Following its entanglement in purchase contract disputes with Beijing Yakang and Beijing Yunxi, which led to the judicial freezing of funds in two bank accounts, XUNZHONG (02597) is poised to confront a fresh challenge for its stock price. It is learned that the 9.5565 million restricted shares held by the company's cornerstone investor will be released from lockup on January 9, representing 31.39% of the total shares offered in the global offering. Should the cornerstone investor opt to realize floating profits post-lockup, it could exert significant pressure on XUNZHONG's share price.

The stock has experienced a wild rollercoaster ride, and its currently anemic trading volume may struggle to support a smooth exit for the cornerstone investor. As Beijing's first company to list under the "Three+H" (New Third Board + H-share) model, XUNZHONG successfully debuted on the Hong Kong Stock Exchange on July 9, 2025. Missing the new HK IPO rules effective August 4 by nearly a month, it failed to capture the associated benefits, resulting in a lackluster performance during its offering phase. Data shows that XUNZHONG offered a total of 30.44 million shares in its global offering, accounting for 25% of the issued share capital post-listing. The Hong Kong public offering comprised 3.044 million shares, or 10% of the global offering, while the remaining 27.364 million shares, or 90%, were allocated to the international placement.

The share allocation results indicate that the Hong Kong public offering was oversubscribed by 12.79 times, not triggering the clawback mechanism, while the international offering was only 1.01 times subscribed, presenting an overall subdued picture. However, XUNZHONG secured a significant cornerstone investor in its international offering—Tongzhou International Development Co., Ltd. Tongzhou International is a wholly-owned subsidiary of Beijing Tongzhou Development Group Co., Ltd., which is primarily engaged in industrial park construction, industrial operations, financial services, and corporate services, and is ultimately beneficially owned by the State-owned Assets Supervision and Administration Commission of the People's Government of Tongzhou District, Beijing. This signifies that the cornerstone investor introduced by XUNZHONG is affiliated with the Beijing SASAC.

It is noteworthy that Oriental Huagai, holding a 2.44% interest in XUNZHONG, and Huagai Venture Capital, holding a 0.36% interest, are both ultimately controlled by the Beijing SASAC with over 30% beneficial ownership, making the cornerstone investor, Tongzhou International, a close associate of XUNZHONG's existing shareholders. This clearly demonstrates the strong support from the Beijing SASAC for XUNZHONG's development. As the cornerstone investor, Tongzhou International subscribed for 9.5565 million shares of XUNZHONG, constituting 31.39% of the total shares in the global offering. This implies that over one-third of the shares in the international offering were subscribed by Tongzhou International, resulting in an actual free float of 17.15% for XUNZHONG post-listing.

Evidently, XUNZHONG did not adopt a "barebones issuance" model to control the actual free float for price stability; instead, it pursued a conventional offering method. While this approach carries a higher risk of breaking the issue price, it maximizes financing to fuel corporate growth and enhances the stock's liquidity. In terms of share price performance, XUNZHONG fell below its issue price intraday on its debut, closing slightly higher, but then traded sideways around the HKD 13.55 issue price for nearly two months. Only after sufficient share turnover and consolidation did the price break out on September 5 with heavy volume, surging up to 64% over ten trading sessions to a peak of HKD 22.1 per share, representing a gain of over 63% from the issue price.

However, after hitting the high of HKD 22.1 on September 18, XUNZHONG's share price embarked on a sustained decline. The intraday lows on November 14, December 11, and December 30 all fell below the issue price. As of December 31, 2025, XUNZHONG was quoted at HKD 15.16 per share, a mere 11.88% increase from its issue price. Thus, over its six months listed in Hong Kong, XUNZHONG's stock has experienced a "crazy rollercoaster" ride. Whether the cornerstone investor sells after the lockup expiry will be the most critical factor influencing XUNZHONG's future share price trajectory, as the current liquidity appears insufficient to withstand significant selling pressure.

