On August 28, COFOE MEDICAL (01187) released its H1 2026 financial report. During the reporting period, the company achieved revenue of RMB 2.072 billion, a year-on-year increase of 38.51%, significantly outpacing the industry average growth rate of 6.5%. Notably, its overseas business revenue reached RMB 210 million, surging 116.97% year-on-year. Meanwhile, the company's gross margin improved for the third consecutive year, reaching 55.89%. Net profit attributable to shareholders stood at RMB 202 million, up 20.84% from the previous year.
On the business front, ventilators, a key product category for COFOE MEDICAL, were the standout performer. The financial report revealed that in Q2 of this year, quarterly sales of its ventilators surpassed RMB 100 million. However, despite this solid performance, the stock's reaction on the secondary market has been less enthusiastic.
Looking at the H-share price action, after peaking at HKD 40 during intraday trading on July 27, COFOE MEDICAL experienced a sustained decline, falling 16.21% between July 27 and August 11. The stock then rebounded ahead of the interim results announcement, closing at HKD 34.02 on August 27. Yet, despite the "revenue and profit growth" in the financial report, the stock failed to sustain further upward momentum. Data from Zhitong Finance APP shows that on the day after the interim results were released, COFOE MEDICAL shares fell 3.35%, and over the subsequent three trading days, they accumulated a further decline of 7.3%, eventually entering a period of sideways consolidation.
Weak Rebound on Low Volume, Lacking Follow-Through Buying
As mentioned earlier, following its decline from July 27 to August 11, COFOE MEDICAL experienced a "volume-backed breakout rebound" before the earnings report. During this period, the stock's closing price rose from HKD 31.64 to HKD 34.02, a cumulative gain of approximately 7.52%. On August 27, the stock surged 5.13% on a single day, with trading volume expanding to approximately HKD 5.95 million, significantly higher than the daily average of around HKD 2.9 million seen during that period.
From a technical perspective, this price movement represented a typical breakout on volume after a low-volume bottoming process, transitioning from a "weak recovery" to "short-term acceleration." After three consecutive up days, COFOE MEDICAL closed at HKD 34.02 on August 27, nearly touching the upper Bollinger Band (BOLL) at HKD 34.07. Fund managers and investors driving the rally were likely banking on the positive re-rating of the stock based on the company's better-than-expected ventilator sales and robust overseas business growth.
However, the rapid price surge also led to "short-term overheating" signals. On August 27, despite the volume spike, the stock failed to break above the upper Bollinger Band, while technical indicators such as RSI6 and KDJ-J flashed overbought signals, suggesting significant near-term pullback pressure. This was a primary factor behind the stock's correction from August 31 to September 3. After closing down 1.07% on September 3, the stock did not plunge all the way to the lower Bollinger Band. Instead, it rebounded on September 4 and September 8, fluctuating around the middle band.
As of September 14's close of HKD 32.00, the stock had moved above its 5-day and 10-day moving averages, although it remained below the 20-day average. However, the price deviation was minimal—just 0.38% from the 20-day average and about 0.4% from the 60-day average. This small deviation could suggest that the market is not in a panic-selling phase but rather in a weak equilibrium structure due to low liquidity.
From a volume perspective, since August 31, the average daily trading volume has been roughly 37,000 shares, only 43.3% of the 85,500 shares averaged between August 1 and August 28. Similarly, the average daily turnover has dropped from approximately HKD 2.77 million to about HKD 1.19 million, with the daily turnover rate falling from 0.32% to 0.14%. The On-Balance Volume (OBV) indicator continues to decline, indicating that while internal liquidity is shrinking, external capital support is weak. In essence, COFOE MEDICAL’s stock is still in a short-term oversold recovery phase. Only a close above the 20-day moving average and the September 8 high of HKD 32.18 might signal an impending trend reversal.
Why Did Good Financials Not Translate Into a Higher Stock Price?
The key highlight of COFOE MEDICAL’s H1 2026 report is its "increase in revenue and profit." The gross margin reached 55.89%, a year-on-year improvement of 3.4 percentage points and an all-time high, thanks to product mix optimization and the ramping up of core products. However, beneath the surface, the company's net margin fell to 9.78% from 11.16% in the same period last year, and further declined to 9.04% in Q2.
The primary reason is a 58.83% year-on-year surge in selling expenses, which reached RMB 763 million. Historical data shows that COFOE MEDICAL's selling expense ratio has climbed from 26% in 2023 to 34.2% in 2025, and further to 36.8% in the first half of this year—an increase of nearly 11 percentage points in three years. This suggests that the company's high revenue growth is partly fueled by marketing and promotions, and whether it can maintain robust growth quality remains to be verified.
In terms of cash flow, the company's net operating cash flow in H1 was RMB 262 million, a year-on-year decrease of 25.33%. The net increase in cash and cash equivalents of RMB 1.056 billion was primarily due to a one-off contribution of HKD 1.007 billion from its Hong Kong IPO proceeds, not from operational improvements. When profit growth does not translate into cash flow, the company's medium-to-long-term valuation upside tends to be constrained.
Furthermore, COFOE MEDICAL's H-shares face structural challenges: only 27 million shares were issued, representing 11.45% of total share capital, with approximately 9.65 million cornerstone shares locked up until November 5 of this year. This results in a low free float, low trading volume, and high volatility. For instance, as of September 11, southbound capital held 5.3695 million H-shares, accounting for 19.88% of the company's issued ordinary shares. However, due to the limited free float, southbound funds have only managed a cumulative net increase of 130,300 shares over the past 20 trading days.
Therefore, while southbound funds have allocated to COFOE MEDICAL’s H-shares, the current situation of "low issuance ratio + cornerstone lock-up period + limited southbound capital support" means that any valuation discounts or lack of capital support are amplified by the market, leading to short-term price volatility.
In summary, COFOE MEDICAL’s H1 report is not entirely a "fundamental negative" for its H-shares. Instead, the issue lies in "good growth but insufficient conditions for valuation realization." Following the earnings release, the Hong Kong market did not offer a premium for its H-shares based on the high revenue growth. Instead, amid low liquidity, the market has been pricing in factors that constrain medium-to-long-term valuation, such as sales-expense-driven growth and weak cash flow relative to profit. This is likely the key reason why the H-share price has failed to strengthen further after the results announcement.