Since the National Day holiday, xxf group (02473) has risen against the market, with its stock price soaring 100% in just one month, showing a strong one-way increase and becoming the focus of the market. It is worth noting that since its listing at an IPO price of 1.1 Hong Kong dollars on November 9, 2023, xxf group's stock price has already reached 18.7 Hong Kong dollars in today's trading session, an increase of about 1600% from the IPO price. As of the close on October 31, the company closed at 17.78 Hong Kong dollars, with a P/E ratio (TTM) of approximately 127.85 times and a total market cap of approximately 9.168 billion Hong Kong dollars.

Behind the consecutive sharp rises, a large-scale storage surprise was found.

Investors can't help but wonder, what triggered xxf's stock price surge in a short period of time?

From the chart above, before the stock price surges, the consolidation period of each increase by the company is getting shorter, especially from February to the end of May this year, a period of consolidation that lasted for 3 months, has not been seen again. In addition, before each uptrend starts, the company's trading volume and value significantly increase, for example, on July 22nd and 23rd, the company's trading volume was around 3 million, with a trading value of about 16 million Hong Kong dollars, followed by a surge. Furthermore, on September 13, the company's trading volume suddenly surged to 4.82 million, with a trading value of about 36.6353 million yuan, and with the strong growth since the National Day, its trading volume has significantly decreased, with an average daily volume of only around 1 million.

Public data shows that the most net buys in the past 20 days were made by CMB International, Futu Securities, Bank of China, and Standard Chartered Bank, with net purchases of 63.5458 million shares, 7.8925 million shares, 3.376 million shares, and 2.5933 million shares respectively, with CMB International leading in the purchase volume by a large margin. At the same time, the net selling volume is relatively small, with the most sold by Yingli of less than 1 million shares, about 0.9725 million shares, and Dayou and Beta International selling 0.8375 million shares and 0.4825 million shares respectively. In short, the aggressive buying by CMB International has significantly boosted xxf group's stock price. CMB International served as the joint bookrunner and joint lead manager of xxf's Hong Kong IPO.

It is worth noting that from the perspective of the unusual storage change, on October 10, 63.5458 million shares were stored in CMB International Securities, with a holding proportion of 12.35%, and a holding market value of about 0.601 billion yuan. Let's first understand this concept, the so-called storage is an act by the issuer or shareholder of a listed company to convert their paper shares into electronic shares, meaning that the company's freely tradable shares increase. Correspondingly, the meaning of this action by xxf shareholders seems quite evident.

According to the previous prospectus, in the shareholder structure of xxf group after its listing, Mr. Huang Wei holds approximately 12.32%, 6.82%, 3.70%, and 2.10% through Mingzhu Capital, Precious Luck, Happy Gain, and Southern Fortune respectively, with a total holding of about 24.94%; Mr. Teng Yungzhuang and his brothers hold 10.49% through Ideal Stand; Mr. Liu Yonghui, Mr. Liu Wei hold 9.26% through Shenghui; Zhuhai Wanhe holds 8.77% through Brown Oak; Ms. Qiu Hui, Mr. Lin Dachun, Mr. Huang Jianqing, and Mr. Wang Yueren hold 8.05% through Charming Tulip; Beijing Che Sheng holds 5.46% through Hit Drive, and so on. Among the top nine major shareholders, as of June 30, only Beijing Che Sheng had reduced its holdings by 5.46% through Hit Drive, while the others had not reduced their holdings.

Mr. Huang Wei holds nearly 12.32% of the company through Mingzhu Capital, with a holding of approximately 63.5433 million shares, almost identical to the shareholding amount deposited by CMB International Securities.

More importantly, as the stock price surges, it also seems to reveal the possibility that XXF is gearing up for the Hong Kong Connect. Approaching the year-end inspection at the end of December, due to the need to review with new regulations this year, but the company's current average daily market capitalization is 3.806 billion Hong Kong dollars, still falling short by 2.131 billion Hong Kong dollars from the threshold of 5.937 billion Hong Kong dollars for the daily average market value of the Hong Kong Stock Connect. Moreover, taking into account the total monthly market value required to reach 16.619 billion Hong Kong dollars over the next 2 months, the stock price will need to be at 41.59 Hong Kong dollars on December 31st for a chance. Not to mention, if the Hong Kong stock market as a whole bull market, the threshold for entering the top 94% of the Hang Seng Composite Index (the market value criteria for HSI small-cap stocks) will be raised, far from the achievable level of the current 6 billion market cap.

Cash flow under pressure, the "hidden worries" in fundamentals.

On the surface, XXF Group's main business is automotive financing leasing, but fundamentally it is a financial company. The so-called automotive financing leasing refers to leasing companies purchasing cars on behalf of customers and renting out the vehicles to customers. The profit the company earns is the difference between the rent paid by the customer and its own financing cost. By essentially borrowing money to buy cars with one hand and collecting rent from tenants with the other hand, XXF Group is essentially a financial company.

This business model dictates that XXF Group needs to purchase a large number of vehicles for rental, thus having to borrow externally to pay for the purchase cost of cars, and then renting the purchased vehicles to users.

In the first half of this year, the company achieved revenue of 0.658 billion yuan, a year-on-year increase of 9.6%, with adjusted net income of 0.024 billion yuan, up 8% year-on-year. The gross profit was 0.209 billion yuan, an increase of 6.1% year-on-year, with the gross margin stable at 31.9%. The automotive financing leasing retail business was 0.411 billion yuan, with significant growth of 17.2% in new car sales volume.

Despite improvements in performance, XXF Group's liquidity issues remain high. As of the end of June 2024, the company had cash and cash equivalents of 0.248 billion yuan, a year-on-year contraction; meanwhile, loans increased from 1.865 billion yuan at the end of 2023 to 1.99 billion yuan, and the debt-to-asset ratio rose from 67.4% at the end of last year to 68.6%.

The Zhitong Finance and Economics App noted that XXF has long maintained a high debt-to-asset ratio. In 2020, 2021, 2022, and up to June 30, 2023, the company's debt-to-asset ratios reached 74%, 74.8%, 75.1%, and 74.6%, respectively.

Based on the above data, it is not difficult to see that xxf's fundamentals cannot be considered "excellent", with performance growth not outstanding, and deeply troubled by poor operating cash flow and high debt ratio. Whether it can sustain such a strong upward trend in the future still needs to be questioned.

From an industry perspective, for xxf Group, the steady expansion of the china auto business leasing market is obviously a major growth driver.

According to the Zhoushi Consulting report, based on the total value of commodity transactions, the market size of the china auto business leasing market increased from 50.9 billion yuan in 2018 to 63.4 billion yuan in 2022, with a compound annual growth rate of 5.7%. With the development of online car-hailing platforms, the increase in self-driving travel consumption, and favorable policy reforms, the market size of the china auto business leasing market is expected to increase to 82.6 billion yuan by 2027, with a compound annual growth rate of 5.4% from 2022 to 2027.

However, it is worth noting that the company may need to be vigilant in the face of intense competition. According to the Zhoushi Consulting report, the china retail auto financing leasing industry is relatively concentrated. As of 2022, the top 20 companies in the china retail auto financing leasing market held a market share of approximately 81.1%, with the top 5 companies accounting for a high 54% market share. This could potentially be a resistance factor for xxf Group.