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Fathom China
Fathom China Team
Nov 14th 2018
Tencent Games: Culture Industry Under Pressure
The Chinese government in March 2018 stopped approving new online games. The cessation hurts Tencent Holdings (“Tencent”), which earns 37% of its revenue from games. A government restructuring that has clogged the approval pipeline is widely misunderstood. It is part of the Communist Party’s tightening grip on the audio-visual industry, including games. Game approvals will resume when the current phase of grip-tightening is complete, which is...
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Fathom China
Fathom China Team
Oct 05th 2018
Autobio: Solid Reputation, Tight Executive Group
Autobio Diagnostics is poised to benefit from China’s booming healthcare services industry. The company has a good reputation but a few odd points. It has escaped controversy in an industry that is beset by scandal, although Fathom China thinks it should do a better job of explaining why its reported gross margins are so high.
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Fathom China
Fathom China Team
Aug 20th 2018
Dali Foods: Consumers Want More
Dali Foods Group (“Dali Foods”) is a large family-controlled maker of snack foods and drinks. It is known as a copycat that develops inexpensive me-too products, promotes them with celebrity-based marketing campaigns, and distributes them to lower-income consumers across vast swathes of China. Yet Dali Foods’ target demographic is shrinking as incomes rise, and even lower-end consumers are now looking for higher-quality fresh and healthy foods....
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Fathom China
Fathom China Team
Apr 27th 2018
YY: Contending With Short Video
Attached is our report on China’s pioneering livestreaming company, YY, which faces new challenges. The biggest is the quick rise of popular apps that share short videos and compete for eyeballs among YY’s user demographic. At the same time, more livestreaming competitors force YY to share more revenue with its hosts. Oddly, government crackdowns on livestreaming and short videos work to YY’s advantage by forcing its more adventurous competitors...
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Fathom China
Fathom China Team
Mar 29th 2018
BYD: New Subsidy Regime, New Battery Challenger
The world’s biggest maker of battery-powered vehicles, BYD, faces a tricky transition. Markets for the private company’s electric vehicles, or EVs, have long been driven by government subsidies for buyers. Beijing is curtailing subsidies for buyers in favor of incentives to boost supply. If Beijing’s scheme succeeds, BYD will almost certainly benefit. If not, then BYD will face a setback just as pressure from other EV makers grows. Meanwhile,...
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Fathom China
Fathom China Team
Jan 31st 2018
Beijing Enterprises Water Group: Local Finance Faces Freeze
Beijing Enterprises Water Group (“BEWG”) is China’s biggest water treatment company. The state-owned firm builds facilities to clean the water that flows into homes and factories, and to treat the sewage that flows out. It has also moved into restoring waterways that suffered heavy pollution during China’s 40-year industrial boom. Although state-owned, BEWG’s leaders come from an entrepreneurial private company acquired in 2008. Key to BEWG’s...
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Fathom China
Fathom China Team
Jan 03rd 2018
Hollysys: Beset By Challenges
Hollysys Automation Technologies (“Hollysys”) makes systems that control industrial processes such as power plants, rail lines and petrochemicals. The former state-owned firm was privatized and taken public through a reverse merger. Hollysys faces stiff challenges. It earns much of its revenue from small to mid-sized coal-fired power plants that are under pressure to close, and its railway systems face strong competitive pressure. The company is...
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Fathom China
Fathom China Team
Aug 31st 2017
China Dairy: Mengniu Turns Sour, Yili Looks Creamy
China’s dairy industry is dominated by two giants who together control 33% of the market: China Mengniu Dairy (“Mengniu”) and Inner Mongolia Yili Industrial Group (“Yili”). Both face the twin problems of low milk prices and slow milk-consumption growth. The two seem to be converging from very different backgrounds. Mengniu started as a freewheeling private firm but was brought under government control; Yili started as a state-owned company but...
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Fathom China
Fathom China Team
Aug 08th 2017
Online Lottery: Hoping The Ban Lifts
China’s online lottery is forbidden fruit—juicy and banned. Selling online lottery products, including sports gambling, will almost certainly enable whatever companies receive a license to hit the revenue jackpot. The consensus opinion of people who profess to know the government’s thinking is that the 2015 ban will end, but when is anybody’s guess. Few expected it to last this long. Two companies will likely stand at the front of the line for...
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Fathom China
Fathom China Team
Jun 26th 2017
LotSynergy: Clinging To A Contract
The main business of China LotSynergy Holdings until 2015 was to supply video lottery terminals – basically slot machines – to China’s lottery. Then LotSynergy lost its exclusive supply contract amid a corruption scandal in which top lottery officials vanished into detention. LotSynergy says it has the right of first refusal when the contract opens up for tender but Fathom China is skeptical.
