On August 24th, YIDU TECH (02158) closed sharply lower, dropping 10.2% to HK$3.875, with a daily turnover of 22.42 million shares and a transaction value of HK$87.89 million. Market sentiment was notably subdued under the shadow of its impending removal from the Stock Connect scheme.

Yet, the trading data behind the scenes revealed a starkly different signal — southbound capital recorded a net purchase of 3.0067 million shares that day, representing 13.41% of the day's total volume. The single-day net buying amount reached HK$11.79 million, the highest level since June 25, 2026, and marked a second consecutive day of net inflows, bringing the cumulative net purchases to HK$16.94 million. This contrarian move speaks volumes: while retail investors were selling off in a panic over the Stock Connect exit, the southbound capital, which best understands the mechanics of this channel, was seizing the opportunity to buy at a discount.

Indeed, concerns had already been raised prior to the news of YIDU TECH's removal from the Stock Connect. As a primary conduit for southbound funds, a stock's removal typically dampens expectations of liquidity, as more mainland retail investors lose direct access to it. However, the actions of southbound capital have provided a counter-intuitive answer. According to the data, over the past five trading days, southbound capital has accumulated net purchases of 4.6155 million shares, totaling HK$18.83 million. In contrast, the cumulative net selling over the past 30 trading days was merely HK$7.18 million. This implies that in less than a week, southbound funds not only offset the previous month's net selling but also swung heavily into net buying territory.

As of August 24th, southbound capital held a total of 244 million shares, a 1.25% increase from the previous trading day. The market value of these holdings reached HK$945 million, representing a substantial 22.71% stake. In other words, nearly one out of every four shares in circulation of YIDU TECH is now held by southbound investors. The core logic behind their bold accumulation is that being removed from the Stock Connect impacts liquidity expectations, not the company's fundamentals.

YIDU TECH's fiscal year 2026 has clearly demonstrated a historical inflection point in its fundamentals — achieving its first full-year profit of HK$78.77 million, with net profit attributable to shareholders reaching HK$72.71 million, exceeding the upper limit of its profit alert by approximately 30%. Furthermore, its operating cash flow turned positive to HK$29.3 million in the second half of the year, signaling a definitive shift from "burning cash for growth" to "self-sustaining profitability."

More importantly, all three of YIDU TECH's core business segments are growing in tandem. Revenue from AI for Medical exceeded HK$380 million, with gross margins surging from 29.7% to 39.7%. AI for Life Sciences generated over HK$270 million in revenue, counting 17 of the global Top 20 multinational pharmaceutical companies as its clients. Meanwhile, AI for Care brought in approximately HK$170 million, up a substantial 37.6% year-over-year. When a company possesses all the key elements — first-time profitability, positive cash flow, high growth across three segments, and widening data moats — its inclusion in the Stock Connect scheme does not fundamentally alter its long-term valuation.

From a trading perspective, the decline on August 24th showed clear signs of panic selling. The stock price plummeted 10.2%, but trading volume expanded to 22.42 million shares with a turnover close to HK$88 million. A high-volume sell-off often indicates an outpouring of panic-driven sellers, and it was precisely at this moment that southbound capital stepped in to absorb these shares. At an average price of HK$3.92, southbound funds acquired a significant number of bargain-priced shares.

From a valuation standpoint, based on the FY2026 profit of HK$78.77 million and a market capitalization of approximately HK$4.5 billion, the static P/E ratio is just over 50 times. However, if the second-half profit is annualized (approximately HK$141.5 million), the forward P/E ratio falls to just around 20 times. For a company with 14.6% revenue growth, improving gross margins, and a presence in the high-growth AI healthcare sector, this valuation level appears to be significantly undervalued.

Looking back, southbound capital has often demonstrated foresight in its operations around the time of a stock's removal from the Stock Connect. While the market was still digesting the negative sentiment of the "exit," they were already casting their votes with real money. The cumulative net purchase of HK$18.83 million over the past five trading days, compared to the mere HK$7.18 million net selling over the past 30 days, highlights a rapid shift in sentiment. This trend indicates that southbound funds have formed a clear consensus recently: the short-term negative of the Stock Connect exit has been overreacted by the market, and YIDU TECH's fundamental turnaround is the more significant long-term variable to watch. When panic spreads and the stock price tumbles, the "smart money," which best understands the logic of mainland investors, is quietly building positions — this in itself is a contrarian signal worth heeding. After all, in the capital markets, the most expensive thing is often not a high valuation, but missing out on the opportunity presented by a low one.