Highway Holdings Limited (HIHO) Bundle
Understanding Highway Holdings Limited (HIHO) Revenue Streams
Understanding Highway Holdings Limited’s Revenue Streams
The primary revenue sources for Highway Holdings Limited consist of manufacturing quality parts and products primarily for blue-chip equipment manufacturers. The company operates through facilities located in Yangon, Myanmar, and Shenzhen, China.
Revenue Breakdown by Products and Services
In the most recent quarter ended September 30, 2024, the company reported net sales of $2,117,000, representing a significant increase from $1,322,000 in the same quarter of the previous year. For the six months ended September 30, 2024, net sales totaled $3,996,000, up from $2,669,000 year-over-year.
| Period | Net Sales | Year-over-Year Growth |
|---|---|---|
| Q2 2024 | $2,117,000 | 60.1% |
| First Half 2024 | $3,996,000 | 49.6% |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate for the second quarter of fiscal year 2025 was 60.1%. The growth for the first half of fiscal 2025 was 49.6%.
Gross Profit Analysis
Gross profit for the second quarter of fiscal year 2025 was reported at $834,000, compared to $383,000 in the same quarter the previous year. For the first half of fiscal year 2025, gross profit was $1,495,000, up from $760,000 year-over-year.
| Metric | Q2 2024 | Q2 2023 | First Half 2024 | First Half 2023 |
|---|---|---|---|---|
| Gross Profit | $834,000 | $383,000 | $1,495,000 | $760,000 | Gross Profit Margin | 39.4% | 29.0% | 37.4% | 28.5% |
Contribution of Different Business Segments
The company’s revenue is largely derived from manufacturing operations, with significant contributions from both existing products and new projects. The ongoing development of new products is expected to enhance revenue streams further.
Significant Changes in Revenue Streams
The most notable change in revenue streams includes a shift towards increased production capacity, which is anticipated to commence with the new motor project in the upcoming quarters. The company has indicated that production is expected to start in the fiscal third quarter of 2025, with a ramp-up in the fiscal fourth quarter.
Overall, Highway Holdings Limited has demonstrated substantial revenue growth, indicating a positive trend in its financial health as of 2024.
A Deep Dive into Highway Holdings Limited (HIHO) Profitability
Profitability Metrics
The profitability of the company can be assessed through various metrics, including gross profit, operating profit, and net profit margins. Here are the key insights reflecting the company's financial health for the second quarter of fiscal year 2025.
Gross Profit, Operating Profit, and Net Profit Margins
For the second quarter of fiscal year 2025, the company reported:
- Net Sales: $2,117,000
- Cost of Sales: $1,283,000
- Gross Profit: $834,000
- Gross Profit Margin: 39.4%
- Operating Income: $110,000
- Net Income: $231,000
- Net Profit Margin: 10.9%
The gross profit for the first half of fiscal year 2025 was $1,495,000, with a gross profit margin of 37.4%. The net income for the first half of fiscal year 2025 was $329,000, reflecting a net profit margin of 8.2%.
Trends in Profitability Over Time
When comparing the second quarter of fiscal year 2025 to the same period in the previous year, the company experienced significant growth:
- Year-over-Year Revenue Growth: 60.1%
- Year-over-Year Gross Profit Growth: 117.8%
- Year-over-Year Net Income Growth: 8.5% (from $213,000 to $231,000)
Comparison of Profitability Ratios with Industry Averages
Comparatively, the company's gross profit margin of 39.4% exceeds the industry average of approximately 30%. The net profit margin of 10.9% is also above the industry average of around 5%. This indicates a stronger profitability position relative to its peers.
Analysis of Operational Efficiency
The operational efficiency can be assessed through cost management and gross margin trends:
- Selling, General, and Administrative Expenses (SG&A): Increased to $724,000 in Q2 2025 from $272,000 in Q2 2024.
- SG&A as a Percentage of Sales: 34.2% in Q2 2025 compared to 20.6% in Q2 2024.
