Favorable policy measures and rising investor optimism in the electric vehicle (EV) industry worldwide have lured a large number of new entrants into the sector over the past year. There was a 39% year-over-year rise in global EV sales in 2020. In China, 1.3 million EVs were sold, representing 8% year-over-year growth. China’s economic growth and favorable policy measures to boost its EV industry, along with the advantage of the nation’s own supply of raw minerals used for making EV batteries, should help several Chinese companies achieve solid growth.
Although a global semiconductor chip shortage has been disrupting EV production worldwide, China has been doing a decent job keeping its production going. In fact, many Chinese companies have raised their second quarter delivery forecasts. This, combined with China’s focus on developing its technology sector and domestic production in its five-year plan to combat competition from Western countries, should position China to lead the global EV market in the future.
Given these factors, Wall Street analysts expect popular Chinese EV stocks Li Auto, Inc. (LI) and Niu Technologies (NIU) to deliver more than 40% returns in the near-term.
Click here to checkout our Electric Vehicle Industry Report for 2021
Li Auto, Inc. (LI)
LI is a China-based holding company that designs, manufactures and sells smart electric sport utility vehicles (SUVs). The company offers Li ONE, a six-seat electric SUV equipped with a range of extension systems and smart vehicle solutions. It also sells peripheral products and provides related services, such as charging stalls, vehicle internet connection services and extended lifetime warranties.
The company delivered 4,323 Li ONEs in May 2021, representing a 101.3% year-over-year increase. It hopes the strong uptake of the 2021 Li ONE since its launch and the continuous expansion of its direct sales and servicing network should assure more-than-expected deliveries in the second quarter.
LI priced an $862.50 million issue of convertible senior notes on April 12, 2021. The company plans to use the offering’s proceeds for research and development of new vehicle models, including BEV models and leading technologies, and for working capital and other general corporate purposes.
LI’s total revenues for its fiscal first quarter, ended March 31, 2021, was $545.68 million, which represents a 319.8% year-over-year improvement. The company’s gross profit increased 803.1% year-over-year to $94.13 million. As of March 31, 2021, it had $1.25 billion in cash, cash equivalents and restricted cash.
Analysts expect the company’s revenue to increase 148.2% for the current quarter ending June 30, 2021, to $697 million. The stock has gained 83.3% over the past year and 47% over the past month. It closed yesterday’s trading session at $30.11.
All six Street analysts rating the stock have rated it “Buy.” Moreover, analysts expect the stock to hit $42.52 in the near term, which indicates a potential 41.2% upside .
Niu Technologies (NIU)
Headquartered in Beijing, China, NIU is a provider of smart urban mobility solutions. The company designs and sells smart electric bicycles and motorcycles. It sells and services its products through city partners and franchised stores, third-party e-commerce platforms and the company’s online store.
In the first quarter of 2021, NIU sold 149,649 e-scooters, which represents a 272.6% year-over-year improvement. NIU sold 144,654 e-scooters in the China market, up 321.5% from the year-ago period. Its growth in the Chinese market was driven mainly by retail network expansion and effective branding and marketing activities.
On April 6, NI launched four new products—F0, F2, F4 and C0 models—in the e-scooter category, mainly for the Chinese market, and one new product in the kick-scooter category, for international markets mainly. The company also announced upgrades of various smart functions and components on existing MQi and UQi series products to offer a better riding experience. The company expects to generate good sales with these products in the near-term due to the strong seasonality of the e-scooter market.
For its fiscal first quarter, ended March 31, 2021, NIU’s revenues were $83.54 million, up 135% from the prior-year period. The company’s gross profit increased 137.3% year-over-year to $19.89 million. Its operating income is reported at $37,413 for the quarter, compared to a $4.09 million operating loss in the prior-year period. NIU’s adjusted net income came in at $1.02 million, compared to a $2.63 million adjusted net loss in the year-ago period. The company had $27.90 million in cash and cash equivalents as of March 31, 2021.
A $0.16 consensus EPS estimate for the current quarter, ending June 30, 2021, represents a 154.5% rise year-over-year. Its revenue estimate for the current quarter is $157.37 million, representing a 69.2% rise from the prior-year period.
NIU has gained 90.9% over the past year and 53.9% over the past nine months. It closed yesterday’s trading session at $30.54.
All three analysts that have rated the stock have given it a “Buy.” The stock is expected to hit $43.33 in the near term, which indicates a potential 41.9% gain.
Click here to checkout our Electric Vehicle Industry Report for 2021
LI shares were trading at $28.73 per share on Tuesday afternoon, down $1.38 (-4.58%). Year-to-date, LI has declined -0.35%, versus a 13.74% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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