Can AI-Powered Energy Storage Startups Thrive Amidst Intensifying Competition?

After six years since its establishment, a company known for its integration of AI and energy storage is now making strides toward an IPO, boasting a staggering 15-fold increase in valuation. Is this “fruit” of AI+ energy storage ripe for the picking?

Founded in 2019, Guoxia Technology has quickly positioned itself as a provider of renewable energy storage system solutions and products, leveraging platform technology and artificial intelligence. The company serves a variety of scenarios, including power grids, commercial, industrial, and residential applications. According to data from ZhiShi Consulting, Guoxia Technology ranks as the eighth largest energy storage system provider in China based on newly installed capacity for multi-purpose energy storage systems in 2024. It is also the tenth largest for household energy storage systems.

The fusion of the popular concepts of AI and energy storage has attracted significant attention from investors. So far, Guoxia Technology has completed three rounds of financing, with two rounds occurring shortly before the IPO filing. Currently, the company is valued at approximately 6 billion yuan, a remarkable increase from its pre-financing valuation of 400 million yuan.

However, the question remains: has this “fruit” truly matured in the context of its strong association with AI?

Guoxia Technology’s core team is relatively young, with an average age under 40. The chairman, Feng Lizheng, is 35; the general manager, Zhang Xi, is 36; and the executive president, Liu Zi Ye, is 37. All three graduated from Jiangnan University and collectively hold 58.54% of the company’s shares. Another significant shareholder is Chen Jun De, who invested 5 million yuan at the company’s inception and has since increased his stake to 15.49%. Chen is also the chairman of the New Third Board-listed company Runda Photovoltaic and holds leadership roles in Wuxi Special Steel.

Guoxia Technology’s business model consists of three segments: smart energy storage system solutions, EPC services, and miscellaneous operations. The smart energy storage solutions have accounted for over 90% of total revenue in the last three years, reaching 97.8% in 2024. Within this segment, large-scale energy storage systems dominate, generating revenue of 785 million yuan in 2024, which is 76.6% of the total. Household energy storage systems contributed 208 million yuan, or 20.3%, while commercial and industrial energy storage systems brought in 9.57 million yuan, accounting for 0.9%.

Guoxia Technology’s EPC services primarily focus on commercial energy storage projects and photovoltaic power station development. Revenue from this segment was 30.33 million yuan in 2023, making it the second largest source of income. However, in 2024, EPC service revenue unexpectedly declined to 19.51 million yuan, dropping to 1.9% of total revenue. The company’s other sales include forklifts, testing equipment, and discarded battery cells, but these currently have a minimal impact on overall performance.

Despite the claim that AI is a core concept driving the company, its actual business is predominantly focused on energy storage systems, with little direct connection to AI. Guoxia Technology promotes itself as the first provider in the industry to develop an IoT platform specifically for energy storage and as the first to create a seamless energy storage industrial model based on AI technology. Their smart systems, such as Safe ESS and Hanchu ESS, utilize AI optimization algorithms for real-time energy management, predictive maintenance, and decision analysis.

While the company’s growth appears impressive, its profitability is lagging. Between 2022 and 2024, Guoxia Technology’s revenue surged from 142 million yuan to 1.026 billion yuan, reflecting a seven-fold increase and a compound annual growth rate of 168.9%. However, net profits grew at a much slower pace, with figures of 24.28 million yuan, 28.15 million yuan, and 49.12 million yuan during the same period.

Additionally, Guoxia Technology has experienced a decline in both gross and net profit margins. The gross margin fell from 25.1% in 2022 to 15.1% in 2024, while the net profit margin dropped from 17.1% to 4.8%. The company attributes the decreasing net margin to rising non-operational costs linked to business expansion, although the prospectus indicates that costs for materials and components are the primary expense drivers.

Currently, Guoxia Technology operates a single production facility located in Wuxi, Jiangsu, with a total area of 28,156 square meters. Production capacity expanded from 72.8 MWh in 2022 to 2,363.9 MWh in 2024, with an impressive utilization rate of 108.1% in 2024. The company plans to invest 53.3 million Hong Kong dollars in three new production lines and six testing systems, aiming to enhance its manufacturing capabilities by the end of 2025.

Despite rapid revenue growth, Guoxia Technology faces financial pressures. In 2024, out of 1.026 billion yuan in revenue, 514 million yuan came from trade receivables, indicating that half of its customers have yet to pay, putting significant strain on cash flow.

Moreover, the energy storage industry is facing intense competition, with over 300 suppliers and the top 30 companies accounting for 90% of the market’s new installed capacity. This competitive landscape poses considerable challenges for emerging companies like Guoxia Technology. Thus, a successful IPO could greatly enhance the company’s risk resilience.

The ability to capitalize on this opportunity will depend on the performance of its young executive team.