Chinese companies are at the center of the green revolution because the technology needed for the transition toward a sustainable energy-based world is mostly produced in China. Many Chinese companies have emerged in this space over the past few years with much promise and have attracted significant investor attention. But some of these companies have so far failed to achieve the performance level investors expected of them.
These companies are lagging in terms of revenues and EPS. Some are also burning through cash at a staggering rate. Moreover, their efforts to raise further capital are leading to a dilution of shareholder value. These factors are causing investor disappointment. This is evidenced by the price decline of some of the Chinese clean energy stocks over the past month.
JinkoSolar Holding Company (JKS), Niu Technologies (NIU), CBAK Energy Technology, Inc. (CBAT) are three companies that are running with almost no profits even after years of operation. These companies are working on turning things around but that may not happen anytime soon. Despite the existing euphoria around clean energy, we think investors should stay away from these stocks in the near term.
JinkoSolar Holding Company (JKS)
JKS is involved in the production and marketing of photovoltaic cells and related products. The company has operations in China and internationally. JKS’s stock has lost 27.7% since hitting its high in October.
Recently, the company announced that it will be offering $100 million in American depositary shares. The move is likely to considerably dilute the ownership interest of existing shareholders and the announcement led to a sell-off of the stock.
For the third quarter, the company’s gross margin was 17%, which was a decline from 18.5% for the same period last year. The company’s cash and short-term restricted cash declined 2.7% sequentially.
The company’s EPS is expected to decrease 71.4% for the quarter ended December 31, 2020 and 4% in 2020.
Niu Technologies (NIU)
NIU is involved in the development, manufacture, and marketing of lithium-ion battery powered e-scooters, which it markets.
NIU’s stock has declined 14.5% since hitting its high of $35.9 on November 19. NIU’s stock price fell after a disappointing third quarter earnings report. The company reported revenues of $135.8 million, which was significantly below analyst’s expectations of $149.3 million.
The launch of its lower-priced G0 model scooter also resulted in a fall in the company’s gross margin. Its gross margin fell from 22.2% in Q3 of 2019 to 20.9% in the last quarter.
NIU’s third quarter earnings surprise was negative 22.7%. And its EPS is estimated to fall 38.5% for the quarter ended December 31, 2020 and 2.6% in 2021.
NIU’s POWR Ratings are consistent with this bleak outlook. It has an overall rating of “Neutral” with a “D” for Peer Grade. It is ranked #20 t of 30 stocks in the Technology – Hardware industry.
CBAK Energy Technology, Inc. (CBAT)
CBAT is engaged in the development, manufacture, and marketing of lithium-ion rechargeable batteries. The company’s batteries are used for electric vehicles, electric tools, energy storage, among other applications. The company’s stock has fallen 17.4% since hitting its high of $11.4 on November 16.
CBAT announced recently that it had entered into an agreement to supply $120 million car batteries to car manufacturer Kandi Technologies. However, the deal may go sour since Kandi Technologies has subsequently accused of fraud.
The company has also revealed that it has entered into an agreement with a creditor to cancel debt in exchange 3.2 million shares. This agreement will dilute shareholders holding by 4.8%.
For the quarter ended September 2020, the company saw a 10.2% increase in financing expenses versus the same period last year. The company’s income from other sources declined 84.3% during the same period.
CBAT’s gross profit margin (TTM) stands at 7.7% compared to the sector average of 29.1%. The company’s net income margin (TTM) is currently -27.6% compared to the sector average of 4%.
CBAT’s poor prospects are also apparent in its POWR Ratings, which assigned it a “Sell” rating. It has a “F” for Trade Grade and Buy & Hold Grade. It is ranked #51 out of 59 stocks in the Industrial – Equipment industry.
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JKS shares were trading at $62.56 per share on Wednesday morning, down $0.69 (-1.09%). Year-to-date, JKS has gained 178.17%, versus a 16.68% rise in the benchmark S&P 500 index during the same period.
About the Author: Aaryaman Aashind
Aaryaman is an accomplished journalist that’s passionate about providing in-depth insights about investing and personal finance. Recently he has been focused on the stock market and he specializes in evaluating high-growth stocks. More...
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