Zhenan Technology 2025 Annual Report Analysis: Revenue up 27.32%, still a loss of 117 million yuan; Operating cash flow doubled

Core Profitability Indicator Interpretation

Operating Revenue: Scale Rebounds but Traditional Business Under Pressure

In 2025, the company achieved operating revenue of 531 million yuan, a year-on-year increase of 27.32%, ending the decline of 39.9% in revenue in 2024. By product, the growth was primarily driven by emerging businesses: revenue from vibration control products was 97 million yuan, a substantial increase of 559.87%; revenue from nuclear power anti-seismic products was 91 million yuan, a year-on-year increase of 49.12%; revenue from traditional damping products was 106 million yuan, a year-on-year increase of 30.01%. However, revenue from core traditional isolation products was 226 million yuan, a year-on-year decline of 10.05%, indicating that traditional businesses still face pressure on the demand side.

Net Profit: Loss Narrowed but Still in Loss Zone

In 2025, the net profit attributable to shareholders of the listed company was -117 million yuan, a year-on-year reduction in loss of 16.78%, but it has incurred losses for three consecutive years (losses of 41 million yuan in 2023 and 141 million yuan in 2024). The primary reason for the loss was the provision of approximately 110 million yuan for credit and asset impairment losses, compounded by a decline in the gross margin of traditional businesses.

Deducted Net Profit: Loss Decrease in Magnitude

The deducted net profit was -128 million yuan, a year-on-year reduction in loss of 11.40%, with the decrease in loss magnitude being smaller than that of net profit, mainly due to the gain of 102 million yuan in non-recurring gains and losses during the year, including a reversal of 105 million yuan in impairment provisions for receivables that underwent separate impairment testing, supporting net profit.

Earnings Per Share: Loss Magnitude Syncs Narrowing

The basic earnings per share were -0.4248 yuan/share, a year-on-year reduction in loss of 25.18%; the deducted earnings per share were -0.4618 yuan/share, a year-on-year reduction in loss of 11.40%, consistent with the trends in net profit and deducted net profit.

Period Expense Control: Significant Reduction in Financial Expenses

Total Expenses: Slight Decrease in Scale

In 2025, total period expenses amounted to 173 million yuan, a slight year-on-year decrease of 3.64%, with sales expenses, management expenses, and R&D expenses all declining slightly, while financial expenses were significantly reduced.

Sales Expenses: Scale Declined but Remains High

Sales expenses were 87 million yuan, down 7.64% year-on-year, primarily due to a decrease in marketing expenses from 427 million yuan to 394 million yuan. However, the sales expense ratio still reached 16.30%, indicating that the company needs to maintain high market investment to expand emerging businesses.

Management Expenses: Slight Optimization

Management expenses were 51 million yuan, down 1.28% year-on-year, mainly achieved by reducing business entertainment expenses (from 50 million yuan to 38 million yuan) and other expenses (from 72 million yuan to 22 million yuan).

Financial Expenses: Significant Reduction

Financial expenses were 4 million yuan, down 80.41% year-on-year, primarily because there were no convertible bond interest expenses this period, with interest expenses decreasing from 258 million yuan to 76 million yuan, while interest income remained around 44 million yuan.

R&D Expenses: Slight Decrease in Scale but Structural Adjustment

R&D expenses were 31 million yuan, down 5.46% year-on-year, mainly due to a reduction in employee salary investment (from 175 million yuan to 140 million yuan), but direct input expenses increased from 99 million yuan to 106 million yuan, and external R&D expenses rose from 19 million yuan to 27 million yuan, with R&D investment tilted towards core projects.

R&D Personnel and Investment: Reduction in Personnel but Increase in Capitalization Rate

R&D Personnel Situation

In 2025, the number of R&D personnel was 46, a year-on-year decrease of 20.69%, but the proportion of R&D personnel increased from 15.55% to 20.63%, optimizing the employee structure to focus more on the core R&D team. In terms of education level, the number of PhDs decreased from 3 to 1, Masters from 19 to 14, and undergraduates from 28 to 24, with the R&D team size shrinking but still maintaining a high educational level.

R&D Investment: Slight Decrease in Scale but Increase in Capitalization Rate

Annual R&D investment amounted to 32.07 million yuan, a slight year-on-year decrease of 2.09%, with R&D investment accounting for 6.04% of operating revenue, a year-on-year decrease of 1.81 percentage points. Capitalized R&D expenditure was 1.2987 million yuan, with the capitalization rate increasing from 0.63% to 4.05%, as some R&D projects entered the results transformation stage.

