Qudian 4Q20 Earnings Analysis


Qudian Stock Analysis

Business Description:


  • According to Qudian, their potential market is 430 million people who do not have access to credit facilities from banks. Qudian serves subprime clients at a maximum APR of 36%. Currently have 3.2 million active borrowers, down 16% QoQ

  • The average loan balance on the small credit facilitation is RMB 1.5k while that on the Open Platform is RMB 6.8k. The Weighted average loan tenure is 4.5 months and 6.5 months respectively. Currently 0.8 million borrowers are still on the OpenPlatform, which is on pause.

  • Invested $100 million in Secoo buying 28% of the company at $9.80/share (355% premium). Secoo is a luxury online retailer. Secoo is going private soon. Qudian started its own luxury online retailer, Wanlimu.


Catalysts:


  • Economic recovery in China

  • Large market possibility


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

  • Currency risks


Qudian Stock Analysis

Financial Analysis:

  • Revenues of RMB 713 million ($104 million) in 4Q20 down 63% from 4Q19

  • Revenues of RMB 3.66 Billion ($564 million) in FY20 down 58% from FY19

  • Net income of RMB 673 million ($103 million) in 4Q20 up 427% from 4Q19

  • Net income of RMB 958 million ($146 million) in FY20 down 70% from FY19


Qudian Stock Analysis
  • Sales Income increased from Wanlimu business

  • Financing and Loan facilitation revenues down with lower loans given

  • Transaction revenues down with pause on OpenPlatform

  • $95 million FY20 net income from bond repurchase

  • Balance Sheet

  • Total assets: $2.05 billion ; total liabilities: $228 million; book value: $1.82 billion

  • Cash: $235 million, debts: $125 million, current assets: $1.79 billion, current liabilities: $71 million

  • Net current asset value of Benjamin Graham: $1.56 billion


Valuations

  • My personal Biases

  • 4.9% of my portfolio

  • Considers risks of unaudited numbers in margin of safety

  • Focusing on balance sheet value


  • Assumptions

  • Generates $200 million in owner’s earnings per year in base case for next 5 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 20% lower in bear case


Qudian Stock Analysis

Conclusion

  • Deep Value Stock, looking at book value

  • Uncertainties surrounding business future

  • Undervalued even with a big margin of safety


Qudian Stock Analysis

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