Financial reporter Zhang Tingwang
In the first quarter of 2024, Xinhua Kam (600735. SH) suffered a "change of face" in performance, with double-digit declines in revenue and net profit. Based on the previous financial reports, the reporter found that Xinhua Jin's performance has already shown a "pressure" signal.
On the evening of April 26, Xinhua Kam disclosed the first quarter report of 2024, during the reporting period, the company achieved operating income of 470 million yuan, a year-on-year decrease of 16.28%, a net profit attributable to the parent company of 7.355 million yuan, a year-on-year decrease of 28.64%, and a net profit attributable to the parent company of 6.4218 million yuan, a year-on-year decrease of 37.23%.
Image source: 2024 first quarter report
Judging from the performance of the first quarter alone, from 2021 to 2023, Xinhua Jin's revenue scale is still in the process of "climbing", with year-on-year growth rates of 10.1%, 36.44% and 25.76% respectively, and this growth rate will begin to turn negative in 2024.
If we look at the net profit attributable to the parent after deducting non-profits, the negative growth trend will already appear in 2023. In the first quarter of 2023, Xinhua Jin's net profit attributable to the parent company after deducting non-profits decreased by 21.49% year-on-year, and in 2024, the net profit attributable to the parent company after deducting non-profits decreased by 37.23% year-on-year, and the decline further expanded.
The year-on-year growth rate of Xinhua Kam deducted non-attributable to the parent company (2015 Q1-2024 Q1) Image source: Flush iFinD
Due to the limited information disclosed in the first quarterly report, the reporter combined the data of previous years for analysis.
Xinhua Kam is a typical "diversified business" enterprise. In the past few years, the company has repeatedly carried out "cross-border" through acquisitions and other means, and the industrial layout has been continuously moved. For example, in July 2023, Xinhua Kam completed the acquisition of 100% of the equity of "Shandong Xinhuajin New Material Technology Co., Ltd.", which was included in the scope of consolidated statements and laid out the new material industry.
Announcements related to Xinhua Kam mergers and acquisitions in recent years Image source: Flush iFinD
According to the 2023 annual report, in its annual revenue of less than 2.4 billion yuan, it covers seven business types of hair products, textiles, chemicals, graphite, e-commerce, second-hand cars and others (including pension and health), of which the annual revenue scale of hair products, second-hand cars, e-commerce, and textiles exceeds 100 million yuan.
Image source: 2023 Annual Report
It should be noted that choosing diversified development can bring more development opportunities to enterprises, but at the same time, it is also facing the danger of dispersion of enterprise resources and forces. After a short "sweet period" of "crossover", the pressure on the company also followed.
In addition to the decline in revenue scale, Xinhua Jin's sales net profit margin also continued to decline. From 2021 to 2023, the company's net profit margin on sales will be 7.39%, 5.80% and 5.24% respectively. Entering 2024, this indicator will continue to decline, and the net profit margin of sales in the first quarter will be only 4.07%.
Xinhua Kam Sales Net Profit Margin (2015-2023) Image source: Straight Flush iFinD
In the 2023 annual report, Xinhua Kam admitted that the company has competition risks. In recent years, the market competition in the hair products and textile and garment industry has become increasingly fierce, and the competition has tended to be diversified, and the intensification of industry competition has also led to the rise in raw material prices, the decline in product sales prices, and the slowdown in sales growth.
In addition, Xinhua Kam said that with the diversified development of the company, there is a greater demand for management talents, technical talents and compound talents. If the company fails to introduce and cultivate enough talents to match the company's diversified business in the future, or if there is a large loss of existing employees, it will have an impact on the stability and performance of the company's business operations.
On the other hand, the "reservoir" of Xinhua Kim's performance, contract liabilities, is also continuing to decline.
At the end of 2022, Xinhua Jin's contract liabilities were 185 million yuan, and the 2023 annual report showed that Xinhua Jin's contract liabilities were 90.53 million yuan, a year-on-year decrease of 51.17%, and in the first quarter of 2024, Xinhua Jin's contract liabilities were further reduced to 43.37 million yuan, down 52.09% from the end of last year.
The so-called contract liabilities are actually the money paid by the dealer before receiving the goods, and the contract liabilities of Xinhua Kam continue to decline, which means that the dealer's willingness to pay is declining.
However, in terms of cash flow, Xinhua Kam is not short of money. As of the first quarter of 2024, the company's closing cash and cash equivalents balance was 565 million yuan.
Maybe it's because he has money in his hands, and Xinhua Jin is also keen on "money makes money". According to the data, Xinhua Jin's transactional financial assets soared from 60 million yuan at the end of 2021 to 161 million yuan at the end of 2022, and rose to 170 million yuan by the end of 2023, and 195 million yuan by the end of the first quarter of 2024, close to 200 million.
Image source: 2024 first quarter report
As can be seen from the 2023 annual report, the money was used to buy wealth management products. Including: bank wealth management products and brokerage wealth management products. The reporter noticed that although the number at the beginning and end of 2023 is less than 200 million yuan, the company used 730 million yuan to purchase related products during the year, but it was redeemed in the short term.
However, "often walking by the river, how can you not get your shoes wet", especially in the turbulent capital market, once you "miss", you may face huge losses. The 2023 annual report shows that Xinhua Kam's stock assets at the end of the period decreased by 570,800 yuan compared with the beginning of the period. The cumulative loss included in equity has exceeded 4.9 million yuan.
Image source: 2023 Annual Report
On April 29, the reporter called the secretary office of the board of directors of Xinhua Kam to learn about the relevant situation, and the staff hung up the phone on the grounds that it was inconvenient to hold a meeting.