Port Observation: Net Profit in the First Half of This Year Is Only One-Tenth of Last Year, Hongdi Technology to "Go Public" with a Loss of RMB 1.159 Billion in Inventory Value Over Three Years

Recently, the Shanghai Stock Exchange announced that the audit committee will hold its first meeting in 2024 on January 5th to review the listing application of Wuhan Hongdi Technology Co., Ltd. (Initial Public Offering, abbreviated as Hongdi Technology). It's worth noting that Hongdi Technology is about to "go public" with a loss of RMB 1.159 billion in inventory value over three years, while its net profit in the first half of this year is only one-tenth of last year.

Sales Seasonal Fluctuations

Net Profit in the First Half of This Year Is Only One-Tenth of Last Year

Hongdi Technology's revenue and profit have shown significant seasonal fluctuations. In the first half of this year, its net profit was only one-tenth of last year's.

According to the prospectus, Hongdi Technology's operating cash flow has been negatively affected by the fluctuation in revenue and profit. In the reporting period, the company's operating cash flow was negative, with a total amount of RMB 1,570.60 million.

Hongdi Technology explained that the main reason for the negative operating cash flow was the strategic inventory buildup to cope with supply chain uncertainties, which increased the cost of goods sold and the need for working capital.

Inventory Value Loss

Loss of RMB 1.159 Billion in Inventory Value Over Three Years

The prospectus shows that Hongdi Technology's inventory value loss has been significant over the past three years, with a total amount of RMB 1.159 billion.

Hongdi Technology attributed the inventory value loss to the decline in market demand and the increase in inventory costs. The company expects its inventory turnover ratio to continue to deteriorate if it fails to accurately forecast market trends and adjust its inventory levels accordingly.

Related Party Transactions Continue and Frequent

Related Sales Over RMB 2 Billion Over Three Years

Hongdi Technology's related party transactions have continued and become more frequent. According to the prospectus, the company has sold products worth over RMB 2 billion to its affiliated companies over the past three years.

The main reasons for these transactions are the sales of automatic driving products, intelligent control systems, and other related products.