EPS of $-0.03 decreased by 296.5% from previous year
Gross margin of 17.5%
Net income of -11.66M
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Huayu Expressway Group Limited (1823.HK) QQ1 2025 Results: Revenue Decline Amid Toll Asset Stabilization in PRC Industrial Infrastructure
Executive Summary
Huayu Expressway Group Limited posted QQ1 2025 results that reflect a challenging near-term profitability trajectory despite a solid liquidity position. Revenue for the quarter ended 31 March 2025 was CNY 37.916 million, down 41.14% year over year and up 9.39% quarter over quarter, while gross profit reached CNY 6.6235 million for a gross margin of 17.47%. The quarter carried an operating loss of CNY 4.3205 million and a net loss of CNY 11.66 million, translating to an EPS of -0.0283. EBITDA stood at CNY 3.603 million with an EBITDA margin of about 9.5%, but the bottom line remained negative due to higher total expenses and non-operating items. The results show a material deterioration in profitability on a YoY basis, even as some operating metrics improved QoQ.
Liquidity remains favorable with a current ratio of 3.45 and a quick ratio of 1.48, supported by a cash position per share of 0.289 and an overall debt capitalization that is modest (total debt to capitalization 0.262; debt ratio 0.185). However, cash flow commentary is mixed: operating cash flow per share is modest at 0.0141, while free cash flow per share is negative at -0.0679, highlighting ongoing capex commitments and limited free cash flow generation in the period. The company also faces efficiency headwinds, as inventory turnover and related working capital dynamics exhibit unusual patterns (days of inventory outstanding reported at 1,142.86 in the quantified metrics), signaling potential inefficiencies or data reporting quirks that require close tracking.
Looking ahead, management guidance is not provided in the data supplied, limiting visibility into forward targets. The market remains uncertain about how Huayu will translate its toll-road asset base and liquor/spirits distribution into a sustainable profitability trajectory, especially given the volatility in traffic volumes and potential capex needs. Investors should monitor traffic recovery, toll-rate adjustments, and cost-control initiatives, as well as potential benefits from diversification into the Liquor and Spirits segment. Overall, the stock remains a high-risk/high-uncertainty name within PRC infrastructure, with a clear need for a sustained improvement in operating performance to justify elevated valuation multiples.
Balance sheet and liquidity (as of 2025-03-31):
- Current Ratio: 3.45; Quick Ratio: 1.478; Cash Ratio: 0.591
- Debt ratio: 0.185; Debt-to-Equity: 0.355; Long-term debt to capitalization: 0.161; Total debt to capitalization: 0.262
- Cash per share: 0.289; Operating Cash Flow per Share: 0.0141; Free Cash Flow per Share: -0.0679
Efficiency and turnover:
- Receivables Turnover: 3.70x; Payables Turnover: 0.679x; Inventory Turnover: 0.0788x; Fixed Asset Turnover: 0.0789x; Asset Turnover: 0.0272x
- Cash Conversion Cycle: 1,034.69 days; Days Sales Outstanding: 24.31; Days Inventory Outstanding: 1,142.86; Days Payables Outstanding: 132.47
Valuation and coverage:
- Price-to-Book: 0.262x; Price-to-Sales: 5.02x; Price-to-Operating Cash Flows: 32.80x; EV/EBITDA: 91.39x
- Dividend Payout: 0%; Dividend Yield: 0%
- Interest Coverage: not disclosed (interest expense is not reported)
- Capital expenditure coverage ratio: 0.172; Free cash flow to operating cash flow ratio: -4.83 (negative FCF-to-OCF when normalized)
Notes on four-quarter context (YoY basis):
- Revenue in Q1 2025 mirrors the broader downcycle observed in the four-quarter history through 2024 (notably lower YoY vs Q1 2024), signaling a structural challenge in near-term top-line growth.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
37.92M
-41.14%
9.39%
Gross Profit
6.62M
-54.59%
28.19%
Operating Income
-4.32M
-272.92%
60.07%
Net Income
-11.66M
-295.67%
-14.13%
EPS
-0.03
-296.53%
-14.11%
Key Financial Ratios
currentRatio
3.45
grossProfitMargin
17.5%
operatingProfitMargin
-11.4%
netProfitMargin
-30.8%
returnOnAssets
-0.84%
returnOnEquity
-1.6%
debtEquityRatio
0.36
operatingCashFlowPerShare
$0.01
freeCashFlowPerShare
$-0.07
priceToBookRatio
0.26
priceEarningsRatio
-4.08
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Earnings call transcript not provided in the data set supplied. As such, no management quotes or thematic highlights from the QQ1 2025 call are available. If a transcript becomes accessible, key themes to capture would include: (1) traffic and toll-rate outlook for SuiYue Expressway and Qing Ping Expressway; (2) cost-control and efficiency initiatives; (3) contribution and performance of the Liquor and Spirits segment; (4) capital allocation plans and any debt management actions; and (5) guidance for the remainder of 2025 and potential reformulation of the business model.
