AI rising star DC Holdings (00861) says goodbye to the past with the motto of "," and its main business is rapidly advancing to embrace the future.

On the evening of March 17th, DC HOLDINGS (00861) issued a "profit warning", stating that the company's main business continued to develop healthily during the reporting period. It is expected that the annual profit generated by the main business will increase by about 30% compared to the same period last year, and the revenue from big data products and solutions is expected to grow by about 30% annually. The net cash flow from operating activities is expected to increase by more than 40% year-on-year. However, despite the strong growth of the company's main business, due to a significant impairment of historical investment assets, it is expected that the annual loss attributable to shareholders will be approximately RMB 1.7 billion to 1.9 billion. Why did this earth-shattering "giant thunderbolt" occur? According to the announcement, the major impairment of assets this time is mainly affected by two major historical investment matters. One of them is the impact of losses and impairment of investment assets by HC GROUP (02280.HK) and its subsidiary Hui Cong small loan company, with an expected one-time provision for losses of about RMB 1 billion. HC GROUP was established in 1992, 7 years earlier than Alibaba, and was one of the first companies to engage in B2B platform business in China, enjoying a wave of early Internet dividends. The industry once referred to it as "Southern Alibaba, Northern Hui Cong". However, with the emergence of new technologies such as mobile Internet, big data, and artificial intelligence, Hui Cong did not adjust its strategy in time and keep pace with the times. In recent years, due to executive turnover, poor management, investment failures, and other factors, it has continued to operate at a loss, with accumulated losses of 3.7-4 billion yuan from 2019 to 2023, with the loss in 2023 nearly equaling the total of the previous four years. It is understood that DC HOLDINGS has held shares in HC GROUP for at least 10 years, and the strategic investment at that time was well-timed, with good business synergy and mutual empowerment between the two sides. However, the investment assets, which had a maximum market value of 30.9 billion Hong Kong dollars in the past, now have a market value of only 300 million Hong Kong dollars, which is lamentable. In recent years, DC HOLDINGS has continued to maintain a high growth trend in its main business, but has been dragged down by the losses of affiliate company HC GROUP year after year, and it is difficult to see a turning point in profitability in the short to medium term. The management of DC HOLDINGS has made a determined decision to fully impair the strategic investment they have held for nearly a decade, reflecting their determination to "cut ties". Another major impact of asset impairment is historical non-core business investment assets, especially financial products, with an expected one-time impairment of 1-1.2 billion yuan. As a veteran listed company with over 20 years of history, DC HOLDINGS also holds some investment assets, including industrial park properties in national core areas acquired at a low cost in the early years. In recent years, affected by the downturn in the domestic real estate market, even assets in prime locations have a certain risk of devaluation. In addition, after the sensational crash of some Citi wealth management products in 2016-2017, despite the company's immediate response and obtaining the active disposal rights of the underlying real estate assets of the wealth management products, it has been actively promoting related sales plans and specific action plans. However, due to the impact of the COVID-19 pandemic in recent years and the continued downturn in the real estate market, the progress of the disposal of financial products has been unsatisfactory, and the potential risks of this matter have become the biggest hidden danger in the minds of investors who have long been concerned about DC HOLDINGS. After the one-time impairment of some investment properties and financial products this year, this can be seen as a thorough "demining" action. At the same time, the above impairment provisions mainly come from historical investments in non-core businesses and assets, and have no negative impact on current cash flow, nor have they caused substantial losses to the company. This large impairment can be regarded as a major defensive measure. The company has sufficient cash flow, a full order book, and a healthy asset-liability ratio of around 54%. With the recovery of the real estate market in the future, the restructuring of historical assets may still bring unexpected returns to shareholders. According to insiders, most of the current management team of the company took over the business after 2018, and in recent years have led the company's main business to achieve sustained high growth. Especially at the beginning of 2024, the company success... Given this background, DC HOLDINGS decided to "cut ties", get rid of burdens, and focus on core businesses such as big data and artificial intelligence to face new challenges in the AI era. Whether the company's management team can turn the tide and turn crisis into opportunity remains to be seen.