Key Facts from the Report:
- Reporting Date and Financial Year: The report covers the financial year ended 30 June 2024.
- Company Overview: Zhongxin Fruit and Juice Limited is a subsidiary of SDIC Zhonglu Fruit Juice Co., Ltd., focusing on the production of concentrated apple juice, primarily for export markets, including the U.S., EU, Japan, and South Africa.
- Revenue Growth: The Group reported an 18% increase in revenue from RMB114.5 million in FY2023 to RMB135.3 million in FY2024, driven by higher selling prices and increased demand for fructose and concentrated juice products.
- Gross Profit Decline: Gross profit dropped to RMB20.0 million (from RMB24.0 million in FY2023), largely due to higher procurement and production costs, resulting in a lower gross profit margin of 14.8%.
- Net Profit Decline: The net profit decreased from RMB6.0 million in FY2023 to RMB2.3 million in FY2024.
- No Dividend Declared: The report does not mention any declaration of dividends for FY2024.
Notable Investor Actions:
- Profitability Challenges: Rising business costs, climate impacts on harvest quality, and global market volatility have significantly affected profitability. Investors should note that although revenue increased, the company’s net profit has declined due to increased costs.
- Suspension of Operations at Xuzhou Zhongxin: The company’s management decided to continue the suspension of production activities at Xuzhou Zhongxin due to a lack of commercial justification. This indicates a focus on resource optimization and cost management.
- Strategic Focus on Fructose Production: The company increased fructose production to meet higher market demand, highlighting its ability to capitalize on niche product demands.
- Climate Risk Management: The company is addressing climate-related risks, such as unpredictable weather conditions affecting apple cultivation, by improving agricultural practices and investing in resilient infrastructure.
Special Investor Notes:
- No Dividend: Investors looking for income via dividends should note that no dividends were declared for FY2024.
- Market and Geopolitical Risks: Ongoing geopolitical and trade tensions, along with increasing logistical costs, are risks that could continue to impact operations and profitability in the near term.
Company Actions to Improve Profitability:
- Cost Management: The company is focusing on managing costs and optimizing production efficiency to mitigate the impacts of rising raw material costs.
- Product Diversification: There is an ongoing effort to broaden the product range by introducing value-added products alongside traditional concentrated fruit juice, utilizing the resources of the parent company, SDICZL.
- Technology Integration: The company is leveraging technology, including AI and blockchain, to enhance product quality and production efficiency, positioning it for long-term growth.
Recommendations:
- For Current Stockholders:
- Hold Position: Despite profitability challenges, the company is actively managing costs, diversifying its product range, and addressing climate risks, which could stabilize profitability in the future. Long-term investors may benefit from potential recovery in market conditions and the company’s strategic initiatives.
- For Prospective Investors:
- Wait and Monitor: Given the current volatility and declining profitability, it is advisable to wait for further financial performance improvements before investing. Monitor the company’s ability to reduce costs and capitalize on new market opportunities, particularly in fructose production and value-added products.
Disclaimer:
The above recommendations are based on the data provided in the company’s sustainability report for FY2024. Investors are encouraged to conduct further research and consider their own financial situations before making investment decisions.
