Since its listing on October 16, Qiniu Smart (02567) has been on a downward trend. As of the close on December 4, the company reported HKD 0.99, with a total market cap of approximately HKD 1.977 billion. Compared to the issue price of HKD 2.75, Qiniu Smart's share price has shrunk by 64%, with a total market cap evaporating by approximately HKD 3.5 billion.

According to Zhito Finance APP, before the IPO, Qiniu Smart was valued at USD 0.682 billion, approximately RMB 4.8 billion. The company's founder Xu Shiwei holds 17.96% directly, making him the largest shareholder; Alibaba holds 17.69% through Taobao China, making it the second-largest shareholder; co-founder and president Guihua Lyu holds 5.88%.

With the backing of star shareholders, why does Qiniu Smart continue to decline?

Is the peak at the time of listing? The cornerstone lost HKD 0.113 billion.

The phrase 'is the peak at the time of listing' could not be more appropriate for Qiniu Smart.

On the first day of trading, Qiniu Smart's opening share price immediately dropped by 40%, and then continued to plummet, dropping more than 60% at one point within an hour. Although there was a brief rebound, reducing the drop to 50%, after the noon break, it could not withstand the selling pressure, and the share price continued to fall, ultimately closing down 56.73% at HKD 1.19 per share, with a first-day trading volume of HKD 0.166 billion.

According to LiveReport big data, the highest net buy was from bocom intl, hsbc securities, and futu securities, with net purchases of 5.942 million shares, 4.585 million shares, and 4.293 million shares respectively. The highest net sell was from bocom intl, zhejiang merchant intl, and fuchang securities, with net sales of 7.351 million shares, 3.933 million shares, and 2.195 million shares respectively. Notably, bocom intl, which had the highest net sell, is one of the co-sponsors of asia vets.

After a significant drop on the first day, asia vets could not reverse the trend, with both volume and turnover ratio showing a downward trend. From October 31 to December 3, asia vets had a decline of 16.53%, with a downward trend lasting for 17 days, and the total turnover ratio over 24 trading days was only 2%, with a volume of 39.873 million shares and an average daily volume of less than 1.7 million shares.

Looking at the capital trend, asia vets has been in a state of net outflow of funds. In the last 20 days, the net outflow of this stock was 7.9699 million yuan, and in nearly 60 days, the net outflow was 24.4471 million yuan.

Investors cannot help but wonder, who is offloading the stock?

From the seats, in the last 20 days, the top five selling seats for asia vets were tiger securities hong kong global, standard chartered bank (hong kong), swhy securities hong kong, bank of china (hong kong), and orient securities (hong kong), selling 1.233 million shares, 1.228 million shares, 1.109 million shares, 0.746 million shares, and 0.736 million shares respectively. In the last 10 days, the top five selling seats were standard chartered bank (hong kong), orient securities (hong kong), swhy securities hong kong, bank of china (hong kong), and hang seng securities, selling 1.334 million shares, 0.731 million shares, 0.499 million shares, 0.404 million shares, and 0.137 million shares respectively. Overall, the top five selling seats overlap considerably.

It is worth noting that as the end of December year inspection approaches, a review needs to be conducted under the new regulations this year. However, the company's average market cap is currently only 2.107 billion HKD, which is still 3.829 billion HKD short of the current average market cap inclusion threshold of 5.937 billion HKD for the hong kong stock connect. Moreover, considering that over the next month (in 17 trading days), the total average market cap needs to reach 13.928 billion HKD. Calculating this, the stock price needs to be at 6.97 HKD on December 31 to have a chance for inclusion.

Currently, from the perspective of the brokerage's shareholding ratio, bocom intl holds about 3.2%, Hong Kong Shanghai HSBC holds about 0.67%, bank of china, futu securities, and耀才 have shareholding ratios of 0.63%, 0.58%, and 0.18% respectively. The combined shareholding ratio of the five major brokerages is less than 5%, and the large circulation also makes it difficult to control the stock price, which complicates its pursuit of the Hong Kong Stock Connect.

