Qudian 3Q21 Earnings Analysis


Qudian Stock Analysis

Catalysts:


  • Large market possibility

  • Good balance sheet to return cash to shareholders

  • Delinquency rates back to 5%


Risks:

  • Regulations could lower their interest rates

  • Subprime lending is risky

  • Lower number of customers if only good borrowers are chosen

  • Rapidly changing business environment in China

  • Business trying new ventures, many of which have failed

  • Walimu Kids, the newest business venture, is taking cash away from the business

  • Resurgence of Covid-19 in China

  • 75% of voting rights belong to CEO


Qudian Stock Analysis

Financial Analysis:


Qudian Stock Analysis

Valuations

  • My personal Biases

  • 1.9% of my portfolio

  • Focusing on balance sheet value

  • Losing confidence in management. If Wanlimu Kids fails or keeps losing so much money, will sell


  • Assumptions

  • Generates $150 million in owner’s earnings per year in base case for next 2 years (down from $200 million in previous analyses because of Wanlimu Kids)

  • $200 million in owner’s earnings in the following 3 years

  • Discount Rate of 20%, assuming all currency and business risks

  • Terminal Growth rate of 3%


Qudian Stock Analysis

  • Exit Multiples Analysis

  • Based on Book value in 2025

  • Book value doesn’t change in base case

  • 20% higher in bull case and 25% lower in bear case


Qudian Stock Analysis

Conclusion

  • Deep Value Stock, looking at book value

  • Uncertainties surrounding business future

  • Undervalued even with a margin of safety

Qudian Stock Analysis

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