Special offer from GMTEight | Multiple funds begin to "lurk", what signal is released behind YEAHKA (09923) "squatting and jumping"?

There is no lack of stories of "dark willows and bright villages" in the Hong Kong stock market. After several days of consolidation, YEAHKA (09923) sudden strong rise on January 14th, showed strong market buying power, attracting the attention of many investors. Specifically, on that day, YEAHKA's stock price opened high and continued to rise strongly during the day, with its price rising more than 19% at one point in the afternoon, and closing with a 16.38% increase at 8.24 Hong Kong dollars. In the previous 10 trading days, the stock price had been falling continuously, with a cumulative decline of over 36%. Due to the large previous market correction, the significant rise on January 14th obviously also reflected to some extent the release of demand for technical rebound of the company. In fact, looking at the data of the top ten net buyers/net sellers of brokers, it is not difficult to find that many funds have begun to "lurk". On January 14th, the top four brokers with net purchases in the last 5 days were Citibank, HKEX (Shanghai), Bank Of China, and Futu Securities, with net purchases of 11.822 million shares, 4.4196 million shares, 1.7552 million shares, and 1.7177 million shares respectively. In addition, as of January 14th, Citibank, Futu Securities, Bank of China, HKEX (Shenzhen), and HSBC Holdings in Hong Kong and Shanghai ranked in the top five of the company's broker shareholding list, with shareholding ratios of 21.37%, 20.20%, 8.66%, 5.53%, and 5.26% respectively. Futu Securities, as a gathering place for retail investors, and HKEX (Shenzhen) and HKEX (Shanghai) for southbound funds, it can be seen that many incremental funds have begun to enter the market. Although YEAHKA fell by 4.73% the next day (January 15), this decline seems not enough to conceal the signs of the company's "deep squat and jump" in stock price. So, what is the "charm" of YEAHKA that makes funds start to "lurk" in advance? Optimizing business structure, significant increase in profitability of two major businesses Looking at YEAHKA's operating performance, its financial performance in the first half of 2024 was under pressure, which seems to discount its attractiveness to investors. However, there are two major growth information points hidden in this, which may be of interest to investors. In the first half of 2024, YEAHKA achieved revenue of 1.578 billion yuan, a year-on-year decrease of 23.5%, and a net profit of 33 million yuan, a year-on-year increase of 7.3%. This performance of "increasing profit without increasing revenue" is mainly due to the negative impact of macroeconomic changes on payment business, offset by the growth of the merchant solution business. Meanwhile, the steady growth of the company's profits during the period was mainly due to the optimization of gross profit margin of merchant solution business and in-store e-commerce business, the increase in corresponding income ratio, and the improvement in efficiency of AI-enabled business, which drove a year-on-year decrease in sales expenses. In the first half of 2024, the company's one-stop payment service revenue was 1.35 billion yuan, the revenue of the merchant solution business was 202 million yuan, a year-on-year increase of 21.2%, the number of active merchants increased by 5.8% year-on-year, and the revenue of in-store e-commerce service was 29 million yuan. Among them, the revenue growth of the company's merchant solution business was remarkable, mainly due to the increase in the proportion of revenue from product structure adjustments and high-profit services, with the gross profit margin of this business increasing to 90.9% year-on-year during the period. In addition to the strategic adjustment of business models focused on higher profitability customers, the gross profit margin of the company's in-store business increased by 4.6 percentage points year-on-year to 81.5%, and it is expected to achieve breakeven in the second half of 2024. From the specific performance of the above businesses, we can see two important growth points for YEAHKA's business in the future: Firstly, the demand for digital operations of small and medium-sized merchants is increasing, and the penetration rate of active merchants in the merchant solution business is less than 20%, so there is still a lot of room for improvement in conversion rates. With the improvement of the business environment for small and medium-sized merchants, revenue growth is expected to recover. At the same time, by integrating a series of merchant solution services in the payment application, YEAHKA can convert payment service merchants into merchant solution merchants almost without incurring additional customer acquisition costs. Secondly, as a service provider that understands merchants' operations the most, YEAHKA's in-store e-commerce business, which is entered through payments, also has a great potential. It is predicted by iii Consulting that the scale of local life services will exceed 35 trillion yuan in 2025, with an average annual growth rate of 12.6% from 2020 to 2025, and the online penetration rate is expected to reach 30.8% by 2025. The vast local life market and the continuously increasing online penetration rate will provide broad development space for YEAHKA's in-store e-commerce services. As of the first half of 2024, the company's brand merchant services have exceeded 18,000, with an increase of about 35% year-on-year, and both single merchant income and per capita income have increased year-on-year. It can be seen from this that with the continuous release of the growth potential of the company's merchant solution and in-store e-commerce business, the certainty of YEAHKA's performance will also continue to increase. Holding multiple advantages, competitiveness is expected to gradually strengthen It is well known that in the Chinese payment industry, Alipay and WeChat Pay dominate and form a duopoly, with the two accounting for over 94% of the market share in the third quarter of 2023. In comparison, although the "duopoly dominance" is established, YEAHKA is actually in a leading position in independent QR code acquiring. YEAHKA, as the largest non-bank independent QR code acquirer, has a market share of nearly 6.0% in the QR code acquiring market. Although the market share is not high, it is in a leading position in independent QR code acquisition, which can also provide a solid foundation for its business expansion and revenue growth. Clearly, as a second-tier company, YEAHKA lags behind the giants in terms of market share and brand influence, and it may have higher costs to acquire new customers and retain old customers, and may also face competitive pressure in transaction fees, which may affect the company's profitability. However, with YEAHKA continuously consolidating its development advantages, its competitiveness is steadily increasing.Enhance.On the one hand, YEAHKA has obvious advantages in business diversification. In addition to its core payment business, YEAHKA has also actively expanded into in-store e-commerce and merchant solutions businesses. The in-store e-commerce business has grown rapidly in GMV and is expected to become the company's second growth curve; the merchant solutions business can meet the customized needs of merchants in different consumer industries, helping merchants improve operational efficiency and business expansion capabilities, further enhancing the company's profitability and resilience. On the other hand, YEAHKA also has a certain advantage in technological innovation. In recent years, YEAHKA has actively deployed AI technology, successfully developing more than 10 AI tools including AI content generation tools and AI cloud editing tools, and launched the metaverse solution YVerse, which improves operational efficiency through AIGC technology, saves KOL editing and production costs, provides merchants with new marketing scenarios and data-driven means, and helps merchants significantly increase repeat purchase rates and active rates in private domain communities. In addition, YEAHKA also has licensing and compliance advantages. It is reported that YEAHKA holds a payment business license issued by the People's Bank of China, which allows it to provide nationwide bank card acceptance and mobile phone payment services. Its legal and compliant operating qualifications give it a competitive advantage in the market, allowing it to gain the trust of merchants and consumers. Currently, third-party payment institutions have scarce licenses. As of the end of December 2023, only 186 third-party payment licenses remained, of which 57 were payment licenses with bank card acceptance qualifications. It is expected that regulatory authorities will continue to supervise enterprises with third-party payment licenses for a long time in the future, and license renewals will also be more cautious, highlighting the value of licenses. Overall, the short-term pressure on performance may cause some cautious funds to hesitate about YEAHKA, but in reality, the company has already experienced a long period of retracement before the "takeoff", accompanied by a strong surge on January 14 breaking through the short-term resistance level. The company probably still has enough momentum to attract many short-term traders to participate.