Intrinsic value of Kandi Technologies Group - KNDI

Previous Close

$7.95

  Intrinsic Value

$1.21

stock screener

  Rating & Target

str. sell

-85%

Previous close

$7.95

 
Intrinsic value

$1.21

 
Up/down potential

-85%

 
Rating

str. sell

We calculate the intrinsic value of KNDI stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -35.82
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  129
  132
  135
  138
  142
  146
  151
  156
  162
  168
  174
  181
  188
  196
  204
  213
  223
  233
  243
  254
  266
  278
  291
  305
  319
  334
  350
  367
  385
  404
  423
Variable operating expenses, $m
 
  81
  82
  84
  87
  90
  92
  96
  99
  103
  107
  111
  115
  120
  125
  131
  136
  142
  149
  155
  163
  170
  178
  186
  195
  205
  214
  225
  236
  247
  259
Fixed operating expenses, $m
 
  86
  88
  90
  93
  95
  97
  100
  102
  105
  108
  110
  113
  116
  119
  122
  125
  128
  131
  134
  138
  141
  145
  148
  152
  156
  160
  164
  168
  172
  176
Total operating expenses, $m
  161
  167
  170
  174
  180
  185
  189
  196
  201
  208
  215
  221
  228
  236
  244
  253
  261
  270
  280
  289
  301
  311
  323
  334
  347
  361
  374
  389
  404
  419
  435
Operating income, $m
  -31
  -35
  -36
  -37
  -38
  -38
  -39
  -39
  -40
  -40
  -40
  -40
  -40
  -40
  -39
  -39
  -38
  -38
  -37
  -36
  -35
  -33
  -32
  -30
  -28
  -26
  -24
  -21
  -18
  -15
  -12
EBITDA, $m
  -26
  -30
  -31
  -32
  -32
  -33
  -33
  -33
  -33
  -33
  -33
  -33
  -33
  -32
  -31
  -31
  -30
  -29
  -27
  -26
  -24
  -22
  -20
  -18
  -16
  -13
  -10
  -7
  -3
  0
  4
Interest expense (income), $m
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  14
  14
  15
  16
Earnings before tax, $m
  -6
  -37
  -38
  -39
  -40
  -41
  -42
  -43
  -43
  -44
  -44
  -44
  -45
  -45
  -45
  -45
  -45
  -45
  -44
  -44
  -43
  -42
  -42
  -41
  -39
  -38
  -36
  -35
  -33
  -31
  -28
Tax expense, $m
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -7
  -37
  -38
  -39
  -40
  -41
  -42
  -43
  -43
  -44
  -44
  -44
  -45
  -45
  -45
  -45
  -45
  -45
  -44
  -44
  -43
  -42
  -42
  -41
  -39
  -38
  -36
  -35
  -33
  -31
  -28

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  17
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  440
  431
  441
  453
  465
  480
  495
  512
  530
  550
  571
  593
  618
  643
  670
  699
  730
  762
  797
  833
  871
  912
  954
  999
  1,046
  1,096
  1,149
  1,204
  1,262
  1,323
  1,387
Adjusted assets (=assets-cash), $m
  423
  431
  441
  453
  465
  480
  495
  512
  530
  550
  571
  593
  618
  643
  670
  699
  730
  762
  797
  833
  871
  912
  954
  999
  1,046
  1,096
  1,149
  1,204
  1,262
  1,323
  1,387
Revenue / Adjusted assets
  0.305
  0.306
  0.306
  0.305
  0.305
  0.304
  0.305
  0.305
  0.306
  0.305
  0.305
  0.305
  0.304
  0.305
  0.304
  0.305
  0.305
  0.306
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
  0.305
Average production assets, $m
  67
  68
  70
  72
  74
  76
  78
  81
  84
  87
  90
  94
  98
  102
  106
  111
  116
  121
  126
  132
  138
  144
  151
  158
  166
  174
  182
  191
  200
  209
  220
Working capital, $m
  86
  66
  67
  69
  71
  73
  75
  78
  81
  84
  87
  90
  94
  98
  102
  107
  111
  116
  122
  127
  133
  139
  146
  152
  160
  167
  175
  184
  192
  202
  212
Total debt, $m
  78
  65
  69
  75
  80
  87
  94
  101
  110
  118
  128
  138
  149
  161
  173
  186
  200
  215
  230
  247
  264
  282
  301
  322
  343
  366
  389
  414
  440
  468
  497
Total liabilities, $m
  207
  195
  199
  205
  210
  217
  224
  231
  240
  248
  258
  268
  279
  291
  303
  316
  330
  345
  360
  377
  394
  412
  431
  452
  473
  496
  519
  544
  570
  598
  627
Total equity, $m
  232
  236
  242
  248
  255
  263
  271
  280
  290
  301
  313
  325
  338
  352
  367
  383
  400
  418
  437
  456
  477
  500
  523
  548
  573
  601
  629
  660
  692
  725
  760
Total liabilities and equity, $m
  439
  431
  441
  453
  465
  480
  495
  511
  530
  549
  571
  593
  617
  643
  670
  699
  730
  763
  797
  833
  871
  912
  954
  1,000
  1,046
  1,097
  1,148
  1,204
  1,262
  1,323
  1,387
Debt-to-equity ratio
  0.336
  0.270
  0.290
  0.300
  0.320
  0.330
  0.350
  0.360
  0.380
  0.390
  0.410
  0.430
  0.440
  0.460
  0.470
  0.490
  0.500
  0.510
  0.530
  0.540
  0.550
  0.560
  0.580
  0.590
  0.600
  0.610
  0.620
  0.630
  0.640
  0.650
  0.650
Adjusted equity ratio
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548
  0.548

