Changjiang Securities recently published a research report by Sifangda, highlighting the performance of a company that released its third-quarter 2013 financial results. During the reporting period, the company recorded operating revenue of RMB 98 million, reflecting a year-on-year increase of 5.93%. The operating cost was RMB 55 million, down 1.09% compared to the same period last year. Net profit attributable to shareholders reached RMB 24 million, representing a decline of 8.41% year-on-year, with an EPS of 0.11 yuan.
In the third quarter alone, the company achieved operating revenue of RMB 38 million, up 14.59% from the previous year. Operating costs rose slightly to RMB 20 million, an increase of 5.69% year-on-year. Net profit for the quarter was RMB 10 million, up 7.78% from the prior year, with an EPS of 0.05 yuan. This compares to an EPS of 0.03 yuan in the second quarter.
The consolidation of Huayuan Superhard Materials Tools Co., Ltd. significantly contributed to the improved performance in the third quarter. Acquired during the first half of the year, Huayuan, a leading domestic provider of PCD tools for woodworking, began to be consolidated into the company’s financial statements in Q3. Due to its relatively high profitability and increased revenue, the acquisition helped boost overall profitability. The company’s comprehensive gross margin improved from 42.27% in Q2 to 47.39% in Q3, reaching a historically high level. Similarly, the net profit margin on sales recovered from 22.62% in Q2 to 26.32% in Q3.
Excluding the impact of Huayuan’s consolidation, the parent company generated operating revenue of RMB 26 million in the third quarter, a decrease of 13.76% compared to the previous quarter. With over 52.07% of its revenue coming from exports, the continuous appreciation of the RMB since the fourth quarter of 2012, especially the sharp rise in the second quarter, weakened the company’s export competitiveness and affected its overseas market growth. This was the main factor behind the drop in operating revenue for the third quarter. However, the parent company’s comprehensive gross margin for the quarter stood at 44.95%, showing a slight increase from the previous quarter. This improvement is attributed to the growing proportion of high-margin, high-end products resulting from the completion of fundraising projects, as well as increased investment and non-operating income from efficient fund management. As a result, the parent company’s earnings remained stable.
Although the RMB’s appreciation posed challenges for the company’s export business, the promotion of high-end new products has shown some positive results. Additionally, Zhengzhou Huayuan, which focuses on the segmentation of PCD tools for domestic woodworking, provides a certain buffer for the company’s overall performance. Overall, the company continues to navigate through external challenges while leveraging internal growth opportunities.
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