Think Amazon forbooks (20 years ago), Etsy for handmades, Airbnb for unique getaways, IDEX isthe defacto service provider for commercial electronic vehicles.
▪ Ideanomics Inc. - Nasdaq: IDEX — Leader of theCommercial Electric Vehicle (EV) Financing Market. IDEX is set to emerge as aleading global player in the commercial segment for the electric vehiclemarket, offering a broad range of services to fleet operators, including leasefinancing, group procurement and rebates administration. After facilitatingadoption of commercial electric vehicles, IDEX intends to generate annuityrevenue by offering energy management services for the vehicles. Its strongpartnerships with fleet operators, vehicle manufacturers, lease financingcompanies, and energy operators provide it a solid platform to become a globalleader in this market.
Investment Highlights
▪ Leadership position and strong order pipelinein a large addressable market. China – IDEX’s first target market – will behome 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 inASEAN nations (starting with Malaysia) and then globally. The company has astrong position in the market, reflected in its $2 billion order pipeline inChina, of which ~$600 million is likely to be converted into revenue in CY20.
▪ End-to-end service offering and value chainpresence: IDEX is not only engaged in facilitating the procurement ofcommercial electric vehicles but also facilitates their financing, which is oneof the hurdles for its target clients who lack financing options for EVs. IDEXalso offers energy solutions to fleet operators by providing them pre-paid andfast charging solutions for EVs. This service not only boosts IDEX’s toplinebut also creates a recurring revenue stream for the company.
▪ Strong industry partnerships: IDEX hasstrategic partnership agreements with leading Chinese fleet operators such asiUnicorn, Yunnan Energy Investment Group, Golden Concord (GCL Group), JiangsuLinghao Network Technology Co., Sichuan Shenwu Yunli Transportation ServicesCo., and Beijing Silk Road Rainbow Car Rental Group Co. These agreementsprovide IDEX a prsence across key EV hubs in China and are the source of its~$2 billion order pipeline. The company has also partnered with leading EVmanufacturers and financing solutions providers to enable smooth orderfulfilment, and with PetroChina to provide energy solutions to fleet operators.These partnerships strengthen IDEX’s execution capabilities and establish itspresence across multiple segments, a key competitive advantage.
▪ Scale: IDEX has started operations in selectprovinces in China including Chengdu, Yunnan, Guanxi etc. This still leaves itwith significant room for expansion within China. The company has alsoestablished its presence in Malaysia and has plans to gradually expand to otherASEAN markets and countries around the globe to set up the first-of-its kindfinancing and sourcing platform for commercial EVs.
▪ Strong fundamentals and cheap valuation make acompelling investment case. We expect IDEX’s topline to climb from $39 millionin CY20 (back-half ended) to $89 million in CY22. Gross margin will remainstable 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 toarrive at an intrinsic value of $1.82/share.
Source: Intro-Act Analyst Report April 20,2020
Copyright: Copyright 2019 Intro-act, LLC(Intro-act).
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