Dahua Revenue Grows But Profits Down, Cause Unclear

By Isabella Cheng, Published Oct 20, 2020, 10:56am EDT (Info+)

While Dahua's overall revenue was up more than 12% in Q3 2020, a significant improvement from the first half of 2020, the company's operating profit is down.

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In this post, we examine Dahua's Q3 2020 financial disclosures and what this means for Dahua going forward, including:

  • Recovery continues as revenue grows
  • Profits attributable to shareholders surge due to chip subsidiary sale
  • Revenue up but operating profits down, reasons unclear
  • Decreasing operating profits partially explained by financial expenses and losses
  • Analysts say government spending recovery contributes to rising revenue
  • Fever camera demand slow down could contribute to stagnating profits
  • Internal management promotions
  • Market reaction

Recovery *********, ******* *****

*****'* ** **** ******* **** **.**% YoY ** ~*.* ******* *** (~$*** million ***). ** *** ***** **** of ****, ***** ***** *.**% ******** ** ************* ** *** **** **** ***** in ****, *** ******* *** ******** performance ** ** ****, *** ***** numbers **** *** ******* ****** ** to *** *********** ** *** ***** 3 ******** ** ****.

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**** ** * *********** ******** **** a ********% *** ******** ** ***** ** Q1 **** *** * *.**% ******** in ***** *** ** ****. ***** ***** *** **** ******* sales ****** *** ** **** *** last *** *****, ** **** ******** the ********.

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Profits ******** ***** ***** ***** ***** *********

*****'* ******* ************ ** ************ ** Q3 **** **** ** ********** ***.**% YoY ** ~*.* ******* *** (~$*** million ***), *** **** ***** ****** is *** ** *****'* **** ** its **** **********, ***** ********* ****.* ******* ***(~$*** ******* ***). ***** ******** ***** 941 ******* *** (~$*** *******) **** this ****, ***** *** ******** ** its ** **********. ********* *** ******* from *****'* *********** ** *****, *****'* profits **** ************* ****.

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Revenues ********** *** ********* ******* ****, ******* *******

*****'* ************ ****** ******** *** ********** operating ******* *** ******* ** ****** revenues ******* ******** ******* ** ****. However, **** ** *** *** ***** time ***** *** ******** ** ******* revenue *** ****** ************. ** ** 2020, ***** ******** * ******** ** sales *** ** ******** ** *******, which ** ******* ** ********* ***** usually ***** *******. ***** *** *** provide ** *********** *** **** ******* revenue *** ****** ******. *****'* ** results **** *** *** ******* ******** v. ******** ******** *** ***** ******* margins, ***** ***** **** **** ******** into *****'* ********* ***********.

Decreasing ********* ******* ********* ********* ** ********* ******** *** ******

*****'* ******* ********* ******* *** ********* be ********* ** *** ****** ********* expenses *** ****** ******** ** ** 2020. *****'* ********* ******** ********* ** 320.95% ***. ***** ********* **** ** "mainly *** ** *** ******** ** exchange ****** ** *** ****** ******** with *** **** ****** ** **** year." ***** **** ******** *********** ******* in ****** ********** ****** ** ** 2020 ******** ** ** ****, **** credit ********** ****** **** **** ******** from ** ******* *** ** *** million ***. ****** ********** ****** ***** when ******* ****** ** *** ** are *** **** ** ***. ******** exchange ************ ** ** *** ***** still **** ** ***** ** ********* give **** *********** ** ** *** Dahua ******** ******** ******* ******, *** did *** *** ************* ********* ******* grow ** ****.

Analysts *** ********** ******** ******** *********** ** ****** *******

******** *** ********* ** ***** ** driving ******* ******, ********** ** ********** projects *** **** *** ******** *** smart ****** **** **** ******* ** the ********* ** **** *** ** COVID-19**** ******* ** ***** ***** ****. ** ******* ********* ******** ****, ***** ********** *** ******** ** revenue ** ** **** ********* ** government ******* ****** *** ******** ******* on ****. *******, ***** **** ********** project ****** **** **** *****-****. ** the **** *** ******, ***** *** largely ********** *** ********, ******** **% ** *** ********** ****** domestic *********** *** ****** *-*** "****** ****" holiday.

Fever ****** ****** **** **** ***** ********** ** ********** *******

******* ***** ****** ****** ***** **** be ************ ** ********** *******. *****'* Q2 **** ****** *** ***** ****** performance **** **** ********** ******. *****'* margins, ********** *** ******** *******, *** significant ****** ** ** **** ******* of *** ****** **** ************* ***** camera *****. ***** **********.**% ***** ****** ******* ** ** 2020, ***** *** * * ***** increase **** ** ****. ******** ******* were **** ****** ** ** **** at **.**%, ********* ** ** ***** increase ***. **** ********* *** *********** and ****.

** ***** ****** ***** *** ********* to **** ** ** ****, ***** would ******** ** *** ********* *******. However, ***** ***** *** ********* *****, there *** ** ************ **** ** profits, ********* *** ***** ****** **** is *** ** ****** ** ** had **** ******* ** ****. ****** into ******* ******* ** ***** ** COVID-19 *** ******* ******* *** ***** products ********, ** ** ********** ** believe **** ***** ****** ***** ** Q3 **** **** *** ** ****** as **** ** **. *******, ***** has *** ******** ******* ********** ** their ***** ****** ***** ** ** 2020 *** *** ***** ******** * geographical ********* *** *** ***** ***** would **** **** ***** ** *** current ***** ** ***** ****** ***** and ******.

Dahua ********* *** ****** ********** ************

***** *********** *** ****** ********** ***************** ********* *** ** **** ******. All ** ***** ************ **** ******** promotions ****** **** ********** ******* ** from ***** *********. **** ** *** first **** ***** *** ********* *********** promotions ***** * **** **********, ********* the ***, ******** *** "******** *******" ** ** ****.

Dahua ***** ********* ** ** ************

*****'* ***** *** ******** ******* ********* in *** **** ********* *** ** financials ******* ** *******, ******* **. This ****** ** **** ******** **** and *************.

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Investor ****

** ** ***********, ***** *** *** yet **** ** ******** ***** ** hold ** ********* **** ********** *** performance ** ** ****. **** **** update **** ****** ** ********* ******* are ****** ** * ****** ****.

Comments (2)

According to Reuters, Operating Profit increased from 583 million CNY to 1,469 million CNY in Q3 2020.

002236.SZ - ZHEJIANG DAHUA TECHNOLOGY CO., LTD. Financials | Reuters

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Hi UM#1,

I see where this confusion comes from. Reuters reports Dahua's net profit attributable to shareholders as operating income/profit, however, the number Reuters uses includes Dahua's recent, one-time divestiture of Huatu Microchip which inflates Dahua's "profits" significantly.

As I mentioned in the report, Dahua made 941 million RMB from the complete sale of its microchip subsidiary, which was reported in Q3's financial results. In China, companies report one-time divestment incomes in their top-line profit. In the US, companies don't. What's important and telling of Dahua's sales performance is their net profit after deducting non-recurring gains and losses because it takes out the large, one time sums of money that a company may receive from selling part of its business. Reuters does not report this number (446 million RMB) anywhere.

English sources like Reuters and Bloomberg often have trouble translating Chinese financial concepts into an appropriate, completely synonymous English counterpart (for example, the net profit minus non-recurring gains and losses concept), so it's safest to look at the China company's official financial report, which is what IPVM defaults to as accurate. You can find an English version of Dahua's report here. Alternatively, one can look up and follow companies on the Shenzhen stock exchange as they issue reports and announcements after making an account here.

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