China Treasures New Materials (2439) H1 2023 earnings summary

Executive summary

• H1 revenue rose 32.9% YoY to RMB181.3m and profit increased 19.1% to RMB38.6m, supported by recovery in PRC demand for biodegradable products.

• Results were unaudited; biodegradable products generated 95.9% of revenue and automobile plastic parts contributed 4.1%.

Financial highlights

• Revenue was RMB181.3m versus RMB136.4m; gross profit was RMB71.0m versus RMB57.0m, up 24.6%.

• Profit before tax was RMB45.8m versus RMB38.3m; net income was RMB38.6m versus RMB32.4m, and owners’ attributable profit was RMB38.2m versus RMB31.7m.

• Cost of sales rose 38.9% to RMB110.3m; gross margin fell to 39.1% from 41.8%, reflecting higher raw-material and production costs.

• Other income increased to RMB2.9m from RMB0.4m, including interest income and discretionary government grants described as one-off.

• Basic and diluted EPS was RMB4.21 cents versus RMB3.92 cents; listing expenses fell to RMB2.3m from RMB8.0m after the March listing.

Outlook and guidance

• PRC environmental-protection policies and post-pandemic recovery are expected to support biodegradable-plastics demand; geopolitical and global economic uncertainty may persist through 2023.

• Plans include expanding Changchun capacity, establishing a Southeast China production base, upgrading R&D equipment, financing R&D projects and strengthening IT systems.

• Huizhou production licenses awaited local-government approval; machinery purchases were arranged for planned expansion.