Hengyang Petrochemical Logistics Limited (SGX: 5PD) FY2025 Financial Analysis

Hengyang Petrochemical Logistics Limited (“Hengyang” or “the Group”) has released its unaudited condensed interim consolidated financial statements for the financial year ended 31 December 2025. The following analysis consolidates key financial metrics, performance trends, significant events, and provides an outlook and recommendations for investors based strictly on the published report.

Key Financial Metrics and Performance Summary

Full-Year Comparison (FY2025 vs FY2024)

Historical Performance and Trends

The Group reported a sharp swing from a profit of RMB 461,000 in FY2024 to a net loss of RMB 45.26 million in FY2025. This drastic deterioration in performance is mainly attributed to the significant loss reported by its 41.64%-owned joint venture, Jiangyin Foreversun Chemical Logistics Co., Ltd. (“China Holdco”). The share of results from China Holdco swung from a profit of RMB 5.05 million in FY2024 to a loss of RMB 40.89 million in FY2025.

Net asset value per share declined by 8.2% year-on-year. Meanwhile, the Group continues to report zero revenue at the consolidated level, as all operating activity is reflected through equity-accounted contributions from the joint venture.

Exceptional Items and Significant Events

• SDN List Inclusion: On 16 October 2025, Hengyang, China Holdco, and Mr. Gu Wenlong were added to the U.S. Specially Designated Nationals List (“SDN List”), which led to a significant loss of business and customer caution, particularly for export-related storage and transport services. This event caused a direct hit to the Group’s revenue-generating ability through its joint venture and is cited as a major reason for the loss in FY2025.
• No Dividend: No dividend was declared for FY2025 or FY2024, reflecting the weak financial performance and uncertainty.
• Impairment: A RMB 16.69 million asset impairment was recognized by China Holdco related to goodwill from the acquisition of Nanrong subsidiaries. However, Hengyang itself did not recognize any impairment on its investment in the joint venture.
• Related Party Transactions: The Group’s joint venture conducted RMB 25.17 million of business with Jinqiao Chemical, a company related to the controlling shareholder’s family.
• Cash Flow: Group cash and cash equivalents declined from RMB 19.25 million to RMB 15.15 million, mainly due to operating losses.

Directors’ Pay/Remuneration

Employee benefit costs (inclusive of directors’ fees) at the Group level were RMB 3.08 million in FY2025, down from RMB 2.89 million in FY2024.

Balance Sheet and Financial Position

• Investment in Joint Venture: The carrying value of Hengyang’s stake in China Holdco fell from RMB 532.3 million to RMB 491.4 million, solely due to the share of loss from the joint venture.
• Gearing and Debt: The Group itself has no external borrowings, but it provides guarantees for China Holdco’s borrowings (RMB 196.3 million as of end-2025), which represents a contingent liability.
• Liquidity: China Holdco faces a working capital deficit (current liabilities exceed assets by RMB 561.98 million) and has RMB 438.85 million of borrowings due within 12 months. However, the Group believes there is no imminent risk of credit loss from its guarantees due to asset cover and no defaults to date.

Forecasts, Risks, and Outlook

• The Group expects business conditions to remain challenging in the next 12 months due to ongoing effects of the SDN List inclusion and the uncertain macroeconomic and policy environment (including U.S.-China tariffs).
• Management is pursuing removal from the SDN List and has implemented cost-cutting and capital expenditure reductions to conserve cash.
• There is no guidance for a dividend in the foreseeable future, and investment in new projects is temporarily suspended.

Chairman’s Statement and Tone

“The inclusion of the Company, the China Holdco and Mr Gu on the SDN List has adversely affected the Group’s revenue as customers have adopted a more cautious approach in their engagements with the Group amid uncertainty regarding the timeline for removal from the SDN List. The lack of clarity over the duration and outcome of the SDN Inclusion continues to affect business visibility. The Group is exploring available avenues to seek removal from the SDN List and has also implemented a series of prudent cost management measures to mitigate the impact on its financial performance. These include the temporary suspension of new investments, the reduction or deferral of non-essential capital expenditures, and the optimisation of labour-related costs through enhanced workforce management. Given the prevailing uncertainties, the Group expects business conditions to remain challenging over the next 12 months and will continue to monitor developments closely, while maintaining a disciplined approach to cost management and operational efficiency.”

The tone of the statement is cautious and defensive, highlighting uncertainty and risk management rather than growth or recovery.

Investment Recommendations

If You Are Currently Holding This Stock:

• Given the severe deterioration in underlying performance, negative earnings, lack of dividend, and high uncertainty due to SDN List inclusion, investors should consider whether their investment thesis still holds. The immediate outlook is weak, and recovery is highly uncertain and dependent on external factors (e.g., removal from the SDN List).
• If you have a low risk appetite or require income/dividends, consider reducing your position. If you are willing to wait for a possible recovery (contingent on SDN List removal), closely monitor developments, as further downside is possible if operational cash flows continue to deteriorate or contingent liabilities crystallize.

If You Are Not Currently Holding This Stock:

• Given the current lack of visibility, negative financial performance, and significant event risk tied to the SDN List, there is little reason to initiate a position at this time. The risk/reward profile does not favor new investment unless and until there is clear evidence of removal from the SDN List and/or a material improvement in the joint venture’s operating environment.

Disclaimer

This analysis is based exclusively on information contained in the company’s official published report. It does not constitute investment advice or a recommendation to buy or sell securities. Investors should conduct their own due diligence and consult their financial advisors before making any investment decisions.

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