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Fathom China
Fathom China Team
Apr 28th 2017
Man Wah: Bubba Goes To Beijing
Man Wah Holdings (“Man Wah”) came from nowhere to dominate the US market for “motion upholstery,” otherwise known as reclining furniture. Family-run Man Wah operates vertically integrated furniture factories and sells under its own brand, Cheers. When its low-priced, innovative products hit US markets around 2007, they were just what American couch potatoes wanted, and revenue soared. Recent competition from Chinese rivals has forced Man Wah to...
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Fathom China
Fathom China Team
Mar 13th 2017
China Lodging: Facing Angry Franchisees
China’s second-biggest hotel chain, China Lodging Group (“China Lodging”) is well run and has a sound expansion plan. The company’s franchise model has allowed it to grow fast and meet strong demand for low-priced hotels; now it is moving into mid-priced hotels. Yet China Lodging faces a big new challenge: angry and empowered franchisees. The company’s franchisees in mid 2016 created a collective-bargaining organization and launched street...
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Fathom China
Fathom China Team
Jan 19th 2017
Xinyi Solar: Sunny Year Ahead
Xinyi Solar Holdings (“Xinyi Solar”) is China’s biggest maker of glass for solar cells, which are arrayed into solar panels to generate power from the sun. The company was in 2013 spun off from Xinyi Glass Holdings (“Xinyi Glass”), the subject of a related Fathom Profile in January 2017. Family-run Xinyi Solar is well managed and enjoys a good reputation, and its political connections run to the highest level of the Communist Party. Its clients...
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Fathom China
Fathom China Team
Jan 09th 2017
Xinyi Glass: Strong Company, Fragile Market
Xinyi Glass Holdings (“Xinyi Glass”) ranks among China’s top glass makers. Its main product is float glass, most of which is sold directly to construction companies. Some of Xinyi Glass’s float glass is also processed into higher-margin products such as insulated or tinted construction glass, or automobile glass. Family-run Xinyi Glass is well managed and enjoys a good reputation. Its main challenges are external – the float glass industry is...
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Fathom China
Fathom China Team
Dec 08th 2016
51job: Waiting For Upstarts To Wither
51job is China’s biggest online job-recruitment website, and one of its oldest. Its market share is shrinking due to competition from specialized websites, or “verticals,” that target specific industries. Yet thanks to fast growth in the online recruitment market, 51job’s revenue is expanding and its leading position in the industry looks secure in the short term. The company turned profitable in 2002 and now earns two-thirds of its revenue...
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Fathom China
Fathom China Team
Oct 20th 2016
China Biologic: The Quest For More Plasma
China Biologic Products (“China Biologic”) ranks among China’s biggest makers of plasma products in a nation with a severe shortage of a key raw material: human plasma. Raw plasma comes from paid donors and is converted into products that treat blood disorders. Donors are sadly few because of the stigma of poverty and the lingering effects of past health scandals. Yet two recent changes bode well. First, the government lifted price caps on...
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Fathom China
Fathom China Team
Aug 10th 2016
Ctrip: Dominating A Changing Industry
Ctrip.com International (“Ctrip”) stands as China’s unrivaled online travel agency, or OTA. The well-run company’s purchase of Qunar Cayman Islands (“Qunar,” pronounced CHOO-nar) in late 2015 neutralized a top rival and ended a profit-killing price war. Government regulations have led to big changes in the market. The country’s state-owned airlines want to direct ticket buyers away from agencies and OTAs and toward their own sites. Although that...
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Fathom China
Fathom China Team
Jul 06th 2016
BYD: Subsidies Spark Electric Car Sales
After years of false starts, BYD is China’s top seller of battery-powered passenger cars and a respectable number five in battery-powered buses. The big-talking private company, which also makes traditional cars and batteries, can thank the government for creating the market. But BYD faces many challenges. Fickle government subsidies to buyers have caused market havoc. Scams are rampant, with cities collecting subsidies for ghost fleets and...
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Fathom China
Fathom China Team
May 31st 2016
On-Demand Services: Baidu Struggles
This report examines China’s on-demand industry, sometimes referred to as “online-to-offline,” or O2O. Specifically, we assess the competitive prowess of Baidu in three categories: food takeout, restaurant coupons and movie ticketing. In all areas, we find that Baidu compares unfavorably to rivals backed by either e-commerce giant Alibaba Group Holding (“Alibaba”) or social-media king Tencent Holdings (“Tencent”). All well-funded Internet giants...
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Fathom China
Fathom China Team
Mar 11th 2016
Sino Biopharmaceutical: Good Assets, Bad Disclosures
Sino Biopharmaceutical (Sino Bio) is related to Thailand’s biggest company, agribusiness giant Charoen Pokphand (“CP Group”). Chairman Tse Ping is nephew to CP Group’s billionaire tycoon chairman. Sino Bio itself is a holding company that operates mostly through joint ventures with state-owned companies. Its most important firms are market leaders in drugs that combat hepatitis. The biggest of those companies enjoy good reputations and operate...
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