JOINN Laboratories (China) Co.,Ltd. (ASX: 06127) shares have tumbled more than 11%, continuing their recent sharp decline. At the time of writing, the stock was down 9.76% to HKD 23.3, with a trading volume of HKD 185 million.

The sell-off follows a company announcement highlighting significant trading risks. The notice stated that the stock's closing price had deviated by more than 20% over three consecutive trading days, indicating a substantial short-term surge. The company warned of overheated market sentiment, irrational speculation, and extreme trading risks, cautioning that a price decline could occur at any time.

Furthermore, the company pointed out that the fair value of its biological assets is subject to various uncertainties, posing a significant risk of value volatility.

This warning comes despite JOINN Laboratories recently issuing a positive profit alert. It forecast first-half revenue between approximately RMB 669 million and RMB 739 million, representing a year-on-year increase of 0% to 10.5%. Net profit attributable to shareholders was projected to be in the range of RMB 600 million to RMB 900 million, a staggering increase of 884.9% to 1377.4% compared to the same period last year.

Key Factor Behind the Profit Surge

However, the explosive profit growth is not attributed to a major improvement in the core business of safety assessment. Instead, the primary driver is the appreciation in the value of the company's laboratory monkey assets. The fair value change of these biological assets is estimated to have contributed between RMB 703 million and RMB 777 million to the net profit for the period.