The latest: Tat Hong Equipment Service Co., Ltd. (2153.HK), a tower crane service provider, issued a profit warning on Friday, forecasting a 45% to 55% drop in net profit for the financial year ending March this year compared with the previous year.
Looking up: The decline in the company’s earnings was not a result of a deterioration in the operating performance of the business, but rather the effect of accounting for the value of shares granted to counterparties in response to the contribution of senior management to the company.
Take Note: The announcement stated that the main reasons for the decline in earnings were the accounting for the value of shares granted under the share award scheme and higher financing costs.
Digging Deeper: The tower crane business operated by Tat Hong is an indispensable transportation tool for large civil engineering sites, as it can move building materials quickly in rising, traversing and crisscrossing patterns. At the backdrop of China’s goals of peak carbon emissions by 2030 and achieving carbon neutrality by 2060, it is likely to require many of these types of cranes to support the construction of necessary green energy sources like nuclear and wind power, allowing the company to expand its revenue streams. Tat Hong’s management said in its interim report in December last year it’s confident of achieving impressive results in the coming months with the decreasing impact of the Covid-19 epidemic and the recovery of the Chinese economy.
Market Reaction: Tat Hong’s share price was muted on Monday, closing 0.9% softer at HK$1.09 at the midday break. It now trades at the lower end of its 52-week range.
Translation by Jony Ho
To subscribe to Bamboo Works free weekly newsletter, click here