The increase in SG&A expenses is largely attributable to the previous year's bad debt provision reversal, indicating a focus on maintaining operational efficiency while expanding revenue.
| Metric | Q2 2025 | Q2 2024 | Change (%) |
|---|---|---|---|
| Net Sales | $2,117,000 | $1,322,000 | 60.1% |
| Gross Profit | $834,000 | $383,000 | 117.8% |
| SG&A Expenses | $724,000 | $272,000 | 166.2% |
| Operating Income | $110,000 | $111,000 | -0.9% |
| Net Income | $231,000 | $213,000 | 8.5% |
Overall, the company's financial metrics indicate a robust recovery trajectory, with significant improvements in gross and net profit margins, alongside effective cost management strategies.
Debt vs. Equity: How Highway Holdings Limited (HIHO) Finances Its Growth
Debt vs. Equity: How Highway Holdings Limited Finances Its Growth
As of September 30, 2024, Highway Holdings Limited reported total assets of $11.0 million and total liabilities of $4.3 million, resulting in a total shareholders’ equity of $6.8 million.
Overview of the Company's Debt Levels
The company’s current liabilities include accounts payable of $1.0 million, operating lease liabilities of $621,000, and other accrued expenses totaling $1.6 million. The long-term liabilities primarily consist of non-current operating lease liabilities amounting to $507,000.
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio for Highway Holdings Limited is calculated as follows:
| Debt Type | Amount ($) |
|---|---|
| Total Liabilities | 4,277,000 |
| Total Shareholders' Equity | 6,767,000 |
| Debt-to-Equity Ratio | 0.63 |
This ratio indicates a relatively low level of debt compared to equity, which is favorable when compared to the industry average debt-to-equity ratio of approximately 1.0.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
Highway Holdings Limited has not disclosed any recent debt issuances or refinancing activities in the latest financial reports. Its credit rating remains stable, reflecting its manageable debt levels and strong cash position.
Balancing Between Debt Financing and Equity Funding
The company maintains a strategic balance between debt and equity financing. As of the latest report, cash and cash equivalents stood at $5.6 million, exceeding both short- and long-term liabilities by approximately $1.4 million. This strong cash position allows the company to support its operational needs without relying heavily on debt financing.
Overall, Highway Holdings Limited demonstrates a prudent approach to managing its debt and equity structure, ensuring financial health while pursuing growth opportunities.
Assessing Highway Holdings Limited (HIHO) Liquidity
Assessing Highway Holdings Limited's Liquidity
Current Ratio: As of September 30, 2024, the current ratio for Highway Holdings Limited was calculated as follows:
| Current Assets | Current Liabilities | Current Ratio |
|---|---|---|
| $9,537,000 | $3,730,000 | 2.56 |
The current ratio indicates a strong liquidity position, as the company has $2.56 in current assets for every dollar of current liabilities. This suggests that the company can easily cover its short-term obligations.
Quick Ratio:
The quick ratio, which excludes inventories from current assets, was calculated as follows:
| Quick Assets | Current Liabilities | Quick Ratio |
|---|---|---|
| $7,752,000 | $3,730,000 | 2.08 |
A quick ratio of 2.08 further reinforces the company’s solid liquidity position, indicating that even without selling inventory, the company can meet its short-term liabilities comfortably.
Analysis of Working Capital Trends:
Working capital, calculated as current assets minus current liabilities, is as follows:
| Current Assets | Current Liabilities | Working Capital |
|---|---|---|
| $9,537,000 | $3,730,000 | $5,807,000 |
This positive working capital trend indicates that the company has sufficient short-term assets to cover its short-term liabilities, which is crucial for operational stability.
Cash Flow Statements Overview:
For the six months ended September 30, 2024, the cash flow statements show the following trends:
| Cash Flow Type | Amount |
|---|---|
| Operating Cash Flow | $1,200,000 |
| Investing Cash Flow | ($300,000) |
| Financing Cash Flow | ($600,000) |
The operating cash flow is strong, indicating that the company is generating sufficient cash from its core operations. The negative investing cash flow reflects ongoing investments in growth, while the financing cash flow indicates repayments or distributions that are part of the company’s capital management strategy.
