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Zhongguancun ScienceTech Leasing Co Ltd (1601.HK) QQ4 2024 Results – Mixed Core Profitability with Heavy Non-Operating Income and Leverage in China's Tech Leasing Sector
Executive Summary
Zhongguancun ScienceTech Leasing Co Ltd reported a highly atypical QQ4 2024 outcome driven by a large, non-operating income item that obscures a weak core operating performance. Revenue and gross profit for Q4 alone were negative (-79.58 million CNY), and operating income was deeply negative (-285.97 million CNY). The positive pre-tax result (75.74 million CNY) and net income (56.83 million CNY) were largely the result of substantial other income and non-cash items totaling 361.71 million CNY, which dwarfed operating losses. Management commentary, if any, is not provided in the dataset, limiting visibility into the drivers behind the one-off or non-operating gains.
From a balance sheet and cash-flow standpoint, the group carries meaningful leverage and a negative free cash flow profile. Total debt stands at 3.37 billion CNY with net debt of 2.53 billion CNY, and cash and cash equivalents of 841.0 million CNY. Operating cash flow was negative at -919.4 million CNY reflecting a sizable working-capital impact (change in working capital -437.5 million CNY; other working-capital items -437.5 million CNY) and large non-cash charges. Despite a negative cash-flow from operations, financing activity generated a sizable positive cash impact (approximately +999.5 million CNY), aided by debt-related activities, dividend payments (206.6 million CNY), and other financing flows. The quarterly trajectory shows a dramatic swing: Q3 2024 revenue of 347.5 million CNY followed by Q4 2024 revenue of -79.6 million CNY, signaling volatility in core lending/leasing activity.
Valuation metrics imply the stock trades at a modest price-to-book (P/B around 0.40) and a near-market P/E in the low single digits (~4.6x), suggesting some upside optionality if core profitability improves or if non-operating gains prove sustainable. However, the combination of negative free cash flow, sizable long-term leverage, and a lack of visible quarterly earnings call commentary warrants a cautious stance. The stock’s performance will hinge on stabilizing core operating performance, reducing reliance on non-operating inflows, and strengthening balance-sheet resilience amid a competitive and evolving Chinese financial-services landscape.
Key Performance Indicators
Revenue
-79.58M
QoQ: -122.90% | YoY:19.56%
Gross Profit
-79.58M
1.00% margin
QoQ: -122.90% | YoY:19.56%
Operating Income
-285.97M
QoQ: -200.00% | YoY:-585.54%
Net Income
56.83M
QoQ: -26.16% | YoY:8.77%
EPS
0.04
QoQ: -26.17% | YoY:8.67%
Revenue Trend
Margin Analysis
Key Insights
Q4 2024 Revenue: -79.58 million CNY (negative). Gross Profit: -79.58 million CNY. Operating Income: -285.97 million CNY. Total Other Income/Expenses Net: 361.71 million CNY. Income Before Tax: 75.74 million CNY. Net Income: 56.83 million CNY. EPS: 0.0426 CNY.
Net income margin: -0.714% (per reported data).
Operating profit margin: 3.593% (per reported data, though operating income is negative in Q4, suggesting a significant non-operating uplift driving margins).
Earnings per share (diluted): 0.0426 CNY.
YoY metrics (from provided dataset): Revenue yoy +19.56%; Gross Profit yoy +19.56%; Operating Income yoy -585.54%; Net Income yoy +8.77%; EPS yoy +8.67%.
Financial Highlights
Overview of key metrics with YoY and QoQ context where available:
Revenue and profitability
- Q4 2024 Revenue: -79.58 million CNY (negative). Gross Profit: -79.58 million CNY. Operating Income: -285.97 million CNY. Total Other Income/Expenses Net: 361.71 million CNY. Income Before Tax: 75.74 million CNY. Net Income: 56.83 million CNY. EPS: 0.0426 CNY.
- Net income margin: -0.714% (per reported data).
- Operating profit margin: 3.593% (per reported data, though operating income is negative in Q4, suggesting a significant non-operating uplift driving margins).
- Earnings per share (diluted): 0.0426 CNY.
- YoY metrics (from provided dataset): Revenue yoy +19.56%; Gross Profit yoy +19.56%; Operating Income yoy -585.54%; Net Income yoy +8.77%; EPS yoy +8.67%.
- QoQ metrics (from provided dataset): Revenue qoq -122.90%; Gross Profit qoq -122.90%; Operating Income qoq -200%; Net Income qoq -26.16%; EPS qoq -26.17%.
Cash flow and liquidity
- Net cash provided by operating activities: -919.44 million CNY.
- Capital expenditures: -35.36 million CNY.
- Free cash flow: -954.79 million CNY.
