Recently, the only two pure hydrogen energy companies in the market, Yihuatong (688339.SH) and Guohong Hydrogen Energy (09663.HK), have respectively announced their semi-annual reports for 2024. The former's net profit loss increased by 84.93% year-on-year to 141 million yuan, while the latter's net profit loss was 212 million yuan, with the loss amount increasing by 70.8% year-on-year.

Yihuatong's main products include fuel cell systems and related technology development and services, which are primarily used in commercial vehicle models such as buses, logistics vehicles, and heavy trucks. Since its listing in 2020, the company has been in a long-term net profit loss, and the loss amount has continued to expand.

Yihuatong stated that the main reason for the net profit loss in the first half of this year was that the decline in the company's product sales prices was greater than the decline in costs, leading to a year-on-year decrease in gross profit. At the same time, with the increase in bank loans, interest expenses have also increased year-on-year. On the other hand, due to exchange rate changes, the foreign exchange gains recognized in the first half of the year have decreased year-on-year.

Guohong Hydrogen Energy's revenue mainly comes from selling hydrogen fuel cell stacks to fuel cell system manufacturers and selling hydrogen fuel cell systems to downstream manufacturers. This year is the first full accounting year after the company's listing, but its performance in the first half of the year is also not optimistic. Regarding the net profit loss, Guohong Hydrogen Energy stated that one reason is that the hydrogen fuel cell industry is still in the early stage of commercialization, and there is volatility in operating performance. The second reason is that the company's new products were in the mass production introduction phase in the first half of the year, and it takes time for capacity to be released, leading to a decrease in the sales of hydrogen fuel cell systems.

Advertisement

In the semi-annual report, both companies directly pointed out that the long-term early stage of commercialization in the hydrogen fuel cell vehicle industry has brought negative impacts on the company's operations, including the uncertainty of policy subsidies, the continuous expansion of debt scale due to business expansion, the inability to recover accounts receivable in a timely manner, and the continuous negative operating cash flow, among other risks.

The over-reliance on fiscal subsidies in the early stage of commercialization has led to a long repayment cycle for fuel cell enterprises and a high level of accounts receivable for a long time. Yihuatong introduced that, affected by the fuel cell subsidy policy, new energy vehicle manufacturers settle with consumers at a price after deducting subsidies when selling products. Subsequently, the central or local financial departments will allocate the subsidy funds prepaid by the enterprises to new energy vehicle manufacturers according to procedures, leading to widespread capital turnover problems among upstream and downstream enterprises in the new energy vehicle industry chain. Fuel cell enterprises have a relatively weak position in the automotive industry chain, so the repayment cycle is longer. Yihuatong stated that its actual repayment cycle is generally around 1-2 years or even longer.

In the first half of this year, Yihuatong's accounts receivable were 1.623 billion yuan, a year-on-year increase of 39.43%, which is 10 times the company's operating income; Guohong Hydrogen Energy's accounts receivable were 1.561 billion yuan, which is 11 times the company's operating income. Among them, the company's trade receivables for 3-4 years increased by 60% year-on-year to 106 million yuan.

Affected by the above factors, Yihuatong and Guohong Hydrogen Energy are under greater pressure on cash flow. In the first half of the year, Yihuatong's net cash flow from operating activities was -183 million yuan, which has improved compared to the same period last year's -276 million yuan, due to the increase in sales repayments and government subsidies year-on-year.

At the same time, being in the early stage of industrialization also means that the company's capital demand will continue to grow rapidly. According to Guohong Hydrogen Energy's semi-annual report, the company's sales expenses in the first half of the year increased by 19.96% year-on-year to 20.825 million yuan, R&D expenses increased by 34.13% year-on-year to 65.302 million yuan, and administrative expenses increased by 30.88% year-on-year to 113 million yuan.

For fuel cell companies, how to raise more money and improve the cash flow situation in the early stages of the industry has become the company's "lifeline". "The company is still in the early stages of R&D and industrialization, and the capital demand will continue to grow rapidly, but the debt financing ability is relatively limited. If the company cannot continue to expand financing channels in the future and effectively improve the operating cash flow situation, there is a risk of insufficient operating funds." Yihuatong stated in the annual report.To expand its financing channels, Yihuatong, after going public on the STAR Market in 2020, also debuted on the Hong Kong stock market in January 2023, raising approximately 1 billion yuan. Seventy percent of this funding is allocated to the company's R&D expenses for the next three years, with the remainder used for product promotion, multi-channel marketing, and retained as operating capital. Consequently, Yihuatong has become the first fuel cell company in China to be listed on both the A-shares and Hong Kong stock markets.

In recent years, many fuel cell companies have regarded financing through public listings as a crucial avenue to alleviate financial pressures. According to the Hong Kong Stock Exchange's official website on September 2nd, Shanghai Refuel Energy Group Co., Ltd. (hereinafter referred to as "Refuel Energy") submitted its application for listing. This is the company's second attempt at an IPO on the Hong Kong stock market after its initial filing with the exchange in late February of this year, which became ineffective. As early as 2021, Refuel Energy also aimed for an IPO on the STAR Market. According to the latest prospectus, the company's net losses for the years 2021 to 2023 and the first five months of 2024 were 654 million yuan, 546 million yuan, 578 million yuan, and 409 million yuan, respectively.

Similarly, on March 20th of this year, Jiangsu Guofu Hydrogen Energy Technology Equipment Co., Ltd. also abandoned its application for the STAR Market and turned to an IPO on the Hong Kong stock market. According to the prospectus, the company has seen an increase in revenue but not in profits over the past five years, and its loss amounts have been trending upwards.

Tian Lihui, Dean of the Institute of Financial Development at Nankai University, stated that some hydrogen energy companies have been incurring long-term losses with varying levels of technological content. Listing on the more inclusive Hong Kong stock market can more quickly meet their financing needs. If they can truly meet the standards in the future, they may also be listed in both markets and return to the Shanghai market.