• Consolidated Revenue: RMB11.48 billion, up 6.7% year-on-year.

• Clean Energy Revenue Growth: 25% increase to RMB7.88 billion.

• Hydrogen Business Revenue: RMB450 million, up 65% year-on-year.

• Offshore Clean Energy Revenue: RMB1.77 billion, up 49%.

• Accounts Payable Turnover Days: Improved by 20 days year-on-year.

• Cash Turnover Days: Reduced from 45 days to 36 days.

• Interest-Bearing Liability: Increased due to RMB100 million panda bond issuance.

• Leverage Ratio: 12.6% excluding convertible options.

• Liquid Food Revenue: RMB2.3 billion, up 15%.

• New Orders: RMB16.4 billion, up 30% year-on-year.

• Clean Energy New Orders: RMB12.9 billion, up 63%.

• Offshore Clean Energy New Orders: RMB6.8 billion, up 128%.

• Order Backlog: RMB29.3 billion, up 43% year-on-year.

• Clean Energy Order Backlog: RMB22.9 billion, up 71%.

• Offshore Clean Energy Order Backlog: RMB15.1 billion, up 137%.

• R&D Investment: RMB334 million in the first half of the year.

• Warning! GuruFocus has detected 4 Warning Signs with CIMEF.

Release Date: August 23, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• CIMC Enric Holdings Ltd (CIMEF) reported a consolidated revenue of RMB11.48 billion for the first half of 2024, marking a 6.7% year-on-year increase.

• The clean energy segment experienced significant growth, with revenue increasing by 25% to RMB7.88 billion.

• The hydrogen business saw a remarkable 65% increase in revenue, reaching RMB450 million.

• The company improved its internal management efficiency, reducing cash turnover days from 45 to 36 days and optimizing accounts payable days by 20 days year-on-year.

• CIMC Enric Holdings Ltd (CIMEF) achieved a historical high in order backlog, reaching RMB29.3 billion, a 43% year-on-year increase.

Negative Points

• The chemical business experienced a significant decline due to industry downturns, impacting overall performance.

• The liquid food segment faced project delays, affecting gross margins and resulting in a decrease in newly signed orders.

• The company issued a RMB100 million panda bond, slightly increasing its leverage ratio.

• The GP margin for clean energy improved but was lower than expected, partly due to a shift towards EPC projects with lower margins.

• The liquid food segment's GP margin was impacted by project delays, dropping to 13% from a previous 40%.

Q & A Highlights

Q: Why was the revenue growth in offshore new energy not as high as expected, and what are the plans to address capacity constraints? A: Xiaohu Yang, President and Executive Director, explained that the shipbuilding cycle typically exceeds a year, and current deliveries are fulfilling older orders from less favorable market conditions. New orders with improved gross profit margins will contribute significantly in 2025. The company is addressing capacity constraints by enhancing production capabilities.

Q: Can you elaborate on the green methanol project, including investment, profitability, and concerns about market saturation? A: Xiaohu Yang stated that CIMC Enric is one of the few companies with core equipment and process control for green methanol production. The project is economically viable and aligns with expectations. The company is confident in its competitive position due to its technological capabilities and strategic partnerships.

Q: What is the current capacity for shipbuilding, and how does the GP margin differ between old and new ship orders? A: Xiaohu Yang mentioned that the company can deliver 12 core model ships annually. The GP margin for new orders has improved significantly, with a 60-70% price increase since 2022. The full-year revenue from offshore clean energy is expected to be between RMB3.5 billion and RMB4 billion.

Q: How is the company addressing the narrowing margins across different business segments? A: Zeqiao Lai, Financial Controller, explained that margin compression is due to changes in business mix and external market conditions. The company expects improvements in Q3 and Q4 as new orders with higher margins are fulfilled. Additionally, strategic cost management and operational efficiencies are being implemented.

Q: What is the outlook for CIMC Pacific Marine Engineering, and what are the expectations for full-year performance in 2024? A: Xiaohu Yang highlighted the long-term trend towards clean energy in marine engineering, with a focus on LNG and methanol-powered ships. The company expects double-digit revenue growth and single-digit net profit growth for the full year, driven by strong order backlogs and improved margins in clean energy segments.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.