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Aug 10, 2023

China Valves Technology: Online Due Diligence Indicates Legitimate Structure (OTCMKTS:CVVT)

After my latest article on China Valves Technology (OTC:CVVT), many questions

After my latest article on China Valves Technology (OTC:CVVT), many questions have been raised regarding the company's corporate structure. Fearful investors wonder whether CVVT truly owns its claimed subsidiaries. In fact, many believe that such a big profitable company cannot be trading at this low valuation and market cap. I have thus decided to perform online due diligence to confirm the relationship between different subsidiaries and CVVT.

One encouraging finding was the presence of Chinese websites for the claimed CVVT subsidiaries. Those web pages don't seem to be directed to US investors, but instead to customers and business partners in China. That's why the English translation was often incomplete or outdated. My strategy was to collect evidence of a relationship between the subsidiaries’ Chinese websites and CVVT.

It's important to note that the above mentioned six firms are the "manufacturing" subsidiaries of CVVT. This is to be distinguished from the holding companies that belong to CVVT. The following figure in form 10-A (CVVT annual report, 2010) explains this corporate structure:

(1) Shanghai Hanhuang Valve Co., Ltd. and Hong Kong Hanxi Investment Co., Ltd were former shareholders of Hanwei Valve, both of which were acquired during the acquisition of Hanwei Valve by CVVT and are shell companies without any active operations.

During my investigation, I have found out that CVVT has great exposure to the Chinese media. It would be impossible to list several thousands of important Chinese search results for 中国阀门技术 (China Valves Technology in Chinese) plus the CVVT symbol. However, this is a "translated" link from Baidu Baike (Baidu Encyclopedia) which provides reference details about CVVT manufacturing facilities. Another interesting finding is this Chinese comprehensive analysis of CVVT provided by Guoyuan Securities (Hong Kong) Ltd.

From the English literature, this PDF file from Yangzhou Rock Valve website is probably one of the best references about CVVT corporate structure and business.

Finally, I have performed this extensive online work to "see what is behind the scenes". I feel very comfortable that CVVT is a reputable company with well-known subsidiaries. Indeed, accusing such a company of being "fake" is clearly baseless, ignores the facts and is simply nonsense.

Disclosure: I am long OTC:CVVT.

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