2003: Starting with Foreign Trade

Chapter 861 Teleconference and Adding Fuel to the Fire
The A-share market in 2016 was neither a bull market nor a bear market, but rather a "monkey market," much like the Year of the Monkey in the Chinese zodiac.

The circuit breaker at the start of the month opened the eyes of all investors. It was expected that the market would fall sharply throughout January. In February, the market finally rebounded for more than ten trading days, but then it was wiped out in the last three trading days, which was something investors did not expect.

The volatile price movements have left investors bewildered and have severely damaged their confidence.

You work hard for a month, and then it's all gone in just a few days. Who can stand that?
"We need to figure out a good story to tell these institutional investors."

Although ordinary investors may perceive institutional investors, including fund managers, as lacking in competence, those who can make money in the financial market are all shrewd and capable.

In a purely financial market where profit takes precedence, you need a compelling reason to convince institutional investors to accept your story, in addition to performance and expectations.

Currently, Weilai Group's performance is outstanding, with a high net profit. Among domestic independent brands, only Great Wall Motors is more profitable than Weilai. With the rapid growth of revenue and net profit in the power battery sector, it is only a matter of time before Weilai becomes the most profitable OEM among independent brands.

But what kind of situation does Wei Lai currently face?
At the close of trading on February 29, Weilai Shares closed at 92.36 yuan, with a market capitalization of 2009.75 billion yuan. What level does this market capitalization represent? Looking across the entire A-share market, only SAIC Motor currently has a higher market capitalization than Weilai Shares!
广汽市值长期维持在1500亿元左右，而BYD目前的市值则保持在1300亿元至1400亿元之间，长城汽车更是跌至700亿元至800亿元之间。

These are currently the four listed companies with the highest market capitalization in the whole vehicle industry. Changan Automobile's market capitalization has remained at around 700 billion yuan, while the market capitalization of other companies such as JAC, Jiangling, and Dongfeng has long been maintained between 150 billion and 200 billion yuan.

Huayu Automotive, currently the domestic auto parts company with the highest market value, has a market value of only around 500 billion yuan. The capital market's valuation of Weilai is actually too high.

There are several reasons for this. First, the company has been listed for a short period of time, and most of its shares are still under lock-up. The market value of the shares that are actually available for trading is only about 50 billion yuan. And apart from the volatility during the stock market crash, very few of these shares are available for trading every day.

Several institutions or speculative funds can join forces and spend at least several hundred million yuan to control the market on a given day and profit from it.

Rather than calling Weilai a large-cap stock with a market capitalization of over 2000 billion yuan, Weilai is currently only a mid-cap stock in terms of its core business. With performance and expectations in place, it is easy for speculation in the capital market.

Another reason is that in the six months following Weilai's listing, the A-share market experienced an unprecedented frenzy. No matter what kind of listed company it was, doubling or even multiplying its value was easy, leading to a severe bubble.

The current volatile market is actually a process of bursting the bubble.

As for Weilai, it is also facing a process of deflating the bubble. Although from the perspective of later observers, Weilai's market value of 2000 billion yuan is not high in Tan Jincheng's opinion, it is hard to say whether the capital market will think so.

Currently, Weilai's market value is not only the second highest among domestic car companies, but even Tesla, which continued to be very popular after the release of the Model 3, does not have a higher market value. In terms of market position, it is indeed not worthy of such a high market value.

Maintaining market value has many benefits for listed companies, and these benefits go far beyond just net worth or ways to reduce holdings.

Weilai invests a significant amount every year, including but not limited to factory equipment, charging piles, offline stores, and acquisitions and investments in supply chain companies, among other things. These investments span the entire production process of the company.

Besides its own ability to generate revenue, the remaining funds need to be raised through bank loans, equity financing, and bond issuance, and a stable stock price is one of the important factors for financing.

"In 2015, in addition to record-breaking sales of complete vehicles, the biggest highlight of Weilai was the rapid growth of its power battery business. Based on the current order volume, Weilai's power battery business will continue to maintain rapid growth in 2016, and the overall revenue will exceed 100 billion yuan."

"Our two core businesses each generate tens of billions in revenue, and we are just one step away from reaching 100 billion in revenue. In addition, as the automaker with the second-highest net profit among domestic brands after Great Wall Motors, our profitability is also commendable."

"In the new fiscal year, Welai's performance in both the whole vehicle and power battery sectors is very promising. You may think that the market value of 2000 billion yuan is a bit high, but I don't think it is. Now is the best time to invest in Welai."

"You can think of Wei as a combination of GAC or BYD and Huayu Automotive. The expectation for the power battery sector is in the field of new energy vehicles. As the most core component of new energy vehicles, we have a dominant market position."

