Kompu Chemical 2025 Annual Report Analysis: Net profit excluding non-recurring gains and losses drops by 82.12%, Operating cash flow increases by 1780.16% year-over-year

Revenue: Continuous decline for two years, significant shrinkage in domestic business

In 2025, Kangpu Chemical achieved revenue of 245,842,260.40 yuan, a decrease of 25.61% compared to 330,480,804.78 yuan in 2024. This marks the second consecutive year of a decline exceeding 25% in the company’s revenue (2024 saw a 25.21% decline compared to 2023).

From the revenue structure, the performance of domestic and overseas businesses shows a clear divergence:

• Domestic revenue was 96,533,906.83 yuan, down 45.85% year-on-year, primarily due to a significant decrease in procurement from core customers like Luoyang Molybdenum, with domestic sales of metal extractants and other specialty surfactants down 34.18% and 90.53% year-on-year, respectively, while average selling prices also decreased.
• Overseas revenue was 149,308,353.57 yuan, only down 1.82% year-on-year, remaining relatively stable, but the average selling prices of core products declined due to market competition and the appreciation of the renminbi.

Looking at the product categories, the core business is under significant pressure:

As the core source of income for the company, metal extractants account for over 87% of revenue, and their decline directly pulls down overall revenue; although flotation agents saw a significant increase in revenue, they have a small output and high fixed unit costs, resulting in a negative gross margin with limited contribution to profits.

Net Profit and Net Profit Excluding Non-Recurring Items: Sharp drop in profits, non-recurring gains cushioning profits

In 2025, the net profit attributable to shareholders of the listed company was 22,094,650.70 yuan, a 72.48% plunge from 80,299,971.39 yuan in 2024; the net profit excluding non-recurring items was 14,499,017.44 yuan, with a staggering year-on-year decline of 82.12%, highlighting a significant deterioration in the company’s main profitability.

The decline in profits is mainly affected by multiple factors: first, intensified market competition led to simultaneous declines in sales volume and prices, significantly reducing gross margin; second, the completion of fundraising projects and increased R&D investments raised operating costs; third, based on a principle of prudence, the company made impairment provisions for certain inventories and fixed assets, further eroding profits.

Non-recurring gains and losses played a certain cushioning role in the current profits, with non-recurring net gains of 7,595,633.26 yuan in 2025, mainly from the fair value changes of trading financial assets yielding 6,121,874.98 yuan and government subsidies of 1,105,643.57 yuan.

Earnings Per Share: Significant decline in line with net profit

In 2025, the basic earnings per share of the company was 0.19 yuan/share, a decrease of 72.06% from 0.68 yuan/share in 2024; the earnings per share excluding non-recurring items was 0.12 yuan/share, also showing a decline of over 70%, consistent with the decline in net profit and net profit excluding non-recurring items, reflecting that the company’s earnings per share shrank in tandem with the overall profit scale.

Expenses: Overall significant increase, notable rise in R&D investment

In 2025, the total period expenses of the company amounted to 52,691,927.57 yuan, a significant increase of 36.74% compared to 38,533,891.21 yuan in 2024, indicating a notable increase in expense pressure.

Selling Expenses: Increased by 14.97%, used for market expansion

In 2025, selling expenses amounted to 8,176,649.84 yuan, a year-on-year increase of 14.97%. The increase was mainly due to intensified market competition, leading the company to enhance after-sales technical services and market development efforts, with sales service fees such as technical personnel salaries, travel expenses, and market development commissions accounted for based on working hours increasing year-on-year.

Administrative Expenses: Increased by 17.53%, multiple expenditures rose

Administrative expenses reached 19,930,139.45 yuan, an increase of 17.53% year-on-year, mainly from four aspects:

• Increase in employee compensation: including growth in non-monetary employee welfare expenses, employee education expenses, and union fees;
• Increase in depreciation and amortization: significant increases in depreciation expenses due to the operationalization of fundraising project research institutes and the purchase of new urban properties;
• Increase in intermediary agency consulting fees: expenses for the research institute’s commission of third-party organizations to apply for research projects increased year-on-year;
• Increase in other management expenses such as disability insurance premiums.

Financial Expenses: Turned positive from negative, exchange losses increased significantly

Financial expenses amounted to 2,013,250.49 yuan, a significant change from -3,252,265.28 yuan in 2024, mainly due to the continuous appreciation of the renminbi against the US dollar in 2025, leading to substantial exchange losses on the company’s monetary assets, while interest expenses also increased.

R&D Expenses: Increased by 27.40%, continuous improvement in R&D system

R&D expenses amounted to 22,571,987.79 yuan, a year-on-year increase of 27.40%, with the proportion of revenue rising from 5.36% in 2024 to 9.18%. The increase was primarily due to the operationalization of the research institute, leading the company to increase R&D investments and gradually introduce a large number of PhDs, engineers, and other technical talents, along with increases in depreciation, amortization, and material consumption related to R&D.

R&D Personnel Situation: Team expansion, talent structure optimization

By the end of 2025, the company had a total of 99 R&D personnel, an increase of 15 from 84 at the beginning of the period, with the proportion of R&D personnel in the total workforce rising from 21% to 28%. In terms of educational qualifications:

• The number of PhDs increased from 7 to 10;
• The number of Master’s degree holders rose from 31 to 38;
• The number of Bachelor’s degree holders increased from 35 to 38;
• The number of those with an associate degree or below rose from 11 to 13.

