117: Chapter 117 Financial Nuclear Bomb

Dawn of November 15th

4:00 AM, top floor of the Spark Technology building in Shenzhen.

Su Chen stood in front of the floor-to-ceiling window in his office, holding a cup of coffee that had already gone cold. Outside, the city was still asleep, with only sparse car lights drawing flowing ribbons of light on the streets. The eastern horizon was tinged with a faint whitish glow; a new day was about to begin.

Today, Spark Technology would release its financial report for the first three quarters of 2017.

Lin Wan pushed the door open, holding a freshly printed final draft of the report. Her eyes were bloodshot; she had clearly stayed up all night as well.

"Mr. Su, the final data has been verified," Lin Wan said, her voice slightly hoarse. "I need your final confirmation."

Su Chen took the report and turned to the first page. Even though he had led this company for four years, he still felt a wave of dizziness upon seeing those numbers.

Spark Technology 2017 Jan-Sept Financial Report Summary:

Cumulative global sales: 200.267 billion yuan

Same period last year: 49.833 billion yuan, a year-on-year increase of 302%

Net profit: 80.307 billion yuan, net profit margin 40%

Net cash flow from operating activities: 100 billion yuan

R&D investment: 30 billion yuan, accounting for 15% of revenue

Earnings per share: 73 yuan (calculated based on a total share capital of 1.1 billion shares)

Su Chen's gaze lingered on "Net profit 80.3 billion" for a long time. He remembered that three years ago, when he took over Spark Technology, the first year's revenue was 6.2 billion, with a net profit of 2.7 billion.

Three years, from 6.2 billion to 200 billion, from losses to a profit of 80.3 billion.

"Are these numbers... real?" Su Chen asked softly, as if asking Lin Wan, or perhaps asking himself.

"The finance department checked three times, and the auditing firm PwC checked twice," Lin Wan said. "The data is absolutely accurate. In fact, if we maintain growth in the fourth quarter, annual revenue could exceed 300 billion, and net profit could exceed 100 billion."

Su Chen put down the report and walked to the window. The sky over Shenzhen was brightening; the morning light pierced through the clouds, gilding the city.

"What are market expectations?" he asked.

"Brokerages predicted an average revenue of 150 billion and a net profit of 40 billion," Lin Wan said, pulling up the analysis report. "We exceeded expectations by double. Especially the net profit margin—40%, an incredible figure in manufacturing. Apple's net profit margin is 22%, and TSMC's is 33%."

"Why is it so high?"

"Three reasons," Lin Wan listed them off. "First, the gross profit margins for the consumer electronics and power system segments are higher than the industry average, and sales far exceeded expectations. Second, the profit margins for military materials are extremely high; the gross profit margins for 'Shadow' and 'Heavenly Bow' exceed 80%. Third, although the chip has just started mass production, our proprietary architecture and process have saved us huge patent licensing and foundry fees."

Su Chen nodded: "Release it."

At exactly 9:00 AM, Spark Technology's official website and the Shanghai Stock Exchange announcement system simultaneously released the financial report.

At 9:01 AM, financial media headlines began flooding the screens:

[Spark Technology's net profit for the first three quarters is 80.3 billion, a year-on-year increase of 706%!]

[Revenue breaks 200 billion, Spark becomes China's most profitable technology company]

[Gross profit margin 60%, net profit margin 40%, Spark's profitability shocks the market]

At 9:15 AM, the A-share call auction began.

Spark Technology's buy and sell order data refreshed crazily:

Buy 1: 3,450 yuan, 72,463 lots (25 billion yuan)

Buy 2: 3,449 yuan, 80,000 lots

...

Sell 1: 3,254 yuan (yesterday's closing price), 1,536 lots (500 million yuan)

Buy-sell power ratio 50:1.

At 9:25 AM, the call auction ended. Opening price: 3,450 yuan, an increase of 6% from yesterday's closing price.

This was already a result of restraint—if not for the limit-up rule, the opening price might have shot directly above 3,500 yuan.

