Shengu Group hits limit-down on 6th trading day, rare under registration system
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This article from data provider DataBao, published on Tencent Stock, analyzes the rare occurrence of a newly listed stock hitting its daily price limit down on the sixth trading day, the first day with standard price limits under China's registration-based IPO system. The focus is on Shengu Group, which fell by the limit on September 24, 2024, after surging over 374% on its debut. The article identifies only eight such cases since the reform, all listed on the main board, primarily in electronics and machinery. It attributes the phenomenon to three factors: excessive early gains (average 12.5% cumulative rise in the first five days vs. -3.48% for stocks that hit limit up), high price-to-earnings ratios (average 97x vs. 82x for limit-up stocks), and weak earnings growth (average net profit decline of 13.21% vs. a 22.37% increase for limit-up stocks). The article then lists 10 low-valuation, high-growth potential new stocks from 2024 IPOs, including Changxin Technology, Linping Development, and Mirui Technology, based on institutional forecasts for 2026 and 2027 net profit growth. It concludes with a disclaimer that the information does not constitute investment advice.
Source report
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On September 24, Shengu Group, a mainboard newly listed stock, hit the daily downside limit after low-level fluctuations on its sixth trading day—a rare event under the registration-based IPO system. The stock has fallen over 65% from its peak, making it the biggest decliner among new stocks listed since August this year in terms of maximum drawdown from the listing-day high.
Only 8 New Stocks Hit Daily Limit on First Day of Price Cap
Under the registration-based IPO system:
- Mainboard, ChiNext, and STAR Market stocks have no price limits for the first five trading days. On the sixth day, the mainboard resumes a 10% daily limit, while ChiNext and the STAR Market resume a 20% limit.
- Beijing Stock Exchange stocks have no limit only on the first day, resuming a 30% limit from the second day onward.
Shengu Group triggered multiple intraday trading halts since its listing on September 17. On the evening of September 18, the company issued a statement noting that its P/E and P/B ratios were significantly higher than the industry average, and warned of high volatility and turnover, with a risk of sharp correction after rapid gains.
Across the A-share market, a daily limit down on the sixth trading day (the first day with price caps) is rare. According to data from Securities Times · DataBao, only eight companies listed under the registration system have experienced this. The most recent is Shengu Group.
Among these eight:
- Seven are mainboard companies, listed in 2023 and 2026.
- This year, besides Shengu Group, mainboard stocks Huike Co. and Tianhai Electronics also hit the daily limit down on their sixth trading day.
- The companies are concentrated in the electronics and machinery equipment sectors.
Three Key Factors Affecting New Stock Performance
Why did these eight stocks hit the daily limit down on their first day of price caps? DataBao analyzed 53 companies listed between 2021 and 2026 (as of September 24) that hit daily limits (up or down) on the sixth trading day—45 up and 8 down. Three main factors emerged:
1. Excessive Early Gains
The average cumulative gain of the eight down-limit stocks over the first five trading days (from the closing price on the first day to the fifth day) was 12.5%. In contrast, the 45 up-limit stocks had an average cumulative change of -3.48%.
- Shengu Group surged nearly 374% on its first day, with a maximum gain of over 600% from its low, and a cumulative gain of over 44% in the first five days.
- Nangwang Digital (listed in 2025) rose nearly 225% on its first day, with a cumulative gain of nearly 11% over the first five days.
2. High P/E Ratios
The average P/E ratio of the eight down-limit stocks on the fifth trading day was over 97x, more than double the industry average. The 45 up-limit stocks averaged about 82x.
- Shengu Group had a P/E ratio exceeding 127x on the fifth trading day, while its industry average was below 44x.
3. Mediocre Earnings Growth
Based on net profit growth in the listing year (or H1 2026 for 2026 listings), the eight down-limit stocks had an average net profit decline of -13.21%, while the 45 up-limit stocks grew by an average of 22.37%. All eight down-limit stocks saw net profit decline during the period.
- Shengu Group reported a slight decline in H1 net profit. Its prospectus indicated full-year 2026 net profit growth of -15.34% to 10.75%, suggesting a possible decline.
- Huike Co. and Tianhai Electronics also saw net profit declines in H1 this year.
- Among up-limit stocks, Hongban Technology saw H1 net profit grow nearly 125%, and Chunguang Group grew over 28%.
10 Undervalued, High-Quality New Stocks to Watch
After excessive price surges, valuations often deviate from industry norms, and a return to rationality is likely. Some high-quality new stocks remain worth attention.
According to DataBao, among new stocks listed this year (before August), 10 stocks meet the following criteria:
- Latest P/E ratio (positive) is lower than the industry average.
- Consensus analyst forecasts show net profit growth of over 15% for both 2026 and 2027.
These stocks are mainly in electronics, pharmaceuticals, and basic chemicals.
Top Picks by Forecast 2026 Net Profit Growth
- Changxin Technology: Forecast 2026 net profit growth of up to 85x. It is China's largest and most advanced DRAM R&D and manufacturing company. Latest P/E below 47x, vs. electronics industry average of over 62x.
- Linping Development: Forecast 2026 net profit growth of over 45%. Latest P/E below 15x, vs. industry average of over 34x. The company produces corrugated and boxboard paper. Huajin Securities notes strong prospects driven by the "paper instead of plastic" trend.
Market Performance
- Changxin Technology has risen less than 15% since listing.
- Longchen Technology and Ruixiang Intelligent have fallen over 45% since listing.
Disclaimer: All content in DataBao is for reference only and does not constitute investment advice. The stock market involves risks; invest with caution.
Editor: Lin Lifeng
Source
数据宝Neutral / independent
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Shengu Group hits daily limit on 6th day after 374% IPO surge; only 8 such cases since 2021