Kandi Technologies Is Focused On Profits
Kandi Technologies (NASDAQ: KNDI) embarked upon a strategic shift last year in the wake of the COVID-19 pandemic. The company's prior focus on off-roa...
The Strategic Shift Is Lifting Kandi Technologies
Kandi Technologies (NASDAQ: KNDI) embarked upon a strategic shift last year in the wake of the COVID-19 pandemic. The company's prior focus on off-road vehicles and Ev parts manufacturing wasn't getting the job done so the company turned its attention to what it calls intelligent transportation. This new and growing segment of the business is focused on scooters including those fun little self-balancing scooters kids love to ride. Along with the consumer aspect, the company is also focused on intelligent vehicles for business applications such as warehousing and facilities maintenance such as the ones we've seen tooling around a few of our local big-box retailers.
Kandi Technology Has A Blowout Quarter
The shift in Kandi Technologies’ focus can be clearly seen in the segment revenue. While the company's gross revenue of $29.88 is up 53.7% from last year it is due entirely to a single segment. The great news Is that net revenue also beat the consensus by 4300 basis points proving just how powerful the new strategy is. On a segment basis, the scooter segment brought in the bulk of revenue at $16.50 million versus its $0.40 contribution last year. Both the off-road and the parts segment saw declines on a YoY basis with off-road sales falling $1.1 million to $5.50 million while parts sales were nearly halved to $6.70 million.
Moving down the report, the results are equally good. The company reported a 220 basis point improvement to the gross margin that helped drive profitability on the bottom line. The GAAP earnings of $0.54 are up more than 900% YoY and beat the consensus by $0.72 on the combination of revenue leverage and the completion of the company's facilities move. The company switched facilities in an effort to help control costs and was able to return the original facility to the Chinese government during the quarter. The transaction resulted in a cash injection to Kandi Technologies’ balance sheet that puts its liquidity position well over $200 million.
The company did not give any guidance for the coming quarter but we view the business favorably. The surge in scooter segment sales is very telling and should continue to gain momentum over the coming quarters. In addition, the company's move into battery packs is very timely and positions it as an important link in the EV supply chain globally.
“Last month, we announced the acquisition of Jiangxi Huiyi, which pushes us further into the battery cell business. Jiangxi Huiyi is a leading battery cell producer with intelligent production lines that each day can manufacture approximately 250,000 units of 18650 lithium-ion rechargeable cells. Today, the cells are implemented in various consumer applications. Equipped with this technology, Kandi will now focus on EV battery packs as well as other appropriate consumer products.”
The Technical Outlook: Kandi Technologies Is In Reversal
The price action in Kandi Technologies hit a bottom earlier this year and is now in reversal. The Q2 results have the stock up more than 10% in the early part of the session and are on track to regain the upper side of the short-term moving average very soon. A move above the short-term moving average would be bullish and likely send the stock above $6. Longer-term, we see this stock moving back up to retest its 2021 highs by the end of the year.