Gotion High-Tech Q3 net profit soars by 1434.42%, Chery IPO boosts book profits | Financial Report Highlights

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Gotion High-Tech’s net profit attributable to shareholders in the third quarter was 2.167 billion yuan, a year-on-year surge of 1,434%, mainly due to significant fair value changes of early-held Chery Automobile shares following its Hong Kong listing.

On Friday, Gotion High-Tech released its Q3 financial report. Key highlights are as follows:

Q3 single-quarter revenue was 10.114 billion yuan, up 20.68% year-on-year; revenue for the first three quarters was 29.508 billion yuan, up 17.21% year-on-year.Q3 net profit attributable to shareholders was 2.167 billion yuan, up 1,434% year-on-year, primarily contributed by fair value changes from Chery Automobile's Hong Kong IPO, with non-recurring gains reaching 2.154 billion yuan; net profit attributable to shareholders for the first three quarters was 2.533 billion yuan, up 514.35% year-on-year.Net profit attributable to shareholders excluding non-recurring gains was only 12.51 million yuan, up 54% year-on-year.Inventory increased 65% year-on-year to 11.746 billion yuan, indicating stockpiling expansion.Construction-in-progress reached 21.04 billion yuan, up 42% from the start of the year, with two new 20GWh battery base projects, each with no more than 4 billion yuan investment.Operating cash flow was 457 million yuan, up 88% year-on-year, but still well below the revenue scale; cash outflow from investing activities was 5.771 billion yuan.

Chery Listing Drives Booked Profit

Non-recurring gains reached 2.154 billion yuan, with fair value change income at 2.326 billion yuan. This means that after excluding investment income and various subsidies, net profit attributable to shareholders excluding non-recurring gains in Q3 was only 12.51 million yuan.

Cumulative net profit attributable to shareholders excluding non-recurring gains for the first three quarters was 85.38 million yuan, up 49.33% year-on-year, which is rather small compared to the asset base of over 100 billion and revenue of nearly 30 billion yuan.

Other non-current financial assets rose to 3.444 billion yuan from 1.571 billion yuan at the beginning of the year, an increase of 119%, and it is precisely the fair value change of this class of assets that propped up the profit statement.

Scale Expansion Coexists with Inventory Buildup

Revenue performance remained relatively stable. Operating revenue for the first three quarters was 29.508 billion yuan, up 17.21% year-on-year. Q3 single-quarter revenue was 10.114 billion yuan, up 20.68% year-on-year. The growth rate is not outstanding in the industry but at least remains positive.

The rapid expansion in inventories: At the end of Q3, inventory balance was 11.746 billion yuan, up 64.94% from 7.121 billion yuan at the beginning of the year. The company attributed this to "increased sales scale and higher inventory reserves," but inventory growth far outpaces revenue growth.

Accounts receivable were 18.8 billion yuan, up 14.24% from the start of the year, a bit below revenue growth, indicating decent control over payment periods. Notes payable and accounts payable totaled 30.362 billion yuan, up 15.67% from the start of the year, keeping bargaining power with upstream stable.

Heavy Assets, Continuous Capacity Expansion

The company continues to ramp up capacity construction, with construction-in-progress reaching 21.04 billion yuan, up 42.16% from 14.799 billion at the start of the year. At the end of August, the company’s board approved new 20GWh battery base projects in Nanjing, Jiangsu and Wuhu, Anhui, each with individual investment not exceeding 4 billion yuan, for a total of 40GWh additional capacity.

Fixed assets balance was 28.376 billion yuan, down 5.47% from the start of the year mainly due to depreciation. In the first three quarters, the company spent 5.86 billion yuan in cash to acquire/build fixed and intangible assets, and investment payments were 3.982 billion yuan, with total investing cash outflow at 9.842 billion yuan, far exceeding operating cash inflow.

With the industry facing generally insufficient capacity utilization, the payback period and profitability certainty for such large-scale new capacity investments are questionable.

Cash Flow and Debt Pressure

Operating cash flow for the first three quarters was 457 million yuan, up 87.72% year-on-year, but only 1.55% of revenue scale, indicating clearly insufficient self-generating cash power. Cash collected from goods sold was 22.805 billion yuan, 77.3% of revenue, reflecting only average payment collection quality.

Financing cash inflow was 24.912 billion yuan, of which 22.064 billion was loans, and 2.113 billion was investment received (including 1.896 billion minority shareholder investment). Debt repayments amounted to 17.745 billion yuan, with interest and dividends paid at 1.401 billion, giving a net financing cash inflow of 3.809 billion yuan.

At end-Q3, short-term debt was 18.714 billion yuan, long-term debt 20.327 billion yuan, meaning total interest-bearing debt exceeded 39 billion yuan. Financial costs were 1.047 billion yuan, up 37.31% year-on-year, mainly due to interest expenses rising to 1.188 billion yuan. The asset-liability ratio was 71.72%, showing significant debt pressure.

Additionally, Volkswagen remains the largest shareholder with 24.29% of shares, Nanjing Guoxuan Holding holds 10.59%, while founder Li Chen and his son Li Chen jointly hold 7.26%. In the first three quarters, a 2024 dividend of 179 million yuan was implemented.

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