Analysis of Hot Stock South China Financial (00619.HK): Divergence Between AI Transformation Concept-Driven Momentum and Weak Fundamentals

: January 7, 2026

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This analysis is based on real-time quote data from Yahoo Finance[1], reports from Zhitong Finance[4], and financial data from the Jinling Analysis System[12], conducting a comprehensive evaluation of South China Financial Holdings Limited (Stock Code: 00619.HK). South China Financial has become a market hotspot due to its announcement of strategic transformation into the AI drug development sector, which, coupled with the 2.72% rise in the healthcare sector on the same day[7], has attracted widespread attention from investors. However, the company’s net loss widened to HK$295 million in fiscal 2024[11], and DCF valuation shows that the current stock price is significantly overvalued by more than 500%[12]. There is a notable divergence between weak fundamentals and concept speculation, and investors need to carefully assess the risk-reward ratio.

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The

behind South China Financial’s popularity is the strategic transformation announced on November 14, 2025 – the company signed a memorandum of understanding (MOU) with a company registered in the Chinese mainland to establish a joint venture for developing an AI drug research and development platform, covering high-growth sectors such as AI drug development, beauty technology, and anti-aging consumer markets[4][5]. This transformation aligns with the continued enthusiasm for AI concepts in the Hong Kong stock market in early 2026.

further strengthens market confidence. Ng Hung Sang, the company’s major shareholder and chairman, agreed to extend the maturity date of previously purchased bonds by three years[6], which the market interprets as a sign of the major shareholder’s confidence in the company’s long-term development, while also providing financial buffer space for the company’s strategic transformation.

: In the global market sector performance on January 7, 2026, the healthcare sector rose 2.72%, leading all sectors[7], forming a dual hotspot overlay with the AI drug development concept. In addition, the background of the AI boom in Hong Kong stocks also provides support: Shanghai Biren Technology rose nearly 76% on its IPO debut, marking the best first-day performance for the largest IPO on the Hong Kong Stock Exchange since 2021[8]; AI drug development company Insilico Medicine listed on the Hong Kong Stock Exchange in December 2025 (Stock Code: 3696), with investments from well-known institutions such as Tencent and Eli Lilly[9].

Time Horizon	South China Financial	Hang Seng Index	Relative Performance
Year-to-Date (YTD)	+2.53%	+2.98%	Underperforms
1-Year Return	+79.91%	+35.72%	Significantly Outperforms by +44.19%
3-Year Return	+4.05%	+25.74%	Underperforms
5-Year Return	+65.24%	+4.19%	Significantly Outperforms by +61.05%

Data Source: Yahoo Finance[2]

The current stock price (HK$0.385) is in the lower-middle range of the 52-week price band (HK$0.147-HK$0.475)[1][3], with approximately 23% downside from the 52-week high and approximately 162% upside from the 52-week low. Technical analysis shows an overall rating of “Strong Sell”[3].

The company’s fundamentals show a

:

Indicator	2024	2023	Change
Operating Revenue	HK$36.8 million	HK$42.84 million	-14.1%
Net Loss	HK$295 million	HK$139 million	Loss Widened by 112%
Loss Per Share	97.9 cents	-	-
Free Cash Flow	-HK$49.686 million	-	Continuously Negative

Data Source: AASTOCKS[11] and Jinling Analysis System[12]

Financial health assessment shows: mixed signals of aggressive and conservative financial stance, continuously negative free cash flow, medium debt risk rating, and EBITDA margin in a severe loss range of -205% to -227%[12].

DCF three-scenario valuation model reveals significant overvaluation risk[12]:

Scenario	Fair Value	Comparison with Current Price
Conservative Scenario	-HK$4.51	-1271.4%
Base Scenario	-HK$1.79	-564.9%
Optimistic Scenario	-HK$3.92	-1118.2%
Probability-Weighted Value	-HK$3.41	-984.8%

: Beta coefficient is -0.24, WACC is 5.6%, 5-year compound annual growth rate (CAGR) of revenue is -25.4%, and 5-year average net profit margin is -548.2%[12]. All valuation scenarios show negative company value, reflecting the company’s continuous loss status and worrying financial prospects.

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South China Financial’s stock price rally is mainly driven by the AI drug development concept, rather than fundamental improvement. The 2024 financial data showing a 14.1% decline in revenue and doubled net loss to HK$295 million[11] stands in stark contrast to the current market price of HK$0.385. DCF valuation shows the stock price is overvalued by more than 500%[12], indicating that market pricing reflects more expectations for future AI business rather than current actual operating conditions.

