EPS of $0.02 increased by 186.7% from previous year
Gross margin of 100.0%
Net income of 61.21M
"N/A" - N/A
Hengtai Securities Co Ltd (1476.HK) QQ4 2024 Results Analysis: Revenue Acceleration Amid Margin Strength, Cash Flow Pressures in Capital Markets
Executive Summary
Hengtai Securities delivered a standout top-line rebound in QQ4 2024, with revenue of 697.1 million CNY up 67.3% year over year and operating income of 376.3 million CNY, yielding an operating margin of approximately 54%. Net income stood at 61.2 million CNY, with an EPS of 0.0235. The strong operating performance is underscored by a high gross margin (reported as 100% due to absent cost of revenue), suggesting a favorable mix and strong cost control in core lines. However, the company faces notable cash-flow headwinds: operating cash flow was negative at 497.8 million CNY and free cash flow was negative at 525.7 million CNY, despite positive net income. This divergence reflects substantial working-capital outflows and sizable other income/expense dynamics (total other income net of -341.6 million CNY) that may not fully reflect recurring cash-generating potential. The balance sheet shows solid liquidity with substantial cash and short-term investments, yet debt levels and some inconsistent accounting signals warrant a cautious stance. Relative valuation appears attractive on a price-to-book basis (~0.60x) and a-mid-20s price-to-earnings multiple, implying a discount to book value but also a need for clearer visibility on sustainable cash generation. Overall, the QQ4 results point to a company with a strong operating core but a cash-flow profile that requires improvement for a durable investment thesis in a regulated Chinese financial services environment.
Key Performance Indicators
Revenue
697.09M
QoQ: 0.00% | YoY:67.30%
Gross Profit
697.09M
1.00% margin
QoQ: 0.00% | YoY:67.30%
Operating Income
376.32M
QoQ: 0.00% | YoY:158.00%
Net Income
61.21M
QoQ: 0.00% | YoY:194.85%
EPS
0.02
QoQ: 0.00% | YoY:186.72%
Revenue Trend
Margin Analysis
Key Insights
Revenue: 697.09; YoY +67.3%; QoQ 0.0%; Gross Profit: 697.09; Gross Profit Margin: 100% (cost of revenue not disclosed) ;
Income Before Tax: 34.69; Tax: 7.68; Net Income: 61.21; Net Margin: 8.78%; YoY Net Income +194.85%; EPS: 0.0235; YoY EPS +186.72%;
EBITDA/EBITDAR not disclosed; Weighted Avg Shares (mn): 2,604.60; QoQ data not provided.
Cash flow and balance sheet:
CFO: -497.80; Free Cash Flow: -525.69; Capex: -27.89; Change in Working Capital: -3,121.32; Other Working Capital: -2,914.43; Non-cash items: 2,514.72; Net cash provided by financing: 516.69; Net cash from investing: -47.16; Net cash flow not fully disclosed for period-end.
Financial Highlights
Revenue and profitability snapshot (CNY mn):
- Revenue: 697.09; YoY +67.3%; QoQ 0.0%; Gross Profit: 697.09; Gross Profit Margin: 100% (cost of revenue not disclosed) ;
- Operating Income: 376.32; Margin: 53.99%; YoY +158.0%; QoQ 0.0%;
- Income Before Tax: 34.69; Tax: 7.68; Net Income: 61.21; Net Margin: 8.78%; YoY Net Income +194.85%; EPS: 0.0235; YoY EPS +186.72%;
- EBITDA/EBITDAR not disclosed; Weighted Avg Shares (mn): 2,604.60; QoQ data not provided.
Cash flow and balance sheet:
- CFO: -497.80; Free Cash Flow: -525.69; Capex: -27.89; Change in Working Capital: -3,121.32; Other Working Capital: -2,914.43; Non-cash items: 2,514.72; Net cash provided by financing: 516.69; Net cash from investing: -47.16; Net cash flow not fully disclosed for period-end.
- Balance sheet highlights: Total assets 39,981.08; Current assets 37,569.75; Total current liabilities 26,978.76; Total liabilities 31,274.06; Total equity 8,295.53; Cash and equivalents 1,907.25; Short-term investments 12,299.44; Total cash & short-term investments 14,206.88; Total debt 10,027.75; Debt/Equity 1.21x; Current ratio 1.393x; Quick ratio 1.393x; P/B 0.60x; P/E 20.38x; ROE ~0.74%; ROA ~0.15%.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
697.09M
67.30%
0.00%
Gross Profit
697.09M
67.30%
0.00%
Operating Income
376.32M
158.00%
0.00%
Net Income
61.21M
194.85%
0.00%
EPS
0.02
186.72%
0.00%
Key Financial Ratios
currentRatio
1.39
grossProfitMargin
100%
operatingProfitMargin
54%
netProfitMargin
8.78%
returnOnAssets
0.15%
returnOnEquity
0.74%
debtEquityRatio
1.21
operatingCashFlowPerShare
$-0.19
freeCashFlowPerShare
$-0.2
priceToBookRatio
0.6
priceEarningsRatio
20.38
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Earnings call transcripts for QQ4 2024 are not provided in the dataset. As a result, no management quotes or explicit remarks from the call can be cited. The analysis below notes the absence of direct quotes and relies on the disclosed financial data to infer themes that would typically be discussed on the call (strategy execution, market conditions, and operational leverage). If a transcript becomes available, the following themes should be highlighted with quotes:
- Strategy and growth priorities (segments driving revenue growth: brokerage/wealth management, IB, investment management, and proprietary trading).
