Puran Co., Ltd. 2025 Annual Report Analysis: Non-recurring Net Profit Down 38.67% Year-over-Year, R&D Expenses Up 22.86%

Operating Revenue: Record Scale Innovation, M&A Contribution Adds Significant Increment

During the reporting period, the company achieved operating revenue of RMB 2.320 billion, up 28.62% year over year, setting a new high since its establishment. The growth mainly comes from three aspects: first, the rebound in the industry outlook for storage chips—demand from downstream AI servers, high-end smartphones, PC upgrades, and other sources was concentrated and released, driving a year-over-year increase in shipment volumes of the company’s NOR Flash and MCU products; second, the strategy effectiveness of “Storage+” has become evident, with the market share of MCU and analog products continuing to rise; third, in November 2025, the company completed the acquisition of a 51% equity interest in Zhuhai Noah Tiantian, and its wholly owned subsidiary SHM contributed operating revenue of approximately RMB 210 million.

From a quarterly perspective, the company’s revenue shows a steadily rising trend quarter by quarter. In the fourth quarter, single-quarter operating revenue reached RMB 886 million, accounting for 38.2% of full-year operating revenue, indicating the strong momentum from the industry’s demand surge in the second half of the year driving the company’s performance.

Net Profit: Revenue Growth Without Profit Growth; Multiple Factors Squeeze Profit Margins

Net Profit and Profit After Non-Recurring Items

During the reporting period, the company recorded net profit attributable to owners of the parent of RMB 208 million, down 29.03% year over year; net profit after deducting non-recurring gains and losses was RMB 165 million, down 38.67% year over year. The characteristics of “higher revenue but lower profits” are prominent.

The specific reasons for the changes are as follows:

1. Gross Margin Under Pressure: Although revenue increased, there are differences in the timing of price changes between upstream and downstream in the industry. Costs remained at a high level; price adjustments lagged. In addition, the expansion of sales volume of the company’s products with relatively lower gross margins led to a reduction in gross margin of 5.19 percentage points year over year, squeezing profit space.
2. Increase in Period Expenses: R&D expenses increased by RMB 55.3178 million year over year, up 22.86%; selling expenses and administrative expenses increased by RMB 28.0096 million and RMB 30.1772 million respectively, up 49.02% and 51.51%. The expense growth rate exceeded the revenue growth rate.
3. Increase in Asset Impairment Losses Provided: The company adopted an active supply chain strategy in the prior period, with inventory levels at a relatively high level. Based on a prudent principle, the provision for inventory impairment losses increased by approximately RMB 62.5446 million year over year.
4. Decrease in Interest and Foreign Exchange Gains: Affected by the macro interest rate reduction and exchange rate fluctuations, interest income and foreign exchange gains decreased by RMB 14.1641 million year over year.

Earnings Per Share

The company’s basic earnings per share was RMB 1.40 per share, down 29.29% year over year; after deducting non-recurring items, earnings per share was RMB 1.12 per share, down 38.80% year over year. The decline in earnings per share is basically consistent with the contraction in net profit, reflecting an overall downward trend in profitability.

Expenses: Continued High R&D Investment; Selling and Administrative Expenses Rise With Scale Expansion

R&D Personnel Overview

At the end of the reporting period, the company had 318 R&D personnel, an increase of 25.69% compared with the same period last year. R&D personnel accounted for 55.40% of the company’s total headcount. Total compensation for R&D personnel was RMB 214.306 million, up 25.23% from the previous year; average compensation was RMB 0.6739 million per year, basically flat with the previous year. The expansion of R&D personnel provides talent support for the company’s technological innovation and product iteration. Especially after the acquisition of SHM, the addition of its R&D team further strengthens the company’s capabilities in areas such as firmware algorithm development and storage chip testing solutions.

Cash Flows: Net Operating Cash Flow Declines; Cash Flow From Investing Turns From Negative to Positive

1. Cash received from sales of goods and provision of services increased by RMB 47.65543 million year over year; 2. Cash paid for purchases increased by RMB 35.70613 million year over year; 3. The number of employees and average compensation grew, and cash paid for wages and salaries increased by RMB 8.16821 million year over year; 4. Due to scale expansion, research and development and business expenditures increased, and cash paid for other items related to operating activities increased by RMB 45.5628 million | | Net cash flow generated from investing activities | 416.90 | -19553.58 | Not applicable |
2. Cash paid for the purchase and construction of fixed assets, intangible assets, and other long-term assets decreased by RMB 16.5 million year over year, mainly because last year’s spending for purchasing the headquarters building was RMB 17.9 million; 2. Cash received from returns on investments decreased by RMB 6.03836 million year over year; 3. Upon consolidation of Noah Tiantian, its beginning cash and cash equivalents exceeded the consideration paid for the acquisition, and cash received for other items related to investing activities increased by RMB 71.3658 million year over year | | Net cash flow generated from financing activities | -3940.97 | -2592.60 | Not applicable | Cash dividends paid increased by RMB 25.4341 million year over year |

