Smart-Core Holdings (2166) H1 2024 earnings summary

Executive summary

• H1 revenue fell 17.6% YoY to HK$2,623.9m, while profit for the period rose 74.8% to HK$36.9m and profit attributable to owners rose 186.6% to HK$36.3m.

• Memory, optical communication, smart vision and communication products grew, partly offsetting steep declines in smart displays, integrated products and independent distribution.

Financial highlights

• Revenue was HK$2,623.9m, down HK$560.7m (17.6%) YoY; gross profit declined 37.6% to HK$143.4m and gross margin fell 1.7 percentage points to 5.5%.

• Profit before tax rose 59.4% to HK$45.2m; profit for the period increased 74.8% to HK$36.9m and owners’ profit rose 186.6% to HK$36.3m. Basic/diluted EPS was HK7.73/HK7.72 cents.

• Administrative, selling and distribution expenses fell to HK$87.4m from HK$166.7m; finance costs declined to HK$15.7m from HK$31.6m, mainly reflecting lower borrowings.

• Other income decreased to HK$9.0m from HK$20.8m; R&D expenses were HK$16.8m, down 1.8% YoY.

• Net operating cash flow was HK$13.3m versus HK$177.4m in H1 2023; cash and cash equivalents ended the period at HK$193.0m.

Outlook and guidance

• Management expects moderate global and China growth and remains positive on H2 semiconductor prospects, supported by AI, rising memory demand and consumer-electronics recovery.

• Memory, optical communication, smart vision and communication products have positive H2 expectations on AI-driven demand.

• Smart display and independent distribution outlooks remain cautious amid weak TV and spot-market demand, despite potential restocking and overseas opportunities.

• Priorities include improving business quality and profitability, expanding licensed and overseas distribution, developing value-added technology services and optical communication capabilities, and strengthening domestic and overseas networks.