- Margin and cost discipline (driven by operating efficiencies and mix).
- Market conditions and regulatory environment impacting volumes, underwriting, and asset-management activities.
- Capital deployment and balance-sheet management (leverage, liquidity, and funding sources).
N/A
— N/A
N/A
— N/A
Forward Guidance
Management guidance for QQ4 2024 is not disclosed in the provided data. Given the period’s top-line strength but cash-flow weakness, the forward outlook hinges on sustainable cash conversion rather than accounting-driven net income. In the near term, the key considerations are: (1) continued revenue growth driven by the core capital-markets franchise (brokerage, wealth management, IB activity, and asset management), (2) normalization of working capital and more stable non-operating income/expense, and (3) the trajectory of financing needs and debt management in a rising-rate or volatile liquidity environment. External trends to monitor include: regulatory changes affecting trading volumes and underwriting activity, capital-raising cycles in China’s markets, and macroeconomic conditions affecting client activity. Our assessment: the optionality remains positive if cash flow normalizes and the company maintains earnings progression; otherwise, reliance on financing to fund operations could pose liquidity and funding-risk concerns.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
1476.HK Focus
1.00%
54.00%
0.74%
20.38%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
QQ4 2024 presents a bifurcated picture: a robust operating core with meaningful top-line growth, but notable cash-flow weakness and non-operating income volatility. The valuation metrics imply a market discount (P/B ~0.60x; P/E ~20.4x) that may reflect earnings quality concerns and cash-flow fragility rather than a simple growth story. The investment thesis rests on two pillars: (1) a sustainable conversion of earnings into cash flow through working-capital normalization and disciplined cost control, and (2) continued revenue growth from core capital-markets services. Upside potential exists if the company can translate strong operating margins into stable cash flow and reduce dependence on non-operating drivers of net income. Monitor: working capital dynamics, non-operating income/expense trends, debt management, and regulatory developments that could affect trading and underwriting activity.
Key Investment Factors
Growth Potential
Strong topline momentum in QQ4 2024 (YoY revenue +67.3%) suggests potential for continued growth across core segments, particularly in high-value advisory and asset-management activities as China’s capital markets deepen. However, long-term growth will depend on converting earnings into sustainable cash flow and expanding high-margin recurring revenue streams.
Profitability Risk
Key risks include: (1) negative operating cash flow despite reported net income, implying working-capital volatility; (2) reliance on non-operating items that distort net income; (3) regulatory and policy risk in China’s financial services sector; (4) potential liquidity strain if financing is not readily accessible; (5) data inconsistencies in the reported numbers requiring prudent review.
Financial Position
Liquidity appears robust on a liquidity-coverage basis (cash and short-term investments total ~14.21b CNY vs total debt ~10.03b CNY). Yet, negative cash flow from operations and a sizeable non-operating expense create a fragile cash-generation profile. Leverage is moderate to elevated (debt ~10.03b; equity ~8.30b; Debt/Equity ~1.21x per the data), with ROE ~0.74% and ROA ~0.15%, indicating limited efficiency in equity-based returns despite strong operating margins.
SWOT Analysis
Strengths
Diversified financial services platform across brokerage, investment banking, proprietary trading, asset management, and related services.
High operating margin (approximately 53.99% in QQ4 2024) suggesting strong core profitability in the reported period.
Robust liquidity indicators with substantial cash and short-term investments backing the balance sheet.
Large asset base and scale, enabling potential for fee-based businesses and cross-selling.
Weaknesses
Negative operating cash flow (-497.8m CNY) and negative free cash flow (-525.7m CNY) in QQ4 2024, signaling cash-generation weakness.
Significant negative contribution from other income/expenses (-341.6m CNY), which may mask true recurring profitability.
Reported numbers show some inconsistencies (e.g., income before tax vs. net income levels) that warrant careful audit confirmation.
Dependence on non-operating components for net income raises questions about earnings quality.
Opportunities
Ongoing expansion and deeper participation in China’s capital markets, including underwriting, advisory, and asset-management opportunities.
Potentialization of wealth management and fund distribution as recurring revenue streams.
Economic stabilization and policy support for financial services could lift client activity and volumes.
Threats
Regulatory and macroeconomic risk in China’s financial sector, including limits on trading activity and changes to underwriting norms.
Market volatility affecting brokerage volumes and proprietary trading results.
Competitive pressure leading to margin compression and elevated funding costs.