- Net cash used/provided by financing activities: +999.54 million CNY.
- Dividends paid: -206.64 million CNY.
- Net change in cash: +75.89 million CNY.
- Cash and cash equivalents at period end: 840.97 million CNY.
Balance sheet health
- Total assets: 13,055.81 million CNY.
- Total liabilities: 10,474.44 million CNY.
- Total stockholders’ equity: 2,581.38 million CNY.
- Long-term debt: 3,371.45 million CNY; Total debt: 3,371.45 million CNY; Net debt: 2,530.48 million CNY.
- Cash and short-term investments: 840.97 million CNY; Cash ratio, current ratio, and quick ratio are all reported at 24.63x (reflecting a liquidity metric that is not conventional in magnitude given single-year reporting and potential balance-sheet structure).
- Leverage and capitalization: Debt-to-capitalization ~0.566; Debt-to-equity ~1.306; company equity multiplier ~5.06.
Valuation and efficiency indicators
- Price-to-book ratio: 0.403; Price-to-earnings ratio: 4.57; Price-to-sales ratio: -13.06 (reflecting negative reported revenue for the most recent quarter and inconsistent quarterly data across the four-quarter window).
- Dividend yield: 0.199%.
- Return on assets (ROA): 0.435%; Return on equity (ROE): 2.20%; Return on capital employed (ROCE): -2.20% (per ratios table).
- Free cash flow yield and other cash-flow efficiency metrics are negative given FCF is negative despite some positive financing cash flows.
Quarterly trend (four quarters to 2024Q4)
- 2024-Q4 revenue: -79.58M; 2024-Q3 revenue: 347.51M; 2024-Q2 revenue: 49.13M; 2024-Q1 revenue: 207.06M; 2023-Q4 revenue: -98.94M. This indicates substantial quarterly volatility and a potential shift in core activity during 2024.
Notes on data quality
- The dataset shows some inconsistencies (e.g., gross margin reported as 1.000 yet operating income negative; margin figures not always aligning with line-item profits). The reader should treat the figures as reported, with particular attention to non-operating items driving headline pretax and net income. Undisclosed items in the notes could materially affect interpretation.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
-79.58M
19.56%
-122.90%
Gross Profit
-79.58M
19.56%
-122.90%
Operating Income
-285.97M
-585.54%
-200.00%
Net Income
56.83M
8.77%
-26.16%
EPS
0.04
8.67%
-26.17%
Key Financial Ratios
currentRatio
24.63
grossProfitMargin
100%
operatingProfitMargin
359%
netProfitMargin
-71.4%
returnOnAssets
0.44%
returnOnEquity
2.2%
debtEquityRatio
1.31
operatingCashFlowPerShare
$-0.69
freeCashFlowPerShare
$-0.72
dividendPayoutRatio
364%
priceToBookRatio
0.4
priceEarningsRatio
4.57
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Earnings call transcript availability: Not provided in the dataset. As a result, no management quotes or thematic insights can be cited directly from the call. The qualitative analysis below relies on disclosed financial results and the implied implications of the numbers.
Key takeaways inferred from the reported data (no direct quotes):
- Core operating profitability appears weak in Q4 2024, with negative operating income (-285.97 million CNY) despite a positive income before tax (75.74 million CNY) driven by substantial other income and non-operating items (361.71 million CNY). This suggests one-off gains or non-recurring items significantly affecting pretax earnings.
- The company maintained a robust cash position overall (cash 841.0 million CNY) but delivered negative free cash flow (-954.79 million CNY) and negative cash flow from operations (-919.44 million CNY), highlighting working-capital strains and non-cash charges.
- Financing activity contributed a sizable positive cash flow (+999.54 million CNY), underscoring the use of leverage and debt-related financing strategies to fund operations and distributions (dividends of 206.64 million CNY).
- The balance sheet shows substantial long-term debt (3,371.45 million CNY) and a high debt-to-capitalization ratio (~0.566), implying elevated leverage and potential funding-risk if operating performance deteriorates.
- The QQ4 divergence from Q3 2024 (revenue swing from +347.51 million to -79.58 million) points to volatility in the core leasing/credit operations and warrants monitoring of the business mix and seasonality.
N/A – Transcript not available in the provided dataset.
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N/A – Transcript not available in the provided dataset.
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Forward Guidance
No explicit forward guidance is provided in the data. Given the volatility in quarterly results and the reliance on non-operating income to generate net profitability, investors should approach management outlook with caution until clarity on core operating improvements is provided. Potential catalysts to watch include:
- A stabilisation or acceleration of core leasing/credit activity in the tech sector, which could improve operating margin and reduce reliance on non-operating gains.
- Margin improvement initiatives targeting cost control (SG&A, other operating expenses) and better working-capital management to drive positive operating cash flow.