According to Wind data, XUNZHONG's monthly turnover for October, November, and December was HKD 3.96 million, HKD 5.81 million, and HKD 33.54 million, respectively. The notably high turnover in December was primarily due to a single day, December 11, which saw HKD 30.93 million in turnover as the stock price plummeted 11.18%, clearly indicating substantial capital outflow on that day. Excluding this anomalous day, December's turnover would likely be similar to that of October and November. Currently, the cornerstone investor Tongzhou International holds 9.5565 million shares of XUNZHONG, with a total market value of approximately HKD 145 million. Given XUNZHONG's weak trading volume, if the cornerstone investor chooses to exit immediately after the lockup expires on January 9, it would not only pressure the stock price but also likely result in a loss for the investor.

The most crucial factor determining the cornerstone investor's decision to "stay or go" is XUNZHONG's fundamental business health and future growth prospects. According to Frost & Sullivan data, XUNZHONG is one of China's earliest providers of cloud communication services and among the few domestic players capable of offering AI-driven communication services. Based on 2024 revenue, XUNZHONG ranked as the third-largest cloud communication service provider in China, holding a 1.8% market share. In terms of financial performance, XUNZHONG had already shown signs of "fatigue" with revenue growth without corresponding profit increases from 2022 to 2024. Its prospectus shows revenues of approximately RMB 810 million, RMB 916 million, and RMB 918 million for 2022, 2023, and 2024, respectively, indicating steady growth primarily driven by increasing CPaaS business revenue.

Conversely, on the profit side, net profit attributable to owners for 2022-2024 was RMB 75.972 million, RMB 77.621 million, and RMB 53.545 million, respectively, with a significant drop in 2024. Notably, XUNZHONG vigorously implemented cost-cutting and efficiency measures in 2024, leading to reductions in sales, administrative, and R&D expenses compared to 2023. However, a sharp increase in impairment losses, other expenses and losses, and finance costs eroded the company's net profit. Entering the first half of 2025, XUNZHONG's operations faced further headwinds. Total revenue for the period was RMB 274 million, a decrease of 27.55% year-on-year, mainly due to a strategic reduction in business volume with some low-margin customers and a temporary decrease in demand for the company's messaging products and services following an announcement by the Ministry of Industry and Information Technology requiring SMS content providers to complete a series of compliance rectifications regarding their qualifications.

XUNZHONG stated that it has completed all rectifications required by the MIIT policies and expects its operating revenue to stabilize in the second half of the year, no longer affected by the aforementioned policies. Within the interim report showing a significant revenue decline, two bright spots emerged. First, revenue from high-margin smart communication solutions surged 151.08% to RMB 13.8074 million, driven by the implementation of projects in scenarios like digital cities and smart construction sites, indicating rapid expansion. Second, the net profit attributable to owners for the period was RMB 25.6185 million, a slight increase of 0.61% year-on-year, demonstrating stability on the profit front, primarily because the high-margin, high-growth smart communication solutions service became the core profit driver.

Thus, XUNZHONG has articulated a new narrative to the market: proactively reducing low-margin business amidst the MIIT qualification rectifications to achieve high-quality development of its core cloud communication services and optimize its business structure. Building on this foundation, XUNZHONG is allocating more resources to expand its smart communication solutions service—providing high value-added, customized projects for government and public sectors—aiming to establish this business as a new growth pillar to stabilize profits and improve cash flow. In H1 2025, net cash flow from operating activities was RMB 73.78 million, a dramatic increase of 224.73% year-on-year, turning positive for the first time and reversing the trend of net cash outflow seen for three consecutive years from 2022 to 2024.

Consequently, XUNZHONG's previous growth model, driven solely by traditional cloud communication services, is gradually transitioning to a dual-engine model featuring stable development in cloud communication services coupled with high growth in smart communication solutions. Furthermore, the smart communication solutions service primarily targets government and public sectors, potentially creating strong synergies with XUNZHONG's government-linked shareholders and accelerating the rapid expansion of this business. This synergy is likely a key reason why the Beijing SASAC chose to act as a cornerstone investor in XUNZHONG's global offering, further bolstering its support. However, the ability to continue delivering on this new narrative will be the core anchor for XUNZHONG to reshape its value proposition in the capital markets, warranting ongoing attention from investors.