China Treasures New Materials (2439) H1 2024 earnings summary

Executive summary

• H1 revenue rose 8.6% YoY to RMB196.868m; profit for the period increased 24.9% to RMB48.208m, with higher gross profit and no listing expenses versus RMB2.3m in H1 2023.

• Biodegradable products remained the core business; Dongguan Phase 1 operated at full scale, while Anji had yet to achieve stable production.

Financial highlights

• Gross profit increased 10.4% to RMB78.4m and gross margin rose to 39.8% from 39.1%; cost of sales was RMB118.480m versus RMB110.339m.

• Profit before tax was RMB56.469m versus RMB45.784m; attributable profit was RMB47.834m versus RMB38.175m.

• Other income fell to RMB0.9m from RMB2.9m, including government grants of RMB0.4m versus RMB1.6m and interest income of RMB0.5m versus RMB1.3m.

• Selling and distribution expenses decreased to RMB2.4m from RMB3.2m; administrative and other operating expenses declined to RMB18.7m from RMB20.2m, partly offset by higher R&D spending.

• Net cash from operating activities was RMB61.2m versus RMB48.0m; cash and cash equivalents were RMB381.714m at 30 June 2024 versus RMB315.696m at 31 December 2023.

Outlook and guidance

• PRC restrictions on non-degradable plastic use are expanding, with a stated policy objective to prohibit non-degradable bags in various marketplaces by end-2025.

• Management sees favorable biodegradable-product prospects, citing policy-driven demand and increased takeaway consumption and home meal preparation; Dongguan expansion supports Southeast China growth.

• Changchun expansion was delayed, though trial production had begun on new machinery; proceeds-use timelines for expansion and R&D funding extended to 2024.

• Allocation of unutilized listing proceeds may be revised after review of FY2024 financial conditions, with an announcement where applicable.