Kandi Technologies A Sweet Play On The EV Market

Kandi Technologies: Mixed Results Today, Outperformance Tomorrow 

Kandi Technologies (NASDAQ: KNDI) is quickly emerging as a diversified EV leader with a growing moat. While others are focusing on personal vehicles, delivery, or long-haul this company is differentiating itself in three ways. The first is that it makes a lot of its money selling EV parts and components. That may not sound like a big deal but there is a high demand for EV parts and components globally that is driving sales growth to high triple-digits. The second is the focus on off-road and personal utility vehicles. The RV market alone is one fast-growing market and one we like very much, within that there is an accelerating push toward EV RVs that we also like very much. Finally, Kandi Technologies is spending money to explore and develop new products and already seeing the benefits of its efforts. 

Mr. Hu Xiaoming, Chairman and CEO of Kandi commented: “The most promising EV opportunities we see today are short-distance small EVs in China and high-end electric Utility Terrain Vehicles in the U.S. ... For China we are developing a ‘neighborhood EV’. For the U.S., we are working on a fully enclosed high-end air-conditioned electric 4WD UTV. We expect to launch both products this year.”

Kandi Technologies Has Mixed Quarter, Growth In The Forecast 

Kandi Technologies had a poor quarter but only if you look at it from the analyst's perspective. The analysts were expecting much more robust revenue growth over the past year so the 150% YOY gain wasn’t all that impressive. We, however, choose to look at the company from the glass-is-half-full perspective because growth was robust, the company is well-funded, and new business begun over the past year is already paying off. 

On a segment basis, the EV parts segment grew 206% to $6.4 million or about 40% of sales while off-road grew at a less robust 39.68%. Sales of off-road vehicles came in at roughly 35% of sales while the new business, scooters and self-balancing scooters, came in at 25% of the net. When you think scooters think of those little hoverboard things you see kids riding around on, and other electric vehicles of that nature. It’s a big market and this company’s products are in places like Walmart. 

Moving down to the bottom line and earnings, the company reported a substantial improvement in margins over last year. The gross margin grew by 900 basis points to 27.3% to outpace the consensus by a wide margin. The earnings themselves are another area of mixed results but there is a mitigating factor that more than makes up for the miss. The company reported a net loss of $0.08 that missed consensus by $0.06 but it's due to increased R&D spending. R&D spending intended to uncover other growth markets such as the electric scooter market.

Mr. Hu concluded, “Although our net loss grew in the first quarter, this was due to our extensive investment in R&D. Sales were solid and the EV product segment should soon recover as we execute our growth plan. We are well-funded, having collected payments for Fengsheng and the relocation. With our strong balance sheet and leading technologies, we intend to pursue exciting EV opportunities such as battery swap and the ride-sharing platform, among others.”

The Technical Outlook: Kandi Technologies Moves Up From Support 

Shares of Kandi Technologies are moving higher in early premarket action and look like they are moving up off of a bottom. The bottom appears to be at the $5.25 level and would be confirmed with a strong move above the short-term EMA. The indicators are consistent with a weakening downtrend and support at this level but have yet to confirm the move so caution is still due. We expect to see a little bit of volatility in the near term but for the price-action to continue consolidating and then eventually make its break to higher levels.