Stock prices rose violently by more than 70% during the intraday period, then quickly fell by more than 6%. POWERWIN TECH (02405) gave investors a stimulating “roller coaster” ride within 1 hour.

The Zhitong Finance App observed that within 15 minutes after opening on November 6, POWERWIN TECH's stock price suddenly rose violently. At one point, the intraday increase broke through 70%, reaching 75.26%; within the next half hour, the increase in POWERWIN TECH's stock price quickly fell back to around 30%. At around 10:17 in early trading, after the increase rebounded to 56.25%, POWERWIN TECH's stock price suddenly dived sharply. The stock price fell to a low of HK$2.33, down 51.25% from the highest point of HK$4.78 on the day.

In the end, POWERWIN TECH closed down 4.04%, with a turnover of 28.28 million shares and a turnover of HK$0.1 billion, ending a “magical day”.

Who started this “roller coaster” market?

Since this year, the overall performance of POWERWIN TECH's Hong Kong stock market has fluctuated and declined. By the close of trading on November 5, its stock price had fallen by 49.63% year to date. In particular, after the end of May, the company's stock price showed a low sideways pattern, and the average daily turnover of shares rarely exceeded 4 million. This makes the November 6 trend performance seem out of place.

After experiencing a long period of sideways trading from the end of May to the beginning of November this year, POWERWIN TECH's stock price remained low at HK$2.5-3. Although there were minor fluctuations during the period, it basically maintained a stable sideways trading effect.

It is worth mentioning that in this process, the buyer's main capital used part of the chip to suppress the deal, and at the same time undertook to sell the chips, so that most of their chips remained on hold, locked in the fund-raising area, and waited for the high-ranking profits to be settled. As can be seen from the chip segment chart, no matter how the stock's high selling and low absorption are interpreted, its low chip concentration area (HK$2.6 to HK$3.5) has not changed.

Looking at trading seats, according to public data, the top three companies with the most net purchases in the past 20 days were Futu Securities, First Shanghai Securities, and Huasheng Securities, which had net purchases of 6.136 million shares, 2.034 million shares, and 1.888 million shares, respectively. At the same time, net sales volume was small. Morgan Stanley had the most sales volume of 1.144 million shares, while both Dasheng Securities and Tiger Securities sold less than 0.5 million shares.

Looking at the long-term timeline, Morgan Stanley was the biggest seller of POWERWIN TECH in the past 60 days, selling a total of 3.856 million shares, followed by Dongwu Securities and Yingli Securities, which sold 3.68 million shares and 2,516 million shares respectively.

However, on November 6, Yaocai Securities was far ahead of other brokerage firms with a large net purchase volume of 11.076 million shares. Futu Securities and Yuexiu Securities, which ranked 2nd and 3rd, had net purchases of only 0.232 million shares and 196,000 shares on the same day, while the sellers' performance on the same day was also lackluster. GF Securities, BOC International, and Tiger Securities, which ranked in the top three places, had net sales volumes of only 0.78 million shares, 0.296 million shares, and 0.192 million shares, respectively.

In terms of funding, POWERWIN TECH had a net outflow of HK$73.2987 million on the same day, including a net outflow of HK$45.1792 million from oversized orders and HK$21.7836 million from small orders. In terms of capital inflows, POWERWIN TECH had a net inflow of HK$24.1,495 million on the same day, including HK$16.2314 million for small orders.

The fundamental decline behind a round trip in stock prices

As a cross-border digital marketing service provider, the root cause of the “difficulties” in starting the stock price of POWERWIN TECH lies in the current state of weak fundamentals.

On August 19 this year, POWERWIN TECH issued the 2024 Mid-Term Profit Alert, and then disclosed the 2024H1 results on August 28. Financial reports show that the company's current revenue and profit both declined. During the period, the company's revenue was 7.368 million US dollars, down 15.93% year on year; net profit for the period was 0.338 million US dollars, a sharp drop of 83.3% year on year.

Regarding the decline in revenue, the company mentioned in the financial report that it is due to increased competition in the digital marketing service industry where the company is located. In order to maintain the company's competitiveness, the company will stop charging account management fees from customers from 2024 and increase the rebate rate for several customers.

According to financial reports, most of the company's revenue comes from cross-border digital marketing services. In previous financial records, the company's customers mainly come from the cross-border e-commerce industry.

Among them, the company's cross-border digital marketing services include 3 segments: standardized digital marketing services, customized digital marketing services, and SaaS-based digital marketing services. During the reporting period, the company's standardized digital marketing service revenue and customized digital marketing revenue both declined, falling 30.9% and 32.7% year over year, respectively, to 4.8 million US dollars and 2.3 million US dollars, respectively; in comparison, revenue from SaaS-based digital marketing services increased by 173.4% year on year to 1.2 million US dollars.

Although its main standardized digital marketing service business experienced a decline in performance due to market competition, the revenue growth of SaaS digital marketing services optimized the company's revenue structure to a certain extent.

As mentioned above, the decline in revenue and profit of POWERWIN TECH is due to insufficient market competitiveness. However, its cross-border e-commerce and marketing market are rapidly expanding.

According to the Zhitong Finance App, cross-border e-commerce will continue to grow in 2023. According to estimates by the General Administration of Customs, China's total cross-border e-commerce import and export volume in 2023 was 2.38 trillion yuan, an increase of 15.6%, 15.4 percentage points higher than the national import and export growth rate. With the rapid rise of cross-border e-commerce, the demand for digital marketing services is also constantly expanding.

According to Frost & Sullivan data, by the end of 2021, there were about 1,000 cross-border digital marketing service providers in China, with a total bill amount of about 22.2 billion US dollars; the market size grew from 4.8 billion US dollars in 2016 to 28.25 billion US dollars in 2022, with a compound annual growth rate of 36.0%; it is expected to reach 61.6 billion US dollars by 2026, with a compound growth rate of 22.5% from 2021 to 2026.

In terms of SaaS-based cross-border digital marketing services, as early as 2021, China already had 200-300 SaaS platforms or solution providers, with the top five service providers accounting for a total of about 46.3% of the market.

As can be seen, in the context of the continuous expansion of the market, market competition is also becoming increasingly heated. As a result, POWERWIN TECH had to adopt a series of concession strategies to maintain customers, and the weakening of the market's bargaining power was reflected in its financial reports.

According to the data, as of the end of June this year, the company's accounts receivable from third parties reached 0.245 billion US dollars, a further increase of 20.39% over the previous month, accounting for 33.27 times the company's revenue share in the current period, and accounts for more than 3 months accounted for 37.83% of these accounts. The weak ability to collect accounts is also reflected in cash flow. The net cash outflow from the company's operating activities in the current period was 40.31 million US dollars, indicating that the company's ability to collect accounts was greatly affected.

At the same time, in order to maintain the normal operation of the company, POWERWIN TECH also maintains a high balance ratio. The current balance ratio reached 331.8%, which may mean that the company has some worrying factors in terms of financial stability. And the overall weak fundamentals are also one of the main reasons hindering the stability of its stock price.