Black technology: a super empire spanning two worlds

Chapter 346 [The Trillion-Dollar Club Gains Another Powerful Member]

After a period of confusion, most small and medium-sized investors gradually realized, as some people explained the situation, that Likang Technology's third-quarter financial report was not a disaster, but rather a serious overperformance. Those who pressed the nuclear button in the morning were now kicking themselves.

During the midday earnings call, Zhou Chengyang took time to personally participate and announce the details of the collaboration with Lingjing Technology to shareholders.

Investors then learned that all operating costs for the product "Liuguang Xingyu" were borne entirely by Likang Technology, but the brand trademark belonged to Likang Technology. At the same time, the profit distribution plan was to split the net profit 30/70, with Likang Technology receiving 30% and Lingjing Technology receiving 70%.

What surprised investors the most was that the sales of Liuguang Xingyu in the third quarter are expected to generate a net profit of 1457.54 billion yuan, according to Mr. Zhou.

Analysts and industry peers were shocked that the "Flowing Star Language" product, priced at this level, could still achieve a net profit margin of over 25%.

What shocked them even more was that the most profitable products were actually the accessories, with a net profit margin of over 45%.

With such a profit margin, even if Likang Technology splits the profits 30/70, the pre-sold Liuguang Xingyu products in the third quarter would still generate a net profit of 437 billion yuan.

During the earnings call, Zhou Chengyang also announced exciting news for investors: Likang Technology is making every effort to expand its production capacity, with the expected goal of achieving an annual production capacity of 30 million units by the end of 2025.

This news not only excited the capital market, but also excited the consumers who had ordered the Liuguang Xingyu products. This production capacity target means that even if the order is 3000 million units behind the back of the queue, it will only take one or two years to deliver. Originally, it was thought that it would take three or even four years for the goods to arrive.

Major investment institutions have raised their expectations for Likang Technology, and based on the third-quarter report and the information disclosed by Zhou Chengyang in the earnings call, analysts generally predict that the net profit in 2025 could reach 415 billion yuan.

This gives the forward P/E ratio of Likang Technology. If calculated based on the stock price before the market opened today, the forward P/E ratio is only 17.43 times.

Likang Technology has hit its daily limit, with its stock price reaching a record high of 2022.70 yuan. Its market value has also soared to 9405.55 billion yuan. Its latest dynamic price-to-earnings ratio is 22.66 times, while the static price-to-earnings ratio still shows that it is not losing money. This will only be updated after the annual report.

The forward price-to-earnings ratio is a projected figure derived from analysts' or companies' forecasts of earnings per share over the next 12 months.

When the market opened in the afternoon, Lingjing Technology's stock price was also boosted, rising by 4.28% to close at 415.76 yuan, with a market capitalization of 36.08 trillion yuan.

After all, Lingjing Technology is the one that makes the biggest profit. Although the company's third-quarter report has not yet been released, it is already known that Lingjing Technology will receive more than 1000 billion yuan in accounts receivable from the sales of Liuguang Xingyu in the third quarter.

It remains to be seen how much net profit will be reflected in Lingjing Technology's financial statements for these 1000 billion yuan.

Obviously, no one outside the industry knew that it would be 100% net profit.

It's normal not to know, since Lingjing Technology is a technology provider. In the eyes of outsiders, there must be R&D costs involved, and those costs are invested by Lingjing Technology.

After the market closed that afternoon, several institutions published analysis reports on Likang Technology.

One analyst, who serves as the chief consultant at a securities firm, published a research report in which he believes that Likang Technology's price-to-earnings ratio below 60 is within a reasonable valuation range. He also raised the medium- to long-term target price to 5135.22 yuan, with a target market capitalization of 23878.77 billion yuan, with both round numbers.

Other analysis reports also raised their expectations, generally giving a price-to-earnings ratio of over 50.

On Friday, the second day of trading, after hitting a record high the previous day, Likang Technology opened with a limit-up, achieving a two-day winning streak and pushing the company's stock price to 2629.51 yuan, with a market value of 1.22 trillion yuan.

Another powerful member joins the trillion-yuan market capitalization club of A-shares, becoming the first listed company on the Beijing Stock Exchange to break the trillion-yuan mark.

Lingjing Technology also strengthened, rebounding upwards and closing with a medium-sized positive line, rising 6.10% to 441.11 yuan, with its market value recovering to 38.288 trillion yuan.

……

The following Saturday.

