" ... an intrinsic value of $1.82/share."
Ideanomics Analyst Report April 2020
Investment Highlights
? Leadership position and strong order pipeline in a large addressable market. China – IDEX’s first target market – will be home to 143 million electric vehicles (~57% of global stock) by 2030. This is ~62x the present stock of electric vehicles (2.3 million units) in China, suggesting that the market is poised for huge growth.
IDEX also plans to grow outside China, first in ASEAN nations (starting with Malaysia) and then globally. The company has a strong position in the market, reflected in its $2 billion order pipeline in China, of which ~$600 million is likely to be converted into revenue in CY20.
? End-to-end service offering and value chain presence: IDEX is not only engaged in facilitating the procurement of commercial electric vehicles but also facilitates their financing, which is one of the hurdles for its target clients who lack financing options for EVs. IDEX also offers energy solutions to fleet operators by providing them pre-paid and fast charging solutions for EVs. This service not only boosts IDEX’s topline but also creates a recurring revenue stream for the company.
? Strong industry partnerships: IDEX has strategic partnership agreements with leading Chinese fleet operators such as iUnicorn, Yunnan Energy Investment Group, Golden Concord (GCL Group), Jiangsu Linghao Network Technology Co., Sichuan Shenwu Yunli Transportation Services Co., and Beijing Silk Road Rainbow Car Rental Group Co. These agreements provide IDEX a presence across key EV hubs in China and are the source of its ~$2 billion order pipeline. The company has also partnered with leading EV manufacturers and financing solutions providers to enable smooth order fulfilment, and with PetroChina to provide energy solutions to fleet operators. These partnerships strengthen IDEX’s execution capabilities and establish its presence across multiple segments, a key competitive advantage.
? Scale: IDEX has started operations in select provinces in China including Chengdu, Yunnan, Guanxi etc. This still leaves it with significant room for expansion within China. The company has also established its presence in Malaysia and has plans to gradually expand to other ASEAN markets and countries around the globe to set up the first-of-its kind financing and sourcing platform for commercial EVs.
? Strong fundamentals and cheap valuation make a compelling investment case. We expect IDEX’s topline to climb from $39 million in CY20 (back-half ended) to $89 million in CY22. Gross margin will remain stable around ~95% while EBITDA margin is likely to expand from ~23% in CY20 to ~32% in CY22 as the company benefits from economies of scale. More importantly, IDEX will generate positive FCF starting this year and its RoE will reach 28% by CY22. We model CY22 EPS of $0.12 and apply a conservative 15x PE multiple to arrive at an intrinsic value of $1.82/share.
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