At 9:30 AM, continuous bidding began.

At the 3,450 yuan price point, buy orders quickly increased to 50 billion yuan. Sell orders remained scarce—faced with such a stellar financial report, shareholders were even less willing to sell.

Ten minutes after opening, the trading volume was only 300 million yuan, with a turnover rate of 0.06%.

"It's started again," the trading director at CICC Securities said with a bitter smile as he looked at the screen. "Liquidity depletion 2.0."

In the stock forum, retail investors were in a frenzy:

"80.3 billion in net profit! My god, earning one China Merchants Bank in a year!"

"Stock price is only 3,450? Worth at least 5,000!"

"Sell? Only a fool would sell! I'm passing this to my grandson!"

"Status of Spark shareholders: Wake up every day, account has an extra apartment."

Institutional investors were also urgently adjusting their models.

At the CICC Research Institute, Chief Strategy Analyst Wang Jin was holding an emergency conference call:

"Our previous valuation model was completely wrong," Wang Jin's voice reached hundreds of institutional clients across the country via the phone line. "We assumed Spark was a high-growth tech company and gave it a P/E ratio of 50. But 80.3 billion in net profit, 40% net profit margin—this is already the profitability of a top-tier consumer company."

"Revised valuation: Based on an expected net profit of 150 billion in 2018, with a P/E ratio of 30 (considering high growth), the reasonable market value is 4.5 trillion. Current market value is 3.6 trillion, still 25% upside."

"Recommendation: Increase holdings. But the problem is still the same—you can't buy it."

At the Goldman Sachs Hong Kong office, James Chen, Head of Asia Tech Research, was writing an emergency report:

"Spark's financial report has changed the rules of the game. Previously, the market thought Spark was a 'concept stock,' relying on policy and sentiment to support its valuation. Now, 80.3 billion in net profit proves it is a true profit machine."

"More importantly, the profitability—a 40% net profit margin, is even higher than Tencent (30%) and Alibaba (25%). This shows that Spark's technological barriers have been converted into commercial barriers."

"Raise target price to 4,000 yuan, maintain 'Buy' rating. Risks: Insufficient liquidity, high valuation, geopolitical risks."

At the end of the report, James added a personal comment:

"I have studied Chinese tech stocks for fifteen years, and I have never seen such an astonishing growth curve. Spark is redefining 'Made in China'—from low-end foundry to high-end innovation, from thin margins to high-profit monopolies. If this model can be replicated, the transformation and upgrading of China's economy will be greatly accelerated."

But amidst the frenzy, there were also calm voices.

At 2:00 PM, at the CSRC's Department of Listed Company Supervision, Director Li looked at Spark's trading data, his brow furrowed.

"Turnover rate 0.08%, trading volume 1.5 billion, market value 3.6 trillion," he said to the deputy director, pointing at the screen. "What does this mean? It means this stock has lost its pricing function. Those who want to buy can't buy, those who want to sell don't want to sell, and the stock price has become a numbers game."

"But the financial report is indeed good," the deputy director said. "80.3 billion in net profit is a top-tier company in any market."

"Good doesn't mean it can rise indefinitely," Director Li shook his head. "Do you know what Spark's P/E ratio is now? Calculated based on the annualized net profit of 107 billion for the first three quarters, the P/E ratio is 33. It doesn't look high, but this is based on explosive earnings growth. Once growth slows down..."

He didn't finish, but the meaning was clear.

"And the liquidity problem must be solved." Director Li pulled up the data. "Spark has a total share capital of 1.1 billion shares, with only 142 million tradable shares, and the actual tradable amount might only be 50 million. Such a small float supporting a 3.6 trillion market value is like a toothpick holding up a building."

"What do you mean?"

"Summon Su Chen," Director Li made a decision. "Not as a regulator, but as a market builder. We need to talk to him about how to let this giant ship, Spark, sail smoothly into the deep waters of the capital market."