"The 'Sky-high Monkey' Returns to CRO, will the 20cm Big Red Pillar sound the charge for Joinn Laboratories (06127) stock price to rebound?"

In December, Joinn Laboratories' Hong Kong stock price opened high and continued to rise, with the largest increase reaching 21.22% during the trading day, and the highest price reaching 21.54 Hong Kong dollars. This allowed Joinn Laboratories' stock price to return to the 20 Hong Kong dollar mark after a month. After a decline of more than 4 months, Joinn Laboratories (06127) used a "20cm big red candle" to attract market attention back to this leading safety assessment company and the recent surge in "monkey price". Was the stock connect fund the "big winner" of this rally? In July this year, with the surge in Hong Kong biopharmaceutical stocks, Joinn Laboratories' stock price reached 28.70 Hong Kong dollars, a new high since March 2023. However, the path to this new high for Joinn Laboratories was not smooth. Just after hitting a high and pulling back with a long upper shadow on June 17th, Joinn Laboratories experienced three consecutive declines, reaching a low of 13.89 Hong Kong dollars on June 20th, down 28.73% from the high on the 17th. But on June 23rd, Joinn Laboratories quickly stopped the decline, with the stock price turning upward and recovering a large amount of lost ground in 7 trading days. At the same time, the Hang Seng Healthcare Index also rebounded after a "five-day decline". From June 20th until now, the index has rebounded by as much as 9.45%, showing a continued upward trend in the Hong Kong biopharmaceutical sector. Against this backdrop, Joinn Laboratories surged in July and eventually reached a high of 28.70 Hong Kong dollars. Subsequently, the index continued to slowly climb until early September, while Joinn Laboratories began to fluctuate downwards on July 29th after reaching a high. From a technical perspective, after reaching a high, Joinn Laboratories' stock price quickly returned to the BOLL line's midline for a technical pullback, oscillating around the midline for a month until first touching the BOLL line's lower bound on August 28th. From a moving average perspective, this was the first time Joinn Laboratories' stock price returned to the 60-day moving average since June this year. From then until October 3rd, the company's stock price fluctuated along the 60-day moving average. However, after falling below the 60-day line on October 4th, Joinn Laboratories' stock price did not return to the 60-day line, but entered a new round of downward fluctuation trend. From a technical perspective, it officially entered a divergence form where all moving averages converged downwards, oscillating below the 30-day moving average. Generally, this technical pattern indicates a fundamental reversal of the stock's previous technical trend, leading to a gradual establishment of a downward trend as the short, medium, and long-term holding costs in the market decrease. Joinn Laboratories' downward trend continued until it showed signs of stabilizing on December 5th after a continuous "three white soldiers" pattern, during which the stock connect fund once again became the main force absorbing chips in the market. Observing the past 60 days, the top five selling seats for Joinn Laboratories were held by HSBC Shanghai, Merrill Lynch, Citibank, Morgan Stanley, and Zhongjin, with HSBC Shanghai being the largest seller, accumulating a net sale of 12.2852 million shares. On the buying side, China Investment (SH-HK Connect) was the largest buyer, purchasing 10.1274 million shares; while China Chuangying (SZ-HK Connect) was the second largest buyer, purchasing 6.8856 million shares. It is evident that most off-market holders are mainland retail investors from the Hong Kong stock connect program. Based on the shareholding ratio, China Investment (SH-HK Connect) and China Chuangying (SZ-HK Connect) currently hold 34.15% and 22.86% of Joinn Laboratories shares, respectively. Looking at the distribution of chips, the stock connect fund continued to buy off-market, causing the average cost of holding chips in Joinn Laboratories to steadily decrease from 23.30 Hong Kong dollars in early October to 19.44 Hong Kong dollars on December 11, with a peak concentration around 17.63 Hong Kong dollars, significantly lower than the average chip cost. On December 12th, a "20cm big red candle" pushed Joinn Laboratories' closing price to 21.25 Hong Kong dollars, also increasing the profit ratio of chips from 32.02% on December 11th to 78.84% on December 12th. For the stock connect fund, the "buy more on the dip" strategy that has been implemented for 4 months has finally paid off. Fundamentally, positive signals have already appeared, but the market still needs the "monkey cycle" to start. After experiencing a global biomedicine investment market adjustment from 2022 to 2023, the CRO industry showed resilience