As the title suggests I am going to be talking about Qudian and it’s a deep value stock. The company offers short-term loans to the underbanked Chinese consumer market, their potential customer base is 430 million people. They also own a variety of other ventures including Wanlimu a luxury consumer brand as well as 30% of Secoo with which they have a strategic partnership. Recently Qudian has invested in an early learning education company (TAM $700B), as well as nearing completion on its business park which will be completed this year.
Much like some other stocks was last year Qudian has been beaten to a pulp by the market. As of today (13/03/21) the company has a market cap of ~$490M. It’s shareholder equity? $1.655B. Yes, that’s not a typo this company has a price to asset ratio of 0.33. But now I hear you ask but what about its earnings? In the three months to September 30 it made 87 million. Yuan? No, DOLLARS. Oh, and did I mention it has $219 million in cash?
The company has been through some tough times the last couple of years, with its regulatory environment unstable and its earnings shrinking, that and its asset quality decreased due to the rapid rise in delinquency rates during COVID. I believe the company is turning the corner on this front, however when you buy the stock you are not just buying a credit business, the CFO and CEO have stated they want to acquire companies much in the same vein as Warren Buffet did with Berkshire Hathaway.
However recently the CCP has stated that the next growth engine for China will not be an increase in factory capacity it will be from domestic consumption. What drives growth in an economy switching from production to consumption? Credit pure and simple. Qudian has outlasted a lot of it’s competitors by tightening it’s lending policy, whilst this conservative strategy has impacted it’s short term earnings it is now in a place it in a position to capitalise on the new direction the government is taking on the economy.
Book value: $6.87 (164% above current price)
Base case: $10
Bull case: $17.5 or fair value (Excess Returns Model, Simply Wall St.)
Sources:
https://ir.qudian.com/financials/quarterly-earnings
https://simplywall.st/stocks/us/diversified-financials/nyse-qd/qudian#valuation
This is not my own DD I got it from someone else and I am simply trying to spread the word because I feel like this stock is criminally undervalued and think it deserves more attention
Also my position is 17 5/21 $6 Calls and 14 Shares however I will increase my position if I start to see it climb back up.
Submitted March 23, 2021 at 08:15PM by BlitherBrick964 https://ift.tt/3cg4Gyf
