After four years of going public, Mingxin Automotive Leather has seen a continuous decline in net income for three and a half years. Not only has its performance been under pressure, but the stock price of Mingxin Automotive Leather, which is currently in a state of breaking, continues to hit 'new lows'. This year, the company's revenue has increased but not its profit, and operational cash flow, investment cash flow, and financing cash flow have all turned negative. The company stated that the current utilization rate of the leather business capacity is about 70%, and the non-leather business capacity utilization rate is about 80%.
On August 23, Caixin reported (by Wang Bin) that after four years of going public, Mingxin Automotive Leather (605068.SH) has seen a continuous decline in net income for three and a half years. At the same time, the company's stock price continues to hit 'new lows'. At today's earnings conference, concerns were raised by investors about the negative operational cash flow, the record high credit impairment, and the substantial increase in accounts receivable in the first half of the year, which put pressure on the company's management.
In the first half of 2024, Mingxin Automotive Leather increased its revenue without increasing profits. The interim report shows that the company's operating income increased by 26.36% year-on-year in the first half of the year, but the net profit attributable to the parent company decreased by about 40% year-on-year, and the non-GAAP net profit changed from profit to loss. The operational cash flow was -0.14 billion yuan, the investment cash flow was -0.232 billion yuan, and the financing cash flow was -0.8518 million yuan.
The Chairman and General Manager of the company, Zhuang Junxin, indicated to Caixin reporters that the main reason for the decline in net income in the first half of the year was the increase in pre-investment expenses of new companies at home and abroad during the reporting period, and the gradual transition of pre-investment in fixed assets, leading to an increase in asset impairment. The company plans to carry out internal governance from the dimensions of increasing revenue and reducing costs.
According to the explanation, the negative operational cash flow of the company is mainly due to overdue payments from some customers during the reporting period and an increase in raw material procurement due to the mass production of multiple vehicle models at the beginning of the year. The negative investment cash flow is mainly due to an increase in the investment in construction of the raised funds project.
Mingxin Automotive Leather's main business is the research, development, production, and sales of new materials for automotive interiors. The company's stock was listed on the main board of the Shanghai Stock Exchange in November 2020 at an issue price of 23.17 yuan per share. By December 2023, the company's stock price had fallen below the IPO price, and has since been in a state of breaking. Today, the company's stock price once dropped to 11.25 yuan per share, hitting a new low since the IPO.
As of June 30, 2024, Mingxin Automotive Leather's accounts receivable amounted to 0.56 billion yuan, showing a year-on-year increase of 33.89%. Zhuang Junxin stated that the main reason for the increase in accounts receivable in the first half of the year is related to changes in the company's customer structure, changes in credit terms, and the timing of new project production. The company has continuously increased its efforts to collect payments and reduce the risk of bad debts in accounts receivable.
In the first half of 2024, Mingxin Automotive Leather's impairment of assets reached 16 million yuan, and the credit impairment loss was 11 million yuan, the highest since the company went public. Zhuang Junxin explained that the credit impairment loss of the company is mainly due to changes in customer structure and the concentration of new projects in production at the beginning of this year, with payments still pending. Additionally, some customers are exceeding the credit period.
An investor asked, "In the first half of this year, the company entrusted fund management with more than 0.7 billion, but now the company's stock price has reached a historical low, with a market cap of only 1.9 billion. With so much idle funds, is a share buyback plan part of the plan for the second half of the year?"
Zhuang Junxin said that the stock price is influenced by many factors in the market, but the company's revenue is stable. The company is considering various factors such as market conditions and financial status, and actively evaluating whether to carry out share repurchases or other measures in the second half of 2024.
The good news is that,"Based on the current capacity utilization rate of the released production capacity, the utilization rate of the genuine leather business is about 70%, and the utilization rate of the non-genuine leather business is about 80%." Zhuang Junxin stated at the earnings conference that the automotive industry competition landscape is changing rapidly, and with the increasing market penetration of new energy vehicles, downstream customer orders are mostly released according to the "sales determine production" approach, with less noticeable cyclical patterns.
Zhuang Junxin also revealed, "The first phase of the overseas factory in Mexico is currently being installed and debugged, with a preliminary designed capacity of 2 million square meters of artificial leather production per year. According to the plan, the Mingxin Xuteng overseas factory in Mexico is scheduled to start operation in 2024. In June of this year, Mingxin Xuteng increased its investment in the Mexico overseas factory by $20 million. Currently, the Mexico overseas factory has successfully passed the factory auditing of some North American customers and is actively advancing the material accreditation for overseas product host plants."