The performance of the Beineng Group in 2018 was not as good as expected. Is the new mining business aimed at solving the problem of unsold inventory?

On March 22, blockchain concept stock BOE Group (01263.HK) announced its 2018 annual report. The report showed that in 2018, the company achieved revenue of HK$9.122 billion, a year-on-year increase of 6.6%; gross profit of HK$957 million, a year-on-year increase of 4.5%; but the following three data all showed a decline: net profit attributable to owners of the company was HK$271 million, a year-on-year decrease of 18.5%, and no dividends were paid; gross profit margin was 10.5%, a year-on-year decrease of 1.9%; net profit margin was 3%, a year-on-year decrease of 23.1%.

Public information shows that the full name of the PCN Group is Hong Kong PCN Technology Group, which was founded in 1997 and listed on the Hong Kong Stock Exchange in 2012. As an electronic manufacturing service provider, its main business is the design, development and manufacture of graphics cards (graphics cards) for desktop computers, electronic manufacturing services (EMS), and the manufacture and sale of other personal computer-related products and parts. Its main brands include ZOTAC, Inno3D and Manli. In the first half of 2017, against the backdrop of the cryptocurrency mining boom, the "graphics card stock" PCN Group revealed its identity as a Bitcoin concept stock for the first time in its annual performance report.

Due to performance falling short of expectations, as of 12:30 p.m., 10:30 p.m., data from Tonghuashun showed that Beineng Group's share price fell as much as 28.16%, with a quoted price of HK$2.34 and a transaction volume of HK$14.274 million.

Regarding the fact that the growth rate of graphics cards was only 1.5%, the Panasonic Group stated that the reason was that after the sharp drop in the price of virtual currency, there was an oversupply of graphics cards in the market channels; in addition, after NVIDIA announced the launch of a new GPU in the second half of 2018, the sales of the previous generation of graphics cards slowed down, resulting in a sharp slowdown in the sales of graphics cards in the second half of 2018.

The decline in gross profit margin was mainly due to Nvidia's price cuts on previous-generation graphics cards after it announced the launch of new GPUs, as well as increased inventory provisions at the end of the year to reduce inventory.

This scene is very familiar. In February of this year, Nvidia also delivered an unsatisfactory performance report in the fourth quarter of fiscal year 2019.

According to Nvidia's financial report, revenue for the fourth quarter (ending January 27, 2019) was $2.21 billion, down 24% year-on-year from $2.91 billion last year and down 31% from $3.18 billion in the previous quarter. Nvidia attributed this to excess channel inventory after the cryptocurrency boom and the recent deteriorating terminal market conditions.

Even though Nvidia officially terminated its investment in the mining graphics card business in August 2018 due to low profits, for graphics card miners including Nvidia and PCB Design, unsaleable inventory is becoming a headache and difficult problem to solve.

Coincidentally, before the opening of the Hong Kong stock market on January 14, 2019, the Beijing Energy Group issued an announcement stating that its wholly-owned subsidiary Beijing Energy Wealth and its joint venture partners have established a joint venture in China, mainly engaged in server leasing, and have involved projects, investments and operations in cloud computing, container cloud and deep learning.

Odaily Planet Daily once learned that this cloud computing joint venture company was engaged in mining business.

It is worth noting that the joint venture company's registered capital is $35 million, and Beineng Wealth will provide capital in kind, providing GPU computing cards, and injecting $16.8 million. In addition, a person close to the matter revealed that Beineng Group can cooperate with the government to obtain cheap electricity.

Combining the two pieces of news, some people can't help but speculate that the Bayer Group, which is troubled by unsold inventory, seems to be changing its mindset. Compared with Nvidia's full withdrawal, the Bayer Group is trying to switch from a graphics card manufacturer to a graphics card demander and miner, hoping to make use of its self-produced and self-sold Zotac graphics cards, while also using it as a means of investing in digital currency.

But in the current environment where the digital currency market has not yet recovered, is mining a good business? As a new mining company, can the PCN Group find a place to use its excess graphics cards?

All this remains to be seen, but the capital market is more sensitive. After the news of the investment in cloud computing power by the Parkson Group was released, its stock price suddenly rose. The stock price soared from HK$1.70 to HK$2.23 on the same day, and then reached a high of HK$3.65, more than doubling. Ten days later, its deputy executive president and executive director Wang Fangbai sold 1 million shares and cashed in HK$2.52 million.