 2015-12-25 |
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Packaging distributor Xinzhu (3171) has seen stable revenue from Taiwan, but has been operating at a loss in various parts of China. This year, Xinzhu shifted its focus in China to large, key clients and reduced bad debt losses. Although overall consolidated revenue did not grow, profitability has significantly improved. For the first three quarters, revenue was NT$1.28 billion (down 1.7% year-over-year), operating profit was NT$79 million (up 63% year-over-year), and net profit after tax was NT$75 million (up 54.4% year-over-year), with EPS at NT$1.27. This amount has already surpassed the previous year's total EPS of NT$1.15. It is estimated that the fourth quarter will see China turning from a loss to a profit. With the addition of new large optical electronics clients in the first quarter of next year, and the clearance of bad debt and inventory issues, the Chinese market is expected to enter an "expansion phase," with estimated revenue and profit growth of over 20% for the year.
Xinzhu is part of the YC (4306) group, with its main brand "Bao Dashi" providing one-stop services through packaging distribution and logistics integration. Its revenue structure is currently about 74% from Taiwan, 23% from China, and 3% from cloud services. In its one-stop services, Xinzhu not only provides packaging products but also offers diverse services such as packaging design, process improvement, product logistics, and waste recycling to enhance product value. Cloud services mainly involve building online platforms for clients, with plans to transform into e-commerce in the future.
For the first three quarters, Xinzhu’s revenue was NT$1.28 billion (down 1.7% year-over-year), operating profit was NT$79 million (up 63% year-over-year), and net profit after tax was NT$75 million (up 54.4% year-over-year), with EPS at NT$1.27, surpassing last year’s total EPS of NT$1.15. This year, Xinzhu changed its strategy in China to focus on large key clients (previously, small clients led to significant bad debt). This shift caused a loss of small client orders and a decline in revenue, but the reduction in bad debt has led to noticeable improvements in profitability.
Previously, many regions in China were in a loss-making state, but some individual months started to show profits in the third quarter. The company expects to turn profitable in the fourth quarter. Looking ahead to next year, China is anticipated to enter an "expansion phase." Most bad debts and inventory have been cleared this year, and with internal disruptions resolved, revenue and profit are expected to grow by more than 20%. Additionally, the revenue contribution from China is expected to increase to over 30% next year.
Due to a reduction in orders in October and November, the company adjusted its inventory, resulting in a slight revenue decline compared to the previous year, with revenues of NT$1.42 billion (down 3.1%) and NT$1.53 billion (down 8.35%) respectively. Orders have stabilized since December. New large clients in the optical electronics industry in China will rely on Xinzhu for services ranging from material supply to application, including die-cutting, lamination, and secondary processing. After nearly a quarter of trial orders, shipments are expected to begin in the first quarter of next year, representing a significant new project for revenue growth.
In Taiwan, operations remain stable, with a focus on tape products, plastic bags, and molds, accounting for 60-70% of revenue. As more than half of the products are custom-made, the company maintains a high gross margin above 20%, outperforming peers. Next year, Xinzhu plans to further strengthen its product portfolio, including packaging materials for the optical electronics industry, conductive adhesives for the semiconductor industry, and hot-melt adhesives for 3D printing, aiming to improve profitability. |
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