The strongest AI trend, mass-producing bull stocks.

In 2023, AI became the strongest global trend. With the support of AI, US tech stocks collectively rebounded and embarked on a super bull run lasting over a year. As the leaders of tech stocks, Microsoft, NVIDIA, and others have repeatedly set new all-time highs, with their market values exceeding $3 trillion, making them the most valuable companies globally.

Amid the global AI wave, A-share tech sectors have also surged, producing big bull stocks like Kunlun Wanwei and Wondershare Tech.

According to relevant statistics, from the beginning of 2023 to June, it took only half a year for Wondershare Tech's share price to surge by over 410%, with its market value exceeding 23.5 billion yuan.

But trends come and go, and performance will ultimately be the deciding factor.

When the tide recedes, it becomes clear who is swimming naked.

Facing new highs in share prices, its controlling shareholder and actual controller Wu Taibing immediately chose to reduce his holdings.

On June 1, 2023, Wondershare Tech announced that controlling shareholder and actual controller Wu Taibing planned to reduce his shareholdings by no more than 2.06 million shares, or no more than 1.5% of the company's total share capital. Based on the share price at the time, Wu Taibing cashed out approximately 310 million yuan through the reduction.

It's worth noting that this was not the first time Wu Taibing reduced his holdings.

Under Wu Taibing's "precise" reduction, Wondershare Tech's share price began to plummet. According to statistics, from mid-2023 to mid-September of this year, over a year's time, Wondershare Tech's share price plummeted from a high of 123.06 yuan per share to 37.92 yuan per share, a drop of over 65%, with a market value evaporation of over 16 billion yuan.

Facing the plunging share price, Wondershare Tech immediately unveiled a share repurchase plan. On September 19, Wondershare Tech announced its first share repurchase plan, stating that it intended to use its own funds to repurchase some of its A-shares through centralized bidding, which would be used for employee stock ownership plans or equity incentive plans; the total amount of funds for repurchases would range from 20 million to 40 million yuan, with the highest repurchase price not exceeding 71.78 yuan per share.

Moreover, on September 27, Wondershare Tech unveiled a draft employee stock ownership plan for 2024. According to the draft, the funding for this employee stock ownership plan comes from the company's accrued reward fund, with a total fund amount not exceeding 25 million yuan, accounting for approximately 29.00% of the company's audited consolidated net profit attributable to the parent company in 2023. The underlying shares for this employee stock ownership plan come from the company's A-shares repurchased from its dedicated securities account for repurchases, with a transfer price of 40.00 yuan per share.

Benefiting from the recent reversal in the A-share market, Wondershare Tech's share price has reversed its downtrend, with its share price rising by over 50% in just half a month. As of the latest close, its market value is 11 billion yuan; from its peak, its market value has still evaporated by over 12.5 billion yuan.

Repeatedly "riding on" concepts

Like most entrepreneurs of his generation, Wu Taibing also has his own trends.

In 2000, facing the burst of the internet bubble, Wu Taibing had only two options: passive waiting or self-reliance.

Fortunately, Wu Taibing chose the latter.

At that time, in Wu Taibing's own words, he created a "loser program." In 2002, Wu Taibing developed a software product himself that burned photos, music, special effects, and text onto VCDs and placed it in software stores for sale with poor packaging. Unsurprisingly, the product sold poorly. However, when he discovered a good overseas channel and placed the product on overseas download sites for foreigners to use, he inadvertently achieved success.

After entering the overseas market, Wu Taibing generated a net income of 1 million yuan in the first year, which was his first pot of gold.

Relying on his successful overseas products and models, Wu Taibing quickly recruited his team to develop a series of products, including data recovery, photo and video editing, and more.

Amid the tide of the times, in 2018, Wu Taibing brought Wondershare Tech to the ChiNext. At its peak, the company had up to 300 products globally.

After Wondershare Tech's listing, it experienced a surge followed by a plunge, with its market value hovering between 3.5 and 5 billion yuan for a long time.

At that time, facing the wave of Chinese internet companies going overseas, Wondershare Tech focused its efforts back on China, and Wu Taibing also proposed "AII in IOT."

