DOGI's IPO plan: Gross margin appears to be artificially manipulated, does it look a bit like selling the company?

This year's Hong Kong IPO market shows severe polarization

Selective picks like the recently listed MOGEPING have doubled in just a few days
 

But random subscriptions will encounter three of the worst-performing IPOs in Hong Kong market history this year: QINIU INTELLIGENT, DUODIAN INTELLIGENCE, and ZHONGGAN COMMUNICATION

Especially DUODIAN INTELLIGENCE - its first-day drop ranked second-worst historically, and the second-day plunge set a new record. In just days, the stock price has been halved 2.5 times

After years of IPO investing, Brother Cai has never seen a stock halve multiple times within days of listing - truly a "live long enough to see everything" moment

Regarding DUODIAN, Brother Cai finds the market's view of "listing just to sell the company" quite reasonable
 

We can extract three "company-selling" characteristics from DUODIAN:

Dishonest management, astronomical valuations, and unrestricted share sales
 

Today's article analyzes YUEJIANG ROBOT $DOBOT(02432.HK) , which Brother Cai increasingly suspects might be another company-selling scheme
 

1. Management Quality Analysis
 

YUEJIANG ROBOT is Hong Kong's third Chapter 18C IPO, mainly selling six-axis collaborative robots
 

Note: collaborative robots aren't humanoid - just mechanical arms, not cutting-edge high-tech

Moreover, management loves grandiose claims
 

They repeatedly emphasize being "global #2, domestic #1"

But they use shipment volume metrics - quite disingenuous
 

Anyone emphasizing only sales while ignoring unit price is being dishonest

Example: A bottle of Feitian Moutai costs 2000 yuan, Erguotou 20 yuan. Erguotou sells more due to affordability

Would you claim Erguotou's company is stronger than Moutai's just because you sell more bottles???

That's pure dishonesty!!!

By revenue, YUEJIANG ranks only 7th globally and 2nd domestically - a significant drop
 

This reveals poor management quality
 

More telling is their gross margin reporting
 

Ranking 7th in its industry, YUEJIANG somehow reports the highest gross margins - even surpassing top-three global leaders

Despite declining robot prices, how does YUEJIANG maintain industry-leading margins?

Answer: Their gross margin calculation method is highly problematic

As shown, YUEJIANG's reported margins exclude inventory write-downs
 

Higher gross margins imply lower costs
 

But inventory depreciates - when below cost, write-downs increase costs and reduce margins
 

Recent reports show YUEJIANG wrote down 26.81 million yuan (14.7% of inventory) - inclusion would lower margins
 

Furthermore, YUEJIANG's true margins will keep declining!

Because their massive inventory keeps growing while becoming harder to sell!!!

Latest data shows 182 million yuan inventory versus only 120 million yuan revenue

Good lord - inventory exceeds revenue!

This means inventory accumulates faster than sales, portending larger future write-downs and poor product marketability

Inventory turnover days perfectly illustrate this:

Previously 248 days to sell inventory; now 395 days

This shows uncompetitive products and predicts growing write-downs that will significantly reduce margins

By excluding inventory write-downs, YUEJIANG management deceives the public

Conclusion: YUEJIANG management is dishonest - investors beware!
 

2. Valuation Analysis

Existing shares are locked up, so we focus solely on valuation
 

YUEJIANG ranks 7th globally. Below, Brother Cai compares it to Japan's FANUC (#2), Switzerland's ABB (#4), and Japan's YASKAWA (#10)
 

These global giants have maximum P/S of 5x, while YUEJIANG's reaches 25x - five times peers, resembling DUODIAN's excessive valuation

PE analysis fails as YUEJIANG is still loss-making
 

But assuming stability, we can estimate fair net margins using peers

Despite claiming industry-high 43.9% gross margins (which we've debunked), let's optimistically accept this figure

Given highest gross margins, we assign 20% net margin (versus peers' 15% maximum)

Even then, YUEJIANG's PE exceeds 120x - multiples above peers

Conclusion: Whether by P/S or projected PE, YUEJIANG's valuation dwarfs leaders - exactly like DUODIAN!!!

That said, YUEJIANG has one bright spot: potential Stock Connect inclusion - discussed in subscription plan!
 

3. Subscription Plan
 

Given dishonest management + astronomical valuation (classic company-selling traits), Brother Cai believes YUEJIANG exists to dump shares
 

However, maintaining IPO price could qualify YUEJIANG for Stock Connect - a potential positive

But this depends entirely on management's willingness to support the share price

Without price support, YUEJIANG's overvaluation could trigger a crash, meaning your profits depend entirely on others' actions rather than fundamentals - Brother Cai prefers investments where outcomes depend on oneself rather than gambling on others' price support, especially when absence could mean another halving! Therefore: NO SUBSCRIPTION!!!
 

That concludes today's analysis. Hope it helps! I'm "Reading Financials for New IPOs" - a hobbyist financial statement reader and professional Hong Kong IPO/global markets investor combining long-term holdings with short-term trades. See you next time!$HERBS GROUP(02593.HK) $MINIEYE(02431.HK)