as early as 2024. From external factors, on the one hand, stimulated by the "patent cliff" issue, several multinational MNCs have shown a rigid increase in research and development budgets. As early as 2023, this led the total global investment in pharmaceutical research to reach 260.5 billion US dollars, forming a "ballast stone" for global CRO industry demand; On the other hand, the domestic policy has shifted from "encouraging innovation" to "encouraging real innovation", emphasizing clinical value, while drug evaluation and approval have been expedited and improved in quality, aligning regulatory standards with international standards, which is favorable for top CROs with high technical standards and excellent execution capabilities. Data shows that in Q1 of this year, the average time for new drug IND tasks in China (from entering the new task queue to leaving the queue) was 71 days, with a maximum of 91 days. In the future, if the clinical review cycle for eligible new drugs can be shortened to 30 working days, it will greatly stimulate the research and development of key innovative drugs domestically and bring more safety assessment market demand to Joinn Laboratories. In terms of Joinn Laboratories, according to the company's financial report for the first three quarters of this year, the company achieved operating income of 0.985 billion yuan, a significant decrease of 26.23% year-on-year; with third-quarter revenue reaching 0.316 billion yuan, a year-on-year decrease of 34.87%. In fact, the downward trend in Joinn Laboratories' revenue began as early as 2023. Looking at it longitudinally, the company's revenue and profits sharply declined after reaching a historical peak in 2022. Especially in 2023, due to the impact of the "monkey price", the company incurred a high biological asset fair value change net loss of up to 267 million yuan, directly leading to the company's current period of "increased revenue but no increase in profits". In 2024, the winter of industry financing led to a contraction in the company's on-hand orders, transmitting to a decline in revenue and profits. Currently, its performance in 2025 is just a continuation of previous performances. From the historical revenue changes mentioned above, it is not difficult to see that for Joinn Laboratories, a CRO company, the change in the scale of on-hand orders is an effective leading indicator for predicting short-term annual revenue trends of 1-2 years. For example, the scale of Joinn Laboratories' orders peaked at 4.5 billion yuan in 2022, shrinking to 2.2 billion yuan in 2024, revealing a subsequent downturn in revenue growth over nearly a year. According to this pattern, a stable rebound in order size could be an important signal for assessing whether the performance is rebounding. Looking at the latest Q3 financial report, in the first three quarters of 2025, Joinn Laboratories signed new orders amounting to 1.64 billion yuan, a year-on-year increase of 17.1%, with a growth rate of 24% in the third quarter, showing signs of recovery. Since this serves as a leading indicator and will not directly affect short-term performance post-finance report, this boost has not been immediately reflected in the stock price. Comparatively, the "monkey cycle" can directly affect Joinn Laboratories' performance. This is because in the company's 2020 annual report, the measurement method of the biological assets of monkeys was changed from the previous "cost-based measurement" to "fair value-based measurement". The result of this change in accounting policy is that when the prices of biological assets continue to rise, the price float profit is released in the current period's financial statements. In other words, the start and end of the surge in monkey prices will directly affect the company's net profit. From a news perspective, it was learned from relevant breeders on December 9th that the price of 3-5-year-old crab-eating monkeys had risen to 140,000 yuan each, and there is now a supply shortage situation. This market price is already more than 50% higher than the company's cost price of 90,000 yuan per crab-eating monkey acquired through acquisition in 2022. Furthermore, according to Founder's estimates, the supply of experimental monkeys in 2025-2027 is approximately 49,000-52,400 per year, while the demand for experimental monkeys is around 51,300-62,600 per year. The bank believes that in the short term, as new drug development warms up, driving the demand for experimental monkeys to increase, and since the short-term improvement on the supply side is difficult, the supply-demand gap may continue to widen. In other words, the continued expansion of the short-term supply-demand gap for experimental monkeys may drive a sustained rise in the price of monkeys, which could become a direct engine driving Joinn Laboratories' performance growth in the second half of 2025 and in 2026.