Today, we need to address again one of the most interesting stocks in the small cap universe this year, Kandi Technologies Group Inc. (NASDAQ:KNDI).
Our regular readers should be well aware of this electric vehicle manufacturer, as we have written a lot about it. We had noted several times that the company had a solid financial situation, had many assets and was already reporting revenues. Additionally, we also noted the good relations that the company seemed to have with the Chinese Government, which is also responsible for the large amount of public incentives to the EV industry.
The market has pushed the share price from around $4.5 to $8.30 in the last three months, but we believe that it could even go higher.
Have a look at it before we provide more details about what happened recently:
Let’s revisit the company’s business model for those who have no time to read our previous articles. The company focuses on the R&D, manufacturing, and marketing of various electric vehicles. According to the company’s website, it has been recognized as one of the China’s Top 500 mechanical companies, nation’s high-tech enterprises, and a member of China Renewable Energy Auto Association.
Two announcements made the share price increase in the months of September and October.
On September 29, 2017, the company announced a strategic agreement with Hangzhou Vocational & Technical College to establish the Renewable Energy Automotive Institution, and the Kandi Renewable Energy Vehicle Collaborative Innovation Center. According to the company, the objective of the two institutions is to “institutionalize renewable energy research and to develop an outreach strategy to promote the renewable energy vehicle industry.”
We believe that the announcement is quite positive and we were glad to see that the market pushed up the share price on the following day.
On top of it, almost 2 million shares changed hands. Have a look at it:
We believe that the words of Mr. Hu Xiaoming, Chairman of KNDI, explained very well the situation of the industry in China:
“As an industry leader in the niche market of renewable energy vehicles, I believe that China’s auto industry is already one of the most important in the world, but in order to grow to be the largest and to dominate global sales, the path to success lies in the renewable energy vehicle industry. In the future most transportation will be car-sharing, and the future of renewable energy vehicles will be intelligent design that incorporates internet connectivity, the Internet of Things (IoT), and autonomous driving.” Source
In October the company did not release anything new, thus we initially could not understand the jump.
Then, we figured out that the equity research firm Rdinvesting had issued a report on the company on the same day. The report included a reference to the previous announcement. Thus, perhaps, some market participants got excited.
The book value per share continues to be less than half the share price. Thus, the market does not seem to be undervaluing the company much, but we still believe that there is room for improvement. The EV industry is expected to grow at a faster pace in the future, so a higher share price is justified.
We need to note that the short position on this name is large; 14% of the total outstanding shares. It seems that there are some people in the market believing that the share price could go down soon. If the share price keeps climbing, expect a major short squeeze to exacerbate the move higher.
Currently trading with a market cap of $400 million, KNDI has been an exciting story among mid caps. Reporting $55 million in revenues, with $30 million in pure cash and a positive net assets of $193 million, the company is in strong financial shape. We appreciate the last share price increases and congratulate those who were with us from the beginning. KNDI has been a big winner for Insider Financial subscribers.
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Image courtesy of Emoti-Con NYC via Flickr
Disclosure: We have no position in KNDI and have not been compensated for this article.