Huatai Securities 2025 Annual Report Analysis: Net profit attributable to shareholders excluding non-recurring gains and losses increased by 80.08% year-on-year; operating cash flow turned from positive to negative

Interpretation of Core Profitability Indicators

Operating Revenue Remains Steady and Moves Up

In 2025, Huatai Securities achieved operating revenue of RMB 35.810 billion, up 6.83% year over year. Judging by the business structure, wealth management business revenue was RMB 15.864 billion, up 29.85% year over year, becoming the core driver of revenue growth; institutional services business revenue was RMB 6.933 billion, up 42.42% year over year, with investment banking and investment trading businesses making a significant contribution; asset management business revenue was RMB 3.959 billion, up 176.35% year over year, mainly due to valuation increases of private equity and alternative investment projects; international business revenue was RMB 5.918 billion, because last year the disposal of a subsidiary led to a one-off increase in the base, and after excluding the impact, it still increased 23.82% year over year.

Clear Divergence Between Net Profit and Non-GAAP Net Profit

In 2025, net profit attributable to shareholders of the parent company was RMB 16.383 billion, up 6.72%; however, non-GAAP net profit reached RMB 16.268 billion, up 80.08% year over year. The difference in growth rates mainly comes from the fact that in 2024, the company disposed of a subsidiary and generated a one-off gain of RMB 6.317 billion, lifting last year’s net profit base; in 2025, there was no such non-recurring gain or loss, so non-GAAP net profit more truly reflects core profitability.

Earnings Per Share Rise in Tandem

Basic earnings per share were RMB 1.73/share, up 6.79% year over year; non-GAAP basic earnings per share were RMB 1.71/share, up 85.87% year over year. This matches the growth rate of non-GAAP net profit, reflecting the company’s strong support for core earnings translating into EPS.

Optimized Expense Structure

In 2025, the company’s business and management fees were RMB 16.042 billion, down 7.99% year over year, mainly due to lower labor costs. By business line:

• Wealth management business: operating costs of RMB 7.019 billion, up 17.15% year over year; gross margin 55.75%, up 4.80 percentage points year over year. With economies of scale, cost control has shown results;
• Institutional services business: operating costs of RMB 4.048 billion, up 9.73% year over year; gross margin 41.61%, up 17.40 percentage points year over year. Profitability efficiency in investment banking and trading has improved significantly;
• Asset management business: operating costs of RMB 1.081 billion, only up 1.03% year over year; gross margin 72.71%, up 47.37 percentage points year over year, as valuation increases of projects drove a substantial improvement in profitability;
• International business: operating costs of RMB 2.257 billion, down 45.88% year over year; gross margin 61.87%, down slightly 0.62 percentage points year over year. Cost compression offset the impact from the revenue base.

R&D Spending Continues to Increase

As of the end of 2025, the company had 3,220 R&D personnel, accounting for 20.76% of total headcount, remaining stable year over year. The educational background of R&D personnel is strong: the share of master’s degree holders and above is 48.85%, with 16 PhDs, providing talent support for the implementation of cutting-edge technologies such as AI. In 2025, the company fully advanced its “All IN AI” strategy, building a leading foundation for data, models, and computing power, and was the first to launch the AI-native trading tool “AI 涨乐” APP. Relevant projects won the Second Prize in the 2024 Financial Technology Development Awards, with evident results from technology enabling the business.

Cash Flow Fluctuates Significantly

In 2025, the company’s cash flow showed a pattern of “one positive and two negative”:

• Net cash flow from operating activities: RMB -12.602 billion, shifting from positive to negative year over year, mainly because the net decrease in trading financial instruments dropped significantly, and adjustments to business structure placed pressure on operating cash inflows;
• Net cash flow from investing activities: RMB -42.102 billion, decreasing by RMB 62.598 billion year over year, mainly because cash paid for investments increased, as the company stepped up its efforts to expand externally;
• Net cash flow from financing activities: RMB 110.790 billion, up 1,704.60% year over year, mainly due to an expansion in financing scale such as issuing bonds, supporting business development and investment plans.

Executive Compensation and Incentives

In 2025, the company’s core executives’ compensation is as follows:

• Chief Executive Officer Zhou Yi: RMB 1.440 million (before tax);
• Executive Committee members Han Zhencong, Jiang Jian, Zhang Hui, and Chen Tianxiang: RMB 1.152 million each (before tax);
• Chief Financial Officer Jiao Xiaoning and Compliance Director Jiao Kai: RMB 1.452 million each (before tax);
• Chief Risk Officer Wang Jun: RMB 2.040 million (before tax);
• Head of Human Resources Sun Yan: RMB 1.152 million (before tax).

Compensation is linked to performance, reflecting the company’s recognition of the value of its core management team. At the same time, long-term interests are tied through an equity incentive plan. In 2025, the company completed the unlocking of some restricted shares and the repurchase and cancellation, and the incentive mechanism has been continuously optimized.

Risk Warning

2. Market risk: In 2025, the Group’s VAR value at the end of the period reached RMB 333 million, up 135.45% year over year. The exposure of equity-type assets expanded, so valuation risks caused by volatility in capital markets should be carefully monitored;
3. Business compliance risk: Throughout the year, Huatai United Securities received regulatory warning letters multiple times because investment banking project reviews were not properly conducted. The company needs to strengthen quality control across the entire project lifecycle;
4. International business risk: While overseas expansion is accelerating, it is necessary to address regulatory differences across markets and geopolitical risks. In 2025, new business qualifications were added for its Singapore subsidiary and U.S. subsidiary, so the cross-border risk control system must be improved in tandem;
5. Technology investment risk: Cutting-edge technology investments such as AI are high and iterations are fast. If implementation does not meet expectations, it may affect the return on investment. The company needs to continuously optimize technology implementation scenarios.

Overall, Huatai Securities’ core profitability in 2025 was strong, and its business structure continued to improve. The results of its technology and internationalization layout have begun to show. However, cash flow volatility and compliance risks require particular attention. Going forward, the company should maintain profitability growth while strengthening risk management and achieving a balance in cash flow.

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