In a recent interview, Yng Yong, the chairman of GuoDun Quantum, expressed his ambitions for the future of quantum technology, suggesting that in five to ten years, it will become an integral part of our daily livesHowever, the general public often finds the concept of quantum technology enigmatic and intimidatingThe term "quantum" originates from Latin, which translates to "how much of a substance," and quantum mechanics is a theoretical framework that describes the behavior of matter on a subatomic scaleSince its inception, quantum mechanics has illuminated the scientific realm, leading to numerous applications that are beginning to take form.
GuoDun Quantum holds a prominent position within the realm of quantum technologyThe company made headlines in July 2020 when it successfully entered the STAR Market, earning the title of "the first stock of quantum communication." While it basks in the glow of high-tech innovation, its financial performance tells a different storyThe company has reported consecutive losses in both net income and net profit excluding non-recurring expenses, depicting a troubling financial landscapeFurthermore, against a backdrop of negative operating cash flow, GuoDun Quantum announced a significant financing plan involving a private placement of 1.9 billion yuan.
What is contributing to GuoDun Quantum's mounting losses? What is the objective of their private placement?
As of July 23, the closing price of GuoDun Quantum stood at 150.69 yuan, with a total market capitalization of 12.11 billion yuanThe company is engaged primarily in the research and development, production, and sale of products related to quantum communication, quantum computing, and quantum precision measurement, along with offering relevant technical services.
From the performance perspective, GuoDun Quantum's revenue has consistently remained below 180 million yuan from the years 2020 to 2023. Correspondingly, the net profits attributable to shareholders have revealed troubling numbers: 29.49 million yuan in 2020, a loss of 37.14 million yuan in 2021, 86.18 million yuan in 2022, and a staggering loss of 123.9 million yuan in 2023. Moreover, net profit excluding non-recurring items exhibited a similar downward trend over four consecutive years.
One of the underlying factors for GuoDun Quantum's incessant losses appears to be related to its extensive investments in research and development
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For instance, from 2021 to 2023, the company expended approximately 91 million yuan, 136 million yuan, and 129 million yuan on R&D, accounting for roughly 50.81%, 100.76%, and 82.51% of its revenue, respectivelyIn a recent interview, Chairman Yng expressed his commitment to innovation, stating a refusal to compromise on R&D expenditures merely to polish financial statements.
During the first quarter of 2024, the company recorded revenue of 9.48 million yuan, a significant decline of 68.95% year-on-yearThe net loss attributable to shareholders was reported at 41.47 million yuan, marking a 155.61% increase in losses compared to the previous yearThe primary drivers of these losses were reduced revenue, diminishing government subsidies, and an uptick in impairment losses.
It is essential to note that both quantum computing and quantum precision measurement are still in their nascent stages of developmentGuoDun Quantum’s products remain in the process of refinement and market entryCurrently, the commercialization of quantum technologies is far from being widespreadFor example, the practicality of quantum communication may hinge on market demand, while the exorbitant costs of quantum computers pose a significant barrier to potential buyersIn its 2023 annual report, GuoDun Quantum openly acknowledged the risks associated with expanding into new markets.
Moreover, a special investigation conducted in July revealed insights from GuoDun Quantum regarding future challenges in quantum computingThey acknowledged that soft and hardware development bottlenecks need addressing, and they hinted at the potential for exploring alternative avenues beyond superconducting technologies.
As the company grapples with financial challenges, it has proposed a substantial private placement plan of 1.9 billion yuan intended to bolster liquidityThis leads to the question: is GuoDun Quantum facing substantial financial pressure?
As of the first quarter of 2024, GuoDun Quantum's debt-to-asset ratio stood at 14.35%, a slight improvement from 14.83% in the first quarter of 2023. The company’s short-term solvency indicators have shown upward trends, with the current ratio reaching 8.228 and the quick ratio at 7.152, both demonstrating improved standings year-on-year.
Given these indicators of improving solvency, one may ask why the company is pursuing a private placement
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