Financial Street (1476.HK) Q4 2024 Earnings Report

Hengtai Securities delivered a standout top-line rebound in QQ4 2024, with revenue of 697.1 million CNY up 67.3% year over year and operating income of 376.3 million CNY, yielding an operating margin of approximately 54%. Net income stood at 61.2 million CNY, with an EPS of 0.0235. The strong operating performance is underscored by a high gross margin (reported as 100% due to absent cost of revenue), suggesting a favorable mix and strong cost control in core lines. However, the company faces notable cash-flow headwinds: operating cash flow was negative at 497.8 million CNY and free cash flow was negative at 525.7 million CNY, despite positive net income. This divergence reflects substantial working-capital outflows and sizable other income/expense dynamics (total other income net of -341.6 million CNY) that may not fully reflect recurring cash-generating potential. The balance sheet shows solid liquidity with substantial cash and short-term investments, yet debt levels and some inconsistent accounting signals warrant a cautious stance. Relative valuation appears attractive on a price-to-book basis (~0.60x) and a-mid-20s price-to-earnings multiple, implying a discount to book value but also a need for clearer visibility on sustainable cash generation. Overall, the QQ4 results point to a company with a strong operating core but a cash-flow profile that requires improvement for a durable investment thesis in a regulated Chinese financial services environment.