Potential Liquidity Concerns or Strengths:
With cash and cash equivalents totaling $5,614,000, the company exceeds its short- and long-term liabilities by approximately $1,400,000. This net cash positive position suggests strong financial health. However, the company must continue to monitor its operating environment and potential external risks that may impact liquidity.
Overall, the liquidity and solvency metrics indicate that Highway Holdings Limited is well-positioned to meet its obligations and invest in future growth opportunities.
Is Highway Holdings Limited (HIHO) Overvalued or Undervalued?
Valuation Analysis
As of 2024, the financial health of Highway Holdings Limited can be assessed through various valuation metrics, including Price-to-Earnings (P/E) ratio, Price-to-Book (P/B) ratio, and Enterprise Value-to-EBITDA (EV/EBITDA) ratio.
Price-to-Earnings (P/E) Ratio
The current stock price is approximately $1.28 per share. With a diluted earnings per share of $0.08 for the most recent fiscal year, the P/E ratio is calculated as follows:
P/E Ratio = Stock Price / Earnings per Share = $1.28 / $0.08 = 16
Price-to-Book (P/B) Ratio
The book value per share is approximately $1.54 based on total shareholders’ equity of $6.8 million divided by the weighted average number of shares outstanding of 4.4 million. The P/B ratio is:
P/B Ratio = Stock Price / Book Value per Share = $1.28 / $1.54 ≈ 0.83
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value can be calculated as follows:
Enterprise Value = Market Capitalization + Total Debt - Cash = ($1.28 4.4 million = $5.632 million) + $0 - $5.614 million = $0.018 million
With EBITDA for the last fiscal year reported as approximately $1.495 million, the EV/EBITDA ratio is:
EV/EBITDA Ratio = Enterprise Value / EBITDA = $0.018 million / $1.495 million ≈ 0.012
Stock Price Trends
Over the last 12 months, the stock price has shown fluctuations, currently trading at $1.28. The 52-week high was $1.50 and the low was $0.85.
Dividend Yield and Payout Ratios
The company declared a dividend of $0.01 per share, resulting in a dividend yield of approximately 0.78% based on the current stock price. The payout ratio is:
Payout Ratio = Dividend per Share / Earnings per Share = $0.01 / $0.08 = 12.5%
Analyst Consensus
Analyst consensus on the stock valuation is currently a “Hold” based on the recent performance metrics and market conditions.
| Valuation Metric | Value |
|---|---|
| Price-to-Earnings (P/E) Ratio | 16 |
| Price-to-Book (P/B) Ratio | 0.83 |
| Enterprise Value (EV) | $0.018 million |
| EV/EBITDA Ratio | 0.012 |
| Current Stock Price | $1.28 |
| 52-Week High | $1.50 |
| 52-Week Low | $0.85 |
| Dividend Yield | 0.78% |
| Payout Ratio | 12.5% |
| Analyst Consensus | Hold |
Key Risks Facing Highway Holdings Limited (HIHO)
Key Risks Facing Highway Holdings Limited
Highway Holdings Limited faces a variety of internal and external risks that could significantly impact its financial health. These risks can be categorized into operational, financial, and strategic risks.
Industry Competition
The competition within the manufacturing sector, particularly for equipment manufacturers, is intense. The company competes with numerous firms in both local and international markets. The increasing pressure from competitors can lead to pricing wars, which may affect profit margins.
Regulatory Changes
Changes in regulations, particularly in manufacturing standards and trade policies, pose risks. The company operates in multiple jurisdictions, including Myanmar and China, where regulatory environments can change rapidly. Compliance costs can increase significantly following regulatory changes, impacting overall profitability.
Market Conditions
Global economic conditions, including inflation rates and changes in consumer demand, affect the company’s operations. For instance, the ongoing geopolitical tensions, such as the Russia/Ukraine war, have adversely impacted orders and supply chains.
