BLUE WHALE NEWS, November 21 (Reporter Zhai Zhichao) Recently, Tosda (300607.SZ)'s performance in the A-share market can be described as limitless, winning 20CM gains and stops for two consecutive days, instantly attracting the attention of many investors.

However, just as the popularity of the stock price soared, the company's “cooling down” announcement followed. On the evening of November 20, Topstar issued a stock price change announcement stating that the cumulative deviation value of the closing price increase of the company's shares reached more than 30% for two consecutive trading days on November 19 and November 20, which is a situation where stock trading fluctuates abnormally. Investors are requested to be aware of the risks.

A Blue Whale News reporter noticed that in addition to some routine “matters that should not be disclosed but not disclosed,” the company also explained recent cooperation with Huawei in the robotics business and the recent situation in the field of artificial intelligence.

It is undeniable that the possibility of a sharp rise in the company's stock price this time is closely linked to cooperation with Huawei. At the same time, various travel investors also appeared frequently during the sharp rise in Topstar's stock price, which also became an important factor driving up its stock price.

Also, the reason why Huawei favors Tosda may be related to its aggressive layout on robotics tracks. However, Blue Whale News found that against the backdrop of the company's stock price advancing rapidly and the robotics business being vigorously promoted, there are still some issues that the market needs to take a calm look at.

Who is the “driving force” of the sharp rise in stock prices?

Looking at the secondary market, Topstar's stock price has continued to soar recently. According to Chioce Financial Services, on November 19 and 20, the company's stock price went up and down for two consecutive days, with an overall increase of 40%. On November 21, the company's stock price reached a record high of 32.95 yuan in the intraday market. By the close of the day, the company's stock price had closed at 32.08 yuan, up 5.08%, and the total market value reached 14.5 billion yuan.

Source: Chioce Financial Services

The reporter found that behind the sharp rise in the company's stock price, the strong support effect brought about by the Huawei concept and the active participation of various investors are probably the two most critical factors.

On November 15, Topstar and Huawei (Shenzhen) Global Embodied Intelligent Industry Innovation Center signed a Memorandum of Cooperation. Judging from the announcement, although this stage of cooperation is still in the initial stages and has not yet been converted into actual revenue contributions, Huawei, as a global technology giant, has drawn up a very imaginative blueprint for Topstar's future development with its influence in the industry and its outstanding strength in integrating market resources.

Source: Topstar Announcements

Especially in the popular and promising field of humanoid robots, the cooperation between the two sides has made market investors look forward to Topstar's breakthroughs in technological innovation, improved product competitiveness, and market share expansion. This optimistic expectation is like a strong undercurrent, driving Topstar's stock price to rise steadily.

According to information, the Huawei Smart Center has signed memorandums of cooperation with a total of 16 companies. Apart from TOSDA, the A-share companies involved include many well-known technology companies such as Dazu Laser, Zhongjian Technology, and Zhaowei Mechatronics. However, after the announcement of the signing, the stock prices of the A-share companies involved above were stimulated to varying degrees on that day.

Furthermore, the presence of various investors also appeared frequently during the sharp rise in Topstar's stock price, becoming an indispensable driving force. For example, the Shanghai Wanping South Road Securities Sales Department of Huaxin Securities Co., Ltd., where the famous floating stock trading company supports the family, made a net purchase of 44.1625 million yuan on November 20. Also, the Shanghai Haiyang West Road Securities Sales Department of Cathay Pacific Junan Securities and Shenzhen Stock Connect have also made heavy investments.

Looking at it over a long period of time, Topstar has been on the Dragon Tiger list a total of 5 times in the past month. Dongfang Wealth Securities's Lhasa East Ring Road First Securities Sales Department, Shenzhen Stock Connect Exclusive, and Huatai Securities's Beijing East Third Ring North Road Securities Sales Department are active in trading.

Lai Tang, an investment advisor at Jinyuan Securities, said in an interview with Blue Whale News that the speculation style of floating capital is often good at creating a hot market atmosphere, and their intervention will attract many small and medium-sized investors to follow the trend and buy. After market sentiment was fully mobilized, large amounts of capital continued to pour in, forming strong buying support, causing the stock price to show a wild trend.

As the industry heats up, why is it favored by Huawei?

According to information, at a time when the wave of technology is raging, the robot circuit competition is heating up, and domestic and foreign companies are setting up one after another. What are the characteristics of Topstar that can stand out in Huawei's strict screening? To dig deeper into the reasons behind this, it is particularly critical to retrace Topstar's past business trajectory.

