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Yunnan Energy International Interim Report HY2025 · Investor Exchange

• 0:02
  Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
• 0:07
  Welcome back to the Deep Dive. Today, we're unraveling, well,
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  a truly fascinating corporate paradox from Yarnan Energy International Co.
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  Limited, that's Hong Kong stock code 1298, and Singapore stock code T43.
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  That's right. We're diving deep into their interim financial results,
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  the ones for the six months ending June 2030, 2025, and, you know,
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  setting them against the same period in 2024.
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  A direct comparison. Exactly. Yeah. And on the surface, their report shows this widening loss.
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  But if you dig just a little deeper, you find this really vibrant growth story
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  in one part of the business, but it's dramatically clashing with struggles in another.
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  So the real mission today is to connect those dots for you, figure out the why
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  behind these shifts, and get a clear peek into what this company is really planning.
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  Especially looking forward. Right, especially with their future,
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  particularly in the, well, the ambitious world of green energy.
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  Just for context, Yenon Energy International operates through two main bits.
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  There is a distribution business. That's your high-tech analytical lab life science equipment.
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  And then there's the supply chain business, trading diverse industrial and consumer products.
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  We're here to pull out not just the numbers, but the key strategic insights.
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  Maybe even some surprising takeaways that go beyond the headlines.
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  Yeah, financial reports, they can look like a dense jungle of numbers at first glance, can't they?
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  Definitely. But when we cut through that, they really reveal the heartbeat of
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  a company, its challenges, its successes, and crucially, its strategic direction.
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  So this deep dive, it's all about breaking down those details so you can really
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  understand what's going on and, more importantly, what it means for their long-term path.
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  Makes sense. We'll be connecting the dots, the individual figures,
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  to the bigger corporate story to give you that whole picture.
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  Okay, let's start at the top then, that immediate top line thing.
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  Looking at the group's overall financial headline, we see a pretty significant
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  increase in their loss for the period.
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  Can you walk us through what those numbers are telling us right off the bat? Sure.
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  So a key observation here is that the GWP's loss for the first half of 2025,
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  it did rise quite dramatically.
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  We're talking H&A $2.7 million, which is a really substantial jump from just
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  H&K better than $0.3 million in the same period back in 2024. Wow, yeah.
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  And that directly translated into a wider loss per share.
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  It expanded from 0.11 HK cents to almost a full HK cent, 0.96 HK cents. Right.
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  And if we link this to the bigger picture, the company itself,
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  they explicitly stated an overall deterioration in financial performance for HY 2025.
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  And they noted it was primarily due to operational pressures within their supply chain business.
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  Ah, okay. So that immediately signals, you know, a core area we need to look
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  at. That's a pretty stark shift in profitability then.
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  So beyond just that high-level number, what were the main things driving this
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  loss higher? What pushed it up?
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  Well, the biggest factor on the revenue side was a, well, a notable drop in
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  total revenue for HY 2025. It was down 30.3% to HK $152.5 million.
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  30%, that's substantial. It is. down from HK $218.8 million in HY 2024.
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  Now, the main driver for this wasn't like a slowdown everywhere.
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  It was a significant decrease in demand for specific agricultural commodities. Oh, interesting.
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  Which ones? Most notably, Panax
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  NotogenSing. And that sits squarely within their supply chain business.
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  Right. The traditional medicine component. Exactly. And as you'd expect,
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  the cost of sales also decreased, pretty much in line with that revenue reduction.
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  It's a sharp reminder that even specialized markets
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  like that aren't immune to demand shifts or market conditions
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  now this next bit is where it gets well
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  kind of paradoxical to me revenue drops significantly
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  like you said but the gross profit margin actually went up from 2.8 percent
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  in hy 2024 to 3.4 percent in hy 2025 how does that work how do we reconcile
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  those two things especially when the total gross profit amount still went down
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  by 17.7% to HK $5.1 million.
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  Yeah, that's a really crucial distinction, and it highlights how different segments
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  can paint, well, very different pictures inside the same company.
