Quoc Cuong Gia Lai (QCG) Q1 profit decreased by 93%, stock price increased to the ceiling for 5 sessions

QCG shares hit the ceiling limit for 5 consecutive sessions. How does Quoc Cuong Gia Lai explain this?

In recent days, Quoc Cuong Gia Lai Joint Stock Company (QCG) has attracted attention with five consecutive sessions of unusually high stock price increases, despite the company's less-than-stellar business results.

In its explanation to the State Securities Commission, Quoc Cuong Gia Lai stated that the fact that the company's share price hit the ceiling limit for five consecutive sessions was due to objective factors beyond the company's control. The decision to buy or sell shares rests with the investors, and Quoc Cuong Gia Lai had no influence whatsoever on the market price.

Profits of 93 shares of Quoc Cuong Gia Lai (QCG) continue to rise to the ceiling for 5 consecutive sessions (Figure 1). — Quoc Cuong Gia Lai's QCG shares have been unusually and continuously hitting the ceiling price despite unremarkable business results (Photo: TL).

This is not the first time Quoc Cuong Gia Lai has recorded such an unusual surge in its share price. Previously, on February 27, 2020, QCG shares also experienced 15 consecutive days of hitting the upper limit, pushing the share price from 3,620 VND/share to a peak of 10,960 VND/share, equivalent to a threefold increase in just 15 trading sessions.

During this period, Quoc Cuong Gia Lai did not announce any notable projects. In fact, at that time, QCG's 2019 financial statements showed after-tax profit of only VND 58.4 billion, a decrease of 41% compared to the same period.

Revenue increased, but profits were meager, less than 1 billion VND.

The surge in QCG's stock price would not be surprising if the company's business were experiencing growth. According to the Q1 2023 financial report, QCG's revenue did indeed increase, from VND 135 billion to VND 168 billion, a 24.4% increase.

However, the cost of goods sold increased sharply from VND 108 billion to VND 150 billion, causing gross profit to fall to only VND 16 billion. Consequently, the gross profit margin also decreased from 19.9% to just 9.8%.

This was accompanied by a 55% increase in financial expenses during the period, from 7 billion VND to nearly 11 billion VND. Selling and administrative expenses, however, decreased by only 22.1%, to 5.1 billion VND.

High cost of goods sold coupled with sharply increased financial expenses resulted in QCG recording after-tax profit of just over 900 million VND, a decrease of 93% compared to the same period last year.

Assets are 73% in inventory, and there is a risk of short-term debt exceeding equity.

As of the end of the first quarter of 2023, the company's total assets reached VND 9,734 billion, a slight decrease of 2.17% compared to the beginning of the year. Cash and cash equivalents decreased to VND 25 billion, a decrease of nearly 68% compared to the beginning of the period.

Notably, QCG recorded inventory levels reaching VND 7,094 billion, equivalent to 72.9% of total assets. The majority of this consists of unfinished real estate projects, accounting for VND 6,589 billion. These mostly include compensation costs, land use fees, and construction costs related to QCG's projects.

As of the end of the first quarter, QCG's total liabilities reached VND 5,394 billion, with VND 5,095 billion being short-term debt. The fact that short-term debt currently exceeds equity indicates a significant risk in QCG's capital structure.

Furthermore, QCG's profits have been on a continuous downward trend since 2019.

Specifically, the company's revenue in 2019 reached VND 859 billion, increasing to VND 1,868 billion, then declining sharply and only recovering to VND 1,274 billion in 2022. Conversely, QCG's after-tax profit continuously decreased from VND 83 billion in 2020 to only VND 32 billion in 2022.

Despite lackluster business results and no noteworthy new project announcements, QCG shares have repeatedly hit the ceiling price. This has led many investors to question whether QCG's unusual surge in share prices, similar to that of 2020, will repeat itself.

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