In a stunning turn of events in the stock market, a Chinese financial IT company named Ying Shijian has seen its stock price surge dramatically, restoring eight years of lost value in a mere 26 trading daysThe stock price increased by an astonishing 295%, leaving investors in aweIn the wake of this skyrocketing stock, Haikang Electronics, Ying Shijian's second-largest shareholder, has also encountered a remarkable financial windfall, registering nearly 1.4 billion yuan in unrealized gains, which can only be described as hitting the jackpot.
The explosive growth of Ying Shijian’s stock has indirectly enriched Haikang Electronics, providing the company with a substantial increase in its asset holdings
On November 5, Ying Shijian reached its maximum allowable limit of 20% rise in stock price, marking an eight-year highTo put this into perspective, since the stock rose from its start on September 24, it has achieved a remarkable increase of 295% over 26 trading days, pushing its total market capitalization to nearly 18.4 billion yuan.
The appreciation of the share price has substantially benefited Haikang Electronics, which has been a main player in this financial musicBack on July 22, Haikang Electronics invested a substantial 180 million yuan, acquiring 37.56 million shares of Ying Shijian at a price of 4.8 yuan per shareThis move increased its total holdings to approximately 73.08 million shares.
On the day of the share transfer, August 20, the total market value of Haikang Electronics' stake in Ying Shijian was only 417 million yuan
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However, fast forward to November 5, those shares have surged in value to around 1.79 billion yuan, showcasing an astonishing gain that many investors can only dream of.
The whirlwind of profitability surrounding Haikang Electronics paved the way for its continued success in the market, intertwining its fate with that of Ying ShijianYing Shijian became a striking star within the burgeoning ChiNext board, reflecting the interests of investors keen on innovative technology and financial services.
At the heart of this remarkable rise are several significant developmentsOn October 24, it was announced that an ambitious plan was underway to form a government-backed investment fund collective worth a trillion yuan, along with additional initiatives aimed at developing various venture capital and private equity funds
This influx of governmental support has served to kindle interest among various investment and internet financing stocks, placing Ying Shijian in the spotlight in the context of the 'Xin Chuang' (New Innovation) narrative that has captivated Chinese investors.
Moreover, beginning in late September, the A-share market demonstrated a marked increase in activity, leading to heightened investment in financial IT firms like Ying ShijianThe resulting funds poured into the market provided an unexpected boost, creating an environment ripe for rapid price appreciation.
The significant price increases observed in Ying Shijian’s stocks allowed Haikang Electronics to enjoy a substantial windfallThe transaction executed with the management of Ying Shijian on July 22 saw Haikang Electronics transfer funds equating to about 180 million yuan to secure additional shares from its founders, including Tang Qiu and his wife, Yan Jianhong.
On August 20, once the share transaction was registered, the total market value of Haikang Electronics holdings in Ying Shijian amounted to approximately 417 million yuan based on the closing price
The implications of this shareholding were profound, with estimates suggesting that by November 5, that same holding would potentially reach nearly 1.79 billion yuan.
One notable aspect to consider is how Haikang Electronics perceives its investment in Ying ShijianAccording to reports, the company considers this a part of its “other non-current financial assets.” This means that although the meteoric rise of Ying Shijian has positively influenced Haikang’s financial reporting, it doesn’t affect the operational net profit figures as the gains are classified under non-recurring income.
Ying Shijian's impressive stock growth has subsequently contributed positively to Haikang Electronics's net profit as a significant portion of non-recurring income for the third quarter
The recent quarterly reports revealed an astounding 159% rise in net profit, reaching around 416 million yuan, largely fueled by the increase in value of its investments.
It’s also important to highlight the timing of Haikang Electronics' investmentsThe company had previously navigated a phase of underestimation in its investment in Ying ShijianBack on February 20, 2021, Haikang Electronics invested 388 million yuan to acquire an additional 54 million shares at 7.18 yuan per share, at a time when it already owned a small number of sharesThe shareholding structure dramatically shifted in a relatively short period, propelling Haikang’s stake to around 9.18% after this transaction.
In retrospect, this partnership has blossomed amid volatility in the stock market, with both companies navigating complex relationships and business dynamics
Over the years, Tang Qiu, Yan Jianhong, and their associates have not only transformed Ying Shijian into a cash cow but also encountered challenges that include a divorce, which led to share redistribution among the founding members.
In June 2017, a divorce settlement prompted former partner Yan Jianbing to transfer over 27 million shares, significantly impacting the share distribution among major stakeholdersThis event foreshadowed further reductions, with Tang Qiu and Yan Jianhong choosing to liquidate substantial holdings periodically, particularly in 2018 when they sold 14.8 million shares in a block trade.
These sales continued unabated, with both founders offloading millions of shares in the subsequent years, totaling an amount that approached 500 million yuan
Their selling patterns reflected an ongoing strategy to capitalize on market fluctuations, primarily by reducing exposure during uncertainties while re-investing smartly when opportunities arose.
Despite the market euphoria surrounding Ying Shijian, underlying financial fundamentals tell a different storyComparatively, year-over-year trends have not shown robust growth, with revenue declining 9.55% to nearly 988 million yuan in the first three quarters of 2024, while net profits decreased sharply by more than 200%. This persistent underperformance calls into question the sustainability of its stock performance amid resilient, albeit fluctuating, market conditions.
In conclusion, while Ying Shijian appears to be riding a wave of stock market excitement, investors need to align their enthusiasm with pragmatic financial assessments