A global shift from fossil fuel electricity and transport to sustainable power and vehicles has opened up a massive opportunity for companies focused on electric infrastructure and the sustainable energy supply chain.
ChargePoint is a California-headquartered EV infrastructure company founded in 2007. ChargePoint is currently the largest independent EV charging infrastructure operator in the world with 150000 charging sites across 14 countries. ChargePoint too has its own cloud-based system allowing customers to find and book any of their stations. In 2020, ChargePoint reverse-merged into Switchback Energy, a SPAC(Special Purpose Acquisition Company) focused on renewable energy. The deal will give ChargePoint $683 million in proceeds to advance its business.
Daqo New Energy Corp.(DQ) is a China-headquartered company that produces monocrystalline silicon and polysilicon, which are critical components needed in solar panel production. The company was founded in 2008 and has a nameplate silicon production capacity of 70000 tons. The company operates a state-of-the-art production facility in Xinjiang, China. Daqo recently announced a 5-to-1 stock split. The company recently cut its Q3 sales guidance due to a rise in silicon prices.
ChargePoint too operates on a host and ChargePoint-owned business model that is both capital-light and high-margin. The company provides complete turn-key solutions to hosts under different arrangements such as host-owned, Chargepoint-owned, and hybrid-ownership. Each arrangement entails different cost-ownership and revenue-sharing structures. ChargePoint also generates recurring revenue from hosts for its cloud platform SaaS. As a first-mover in the space, ChargePoint has a far bigger footprint.
Daqo is a leading high-purity polysilicon manufacturer based in China. The company produces polysilicon using the CVD(Chemical Vapor Deposition Process) and has developed a closed-loop system to produce polysilicon of high-quality consistently and in a cost-effective manner. The company’s biggest customers are photovoltaic/solar manufacturers looking for high-quality silicon, who then process the silicon into wafers, cells, modules, etc. The company has a major competitive advantage over some competitors as the Xinjiang region, where the company’s production facilities are located, has much lower electricity and utility costs compared to other industrial and coastal areas, thus giving the company valuable cost-savings.
Since ChargePoint has just completed its SPAC deal, it is yet to declare any financial results. In 2019, ChargePoint generated a revenue of $147 million and a net loss of $133 million. However, the company stated that it expects hockey-stick growth in revenues.
The company aims to grow its network to 2.5 million charging ports by 2025. It expects revenues to grow from $135 million in 2020 to $2.069 billion by 2026, implying a 57% compounded growth rate. The company is currently trading at a revenue multiple of a little over 9x. ChargePoint has a 51% upfront and 49% recurring revenue ratio. In North America, they have a 73% market share, more than 7x its closest competitor(Blink). The company has given revenue guidance of $198 million and $346 million for FY21 and FY22. The company is currently trading under Switchback Energy and has a market cap of $1.34 billion.
In Q2’20, Daqo outperformed projections and turned a profit after it saw sales double year-on-year. The company reported a top-line of $133 million and a profit of $2.4 million. The company produced 18,097 tonnes and sold 18,881 tonnes in the quarter. The company has given Q3 sales guidance of 13,643 tonnes and 2020 full-year guidance of 70000-75000 tons. The gross margin for Q1 and Q2 was 37.4% and 20%, respectively. The company attributes the sharp fall in margins to disruptions caused by the pandemic. Daqo has a market cap of $607 million and a P/E of 10.44.
Daqo is yet to put out Q3 numbers. Being domiciled in China, Daqo has a huge opportunity as China is expected to top 60GW in annual solar installations by 2025(2x 2019 installations), thus giving the company significant growth opportunities.
Both companies provide great opportunities for investors as both operate in burgeoning fields. However, due to huge planned capital expenditure to expand its footprint, ChargePoint may take a while before hitting profitability.
On the other hand, Daqo has successfully increased its business and profits over the past few quarters, barring some disruptions due to Covid, thus making it a better choice for investors. Also, the drop in its stock price (from $250 to $218 before 5 to 1 split) is a huge bottom-fishing opportunity for investors.