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  It's not just a numbers quirk.
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  It's a critical strategic signal.
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  The increase in the gross profit margin is mainly because of a shift in the mix of revenue.
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  A bigger slice of their revenue in HY 2025 came from the distribution business,
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  particularly in PRC markets. Ah, the higher tech side. Right.
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  And that segment consistently carries a relatively higher gross profit margin.
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  So while the total amount of gross profit decreased because of the struggles
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  in the larger supply chain business, the improved mix with more higher margin
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  sales helped lift the overall gross profit rate, the margin.
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  So it suggests maybe a strategic focus or perhaps just a fortunate outcome where
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  that higher value part is becoming more important.
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  Exactly. It suggests, you know, a higher value segment is starting to play a
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  more significant role, even if it's not quite big enough yet to offset the total
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  revenue drop from the other side of the house. That's a great insight into how
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  those internal shifts work.
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  Let's dive deeper into those two segments you mentioned. First,
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  the distribution business, the analytical instruments, medical equipment.
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  What happened there? Because it sounds like a very different story indeed.
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  Oh, it absolutely is. It's a story of, well, remarkable growth, actually.
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  The distribution business saw its revenue surge. We're talking 567.7% growth. Wow, 567 percent.
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  Yep, up to HK $20.7 million in HY 2025 from just HK $3.1 million in HY 2024.
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  Okay, what drove that massive jump? It was primarily driven by just more equipment
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  being delivered and accepted during the period.
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  And a key factor here was the group cleverly leveraging national subsidy policies,
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  policies for equipment replacement in grade 3A hospitals, specifically in Yunnan and Gizu provinces.
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  They were really successful in winning lots of bids for high-value medical devices,
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  things like color Doppler, ultrasound systems, ventilators. Bar positioning there.
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  It really demonstrates a clear ability to capitalize on those government initiatives
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  and market openings. That's phenomenal growth, a real standout.
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  But looking at it, this success in grade 3A hospitals, while impressive,
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  it does sound quite localized, right? Yuna Nengizu.
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  Is there anything in the report that suggests how sustainable this kind of rapid
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  growth is? or how they might replicate it beyond those specific regions,
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  those specific policies. Yeah.
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  Especially since, like you said, their focus on technical services seems key.
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  That's a really excellent point about sustainability and scalability.
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  The report does highlight that their whole approach from system design right
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  through to after-sales support, that's a critical differentiator.
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  It builds client trust, gets repeat business.
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  So while the initial surge, yes, it's linked to specific regional policies that.
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  Technical service capability, it suggests a pretty robust foundation for broader expansion.
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  But to your question, the report does indicate their future strategy for this
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  segment involves expanding significantly across Southwest China.
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  Okay, broader reach then. Yeah, leveraging their controlling shareholders' extensive network.
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  So that implies a plan to move beyond just that initial localized success.
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  Now, in stark contrast to that booming distribution business,
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  you have the supply chain side, dealing in commodities like Panax and Nodotunsen,
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  other industrial products.
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  Yeah, what happened there? Well, it saw a significant revenue decrease,
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  down 38.9%. It fell to HK $131.9 million from HK $215.7 million.
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  And this was directly linked, as we discussed, to that decreased demand for
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  agricultural commodities. It's a stark reminder of the volatility you get in
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  commodity trading compared to the more predictable service-based model of their distribution arm.
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  So putting it all together for the overall group performance,
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  that really robust growth in distribution, amazing as it was,
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  it just wasn't enough, was it?
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  No, not quite. Not enough to fully counter the decline and the lower profit
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  coming from the much larger traditionally supply chain business. That's the dynamic.
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  And this ultimately led to that overall increased loss for the group.
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  It's really a tale of two very different operational stories under one roof.
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  So that's the operational heart of it. a real split personality there.
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  But financial reports, they're never just about core ops, are they?
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  Never just that, no. What else shifted on the income and expense side that we
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  should know about? What did those changes tell us?
