China Graphite Group (2237) H1 2023 earnings summary

Executive summary

• H1 2023 revenue fell 49.6% YoY to RMB47.211m amid weak downstream graphite demand; the period recorded a net loss of RMB3.342m versus net profit of RMB13.249m in H1 2022.

• July revenue exceeded RMB20.0m, more than 42% of H1 revenue, as orders recovered and peak production season began.

Financial highlights

• Revenue was RMB47.211m versus RMB93.552m; gross profit was RMB16.883m versus RMB41.262m, and gross margin fell to 35.8% from 44.1%.

• Operating loss was RMB4.802m versus operating profit of RMB18.062m; basic and diluted loss per share was RMB0.21 cents versus EPS of RMB1.10 cents.

• R&D expenses rose 84.4% YoY to RMB8.3m; G&A expenses fell 26.5% to RMB11.1m, partly reflecting lower listing expenses.

• Selling and distribution costs fell 48.5% YoY to RMB1.7m.

Outlook and guidance

• 2023 Beishan Mine target: extract 500,000 tonnes of graphite ore and raise annual mining capacity to 500,000 tonnes; plans include seeking approval to mine below 150m elevation and increase the permitted cap.

• Converted processing plant can produce at least 10,000 tonnes of unpurified spherical graphite annually; purification development in Weihai and third-party cooperation remained under consideration.

• The announced acquisition will not proceed; purification strategy was being reconsidered in light of cost, location, policy and market considerations.

• Management expected H2 operations to improve with demand recovery and the annual peak production season.