Qudian Chief Turns to Star Power in Company Transformation

Key Takeaways:

• Qudian sold nearly 10 million of its new line of ready-to-cook meals during an online promotion hosted by the company’s founder and CEO
• Company rolled out QD Food in March, and is hoping to achieve significant revenue from the service this year as it scales back its older online lending business

By Doug Young

CEO + livestreaming = smashing success.

That’s the winning formula that’s emerging for a new generation of celebrity Chinese chief executives who are hawking their products online via livestreaming. The latest in that category is Luo Min, founder and CEO of Qudian Inc. QD, who is trying to transform his company from an online lender to the completely unrelated area of ready-to-cook meals seller.

Qudian announced its launch of QD Food back in April, at which time many – including ourselves at Bamboo Works – were skeptical of such a major transformation. Qudian made the radical move in response to an ongoing government crackdown on private online lenders who were once welcome by Beijing but later became a source of worry due to their inexperience and freewheeling ways.

Most of Qudian’s rivals, such as 360 DigiTech QFIN, also altered their business models in less radical ways by becoming loan facilitators between consumers and banks rather than direct lenders. When it first announced its QD Food initiative in April, Qudian also indicated it was seriously considering getting out of the lending business altogether.

Now Qudian has just provided its first update on Qudian Food, with a special emphasis on an online livestreaming event the company held on Sunday on Douyin, the Chinese version of the wildly popular TikTok short video site.

Whereas Qudian shares tumbled 10% after its initial announcement of QD Food in April, the latest update had just the opposite effect. The company’s stock rocketed as much as 83% after the market opened, and ultimately closed up about 40% for the day. At its Monday close of $1.67, the stock is now comfortably above the $1 mark, eliminating a potential delisting risk that it previously faced after the price fell below that key threshold for two months earlier this year.

Even after the rally, however, the stock is still an investor pariah compared with most of its peers. It currently trades at a price-to-book (P/B) ratio of just 0.16, compared with a far higher but still unimpressive 0.89 for 360 DigiTech, reflecting ongoing investor concerns about China fintech stocks. U.S. ready-to-eat meal maker Blue ApronAPRN trades at a far higher P/B ratio of 2.54, while Chinese peer Dingdong DDL, which sells groceries and also ready-made meals online, trades at a far higher ratio of 30.

So, if you believe that Qudian’s new foray into online prepared meals has a good chance for success, now would certainly be a good time to buy the stock. In fact, Luo Min is something of a pioneer in China’s online landscape, distinguished as one of the first to enter the online consumer lending market that briefly made his company an investor darling after its IPO in 2017.

The company was briefly worth more than $8 billion shortly after the listing, as investors bet that China would embrace online lending by private fintech companies to complement traditional state-owned banks that were less skilled at lending to the private sector. But Qudian’s stock has lost most of its value during the crackdown of the last three to four years, and even after the Monday rally the company is only worth about $420 million.

Celebrity CEO

With all that background in mind, we’ll take a closer look at the latest QD Food update that got investors so excited. As of July 18, QD Food operated a network of 15 warehousing, assembly and packaging facilities delivering products to more than 200 cities and towns across China, according to the announcement. It was offering 10 products over three channels: Douyin; as well as a miniapp on the popular WeChat social networking platform; and via its own QD Food app.

At the time of the original April announcement, the company said more than 80,000 people ordered QD Food products between the service’s launch in late March and April 13. Its latest update didn’t provide any new user numbers for the service or how many orders it had delivered.

Instead, what got investors so excited were some impressive stats the company logged from its livestreamed “717 Foodies Festival” on Monday featuring Qudian’s products being hawked by Luo. It said 9.56 million dishes were ordered during the event, though it pointed out that figure could be inflated by orders that might later get canceled or discarded for other reasons.

It said the festival was the top-ranked livestreamed event on Douyin for over 10 hours, with as many as 900,000 concurrent views at the height of its popularity. What’s more, the event allowed Luo to significantly boost his followers on Douyin to more than 5 million from a previous total of about 1 million. That last figure is quite significant, since those 5 million people will automatically see any new activities or future promotions by Luo over the platform.

This particular strategy looks quite similar to one used by New Oriental Education EDU, a former provider of after-school tutoring services that was also forced to make a radical transformation after Beijing cracked down on the private education sector last year. New Oriental founder Yu Minhong found his own big success hawking e-commerce products via livestreaming, and now many of New Oriental’s former teachers have found similar success selling additional products via the company’s livestreaming channels.

Optimism about the transformation has lit a fire under New Oriental’s stock, which has roughly doubled since mid-May.

Other top executives who have taken to livestreaming to promote their companies’ products and services include travel giant Trip.com TCOM founder James Liang, and Dong Minzhu, president of appliance maker Gree Electric (000651.SZ).

In the meantime, Qudian really does seem to be winding down its core online lending business that was once its crown jewel. The company’s latest quarterly report shows its outstanding loan balance at the end of March stood at 1.5 billion yuan ($222 million), down 41.3% from a year earlier. Its revenue for the quarter fell by more than half to just 202 million yuan from 516 million yuan a year earlier.

Truth be told, we’ll need to see some longer-term performance figures for QD Food before determining if the new product line can really lead Qudian back to riches. But the strong livestreaming performance, and also Luo’s track record as a pioneer in emerging online fields, are certainly strong early signs that could point to potential future success.