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Some notes from bill
Kandi Update
At my last news update on October 1 the stock price was $12.01 and about 1/3 of reasonable value. Now the stock price is a disappointing $12.45, having in the meantime been down to $11.20 and up to $18.17. The value of the company has not changed, just the stock price - so it is once again a great buying opportunity. Lots of good news below that should assure you that the stock price will not stay at these levels for long.
News 1 - Q3 Results
JV EVs sold in Q3 were 1,950, much less than the 4,114 in Q2 and well below expectations. The explanation was that sales were held up because the elimination of 10% sales tax in September stopped buying in July and August. Hangzhou subsidy delay could be an additional factor. The JV's profit (and Kandi's share of that profit) was well above expectations and the higher profit on lower sales volume is a good indicator of future profit. Similarly Kandi's parts sales to the JV was lower than expected but profit was higher than expected - which bodes well for future profit. Lumpy results are normal when a business is in the early growth stage.
News 2 - Hangzhou Subsidies
The Hangzhou government published a draft of its subsidies law for public comment. The deal for private buyers was not as generous as other cities and may get som e kick back. The proposal for micro-bus (Kandi's car-share) was "undecided." Mr Hu has said that Kandi is negotiating with the city for a better deal on the basis that micro-bus is public transport just like taxis and should receive subsidies that match the PRC subsidies. The procrastination of the Hangzhou government is outstanding.
News 3 - Nanjing
Kandi will launch a car-share program in Nanjing, the capital of Jiangsu province. ZZY has registered a subsidiary in the city and car-share will commence upon completion of formalities. It is presumed that the group leasing program will also be launched.
News 4 - New EV Model "Cyclone"
Kandi "Cyclone" is a five-door, four-seat vehicle with spacious and comfortable seating area. (See Pic) The vehicle utilizes newly developed triple element non-polymer battery and central control system featuring in both touch screen and conventional buttons. "Cyclone" achieved multiple domestic automobile golden standards and is currently under scrutiny of China's Ministry of Industry and Information Technology ("MIIT"), with the expectation to release to market at the end of 2014. Expected to launch at year end - but my guess is Q1.
News 5 - Chengdu Car-Share
Kandi will launch a car-share program in Chengdu, the capital of Sichuan province. ZZY has r egistered a subsidiary in the city and car-share will commence upon completion of formalities. Kandi plans to deliver 1,000 EVs before year end.
News 6 - Alibaba Alipay Agreement
Kandi expects to launch the first mobile application for the Car-Share Program based on Alipay Wallet platform by the end of November. This allows customers to book and EV and pay from mobile devices and the customary deposit will not be required.
News 7 - Mr Hu's Investor and Analyst Conference in San Francisco
In San Francisco on November 12 Mr Hu gave a slide presentation followed by a Q&A session. Of particular interest was the announcement of new batteries with breakthrough technology that will be used in Kandi EVs in 2015. The new Tianneng batteries provide twice the life and a longer range at half the cost. The appeal of EVs will be greatly enhanced.
News 8 - Wuhan
Kandi is launching a car-share program in Wuhan, the capital of Hubei province. ZZY has registered a subsidiary in the city and car-share and group leasing programs are expected to be launched before the end of this year. 64 EVs have been delivered and the total of 500 - 1,000 are expected to be delivered this year.
< br>News 9 - New EV Model "Luxury Sedan"
Mr. Hu Xiaoming, Chairman & CEO of Kandi commented, "The approval of the newly added model SMA7002BEV05 is an indication of success in expanding our portfolio of the vehicle products. (See Pic) In addition to meet the demand of the Car-Share market, this mid-tier luxury pure electric vehicle is aiming to serve the government and enterprises' needs. We are confident that Kandi will be diversifying its product categories to satisfy the market's growing demands and secure its leading position in manufacturing pure electric vehicle products in China." This is the 4th new Kandi EV that will be launched in 2015.
News 10 - Changsha Group Leasing
Kandi has delivered an initial 240 EVs to Changsha, the capital of Hunan province. A private leasing company "Hunan Earth Electric Car Rental Co." is running the program and is so far over subscribed by applicants, and plans on increasing to 800EVs. No quality information is available, only a poor China media translation. The article also describes a plan for 1600 Kandi EVs in a car-share (micro-bus) program. Kandi has not yet PR'd this new business arrangement.< br>
News 11 - Chengdu Leasing
Kandi has delivered part of a 1,000 EV order to Chengdu, capital of Sichuan province. Founding Auto which has the brand name China Kingo and the logo E-Kingo is one of China's top ten auto dealers representing over 30 auto brands. Founding will operate the leasing program and plans to expand to 5,000 EVs. This is their EV leasing page. This is their Chinese home page. Kandi has not yet PR'd this new business arrangement. Founding Auto will operate EV leasing and ZZY will op erate car-share as covered in News 5.
News 12 - Kandi Business Model Grows Tentacles
For over a year ZZY has been the sole revenue engine for the Kandi JV. It has recently opened subsidiaries in multiple cities to conduct car-share and group leasing operations. Now we see a major new development in News 10 and 11 where local leasing companies in distant provinces are dealing directly with the Kandi JV. This can spread like wildfire. Much easier to sell to self contained enterprises that know their region, have connections and seek a business opportunity, than have ZZY build out to everywhere at the same time.
News 13 - My Seeking Alpha Instablog is updated:
Kandi Simply Explained, And Its Valuation
Bottom line s...
Share Value as of September 30 2014 = $33.96
Forward Share Valuation for September 30 2015 = $101.88
Note that it is normal for share price to be either much lower or much higher than reasonable valuation.
