Qian Hu Corporation Financial Analysis: 2024 Net Profit Growth of \$9.6M Highlights Recovery

Business Description

Qian Hu Corporation Limited, headquartered in Singapore, specializes in the import, export, farming, breeding, and distribution of ornamental fish, aquaculture products, aquarium and pet accessories, as well as the manufacturing of aquarium accessories and plastic bags. The company operates through three primary business segments:

• Fish: Core segment involving ornamental fish farming, breeding, and global exports.
• Accessories: Manufacturing and distribution of pet and aquarium accessories, including proprietary products.
• Plastics: Manufacturing and sales of plastic bags, with plans to expand into biodegradable plastics.

Geographically, Qian Hu serves Singapore, other Asian countries, Europe, and other global markets, with Singapore and Asia being the major revenue contributors.

Industry Position and Competitive Landscape

Qian Hu holds a strong position in the ornamental fish industry, leveraging its innovative technologies like the Recirculating Aquaculture System (RAS) and Aqua-Ring Technology (ART). Competitors include other global exporters of ornamental fish and regional players in the accessories and plastics segments. While the company has a diversified product mix, its market share is supported by its robust distribution network and in-house proprietary products.

Revenue Streams and Customer Base

• Fish: \$29.3M in revenue, up 6.1% YoY, driven by higher exports and wider product offerings.
• Accessories: \$34M in revenue, down 1.8% YoY due to weaker global demand.
• Plastics: \$8.1M in revenue, up 0.5% YoY, with stable customer demand in the healthcare and waste management sectors.

The company’s customer base is diverse, with no single customer contributing more than 10% of total revenue. Its supply chain focuses on sustainability and innovation, particularly with its planned expansion into biodegradable products.

Financial Statement Analysis

Income Statement

For FY2024, Qian Hu reported a net profit of \$416,712, compared to a net loss of \$9.1M in FY2023, reflecting a significant turnaround of \$9.6M. Key highlights include:

• Gross profit margin improved to 35.5% (FY2023: 33.5%).
• Revenue increased by 1.6% to \$71.4M.
• Net profit margin improved to 0.6% (FY2023: -13.0%).

Balance Sheet

Total assets as of December 31, 2024, were \$58.0M, slightly down from \$58.9M in FY2023. Key changes include:

• Inventory reduced by \$0.4M due to streamlined inventory management.
• Cash and cash equivalents decreased by \$0.9M due to loan and lease repayments.
• Total liabilities decreased to \$16.0M (FY2023: \$17.2M), primarily due to loan repayments.

Cash Flow Statement

Net cash from operating activities improved due to higher profits and better inventory management. Investing cash flows were used for capital expenditures, including farm enhancements and partial payment for a new building. Financing cash flows reflected repayments of loans, lease liabilities, and dividend payments.

Dividend

The company proposed a final dividend of 0.4 cents per share (FY2023: 0.3 cents), totaling \$454,106, a 33% increase from the previous year.

Key Strengths

• Turnaround in Profitability: The \$9.6M improvement in net profit showcases effective cost management and strategic decisions.
• Innovation-Driven Growth: Technologies like RAS and ART position Qian Hu as a leader in sustainable aquaculture and fish farming.
• Dividend Increase: A higher dividend signals confidence in future profitability.

Key Risks

• Economic Uncertainty: Global trade tensions and weak consumer sentiment could impact revenue growth, particularly in accessories.
• High Dependency on Asia: While diversified, the company remains heavily reliant on Asian markets for revenue.

Special Activities

The company is focusing on sustainable practices, including biodegradable plastics and AMR-based pet products through a partnership with N&E Innovations Pte Ltd. Additionally, it is ramping up operations at its new aquaculture farm in Malaysia.

Recommendations

If You Currently Hold the Stock

Recommendation: Hold

The company’s turnaround in profitability, coupled with its innovative strategies and increasing dividends, makes it a strong long-term investment. However, monitor global economic conditions closely.

If You Do Not Hold the Stock

Recommendation: Buy

Qian Hu’s recovery in profitability, sustainable growth strategies, and strong market position in ornamental fish exports provide a compelling investment case. The growing dividend payout adds to its attractiveness.

Disclaimer

This analysis is for informational purposes only and does not constitute financial advice. Investors should conduct their own research or consult a financial advisor before making investment decisions.

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