Analysis of the Impact of Master Kong's Beverage Business Decline on Cash Flow Stability

According to the latest financial data, Master Kong (0322.HK) has maintained a robust cash flow generation capacity amid pressure on its beverage business [0]. In 2024, the company achieved approximately RMB 4.655 billion in free cash flow, about RMB 6 billion in operating cash flow, a net debt/EBITDA ratio of around 1.5x, and an interest coverage ratio of approximately 8x. These indicators show that the company’s overall cash flow situation remains healthy, and the decline in the beverage business has not yet shaken its cash flow foundation.

The beverage business accounts for about 60% of Master Kong’s total revenue and is the company’s largest business segment. This business did face some pressure in 2024, but analysis shows that its impact on cash flow is relatively controllable [0]. Reasons include: first, the company’s business structure is diversified—the instant noodle business contributes about 35% of revenue, forming an effective risk hedge; second, Master Kong has maintained a relatively stable gross profit margin through refined cost control and supply chain optimization; third, as an industry leader, the company’s deep accumulation in channels and brands ensures basic cash recovery capabilities.

Although overall cash flow is stable, Master Kong still has short-term debt repayment pressure that needs attention. The company’s current ratio is 0.57 and quick ratio is 0.48, both below the warning line of 1 [0]. However, the company holds about RMB 10 billion in cash reserves, plus continuous positive operating cash flow, which can effectively cover short-term debt needs. From the perspective of debt structure, the net debt/EBITDA ratio of about 1.5x is in a reasonable range, and the interest coverage ratio of about 8x indicates that the company has sufficient debt repayment capacity.

1. Solid Cash Flow Foundation
   : The company maintained positive free cash flow and operating cash flow in 2024, and its cash flow generation capacity has not been fundamentally damaged.

2. Short-term Debt Repayment is Secured
   : Approximately RMB 10 billion in cash reserves, combined with continuous inflow of operating cash flow, can effectively cope with short-term debt pressure.

3. Diversified Business Provides Buffer
   : The stable performance of the instant noodle business and effective cost control have offset the impact of the beverage business decline.

4. Continuous Risk Monitoring Needed
   : The low current ratio is still a potential risk point; if the beverage business continues to deteriorate or the macroeconomic environment worsens, attention should be paid to the rise in liquidity pressure.

[0] Jinling AI Financial Database - Master Kong Holdings (0322.HK) Financial Data and Analysis