"With this understanding, does it mean that our current market value is not high?"

The de-bubbling process for Wei Lai is definitely going to happen, but Tan Jincheng still hopes it will be delayed, at least this year, to keep the stock price stable. The reason is simply that this year is the first year of the new chairman of the China Securities Regulatory Commission.

As the current leading stock on the ChiNext board, if its stock price falls too sharply during a period of rapid earnings growth, it will not only be bad for Wei Lai, but also for the entire A-share market.

The reason why Weilai released its 2015 annual report after the market closed on February 29, the day of the sharp drop in A-shares, was precisely this consideration.

Tan Jincheng still has some impression of this new person in charge.

The dramatic circuit breaker only lasted for four trading days, but the impact of this policy was far-reaching. Not to mention shareholders of all sizes, investors suffered huge losses because of these four trading days.

As for the national team, before the circuit breaker was triggered, the national team would occasionally mention its exit plan. However, after the circuit breaker was triggered, the national team was forced to rescue the market again. After that, it had no chance to exit. The A-share market has also entered an era where the national team is in control.

The appointment of the new leader was not in accordance with procedure in terms of timing, and it seemed more like a firefighting effort. Since taking office, this person has not appeared in public.

Tan Jincheng expects this person's first public appearance to be during the Two Sessions, when Tan Jincheng will also be in Beijing. He just doesn't know if there will be a chance to meet him.

Tan Jincheng did not invest in stocks in 2016, but since the start of the bull market, the stock market has always been a hot topic. I know a little about this new leader, Tan Jincheng, mainly because his resume of getting into trouble but then escaping trouble is quite strange.

Since taking office this year, this person nicknamed 641 has been in office for three years. In those three years, he has only done two things: strengthening regulation and issuing new shares.

During his three-year term, there were more than 500 trading days and more than 700 new shares were issued, averaging more than one new share per trading day. The number of new shares listed broke various records.

The most controversial aspect of his tenure was the rapid expansion of bank stocks, with banks from his hometown of Jiangsu Province accounting for the largest share. City commercial banks from various regions were all listed, leading to a period when even bank stocks were being speculated on by speculative capital.

Judging from the current IPO queue, five city commercial banks in Jiangsu Province are waiting to be listed in the first half of the year alone, which is larger than any other province.

Besides issuing new shares, strong regulation is also one of his hallmarks. The amount of money confiscated during his three years in office also broke various records. The concept of high-dividend stock splits was eliminated during his tenure, and the disorderly reduction of holdings by major shareholders was also well controlled during his tenure.

This is his contribution to small and medium-sized investors. In addition, he is also very unique in terms of speculative trading. He will force a trading halt if the stock price rises for more than a certain number of consecutive limit-up days. His real-time guidance to large speculative funds during trading hours is also an innovation.

Furthermore, his attitude towards large funds is also very interesting. The most famous example is the ongoing battle between Baowan and Vanke. His attitude towards insurance funds has influenced the final outcome of the battle to some extent.

The investment that Weilai will make over the next three years will be substantial. In addition, the large-scale expansion, including recruitment plans, has also increased the company's operating costs. It can be said that these three years are a critical period for whether Weilai can become a first-class company.

If successful, Weilai will at least be a top-tier domestic automaker, and will be able to compete with other multinational automakers in the international market.

If it fails, it will be a second-rate car company. It won't necessarily go out of business, but it won't have much development either. At that time, Mr. Tan will have to retire prematurely.

The primary and secondary capital markets are crucial to whether Weilai can overcome the limitations of corporate development. Tan Jincheng needs major institutions to continue to maintain the stability or even increase of Weilai's stock price.

The occasional big commotion might be driven by marketing needs, but it's also possible that there are other considerations at play.

During the two-hour conference call, institutional investors generally agreed with Tan Jincheng's statements and also with Weilai's projected earnings increase this year, at least during the conference call.

Whether or not they will actually give us face remains to be seen; everything will depend on tomorrow's stock price performance.

However, institutional investors are very satisfied with Weilai's overall performance. Its performance has once again exceeded expectations, with revenue almost doubling compared to 2014. Such performance is extremely rare among car companies.

What is stock trading all about? It's all about expectations and scarce resources. Just based on Weilai's performance in the new energy business, which is mainly focused on power batteries, one can make a fortune in the stock market.

In addition, Weilai's sales forecast of 10 new energy vehicles in 2016 is still quite promising.

The sales target of 10 vehicles indicates that this sector is gradually entering a period of explosive growth. Without sales of 10 vehicles, it cannot be considered a normal sector. The growth in sales of new energy vehicles is also driving the growth of the power battery business.

