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.

Investment Advisors

Herbalife China: Sales Collapsed in January; Government Opening Investigation

Herbalife China: Q1 VP Down ~25% YoY, New Cash Bonus Policy to Retain Distributors

Herbalife China: RMB Appreciation Tailwind for All MNCs; Fundamental Slowdown Irreversible

Herbalife China Q4:  New Policy in Favor of New Recruits

Investment Advisors, JL Warren Capital

Junheng Li

Equity Bottom-Up

<p>2017 was a challenging year for <a href="https://www.smartkarma.com/entities/6216" target="_blank" data-smartkarma-citation="entities:6216:1">Herbalife Ltd (HLF US)</a> China, a market that generates ~30% of the entire company's revenue.  The formal CEO Jerry Li officially departed taking key executives with him onto his next venture, a 25-year old debt-burdened distributor committed suicide followed by investigation by Chinese authorities, scrutiny by the US regulators deepened, number of firm-wide meetings and gatherings sharply declined, and the direct sales market in China was swamped with new entrants competing for quality distributors.  </p><p>However, in spite of all the headwinds the company was able to pick itself up and finish the year strong, most likely delivering positive growth of Volume Points (VPs) 2017/2016 in China.  A range of effective defensive strategies saved HFL China but what do the longer-term prospects looks like for HLF China?   In this report, we discuss the natures of the challenges for HLF China in 2017.  Our view is that unless HLF China comes up with new products for distributors to sell, given the intensifying competition in the industry, the effectiveness of the stimulus policies implemented first in April and again in November 2017 will be short lived.  The structural headwinds faced by HLF China are only going to get tougher in the long run.     </p>

2017 was a challenging year for Herbalife Ltd (HLF US) China, a market that generates ~30% of the entire company's revenue.  The formal CEO Jerry Li officially departed taking key executives with him onto his next venture, a 25-year old debt-burdened distributor committed suicide followed by investigation by Chinese authorities, scrutiny by the US regulators deepened, number of firm-wide meetings and gatherings sharply declined, and the direct sales market in China was swamped with new entrants competing for quality distributors.  However, in spite of all the headwinds the company was able to pick itself up and finish the year strong, most likely delivering positive growth of Volume Points (VPs) 2017/2016 in China.  A range of effective defensive strategies saved HFL China but what do the longer-term prospects looks like for HLF China?   In this report, we discuss the natures of the challenges for HLF China in 2017.  Our view is that unless HLF China comes up with new products for distributors to sell, given the intensifying competition in the industry, the effectiveness of the stimulus policies implemented first in April and again in November 2017 will be short lived.  The structural headwinds faced by HLF China are only going to get tougher in the long run.     

Herbalife China in Transition:  2017 Review