On July 10th, Hengsheng Electronics Co., Ltd. (referred to as "Hengsheng Electronics") (600570.SH) released the 2024 interim performance forecast on the Shanghai Stock Exchange.
According to preliminary calculations by the finance department of Hengsheng Electronics, the net income attributable to shareholders of the listed company is expected to be approximately 35.377 million yuan in H1 2024, a decrease of approximately 0.411 billion yuan compared to the same period last year, a decrease of about 92.07%.
It is expected that the net profit attributable to shareholders of the listed company after deducting non-recurring gains and losses in H1 2024 will be approximately 0.141 billion yuan, a decrease of approximately 0.124 billion yuan compared to the same period of last year, a decrease of about 46.76%. It is expected that the impact of non-recurring gains and losses on net profit in H1 2024 will be a loss of approximately 0.106 billion yuan.
Hengsheng Electronics is expected to achieve a revenue of about 2.834 billion yuan in H1 2024, an increase of about 7.0888 million yuan from the same period last year, a year-on-year increase of approximately 0.25%. The expected total operating cost is about 2.785 billion yuan, a decrease of about 5.22 million yuan from the same period last year, a decrease of approximately 0.19%.
(Source: Announcement by Hengsheng Electronics on the Shanghai Stock Exchange)
The main reasons for the performance changes are also explained in the forecast.
The forecast shows that the year-on-year operating income of Hengsheng Electronics in the first half of 2024 is basically flat. This is mainly due to the varying degrees of reduction in IT budget proportions by financial institutions, further slowing down the budget execution rhythm, resulting in longer customer procurement projects, procurement decision-making processes, and acceptance processes.
With the basically flat income, the company strengthened management and achieved growth in revenue lower than the growth in costs and expenses.
Regarding the reason for the decrease in net profit attributable to shareholders of the listed company in H1 2024, Hengsheng Electronics stated in the announcement that firstly, the fair value change of WinTech has changed significantly, resulting in a significant year-on-year decline in fair value change income compared to the same period last year. Excluding the fair value change of WinTech, the company's investment management is operating steadily and has achieved profitability; secondly, the profits and dividends of joint ventures invested by the company have decreased year-on-year; thirdly, the provision for bad debts of accounts receivable has increased year-on-year, and government subsidies have decreased year-on-year.
In addition, Blue Whale News contacted Hengsheng Electronics for its performance changes and development plan and obtained a response.
Regarding the revenue and profit forecast for the second half of the year, Hengsheng Electronics stated that the current business goal is to maintain revenue growth, continuously improve the quality of the company's revenue, keep costs lower than revenue growth, continuously improve operational efficiency, maintain a stable financial structure and operating cash flow. In the context of increased external uncertainty, Hengsheng Electronics has achieved the above goals for the half-year period and strives to achieve the full-year business goals.
Regarding the magnitude of the net profit change, Hengsheng Electronics responded that the decrease in profits is mostly due to investment factors in the half-year report forecast, while operations and cash flow are normal, and the main business is stable.
In addition, Hengsheng Electronics stated that the decline in net profit will not affect employee salaries.
Blue Whale News noted that in October 2023, Hengsheng Electronics announced that it had passed a plan to repurchase company shares with its own funds through centralized bidding methods. The repurchase purpose is to cancel and reduce the company's registered capital.
In response, Hengsheng Electronics responded that cash dividends and stock repurchases are both ways to reward investors.
It revealed that in 2023, based on a cash dividend of 0.246 billion yuan, Hengsheng Electronics decided to use the method of repurchasing and canceling stocks to reward investors in September. The repurchased stock amount was about 0.15 billion yuan, and the relevant shares were cancelled in accordance with the law, increasing investor returns.
Regarding future share repurchase plans, Hengsheng Electronics stated that it will continue to use cash dividends or repurchase a portion of public shares through centralized bidding transactions using its own funds based on financial conditions, future development, and reasonable valuation levels. It is estimated that the amount of cash dividends and repurchases will be no less than 30% of net profit of the year.
According to previous announcements, as of April 9, 2024, Hengsheng Electronics had redeemed a cumulative total of 5,861,667 shares through centralized bidding transactions, and had completed the cancellation of repurchased shares on April 12. The total share capital has changed from 1,900,006,442 shares to 1,894,144,775 shares, and the company's registered capital has changed from RMB 1.9 billion to RMB 1.894 billion.
Currently, Blue Whale News understands that the progress of the registration capital change is in the stage of preparing materials to be submitted to the industry and commerce.