Today, we will again talk about Kandi Technologies Group Inc (NASDAQ:KNDI), the manufacturer and marketer of electric vehicles (“EVs”), because the stock has turned into a big winner for Insider Financial subscribers. The stock price jumped from $3.50 to over $5 a share.
It seems that the market finally took into consideration what we said in our previous reports. The share price was undervalued as compared to its book value per share and the company was delivering very good news about its operating performance and its satisfactory relationship with the Chinese Government.
It is true that a new announcement was made in the month of September. It was released that KNDI has sold 3,213 units of electric vehicle products in August, but the increase in the share price seems more the result of the steps taken in previous months.
We are revisiting KNDI’s business model for those who got to know the company now. Kandi manufactures EVs, and quads. The company benefits from subsidies given by the Chinese Government for manufacturing in China. Just to give some figures, on April 24, 2017, the company announced the receipt of payments from the Chinese Government; in total approximately US$87.6 million for the manufacturing of its EVs.
In previous pieces, we have talked extensively about the opportunity that represents investing in this industry right now . We will not repeat it again, but those who want to know more are encouraged to check our previous work on the subject.
On September 5, 2017, the company announced the sale of 3,213 units of electric vehicle products in the month of August. It seems that the company has been able to come back to normal production after some problems that occurred last year. This is what the CEO, Mr. Hu Xiaoming, said about it:
“Our business was heavily impacted last year due to the confusion surrounding the reusable battery exchange model. We have been working diligently to resume the normal production gradually. We believe that we will regain our leading market position in the EV industry by the year end.” Source
Release of the latest 10-Q
We had a look again today at the financial figures released in the latest 10-Q. We need to remember that the company shows quite a solid balance sheet, with plenty of cash and a lot of assets. The most interesting are the net receivables; $200 million.
Because these are payments that the Government of China will need to pay for the EVs manufactured and sold. We believe that it is the biggest catalyst for this company. We don’t know when they will be paid, but when it will happen, the share price will definitely jump.
|Current Assets (All numbers in thousands)|
|Cash And Cash Equivalents||30,115.686||16,266.443||25,193.298||17,930.465|
|Short Term Investments||–||82.371||4,463.097||–|
|Other Current Assets||4,319.89||4,011.087||4,317.855||746.748|
|Total Current Assets||248,707.35||229,681.253||264,025.932||236,689.1|
|Long Term Investments||96,632.981||106,044.755||78,820.737||89,146.017|
|Property Plant and Equipment||57,189.035||51,057.118||42,248.623||73,784.81|
|Deferred Long Term Asset Charges||4,394.192||3,196.909||–||–|
Have a look now at the liabilities shown and note that the net asset is positive.
|Accounts Payable (All numbers in thousands)||118,088.284||111,635.173||122,210.095||117,338.288|
|Short/Current Long Term Debt||69,297.743||51,270.164||49,062.39||38,770|
|Other Current Liabilities||4,498.655||1,518.275||6,405.422||15,068.219|
|Total Current Liabilities||191,884.682||164,423.612||177,677.907||171,176.507|
|Long Term Debt||29,501.136||29,025.343||28,794.172||–|
|Deferred Long Term Liability Charges||–||–||878.639||1,284.335|
On top of it, as we have said in previous articles, insiders are holding their shares. We did not see any of the following directors selling their stakes.
|HU XIAOMING||1,138,077||Apr 12, 2016|
|YU HENRY||82,336||May 17, 2017|
|LEWIN JERRY||50,000||Aug 9, 2016|
|QIAN JINGSONG||49,000||Apr 12, 2016|
|WANG CHENG(HENRY)||9,610||Nov 15, 2016|
|MEI BING||2,500||Feb 23, 2017|
Furthermore, several big players maintain large stakes in the company.
|Holder||Shares||Date Reported||% Out||Value|
|Susquehanna International Group, LLP||530,833||Jun 29, 2017||1.11%||2,256,040|
|Invesco Ltd.||244,040||Jun 29, 2017||0.51%||1,037,170|
|Bank of Montreal/Can/||150,200||Jun 29, 2017||0.31%||638,350|
|Oz Management, L.L.C.||139,700||Jun 29, 2017||0.29%||593,725|
|Group One Trading, L.P.||132,654||Jun 29, 2017||0.28%||563,779|
After noting that Kandi Technologies Group Inc. was being undervalued by the market, we finally commence to see that the market has corrected some of KNDI’s undervaluation. The book value per share is $4.29 and the share price as of September 14, 2017 is $4.77. Thus, it now makes more sense now. We still believe that the share price could increase even more if the Government of China pays the subsidies owed to the company. We will, of course, be monitoring the situation closely.
We will be updating our subscribers as soon as we know more. For the latest updates on KNDI, sign up below!
Image courtesy of Flickr
Disclosure: We have no position in KNDI and have not been compensated for this article.