Bearish stock to watch: Qudian Inc – ADR (NYSE: QD)

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Qudian Inc – ADR (NYSE: QD) stock fell over 7.3% on 20th May, 2019 (as of 1:08 pm GMT-4; Source: Google finance), hurt by a decrease in sales income generated by the Dabai Auto business.

The company in the first quarter of FY 19 has reported the 22.2% rise in the total revenues to RMB2,096.9 million (US$312.4 million), mainly due to a substantial increase in loan facilitation income and others and an increase in financing income, Non-GAAP Net income attributable to Qudian shareholders grew by 187.9% to RMB974.3 million (US$145.2 million). As of March 31, 2019, the Company had cash and cash equivalents of RMB1,931.4 million (US$287.8 million) and restricted cash of RMB1,138.4 million (US$169.6 million).

Furthermore, cost of revenues fell by 62.1% to RMB260.5 million (US$38.8 million) from RMB686.4 million for the first quarter of 2018, mainly driven by a decline in costs incurred by the Dabai Auto business and a decrease in funding costs associated with the core online consumer finance businesses. Sales and marketing expenses fell by 35.0% to RMB79.9 million (US$11.9 million) mainly due to a decrease in marketing expenses associated with the scaling down of the Dabai Auto business.

Bearish stock to watch: Qudian Inc – ADR (NYSE: QD)

Moreover, as of March 31, 2019, the net cash provided by operating activities of RMB1,197.4 million (US$178.4 million), mainly due to the net income of RMB949.6 million (US$141.5 million) and provision for receivables of RMB390.4 million (US$58.2 million). Net cash used in investing activities was RMB1,454.3 million (US$216.7 million), mainly on the back of the payments to originate loan principal of RMB7,704.3 million (US$1,148.0 million), which is partially offset by proceeds from collection of loan principal of RMB6,297.0 million (US$938.3 million). Net cash provided by financing activities was RMB496.6 million (US$74.0 million), mainly driven by the proceeds from borrowings of RMB1,797.0 million (US$267.8 million), which is partially offset by repayments of borrowings of RMB1,271.3 million (US$189.4 million).

Meanwhile, on December 1, 2017 and December 13, 2018, the Company had announced two share repurchase programs to purchase up to US$600 million of the company’s American Depositary Shares. On the back of the continued disconnection between strong fundamentals and low stock price, on April 12, 2019, the company had repurchased all the remaining 18,173,885 shares held by one of its shareholders, Kunlun Group Limited for US$103.2 million and has subsequently cancelled the shares

For FY 19, QD expects total Non-GAAP net income to exceed RMB3.5 billion, which means a 37.3% increase from RMB2,549.3 million for 2018.

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