The main reason behind Huitongda's exclusion from the Hong Kong Stock Connect was its tradable market capitalization not meeting the eligibility requirements. However, the company is proactively driving the full circulation of its H shares, which is expected to quickly boost its tradable market capitalization.

According to its latest announcement, Huitongda plans to convert 350 million domestic shares into H shares. Upon completion, the proportion of H shares in circulation will increase sharply from 32.04% to 94.21%, significantly expanding the company's negotiable market capitalization (which will be almost equal to its total market capitalization), and in turn, allowing the company to meet the Hong Kong Stock Connect inclusion requirement. The market expects that once the full circulation is completed, Huitongda could be re-admitted to the Hong Kong Stock Connect as early as 2026, attracting more passive index funds and active international investors in the process.

In fact, full circulation is not exactly a rare sight. Since the China Securities Regulatory Commission (CSRC) launched the H-share full circulation pilot program in 2018 and fully implemented the reform in 2019, many positive and far-reaching changes have taken place at the policy level, which has provide significant incentives for market players as well as broader access for enterprises at different development stages from different industries, allowing qualified enterprises to participate in the capital market reform at the right time.

Reviewing the companies that have completed or are in the process of implementing full circulation in the year, such as Poly Property, Shiyue Daotian, and Sunshine Insurance etc., their share prices experienced significant increases after full circulation, rising by 17% to 38%. The market's positive response underscores how full circulation can help to unleash corporate value. Likewise, Huitongda is expected to benefit from this reform, leading to a more optimized capital structure, improved liquidity, and enhanced valuation visibility.

The latest institutional research reports, including those from Zheshang Securities, also pointed out that Huitongda submitted an application to the China Securities Regulatory Commission in June for the full circulation of its 350 million domestic shares. Upon completion, the total number of H shares is expected to reach 530 million, which will significantly increase the company's tradable market capitalization, supporting its re-admission to the Hong Kong Stock Connect.

From a longer-term perspective, the benefits of full circulation and a more flexible capital structure can only be fully realized through robust fundamentals and profitability - an area in which Huitongda continues to focus on through strategic transformation.

On the one hand, the company improved its profit quality by actively streamlining its business mix, reducing exposure to low-margin verticals such as agricultural means of production and vehicles and auto parts merchandise. On the other hand, Huitongda has deepened collaborations with top brands while accelerating its self-owned brand development, in order to refine its product mix and improve its value-added capabilities. In the first half of 2025, revenue from self-owned brands exceeded RMB80 million, representing a remarkable 490% increase year-on-year, with a gross profit margin of above 25%.

More importantly, as artificial intelligence continues to redefine business operations across industries, Huitongda has positioned itself at the forefront of AI adoption.

Not only has it established a "full-stack AI comprehensive cooperation" with Alibaba Cloud, with both parties deeply penetrating the lower-tier markets around "AI + industries," but it has also actively integrated leading large language models, launched its AI agent“AI Employee Xiaohui”, and deployed over 24 AI Agents across retail and supply chain management scenarios, greatly improving stores' operational efficiency. For instance, its“Qiancheng AI Super Store Manager” APP can automate up to 60% of daily store operations, boosting retail store efficiency by more than 30%, and shortening inventory turnover by 15% to 20%.

These AI-driven capabilities are gradually becoming a new growth engine for Huitongda. In the first half of 2025, AI-related revenue contributed over 20% of the company's total service revenue.

Overall, while full circulation opens access to a broader capital market, it is Huitongda's solid earnings growth, clear business roadmap, and cutting-edge AI capabilities and deployment that put them in a good position to capture such an emerging opportunity.

The full circulation of H shares has become an important catalyst for the structural reform of the Hong Kong stock market. The strong performance of companies post-full circulation, such as Poly Property, further demonstrates the positive impact of the reform on corporate valuation.

For Huitongda, completing the full circulation will not only address its limitation on tradable market capitalization, accelerate its re-admission to the Hong Kong Stock Connect, and attract more high-quality investors, it will also bring positive synergies with its fundamentals, driving earnings growth, the expansion of its self-owned brands, and the commercialization of its AI technologies. Looking ahead, as the capital structure reform and business fundamentals continue to converge, Huitongda is well positioned for value re-rating, setting a good example for other Hong Kong-listed companies aiming to leverage policy benefits for sustainable, high-quality growth.

16/10/2025 Dissemination of a Financial Press Release, transmitted by EQS News.
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