Dahua Stock [NOT] Falls Off Cliff After Earnings Report

The cliff:

The report.


Coukd you please clarify section 3 for me?

  1. operating income increased 48.24% compared with the same period last year, mainly due to the expanding of sales;
  2. operating costs increased 46.28% compared with the same period last year, mainly as revenue growth, due to a corresponding increase in costs;
  3. cost of sales increased 74.13 percent compared with the same period last year, mainly to strengthen the company's marketing, due to increased marketing investment;
  4. administrative expenses increased 42.48% compared with the same period last year, mainly to expand the size of the company, research and development expenses and other related costs due to increase investment;
  5. Financial expenses increased 164.03% compared with the same period last year, mainly due to the impact of interest expense and foreign exchange gains and losses;
  6. changes in fair values increased 136.85% over the same period last year, the company is mainly due to changes in foreign exchange forward contracts, gains and losses;
  7. investment income 84.90% lower than last year, mainly due to reverse repurchase treasury income over the previous year due to the reduction in the same period;
  8. operating income increased by 244.87% compared with the same period last year, mainly software VAT refund due to the increase over the previous year;
  9. operating expenses increased 57.98% over the previous year, mainly due to water conservancy fund with revenue growth;
  10. income tax expense increased 181.02% compared with the same period last year, mainly due to income tax and profit growth with total growth.

1, thanks for bringing this up. It is a very strange case but I think the Google (and mainstream stock quote) reports are wrong.

I had a China based economics expert review this and they say local stock data shows no sharp move (or fall) in the stock price.

I think he's right (besides the fact that he's a known expert) because (1) Shenzhen only allows 10% max daily moves while Google shows ~30% drop in a day, (2) the Q1 results are quite strong so it does not fit or explain a price drop and (3) I cannot find any other negative information or stories that would explain a drop.

I can't find anything either, except that they implemented a Employee Stock Ownership Program, ESOP, and I was thinking maybe there was a fractional stock split or some other administrative application to accommodate this.

So, what does your friend say the price/per share is currently, ~18 ?

The economics expert, who we hire as a consultant, says the most recent price was the in ~13.5 RMB range.

I believe there was a 3:1 stock split (confidence level 80%) at the same time that the earnings came out, which unadjusted would show like this:

The adjusted numbers show that the stock actually rose a good deal:

The reason for the split may have been to make the stock cheaper to buy per unit to facilitate the newly created employee stock ownership program, (conf. lev. 65%).

Google may not have recognized the split action, (c.l. 50%), yet but I have no idea why they show 18, not 33, before the split.

From Chinese financial site:

"Dahua issued to all shareholders bonus shares for every 10 shares 8 shares"

We also have been investigating Dahua's profits and have a post on that coming next week.