Image Source: Visual China Group

Eternal (002183.SZ), once a shining star in the supply chain field, is currently facing a situation of declining revenue and net income.

Recently, Eternal released its financial report for the third quarter of 2024. The company's revenue for the first three quarters was 58.441 billion yuan, a year-on-year decrease of 14.41%; the net profit attributable to the parent was 61.2698 million yuan, a year-on-year decrease of 47.12%; the non-net profit attributable to the parent was 31.7293 million yuan, a year-on-year decrease of 46.77%.

Through analyzing the third quarterly report, Blue Whale News also found that the company's construction in progress amount has been continuously reaching new highs after 2021. The construction in progress will gradually transfer to fixed assets in the future, and according to regulations, once transferred to fixed assets, it will start depreciating, which will directly affect the company's net income. It is worth paying attention to whether this will impact Eternal's future net income.

The highly anticipated Qianhai Headquarters Base project of the company has a budget of approximately 1.5 billion yuan, started in early 2020, topped out by the end of 2021, and has not yet been transferred to fixed assets. According to Blue Whale News' on-site investigation, based on Eternal's plan, the Qianhai Headquarters Base project should have been completed by August 28, 2023, but over a year has passed and the project is still in the decoration phase.

Currently, Eternal's construction in progress that has not yet been transferred to fixed assets includes the Shanghai Eternal Base and Yibin Base.

The construction in progress amount has surged.

Eternal started in 1997 and is an integrated digital comprehensive trading company, with business including supply chain platform services, industry chain integration operation, brand marketing, digital commerce, enterprise investment and financing incubation. In 2007, the company was listed on the Shenzhen Stock Exchange, taking the lead in occupying the "first domestic supply chain stock" throne.

From 2013 to 2017, the company saw nearly a 5-fold growth. However, due to rapid expansion, the company faced high debt and was once on the brink of bankruptcy. To address the financial crisis, in 2018, the company brought in Deep Control to become its largest shareholder.

Starting from 2021, the company's under-construction projects have shown explosive growth. From 2020 to September 2024, the amounts of the company's under-construction projects were 0.74 billion yuan, 0.938 billion yuan, 1.865 billion yuan, 2.403 billion yuan, 2.643 billion yuan. Among them, in 2022 and 2023, the company's under-construction projects saw significant growth rates of 97.9% and 29.0% respectively.

Image Source: Choice Financial Terminal

Reporters found that the above situation may be related to the company's business expansion and diversification. It is understood that the company's business started from IT procurement, gradually expanded into medical instruments, chemicals, textiles, fast-moving consumer goods, and implemented the "380 Plan", with a service network covering 320 cities and reaching nearly 1.5 million retail terminals.

In July 2021, the company completed a 2.225 billion yuan private placement, with Deep Control continuing to increase its investment by injecting approximately 1 billion yuan, greatly improving the company's cash flow situation and providing financial support for the company's large-scale construction projects.

According to the semi-annual report for 2024, the company's largest under-construction project is the Qianhai Headquarters Base, with a budget of about 1.59 billion yuan. In addition, there are the Shanghai Eternal Base with a budget of 0.5 billion yuan, and the Yibin Base with a budget of 0.589 billion yuan. The funding for these projects mainly comes from own funds, bank loans, bond financing, shareholder contributions and support, project cooperation and investment, government support and subsidies, etc.

Image Source: Eternal's 2024 interim report

In fact, large-scale construction projects in progress may keep Eternal's financial situation relatively tight.

As of the end of the third quarter of 2024, the company's monetary funds were 10.557 billion yuan, short-term borrowings were 20.757 billion yuan, accounts payable were 14.336 billion yuan, and total current liabilities were 38.153 billion yuan; the company's asset-liability ratio was close to 80%. The net cash flow from operating activities of the company in the first three quarters of 2024 was 0.189 billion yuan, a year-on-year decrease of 37.05%.

Some financial professionals have pointed out that the construction period of projects under progress is relatively long, resulting in delayed cash recovery. Until the construction projects are completed and put into use or sold, companies cannot directly bring in cash flow. In such situations, a company's operation often relies on the rapid turnover of funds to sustain.

The construction of the Qianhai headquarters base has been ongoing for nearly five years.

From publicly available information, the Qianhai headquarters base is a landmark project for Eternal's own development. Zhou Guohui, Chairman of the Eternal Group, has also stated that the establishment of the Eternal Tower (Qianhai Headquarters Base project) marks the company's process from 0 to 1, and a big step towards the future from 1 to 10.

However, according to Blue Whale News, nearly five years after the start of construction, the Qianhai headquarters base project has not yet been converted into fixed assets. Some market experts have mentioned that this situation is not very common, but there are also some reasonable reasons that could lead to it.

According to the official company's public account, the topping-out ceremony of the Qianhai Headquarters Base project was held on December 22, 2021. According to the information disclosed by eternal, as of the end of 2023, the progress of the project was only 73.1%.

Image Source: Internet

At the same time, the 2024 interim report shows that the progress of the Qianhai Headquarters Base project is still 75.6%, with an increase of only 2.5% in half a year.

Lanjing News found that the progress bar of the Qianhai Headquarters Base project had experienced setbacks. According to the 2022 interim report, the completion rate of the project was 41.07%, but in the annual report of the same year, it became 36.37%. In response, the company stated in an announcement that this was mainly due to an increase in the project budget.

How much longer will it take for the Qianhai Headquarters Base to be converted into fixed assets? A reporter from Lanjing News, acting as an investor, called the office of the director of eternal, and the staff member on the other end of the phone stated that this is related to the progress of the construction.

