Kandi Technologies Group Inc. (KNDI, Financial), headquartered in Jinhua, Zhejiang Province, China, is engaged in the research and development, manufacturing and sales of various vehicle products. Kandi has established itself as one of China's leading manufacturers of pure electric vehicle (EV) products (through its joint venture), EV parts and off-road vehicles. It engages itself in designing, developing, manufacturing and commercializing EV, go-karts, all-terrain vehicles (ATVs) and specialized automobiles related products for the People’s Republic of China and global markets.
The company conducts its primary business operations through its wholly owned subsidiary, Zhejiang Kandi Vehicles Co. Ltd. (Kandi Vehicles) and the partial and wholly owned subsidiaries of Kandi Vehicles. As part of its strategic objective to become a leader in the EV market in China, the company focuses on fuel efficient, pure EV parts manufacturing with a particular emphasis on expanding its market share in China.
Its subsidiary, Kandi Vehicles, is nationally recognized as a high-tech enterprise by the Chinese government and is ranked as a top 500 company in the machinery industry in China. It is one of the largest all-terrain vehicle manufacturers in the world.
It launched China’s first pure EV way back in August 2008.
Strong second quarter
Total revenues increased by 45.5% and were $48.0 million during the second quarter of 2015 (which was $33.0 million during the prior-year period).
Net revenues increased 9.6% sequentially from the first quarter of 2015 due to the sales growth of EV cars from Kandi Electronic Vehicles Group Co. Ltd. (the JV Company).
Total operating expenses slightly increased 0.6% quarter over quarter due to the $1.4 million increase in stock compensation expenses and general expense savings in the second quarter.
EV parts sales increased by 168.3% and were $46.6 million during the second quarter of 2015 (which was $17.4 million in the same period of 2014).
The JV Company, sold 4,446 EV products, including 3,803 EV products to the Micro Public Transportation (MPT) program and 643 EV products to the direct sales program, an 8.1% increase compared to the same period last year;
GAAP net income for the second quarter of 2015 was $5.4 million, or approximately $0.12 per fully diluted share (which was compared to $11.2 million, or approximately $0.27 per diluted share during the prior-year period).
Non-GAAP adjusted net income, which excludes stock award expenses and changes in the fair value of financial derivatives, was $4.9 million, or approximately $0.10 per fully diluted share (which marked a 52.1% increase from $3.2 million during the prioryear quarter).
Working capital surplus was $48.5 million as of June 30.
Cash, cash equivalents and restricted cash totaled $32.5 million as of June 30.
Strong attributes of second quarter
- Achievement of excellent growth in EV parts and EV sales
- Focus on strong operational results
- Improvement of environmental conditions
- Focus on easing traffic congestion and energy crisis
- Successful launch of direct sales initiative this quarter
- Multiple expansion initiatives to satisfy municipal and consumer demand
Expectations for third quarter
The company expects the following:
- Net revenues to be in the range of $49.0 million to $51.0 million.
- Gross margin to be in the range of 13.5% to 14.5%.
- Â The JV Company to deliver 5,500 to 6,500 EV products in the third quarter and a total of 20,000 to 25,000 EV products in the full year 2015.
Focus at the moment
- Continued strong cost savings
- Free cash flow productivity
- Product innovation
- Improvement in top-line growth
- Operating profit margin expansion
- Sales growth
Being in the news
It recently announced the launch of its Micro Public Transportation program in Kunming. Hu Xiaoming, chairman and chief executive officer of Kandi, commented, “We are very confident about the launch of the MPT program in Kunming and the delivery of 2,000 Kandi Brand EVs by the end of 2015. With strong government supporting policies, the MPT program will be the most efficient solution for easing Kunming’s traffic and environment concerns, while also promoting the city’s development and use of EVs.”
It recently partnered with ZTE and ZZY to promote Micro Public Transportation. Under the agreement, Kandi, ZTE and ZZY will combine their expertise and resources to promote the Micro Public Transportation program with advanced wireless charging technologies. The parties will jointly market the MPT program in China and conduct R&D for automotive wireless charging and other core EV technologies and establish a research institute, which will focus on key topics, including MPT operation optimization, big data analysis and self-service EV rental.
It recently announced a new JV Sales contract. The total value of the contract is over RMB540 million (approximately $89 million). Kandi expects vehicle delivery to be completed by the end of 2015.
Kandi secured an agreement with the Wanning city government for a factory development with an annual production capacity of 100,000 EVs. The Wanning facility is expected to launch production by the end of 2015.
Change in management
Cheng (Henry) Wang is the company's new chief financial officer, effective May 1. Wang has over 20 years of international financial management experience. Before joining Kandi, Wang served as chief financial officer for Shanghai Always Marketing Service Co. LTD. one of the largest field marketing service agencies in China, leading its procurement and finance departments since May 2014.
(Source: Company’s website)
On a concluding note
China is one of the fastest-growing economies in the world, and Kandi is a hit. It posted impressive revenues during the second quarter and has more room to grow. It is progressing at a stable pace and is a long-term investment.
JV Partnership with Geely Auto enhances development of high quality and large scale EV products.
With a market capitalization of $423.4 million, the company is favorably positioned in the industry. It is the leading pure EV products provider in China. Its Micro Public Transportation Program maximizes takes advantage of Kandi’s existing EV products, technology and infrastructure, and further stimulates the expansion of the EV markets to urban communities.
The company is currently focusing on efficiency, and this is going to fuel its future growth. It is constantly concentrating on emerging markets where it has tremendous potential in store. This company is a buy.
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