Zhengwei Group Holdings Company (2147) H2 23/24 earnings summary

Executive summary

• 6MFY2024 revenue rose 55.5% YoY to RMB298.1m, but gross profit fell 98.3% to RMB1.1m and results swung to a net loss of RMB40.6m from net profit of RMB29.7m.

• Higher direct material costs drove cost of sales above revenue growth, reducing gross margin to 0.36% from 33.7%.

Financial highlights

• Revenue was RMB298.1m, up 55.5% YoY; cost of sales was RMB297.0m, up 133.5%, mainly due to higher direct material costs.

• Gross profit was RMB1.1m, down 98.3% YoY; gross margin was 0.36%, versus 33.7%.

• Net loss was RMB40.6m versus net profit of RMB29.7m; loss before tax was RMB20.9m versus profit before tax of RMB35.6m.

• Distribution and selling expenses declined to RMB6.8m from RMB14.5m; administrative expenses increased to RMB18.8m from RMB14.8m.

• Income tax expense rose to RMB19.7m from RMB5.9m, attributed to higher taxable income at a subsidiary.

Outlook and guidance

• Plans include launching new vegetable and meat snacks, including mushrooms, boneless chicken feet, beef jerky, pork trotters, quail eggs and quail meat snacks.

• Intended expansion includes supermarket and concession-counter networks in Southwestern China, especially Sichuan, alongside promotions with supermarket chains and advertising across traditional media, high-traffic locations and WeChat.