Sichuan Huati Lighting TechnologyLtd's (SHSE:603679) Profits May Not Reveal Underlying Issues

Sichuan Huati Lighting Technology Co.,Ltd.'s (SHSE:603679) healthy profit numbers didn't contain any surprises for investors. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.

View our latest analysis for Sichuan Huati Lighting TechnologyLtd

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Sichuan Huati Lighting TechnologyLtd's profit received a boost of CN¥35m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. We can see that Sichuan Huati Lighting TechnologyLtd's positive unusual items were quite significant relative to its profit in the year to June 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Sichuan Huati Lighting TechnologyLtd.

Our Take On Sichuan Huati Lighting TechnologyLtd's Profit Performance

As previously mentioned, Sichuan Huati Lighting TechnologyLtd's large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. For this reason, we think that Sichuan Huati Lighting TechnologyLtd's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. On the bright side, the company showed enough improvement to book a profit this year, after losing money last year. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. If you want to do dive deeper into Sichuan Huati Lighting TechnologyLtd, you'd also look into what risks it is currently facing. Case in point: We've spotted 4 warning signs for Sichuan Huati Lighting TechnologyLtd you should be mindful of and 3 of these are concerning.

This note has only looked at a single factor that sheds light on the nature of Sichuan Huati Lighting TechnologyLtd's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.