Investment Advisors, JL Warren Capital

Junheng Li

Investment Advisors

JL Warren Capital

JL Warren Capital LLC is a leading independent equity research firm focused on Chinese companies and listed multinationals in China. We employ a bottom-up research approach that takes great care to avoid the acquisition of material non-public information. Through investigative due diligence including channel surveys and interviews, our research helps clients to pinpoint the dislocations in the market.

Equity Bottom-Up

<p>Our <a href="http://www.jlwarrencapital.com/byd-auto-1211-hk-conviction-short-august-17-2016/" target="_blank">deep dive</a> into <a href="https://www.smartkarma.com/entities/20962" target="_blank" data-smartkarma-citation="entities:20962:1">BYD Co Ltd (H) (1211 HK)</a>'s electric vehicle business model last year led us to the conclusion that as soon as the governments’ subsidy withdrawal began in 2017, the company’s electric bus (E-bus), pure electric passenger vehicles and plug-in hybrid PVs (PHEV) would all suffer sharp declines in profitability. Our prediction turned into reality one by one over the past 12 months. On April 20, BYD announced a 29% decline and guided to 15-33% decline in net profit in Q1 and Q2 2017 respectively, primarily on a sharp reduction of the government subsidy to electric vehicles. </p><p>BYD’s earnings disappointments are far from over.  Expectations for the company’s auto, handset and battery businesses are still way above the reality of each business.  Longer term, the company’s stretched balance sheet could push it into insolvency. The ramp of its monorail business - if at all - will add significant new debt and yet cash flow via ticketing revenue will not come in till the monorail’s operation.</p>

Our deep dive into BYD Co Ltd (H) (1211 HK)'s electric vehicle business model last year led us to the conclusion that as soon as the governments’ subsidy withdrawal began in 2017, the company’s electric bus (E-bus), pure electric passenger vehicles and plug-in hybrid PVs (PHEV) would all suffer sharp declines in profitability. Our prediction turned into reality one by one over the past 12 months. On April 20, BYD announced a 29% decline and guided to 15-33% decline in net profit in Q1 and Q2 2017 respectively, primarily on a sharp reduction of the government subsidy to electric vehicles. BYD’s earnings disappointments are far from over.  Expectations for the company’s auto, handset and battery businesses are still way above the reality of each business.  Longer term, the company’s stretched balance sheet could push it into insolvency. The ramp of its monorail business - if at all - will add significant new debt and yet cash flow via ticketing revenue will not come in till the monorail’s operation.

Build-Your-Dream on Government's Life Support

China

Lens Technology Co., Ltd. manufactures optical products. The Company produces optical lenses and other products. Lens Technology also produces electronic components, metal parts, and other products.

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Lens Technology (300433 CH)

Build-Your-Dream on Government's Life Support

Our deep dive into BYD Co Ltd (H) (1211 HK)'s electric vehicle business model last year led us to the conclusion that as soon as the governments’...

JL Warren Capital

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