Independent Insight Provider

Hao Wang, CFA

Equity Bottom-Up

Huabao International Holdings / Equity Bottom-Up

This short note is to be used as complement for my <a href="http://www.smartkarma.com/insights/what-is-safe-to-buy-in-china-now-huabao-international" target="_blank">early note</a> on Huabao International, which has been often questioned by short sellers (<a href="http://www.anonanalytics.com/2013/04/initiating-coverage-huabao.html" target="_blank">See AA’s report in 2012</a>) about its hefty profit, suspicious production or R&amp;D facility, and relations with customers in China. You can expect two things from this note: • A brief summary of AA’s claim and <a href="http://huabao.todayir.com/attachment/20120504061701001422700_en.pdf" target="_blank">Huabao’s rebuttal</a>, and justification • My personal views on Huabao’s business, accuracy of accounts and corporate governance. I hope these information helps you better assess the risks of investing in Huabao International. Overall, I am not recommending buy the shares immediately in large given the correction mode of A share / HK market, but it’s good to pick up some at the dip.

This short note is to be used as complement for my early note on Huabao International, which has been often questioned by short sellers (See AA’s report in 2012) about its hefty profit, suspicious production or R&amp;D facility, and relations with customers in China. You can expect two things from this note:  • A brief summary of AA’s claim and Huabao’s rebuttal, and justification • My personal views on Huabao’s business, accuracy of accounts and corporate governance.  I hope these information helps you better assess the risks of investing in Huabao International.  Overall, I am not recommending buy the shares immediately in large given the correction mode of A share / HK market, but it’s good to pick up some at the dip.

Huabao International, is this a value trap, fraud or hidden gem?