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -7
  -37
  -38
  -39
  -40
  -41
  -42
  -43
  -43
  -44
  -44
  -44
  -45
  -45
  -45
  -45
  -45
  -45
  -44
  -44
  -43
  -42
  -42
  -41
  -39
  -38
  -36
  -35
  -33
  -31
  -28
Depreciation, amort., depletion, $m
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
Funds from operations, $m
  -120
  -32
  -33
  -34
  -35
  -35
  -36
  -37
  -37
  -37
  -37
  -37
  -37
  -37
  -37
  -37
  -36
  -36
  -35
  -34
  -33
  -32
  -30
  -29
  -27
  -25
  -23
  -21
  -18
  -15
  -12
Change in working capital, $m
  -70
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
Cash from operations, $m
  -50
  -33
  -35
  -36
  -37
  -38
  -38
  -39
  -40
  -40
  -41
  -41
  -41
  -41
  -41
  -41
  -41
  -41
  -40
  -39
  -39
  -38
  -37
  -36
  -34
  -33
  -31
  -29
  -27
  -24
  -22
Maintenance CAPEX, $m
  0
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
New CAPEX, $m
  -6
  -1
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
Cash from investing activities, $m
  1
  -6
  -7
  -7
  -7
  -7
  -8
  -9
  -9
  -9
  -9
  -11
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -18
  -18
  -19
  -20
  -21
  -23
  -23
  -25
  -26
Free cash flow, $m
  -49
  -40
  -41
  -43
  -44
  -45
  -47
  -48
  -49
  -50
  -50
  -51
  -52
  -53
  -53
  -54
  -54
  -54
  -54
  -55
  -55
  -55
  -54
  -54
  -53
  -53
  -52
  -51
  -50
  -49
  -48
Issuance/(repayment) of debt, $m
  42
  4
  4
  5
  6
  6
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  23
  24
  25
  26
  28
  29
Issuance/(repurchase) of shares, $m
  0
  42
  44
  46
  47
  49
  50
  52
  53
  54
  56
  57
  58
  59
  60
  61
  62
  62
  63
  64
  64
  65
  65
  65
  65
  65
  65
  65
  65
  64
  64
Cash from financing (excl. dividends), $m  
  45
  46
  48
  51
  53
  55
  57
  60
  61
  63
  66
  67
  69
  71
  72
  74
  76
  77
  79
  80
  81
  83
  84
  85
  86
  88
  89
  90
  91
  92
  93
Total cash flow (excl. dividends), $m
  -5
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
Retained Cash Flow (-), $m
  7
  -42
  -44
  -46
  -47
  -49
  -50
  -52
  -53
  -54
  -56
  -57
  -58
  -59
  -60
  -61
  -62
  -62
  -63
  -64
  -64
  -65
  -65
  -65
  -65
  -65
  -65
  -65
  -65
  -64
  -64
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -36
  -37
  -38
  -38
  -39
  -40
  -40
  -40
  -41
  -41
  -41
  -41
  -41
  -41
  -41
  -40
  -40
  -39
  -38
  -37
  -36
  -35
  -34
  -32
  -30
  -28
  -26
  -24
  -21
  -19
Discount rate, %
 
