How Danhua Chemical Technology Can Solve Its Expenses Issues
This article focuses on the performance of the company and possible ways to solve the expenses issues.
The profile of the company:
Danhua Chemical Technology Co. Ltd. [600844:CH] is a Chinese based chemical company that focuses mainly in the manufacturing, marketing and distribution of different kinds of chemical products. Some of the products that are been produced and marketed by the company are ethylene glycol, oxalic acid, and catalytic agents. Most of the chemical products that are been produced by the company are vastly used in so many fields such as polyester, pharmaceuticals and rare earths. The company also engages in other businesses such as the manufacturing of copper palladium powder alloy, activated carbon and others. The Company conducts its business activities within the Chinese domestic region and oversea regions with huge exportation rate. The company was formed and issued a business license on April 1993 while its headquarter is situated at Zhenjiang, China. The company is headed by Hualong Zhang with up to 1,202 other employees currently working for the company
Previous annual financial performances of the company:
A glance at the financial performance reports of the company for the Fy20 period, highlights strong decrease in most of the major financial indicators. According to the financial data that was showcased by reuters, some of the major financial indicators such as total revenue, net profit and total debt performed as follows;
Total revenue: The financial report of the company for the Fy20 period reveals that the total revenue generated from business during that period significantly reduced to about CNY1.07 billion which represents a decrease by 12.29% year-on-year when compared and analyzed from the CNY1.22 billion that was reported in the previous year’s financial result.
Net profit: The financial data of the company targeting the Fy20 period also showed that the net profit during that period also decreased to CNY86.86 million which represents an increase by 89.43% year-on-year when compared and analyzed from the CNY9.18 million that was reported in the previous year’s financial result.
Total debt: The financial report of the company posted by reuters also highlighted to that the total debt accumulated by the company significantly amounted to CNY448.00 million which represents an increase by 31.36% year-on-year when compared and analyzed from the CNY307.49 million that was reported in the previous year’s financial result.
The company’s performance in the Chinese stock market:
From the report derived from reuters platform, the stock of Danhua Chemical Technology Co. Ltd. [600844:CH] is traded at about CNY4.98 per stock which represents a 24 hours price decrease by 6.74% as compared to the price as at same time on yesterday. The price of the stock also trends on a 12 months price increment by 8.55% as compared to the price of the stock as at same period last year. The stock of the company also surges the market with a 52-weeks high price of about CNY6.30 per stock and 52-weeks low price of about CNY2.52 per stock. The annual price to sale ratio (PSR) of the stock amounted to about 4.03x due to the company’s market capitalization of about CNY4.33 billion and the total revenue generated from business in the Fy20 period which amounts to about CNY1.07 billion. The decreased revenue in the FY20 took part in fostering the slightly reduced PSR of the company’s stock.
How to solve the problem of high expenses rate:
A look at the financial performance reports of the company for the past three years shows that there is consistent and steady fall in most of the major financial indicators of each of the report.
The company has a long track record of high expenses rate incurred during business activities any period which accounts to more than 85% of the total quota from the total revenue generated from business during that period. However, there maybe a way to alleviate these kinds of business challenges.
1. The company should pay their invoices on time.
2. The company should reduce inventory level.
3. The company should consider the use of internet marketing.
4. The company should hire interns.
Sources:
https://www.marketscreener.com/quote/stock/DANHUA-CHEMICAL-TECHNOLOG-9949962/company/
https://www.reuters.com/companies/600844.SS/financials
https://www.bloomberg.com/profile/company/600844:CH
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