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  Well, interestingly, other income and gains, net, that actually increased by
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  a healthy 63.6% to HK $1.8 million.
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  Okay, where did that come from? It was significantly boosted by something new and quite interesting.
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  HK $644,000 in dividend income. Dividends.
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  From where? From their 6.67% equity investment in Daiyao Green Energy.
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  Ah, the green energy paying off already. Exactly. A tangible return from that
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  strategic long-term investment already coming through.
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  Now, on the expense side, selling and distribution costs went up by 80% to HK$1.8 million.
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  80%? Why so much? Mainly due to increased freight costs, particularly linked
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  to coal sales within the PRC.
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  Finance costs also rose, up 50% to HK$1.8 million. That was attributed mostly
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  to higher interest rates on loans. Makes sense in the current environment. It does.
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  But interestingly, there's a positive note. A reversal of impairment losses
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  on financial assets of HKCO.5 million dollars.
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  That was due to them receiving trade receivables that were previously outstanding.
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  Cleaning up the books a bit, collecting debts.
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  Exactly. A positive sign of successful collection efforts.
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  And stepping back again, looking at the overall financial position,
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  the balance sheet, what are the key things there that give us insight into the
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  company's stability and resources? Well, net current assets remain pretty stable, actually.
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  HK $122.4 million, which is only a slight dip from HK $123.1 million at the end of 2024.
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  So liquidity looks okay short-term? It suggests a pretty consistent short-term
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  liquidity position, yes.
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  Cash and bank balances stood at HK$61.4 million, and their current ratio stayed healthy at 1.6.
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  Which is generally seen as good. Generally a good indicator of their ability
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  to meet short-term obligations.
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  We also saw trade receivables decreased by HK$37.0 million down to HK$104.7 million.
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  And that reflects the supply chain slowdown?
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  Largely, yes. It reflects the decreased revenue in the supply chain business,
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  so less credit being extended for those sales.
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  And mirroring that, trade payables also decreased, reflecting lower procurement in that segment.
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  I did notice that significant and clearly strategic investment in Dio Green Energy.
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  You mentioned the dividend, but the investment itself, HK $52 million in equity,
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  plus another HK $11.368 million invested just in this half year.
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  That's a serious amount of capital going in that direction.
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  It is, and it's clearly a very deliberate move. The 6.67% stake in Dio Green
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  Energy, it's definitely a strategic long-term bet on green energy projects. It's already working.
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  Well, Dio Green Energy already has six photovoltaic solar power stations up
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  and running, which are generating that dividend income we just talked about. Right.
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  So this investment, it signals a proactive diversification into what is clearly
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  a high-growth sector. What's also interesting is that even with substantial
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  borrowings, they total HK$130.6 million, the group's gearing ratio actually improved. Improved?
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  How? It went from 93.7% down to 80.1%. This indicates a healthier debt-to-equity
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  position even with these new investments.
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  It speaks to some careful financial management alongside their strategic pivots.
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  Okay, so given all these moving parts, successes in distribution,
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  the definite challenges in supply chain, these new strategic green investments.
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  What's the outlook? What are their prospects and future plans?
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  How are they positioning themselves?
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  Well, the group is unequivocally committed, they say, to continuously increasing
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  its business scale, broadening its customer base, and enhancing profitability
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  across both businesses.
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  And they've outlined some very specific, quite actionable plans that speak directly
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  to the challenges and opportunities we've just been discussing.
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  So for the distribution business, the one that saw that really impressive growth,
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  What specifically are they planning there? How do they build on that success?
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  The plan is to expand significantly across southwest China, and they're planning
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  to smartly leverage the extensive network and resources of their controlling
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  shareholder, YEI Group. Makes sense to use those connections.
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  Absolutely. This includes actively participating in more public tenders for
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  high-end medical equipment in those grade 3A hospitals, expanding their direct
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  trade channels, and also refining customer credit assessment processes to manage risk better.
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  Any targets mentioned? Yes. The report states they've already accumulated RMB
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  17 million in sales contracts just for HY 2025.