Risks the Company May Face

Risk to Core Competitiveness

2. Product R&D Risk: The integrated circuit industry has rapid technological iteration. If the company fails to timely achieve product performance upgrades or if process technology advances lag behind competitors, it will affect product competitiveness.
3. Risk of Authorization for Basic Process Technology: The SONOS process technology authorization used by the company has an authorization end date of December 31, 2038. If it cannot be renewed after the authorization expires, it will have an adverse impact on the R&D design and production of NOR Flash.
4. Risk of Intensifying Market Competition: In product areas such as NOR Flash, EEPROM, MCU, VCM Driver, etc., competition is fierce. The company, in terms of overall scale, financial strength, and overseas channels, is behind industry-leading manufacturers. If it cannot maintain product competitiveness, it may lead to a reduction in product prices and profit margins.
5. Product Quality Risk: The semiconductor industry is highly complex. If product quality issues arise, they may trigger returns and compensation liabilities, damaging the brand image and customer relationships.
6. Risk of Talent Loss: Talent in the chip design industry is scarce. If core technical personnel leave, it will affect the R&D of new products and technology reserves.
7. Intellectual Property Risk: There are many intellectual property rights in the industry. The company may face malicious lawsuits by competitors or third parties, and there is also a risk that intellectual property is stolen.

Operating Risks

2. Risk of Concentration of Suppliers and Capacity Fluctuations: The company’s wafer foundry outsourcing, testing, and packaging/testing mainly rely on a small number of suppliers. If suppliers experience force majeure events or face tight capacity, it will affect the company’s operations.
3. Internal Control and Management Risk Brought by Scale Expansion: Scale expansion increases resource integration and the complexity of production and operations management. If management capabilities cannot improve in parallel, it will affect the company’s ability to respond and competitiveness.

Financial Risks

2. Risk of Gross Margin Volatility: Product gross margins are affected by multiple factors, including market demand and capacity supply. If market competition intensifies in the future or product prices decline and costs rise, there is a risk that gross margin will fluctuate or decline.
3. Accounts Receivable Risk: With the expansion of business scale, the amount of accounts receivable may increase. If accounts receivable cannot be collected on time or if bad debts occur, it will increase funding pressure and affect operating performance.
4. Risk of Inventory Price Declines: As of the end of 2025, the carrying value of the company’s inventories was RMB 1.256 billion. If in the future the market environment changes, demand declines, or technology updates cause inventories to become obsolete, it will increase the risk of inventory price declines.
5. Risk of Changes in Preferential Income Tax Policies: The company currently enjoys a 15% income tax preferential rate as a high-tech enterprise. If in the future it cannot continue to enjoy the benefit or if tax policies change, it will affect operating performance.
6. Risk of Foreign Exchange Gains and Losses: The company has a relatively large volume of sales and purchases outside the country. SHM mainly settles using foreign currencies such as USD. Large exchange rate fluctuations may bring risks related to foreign exchange gains and losses.

Industry Risks

The semiconductor design industry is cyclical. If industry growth slows down, it will have an adverse impact on the company’s performance. At the same time, as the number of companies in the industry increases, market competition intensifies. If the company cannot capture market dynamics and industry trends, it will affect its position and operating performance.

Macroeconomic Environment Risks

Global trade frictions, geopolitical risks, and U.S. export control regulations may impact China’s integrated circuit industry, affecting the company’s R&D, operations, and order acquisition.

Other Risks

2. Investment Risks: Target enterprises of investment projects may face uncertainties such as changes in industrial policies and market environment. Actual benefits may differ from expectations.
3. Risk of Overseas Operations: SHM carries out business in Hong Kong, South Korea, Japan, and other places. If political and economic conditions, industrial policies, etc. in the relevant countries or regions undergo unfavorable changes, it will affect its overseas operations.
4. Risk of M&A Integration: After acquiring SHM, if effective integration cannot be achieved in strategic synergies, organizational management, financial control, corporate culture, and talent team integration, it may lead to synergy effects not meeting expectations, issues such as the loss of core technical teams, and other problems.

Compensation of Directors, Supervisors, and Senior Management (Top Management)

During the reporting period, the aggregate pre-tax compensation amounts received by the company’s chairman, general manager, deputy general manager, and CFO from the company are as follows:

The compensation system for directors, supervisors, and senior management is linked to the company’s operating performance and the fulfillment of individuals’ responsibilities. While ensuring the stability of the core management team, it also reflects market-oriented compensation levels.

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