On July 31, the stock price of Kodi B (02487) opened and began a “boom” attitude. The upward trend continued from early trading until the afternoon close. The intraday increase once broke through 33%, and eventually closed up 32.05%, with a turnover of HK$38.2608 million. According to the news, Kodi issued an announcement on the same day that its CU-30101 drug marketing license application was accepted by the China National Drug Administration.

But can an announcement on the progress of commercialization of a product enable Kodi to embark on a path of rising valuations? The answer is clearly no. On August 1, Kodi's stock price opened and followed a 180-degree trend from the previous day. From a sharp rise to a sharp drop of 31.84%, it closed with the biggest drop of 31.84%. Not only did it take back the previous day's increase, but the stock price also broke through the low value of HK$7.33 on July 30 and fell to HK$7.02.

In line with the news, the shipping intention is obvious

The Zhitong Finance App learned that since its listing, Kodi's stock price has been in a downward state. Since November last year, the company's stock price had a clear downward trend. Since November 9 last year, its stock price hit a high in the HK$24 range, it has fluctuated and declined until June 25, when it hit a low of HK$5.58. However, after June 25, Kodi's stock price bottomed out and rebounded throughout July. Counting the 32% increase that closed on July 31, the monthly stock price increase was as high as 60.69%.

According to the news, in addition to the product acceptance announcement issued on July 31, Kodi also carried out 4 stock repurchases in July, totaling 0.5858 million shares, for a total amount of HK$4.2072 million. It is worth mentioning that this is Kodi's only 4 repurchase operations in the past year.

On the technical side, Kodi's “golden fork” pattern appeared on June 27. At the same time, Kodi's Bollinger Line (BOLL) reached a new low around July 10. At the same time, the opening narrowed, which meant that the fluctuation of the stock price was reduced, which meant that the strength of the long and short side or reversal occurred. The market may soon choose a new trend direction, which is a sign that a dark horse has begun.

After the news and technical preparations were completed, the secondary market began the “show” on July 31 and August 1.

The Zhitong Finance App observed that on July 31, Kodi bought 1.6714 million shares by Tiger Securities, making it the largest buyer; Futu Securities and Hong Kong Stock Connect bought 0.594 million shares and 0.0392 million shares respectively, which each ranked in the second and top three buyer seats. If you buy, you sell. Looking at the seller's seat, Hong Kong and Shanghai HSBC was the biggest seller, selling a total of 1.0966 million shares on the same day; CICC and Merrill Lynch were the second and top three sellers, selling 0.8946 million shares and 0.3911 million shares respectively. In comparison, the number of buyer seats is smaller than that of sellers, and the majority are retail investors.

After attracting “technical” capital to complete the first wave of shipments by raising stock prices, the second wave of shipments was achieved immediately through a sharp decline on August 1 to attract the bottom of takeover capital. On August 1, Kodi was purchased 1.6698 million shares by China Investment (Shanghai-Hong Kong Stock Connect), the largest buyer; China Chuangying (Shenzhen-Hong Kong Stock Connect) and Futu Securities were the second and top three buyers; in the seller's seat, CICC was the biggest seller and sold 0.519 million shares.

In fact, during the annual performance report period at the end of February this year, Kodi had a round of similar operations. On February 29, the company released the 2023 performance report. The company's stock price closed up 24.39% on the same day and fell sharply by 21.57% the next day.

In fact, judging from the chip distribution, after falling prices since November last year, retail investors on the upper side of the stock continued to sell their high-ranking chips this year, while the main players continued to take over at lower prices. In the end, chips showed a concentrated pattern of single peak at the bottom. With the bottom position opening completed, shipping was bound to be on the follow-up agenda.

When will the results of commercialization be realized in value?

In fact, as a research and development company in the field of pan-dermatology treatment and nursing, Kodi achieved rapid growth and improved layout after its establishment in 2019. As the first full commercialization year for Kodi in 2023, the current commercial product revenue was 0.138 billion yuan, a significant increase of 1110.8% over the previous year.

By business, Kodi's current layout mainly focuses on the hair loss sector. The revenue of its hair pipeline reached 0.096 billion yuan in 2023, a sharp increase of 933% over the previous year, accounting for about 70% of total revenue.

The reason for this is that the contribution of the company's big single product, the French white tube, is still remarkable. According to the Zhitong Finance App, as Tmall/Jingdong's top 1 product for overseas skin drug sales, sales of small white tubes in France in 2023 account for 73% of the total revenue of hair products.

Earlier financial reports showed that the repurchase rate of Kodi's overseas flagship stores had increased from over 20% in early 2023 to over 30% at the end of the current period, and consumer stickiness continued to increase; secondly, the contribution of Kodi's other hair products increased significantly in 2023, with hair pipelines other than small white tubes accounting for 27% during the reporting period, a significant increase compared to 10% in the first three quarters of 2023.

As Kodi's second growth pipeline, the revenue of its skincare product line reached 0.041 billion yuan in 2023, accounting for about 30% of revenue, mainly due to the contribution of the addition of the US high-efficacy skincare brand Omar in September last year.

Since its launch, Kodi's valuation has been suppressed by the market. One of the key factors is that its R&D pipeline has limited appeal. Most of it has been filled through acquisitions or license-in methods, and there are not many self-developed projects. Currently, there has been a certain shift in the biomedical investment logic of Hong Kong stocks. When capital faces shocks in the secondary market, finding targets with stable “hematopoietic expectations” and mature commercialization potential has become a key factor for investors to obtain positive returns. Hematopoiesis, on the other hand, is currently one of the weak links in Kodi.

Judging from the company's prospectus data for that year, Kodi's performance has not yet been profitable due to the product being in the R&D stage or in the early stages of commercialization. From 2020 to the first half of 2022, Kodi Group achieved revenue of 0, 2.038 million yuan, and 0.658 million yuan respectively; net losses for the same period were 0.1999 billion, 0.3195 billion, and 252 million yuan, respectively, with a cumulative loss of approximately 0.77 billion yuan. After achieving a full commercialization year in 2023, Kodi's loss phenomenon has not improved, and it achieved a net loss of 1.964 billion yuan in 2023.

From the cost side, one of the main reasons for the loss of the Kodi Group is the company's high R&D costs. From 2020 to the first half of 2022, the company's R&D costs reached 0.162 billion yuan, 0.111 billion yuan, and 83 million yuan, respectively. In 2023, the company's R&D costs once again reached 0.216 billion yuan, an increase of 19.3% over the previous year. As Kodi previously stated in its prospectus, the company plans to continue improving its technical capabilities in drug discovery, development and production, and this process requires a large amount of money and time.

On the other hand, in 2023, the company's gross margin was 51.6%, a year-on-year decrease of 18.2 percentage points. This is probably also one of the reasons affecting its valuation. This is mainly due to changes in Kodi's current product structure (the gross margin of the new skincare product pipeline is lower than the original hair line).

Looking at it now, Kodi's revenue mainly depends on the French white tube, which is easily affected by market fluctuations. In addition, the company's profit and hematopoiesis are still in the early stages, making it difficult to open up room for imagination. In the future, until the revenue structure or hematopoietic capacity is optimized, the company's intrinsic value will still be difficult to be effectively realized.