Cash Flow Situation: Operating Cash Flow Doubled, Financing Pressure Emerges

Overall Cash Flow: Turned Positive

In 2025, the net increase in cash and cash equivalents was 35.4163 million yuan, a significant improvement year-on-year (from -38.2978 million yuan in 2024), primarily driven by substantial growth in operating cash flow.

Operating Activity Cash Flow: Doubled Growth

The net cash flow generated from operating activities was 199 million yuan, a year-on-year increase of 106.88%, mainly due to a significant increase in sales receipts, with cash received from selling goods and providing services rising from 594 million yuan to 716 million yuan, while the growth rate of cash outflows from operating activities was only 6.20%, indicating notable effectiveness in cash flow control.

Investment Activity Cash Flow: Net Outflow Narrowed

The net cash flow generated from investment activities was -19 million yuan, a year-on-year reduction in loss of 51.98%, primarily due to a decrease in capital expenditures for fixed assets from 46 million yuan to 20 million yuan, while the principal of financial products purchased decreased from 830 million yuan to 390 million yuan, indicating a contraction in investment scale.

Financing Activity Cash Flow: Net Outflow Expanded

The net cash flow generated from financing activities was -145 million yuan, a year-on-year expansion of 51.18%, mainly due to a decrease in the amount of loans from 203 million yuan to 92 million yuan, while cash paid for debt repayment increased from 289 million yuan to 233 million yuan, indicating pressure on financing capacity.

Executive Compensation: Core Management Salary Adjustments

Chairman’s Compensation

The current chairman, Zhou Jianqi, received a total pre-tax compensation of 0 yuan from the company in 2025, with his main compensation coming from related parties.

General Manager’s Compensation

General Manager Li Tao’s total pre-tax compensation in 2025 was 743,200 yuan, which is relatively high among the core management team.

Vice President’s Compensation

Among the vice presidents, Zhang Xue received a pre-tax compensation of 423,800 yuan, Cui Qingyong 350,600 yuan, Hai Shuyu 364,100 yuan, Yin Jing 682,200 yuan, and Wu Weihua 42,400 yuan, with significant differences in compensation due to variations in tenure and responsibilities.

CFO’s Compensation

CFO Wu Weihua’s pre-tax compensation in 2025 was 42,400 yuan, calculated based on the actual tenure of service as he took office only in November.

Risk Warning: Operational Uncertainty Amidst Multiple Pressures

Insufficient Demand Risk for Traditional Business

The traditional damping and isolation market relies on public infrastructure construction, which is affected by macroeconomic conditions. The construction pace in the building industry has slowed, putting pressure on new market demand in traditional sectors. If subsequent policy advancement does not meet expectations, the company’s traditional business revenue may continue to be sluggish.

Increased Competition Risk

As industry attention rises, more new entrants are emerging, leading to intensified market competition, which may result in declining product prices and pressure on gross margins. In 2025, the company’s overall gross margin was 30.10%, down 1.55 percentage points year-on-year, with the gross margin for damping products decreasing from 39.54% to 31.68%, indicating evident competitive pressure.

Accounts Receivable Recovery Risk

The company’s downstream customers are primarily construction contractors, who are significantly impacted by industry prosperity, facing considerable financial pressure. At the end of 2025, the accounts receivable balance was 506 million yuan, down 29.07% year-on-year, but 69 million yuan in credit impairment losses were still recorded. If customers’ repayment capabilities deteriorate in the future, there may still be a risk of bad debts.

Raw Material Price Fluctuation Risk

The company’s main raw materials for production are steel, rubber, and other bulk commodities, with prices frequently fluctuating due to macroeconomic cycles and market supply-demand relationships. In 2025, raw material costs accounted for over 45% of operating costs, and if raw material prices rise, it will directly increase production costs and compress profit margins.

Business Transformation Below Expectations Risk

The company is transitioning from traditional damping and isolation businesses to emerging fields such as vibration dual control and nuclear power anti-seismic. Although emerging businesses are growing rapidly, they account for only 35.48% of total revenue. If technology development and market expansion do not meet expectations, the transformation progress may lag, affecting the company’s long-term profitability.

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Editor: Xiao Lang Quick Report