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  • Gotham City Research LLC

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


  • 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 China-based subsidiaries’ 2015 operating margins are only around 9%, per local filings, compared against AAC’s total 2015 operating margins of 30%.

  • There are at least 30 companies listed under CEO father’s name, some of which do business with AAC.

  • Companies with more automation should have a higher – not lower – average compensation, revenue, & gross profit per employee versus peers, according to a Sunwah analyst.

  • AAC has no CFO, & has never addressed whether its reporting, financial statement accuracy, & quality of internal controls would be affected.

  • Conference call: “At this moment we don’t need a CFO.”

  • AAC CEO’s responsibilities include finance while AAC CEO’s wife sits on the audit committee.

  • AAC has not explained how its auditor is able to audit AAC’s financial statements with such low audit fees, given that AAC’s size would seem to require more billable hours.

Is there a smoking gun? See for yourself, by reading this report.

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