Ehang's business model has been changed! Time to rethink our investment. #EH #ehang stock

Ehang's business model has been changed! Time to rethink our investment. #EH #ehang stock

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[Music] hi guys welcome back so this video is about nihang as you know i started to invest in ihang in early january i made a video about that and i said this is the future boeing at the baby stage and now after a few months had passed a lot of things had happened and not just the share price which was what a roller coaster so in this video i'm going to tell you what i think the business model has changed is it heading to a good direction i will address the opportunity and the risk behind it hopefully it can help you form a long-term vision on this company and investment so first of all how did their business model change at first analysts had looked at ehan and gave them evaluation based on their production or the sales of drone mostly including myself of course we have evaluated the company based on their revenue in the past and their revenue projection for the year of 2020 2021 and following the speed of growth was very attractive to begin with with their projection of growing 180 year-over-year this kind of growth rate is very attractive but at the same time kind of require for an early stage company so when i started to invest in ehang the share price was 20 which had already had a good run up but i would think 180 percent year-over-year increase it would make sense for the share price to at least triple on top of that they were already making profit and that was very unlikely for an early stage company so i think that was a huge bonus for a lot of investors because usually when a company start to turn to positive profit it is a big milestone and usually the share price will reflect that so back then a profitable business growing at a super fast rate with strong advanced technology in the business in an industry that is huge in the future it just seemed to be a no-brainer but then the turning point came first one was the wolf pack research short report that put a doubt in many investors mind to begin with and then second the earning report that shows growth not up to expectation and the company projection on growth was mainly flat so more disappointment and then a final kick when the company announced the delay on the earning because of the auditing problem everything happened recently one after the other is enough to scare most investors away so it does make sense to downgrade the quality of this investment based on these rational reasons so it's actually a rational decision for rational investors to decide to stop their investment on ihang but if you are a visionary investor more than rational investor then i will give you my reason on why i finally decided to stay invested in ihang regardless of the share price constant dipping and in fact took the opportunity to increase my position after i had spent a lot of time researching analyzing on the company and the industry in my future videos let me just share with you the business model there's no doubt that ehan is figuring things out while they're growing the company changing the strategy or business model does not happen quite often so i would say the year of 2021 would be quite important year for ihang and because of this change it would also affect their future projection and the growth rate at this point because there is still more to experiment first more to figure out they are figuring things out refining strategy while they're growing their business and it is understandable given the fact that the industry is at a very early stage and they are the first scammer the most advanced in the industry so it would make sense for them to be exploring based on the problems they find they realize for the industry so recently the company announced that they will shift their strategy to be more focused on the autonomous aviation platform instead of making manufacturing their drones there are three reasons why they do that first of all it's the vision since the beginning we know that they spend a lot of effort doing r d to focus on the autonomous driving because the industry cannot grow if the users using their products have to have the license as a pilot or hire a private pilot this is just not feasible it's way too expensive and if their mission was to solve the traffic problem in the city then how are they solving this problem for real when is not accessible for most people so autonomous driving vehicle is somehow the must solution to begin with so then it can truly be a traffic solution for the city as it would be much more accessible affordable for the mass so this vision is great from the beginning and i can really agree with that second is the safety issue think about it the more drones they sell the more safety concern there is because there needs to be regulation on the air traffic we cannot let everyone who bought the vehicle and navigate it everywhere as they wish it's not yet a problem we can see because it's not in mass production no government in the world has issued such certificate to allow this yet but once they do once it gets into mass production and mass sales it will become a big problem and that is what they see so instead they decided to shift the focus from selling this vehicle into building a platform that can central control all the vehicles flying in this way they would be planning the route making the rules setting the standard and this in my point of view it's basically building infrastructure and it is usually what the government would do it is hard to imagine but just compare with the roads we're driving in this is just the same as building the roads drawing the lanes the traffic lights the signs right now ian is making the traffic rules and setting up standard all of these works in my opinion is just what the government would do so then it is no wonder the government is giving them so much support a while ago we saw that the herjo government is giving a 2 billion investment into supporting nihon to build the manufacturing plant by building the hojo aviation industrial city and also it is not just money support but also herjo is the first smart city with autonomous aviation vehicle operation platform so that just means not only ehang is building a massive manufacturing plant in herzl but also herjo would be the module city where they can do a lot of trials and eras with massive data collection which they can take into refining the operation platform this is again the experimentation into refining a good smart city model with aav so then they can use this and copy it to expand to other cities also the government is letting ihang to make a hundred test roads the most important is including hong kong to macau this is such a strategic location for china it is giving them more recognition with more international exposure so i think this is quite significant the government is giving ihang a lot of support it is their best interest to want them to succeed so that's why i was not worried about the certificate process in april we saw the news that the caac had established a new team just to help to speed up the process of the certificate getting approved as you see they set up this new team called eh216 type certification team so this team's main purpose is to work with ihang to figure things out as i said right now ehan has the roles and responsibility to make infrastructure building for the air traffic so it would be the best interest for the government to want ihan to succeed