HK IPO Subscription|Guoxia Tech: PE189, Who Gave the Courage?

Today, let's talk about the last-minute market manipulation of Zhuoyue Ruixin and the lottery rate of Baoji Pharmaceutical.

You’ve probably seen the institutional placement of Zhuoyue Ruixin, which was a pitiful 2.33x, even worse than Tianyu Semiconductor and Naxin Micro. At this multiple, there’s almost no chance of long-term institutional holding. The last-minute manipulation seems more like a short-term pump to control the market cap. You could say the 🐶 market maker does whatever it wants—I got tricked off the ride by such a market maker, and I admit defeat.

As for whether it can stay around HKD 10 billion, that depends entirely on market cap management skills and has nothing to do with fundamentals. At this point, I’m not willing to bet on inclusion expectations anymore—the probability of failure still exists. The key is that the expected return now is only 25%, but the downside risk is 50%, so the risk-reward isn’t great. Players looking to flip new stocks would’ve entered in the morning session and wouldn’t wait until now. If you haven’t bought in yet, don’t jump in.

Baoji Pharmaceutical’s lottery this time was insane—Group A averaged only around 10%, while Group B heads were as high as 85%+. Group A tails lost almost as badly as Zijin Gold that time. The near-identical pattern for Groups A and B benefits the big players. Luckily, Group B heads got it right this time, but no one expected the gap to be this huge. Guess luck is part of the game.

Expected gains are around 150%. Innovative drugs + Mechanism B—buff stacked to the max. Of course, we’ll have to check the institutional placement multiple tomorrow. If it exceeds 15x, inclusion is a lock. Here, I’d rather believe it’s real institutional support, not Zhuoyue Ruixin-style market manipulation.

Back to the main subject—Guoxia Tech. Should we go for it?

Conclusion first: No. Stay 观望. The valuation is too expensive—expensive is the original sin. I won’t bet on the market maker being a good guy.

The energy storage sector is already cutthroat. This Xiaomi Laka can’t even crack the top 5. It’ll likely end its miserable life via acquisition or bankruptcy.

The key is the valuation is still so high—from RMB 20 million in 2023 to RMB 6 billion in 2025. Now it wants to IPO at a market cap of HKD 10.19 billion (RMB 9.263 billion). Absolutely ridiculous.

If the RMB 7.7 billion free float wants inclusion, there’s still about 30% upside—the only bet left.

Financial metrics are a mess. Revenue growth is okay—RMB 1 billion last year, RMB 690 million in H1 this year—but net profit dropped. Last year’s net profit was RMB 49 million; this H1, it’s just RMB 5.57 million. Gross margin also tanked hard, down to 15%.

The key is the profitable European business shrank, while the cutthroat Chinese business grew. No wonder gross margin dropped so much.

The best biz model is making money in inflationary countries and spending in cutthroat ones. But this company does the opposite—insisting on competing in manufacturing in the world’s strongest industrial country.

Static PS 9, static PE as high as 189. 2024 net profit is already the peak—the past two years were at the RMB 20 million+ level.

Definitely got courage from Fish Leong.

The 2023 valuation of RMB 20 million is definitely unreasonable, but RMB 9 billion by end-2025 is even more absurd. Net profit grew just over 2x, but valuation grew 450x—faster than the hottest CPO stocks.

A reasonable valuation should be between RMB 1.6 billion and 6 billion, leaning toward around RMB 2 billion. 2x PS isn’t excessive, and 40 PE seems acceptable.

Sponsor China Everbright has a sparse track record and is obscure. There’s a greenshoe, but they got Livermore to handle it. Think about it—the sponsor itself didn’t dare handle the greenshoe, leaving it to an underwriter.

Cornerstones at 10.91% are also obscure, especially that English guy who ate two bowls of noodles from Fibocom and Meet Noodles—a real noodle pro.

Supply isn’t too low—33,850 lots, slightly less than Baoji Pharmaceutical, but the fundamentals are worlds apart. I estimate no more than 500x oversubscription, so the lottery rate should be okay. Group A tails and Group B heads probably have 10,000–20,000 lots.

Expected drop on debut should start at 20%. Of course, this is based on market-driven pricing. If the company is strong and finds a solid market cap manager, it likely won’t break issue price. How much it rises depends entirely on the market maker’s skills. But even if it rises, don’t hesitate—never fall in love with junk stocks. Take a bite and run.

I won’t participate anyway—the risk-reward is too low. Betting on this is worse than betting on Zhuoyue Ruixin hitting the inclusion line.

The above conclusions are based on my analysis of public information and do not constitute professional advice. Think twice before acting.