KNDI: New Product Initiatives Portend Well For Accelerating Momentum

By M. Marin

NASDAQ:KNDI

READ THE FULL KNDI RESEARCH REPORT

Pursuing UTV Market Opportunity in the U.S…

Kandi Technologies (NASDAQ:KNDI) recently unveiled prototypes of its K32 premium fully-enclosed electric 4WD utility terrain vehicle (UTV), which it produced at its production facility in Hainan, China. The company is optimistic about high-end electric UTVs for the U.S. market. Kandi is also optimistic about electric vehicle (EV) opportunities in China, particularly about short-distance small EVs, and is developing what it calls an affordable “neighborhood EV” for the China market, as well as the UTV for the U.S. Kandi expects to launch both products in 2021.

… And China’s EV Market Opportunity…

KNDI is able to pursue the China EV market more aggressively now, as the company is no longer constrained by the non-compete restrictions of the former Fengsheng affiliation. 1Q21 R&D spending reflects this initiative to pursue EV and other opportunities; R&D costs were $21.6 million compared to $0.6 million, as KNDI invests in new product development.

KNDI has indicated that it might also consider expanding its EV product line through strategic M&A and has engaged in discussions with potential target companies, with talks at various stages of development. KNDI could use a portion of its cash on hand to advance this potential initiative.

… With Sizable Cash Position To Fund Initiatives

KNDI had cash and equivalents of about $147.2 million at the end of 1Q21, including cash from the a real estate repurchase agreement, exit of the Fengsheng affiliation and a 4Q20 equity offering. KNDI believes it has sufficient capital to support R&D and its growth initiatives.

Separately, Kandi’s total 1Q21 revenue more than doubled from $6.4 million in 1Q20 to $16.0 million, primarily reflecting higher sales of EV parts and sales from the company’s new Electric Scooter & related parts segment. We believe the category represents a growing source of revenue for KNDI. In addition, revenue from sales of off-road vehicles advanced 39.2% year-over-year to $5.6 million.

Ride Sharing, Battery Swap plans also advancing

KNDI remains focused on its ride-share program and battery swap service. Kandi’s subsidiary focused on operating a ride-sharing service across China recently entered into a collaborative alliance in the market and launched several ride-share pilots that also include KNDI’s battery swap feature. Given the growing traffic and congestion China faces that contribute to its pollution problem, Chinese regulators look to ride-share as one solution to expand affordable transportation options. China is already the world’s largest ride share market, but KNDI management believes the ride-share market remains under-penetrated.

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