and they're here to help and support so i think it is very possible for ihan to be the first one in china to get this certificate and it is quite possible that china will be the first one in the world to grant this certificate to anyone that means ihang would have the best chance to be the first company in the whole world to get this certificate and put this into commercial use so when this happens expect this news to be explosive and i am very much looking forward to this it might be faster than we expected and then the third reason why they decided to shift the focus right now is the timing as they think the technology and the infrastructure is getting ready for the aav as we shared last time china is by far the most advanced in terms of 5g infrastructure building and with this it would allow the vehicle to have smooth communication with the central platform to ensure safety at the same time the data collection can help refine the platform and system later another good timing is because they believe right now we are at the last stage of the certificate process and once they're granted the certificate it will get into mass production massive application so that is why it is better we think about the solutions before the problem happened instead of waiting for the problems and figure out the solution later better preventing the fire before rushing and thinking about how to put off the fire when it happens all of these reasons require ihan to shift their focus refine their business strategy and business model but because of that i think most of the analysts have trouble to give ihang a valuation just because the traditional valuation model for this doesn't work here they have shifted from the aviation manufacturer into the urban air mobility platform operator so before the valuation that analysts give them would be based on the sales of the vehicles and the profit margin and also we knew that they were aiming for the sas model as well the saas software as a service model because they were researching and developing their software for the autonomous aviation and now it seems like they want to be more the paas model the platform as a service model and that would require a different method of valuation and as a platform for air taxi there is absolutely no previous example for that it is yet to be explored at this point in this case it's quite similar with tesla where the analysts had trouble giving it a proper valuation because it's a new business model that they had never seen before so right now investing in ihang it's a little bit similar with investing in tesla at an early stage we saw that tesla stayed undervalued for quite a while because the valuation model was not up to date there are still a lot of things to be explored to be figured out so before their competitors were more like joby lilium archer or boeing or airbus but now it seems like they want to be the uber of uam as uber would also be getting into the business of air taxi so now it seems like ehang's competitor would be more like uber or didi the uber of china because it seems natural for dd to get into air taxi as well but in the paas model they still have a lot to prove their operation ability the management the talent shifting from manufacturing into operating it's a good direction for the business model but yet they still have a lot of things to narrow down they have a lot to figure out to refine right now it is hard for analysts to give them a proper price target a proper valuation because there are so many things uncertain like i said the most important thing is the business model and the business model is how they make money so how much are they going to charge per trip how much do they make out of it the percentage of the margin these are yet to be figured out through their trials and eras it is a lot of uncertainty so we must know that at this point investing in ihan would be more like venture capital we are investing in the industry we are investing in the management in the leader it is full of uncertainties but at the same time it's part of the beauty because the market is huge the potential is massive because if ihan does succeed and manage and manage to make things happen as they intended then the limit is only our imagination here but based on what we have i do believe just their technology alone should be worth more than their current valuation which is one and a half billion dollars and once they have refined their business model and figure out more details later on they should be evaluated more like i said the business model of a company is the most important thing to look at because it basically decide how far the company can grow in the next five to ten years how much potential it has and i do find this business model much more potential and if the company can deliver what they say it will grow into a future giant so this is the long-term vision i have for ihang now let's talk about the share price what a great day on friday for us at some point it was shooting up to 34 percent plus and then close at 19 but it should not be too much of a surprise in the last two weeks i've said several times that i think ehan is still on an uptrend it's still growing as i just said so many bad news one after the other had driven all the investors who were not long-term investors away whoever that was supposed to sell had already sold whoever remained might most likely remain and as i suspected on this day and this day it was to make people sell as a last chance so i said so much effort had been done already it doesn't seem like they would stop right now and i also said you don't need to follow because it's chinese stocks so there is always chance for bad news like political issue blacklisting fcc earning report etc to drive the share price down as the perfect dip to buy i said eh support was at 27 and if you see bad news coming out and does not drive the share price to break the support that might be a perfect buying opportunity and as we saw on thursday there was the bad news of president biden's administration blacklisting 50 more companies so of course eh had a dip as well and it dipped exactly to 27. so on friday it opened up did again to 27 exactly and then right away from 27 shooting up to 36. so do you think it's coincidence for me it sounds very much like a plan it was plotted out since a while ago i personally took the chance to trim a little bit of my position on friday and the reason was because back in january when i bought a thousand shares of eh at around twenty dollars i told myself that my ideal position is two thousand shares it just shot up too fast that i had no chance to finish building my position and i also said that if a market correction comes and drive e-h down i would be there to buy the dip and i did throughout the whole correction i took a lot of chances to buy the dip and in fact i have built up too heavy position i kept buying on the way down on every dip the last time was 22 so i overall had accumulated 4 200 shares to be precise so this position had gone up to be too heavy so i will take the chance to slowly trim the position once it has gone up so then my portfolio is not too volatile as you know it is very volatile i think it can keep growing but then at some point it would have a bigger pullback okay now if you have enjoyed this video please give me a big like and write me a great comment that's it guys hope you can find my videos helpful make sure you subscribe to my channel and give me a big like thank you you

2021-06-08 22:07

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