In recent times, Haiguang Information Technology Co., Ltd(stock code: 688041.SH), often referred to as the "first high-end CPU stock," has found itself at the intersection of impressive financial performance and notable shareholder selling activity since its debut on the Shanghai Stock Exchange's STAR MarketAs of the third quarter of 2024, the company reported an astonishing net profit increase of nearly 200% year-on-yearHowever, despite this promising growth, it has been unable to retain the interest of some major shareholders, particularly the well-known investor Ge Weidong, whose firm, Chaos Investment, has been shedding its holdings in the company.

Haiguang's third-quarter report for 2024 revealed that the company achieved a significant revenue of 2.374 billion yuan (approximately $346 million), reflecting a 78.33% increase compared to the previous yearThe net profit attributable to shareholders reached 672 million yuan, signifying a remarkable growth rate of 199.9%. The surge in performance has been attributed to a consistent rise in market demand, propelling the company's revenue upward rapidly.

Looking at the early quarters of the year, Haiguang's performance has been robust, with total revenue for the first three quarters hitting 6.137 billion yuan (around $900 million), marking a year-on-year rise of 55.64%. During the same period, the company's net profit saw a 69.22% jump, reaching 1.526 billion yuan

These figures not only indicate strong financial health but also affirm the company's strategic position within its industry.

Founded in 2014 as a joint venture with AMD, a leading American semiconductor company, Haiguang Information is predominant in the development, design, and sales of high-end processors used primarily in server and workstation applicationsIts product lines include Haiguang's general-purpose central processing units (CPUs) and its co-processors (DCUs).

Notably, the Haiguang CPU series models are built on compatibility with the x86 instruction set, ensuring their usability across several popular operating systems and software applicationsThis versatility has made them vital in critical sectors such as telecommunications, finance, internet services, education, and transportationAdditionally, the Haiguang DCU range leverages General Purpose Graphics Processing Unit (GPGPU) architecture, compatible with widely-used 'CUDA-like' environments, thus finding applications in big data processing, artificial intelligence, and commercial computing.

Despite its less-than-stellar performance in the years following its founding, Haiguang experienced a remarkable turnaround by 2021, marking its first profitable year

In 2022, it made headlines by listing on the STAR Market, trading at an initial offering price of 36 yuan per shareThis trajectory has resulted in revenue increases from 2.31 billion yuan in 2021 to over 6 billion yuan in 2023, alongside net profit rising from 327 million yuan to 1.263 billion yuan in the same time frame.

Another interesting aspect of Haiguang's financial dynamics is its impressive gross profit marginsIn the third quarter of 2024, the company's gross margin stood at 69.13%, with an average gross margin of 65.63% for the first three quarters, representing a robust growth compared to 59.67% in all of 2023.

Moreover, it's noteworthy that while Haiguang's financial metrics have soared, the ratio of its research and development (R&D) spending has not seen a corresponding increaseThe R&D expenditure for the first three quarters of 2024 was 2.167 billion yuan, a 10.56% increase from the previous year, but only constituted 35.31% of revenue—down by 14.4% compared to the same time last year

The company's management attributes this reduction to the significant revenue growth exceeding last year’s metrics, creating a skew in the proportional spending.

Despite the company's promising financial results, the stock market behavior has been quite contradictoryProminent investment firms like Kaiyuan Securities and Huafu Securities issued "buy" ratings following the release of the positive third-quarter reportYet, on the other hand, shareholders have engaged in significant sell-offs.

One of the key figures in this selling spree is Ge Weidong, whose firm, Chaos Investment, has systematically reduced its stake in HaiguangRecords show that Chaos Investment acquired a stake worth approximately 499 million yuan for over 44.5 million shares back in June 2020. By the time of Haiguang's IPO, the investment firm had rising profits, peaking with a market cap worth over 2.79 billion yuan following the stock's issuance at 36 yuan and momentarily reaching highs of 73.8 yuan per share.

However, after hitting a peak price of 102 yuan in April 2023, the stock has been on a decline, ultimately dropping to around 54 yuan by August 14, the one-year anniversary of Haiguang's public listing and the lifting of restrictions on share selling.

In the following months of 2023, Chaos Investment made several reductions, selling 2.78 million shares in the third quarter and about 639,000 shares in the fourth quarter, reaping around 15.4 million and 43.6 million yuan respectively

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By the end of 2023, Chaos was left with 35.4 million shares, reducing its holding percentage dramatically.

As the turn of the year approached in 2024, Chaos Investment further exited the top ten shareholders’ list of HaiguangIn the first quarter of 2024, it offloaded 12.08 million shares for nine billion yuan, and again in the third quarter, it sold another 4.13 million shares, collectively cashed out around 12.8 billion yuan.

Since the restrictions were lifted in August 2023, Ge Weidong's Chaos Investment has divested approximately 25.4 million shares, grossing an estimated 18 billion yuan in cashCurrent records indicate that by the end of the third quarter of 2024, Chaos holds only about 19.19 million shares, approximately 2.17% of the total circulating stock of Haiguang, with a remaining market value of around 1.98 billion yuan.

Beyond Ge Weidong, Haiguang’s roster of notable shareholders includes influential entities such as Zhongke Shuguang, Guoke Holdings, Changhong Electric, and others