Lingjing Technology also released its third-quarter financial report, which immediately caused a sensation in the capital market.

To date, no market analyst has accurately predicted Lingjing Technology's performance even once. Despite repeatedly raising expectations, they have consistently underestimated the company's potential. Lingjing Technology has consistently far exceeded analysts' estimates. This third-quarter financial report is no exception, especially with net profit significantly exceeding expectations, surpassing 2200 billion yuan.

However, the outside world still doesn't know how much of the net profit that the "Flowing Star Language" product brought to Lingjing Technology in the third quarter was, because the financial report did not disclose the details. As it is a company trade secret, only the total profit amount in the financial report was disclosed.

The better-than-expected third-quarter report has led market analysts to optimistically and boldly raise their fourth-quarter forecasts, with the market generally expecting Lingjing Technology's net profit to reach 3375 billion yuan in the last quarter of 2024.

In other words, Lingjing Technology's net profit is expected to reach around 5575 billion yuan in the second half of the year.

Based on the usual practice of distributing one-third of net profit as cash dividends, Lingjing Technology's cash dividend for the second half of the year is expected to reach 1858 billion yuan, with a cash dividend of about 2.14 yuan per share.

With 812 billion yuan already distributed in dividends over the past six months, Lingjing Technology's total dividends for the year are expected to reach 2670 billion yuan, surpassing the world's largest bank to become the A-share listed company with the highest dividends.

The market generally expects the largest bank in the universe to distribute dividends of around 1000 billion for the whole year. Based on this calculation, Lingjing Technology's dividend scale is 1.6 times larger.

For investors in Lingjing Technology, this is undoubtedly a happy situation, and they feel a great sense of accomplishment.

Not only can they enjoy the benefits of rising stock prices, but they can also steadily receive cash dividends, with the annual cash dividends doubling every year.

Lingjing Technology's current dividend yield is not high because its stock price has risen too sharply, especially since the "9.24 rally" that triggered the surge in stock price. Buying Lingjing Technology's stock at this time would be too costly.

Based on the latest closing price, buying 5000 shares would require 220 million yuan. However, based on this year's expected dividend income, 5000 shares would only yield a cash dividend income of around 1.5 yuan.

Clearly, this dividend yield is lower than bank deposit interest.

Based on this year's one-year fixed deposit interest rate, a deposit of 220 million yuan in a bank would yield 2.42 yuan in interest.

However, if the 220 million yuan was purchased on the last trading day of 2023, it would be different. Lingjing Technology's closing price for the previous year was 205.29 yuan, and 220 million yuan could buy 10700 shares.

So, with the same amount of 220 million, the expected dividend income this year could reach 3.28 yuan.

Compared to the interest income from bank deposits during the same period, the dividend income not only increased by 8600 yuan, but the gains from the stock price increase were even more substantial, more than doubling from 220 million yuan a year ago to more than 470 million yuan.

If this 220 million yuan was used to buy shares two years ago and the shares have been held ever since, then Lingjing Technology's stock price was 127.27 yuan.

The same amount of money can buy about 17300 shares, and the expected dividend income this year can reach 5.3 yuan. The return from the stock price increase is even greater. Two years ago, 220 million yuan would be 763 million yuan today, with the return from the stock price increase reaching +246%.

Therefore, it is evident that a long-term value investment strategy for Lingjing Technology will yield higher returns on equity and dividends as the holding period lengthens.

The vast majority of retail investors who bought Lingjing Technology stock chose to hold it for the long term, only buying and not selling, and some even used dollar-cost averaging. This is an important reason why the number of retail investors in Lingjing Technology has surged to 3000 million.

However, 3000 million retail investors is about right, and the number of retail investors is not expected to grow significantly for a considerable period of time in the future.

On the one hand, Lingjing Technology's current stock price is not as cost-effective as it was a year or two ago; on the contrary, the risk is higher. Buying the same number of shares now will cost twice as much as those who bought a year ago, about 2.5 times more than those who bought two years ago, and a staggering 107 times more than those who bought three years ago.

On the other hand, Lingjing Technology's current share price is over 400 yuan per share. The minimum purchase amount is 100 shares, which costs more than 40,000 yuan. Many small investors may only be able to buy one lot, which may take up half of their account position, or they may not even be able to buy one lot.

Therefore, for a considerable period of time in the future, the number of shareholders holding Lingjing Technology shares will likely fluctuate around 3000 million.

……

(End of this chapter)