JXR (01951): HK$100 million stock repurchase brings "profit signal"?

On the evening of December 1st, JXR (01951) issued an announcement, declaring its intention to repurchase shares at a total price of not less than 100 million Hong Kong dollars, believing that the current trading price of its shares does not reflect their intrinsic value or the actual business prospects of the company. It can be observed that since hitting a temporary stock price high on July 29th, the price of JXR shares has been fluctuating and falling, reaching a low of 2.33 Hong Kong dollars on November 24th, setting a new low for the year. Looking back over a longer period of time, this year marks the fifth consecutive year of declining share prices for JXR, with the price falling by 90% from the high of 23.79 Hong Kong dollars in 2021. Therefore, JXR's decision to announce a buyback at this point is clearly aimed at boosting market confidence. Hong Kong Stock Connect bottom fishing bets, does the buyback bring a "profit signal"? As mentioned earlier, since hitting a temporary high on July 29th, the price of JXR shares has been in a downward trending channel. Specifically, after a significant drop below the upper BOLL line and forming a large bearish candlestick on July 29th, JXR went through a "deep V trend" within 20 days, rapidly dropping to near the lower BOLL line, then rising by over 15% in 5 trading days to pull the price back to the upper band, but a long upper shadow on August 18 signaled exhaustion of bullish momentum. On August 19th, JXR started a fast downward trend of nearly 13 consecutive red candles. During this period, the BOLL line opened downwards, guiding the stock price to drop rapidly. Looking at the trading volume, the daily trading volume of JXR continuously shrank during this period, indicating that off-exchange holders were in a wait-and-see state, with weak market buying power leading to continuous price declines and low trading volume. It can be seen that the company's stock price stabilized in early September, and subsequently JXR's stock price has been oscillating around the BOLL upper and lower bands mechanically, but it has been in a state of declining volume, without any significant increase in volume support and no effective breakthrough in candlestick patterns, which technically classifies as a "false breakout" according to the BOLL indicator. Looking at the recent period, even after hitting the upper BOLL line on November 13th, JXR's stock price continued to experience a 2.33% price correction the following day, and another "six consecutive red candles" was observed on November 21st, bringing the price back to the lower BOLL line. Despite the market sentiment for JXR hitting rock bottom after four consecutive months of decline, as a Hong Kong Stock Connect target, such performance triggered the "muscle memory" of Hong Kong Stock Connect funds. According to observations, in JXR's broker trades in the past 60 days, the top five selling positions were held by Goldman Sachs, HSBC Hong Kong and Shanghai, Guozheng International, Huatai Financial Holdings, and Nanyang Commercial Bank, selling 87.6084 million shares, 33.1715 million shares, 11.2245 million shares, 7.3245 million shares, and 5.029 million shares respectively. Looking at the buyers, the two main channels of the Shanghai and Shenzhen Stock Connect purchased 75.0565 million shares and 71.8243 million shares for JXR respectively, ranking as the top two net buyers. Analyzing the changes in JXR's stock holdings through the Hong Kong Stock Connect, the holding ratio of Hong Kong Stock Connect funds for JXR has significantly increased since September this year, reaching 53.83% as of December 1st, which corresponds to the downward trend in JXR's stock price from September to the end of November this year. However, in the recent bottoming rebound trend of JXR, Hong Kong Stock Connect funds have deviated from the previous strategy of "buying more as the price falls, selling more as the price rises," opting instead to increase holdings and bottom fish. In the last 5 days, the total net buying volume through the Hong Kong Stock Connect channel reached 27.119 million shares, continuing to be one of the top net buyers for JXR. Buyback or prelude, stock price rebound still needs strong fundamental support On December 2nd, Hong Kong stock GIANT BIOGENE announced a repurchase of 104 million shares, which directly pushed GIANT BIOGENE's stock price up by 13% in the afternoon. On the other hand, JXR's stock price only rose by 1.63% on the day following the buyback announcement, and on the morning of December 3rd, it even opened lower and fell by as much as 1.6%, a performance that clearly fell short of many investors' expectations. Looking at the recent chip distribution chart, after more than 3 months of