum fee of up to $50,000 annually for these services provided to or regarding the issuer. Full Disclaimer HERE.
