Recently, the Hang Seng Index has been in a general downtrend, but the performance of Huajian Medical (01931.HK) has been exceptionally strong.

Data shows that from August 28 to September 12, its stock price has accumulated a rise of over 121%, and the trading volume during the rise has significantly increased, indicating unusually active capital.

The abnormal movement of Huajian Medical's stock price has attracted widespread attention from investors.

Huajian Medical and its subsidiaries are leading distributors of domestic IVD (In Vitro Diagnostics) products, and they also participate in the research, development, production, and sales of their own brand IVD products.

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Among them, distributing IVD products is the core business of Huajian Medical, mainly involving the distribution of IVD analyzers, reagents, and other consumables to distributors, hospitals, medical institutions, and logistics providers.

In addition, Huajian Medical also earns revenue from after-sales service for the end customers of the Sysmex coagulation analyzer in China; Huajian Medical is also engaged in the research and development, production, and sales of its own brand IVD analyzers and reagents.

From the news perspective, the abnormal movement of Huajian Medical's stock price is related to the recent announcement.

On August 28, Huajian Medical announced the mid-year performance report for 2024.

The data shows that in the first half of the year, the company achieved a revenue of 1.353 billion yuan (RMB, the same below), a decrease of 1.7% year-on-year.

Among them, the revenue from the sale of trade goods in the first half of the year was 1.254 billion yuan, a decrease of 3% year-on-year; the revenue from the sale of finished products was 4.578 million yuan, a decrease of 25.5% year-on-year; and the revenue from after-sales service increased by 21.9% year-on-year to 95.258 million yuan.

However, although the operating income in the first half of the year was slightly reduced, the sales cost of Huajian Medical also decreased by 4.4% year-on-year to 1.029 billion yuan, so the gross profit in the first half of the year increased by 7.7% year-on-year to 325 million yuan, and the gross margin during the period also increased by 2.1 percentage points to 24%, among which, the gross margin of after-sales service increased by 18.2 percentage points to 57.1%.

In the first half of the year, Huajian Medical achieved a net profit attributable to the parent company of 125 million yuan, an increase of 21.6% year-on-year; the adjusted net profit during the period was 128 million yuan, an increase of 8.9% year-on-year.

The increase in profit mainly stems from the increase in the gross margin of after-sales service.

It is worth mentioning that in addition to the news of profit growth in the first half of the year, another piece of news is also regarded by investors as an important reason for the sharp rise in its stock price.

Also on the announcement of August 28, Huajian Medical announced that its wholly-owned subsidiary, Huajian Technology, has been registered in Hong Kong.

Huajian Technology plans to mainly engage in artificial intelligence (AI) related projects.

Huajian Medical believes that the use of AI in the group's operations can enhance the group's IVD product development work, and AI-driven tools and analysis can provide help in the research, testing, and data analysis of the IVD product portfolio.

It is not difficult to find that the establishment of Huajian Technology by Huajian Medical aims to promote the development of its own brand IVD products, and ultimately cultivate its own brand products.

Looking at the data disclosed in the mid-term performance, the overall gross margin of the own brand product business can reach 73%, far higher than the 21.3% of the distribution business.

In terms of long-term development, using AI to enhance the group's IVD product development work is of great significance to Huajian Medical, and AI is also the hottest concept at present, which may also be one of the reasons why capital is willing to support it.

In addition to the stimulus of good news, the trading volume of Huajian Medical has suddenly increased in this round of crazy rise, showing obvious abnormal movement, indicating that there are funds in the speculation, and the crazy rise in stock price also benefits from this.

It is worth noting that although the profit of Huajian Medical in the first half of the year has increased, the overall performance is not particularly outstanding, and whether the bet on AI development of its own brand products can ultimately succeed still needs to be tested by time, and its stock price has achieved rapid doubling growth under this situation, which is more a result of capital speculation on good news, and the risk of subsequent decline is very high.