Hengyang Petrochemical Logistics Limited: 1H2025 Financial Results Analysis

Hengyang Petrochemical Logistics Limited (“Hengyang” or “the Group”), listed on the Catalist Board of the Singapore Exchange, has released its unaudited condensed interim consolidated financial statements for the half-year ended 30 June 2025 (“1H2025”). The Group primarily holds a 41.64% interest in Jiangyin Foreversun Chemical Logistics Co., Ltd. (“China Holdco”), with all operations and results fundamentally derived from this joint venture in the People’s Republic of China (PRC).

Key Financial Metrics and Performance Overview

*QoQ data for net profit/EPS is not available as the company only reports half-yearly and full-year results.

Historical Performance and Notable Trends

• Significant earnings swing: The Group posted a net loss of RMB11.9 million in 1H2025, reversing from a profit of RMB3.4 million in 1H2024. This is largely due to a sharp decline in the share of results from its joint venture, China Holdco, which swung from a profit of RMB5.14 million to a loss of RMB10.38 million year-over-year.
• Revenue (Joint Venture): China Holdco Group’s revenue dropped 7.65% YoY to RMB266.7 million, with gross profit down a steeper 25.75% as cost pressures outpaced revenue contraction.
• Operating cash flow: The Group’s cash and cash equivalents decreased by RMB1.85 million in 1H2025 due to operating losses and continued outflows.
• No dividend payout: No dividend was declared for 1H2025 or the prior comparative period, as China Holdco did not declare any dividends upstream.

Exceptional Items, Related-Party Transactions, and Other Noteworthy Events

• Related-party transactions: During 1H2025, the joint venture provided RMB14.1 million in services to a related party, Jinqiao Chemical, which is controlled by the spouse of the Company’s CEO and controlling shareholder. This is a notable concentration and potential governance risk.
• Guarantees and Contingent Liabilities: The Group and its partners have given guarantees up to RMB282.5 million on China Holdco’s borrowings, with RMB201.8 million actually covered by guarantees as at 30 June 2025. Importantly, the China Holdco Group’s current liabilities exceed its current assets by RMB583.7 million, highlighting liquidity pressure at the joint venture level. However, there has been no default to date.
• Cash Restrictions: China Holdco’s cash balances are subject to PRC exchange controls, limiting the ability to remit capital out except via dividends (none paid).
• No impairment: The Group conducted a regular impairment review of the joint venture stake and found no impairment as at 1H2025.

Macroeconomic and Industry Developments

• Policy and market headwinds: The PRC government’s 14th Five-Year Plan supports the development of the Yangtze River Economic Belt, which may benefit Hengyang’s operations in the long run. However, the recent imposition of tariffs on Chinese goods by the United States creates industry uncertainty.
• New capacity online: The Wuhan and Tianjin projects completed new storage tank construction by early 2025 and have commenced operations, which could contribute to future revenue if utilization improves.
• Market demand volatility: Lower tank utilization rates and weaker demand for chemical and gas products have pressured revenue, especially at certain subsidiaries of China Holdco.

Directors’ Remuneration

• Employee benefit costs, including directors’ fees, were RMB1.27 million in 1H2025, essentially flat year-over-year.

Corporate Actions, Fundraising, and Share Capital

• No changes in share capital, treasury shares, or dilutive instruments since the last reporting period.
• No share buybacks, placements, or fundraising activities disclosed in the report.

Chairman’s Statement and Management Outlook

“According to the PRC’s 14th five-year (2021–2025) plans, the PRC government will more comprehensively promote the development of the Yangtze River Economic Belt… China Holdco Group will continue its efforts to increase the overall utilisation rate of its storage tanks and port terminals to improve its performance. Since February 2025, the United States has implemented a policy of imposing tariffs on Chinese goods, and the impact of this policy to the China Holdco Group’s industry and businesses remains uncertain. The China Holdco will closely monitor the development and actively take countermeasures.”

The chairman’s tone is measured, noting both long-term strategic opportunities and short-term uncertainties due to market and geopolitical challenges.

Conclusion and Investment Recommendations

Overall Assessment: The Group’s 1H2025 financial performance is weak, reflecting both operational and market headwinds. The swing to a net loss and the lack of dividends, combined with ongoing liquidity challenges at the joint venture level and external macroeconomic uncertainties (notably US tariffs), are significant concerns. While new capacity coming online may support future growth, near-term risks appear elevated.

• If you are currently holding this stock: Consider reducing or exiting your position unless you have a high risk tolerance and a long-term investment horizon. The lack of dividend yield, current losses, and balance sheet risks at the joint venture level all weigh against near-term upside. Monitor for signs of improved utilization and profitability at China Holdco before reassessing.
• If you are not currently holding this stock: It is advisable to stay on the sidelines until there is clearer evidence of recovery in earnings and cash flow, and a reduction in contingent liabilities and liquidity risk at the joint venture level.

Disclaimer: This analysis is based solely on information contained in the company’s 1H2025 financial report and does not constitute financial advice. Please conduct your own research or consult a licensed financial advisor before making any investment decisions.

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