Kandi Technologies Group, Inc

KNDI Details

Supply Framework Agreement: Kandi Technologies Group, Inc (NASDAQ: KNDI) is one of the leading electric vehicle supply chain companies in China. As on 30 November 2020, the market capitalization of the company stood at ~$706.40 million. The company has recently signed a Supply Framework Agreement with the wholly-owned subsidiary of CBAK Energy Technology, Inc., Dalian CBAK Energy Technology Co., LTD to promote the development of the pure electric vehicles. As per the terms of the agreement, Kandi Vehicles is likely to purchase battery pack system and customized battery manufacturing service of 800 million RMB in 2021.

Closing of $100 Million Registered Direct Offering: The company has closed the registered direct offering of 8,849,560 units of its securities at a purchase price of $11.30 per unit.  The offering generated ~100 million of gross proceeds. The net proceeds of the capital raise will be used for working capital purposes.

Quarterly Results: During the third quarter ended 30 September 2020, the company reported a decline of 40.9% in revenues to $18.7 million and witnessed a decline of 67.4% in electric vehicle parts sales to $8.4 million. However, off-road vehicle sales went up by 51.6% to $8.9 million. During the quarter, net loss was $1.5 million as compared to net income of $12.1 million in the pcp. As of 30 September 2020, the company reported a cash balance of $23.9 million.

Quarterly Financial Highlights (Source: Company Reports)

Stock Recommendation: As per NASDAQ, the stock of KNDI is trading above the 52-weeks’ average level and thus retains limited potential for further growth. The stock of KNDI gave a return of 55.91% in the past one month and a return of 45.02% in the last three months. On a technical front, the stock of KNDI has a support level of ~$8.73 and a resistance level of ~$11.56. Considering the current trading levels, volatility in returns, softer market conditions, and key investment risks, we suggest investors to keep an eye on the business activities and give an ‘Avoid’ rating on the stock at the closing price of $9.76, down by 28.34% on 30 November 2020, as most of the stocks from Chinese Electric Vehicle space saw selling pressure due to the disruption in Chinese Auto markets.

KNDI Daily Price Chart (Source: Refinitiv, Thomson Reuters)

Fulgent Genetics, Inc.

FLGT Details

Collaboration of LANES, Fulgent Genetics, and LA County Department of Health Services: Fulgent Genetics, Inc. (NASDAQ: FLGT) is a technology platform with the ability to expand and improve its proprietary genetic reference library. As on 30 November 2020, the market capitalization of the company stood at ~$1.09 billion. The company has recently announced a co-partnership with the Los Angeles Network for Enhanced Services and The Los Angeles County Department of Health Services to support the data exchange of COVID-19 tests at ~20 local drive-thru, walk-up, and community clinic testing sites.

Record Third Quarter 2020 Financial Results: During the quarter ended 30 September 2020, the company reported an increase of 883% in revenue to $101.7 million from $10.3 million in the third quarter of 2019. In the same time span, adjusted EBITDA of the company stood at $67.4 million as compared to $3.0 million in the pcp. These results demonstrate the true scalability of the company’s technology platform for genetic testing.

Quarterly Financial Highlights (Source: Company Reports)

Guidance: The company has provided guidance for FY20 and expects to generate at least $300 million in revenue for FY20, an increase of 28% compared to previous guidance of $235 million. The increased guidance is mainly due to accelerating demand for its COVID-19 testing solutions.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The company will continue to invest in its platform to expand its capabilities to capture share in the broader genetic testing market in the future. As per NASDAQ, the stock of FLGT is trading towards its 52-week high of $52.47 but retains potential for further growth. The stock of FLGT gave a return of 51.96% in the past three months and a return of 38.08% in the past one month. On a technical front, the stock of FLGT has a support level of ~$38.91 and a resistance level of ~$48.83. We have valued the stock using an EV/Sales multiple based illustrative relative valuation and have arrived at a target upside of lower double-digit (in % terms). For the said purposes, we have considered Avantor Inc (NYSE: AVTR), Thermo Fisher Scientific Inc (NYSE: TMO) and Concord Medical Services Holdings Ltd (NYSE: CCM) as peers. Considering the current trading levels, record quarterly results, decent outlook and valuation, we recommend a ‘Speculative Buy’ rating on the stock at the closing price of $44.92, up by 10.56% on 30 November 2020.

FLGT Daily Price Chart (Source: Refinitiv, Thomson Reuters)

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