Should You Buy the Dip in Kandi Technologies Group?

Kandi Technologies (KNDI) operates in China, one of the largest Electric Vehicles (EVs) markets in the world. Even though the company is underfollowed, it portrays a promising outlook based on the growing demand for EVs, cutting-edge technologies, and a favorable revenue outlook. So, the recent price decline offers a good buying opportunity.

Based in Jinhua, China, Kandi Technologies Group, Inc. (KNDI) is one of the lesser-known cleantech stocks. This electric vehicle supply chain company designs develops, manufactures, and commercializes electric vehicles (EVs), EV parts, and off-road vehicles. KNDI operates four business lines: the development and sale of pure electric automobiles, electric vehicle parts, intelligent battery swapping systems, and all-terrain vehicles.

KNDI, recognized in China as a national high-tech enterprise, is a member of China’s top 500 machinery companies. With the growing awareness about climate change, and the gradual recovery of the Chinese economy, the stock is expected to soar in the coming years. The stock has gained 204.7% year-to-date. This impressive performance and the potential upside based on several factors have helped the stock earn a “Buy” rating in our proprietary rating system.

Here is how our proprietary POWR Ratings system evaluates KNDI:

Trade Grade: B

KNDI is currently trading above its 50-day and 200-day moving averages of $7.59 and $5.78, respectively, indicating an uptrend. Moreover, KNDI has gained 350.3% over the past six months, reflecting a solid short-term bullishness.

KNDI’s off-road vehicle sales increased 51.6% year-over-year to $8.90 million for the third quarter ended September 2020. Gross margin increased by 42 basis points to 20.9% versus last year’s 16.7%. In September, the company established the China Battery Exchange Technology Company, a wholly-owned subsidiary for its battery swapping services.

KNDI started the IPO process to list its wholly-owned subsidiary, Zhejiang Kandi Smart Battery Swap Technology Co, Ltd on the Shanghai Stock Exchange’s Sci-Tech Innovation Board (“STAR”) market. The company entered a strategic cooperation agreement with the Zhejiang State Grid Electric Vehicle Service Company in the area of battery exchange for pure electric vehicles.

On November 12th, KNDI raised $60 million through a purchase agreement of 9.40 million common shares to institutional investors. Kandi America, the US subsidiary received clearance from the United States Environmental Protection Agency (EPA) for its two electric vehicle models K23 and K27. KNDI delivered its fully automatic intelligent battery exchange system to the rideshare operator in Haikou City, Hainan in August.

Buy & Hold Grade: C

In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade takes into account, KNDI is not too well positioned. The stock is currently trading 17.2% below its 52-week high of $17.40, which it hit on July 30th.

The company’s net revenue grew at a CAGR of 11.3% over the past three years. While the demand for Electric Vehicles (EVs) has been growing gradually, it only increased recently with the improvement of its battery swapping technology.

Peer Grade: B

KNDI is currently ranked #60 out of 115 stocks in the China group. Other popular stocks in the China group are NIO Inc. (NIO), New Oriental Education & Technology Group, Inc. (EDU), and Baidu, Inc. (BIDU).

NIO beat KNDI, gaining 1105.2% year-to-date, while EDU and BIDU gained 49% and 8%, respectively over this period.

Industry Rank: B

The China group is ranked #23 out of the 123 industries. The companies in this industry are located exclusively in China and most cases conduct their business in their home country.

With the Chinese economy gradually recovering, the stocks in this industry are expected to gain with the continued opening up of the economy. Moreover, China continues to be the only major economy in the world which has shown positive growth in 2020.

Overall POWR Rating: B (Buy)

KNDI is rated “Buy” due to its short-and-long-term bullishness, solid growth prospects, and underlying industry strength, as determined by the four components of our overall POWR Rating.

Bottom Line

KNDI has the potential to soar in the upcoming months despite gaining 204.7% so far this year, based on its continued business growth, favorable earnings and revenue outlook, and strong financials. 

Analysts expect KNDI’s revenue to increase by 76.7% in 2021. Operating in the world’s largest EV market, this outlook should keep KNDI’s price momentum alive in the near term. 

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KNDI shares were trading at $12.06 per share on Friday afternoon, down $2.35 (-16.31%). Year-to-date, KNDI has gained 154.97%, versus a 12.57% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.


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