TOSTAR was founded in 2007. In the early days, it was mainly engaged in the production and sale of auxiliary equipment for injection molding machines. At that time, the domestic injection molding machine market relied heavily on imported robots. Not only were they expensive, but after-sales maintenance was also extremely inconvenient because parts had to be ordered from abroad. Topstar keenly captured this market pain point, set up a R&D team in 2010 to fully overcome technical problems, and successfully launched the first self-developed manipulator control system in China the following year. With this product, Topstar quickly gained a foothold in the domestic market.

However, with the intensification of market competition and changes in industry development, Topstar's single injection molding machine auxiliary equipment business is facing growth bottlenecks. In order to seek a wider development space, Topstar has begun to transform into the field of robotics. In 2022, Topstar successfully launched two new products — the gmu600 five-axis machining center and the dmu300 vertical five-axis machining center, demonstrating its strong R&D and manufacturing capabilities in the field of high-end CNC machine tools, further consolidating its position in the field of industrial manufacturing. In the same year, it also became the first listed company in the robotics industry in Guangdong Province.

In fact, Tosda and Huawei are probably also closely cooperating. Earlier, Topstar said on an interactive platform that the company provides industrial robot products to Huawei and suppliers, and exchanges and verifies related technologies such as underlying control, AI industrial robots, and physical intelligence.

Although Topstar claims to place importance on R&D, its R&D expenses are declining. From 2020 to 2023, 0.161 billion yuan, 0.142 billion yuan, 0.13 billion yuan, and 0.138 billion yuan accounted for 5.2%, 4.8%, 2.61%, and 2.3% of revenue, respectively.

Compared with its peers, Topstar also invests less in R&D. Taking Huazhong CNC as an example, its multi-year R&D investment accounted for more than 15% of sales revenue, while Topstar's R&D expenses accounted for only 3.3% of revenue in the first half of 2024. Also, look at Eston. The company invested about 0.3 billion yuan in R&D in the first three quarters of 2024, while Topstar invested only about 85 million yuan in R&D during the same period.

In response, the Blue Whale News reporter called the Topstar Director's Office as an investor. Staff said that it is possible that the reduction in R&D expenses for certain businesses has led to a reduction in overall R&D expenses, and the R&D expenses for robots have not been reduced.

It is worth noting that the 2023 annual report shows that Topstar's market share is mainly concentrated in the domestic market, and its influence in the international market is relatively small. Some industry insiders said that as competition in the global robot market becomes more intense, Topstar needs to expand the international market and face different cultures, regulations, and market environments. This is a huge challenge for Topstar, and the speed and effect of its expansion in the international market remains to be seen.

Source: 2023 Annual Report

The pain of transformation still exists

The three-quarter report shows that in the first three quarters of 2024, the company continued to adjust its business structure and deepen the transformation strategy focusing on products and contraction projects. In fact, TOSTAR's transformation strategy began at the end of 2021. In this year, the company proposed the strategic positioning of an “intelligent hardware platform driven by core technology” and established industrial robots, injection molding machines, and CNC machine tools as the three core products.

Although the company's transformation strategy has taken nearly three years, the pressure to transform is still there. Financial data shows that in the first three quarters of this year, the company's total revenue was 2.235 billion yuan, down 30.96% year on year, and net profit to mother was 9.0237 million yuan, down 92.99% year on year. The overall gross margin was 20.31%, a year-on-year decrease of 0.83 percentage points.

The company said that the main reason for the decline in revenue was that the company continued to actively shrink its project business. Among them, the revenue scale of the intelligent energy and environmental management system business contracted by 42.53%, and the revenue scale of the automated application system business contracted by 25.74%; the main reason for the decline in profit was the sharp decline in the scale and profit level of the intelligent energy and environmental management system business. In addition to the intelligent energy and environmental management system business, the gross margin of the company's remaining businesses was 37.78%, an increase of 3.94 percentage points over the previous year. The gross profit contribution accounted for 90.23%, an increase of 29.17 percentage points over the previous year.

More importantly, the strategic transformation has also put a certain amount of financial pressure on Topstar. In the process of transformation, the company needed to invest a large amount of capital in R&D, construction of production facilities, and market expansion, which led to an increase in its balance ratio. In 2020-2023, the company's balance ratio was 46.48%, 63.95%, 63.79%, and 64.54%, respectively.

Against this backdrop, the company's financial situation is also tight. As of the end of September this year, the company had monetary capital of 0.841 billion yuan, short-term loans of 0.567 billion yuan, accounts payable of 1.4 billion yuan, and total current liabilities of 3.043 billion yuan.

So when can you get through the painful period? Staff at the Topstar Executive Office told the Blue Whale News reporter that since project businesses have an account period, 2024 is still quite difficult in terms of this year's environment. There is indeed too much uncertainty about when it will be possible to get through the painful period.