However, institutional investors also have concerns beyond the performance, namely that the company's operating cost budget has increased significantly this year, which will inevitably affect net profit.

Another issue is the current doubts about Weilai's share capital and stock price. According to the annual report and Mr. Tan's statement in the conference call, Weilai has no plans for high stock dividends in the next few years.

"Weilai's goal is to become the Kweichow Moutai of the ChiNext board. The current total share capital is suitable, so there will be no plans for high stock dividends in the next few years. We hope everyone can understand this."

Institutional investors still have a strong preference for high stock dividends. Take Great Wall Motors as an example. Great Wall Motors has increased its total share capital by transferring capital reserves to share capital, which has tripled the total number of shares. Currently, the total share capital is as high as 91.27 billion shares.

The main issue is that ordinary investors in the A-share market have a natural aversion to high stock prices, and instead prefer to speculate on low-priced stocks. As for total share capital and total market capitalization, they simply don't understand them. This is the current state of the A-share market. In fact, in the early stages of mobile internet development, retail investors had very little understanding of stocks. Those who entered the market in 2015 knew absolutely nothing and simply followed the trend, losing money in the process.

Wei Lai didn't have such an idea, which was a failure for them. In fact, these institutions really hoped that Wei Lai could conduct a high stock dividend during the annual report or first quarter report period.

Tan Jincheng could understand the institutional investors' thoughts, but he also knew that the newly appointed leader, who had been in office for less than a month, had a very tough stance on high stock dividends.

Let's see in a month. In a month, we'll see who among you will still raise the bonus share issue rate. We'll crush you all then.

Tuesday, May 3th.

"Hey, could you contact Zhang Yiming's media outlets and have them report on Lifan's situation, without using our name?"

"Boss, you're up to something again."

"Do I need to do anything sabotage? We're just giving it a push."

According to Zhu Pei's feedback, since he left Shancheng, negotiations with Lifan have been quite difficult. The other party is not unwilling to sell the car business, including the land and financial licenses, but their asking price and attitude are somewhat ambiguous.

In addition, Zhu Pei and Li Bing discovered during the actual negotiations that there were too many voices within the company, which made Li Bing and Zhu Pei quite frustrated.

Looking at the share distribution among the controlling shareholders, Mr. Yin and his eldest son together hold 51% of the company's shares, while Mr. Yin's second wife and daughter hold 49% of the company's shares.

According to the shareholding structure, Mr. Yin and his eldest son, who has already resigned, should have absolute control and say, but this is not the case.

The second wife firmly controls the group's finances. Rumor has it that without her signature, even Boss Yin cannot get a single penny from the company, and signs of internal family strife are very obvious.

In addition, there is a team of professional managers who also want to have a certain say in the company. Although they all have a unified understanding on the sale of the car business, the three parties cannot reach a consensus due to their own interests, which is very troublesome.

This morning, four ministries officially announced the penalties for companies that committed subsidy fraud. Lifan was fined 1.14 million yuan and its eligibility for subsidies in 2016 was revoked.

The 1.14 million yuan fine may not be much for Lifan, but the cancellation of new energy vehicle subsidies is fatal. Subsidies are very important for leading new energy vehicle companies, including Wynn and BYD.

Without subsidies, the new energy business simply cannot continue. For Lifan, which has invested heavily in the new energy field and increased leverage, this is nothing short of a blow to the back of the head.

But that wasn't enough. Tan Jincheng decided to add fuel to the fire by using this topic to promote Lifan.

In 2015, Lifan claimed to have sold 14.5 vehicles, but this figure was largely inflated. Most of the sales figures followed the same tactics as other car companies like Zhongtai, essentially a money laundering scheme where they had a large number of vehicles stuck in their own hands.

Once subsidies for new energy vehicles are directly eliminated, their scheme of transferring money from one pocket to another will no longer be viable.

Take Zhongtai as an example. They can no longer operate the Zhidou brand and are currently negotiating with Geely regarding its sale. If nothing unexpected happens, the brand will be acquired by Geely.

"Boss, that's a ruthless move. With so many users on Toutiao now, aren't you afraid that Boss Yin will hold a grudge against you for doing this?"

"That's why I wanted you to be discreet. But even if they find out, it's not a big deal. It's normal in business competition."

Boss Yin probably doesn't quite understand Boss Tan's way of doing things. Boss Tan, who values ​​efficiency, dislikes this kind of wrangling. Formal negotiations and bargaining are understandable, but it's a bit of a headache when it's hard to determine who should make the decision.

"Okay, I'll go ask around and see if it can be done as soon as possible."