In addition, Qiniu Asia Vets' cornerstone investor, He Shun Limited Partnership, has suffered severe losses. According to the agreement, the Jiaxing State-owned Assets Supervision and Administration Commission managed He An subscribes at the issue price for 63.9 million shares of Qiniu Asia Vets (totaling about 0.1757 billion Hong Kong dollars), accounting for approximately 3.20% of its total share capital post-IPO (excluding over-allotment, etc.). Based on the issue price and total share capital (1.9966 billion shares), Qiniu Asia Vets has a market cap of approximately 5.491 billion Hong Kong dollars. As of the market close on December 4, He Shun has already incurred an unrealized loss of about 0.113 billion Hong Kong dollars.

With the current share price of 0.99 Hong Kong dollars, Qiniu Asia Vets' only shareholders with remaining profit margins are MPCs, Qiming Fund, and CBC, with per-share costs of 0.5253 Hong Kong dollars, 0.6303 Hong Kong dollars, and 0.7637 Hong Kong dollars respectively. Among them, Yonglu has lost 0.26 billion Hong Kong dollars, Magic Logistics has lost approximately 0.19 billion Hong Kong dollars, and so on.

How to break the profit dilemma with a cumulative loss of over 0.9 billion yuan in the past three years?

Founded in 2011, Qiniu Asia Vets focuses on providing cloud computing services for audio and video. Audio and video cloud computing services refer to the production, storage, processing, distribution, analysis, auditing, retrieval, and recommendation of unstructured audio and video content in multimedia formats, which includes recordings, short films, live videos, music, and images.

However, Qiniu Asia Vets' performance continues to show signs of decline despite being profitable. In the past three months from 2021 to 2024, Qiniu Asia Vets' revenue was 1.471 billion yuan (unit: RMB, the same below), 1.147 billion yuan, 1.334 billion yuan, and 342 million yuan, showing some fluctuations. During the same period, the net losses were 0.22 billion yuan, 0.213 billion yuan, 0.324 billion yuan, and 148 million yuan, with a total loss of over 0.9 billion yuan in the recent three years.

In response to the lack of profitability in the past few years, Asia Vets explains in its prospectus that business expansion takes precedence over short-term profits and states that the losses align with the overall trend of the industry. The decision made in 2022 to reduce its all-in-one server business also affected its overall revenue and gross profit. According to the prospectus, in order to control costs, Asia Vets chose to streamline its workforce. From 2021 to the first quarter of 2024, the total severance payments made by Asia Vets amounted to approximately 56 million yuan.

The Zhitong Finance App notes that Asia Vets is not only continuously operating at a loss but also consistently "bleeding" in terms of operating cash flow. From 2021 to the first three months of 2024, the company's cash flow from operating activities amounted to -91.493 million yuan, -71.344 million yuan, -3.837 million yuan, and -6.269 million yuan respectively, totaling approximately -1.73 million yuan. This means that Asia Vets has never earned cash from operations, instead showing a total net outflow of over 0.17 billion yuan in cash.

In terms of business, Asia Vets primarily owns businesses such as MPaaS and APaaS, with sales revenues generated by MPaaS being 1.37 billion yuan, 0.875 billion yuan, 0.975 billion yuan, and 0.249 billion yuan, accounting for 93.1%, 76.3%, 73.1%, and 72.9% of the main business income during the same period, respectively, making it the company's pillar business.

It should be noted that over the past three years, the average revenue contribution from paid customers of MPaaS has been 19,905 yuan, 10,420 yuan, and 10,537 yuan; the number of quality customers has been 185, 105, and 67, respectively. It is evident that Asia Vets in 2022 and 2023 had almost half the customer price ratio compared to 2021, while the number of quality customers has also continuously declined sharply. In such circumstances, what methods can Asia Vets rely on to turn losses into profits?

More importantly, Asia Vets currently ranks quite high in the industry, raising concerns about its growth potential.

According to iResearch Consulting, in 2023, based on the revenue of China's audio and video paas (Platform as a Service) market, the top five service providers accounted for 39.2% of the market share, with Asia Vets ranking third with an income of 1.33 billion yuan. From the perspective of revenue growth rate, the company is clearly lagging behind the industry. Over the last three years, the company's average annual compound growth rate was 7%, far below the industry growth rate of 15.36%.

According to iResearch Consulting, the market for China's audio and video cloud computing service is expected to continue growing at a compound annual growth rate of 21.3% from 2023 to 2028, with the market size reaching 240.5 billion yuan by 2028. In the face of the accelerating growth in industry scale, can Asia Vets' revenue keep pace with the industry's growth?