Regarding why Wu Taibing chose IOT, he once summarized: First, the Chinese market cannot be abandoned; second, the future computing environment will be a supercomputer; third, artificial intelligence is the general trend.

It is worth noting that while Wu Taibing's vision is admirable, his company's performance has not improved significantly.

According to financial reports, Wondershare Tech's revenues from 2018 to 2023 were 546 million, 703 million, 976 million, 1.029 billion, 1.18 billion, and 1.481 billion yuan, respectively; net profits were 82.6676 million, 86.2607 million, 125 million, -34.4944 million, 40.4335 million, and 86.2057 million yuan, respectively.

In other words, after five years, Wondershare Tech still hasn't escaped the dilemma of increasing revenue without increasing profits, nor has it been able to elevate the company to the next level.

The financial report shows that Wondershare Tech's revenue for the first half of 2024 was 705 million yuan, a year-on-year decrease of 1.80%; net profit was 24.4908 million yuan, a year-on-year decrease of 43.99%; and deducted net profit was 15.6523 million yuan, a staggering year-on-year decrease of 54.77%. Nevertheless, Wondershare Tech continues to pursue "hot topics."

Data shows that since 2018, Wondershare Tech has boasted multiple labels and concepts, including "unicorn," "metaverse," and "large model."

In 2023, it was also issued a letter of concern by the Shenzhen Stock Exchange, requiring it to explain whether it was leveraging the ChatGPT concept to "ride the trend."

In 2024, Wu Taibing proposed "AII in Going Global." Although he mentioned in 2018 that the Chinese market cannot be abandoned, as of now, over 90% of Wondershare Tech's revenue comes from overseas. In other words, despite Wondershare Tech's many AI concepts, they have yet to translate into actual performance gains for the company.

How big is the "bubble"?

The surge in share prices and market value has severely deviated from fundamentals.

As of June 30, 2024, its net profit was only 24.4908 million yuan, but its market value was as high as 11 billion yuan, with a dynamic price-to-earnings ratio of an astonishing 225 times.

It is evident that Wondershare Tech, with only 15.6523 million yuan in deducted net profit, is struggling to support a market value of billions. It is only due to the AI trend that this company has become a "pig on the wing" of the trend.

Li Xunlei, Chief Economist at Zhongtai Securities, once said that AI is a technological trend that will bring profound changes to human society's development. AI's emergence enhances productivity, which is its most important value. He noted that both industrial development and the stock market need to navigate through this current phase of "mania."

It is worth noting that despite the company's emphasis on AI, according to its 2024 interim report, the largest expense among the company's "four major expenses" is not R&D but sales expenses, amounting to 365 million yuan, accounting for more than half of total revenue.

It is thus not difficult to understand why Wu Taibing chose to reduce his holdings at a high point in June 2023.

According to Kanjian Finance statistics, throughout 2023, Wondershare Tech's actual controller Wu Taibing and his concerted actors Suqian Xingyi and Suqian Jiaxing reduced their holdings and cashed out over 582 million yuan, including 380 million yuan in the second quarter and 201 million yuan in the third quarter of last year. Moreover, this was not Wu Taibing's first reduction; he also reduced his holdings in Wondershare Tech in 2021.

Another noteworthy point is that since 2024, several core executives at Wondershare Tech have resigned, including Sun Chun, the company's former deputy general manager, chief financial officer, and board secretary; and Zhu Wei, a member of the board of directors, the strategic committee, and the audit committee.

Of course, performance is one aspect, and future expectations are another. Although Wondershare Tech's performance has "stood still" since 2018, some institutions still relatively favor it.

Recently, Ping An Securities released a research report stating that Wondershare Tech is deeply engaged in video creativity and digital office business, with product lines benchmarked against global creative software giants. At the same time, facing current opportunities in the multi-modal AIGC field, the company has continued to deepen the intelligence of its core products, with multiple products achieving AI application landing in the industry first, laying the foundation for the company's subsequent business growth. It believes that as a leading domestic provider of digital creative software, the company has a certain degree of scarcity. The increase in global demand for video creation and digital office, coupled with the rapid development of AIGC, will open up growth space for the company. The first coverage gives it a "recommend" rating.