china xd plastics: false claims don\'t stick, over 200% upside

by:Yucai     2020-05-17
XD Plastic, China (NASDAQ:CXDC)
It is a plastic manufacturer of auto parts in China, in Audi (OTCPK:AUDVF), Toyota (NYSE:TM)
And local Chinese car brands.
Estimated at $1 billion in revenue of $2 billion to 2017, CXDC continues to benefit from increased car penetration in China as an alternative to more expensive imported products and Chinese auto exports.
This report will think that CXDC should be like mid-
Based on the market value multiples of supporters such as Morgan Stanley (
Company 25%)
Bond holders such as Fidelity investment and their competitive advantages.
Car manufacturers in China are certified and integrated with the most reputable and largest suppliers.
CXDC is the number one company in China in terms of production capacity and certification.
The obstacles to CXDC Operations & EntryI must thank CXDC\'s chief financial officer, Zhang Taylor, for his glowing explanation on the phone as to why CXDC is more than just a vendor of plastic pellets.
For example, the operation of CXDC is highly integrated with the operation of its customers, including distributors, auto parts manufacturers (AP)
And original equipment manufacturers (OEM).
Typical sales include OEM (
Audi, for example)
Send the technical requirements of auto parts manufactured by AP to CXDC.
These requirements will include a long list of plastic specifications such as impact and heat resistance, such as the large difference between the bumper and the dashboard.
CXDC will then contact the AP and provide the AP with plastic specifications and conduct initial R & D trials with the AP to ensure that it meets the requirements of the OEM.
At a later stage, CXDC processes the rest of the R & D process, once completed, sells the particles to the AP through the distributor, who processes inventory and overall logistics for the AP.
CXDC will only confirm revenue when the AP receives a batch of the distributor\'s products, not when the CXDC ships to the distributor, thus minimizing the risk of filling the channel.
The following figure describes the time-consuming (1. 5 to 2 years)
Process before obtaining product certification and product delivery from OEM.
As shown in the figure, order fulfillment means a close and continuous connection between CXDC, OEM, AP and dealers, and a business relationship that is not conducive to simple shopping has been established.
Market share and barriers of Japanese automakers Toyota and Honda (2013)NYSE:HMC), Nissan (OTCPK:NSANY)(OTCPK:NSANF)and Mazda (OTCPK:MZDAY)
More than 3 million vehicles have to be recalled globally to replace the defective airbag inflator that is prone to fire.
By May 2015, it had become the largest car recall in the United States. S. history.
Plastic airbag inflators are produced by Takada, a Japanese supplier of auto parts. (TKTDY).
Unlike the modified plastics for electronics and electrical appliances whose price is the determining factor, the technical performance is the driving factor for the automotive industry.
Car Brands of good size and reputation seek the most mature companies and vote by awarding product certification.
CXDC is considered to be the most accredited company in China.
The company has been certified and utilized by 8 of China\'s top 10 automotive OEMs and offers products to 25 brands and 80 models.
CXDC is also a manufacturer of automotive modified plastics by production capacity in China, and two are producing automotive modified plastics by sales volume, with a market share of 36% in the northeast of China\'s major automotive manufacturing areas.
According to data from Frost & Sullivan, multinational companies have largely imported high-cost products relative to Chinese products and are expected to continue to lose market share, down from 57% in 2008 to 26% in 2017
In the same period, large domestic well-known producers like CXDC with a long history in product certification and local production are expected to increase from 43% of the market share to 74% in the growing market.
Conservative leverage and growth markets since the Nasdaq listing in 2009, GAAP revenue has grown by more than 50% and annual revenue has grown by nearly 100%.
At the expense of reducing imports, increasing market share has driven growth (See above)
As well as the increasing penetration rate of automobiles, from 4% in 2008 to 8% in 2012, it is expected to reach 15% by 2017.
This will still be far below 78% in the United States. S.
In Europe there are 52%.
Hold on to this idea when U. S.
The media reported a cyclical slowdown in Chinese cars.
Long term growth is a fair assumption unless China resumes cycling.
It is expected that by this year, the amount of plastic used per car in China will increase from 152 kg in 2005 to 67 kg, but will still be lower than in Europe (250 kg)and the U. S. (200 kg).
In fact, in order to reduce the weight of the car, the use of plastic in the car is expected to increase globally, which reduces carbon dioxide emissions.
Electric cars that are also good for the environment are a godsend.
I\'m not going to granola.
Electric cars use 15% more plastic than conventional cars to compensate for the extra weight of the battery.
When the company is involved 3-D, bio-
Plastic, airplane and high
China\'s high-speed rail market will continue to focus on the growing automotive industry.
