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Hubei DinglongLtd’s Anemic Earnings Might Be Worse Than You Think.
The market wasn’t impressed with the soft earnings from Hubei Dinglong CO.,Ltd. (SZSE:300054) recently. Beyond the statutory profit, there are a few more reasons to be concerned. Let’s delve into the details.
For anyone who wants to understand Hubei DinglongLtd’s profit beyond the statutory numbers, it’s essential to note that during the last twelve months, statutory profit gained from CN¥53 million worth of unusual items. While higher profits generally leave us optimistic, it’s crucial to assess whether these boosts are sustainable. Significant unusual items are often not repeated, and that’s as expected. If Hubei DinglongLtd doesn’t see that contribution repeat, we’d expect its profit to drop over the current year.
Arguably, Hubei DinglongLtd’s true underlying earnings power might be less than its statutory profit. The decrease in profit margin (from 14% in FY 2022 to 8.3% in FY 2023) was primarily driven by higher expenses. Additionally, the earnings per share (EPS) declined over the last twelve months, which raises questions about the company’s potential.
While the company missed analyst forecasts with revenues of CN¥2.7 billion and an EPS of CN¥0.24, it’s essential to consider the ever-present specter of investment risk. We’ve identified one warning sign with Hubei DinglongLtd and understanding it should be part of your investment process.
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