- Deleveraging efforts or more disciplined capital allocation to reduce interest costs and strengthen balance-sheet resilience.
- Regulatory and policy developments affecting Chinese finance leasing and credit services, particularly any measures impacting technology innovation financing.
Prognosis: If management can demonstrate sustained improvement in core profitability and a path to generating positive free cash flow, the valuation multiple (P/B around 0.40, P/E around 4.6x) offers upside versus peers. Conversely, continued dependence on non-operating income and high leverage could keep downside risk elevated in a cyclically sensitive sector.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
1601.HK Focus
1.00%
3.59%
2.20%
4.57%
1740.HK
30.05%
57.45%
-1.06%
-22.80%
1747.HK
27.80%
5.12%
-2.78%
-8.16%
1692.HK
32.60%
17.10%
16.60%
4.15%
1713.HK
19.80%
11.60%
7.25%
2.04%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Given the mixed QQ4 2024 results, the investment thesis hinges on a tangible improvement in core operating performance and a clear de-risking of the balance sheet. The stock trades at a low P/B (~0.40) and a mid-single-digit P/E (~4.6x), implying valuation support if the company can stabilize earnings and demonstrate consistent free cash flow generation. However, the absence of explicit forward guidance and the reliance on non-operating income for near-term profitability introduce meaningful risk. Investors may consider a wait-and-see approach, monitoring for: (1) a sustained reduction in operating losses and a path to positive operating cash flow; (2) any management commentary on deleveraging, cost controls, and core growth initiatives; and (3) regulatory or macro developments that could impact the Chinese finance-leasing market. In scenario terms, a conservative base case would assume gradual earnings stabilization with tight cost control and modest improvements in working capital, while an upside case would hinge on a reacceleration of core leasing activity and stronger cash flow conversion.
Key Investment Factors
Growth Potential
Potential upside from growth in China’s technology financing ecosystem and leasing activity, particularly if the group leverages its Beijing tech-innovation network to expand leasing facilities. Potential monetization of non-core assets or items contributing to other income could provide limited near-term upside if repeated; potential synergies with Zhongguancun Development Group could improve access to credit channels and deal flow.
Profitability Risk
Primary risks include heavy leverage (long-term debt of 3.37B CNY, net debt ~2.53B CNY) and negative free cash flow, which heighten liquidity and refinancing risk in a rising-rate/slow-growth environment. Core operating profitability appears weak in Q4 2024, with volatility across quarters. Data inconsistencies raise questions about the quality of reported metrics. Dependence on non-operating income to generate net income raises sustainability concerns. Competitive pressure in the Chinese finance-leasing market and regulatory risk are additional headwinds.
Financial Position
Liquidity remains a strength with cash balance of 841.0M CNY and an aggressively leveraged but large balance-sheet structure (total assets ~13.06B CNY; total liabilities ~10.47B CNY). The firm’s capitalization shows Debt-to-Capitalization around 0.566 and a Debt-to-Equity of about 1.306, with an equity multiplier near 5.06, indicating a substantial reliance on debt financing within a relatively modest equity base.
SWOT Analysis
Strengths
Net income reported for QQ4 2024 despite negative quarter revenue, driven by sizeable other income (361.71 million CNY) which indicates potential non-operating gains or windfalls.
Strong liquidity signal in the short term with cash and cash equivalents of 840.97 million CNY and a reported current ratio of 24.63x.
Large asset base and stable capitalization framework with substantial total assets and a long-standing market presence in Beijing’s tech-finance ecosystem.
Weaknesses
Weak core operating profitability in QQ4 2024 (operating loss of -285.97 million CNY) and negative free cash flow (-954.79 million CNY).
High leverage metrics (long-term debt of 3,371.45 million CNY; net debt 2,530.48 million CNY) and a Debt-to-Capitalization of ~0.566.
Volatile quarterly revenue (Q3 2024: 347.51 million CNY vs Q4 2024: -79.58 million CNY) suggesting sensitivity to cyclicality or mix, with potential concerns about revenue quality.
Opportunities
Opportunity to expand tech-innovation financing through partnerships within the Zhongguancun ecosystem and government-supported sectors.
Potential to optimize non-core income sources and reduce reliance on one-off gains by strengthening core lending/leasing activities.
Upside if the company pursues deleveraging and improves cash conversion, unlocking higher operating cash flow and resilience to market cycles.
Threats
Regulatory shifts in China’s financial services and leasing sectors could impact lending terms, interest rates, or asset quality.
Macro headwinds and credit-cycle risks in the Chinese economy could pressure demand for lease financing and asset-backed lending.
Sustained operating volatility could pressure investor sentiment and raise the cost of funding.
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