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Forward Guidance
No formal forward guidance was provided in the supplied data set. Given the current earnings trajectory, the company faces an uncertain near-term path. Investors should monitor:
- Traffic trends and toll-rate changes on SuiYue and Qing Ping Expressways, which drive toll revenue growth;
- Capex program intensity and its amortization against cash flow;
- Liquor and Spirits segment performance, including any synergies or margin expansion opportunities;
- Working capital dynamics, particularly inventory efficiency and receivables collection;
- Any management commentary on refinancing needs or debt maturities. A baseline assumption would be continued volatility in toll revenue with potential for stabilization only after traffic normalization and any policy adjustments; the achievability of any implied targets will hinge on traffic recovery and cost discipline.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
1823.HK Focus
17.47%
-11.40%
-1.60%
-4.08%
1822.HK
0.00%
0.00%
0.00%
0.00%
1831.HK
21.20%
-1.84%
9.48%
-6.49%
1866.HK
19.50%
10.60%
4.21%
3.12%
1878.HK
-8.81%
-12.80%
32.60%
-1.11%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Huayu Expressway remains a high-uncertainty exposure within the PRC industrial infrastructure space. The QQ1 2025 results show meaningful revenue decline and a negative bottom line despite a healthy liquidity cushion and modest leverage. The absence of explicit management guidance heightens execution risk. A constructive investment thesis would require clear signs of sustainable top-line stabilization or growth (traffic volumes, toll rate optimization) and a path to profitability improvement (cost containment, higher-margin segments, or better asset utilization). Until such visibility appears, the stock should be approached with caution, prioritizing downside protection and monitoring of traffic recovery, capex cadence, and liquidity resilience. Relative to peers that show stronger profitability and margins, Huayu presents significant execution risk but potential optionality if traffic and cost efficiencies improve and Liquor/Spirits segment scale contributes meaningfully to earnings.
Key Investment Factors
Growth Potential
Growth potential hinges on (i) traffic recovery and toll-rate optimization on Huayu’s expressways (SuiYue and Qing Ping) and (ii) potential expansion or optimization of the Liquor and Spirits distribution under Huamaojiu/Xijiushaofang brands. A return to revenue growth would require a meaningful uplift in toll volumes and traffic mix, supported by capex optimization and asset utilization improvements.
Profitability Risk
Key risks include persistent weakness in toll-road traffic, regulatory changes affecting toll policies, sustained cost inflation, and higher-than-expected capex fueling negative free cash flow. The absence of formal guidance adds uncertainty around the path to profitability. Other risks include governance and execution risk in integrating the liquor segment with the infrastructure business and potential impairment risks given the inventory turnover dynamics observed.
Financial Position
The company shows solid liquidity metrics (current ratio 3.45; quick ratio 1.478) but modest profitability (net margin -30.8%, operating margin -11.4%) and negative near-term earnings. Leverage remains moderate (debt to capitalization 0.262; long-term debt to capitalization 0.161), yet free cash flow is negative per share (-0.0679) despite positive operating cash flow per share (0.0141). Valuation is challenging (P/B 0.262x; P/S 5.02x; EV/EBITDA 91.39x) given negative earnings and uncertain near-term visibility.
SWOT Analysis
Strengths
Diversified asset base with exposure to toll-road operations (SuiYue Expressway, Qing Ping Expressway) and a Liquor and Spirits segment, potentially providing revenue diversification.
Solid liquidity indicators: Current ratio 3.45 and quick ratio 1.478 suggest ample short-term liquidity.
Moderate leverage with debt capitalization metrics (Total debt to capitalization 0.262; Long-term debt to capitalization 0.161) indicate a manageable leverage position relative to peers.
Positive operating cash flow per share (0.0141) despite net losses, signaling some cash-generation capability from core operations.
Weaknesses
Material net loss and negative net margin (-30.8%) in QQ1 2025; profitability heavily dependent on cost discipline and traffic recovery.
Inventory turnover extremely low (0.0788x) and days of inventory outstanding reported as 1,142.86 days, suggesting potential inefficiencies or data anomalies that require management attention.
Negative cyclical exposure to toll demand risk; no earnings guidance provided, increasing uncertainty for investors.
Free cash flow per share negative (-0.0679), signaling limited cushion for growth capex without external financing.
Opportunities
Traffic rebound and toll-rate optimization on expressways could restore top-line momentum and improve margins.
Strategic leverage of Liquor and Spirits distribution to bolster non-toll revenue streams and diversify earnings exposure.
Operational improvements and potential asset optimization could enhance asset turnover and efficiency metrics over time.
Threats
Macro and policy risk in PRC infrastructure: weaker traffic growth, regulatory rate changes, and potential additional capex commitments.
Competition for road concessions and potential financing constraints in a high-capex environment.
Delays in the Liquor segment's profitability realization amid consumer demand shifts or competitive pressures.