Why Highpower International (HPJ) Is SkyrocketingToday

NEW YORK (TheStreet) -- Highpower International  (HPJ) skyrocketed 44.1% to $4.54 just before noon on Tuesday after the company, which produces and sells rechargeable nickel-metal hydride (Ni-MH) batteries, announced its first-ever order for large format lithium batteries.

Huizhou Yipeng Energy Technology, a system integrator that serves several large bus manufacturers throughout China, will use the batteries in its electric buses. The order marks Highpower's first major entry into the electric vehicle market. As part of the deal, Highpower will deliver two formats of product, including 16-ampere-hour and 20-ampere-hour NCM lithium polymer batteries that have passed the quality test from China National Quality Center and Huizhou Yipeng.

The company expects sales to Huizhou Yipeng to range between $4 million and $5 million in the fiscal year 2014.

Some of China's most well-known brands of hybrid electric and plug-in hybrid electric buses will use the batteries. The company's press release estimates each hybrid electric bus will use 96 of the 16-ampere-hour batteries, while each plug-in hybrid electric bus will use 288 of the 20-ampere-hour batteries.

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TheStreet Ratings team rates HIGHPOWER INTERNATIONAL INC as a "hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate HIGHPOWER INTERNATIONAL INC (HPJ) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, poor profit margins and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 7.4%. Since the same quarter one year prior, revenues rose by 21.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • Compared to its closing price of one year ago, HPJ's share price has jumped by 176.69%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • HIGHPOWER INTERNATIONAL INC reported flat earnings per share in the most recent quarter. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, HIGHPOWER INTERNATIONAL INC turned its bottom line around by earning $0.13 versus -$0.18 in the prior year.
  • Net operating cash flow has decreased to $0.26 million or 23.75% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, HIGHPOWER INTERNATIONAL INC has marginally lower results.
  • The debt-to-equity ratio is very high at 2.17 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, HPJ has a quick ratio of 0.68, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • You can view the full analysis from the report here: HPJ Ratings Report

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