In 2009, China overtook the United States as the world\'s largest auto market. S.
Whether it\'s manufacturing or consumption.
China has more than 0. 3 billion drivers and the same number of licensed drivers as the United States. S.
Exports will follow.
As stated by Chrysler (NYSE:FCAU)
CEO, \"Future plans for export markets are important\" and the risks facing the USS.
European companies are \"huge \".
In 2015, the company expects revenue and profit figures to be similar to those in 2014, having reached full capacity since 2013.
However, the company said that capital expenditures currently in progress will increase additional capacity by 80% by 2017 and increase margin products.
CXDC has exceeded sales guidance every year since 2009.
If the economic situation remains the same, the net income of CXDC in 2017 will exceed $0. 22 billion and the income will be $2 billion (See table below).
With the $330 in cash obtained from last year\'s issuance of bonds and a fully converted enough leverage ratio, the company should have no problem meeting planned investments.
So why is CXDC trading 3. 4x 2015 & 1.
8x2017 income?
On the basis of complete conversion, the cost of the entire company is $0. 409 billion (
Calculate only the market value of the issued shares at $0. 304 billion)or $6.
20 per share, 3 CXDC transactions.
Net income of 4x2015.
If the economy remains the same, the company deals 1.
Net income of 8x2017.
What is possible to explain such a ridiculous valuation?
All of this can be traced back to the 2010 fiasco surrounding suspicious Chinese reverse mergers and listings such as China Oriental paper.
Reverse consolidation is a common practice involving a private company bypassing the cost and review of an IPO by merging with smaller companies already listed.
From the point of view of the 60% drop in the Bloomberg China Reverse Merger Index ((CHINARTO))
Since 2010, investors in general believe that all reverse mergers and acquisitions in China are for fraud.
However, since the publication of the China Oriental News, the case of China\'s reverse mergers and acquisitions has been revealed, proving the bias against China\'s reverse mergers and acquisitions.
The most significant study was probably published in November 20 by Stanford University business school.
Compare the Sino-US reverse M & A of the report are summarized as follows :(1)
Most American companies are small and have never successfully migrated to Nasdaq (
Where CXDC deals); (2)
Chinese companies have chosen the United States. S.
Not only for the reputation given by the United States. S.
It may take 12% of the capital to go public or save money through an IPO, but it is also because of corruption in the Chinese market.
Many local governments require companies to hold shares in exchange for authorized listings; (3)
China\'s reverse M & A has better capital and better operating results than the US\'s reverse M &.
All in all, it would be ironic if CXDC finally got a better valuation than its US counterparts.
In fact, the reverse merge makes sense, and not all lists can be defrauded.
Berkshire Hathaway (NYSE:BRK. A)(NYSE:BRK. B)
After all, it is a reverse merger in his 60 s.
Anonymous Analysts simulated market prices. China\'s reverse M & A is booming in the Asian market, not a cottage, but a widely spread industry. Anonymous bloggers, riding on the tail of legitimate short sellers like muddy water research, unveiled China\'s Oriental paper industry.
This is the case, citing Bloomberg: \"an anonymous researcher has released a report questioning the accounts of a listed company.
Investors seize the wind and sell it.
The target company denied the charges, but by then
The price has been lost.
\"Normally, like CXDC, there are arithmetic errors in these anonymous research reports that can only be traced back to Gmail addresses.
This approach increases the correlation with CXDC as it leads to bot-
Yahoo Finance said, \"Did you get hurt in a car accident?
, In the case of CXDC reading, eastholder reminds investors to take collective action against China XD Plastics Co. , Ltd.
The deadline for its board of directors and major plaintiffs is September 15, 2014 \".
I counted ten robots.
Listed lawyer affairs so this way to advertise for the enterprise.
All claims are based entirely on a research article written by anonymous short sellers.
After CXDC sought counsel for defamation, Shearman & Sterling LLP contacted the short seller and the report of 2,300 words was cut to 1,500 words.
The rest is a watered-down allegation that CXDC is underinvested in R & D, and that profit margins are questionable compared to Kingfa, another Chinese company in the same industry.
However, from 2010 to 2013, through Kingfa\'s financial data, it can be seen that the two differences are located by Kingfa in different market segments and traded raw materials (20% of revenue)
This is a well-known low profit margin (4%)
Large business volume.
In contrast, Shanghai Pret Composite, China\'s third-largest supplier of modified plastics for automobiles, may be closer.
The gross profit margin difference of CXDC 5% compared to this company can be explained by various reasons, including Shanghai Pret Composites, which also serve the communications and electrical industries, while CXDC focuses on the automotive industry.
