China Huishan Dairy Holdings 6863.HK
Huishan's revenue is fabricated: tax-bureau data, cow-farm photos, and e-commerce scrapes all show the reported top line is dramatically overstated — the stock is a zero.
Thesis
Part 2 of Muddy Waters' China Huishan Dairy (6863.HK) short thesis argues Huishan's revenue — not just its margins and CapEx — is fraudulent. Investigators obtained State Administration of Taxation (SAT) VAT data for Huishan's four finished-product entities showing CY15 sales of RMB 2,352m, 29.4% below the company's adjusted reported figure and 36.2% below SAIC filings. The implausible 9.0 tons/cow yield underpinning Huishan's story is unsupported by the pre-IPO farms, where MWC investigators photographed rusting roofs, crumbling concrete, poor ventilation and cheap construction incompatible with world-class yields. Huishan's much-hyped 'Internet+' online sales miracle collapses under scraping: T-mall/Suning revenue reads as effectively zero while Mengniu and Yili dwarf it by ~1,500x. Muddy Waters concludes Huishan is 'a fraud through and through' and should struggle to avoid default.
SCQA
China Huishan Dairy is a Hong Kong-listed vertically-integrated dairy company claiming premium raw-milk yields, rapidly growing branded liquid milk sales and a thriving Internet+ e-commerce channel across northeast China.
Part 1 established margin/CapEx/cash fraud; Part 2 shows the top line itself is fabricated — SAT tax records, decrepit cow-farm conditions, and third-party e-commerce scrapes all contradict Huishan's reported revenue and yield narrative.
Muddy Waters publishes granular tax-bureau, on-the-ground and web-scraping evidence to force the market to reprice the shares and to warn creditors given Huishan's heavy debt load and collapsing real cash flow.
Given fake revenue, fake margins and a massive debt stack, Muddy Waters expects Huishan to struggle to avoid default — implying equity that trades toward zero for short-sellers positioned against it.
The three reasons
- 1
SAT tax data shows reported revenue is 29-36% higher than actual finished-product sales
- 2
Claimed 9.0 tons/cow milk yield is implausible vs China average of 5.8 tons and pre-IPO farms are dilapidated
- 3
Huishan's e-commerce 'sales miracle' is fiction — T-mall/Suning sales outsold by Mengniu/Yili by 1,500x
KPIs cited
Pattern membership
Where this document fits across the library's 12 rhetorical / structural patterns.
Notable slides (5)
Notes
Part 2 of a two-part Muddy Waters short thesis on China Huishan Dairy (6863.HK) published 2016-12-19. Part 1 focused on margin/CapEx/cash fraud; Part 2 layers on revenue fraud using (a) State Administration of Taxation VAT records, (b) on-the-ground farm photography and expert commentary on cow-shed design, and (c) algorithmic e-commerce scraping of T-mall/Suning. Document is formatted as a Word-style research note with embedded photos and basic Excel charts — not a designed deck. Quotes Huishan 2016 Annual Report verbatim ('sales miracle' language) to set up the e-commerce teardown. Huishan shares collapsed ~85% in March 2017, validating the thesis. campaign_phase set to follow_up since this is explicitly Part 2 of the same short campaign.