JL Warren Capital

JL Warren Capital LLC is a leading independent equity research firm focused on Chinese companies and listed multinationals in China. We employ a bottom-up research approach that takes great care to avoid the acquisition of material non-public information. Through investigative due diligence including channel surveys and interviews, our research helps clients to pinpoint the dislocations in the market.

Investment Advisors

Qutoutiao IPO Valuation: Updated Disclosure Poses More Questions than It Answers

Qutoutiao IPO Trading Update - The Debut Definitely Qualifies for Some Fun Headlines

NIO IPO Trading Update - Too Fast Too Furious

ECM Weekly (15 September 2018) - Fast & Furious - NIO, Qutoutiao, Haidilao, Viomi, X Financial

Investment Advisors, JL Warren Capital

Junheng Li

Equity Bottom-Up

The key operating matrix of <a href="https://www.smartkarma.com/entities/27418" target="_blank" data-smartkarma-citation="entities:27418:1">Qutoutiao Inc (QTT US)</a>  deteriorated alarmingly in Q4, even with the help of Midu, a mobile literature reading app launched in May.   Midu contributed 100 mm RMB in revenue and 100 mm RMB net loss to QTT in Q4.Rising user acquisition cost, elevated churn rate and user loyalty payable all reinforced our short thesis. QTT does not have a sustainable business, let alone a profitable one.  The company is engaging in a vicious cycle of upping the spend to recruit users, to offset the high churn of existing users. Since the company’s product ecosystem is weak (in fact users return apps mostly just for the coin reward), churn rate is as high as 80% within 6 months, according to our research.  On the other hand, user acquisition costs have increased to 87 RMB, implying that 870 days are required for QTT to break-even on each new DAU, that is nearly 2.5 years. Our price target is ~$6.; QTT IPO lockup expiration is on March 13, 2019/next week.

The key operating matrix of Qutoutiao Inc (QTT US)  deteriorated alarmingly in Q4, even with the help of Midu, a mobile literature reading app launched in May.   Midu contributed 100 mm RMB in revenue and 100 mm RMB net loss to QTT in Q4.Rising user acquisition cost, elevated churn rate and user loyalty payable all reinforced our short thesis. QTT does not have a sustainable business, let alone a profitable one.  The company is engaging in a vicious cycle of upping the spend to recruit users, to offset the high churn of existing users. Since the company’s product ecosystem is weak (in fact users return apps mostly just for the coin reward), churn rate is as high as 80% within 6 months, according to our research.  On the other hand, user acquisition costs have increased to 87 RMB, implying that 870 days are required for QTT to break-even on each new DAU, that is nearly 2.5 years. Our price target is ~$6.; QTT IPO lockup expiration is on March 13, 2019/next week. 

QTT Q4 Misses Revealing a Moat-Less Business; Lockup Expiration to Catalyze Selloff