Zhongce Rubber’s first quarterly report after listing is a strong start: Q3 net profit surged 76.6%, overseas expansion accelerates, exchange gains boost gross profit｜Financial Report Watch

Zhongce Rubber’s first quarterly report after listing is a strong start: Q3 net profit surged 76.6%, overseas expansion accelerates, exchange gains boost gross profit｜Financial Report Watch

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Against the backdrop of sluggish overall demand in the rubber industry and increased volatility in raw material prices, Zhongce Rubber delivered a remarkable first quarterly report after its listing.

On the 20th, the company released its third-quarter report, showing double-digit growth in both revenue and net profit for the third quarter. Revenue increased by nearly 10% year-on-year, and net profit surged by 76%, with the company’s profitability significantly enhanced. With a year-on-year improvement in gross profit margin, Zhongce Rubber, amid accelerated expansion in overseas market share and increased foreign exchange risks, managed to substantially reduce foreign exchange losses through strong financial management, becoming the core driver for profit growth.

Key points are as follows:

Strong financial performance: Third-quarter revenue was 11.83 billion yuan, up 9.77% year-on-year; net profit was 1.19 billion yuan, up 76.56% year-on-year; cumulative revenue for the first three quarters was 33.68 billion yuan, up 14.98% year-on-year, and net profit was 3.51 billion yuan, up 9.30% year-on-year.Significantly improved profitability: Q3 gross profit margin improved year-on-year, and the substantial decline in foreign exchange losses became a core driver of profit growth.Cash flow under pressure: Net operating cash flow for the first three quarters was 830 million yuan, a sharp drop of 62.01% year-on-year, mainly due to a significant increase in procurement expenditures.Accelerated expansion: Total assets reached 51.08 billion yuan, up 13.96% from the beginning of the year; projects under construction amounted to 4.35 billion yuan, doubling from the beginning of the year, indicating accelerated capacity expansion.Change in equity structure: Equity attributable to shareholders was 24.14 billion yuan, an increase of 38.14% from the beginning of the year, mainly benefiting from profit accumulation and increased capital reserves.

Gross profit margin improvement combined with FX gains; profit growth rate far exceeds revenue

Zhongce Rubber delivered an impressive quarterly result in the third quarter. Single-quarter net profit was 1.19 billion yuan, soaring by 76.56% year-on-year, far outpacing the 9.77% increase in revenue, indicating a clear improvement in profitability. Cumulative revenue for the first three quarters was 33.68 billion yuan, and net profit was 3.51 billion yuan, with basic earnings per share at 4.25 yuan, up 4.17% year-on-year.

Two core drivers are behind this divergence between profit and revenue growth. First, the company’s gross profit margin improved compared to the same period last year. Operating costs for the first three quarters amounted to 26.74 billion yuan, a year-on-year increase of 16.07%, lower than the revenue growth rate of 14.98%, showing progress in product structure optimization and cost control.

Second, the sharp reduction in foreign exchange losses contributed significantly to profits. Financial expenses were 282 million yuan, and while interest expenses stood at 239 million yuan, the overall financial expenses dropped significantly from 305 million yuan in the same period last year.

It is also worth noting that net profit excluding non-recurring items grew by 80.52%, higher than the overall net profit growth rate, reaching 1.16 billion yuan, indicating a real improvement in the company’s core business profitability rather than relying on one-off gains.

However, despite the impressive profit figures, the cash flow situation appears rather awkward. Net operating cash flow for the first three quarters was only 830 million yuan, plunging by 62.01% year-on-year and forming a sharp contrast with the net profit of 3.51 billion yuan. This divergence mainly stems from "cash paid for goods and services," which reached 23.499 billion yuan, skyrocketing by 51.1% year-on-year, far outpacing revenue growth.

This phenomenon may reflect several issues: first, the company may have stockpiled inventory on a large scale to cope with demand growth or raw material price volatility; second, there is growing pressure in accounts receivable management. Data show that accounts receivable reached 7.71 billion yuan, up 27.8% from the beginning of the year, and notes receivable hit 2.09 billion yuan, up 41.7%. Although the company’s revenue recognition scale has expanded, cash recovery efficiency has clearly declined.

Ending cash and cash equivalents stood at 5.29 billion yuan, up 35.7% from the beginning of the year, but this was mainly due to financing activities—net cash inflow from financing activities in the first three quarters was 2.81 billion yuan, including 3.93 billion yuan from equity financing. This means that the company’s cash generation ability from operations is actually weakening.

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