Smart funding support CXDCCXDC bulls include Scott Blake, president of Delphi Management, a leading fund management company founded in 1980 that lists Michael Bloomberg as its client
As he has done over the last 12 years, Scott Black has time to join 10 other general panelists in the 2011 Annual Round Table in Barron, including fellow Mario Gabriel, Abby Joseph Cohen and Mark Faber
During the round table, experts competed and promoted their best investment ideas for the coming year, affecting their company\'s reputation.
Barron then counted the results and held the results accountable in the second year.
In 2011, Scott Black listed CXDC as his first choice after a year at China Oriental.
Seven months after Scott Black\'s recommendation, Morgan Stanley will invest $100 million in the company through the third Morgan Stanley Private Equity Asia Fund (MSPEA III)
The valuation was $0. 4 billion.
Three years later, the CEO of MSPs EA Chin Chou commented on the success of raising $1. 7 billion (target was $1. 5 billion)
For the fourth and final fund, this is due to the performance record and strong performance of the top three funds.
According to Zhou, the funds benefited from what he said was \"the most attractive entry price we \'ve seen in the last 10 years \".
According to a Reuters article, the company understands that the net return on the top three MSPs EA funds is more than 20% per year.
Keep in mind that the company will be reviewed before the Morgan Stanley Private Equity Fund is ready to give up $100 million.
Now add two more Morgan Stanley board seats, KPMG as auditor, and the first Chinese industrial company to issue bonds in the United StatesS.
Buyers of bonds issued in 2014 included Fidelity Investments, Morgan Stanley, UBS and other banks.
I tried to find the organization that had an impact on the company but did not find it.
Shareholder scxdc is controlled by Han Jie, its founder, chairman and CEO, who owns about 50% of the company.
Morgan Stanley shares D with 25% preferred stock through MSPs III (
All numbers are based on full conversion).
When I wrote this, MSPs EA fund III may be working on a bid plan for CXDC, but only re-listing in Hong Kong or China in a market multiple within two or three years, and continue to achieve an annual return of 20% investment.
The remaining 25% is a floating deposit, held mainly by institutional investors, including Renaissance technology, CALPERS and Invesco.
According to the latest 13-10, the top 10 institutional investors hold about 50% of the stockFs.
These investors are unlikely to accept low-ball bid offers due to trust reasons.
But the opportunity is there, the offer of about $6 premium 50% over the current market price is a low-risk, high-return proposal for any buyer, $9 per share.
Before last year\'s questionable class action, shares were traded for $13.
From the current price point of view, it is up 200% to 600% if CXDC choose to go public in China instead of the USS.
The company will receive 20x2014 of revenue by reverse merger.
This is a multiple of the Shanghai Stock Exchange as of May 18, representing $2.
The CXDC is valued at 4 billion, six times the current price.
If CXDC is Russell 2000, then it will earn 23x2014, or $2. 8 billion.
While China\'s growth prospects can be said to be better than the US, this is seven times the current valuationS.
If the economic situation remains the same, the figures in the above table do not account for nearly twice the income in 2017.
Conclusion: CXDC is worthy of multi-party investment in the market. They tried to give up any of Buffett\'s maxims but would eventually give in.
Only when he\'s not right all the time).
You \'ve heard of 20 punch-in ideas for lifelong investment.
CXDC deserves a punch.
It turns out that China\'s reverse M & A is better at managing capital than the US\'s reverse M &.
Most of the fraudulent claims of anonymous short sellers have been recovered and the remaining claims have been overturned.
However, CXDC continues to trade for $6 due to inertia.
£ 20 per share, which means a ridiculous PE of £ 3. 4x (1.
8x2018 expected earnings).
All you have left is Morgan Stanley-backed (25%)
Since its launch on Nasdaq in 2009, China\'s leading company, GAAP, has seen revenue grow by more than 50%, earning nearly 100% a year.
After the new plant is put into operation, the company may double its revenue again in 2017.
Despite the impressive numbers, there is still a lot of room for growth, with only 15% of people in China expected to own cars by 2017.
Exports will follow.
Not all manufacturers of modified plastics will benefit.
Local market leaders like CXDC, within the scope of integrating business with auto parts manufacturers, distributors and OEMs, will continue to develop at the expense of smaller local players and importsAt around $6.
At $20 a share, the value of CXDC is ridiculously high.
I will not sell it for $12.
Disclosure: The author is long CXDC.
The author wrote this article himself and expressed his views.
The author was not compensated.
The author has no business relationship with any company mentioned in this article.
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