Megain faces profit plunge
August 28, 2024
Megain Holding reports a significant 2023 profit drop and struggles with intense market competition and rising costs.
Megain Holding (Cayman) Co., Ltd., the Zhuhai-based designer of chips for third-party ink and toner cartridges, reported in April that 2023 was a challenging fiscal year. This highlights the continued difficulties faced by the company amidst intense market competition.
The company’s annual revenue saw a slight decline of 0.6%, falling to approximately RMB172.4 million (€22.4 million/ $24.0 million), down from RMB173.4 million (€22.6 million/ $24.2 million) in 2022. However, the more concerning figures came from the company’s profitability metrics.
Gross profit plummeted by 26.1% to RMB67.0 million (€8.7 million/ $9.3 million), with gross profit margins shrinking from 52.3% in 2022 to 38.9% in 2023. This steep decline was primarily attributed to increased costs, particularly in direct materials like semi-finished semiconductors, which are critical for producing customised chips.
Net profit after tax experienced an even sharper drop, falling 48.3% from RMB44.9 million (€5.8 million/ $6.2 million) in 2022 to just RMB23.2 million (€3.0 million/ $3.2 million) in 2023. The company’s basic earnings per share reflected this decline, decreasing from RMB8.7 cents (€0.011/ $0.012) to RMB4.5 cents (€0.006/ $0.006). In response to the reduced profitability, the board recommended a significantly lower final dividend of RMB1.79 cents (€0.002/ $0.002) per share, down from RMB3.46 cents (€0.005/ $0.005) the previous year.
Despite these financial setbacks, Megain maintained a stable financial position with net current assets of RMB345.6 million (€44.8 million/ $48.0 million) by the end of 2023, only slightly higher than the RMB345.0 million (€44.7 million/ $47.9 million) reported in the previous year. The company also successfully eliminated its bank borrowings, ending the year with a gearing ratio of 0.0%, indicating a solid balance sheet despite the operational challenges.
On the 20th of August, the company issued a profit warning. The company forecasted a further significant decrease in net profit for the first half of 2024, potentially dropping by as much as 94% to 99% compared to the same period in 2023. The company has attributed these anticipated losses to continued aggressive pricing by competitors and a challenging market environment.
Megain’s board is scheduled to meet on 29 August 2024, to review the interim results for the six months ending 30 June 2024
Megain has expressed a cautiously optimistic outlook. It plans to introduce more new models of compatible cartridge chips and strengthen its position in the growing IoT chip market.
Categories : City News
Tags : Business Financials Megain Warning