The AI drug development joint venture has only signed an MOU to date, with no substantive revenue generated[4][5]. It usually takes a long time from signing an intent document to achieving commercial operations, and there are multiple uncertainties such as regulatory approval, technology development, and market competition. The company lacks deep accumulation in the pharmaceutical industry, resulting in significant uncertainty about the success probability of the transformation.

Although the 1-year and 5-year returns outperformed the Hang Seng Index by 44.19% and 61.05% respectively[2], the 3-year return (+4.05%) underperformed the Hang Seng Index (+25.74%) by approximately 21 percentage points[2]. Long-term data indicates that the company’s stock price performance lacks sustainability, and past high returns may be related to market hype at specific times rather than fundamental improvements of the company.

The enthusiasm for AI concepts in the Hong Kong stock market has formed a certain bubble risk. IPOs of AI companies such as Biren Technology and Insilico Medicine have received high market attention[8][9][10], but the valuations of some companies have deviated from fundamental support. As a small financial enterprise venturing into AI drug development, South China Financial’s technical capabilities and commercialization path have not yet been verified, and investors need to be alert to the risk of valuation correction after the concept cools down.

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Risk Type	Risk Description	Risk Level
Continuous Loss Risk	Loss widened to HK$295 million in 2024, doubling from the previous year	High
Overvaluation Risk	DCF valuation shows the stock price is significantly overvalued by more than 500%	High
Revenue Decline Risk	Revenue has declined continuously, with a 5-year CAGR of -25.4%	High
Cash Flow Risk	Continuously negative free cash flow, high financial pressure	Medium-High
Business Transformation Risk	AI drug development business has not generated substantive revenue	Medium
Concept Speculation Risk	Stock price may be driven by AI concept rather than fundamentals	Medium

1. Net Profit Margin of -548%
   : The 5-year average net profit margin indicates the company has been in a state of severe long-term loss[12]
2. Negative Values in All DCF Scenarios
   : All valuation scenarios show negative company value[12]
3. Revenue Contraction
   : Continuous decline with no signs of reversal[11]
4. No Dividends
   : No dividend distribution indicates tight cash flow[11]

1. Better-Than-Expected Progress in AI Business
   : If the joint venture achieves breakthrough technological results or secures cooperation with large pharmaceutical companies, it may reshape market expectations
2. Continuous Sector Strength
   : If the healthcare sector continues to lead gains, it may provide short-term support for the stock price[7]
3. Continuous Support from Major Shareholder
   : If there is additional investment or asset injection in the future, it may improve financial conditions[6]

Price Type	Price	Implication
Current Price	HK$0.385	Today’s opening price
Immediate Resistance Level	HK$0.40	Psychological resistance level
Key Resistance Level	HK$0.475	52-week high
Immediate Support Level	HK$0.35	Round-number support level
Key Support Level	HK$0.30	Technical support zone
Strong Support Level	HK$0.147	52-week low

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South China Financial (00619.HK), as a hot target of the AI drug development concept in the Hong Kong stock market, currently features

. The company’s financial situation of widened loss, declining revenue, and negative free cash flow in fiscal 2024 shows a notable divergence from future expectations of AI transformation. The DCF valuation model shows negative fair values in all scenarios[12], indicating that the current stock price lacks fundamental support.

:

• Substantive progress of the AI joint venture (including cooperation agreements, technology development progress, revenue contribution, etc.)
• Subsequent financial report performance (focus on whether revenue stabilizes and losses narrow)
• Financing developments and business cooperation announcements
• Overall trend of the healthcare and AI concept sectors

: This stock is currently a high-risk speculative target, suitable for investors with high risk tolerance. Positions should be strictly controlled below 5% of the total portfolio, and a 10-15% stop-loss level should be set. It is not suitable for investors seeking value investment, stable returns, or risk-averse investors.

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[1] Yahoo Finance - South China Financial Real-Time Quotes

[2] Yahoo Finance - South China Financial Statistical Data

[3] Investing.com - South China Financial Technical Analysis

[4] Zhitong Finance - South China Financial Plans to Establish Joint Venture to Enter AI Drug Development Sector

[5] Moomoo - South China Financial MOU for AI Pharma

[6] Moomoo - South China Financial Shareholder Agrees to Extend Bond Maturity

[7] Sector Performance Analysis - Jinling Database

[8] Bloomberg - China AI Exuberance Fuels Hong Kong Debut

[9] Genetic Engineering News - Seven Biopharma Trends 2026

[10] Proactive Investors - IPO Market 2026 AI firms

[11] Yahoo Finance - South China Financial Reports Full-Year Loss of HK$295 Million

[12] Financial Analysis Database - Jinling Analysis System