GOTION's Q3 net profit surged by 1434.42%, CHERY's IPO boosts book profits | Financial Report Insights

GOTION's net profit attributable to shareholders for the third quarter reached 2.167 billion yuan, a year-on-year surge of 1434%, driven by significant changes in the fair value of its early holdings in CHERY AUTO due to its listing on the Hong Kong stock exchange.

On Friday, GOTION released its third-quarter financial report, highlighting the following key points:

• Q3 single-quarter revenue of 10.114 billion yuan, a year-on-year increase of 20.68%; revenue for the first three quarters reached 29.508 billion yuan, a year-on-year increase of 17.21%
• Q3 net profit attributable to shareholders of 2.167 billion yuan, a year-on-year increase of 1434%, primarily contributed by the fair value changes from CHERY AUTO's Hong Kong listing, with non-recurring gains and losses amounting to 2.154 billion yuan; net profit attributable to shareholders for the first three quarters was 2.533 billion yuan, a year-on-year increase of 514.35%
• Net profit attributable to shareholders after deducting non-recurring items was only 12.51 million yuan, a year-on-year increase of 54%.
• Inventory increased by 65% year-on-year to 11.746 billion yuan, indicating an expansion in stockpiling.
• Construction in progress reached 21.040 billion yuan, up 42% from the beginning of the year, with two new 20GWh battery base projects, each with an investment not exceeding 4 billion yuan.
• Operating cash flow was 457 million yuan, a year-on-year increase of 88%, but still significantly lower than the revenue scale; cash outflow from investment activities was 5.771 billion yuan.

CHERY's Listing Achieves Book Profit

Non-recurring gains and losses reached 2.154 billion yuan, with fair value change gains of 2.326 billion yuan. This means that if investment income and various subsidies are excluded, the company's net profit attributable to shareholders after deducting non-recurring items for the third quarter was only 12.51 million yuan.

For the first three quarters, the cumulative net profit attributable to shareholders after deducting non-recurring items was 85.38 million yuan, a year-on-year increase of 49.33%, compared to the asset scale of over 100 billion yuan and nearly 30 billion in revenue.

Other non-current financial assets increased from 1.571 billion yuan at the beginning of the year to 3.444 billion yuan, an increase of 119%, which is precisely this part of the asset's fair value changes that supported the profit statement.

Scale Expansion and Inventory Backlog Coexist

The performance on the revenue side was relatively stable. Revenue for the first three quarters reached 29.508 billion yuan, a year-on-year increase of 17.21%, with third-quarter single-quarter revenue of 10.114 billion yuan, a year-on-year increase of 20.68%. The growth rate is not outstanding in the industry, but at least it maintained positive growth.

The rapid expansion of inventory scale. By the end of the third quarter, the inventory balance was 11.746 billion yuan, a significant increase of 64.94% compared to 7.121 billion yuan at the beginning of the year. The company explained this as "increased sales scale and increased inventory reserves," but the inventory growth rate far exceeded the revenue growth rate.

Accounts receivable stood at 18.8 billion yuan, an increase of 14.24% from the beginning of the year, slightly lower than the revenue growth rate, with acceptable control over the billing period. The total of notes payable and accounts payable was 30.362 billion yuan, an increase of 15.67% from the beginning of the year, with basic stability in bargaining power with upstream suppliers.

Heavy Asset Capacity Expansion Continues to Advance

The company continues to increase its capacity construction, with ongoing projects reaching 21.04 billion yuan, a growth of 42.16% compared to the beginning of the year at 14.799 billion yuan. At the end of August, the company resolved through the board of directors to invest in the construction of 20GWh battery bases in Nanjing, Jiangsu, and Wuhu, Anhui, with each investment not exceeding 4 billion yuan, totaling an additional capacity of 40GWh.

The balance of fixed assets is 28.376 billion yuan, a slight decrease of 5.47% compared to the beginning of the year, mainly due to depreciation. In the first three quarters, cash payments for the purchase of fixed assets and intangible assets amounted to 5.860 billion yuan, with cash payments for investments at 3.982 billion yuan, resulting in total cash outflows from investment activities of 9.842 billion yuan, far exceeding cash inflows from operating activities.

In the context of generally insufficient industry capacity utilization, the return cycle and profitability certainty of large-scale new capacity investments are in doubt.

Cash Flow and Debt Pressure

In the first three quarters, the net cash flow from operating activities was 457 million yuan, a year-on-year increase of 87.72%, but only 1.55% of the revenue scale, indicating a significant lack of self-sustaining ability. Cash received from sales of goods was 22.805 billion yuan, accounting for 77.3% of revenue, with average collection quality.

Cash inflows from financing activities amounted to 24.912 billion yuan, including loans obtained of 22.064 billion yuan and investments absorbed of 2.113 billion yuan (including minority shareholder investments of 1.896 billion yuan). Debt repayments totaled 17.745 billion yuan, with interest and dividends paid at 1.401 billion yuan, resulting in a net cash flow from financing activities of 3.809 billion yuan.

At the end of the third quarter, short-term loans amounted to 18.714 billion yuan, long-term loans to 20.327 billion yuan, with total interest-bearing liabilities exceeding 39 billion yuan. Financial expenses were 1.047 billion yuan, a year-on-year increase of 37.31%, mainly due to interest expenses rising to 1.188 billion yuan. The debt-to-asset ratio is 71.72%, indicating significant debt pressure.

In addition, Volkswagen holds a 24.29% stake, maintaining its position as the largest shareholder, while Nanjing Guoxuan Holdings holds 10.59%, and founder Li Zhen and his son Li Chen together hold 7.26%. In the first three quarters, a dividend of 179 million yuan for the 2024 fiscal year was implemented