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  • Gotham City Research LLC

AAC Technologies LTD (Ticker = 2018): Why are AAC’s reported profit margins higher AND smoother than

Why are AAC Technologies LTD’s – a supplier of Apple – reported profit margins higher AND smoother than Apple’s?


  • AAC has used 20+ undisclosed related parties & dubious accounting to overstate & smoothen profits since 2014.

  • At least 20 undisclosed related party suppliers are owned or managed by AAC CEO’s family members or employees.

  • These undisclosed related party suppliers are not listed in Apple’s supplier list, despite some claiming otherwise.

  • Some of the undisclosed related entities supply the same products as AAC does, are based in the same locations as AAC is, & hire employees under AAC’s name.

  • AAC has used these hidden entities to evade Apple’s labor standards specified in the Apple Supplier Code of Conduct.

  • Apple (and other parties) will conduct independent investigations, & validate our findings. As a result, AAC’s profit margins will decline, converging to its peers’ levels.

  • AAC is in violation of Hong Kong listing rules, Apple’s supplier code of conduct, and its own representations.

  • AAC’s share price will initially decline to 40 HKD – 50 HKD per share, as the undisclosed related party supplier revelations are digested.

  • We see far greater downside potential to the share price if the company were to concurrently experience the same problems that other Apple suppliers have in the past, e.g. increased competition, pricing pressure from its customers, wage inflation, etc.

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