China Graphite Group (2237) H2 2023 earnings summary

Executive summary

• FY2023 revenue fell 26.2% YoY to RMB202.0m; gross profit declined 45.8% to RMB73.7m and net profit fell 73.0% to RMB21.3m amid weaker graphite pricing and fierce competition.

• H2 performance improved from H1: revenue was RMB154.8m, down 14.0% YoY versus a 49.5% H1 decline; H2 net profit was RMB24.7m versus an H1 net loss of RMB3.3m.

• FY2023 production rose for flake concentrate and spherical graphite as production efforts strengthened in H2; sales volumes and segment margins remained under pressure from market competition.

Financial highlights

• Revenue RMB202.0m, down 26.2% YoY; cost of sales fell 6.8% to RMB128.3m, while gross profit declined 45.8% to RMB73.7m.

• Operating profit RMB23.6m versus RMB94.4m; profit before tax RMB24.1m versus RMB93.9m; net profit RMB21.3m versus RMB79.0m.

• Basic and diluted EPS were both RMB1.33 cents, versus RMB5.71 cents and RMB5.70 cents, respectively, in FY2022.

• Adjusted net profit, excluding government grants and FY2022 listing expenses, was RMB18.7m in FY2023 versus RMB83.8m in FY2022.

• R&D expenses rose 49.6% to RMB17.2m; four efficiency and product-development projects began in H1.

Outlook and guidance

• Applications are underway to mine below 150 metres above sea level and raise permitted Beishan Mine extraction capacity to over 500,000 tonnes annually; resource reporting is in preparation after 25 drill holes totaling ~6,700 metres.

• Existing annual capacity is ~60,000 tonnes of flake graphite concentrate and ~10,000 tonnes of spherical graphite; a planned new beneficiation and processing plant is expected to expand capacity.

• Plans for Weihai include purification facilities and lithium-ion battery anode material production, extending downstream activity and broadening the revenue base.

• Management expects global NEV and lithium-ion battery demand to keep growing, supporting graphite demand, while aiming to extend the value chain and optimize production costs.