fluctuating declines, JXR's stock price has entered a notably weak zone, with a large number of trapped positions above, and the chip concentration area is below the average cost line of 2.86 Hong Kong dollars, even though there has been a recent rebound action, the overall profit ratio of the chips is only 14.92%. On the other hand, after the company announced the buyback, the trading volume of its shares has only been gradually increasing, indicating that off-exchange holders may still be cautious about entering the market, with a weaker willingness to switch chips both inside and outside the exchange, making it more difficult for major funds to push up the price in the short term, thus affecting the momentum of JXR's stock price rebound to a certain extent. To further boost confidence, JXR CEO Dong Yang posted an article on his personal account before the Hong Kong stock market opened on December 3rd, stating, "Regarding 2026, we estimate 3-4 billion in the regular plan outside of the special plan. Based on the current stock price, if all of it is used for buybacks and cancellations, it will reduce the share capital or generate a dividend yield of 5%-6.5%." In fact, for JXR, to boost market confidence, the buyback is one aspect, while improving the company's fundamentals is another. According to the mid-year performance disclosed by the company in late August this year. The financial report shows that the company's revenue in the first half of the year was 1.288 billion yuan, a year-on-year decrease of 10.7%, compared to 1.443 billion yuan in the same period last year; the net loss was 1.04 billion yuan, a reversal from profit to loss, compared to a profit of 190 million yuan in the same period last year. After adjusting for impairments and other non-recurring, non-cash items, the company's adjusted net profit for the period was about 82.3 million yuan, a decrease of 68.3% from the previous year. In the financial report, the company attributed the decline in performance in the first half of the year to four main factors: 1. The core assisted reproduction business experienced a simultaneous decline in volume and price - the number of egg retrieval cycles decreased by about 8%, and medical insurance cost control caused a 7%-8% decline in average price per cycle, while an increase in the proportion of artificial insemination further lowered the average customer price; 2. The continuing decrease in domestic birth intentions, with a sharp drop of nearly a quarter in traditional deliveries, directly affecting obstetric and related income; 3. To cultivate new growth curves, the company increased investment in multiple new departments and businesses, leading to a rise in costs; 4. Some assets in the United States and Laos showed signs of impairment, prompting one-time provisions for goodwill, intangible assets, and other financial assets, further eroding profits. In summary, the poor performance of JXR in the first half of the year was mainly due to multiple factors affecting the simultaneous decline in volume and price of domestic business, as well as one-time impairments of overseas assets. Such performance has led to multiple institutions lowering their revenue and profit forecasts for JXR for the years 2025-2027. BOCOM INTL has lowered its revenue forecast for JXR for the years 2025 to 2027 by 17%-18% and its adjusted net profit forecast by about 50%, with the target price also reduced to 3.3 Hong Kong dollars and the rating downgraded to "neutral," considering the current valuation to be more reasonable; while Citic Securities has also taken a neutral stance on JXR for the year 2025 and lowered its revenue forecast for the years 2025-2027 by 12%-20% and its net profit forecast by 27%-31%, expecting a net loss in 2025 to reflect the performance in the first half of the year and a cautious outlook for the next year. Moreover, based on the adjusted forecasts and a higher target price-to-earnings ratio, the target price for the company has been lowered from 3.8 Hong Kong dollars to 3.5 Hong Kong dollars. However, given that JXR has stated that all adverse factors have been concentrated and released in the first half of the year, it is expected that the operating conditions will improve in the second half of the year, and Citic Securities anticipates that it will gradually return to the right track from 2026 to 2027. According to the announcement made by JXR on October 24th this year, by the end of the third quarter of 2025, the cumulative number of IVF egg retrieval cycles for the company had decreased by 5.2% year-on-year, narrowing from the 8.3% decline in the first half of the year, indicating that the overall operational improvement for the company is starting to show. This also increases market expectations for the annual performance data of the company in 2025.