The expansion of the R&D personnel scale and the increase in the proportion of highly educated talent provide support for the company’s future technological innovation and product development, while the company has been approved to establish a national-level postdoctoral research station, further improving the talent cultivation platform.

Cash Flow: Operating cash flow turned positive from negative, investment and financing cash flow outflow narrowed

Operating Cash Flow: Year-on-year increase of 1780.16%, quality significantly improved

In 2025, the net cash flow generated from operating activities was 149,920,528.81 yuan, a turnaround from -8,922,978.88 yuan in 2024, with a remarkable increase of 1780.16%, indicating a significant improvement in the quality of operating cash flow, mainly due to:

• A large amount of receivables and quality assurance funds being collected, with significant advance payments received from major customers in the fourth quarter, leading to an increase of 54 million yuan in cash received from selling goods and providing services year-on-year;
• A decrease in raw material procurement volume year-on-year amid declining production and sales and inventory reduction, leading to a cash outflow of 114 million yuan year-on-year for purchases of goods and acceptance of services;
• A decline in economic benefits resulted in lower enterprise income taxes and other taxes paid year-on-year, reducing tax payments by 19 million yuan.

Investment Cash Flow: Outflow narrowed by 84.68% year-on-year, fundraising projects completed

The net cash flow generated from investing activities was -27,233,326.19 yuan, a significant narrowing of outflow by 84.68% compared to -177,771,442.47 yuan in 2024, mainly due to the completion of fundraising projects, leading to a substantial decrease in payments for engineering equipment and other long-term assets, with cash payments for fixed assets, intangible assets, and other long-term assets decreasing by 156 million yuan year-on-year.

Financing Cash Flow: Outflow narrowed by 66.24% year-on-year, reducing interest-bearing debt

The net cash flow generated from financing activities was -7,852,034.19 yuan, a narrowing of outflow by 66.24% compared to -23,259,956.02 yuan in 2024, mainly because the company repaid and reduced interest-bearing debts in line with its cash flow arrangements.

Potential Risks: Multiple risks persist, need to be cautious about main business pressure

Concentration Risk of Major Customers

Sales from the company’s top five customers account for 50.56%, indicating high customer concentration. If major customers reduce procurement due to industry cycles or their own operations, it will negatively impact the company’s production and operations.

Raw Material Price Volatility Risk

Direct materials account for a high proportion of the company’s main business costs. Raw materials are petrochemical products or basic chemical raw materials whose prices are heavily influenced by international oil prices and macroeconomic cycles. If raw material prices rise significantly and the company cannot effectively transfer cost pressure, it will adversely affect performance.

Exchange Rate Volatility Risk

With a large export proportion, the appreciation of the renminbi against the US dollar in 2025 has already impacted overseas business profits. If exchange rate fluctuations increase in the future, it will further affect the company’s net profit levels.

Product Technology Iteration Risk

The fields in which the company’s products are applied, such as hydrometallurgy, require high levels of technological improvement and product upgrades. If the company fails to accurately grasp industry technological development trends or continues to innovate technologically, it will face risks of declining core competitiveness and customer loss.

Gross Margin Volatility Risk

The company’s gross margin has been declining consecutively. If downstream demand changes, raw material prices rise, and market competition intensifies, and the company cannot respond by optimizing product structure or improving production efficiency, the gross margin will face further downward pressure.

Macro-economic Volatility Risk

The company’s upstream and downstream industries are closely correlated with macroeconomic conditions. If global or domestic economic growth slows down, it will lead to insufficient downstream demand in the industry, affecting the company’s operational performance.

Core Technical Personnel Attrition Risk

The company’s core technical personnel are key to technological R&D and product innovation. If competitors attract the company’s technical personnel with better compensation, it will impact the company’s new product development and process improvement.

Technical Confidentiality Risk

The company’s core technology and product formulas are its core competitiveness. If core technology is lost due to personnel turnover or technology leaks, it will weaken the company’s technological and product advantages.

Production Safety Risk

As a chemical enterprise, although the company has established a complete safety production management system, there remains a possibility of unexpected safety accidents due to improper operations or natural disasters, impacting normal production and operations.

Management and Internal Control Risks from Business Expansion

As the company’s operating scale expands, if the internal control system is not improved concurrently, there may be risks of inadequate internal control effectiveness.

Market Competition Intensification Risk

The company’s core product, metal extractants, faces competition from international chemical giants and potential new competitors. If the company cannot maintain advantages in technological innovation, cost control, and after-sales service, it may lead to customer loss and declining sales revenue.

Remuneration for Directors, Supervisors, and Senior Management: Compensation declines year-on-year due to unmet operational goals

In 2025, the total pre-tax remuneration for the company’s directors, supervisors, and senior management was 2.8881 million yuan, a decrease of 19.18% from 3.5733 million yuan in 2024, mainly due to the company not meeting its operational goals for 2025, leading to performance deductions for relevant personnel.

Among them:

• Chairman Zou Qian’s total pre-tax remuneration during the reporting period was 438,300 yuan;
• General Manager Zhang Dongmei’s total pre-tax remuneration during the reporting period was 664,800 yuan;
• Executive Vice President Xu Zhigang’s total pre-tax remuneration during the reporting period was 663,600 yuan;
• Financial Director Zhang Yu’s total pre-tax remuneration during the reporting period was 389,000 yuan.

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