Hengyang Petrochemical Logistics Limited Reports Net Profit Growth of 101.1% for 9M2024

Business Description

Hengyang Petrochemical Logistics Limited, incorporated in Singapore, is an investment holding company. The company holds a 41.64% interest in Jiangyin Foreversun Chemical Logistics Co., Ltd. (“China Holdco”), which is its primary business operation. All operations are based in the People’s Republic of China (PRC), focusing on the storage, dispatch, drumming, and land transportation of liquid petrochemical products, and management of port terminals.

Industry Position and Competitors

The company operates within the petrochemical logistics industry in China. Its competitors include other logistics and storage service providers in the PRC, particularly those with operations along the Yangtze River and coastal areas. Hengyang’s strategic locations and comprehensive transportation systems offer a competitive advantage within this market.

Revenue Streams and Customer Base

The primary revenue streams for Hengyang are derived from its joint venture’s transportation and storage services. Key customers include large chemical companies such as Sinopec Chemical. The company has been expanding its customer base by increasing the utilization rate of its storage tanks and port terminals.

Financial Analysis

Income Statement

The company reported a net profit of RMB 232,000 for the nine months ended 30 September 2024, a significant improvement from a net loss of RMB 21.126 million in the same period of the previous year. This represents a net profit growth of 101.1%. The growth is mainly attributed to the improved performance of the joint venture, China Holdco, which transitioned from a loss to a profit in this period.

Key figures include:

• Other income: RMB 26,000 (9M2024) vs RMB 1,000 (9M2023)
• Administrative and other expenses: RMB 2.607 million (9M2024) vs RMB 2.972 million (9M2023)
• Share of results of joint venture: RMB 2.814 million (9M2024) vs a loss of RMB 18.154 million (9M2023)

Balance Sheet

As of 30 September 2024, the company has total equity of RMB 549.276 million, a slight increase from RMB 549.044 million as of 31 December 2023. Non-current assets include a significant investment in the joint venture, while current assets primarily consist of cash and cash equivalents. The company has no secured or unsecured borrowings and maintains a healthy financial position.

Cash Flow Statement

Net cash used in operating activities amounted to RMB 2.147 million for the nine months ended 30 September 2024, mainly due to operating losses before adjustments. Investing activities generated a net cash inflow of RMB 26,000, while financing activities used net cash of RMB 44,000. The company held cash and cash equivalents of RMB 20.94 million at the end of the period.

Key Findings and Recommendations

Strengths

• Significant improvement in profitability, with a net profit growth of 101.1%.
• Strong financial position with no borrowings and substantial cash reserves.
• Strategic positioning along the Yangtze River and coastal areas, capitalizing on infrastructure developments in the PRC.

Risks

• Dependence on the performance of the joint venture, China Holdco.
• Exposure to economic and regulatory changes in the PRC.

Dividend Information

No dividend has been declared or recommended for the nine-month financial period ended 30 September 2024.

Special Activities

The company is focusing on increasing the utilization rate of its storage tanks and port terminals. New storage tanks have been brought into operation, and ongoing projects are expected to enhance future performance.

Investment Recommendations

For Current Investors

Hold: Given the significant improvement in profitability and the company’s strategic positioning, it is recommended to hold the stock. The company’s efforts to enhance operational efficiency and leverage infrastructure developments in the PRC are likely to yield positive results.

For Potential Investors

Buy: The company’s current financial health, strategic initiatives, and improved performance make it an attractive investment opportunity. The growth potential in the PRC’s logistics and petrochemical sectors adds to its appeal.

Disclaimer: The above recommendations are based on the financial report analysis and current market conditions. Investors are advised to conduct their own research or consult with a financial advisor before making any investment decisions.