Huadi International Group Well Positioned To Recover Quickly Post-COVID

● Since 2013, the Chinese government has been launching new policies to improve the domestic steel industry.

● The slow-growing demand for steel globally exerted a negative effect on the overall industry, making it harder for firms to earn profits.

● Even though Huadi International Group's gross profits were much lower than the industry average, its R&D expense ratios were higher than those of competitors in the last two years.

Among the other traumas it inflicted, COVID-19 hit the steel industry, as dozens of projects were postponed. Recently, with China's economic recovery ongoing, some steel firms gradually resumed their work schedules. Huadi International Group, a steel pipe maker, announced that it had won the bidding fight in Gansu Province's mining project on March 17, 2021. After this bidding, it also obtained a new contract for stainless steel seamless pipes costing USD 160 million. 

Founded in 2018, Huadi International Group earned CNY 59 million by the first quarter of 2020. As a manufacturer of stainless steel seamless pipes, Huadi International Group's distribution network spans 20 cities in China. Its products are also shipped to the United States, Australia, and other countries. On January 22, 2021, the company went public on the New York Stock Exchange (NYSE), raising USD 25 million.

The financials

In 2019, Huadi International Group's (HUDI) operating income and net profit increased by 8.5% and 3.8% year-on-year. Nevertheless, due to the COVID-19 crisis, its profitability dropped dramatically in 2020. In the first half of 2020, Huadi's operating income was less than half the previous year's figure. 

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The firm has a diverse business structure, covering a handful of regions and sectors. Meanwhile, over half of its sales came from China in 2019, while India and the US were major sales regions, listing in the top three.  Currently, its main business focus is the petroleum industry.

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