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  And they're targeting an additional RMB 20 million in new contracts in the second half of 2025.
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  OK, so a clear growth path laid out there. Provides a clear roadmap for continued
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  growth in the higher margin area. Yes.
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  And what about the supply chain
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  business, the one that faced those significant headwinds this period?
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  What's the strategy to stabilize or, I guess, reinvigorate that segment?
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  They're definitely adjusting strategies there.
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  They're seeking more long-term supply agreements for key commodities,
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  coal, traditional Chinese medicine.
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  The idea being to stabilize revenue and cut down on that volatility.
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  Looking for stability. Right.
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  And crucially, they're also looking beyond just domestic markets now.
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  Internationally, they've launched an export business for a Laos photovoltaic project.
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  Interesting link to the green energy side. Mm-hmm. They've expanded silicone
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  wire trade in South Asia, including a successful 20-ton deal they've already done.
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  They've secured three-year supply orders for rice vermicelli going to Singapore,
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  and they're exploring beverage exports to Thailand.
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  So a real push for international diversification. It's a clear pivot towards
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  international diversification to try and offset those domestic demand shifts.
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  And they mentioned they have a seasoned management team led by Mr.
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  McCann with extensive international trade experience.
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  Which you'd certainly need for that kind of expansion. Absolutely crucial for
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  executing that ambitious global plan. That's a lot of international activity.
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  It does raise an important question about their new specific focus on international
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  energy project investment. How does that fit into the bigger strategic picture?
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  What's the long-term vision there beyond just the Dio Green Energy state?
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  Yeah, building on that successful experience with Dio Green Energy,
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  the group is actively researching green energy markets right across Southeast
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  Asia countries like Laos and Myanmar.
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  They're specifically focusing on renewables like photovoltaic and hydropower.
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  The vision seems to be leveraging the YEI groups, their parent companies,
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  established government resources, and extensive network in that region.
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  Using the state-owned connection.
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  The aim is to form synergies with existing energy infrastructure construction
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  supply chains. The goal?
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  To significantly increase installed capacity and enhance revenue from these
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  new green energy projects.
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  So it's not just a one-off investment. No, this isn't just about a single investment
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  stake. It looks like a strategic move to really diversify into a high-growth,
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  high-impact sector that aligns perfectly with global energy trends.
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  And they sound very confident that this diversification and internationalization
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  strategy will be a significant long-term value driver, moving them beyond the
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  immediate operational issues.
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  So wrapping this up, what does this all mean for you, the listener?
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  We've seen Union Energy International navigate, well, an undeniably mixed period financially.
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  You've got impressive targeted growth in distribution. Really impressive.
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  Beautifully counteracting significant declines in its traditionally larger supply chain business.
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  But the real story that seems to emerge from this deep dive isn't just about
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  the numbers themselves.
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  It's about the company's clear strategic pivot and, frankly,
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  ambitious plans for the future.
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  They're clearly looking beyond the immediate bumps, expanding internationally,
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  and making these significant strategic bets in the burgeoning green energy sector. Exactly.
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  The focus seems clearly on leveraging those strategic partnerships,
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  including, yes, their ultimate parent company and their season management expertise
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  to diversify revenue streams and enhance long-term value.
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  This strategy, it aims to build a more resilient, more growth-oriented company,
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  moving beyond the immediate challenges in any one single segment.
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  Okay, so here's a final provocative thought for you to mull over as we finish.
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  Given that Yunnan Energy International's parent company, YEI Group,
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  is a state-owned enterprise in the PRC. Right, that connect.
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  How might this influence the company's ability to secure these large-scale green
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  energy projects and international supply chain agreements,
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  especially in strategically important and rapidly developing regions like Southeast
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  Asia, where, let's face it, state-backed connections can be a very powerful asset indeed.
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  Something to think about. Thank you for joining us on this deep dive into Yunnan
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  Energy International Co.
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  Ltd. We hope this has given you a clearer, more informed, and perhaps even a
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  slightly surprising picture of a company definitely in transition.
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  Music.