China Kangda Food Company Limited – Net Profit Decline of 157.1% in FY2024

Business Description

China Kangda Food Company Limited is a food production and trading company based in China. The company operates in three main business segments: processed foods, chilled and frozen rabbit meat, and chilled and frozen chicken meat. The company’s operations are primarily located in China, with some export sales to Japan, Europe, and other regions. [[29-30]]

Financial Performance Analysis

Income Statement

The company reported a loss attributable to owners of the Company of approximately RMB21.5 million in FY2024, representing an increase of 157.1% compared to the loss of RMB8.4 million in FY2023. [[29]] The decline in profitability was due to a combination of factors: – Decrease in government grants income by RMB4.4 million [[34]] – Decrease in gross profit by RMB21.2 million due to lower revenue and gross profit margin [[33]] – Decrease in other income by RMB12.0 million due to lower recognition of gains from changes in fair value of biological assets and no disposal gains in FY2024 [[34]]

Balance Sheet

As of 31 December 2024, the company had a net current liability position of approximately RMB26.6 million, primarily due to significant short-term borrowings and loans from related parties. [[38]] The company’s gearing ratio was 74% as of 31 December 2024, indicating a high level of debt financing. [[39]]

Cash Flow Statement

The company’s cash and cash equivalents decreased by 17.6% to approximately RMB234.2 million as of 31 December 2024, mainly due to lower trade receivables collected during the year. [[36]]

Key Findings and Risks

The key findings from the financial analysis are: – Significant decline in profitability due to lower revenue, gross profit, and other income – High level of debt financing and net current liability position, indicating liquidity risks – Uncertainty regarding the company’s ability to continue as a going concern, as highlighted by the auditor’s disclaimer of opinion [[43-45]]

Recommendation

Based on the financial performance and the significant uncertainties surrounding the company’s ability to continue as a going concern, I would recommend the following:
For current shareholders:
Consider selling the stock, as the company’s financial position and profitability outlook are concerning.
For investors not currently holding the stock:
Avoid investing in China Kangda Food Company Limited at this time, as the significant risks and uncertainties outweigh the potential upside.

Disclaimer

This report is for informational purposes only and does not constitute investment advice. Investors should conduct their own due diligence and consult with a financial advisor before making any investment decisions.

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