Zhonggan Communication (Group) Holdings (2545) H1 2024 earnings summary

Executive summary

• H1 revenue fell 2.5% YoY to RMB237.3m and attributable profit declined 14.8% to RMB18.6m, as weaker digitalisation revenue and its lower share of gross profit weighed on results.

• Telecommunications infrastructure revenue grew 5.1%; priorities include nationwide expansion beyond Jiangxi and investment in digitalisation capabilities.

Financial highlights

• Revenue was RMB237.3m versus RMB243.3m; cost of sales rose 1.3% to RMB186.0m, while gross profit fell 13.9% to RMB51.3m from RMB59.6m.

• Gross margin declined to 21.6% from 24.5%; operating profit was RMB25.9m versus RMB30.5m, and profit before tax was RMB18.2m versus RMB21.5m.

• Administrative expenses fell 15.6% to RMB20.5m; finance costs declined 14.3% to RMB7.7m, while R&D expenses were stable at RMB5.9m.

• Basic and diluted EPS was RMB0.04 versus RMB0.05; income tax was a credit of RMB0.4m versus a credit of RMB0.3m.

Outlook and guidance

• Plans include expanding telecommunications infrastructure services nationwide and beyond Jiangxi; projects had been developed in Xinjiang as of 30 June 2024.

• Seeking digitalisation partnerships and M&A opportunities, strengthening R&D and liquidity, and pursuing larger digitalisation projects.

• Management expects the July 2024 listing to raise customer awareness, reinforce reputation and broaden the shareholder base.