Zhao Xinyi smiled slyly. The boss could be really wicked when he wanted to. Asking Toutiao to report on Lifan on such a large scale at this time would definitely be a betrayal. By 2016, Toutiao had nearly 3 million users and more than 2000 million daily active users.

In addition, ByteDance is currently planning a short video project, and has internally incubated Huoshan Video and an app codenamed A.me. This app is similar in model to Kuaishou and is currently in internal testing. The boss and her phone already have it.

The planned app will officially launch in September. In the boss's words, this app is ByteDance's trump card.

With hundreds of millions of users and tens of millions of daily active users, this app is a significant blow to Lifan's brand image and sales, both in terms of user base and its unique algorithm recommendation system.

"Yes, hurry up, catch it while it's still hot."

Lifan, which had painstakingly driven its stock price up to 11.49 yuan at the end of last month, has not received any response from Weilai regarding its earlier rumored cooperation with Weilai. In addition, affected by the new energy investigation scandal, it suffered two limit-down days in the last three trading days, with an overall drop of more than 23%.

Li Bing had been staying in Chongqing for some time, and having failed to reach an agreement, he had already returned to Shanghai. Li Fan wasn't in a hurry to use the negotiations to raise the price, and neither of them was in a rush.

He had already raised the price to 6.5 million yuan, but Lifan still didn't react much. He wasn't willing to raise it any further. In any case, he could just talk to Jianghuai. If that didn't work, he would think of other solutions.

Normally, it takes two to three years from developing a car to putting it into formal production, but he can afford to wait if he's just skirting the edges.

As for Yangzi Motors, Tan Jincheng is not in a hurry either. At most, he will spend more on marketing in the southwest region. If Chongqing is not an option, there is Chengdu. Zhu Pei has also gone to Chengdu for inspection.

Before going to the mountain city, Tan Jincheng showed his seniors great respect. When the formal negotiations began, Tan Jincheng was not too demanding in terms of price. Now that no results have been achieved, he can only change his attitude and approach.

In the A-share market, after experiencing three consecutive days of sharp declines, the three major indices opened slightly higher on the first trading day of March, which can be considered a good start.

"It's a double bottom. Although the ChiNext index hit a new low on the 29th, the Shanghai Composite Index did not break the low of 2638. The market's low point has basically been identified."

The 2638 point level should be the low point of 2016. As for the 3000 point level, there is still a room for an increase of more than 10 points. As long as the index reaches above 3000 points, buying at this point would be considered profitable.

Like the three major indices, Weilai Co., Ltd. opened slightly higher today. The stock price reached a high of 98.76 yuan during the day and closed at 95.32 yuan, up 3.2%. The trading volume of 13.06 billion yuan was also the second highest in recent times.

"Not bad, these organizations didn't really try to fool me too much."

Weilai's performance in 2015 was very good, and the performance expectation for 2016 is also good. The sales of complete vehicles and power battery orders in January and February were very good. However, as mentioned before, in the process of deflating the bubble, it will take some time for the stock price to recover to its peak.

"No rush, just stay stable. As long as we can maintain a market value of around 2000 billion yuan for a long time, that would be a victory for us."

A surge in prices is certainly desirable, but stability is even more crucial.

The conference call regarding the annual report did have some effect. The tangible inflow of funds shows that investors from all sides still gave Mr. Tan some face, which is quite commendable in a market that is entirely driven by profit.

There are countless companies whose stock prices plummeted the day after their annual reports showed a significant increase in profits. It's already quite remarkable that Weilai was able to maintain its stock price in the current sluggish A-share market.

Lifan's stock performance today was mediocre, but it did stop falling. The Yin family did not make any statement regarding the departure of Li Bing and Zhu Pei, but the management team led by Mou Gang was somewhat uneasy.

The other party that couldn't sit still was the Chongqing government.

Wenjie's acquisition of Lifan Motors' production qualification will directly bring cash benefits to the company. In addition to optimizing its business, the cooperation with Weilai and Yangzi Motors can also boost the stock price, which is of great importance to Lifan Motors, which is destined to suffer huge losses this year.

The most crucial point is that Zhu Pei didn't return to his old base like Li Bing did, but instead went to Chengdu, which is quite frustrating.

Both Lifan's management and the Chongqing government are looking forward to the upcoming cooperation. Although they can guess that Zhu Pei's trip to Chengdu might be a feint, no one can guarantee that Chengdu will offer better preferential policies to keep the deal going.

This has happened before.

"Take advantage of the trip to the capital to have another chat with President Tan. What's going on with this whole mess?"

P.S.: My grandmother passed away, so updates may not be as regular these days. I'll try my best.

(End of this chapter)