  5.20
  5.46
  5.73
  6.02
  6.32
  6.64
  6.97
  7.32
  7.68
  8.07
  8.47
  8.89
  9.34
  9.81
  10.30
  10.81
  11.35
  11.92
  12.51
  13.14
  13.80
  14.49
  15.21
  15.97
  16.77
  17.61
  18.49
  19.41
  20.38
  21.40
PV of cash for distribution, $m
 
  -34
  -33
  -32
  -30
  -29
  -27
  -25
  -23
  -21
  -19
  -17
  -15
  -13
  -11
  -9
  -8
  -6
  -5
  -4
  -3
  -2
  -2
  -1
  -1
  -1
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  90.2
  81.1
  72.7
  65.2
  58.4
  52.3
  46.9
  42.0
  37.7
  33.9
  30.5
  27.6
  24.9
  22.6
  20.5
  18.7
  17.1
  15.6
  14.4
  13.2
  12.2
  11.3
  10.5
  9.8
  9.2
  8.6
  8.1
  7.7
  7.3
  6.9

Kandi Technologies Group, Inc. (Kandi) is focused on the development of pure electric vehicle (EV) products and manufacturing electric vehicle's parts. The Company's business operations are the design, development, manufacturing and commercialization of electric vehicles, electric vehicle parts and off-road vehicles, which are distributed in China and global markets. Its products include EV parts, EV products and off-road vehicles, including all-terrain vehicles, utility vehicles, go-karts and others. The Company conducts its business operations through its subsidiary, Zhejiang Kandi Vehicles Co., Ltd. (Kandi Vehicles), and the partial subsidiaries of Kandi Vehicles. The Company focuses on fuel efficient, pure EV parts manufacturing. Its subsidiary, Jinhua Kandi New Energy Vehicles Co., Ltd., holds battery packing production rights, and supplies the battery pack to the joint venture company.

FINANCIAL RATIOS  of  Kandi Technologies Group (KNDI)

Valuation Ratios
P/E Ratio -54.2
Price to Sales 2.9
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow -7.6
Price to Free Cash Flow -6.8
Growth Rates
Sales Growth Rate -35.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 500%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 12.5%
Total Debt to Equity 33.6%
Interest Coverage -2
Management Effectiveness
Return On Assets -1.2%
Ret/ On Assets - 3 Yr. Avg. 3%
Return On Total Capital -2.4%
Ret/ On T. Cap. - 3 Yr. Avg. 3.1%
Return On Equity -3%
Return On Equity - 3 Yr. Avg. 3.9%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 14%
Gross Margin - 3 Yr. Avg. 13.8%
EBITDA Margin 0.8%
EBITDA Margin - 3 Yr. Avg. 9.8%
Operating Margin -24.8%
Oper. Margin - 3 Yr. Avg. -8%
Pre-Tax Margin -4.7%
Pre-Tax Margin - 3 Yr. Avg. 4.9%
Net Profit Margin -5.4%
Net Profit Margin - 3 Yr. Avg. 3%
Effective Tax Rate -16.7%
Eff/ Tax Rate - 3 Yr. Avg. 10.6%
Payout Ratio 0%

KNDI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KNDI stock intrinsic value calculation we used $129 million for the last fiscal year's total revenue generated by Kandi Technologies Group. The default revenue input number comes from 2016 income statement of Kandi Technologies Group. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our KNDI stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 5.2%, whose default value for KNDI is calculated based on our internal credit rating of Kandi Technologies Group, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Kandi Technologies Group.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of KNDI stock the variable cost ratio is equal to 61.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $84 million in the base year in the intrinsic value calculation for KNDI stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Kandi Technologies Group.

Corporate tax rate of 27% is the nominal tax rate for Kandi Technologies Group. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the KNDI stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for KNDI are equal to 51.9%.

Life of production assets of 13.4 years is the average useful life of capital assets used in Kandi Technologies Group operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for KNDI is equal to 50%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $232 million for Kandi Technologies Group - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 48.021 million for Kandi Technologies Group is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Kandi Technologies Group at the current share price and the inputted number of shares is $0.4 billion.

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COMPANY NEWS

▶ Can Kandi Stock Keep Going After Last Week's 60% Pop?   [Oct-08-17 10:07AM  Motley Fool]
▶ Kandis JV Company Achieved 3,213 EV Units Sales in August   [Sep-05-17 08:37AM  GlobeNewswire]
▶ Kandi Tech reports 2Q loss   [Aug-09-17 10:39PM  Associated Press]
▶ Kandi Tech reports 1Q loss   [08:01AM  Associated Press]
Financial statements of KNDI
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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