Profit growth comes from financial investment interest

Elcom Technology - Telecommunication Joint Stock Company (Elcom, code ELC - HoSE) has just announced its consolidated financial statements for the first quarter of 2024 with strong profit growth. However, the above increase was largely due to profits from selling investments during the period.

For core business activities, net revenue still increased by 25% over the same period, reaching more than 107 billion VND. However, the increase in cost of goods sold (mainly due to a sudden increase in external costs) caused the company to earn only 21.4 billion VND in gross profit. Gross profit margin therefore also decreased from 34% in the first quarter of 2023 to 20%.

Meanwhile, the profit from selling investments helped Elcom receive an extraordinary income of 7.1 billion VND. Along with the reduction in sales costs, the company's pre-tax profit reached 8.3 billion VND, up 69% over the same period last year. Earnings per share reached 88 VND.

Elcom's Q1/2024 business results.

Elcom did not elaborate on the investment that helped the company maintain positive growth. According to the company representative, Elcom recorded profits from the transfer of some financial investments.

Previously, in the fourth quarter of 2023, the company also recorded a sudden profit from financial activities. Specifically, due to the increase in ownership ratio at Vietnam Computer and Communications Joint Stock Company (Vietcom), Elcom revalued the assets and recorded goodwill from the bargain purchase transaction with the profit calculated as the difference between the cost of the investment in the subsidiary compared to the parent company's ownership in the fair value of the subsidiary's net assets at the date of purchase.

Profit from financial investment activities in the fourth quarter of 2023 reached nearly 35 billion VND, a significant figure compared to the total pre-tax profit in the period of more than 45 billion VND.

Vietcom is also the company that owns the "golden land" at 18 Nguyen Chi Thanh (Hanoi). According to the update of the company's leaders at the 2024 Annual General Meeting of Shareholders held last week, Elcom's leaders said that the real estate project at 18 Nguyen Chi Thanh, Ba Dinh, Hanoi is expected to be implemented in the fourth quarter of 2024 or early first quarter of 2025. The reason for the delay is that a small part of the state's capital is still waiting for divestment procedures, so it depends on administrative procedures and state agencies. Other tasks such as planning indicators and construction parameters have been completed and are ready to start construction.

Completed 6.76% of profit plan

Despite the growth compared to the first quarter of 2023, the business results in the first 3 months of the year have only completed a fraction of the annual profit target. At the General Meeting of Shareholders, Elcom presented and received approval from shareholders for a revenue plan of VND 1,100 billion and a profit after tax of VND 108 billion, up 12% and 28% respectively over the same period. Thus, to date, Elcom has completed 9.75% of the revenue target and 6.76% of the profit target, respectively.

Of course, this is only the result of the first quarter - usually not the quarter that records the profit drop of this business. As in 2023, although the first quarter only recorded low profits, Elcom still completed one and a half times the profit plan.

Operating in the technology sector, the company has benefited greatly from the promotion of public investment disbursement on expressways when implementing important projects in the field of intelligent transportation (ITS). In 2023, Elcom is the unit deploying the ITS system for the Nha Trang - Cam Lam expressway, including main components such as: route and tunnel monitoring and control system, automatic toll collection, communications, and AI surveillance cameras. The company also participates in public security and traffic safety monitoring projects in Thua Thien Hue, ETC, WIM projects for VEC, VDTC and other units. Other business segments including telecommunications and national security maintain stable business results.

In 2024, the company's leaders said that the digital transformation segment will be considered a strategic business segment with great potential. Elcom plans to focus on promoting the provision of the Company's digital transformation product lines such as the Centralized Large Database Center (Bigdata Technology), the Smart Urban Operation and Monitoring Center (IOC), the Digital Transformation Product Solution Chain for Local Economic Development... for customers such as the People's Committees of Provinces, Cities and other units and organizations.