GoerTek Q3 revenue increased by 4.4% year-on-year, net profit grew by 4.5%, inventory surged by 55% | Financial Report News
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The A-share "Apple supply chain" leader GoerTek showed resilience in its third-quarter results: both revenue and net profit saw slight growth. However, at the same time, a surge in inventory, a sharp decline in operating cash flow, and rising debt levels also revealed the potential pressures it faces in expansion and operation.
On Friday evening, GoerTek released its third-quarter financial report. The key points are as follows:
Financial Performance:
- Q3 revenue was 30.557 billion yuan, up 4.42% year-on-year; revenue for the first three quarters was 68.106 billion yuan, down 2.21% year-on-year, indicating pressure on the income side
- Q3 net profit for the single quarter was 1.17 billion yuan, up 4.51% year-on-year; net profit for the first three quarters was 2.587 billion yuan, up 10.33% year-on-year
- Net profit excluding non-recurring items was 2.067 billion yuan, up only 1.02% year-on-year, indicating mediocre profitability quality
Asset and Liability Changes:
- Inventories surged to 16.274 billion yuan, up 55.30% from the beginning of the year, showing significant inventory turnover pressure
- Short-term borrowings plus long-term borrowings totaled 19.296 billion yuan, a significant increase from the beginning of the year, reflecting increased financial leverage
- Operating cash flow was 1.475 billion yuan, down 44.56% year-on-year, showing weakened cash generation capability
- Total assets were 94.823 billion yuan, up 14.65% from the beginning of the year
Business Developments:
- Financial expenses were 411 million yuan, up 284.34% year-on-year, mainly due to exchange rate fluctuations causing exchange losses
- Investment income was 400 million yuan, up 996.09% year-on-year, mainly relying on income from foreign exchange derivatives
- New long-term equity investment in Shanghai Conant Optical, with total long-term equity investments rising to 2.182 billion yuan
- R&D expenses were 3.98 billion yuan, up 19.21% year-on-year, reflecting continued increased investment in R&D
Slow Improvement in Profitability
GoerTek's third-quarter performance showed clear signs of growth fatigue. Single-quarter net profit was 1.17 billion yuan, up only 4.5% year-on-year.
In terms of profitability quality, net profit excluding non-recurring gains and losses was 2.067 billion yuan, up only 1.02% year-on-year.
Of the 520 million yuan in non-recurring gains and losses, gains from changes in fair value and settlement of foreign exchange derivatives contributed 620 million yuan, accounting for as much as 119%. The company's profit growth depended largely on financial derivatives operations rather than the core business.
Inventories Surge 55%, Inventory Management A Warning Sign
The most eye-catching data in the financial report is the explosion of inventories to 16.274 billion yuan, up 55.30% from the beginning of the year’s 10.479 billion yuan.
The company explained this as "increased inventory reserves," but against the backdrop of a 2.21% year-on-year decline in revenue, such a large inventory increase inevitably raises concerns about the risk of inventory backlog. Net operating cash flow was 1.475 billion yuan, a large year-on-year decrease of 44.56%.
Cash received from sales of goods was 54.694 billion yuan, down year-on-year, while cash paid to employees was 8.075 billion yuan, up 21.6% year-on-year. The worsening cash flow combining with the inventory surge forms a dangerous combination.
Exchange Losses Cause Financial Expenses to Soar
Financial expenses were 411 million yuan, a year-on-year jump of 284.34%, becoming an important factor eroding profits. The company clearly pointed out that this was mainly due to "increased exchange losses caused by exchange rate fluctuations."
The company made 620 million yuan through foreign exchange derivative operations (included in non-recurring gains and losses), but at the same time, it suffered huge exchange losses in its financial expenses.
Borrowing Scale Surges Dramatically
The balance sheet shows short-term loans of 12.843 billion yuan, up 66.51% from the beginning of the year; long-term loans of 6.453 billion yuan, up 381.15% from the beginning of the year. The two total 19.296 billion yuan, showing a significant rise in the company's financial leverage.
In addition, the company issued 1 billion yuan in technology innovation bonds, further increasing its debt level.
Against the sharp drop in operating cash flow, the company chose to support business expansion and capital expenditures through large-scale borrowing. Construction-in-progress was 2.28 billion yuan, up 63.17% from the beginning of the year, indicating the company remains active in capacity expansion.
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