LGCL, Lucas GC Limited

Will it survive?

• Can it pay its interest? 7.3×
  Comfortable
  Operating income CN¥20M ÷ interest expense CN¥3M
  What this means

  Operating profit covers interest with the kind of margin Graham wanted for a defensive holding. Necessary, not sufficient, it says solvent, not cheap.

• How heavy is the debt, net of cash? +CN¥35M
  Net cash, debt-free
  Cash CN¥30M + ST investments CN¥5M − debt CN¥0
  What this means

  Cash and short-term investments exceed every dollar of debt by CN¥35M, on net the company owes nothing, and can act from strength when others can't. Net debt is the leverage figure that matters: the cash is already set against the debt. Strategic or illiquid investments aren't counted here.

• How long is cash tied up? -8d
  Negative, funded by others
  DSO 11 + DIO 0 − DPO 19 days
  What this means

  Days cash is tied up between paying suppliers and collecting from customers. A negative cycle is a quiet moat: suppliers and customers fund the operation (Buffett's “float”), the company grows on other people's money. (Little or no inventory, a services / asset-light model, so the inventory leg is ~0.)

Is it a good business?

• Return on invested capital —
  Not enough data
  Industry peers: median -6%
  What this means

  The filing data didn't include the inputs for this check.

• Owner-earnings margin 1%
  Thin through the cycle
  5-yr median margin, range -3%–9%; latest CN¥22M = operating cash CN¥35M − maintenance capex CN¥13M
  Industry peers: median 13%
  What this means

  What an owner could take out without starving the business: operating cash less the maintenance capital it must spend to hold its position — Buffett's owner earnings. That's 2% of revenue this year, a 1% median across 5 years. It chose to put CN¥70M more into growth, so free cash flow this year was (CN¥48M) — the gap is investment, not weakness.

• Are earnings backed by cash? 3.60×
  Cash-backed
  Cash from ops CN¥35M ÷ net income CN¥10M

  In the filing’s words Read against the cash, reported earnings have run ahead of the operating cash the business generated over the record — about 6% of assets a year, among the widest gaps in the catalogue. For an inventory- or content-heavy grower that can be cash tied up in real assets as it expands; elsewhere it can mean the earnings lean on accounting estimates — the cash-flow statement against the income statement is where to tell which.

  What this means

  How much of reported profit showed up as operating cash. Above 1× is reassuring; well below suggests earnings lean on accruals. One year is noisy, growth and working-capital swings distort it, and this is operating cash, not free cash. Watch the multi-year trend.

How is the cash used?

• Where do the earnings go? —
  Not enough data
  What this means

  The filing data didn't include the inputs for this check.

• Investing or harvesting? 6.29×
  Expanding
  Capex CN¥83M ÷ depreciation CN¥13M
  What this means

  Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth, or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency, or a melting asset base). The ratio won't tell you which; the filings will.

Graham’s defensive tests · 1 of 3 met

Graham’s numerical criteria for the defensive investor (The Intelligent Investor, ch. 14), run on the filings. A floor of safety, not a buy signal; many fine modern businesses fail his strictest liquidity rules by design.

• Adequate size —
  Revenue ≥ $2B (a dollar floor) · CN¥1.0B
  What this means

  Big enough to weather a storm. Graham's floor is a dollar figure — about $2B of revenue as a conservative modern stand-in. This company reports in its home currency and we carry no exchange rate, so we show the figure and leave the size bar for you to apply rather than convert it with a number we don't have.

• Strong liquidity Near
  Current ratio ≥ 2× · 1.61×
  What this means

  Current assets at least twice current liabilities, near-term bills covered without touching the business. Strict by design: many cash-rich modern firms run leaner and miss it, holding their cushion in longer-dated securities.

• Earnings stability Pass
  A profit every year (5-yr record) · no losses
  What this means

  Graham wanted earnings in each of the past ten years, the stability a defensive owner leans on.

• Dividend record Miss
  Uninterrupted dividends · none paid
  What this means

  An unbroken dividend was Graham's mark of durability. He wanted twenty years; the filings show about ten, and a single suspension breaks the streak. Non-payers, many fine modern compounders, fall outside his defensive net by design.

• Moderate price —
  P/E ≤ 15 and P/E × P/B ≤ 22.5 · decided by the price
  What this means

  Graham's valuation gate, the wall he kept between a sound business and a sound investment. Three-year average earnings are CN¥15.30/share (latest year CN¥3.53), the averaged base the calculator's gate runs on, and book value is CN¥111.56/share. Enter a price in “What the price implies” just below for the P/E, P/B, and whether it clears. But this is the rule Buffett outgrew: there's no hard P/E law, and a wonderful business can deserve a far richer multiple if the thesis holds, treat it as the bargain-hunter's floor, not a verdict on the price.

Durability & moat, 2021–2025

Whether the record’s returns held, and what the capital reinvested earned.

• Profitable years 5 of 5
  What this means

  Never lost money over the record, the earnings stability Graham insisted on.

• Operating margin 5% → 2% (2-yr avg ends)
  What this means

  Through the cycle the operating margin slipped — about 5% early to 2% lately, median 4% — competition or costs are biting in.

• Owner earnings growth −4%/yr
  What this means

  Owner earnings shrank about 4% a year over the record.

• Worst year 2025 · 1.9% op. margin
  What this means

  Stayed profitable even in its hardest year, the resilience that survives recessions.