Image Source: eternal 2024 Interim Report

At the same time, the journalist also learned from a construction worker that the general process after the topping out of a building includes interior decoration, equipment installation, and other steps. It usually takes several months to more than a year to complete, depending on the scale and complexity of the project.

According to the data, the headquarters building of Qianhai Headquarters Base is located near Yu'an Road, Baoan District, Shenzhen. In early July this year, when the journalist arrived near the building, it was observed that there was no construction material on the top of the building, the exterior glass walls were clearly visible, all construction fences downstairs were removed, the entrance of the building was very clean, and the nearby green belt had been completed.

Source: Blue Whale News reporters took the photo on site.

After entering the building, the interior construction waste has been cleaned up, the scaffolding used for construction has been removed, and the remaining construction materials are also being dismantled. At the same time, it seems that the water and electricity wiring on the interior ceiling can also be seen.

Source: Blue Whale News reporters took the photo on site.

The entrance and exit of the underground parking lot have been marked, and some parking spaces have also been completed. On that day, there were only a few scattered workers working in the parking lot.

Image Source: Blue Whale News Reporter's on-site shooting.

On November 11th this year, the reporter once again visited the Eternal Qianhai Headquarters Building, and learned from the project information on the wall of the building that the Qianhai Headquarters Base project started on January 5, 2020, and is scheduled to be completed on August 28, 2023.

Image Source: Blue Whale News Reporter's on-site shooting.

In fact, the completion time of the Qianhai Headquarters Base project has also experienced a "delay." According to the company's "2020 Tracking Rating Report," the project was expected to be completed in 2022; however, the "2022 Tracking Rating Report" shows that the project is expected to be completed in April 2023.

Image Source: Eternal Tracking Rating Report

On November 11th, Lanjing News found on site that there are fences being constructed around the project building now. According to the on-site construction sign, the renovation period is from November 9, 2024 to May 18, 2025. It is worth noting that the fence was installed at the beginning of November, while the reporter did not see any construction fence when they came in early July, a difference of 4 months. In response, the staff of the listed company said that the company was going through the approval process during this period.

Image Source: Lanjing News reporter's on-site shooting

Regarding the construction situation of the building, Lanjing News reporters asked the on-site construction workers, who mentioned that it is currently interior decoration, and these construction fences were recently installed, not installed before. At the same time, the reporter, as a client of leasing office space, contacted the nearby Central China real estate sales and inquired about the matters related to the building. He mentioned that the building had previously to some extent reached office standards, and they are planning to rent out some office spaces, leading to the current situation. It can be seen that there is still uncertainty in the turnover time of the Qianhai headquarters project.

It is understood that there is no fixed standard for the time required from the completion of a construction project to its turnover. Generally, after completion, it is necessary to complete various acceptance work as soon as possible, such as engineering quality acceptance, fire protection acceptance, and environmental protection acceptance, etc. If the acceptance goes smoothly and the relevant documents are ready, the turnover may be completed in a relatively short time after completion, for example, from weeks to months. The specific duration depends on various factors such as the acceptance situation and the progress of document preparation.

Will a delayed renovation affect the fixed asset turnover time? The staff of the listed company's secretary office told reporters, "Because it takes time from completion to acceptance."

It is certain that once the construction project is turned into fixed assets, there is a possibility of depreciation. So how will the depreciation of construction projects into fixed assets generally be calculated?

It is understood that assuming a 1.6 billion yuan construction project with an expected service life of 20 years, an estimated net residual value of 5% of the original value (i.e., 1.6 billion x 5% = 0.08 billion yuan), then under the straight-line method, the annual depreciation amount = (1.6 billion - 0.08 billion) ÷ 20 = 0.076 billion yuan. If calculated this way, the company may have tens of millions of yuan in annual depreciation expenses, plus depreciation from several other construction projects turning into fixed assets, the total depreciation expenses may be even higher.

However, for the Eternal Qianhai project, the actual depreciation amount needs to be determined according to specific circumstances.

As of the first half of 2024, the total investment in the Eternal Qianhai headquarters project has reached 1.1 billion yuan, with an accumulated capitalized interest amount of 97.95 million yuan. The company's 2023 annual report shows that the shortest depreciation period for company buildings is 20 years, while the longest is up to 46 years.

Source: Eternal 2024 semi-annual report

In the past three years, the company's performance has shown 'increased revenue but not increased profit'.

It is worth mentioning that in recent years, the scale of Eternal's revenue has grown, but the profit has not increased accordingly.

From 2021 to 2023, the company's revenue was 70.2 billion yuan, 85.398 billion yuan, 0.256 billion yuan, and 94.422 billion yuan respectively; while the net income was 0.506 billion yuan, 0.256 billion yuan, and 0.141 billion yuan.

In response, the company's director once stated on the interactive platform that the company's significant increase in total operating revenue was due to the business of both distribution + marketing of the industry chain supply chain services, as well as the rapid growth of cross-border and logistics service businesses.

“由于快速增长业务的营业毛利率较低，对公司的利润贡献较小，品牌运营的毛利率受酒饮业务毛利下降，部分联营企业的业绩同比下滑，以及人民币汇率变动影响，导致公司利润下降。2021—2023年，公司销售毛利率分别为6.35%、4.67%、4.11%。”怡亚通董秘称。

于2023年12月27日，怡亚通第二大股东深圳市怡亚通投资控股有限公司套现4.13 million股，彼时股价大约4.4元左右，套现金额大约18.17 million元。

图源：chioce金融端

据天眼查显示，深圳市怡亚通投资控股有限公司股东分别卫周国辉和周爱娟，分别持股99.0099%、0.9901%，上述两人为兄妹关系。