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  • Writer's pictureIshfaaq Peerally

Qudian gains 22% after earnings

Qudian Stock $QD is up 22% this week after satisfactory earnings showing that things are finally getting better for the company.

Revenues and profits of Qudian are still falling with 516 m RMB in revenues for the first quarter of 2021, compared to 714 m RMB for the last quarter of 2020. Qudian D1 Delinquency rate is now back to around 8% after increasing to over 20% last year with the pandemic and regulations.

Qudian is now being more choosy on who they are going to give a loan to. That's why they can lower the delinquency rate but at the same time, they have to lower their customer base and consequently revenues and profits. If this trend continues, the business of Qudian will stabilize and can eventually grow again but at a slower rate.

Qudian still has a very good balance sheet and at its current valuation is at a big discount to its book value. Qudian is a cash producing machine and they are trying to do the same things that Berkshire Hathaway $BRK.B did, invest in other businesses. Qudian started Dabai Auto, Wanlimu, and most recently Wanlimu Kids.

Wanlimu Kids is about providing quality education to kids in China. There's a market for it but the initial Capex can be big like in any other business.

As Value Investors, we need to focus on the existing business, that is, fintech. And at current price, this is a deep value stock.

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