Why Is Feihe Dairy Once Again Short By Institutions Before Listing For One Year?

Recently, feishuhe milk powder Co., Ltd. (hereinafter referred to as "feishuhe") was once again the leader in the industry. In response to the report issued by blue Orca capital on July 8, flying crane issued an announcement at noon on the same day, strongly denying the relevant accusations in the blue Orca report and believing that the accusations are inaccurate and misleading.

In the morning of July 9, flying crane issued another Clarification Announcement. Compared with the statement issued in a hurry the previous day, the announcement made an item by item response to the short report of blue Orca capital.

Blue Orca capital said flying crane overstated sales revenue and its logistics company was not an independent third party, but was managed by a flying crane employee. In this regard, Feihe explained in the clarification announcement that Kedong ruixinda Logistics Co., Ltd. (hereinafter referred to as "ruixinda") is one of the logistics service providers of the company. Since Feihe only recognizes the revenue of the products directly sent to the distributors at the time of delivery, the logistics from the factory warehouse to each sub warehouse belongs to allocation, so the revenue will not be recognized.

Second, blue Orca capital said data from Nielsen and the Ministry of Commerce showed that flying crane's actual revenue in 2018-2019 was 49% less than the company reported. It also points out that flying crane underreported billions of dollars in operating expenses, including labor costs for employees and advertising costs.

Flying cranes responded one by one in the report. First, there is the problem of Nielsen statistics. Feihe said that the data collected by Nielsen can reflect the development trend and competition situation of the industry, but it may not be able to fully reflect the actual operation of the company. At the same time, the company has not reported the operation data to the Ministry of Commerce. The so-called Ministry of commerce data in the short report does not provide a clear source or link, so the reliability of the data is questionable.

Secondly, for the labor cost statistics of employees, the number of employees calculated in the short report is not the Group employees, but includes all the market service personnel of the group distributors and terminal retail stores, so it is not accurate to include them in the group labor costs.

Because of the difference of advertising time, the advertising cost should not be taken as the basis of advertising cost.

In addition to Feihe's positive response, Guojin securities also questioned the short report. In its research report released on July 8, it said that the basis of the short report was not accurate and objective, and the conclusion was one-sided and misleading.

　　 Short is not the first time why flying crane is frequently "targeted"

On November 21, 2019, more than 10 days after the listing of Feihe, a short agency, GMT research, made a sudden report, accusing Feihe company of being the world's largest in profitability, possessing a large amount of cash but never paying dividends, which is characterized by fraud.

Because of this accusation, flying crane urgently announced the suspension of trading and issued a clarification report. Leng Youbin, chairman of Feihe, issued an internal letter in response to the query, saying that the report was "groundless and maliciously slandered, which not only seriously misled investors, but also hurt China's dairy industry. Therefore, it is absolutely unacceptable."

The growth rate of the company has not been listed for two consecutive years. According to the data, from 2017 to 2019, Feihe's net profit increased to 1.16 billion yuan, 2.242 billion yuan and 3.935 billion yuan, which is really remarkable.

However, for both blue Orca capital and GMT research, most of the data used in their reports are lack of actual research. Without the "real hammer" accusation, it is difficult for the public to believe its authenticity, let alone confirm its own short selling view. At present, the stock price of flying crane company has begun to rise normally after a small drop on July 8, and has not been affected too much.