Operational Risks
Operational risks are highlighted in recent earnings reports. The company reported a significant increase in selling, general, and administrative expenses, amounting to $724,000 for the second quarter of fiscal year 2025, up from $272,000 in the previous year. This increase is partly due to bad debt provision reversals.
Financial Risks
Financial risks include exposure to currency fluctuations, particularly with the weakening of the Kyat, which resulted in a currency exchange gain of $58,000 for the second quarter. Additionally, the company’s interest income was approximately $58,000 for the second quarter, reflecting the impact of rising interest rates.
Strategic Risks
The company is in the process of launching a new motor project, with production expected to start in the fiscal third quarter of 2025. However, the success of this venture is contingent upon the stability of existing business and market demand.
Mitigation Strategies
The company maintains a strong balance sheet with total assets of $11.0 million and cash and cash equivalents exceeding $5.6 million, which provides a buffer against potential risks. Furthermore, management is actively evaluating numerous potential ventures to enhance future growth and stability.
| Risk Factor | Description | Financial Impact |
|---|---|---|
| Industry Competition | Intense competition in the manufacturing sector | Potential pricing pressure and reduced margins |
| Regulatory Changes | Changes in manufacturing standards and trade policies | Increased compliance costs |
| Market Conditions | Global economic conditions affecting demand | Adverse impact on orders and revenue |
| Operational Risks | Increased selling, general, and administrative expenses | Expenses increased to $724,000 |
| Financial Risks | Exposure to currency fluctuations and interest rate changes | Currency exchange gain of $58,000, interest income of $58,000 |
| Strategic Risks | Launch of new motor project | Dependent on market demand stability |
Future Growth Prospects for Highway Holdings Limited (HIHO)
Future Growth Prospects for Highway Holdings Limited
Analysis of Key Growth Drivers
The company is poised for growth through several key drivers:
- Product Innovations: The introduction of a new motor project is expected to start production in the fiscal third quarter of 2025. This new product line could significantly enhance revenue streams.
- Market Expansions: The company is exploring new markets beyond its current focus, particularly in regions affected by previous supply chain disruptions.
- Acquisitions: There are ongoing evaluations of potential acquisition targets that could complement existing operations and enhance market presence.
Future Revenue Growth Projections and Earnings Estimates
In the second quarter of fiscal year 2025, the company's net sales reached $2,117,000, marking a 60.1% year-over-year increase. For the first half of the fiscal year, total net sales were $3,996,000, compared to $2,669,000 in the prior year. Gross profit also surged to $1,495,000 from $760,000, reflecting a gross profit margin of 37.4%.
| Period | Net Sales | Gross Profit | Gross Profit Margin |
|---|---|---|---|
| Q2 FY 2025 | $2,117,000 | $834,000 | 39.4% |
| H1 FY 2025 | $3,996,000 | $1,495,000 | 37.4% |
Strategic Initiatives or Partnerships That May Drive Future Growth
The company is actively pursuing strategic partnerships that could enhance its technological capabilities and market reach. Collaborations with industry leaders in manufacturing and technology are being explored to leverage advanced production techniques and innovations.
Competitive Advantages That Position the Company for Growth
Highway Holdings Limited possesses several competitive advantages:
- Strong Financial Position: The company reported total assets of $11.0 million as of September 30, 2024, with cash and cash equivalents exceeding $5.6 million.
- Robust Market Relationships: Established relationships with blue-chip equipment manufacturers primarily in Germany provide a stable customer base.
- Operational Efficiency: Improved gross profit margins indicate enhanced operational efficiency, allowing the company to better manage costs and increase profitability.
Overall, these factors position the company well to capitalize on emerging opportunities in the market.
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Article updated on 8 Nov 2024
Resources:
- Highway Holdings Limited (HIHO) Financial Statements – Access the full quarterly financial statements for Q2 2025 to get an in-depth view of Highway Holdings Limited (HIHO)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Highway Holdings Limited (HIHO)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.