A major Financial Times expose of the leading Chinese solar company follows in the footsteps of an obscure Hong Kong research boutique run by a former UBS analyst.
The FT cited “unconventional practices” in a recent article on Hanergy Group, the world’s largest solar company by market value. The FT accused the firm of inflating its revenues through sales between a listed subsidiary and the parent company. The FT also found discrepancies between factory level accounts and the parent’s accounting.
The FT cited a recent report by CLSA, a prominent Asia-based investment bank respected for its research. The CLSA report questioned Hanergy’s valuation and said that company production figures did not seem to tie to actual installations of solar panels.
However, the FT did not cite a more extensive report first issued in October 2013, which highlighted in detail the issues the FT is now bringing to light. The report was issued by Hong Kong-based LH Equity Research founded by William Lin. Lin was an analyst at UBS and is now at JP Morgan, and is no longer publishing independent research. His 28 page report on Hanergy documented extensive related-party sales transactions, questionable acquisitions, and misleading disclosures.
In its disclaimers, LH Equity Research says it held no position in Hanergy, unlike the “short and shout” firms like Muddy Waters and Citron Research. Lin appears to have chosen a career with large investment banks rather than going independent.