Xinke Materials 2025 Annual Report Analysis: Revenue up 20.01% to 4.751 billion yuan; net profit excluding non-recurring gains and losses plummeted 67.52%

Key Financial Indicator Interpretation

Operating Revenue: Scale Expansion but Profitability Under Pressure

In 2025, the company achieved operating revenue of RMB 4.751 billion, up 20.01% year over year, mainly due to the expansion of sales volume for copper-based products and the increase in copper prices. By quarter, revenue increased quarter by quarter, reaching RMB 1.335 billion in the fourth quarter, showing a strong push on the revenue side in the second half of the year.

However, while operating revenue grew, operating costs also rose 21.37% year over year to RMB 4.429 billion, with a growth rate exceeding that of revenue, compressing the overall profit margin. In terms of business structure, revenue from the copper-based alloy business contributed RMB 4.233 billion, up 23.45% year over year, serving as the core driver of revenue growth; revenue from the wire and cable business was RMB 332 million, down 13.29% year over year, becoming a drag on the revenue side.

Net Profit: A Halving-Style Decline, Supported by Non-Recurring Gains and Losses

In 2025, net profit attributable to shareholders of listed companies was RMB 30.89 million, down 50.46% year over year. Meanwhile, net profit after deducting non-recurring gains and losses was only RMB 12.13 million, down 67.52% year over year, with core profitability declining significantly.

The decline in the company’s net profit was mainly affected by multiple factors: first, after a controlling subsidiary, Jiangxi Xinke, commenced production following the conversion from construction to production, it was in a capacity ramp-up phase, with higher costs; second, adjustments to the export tax rebate policy squeezed profit margins; third, volatility in copper prices at high levels and intensifying industry competition led to a narrowing gross margin. However, in the reporting period, non-recurring gains and losses reached RMB 18.76 million, providing some support to net profit. Among them, government subsidies contributed RMB 11.21 million, and gains from asset disposal contributed RMB 4.58 million.

Earnings Per Share: Synchronized Decline, Profitability Indicators All Weaken

Basic earnings per share in 2025 was RMB 0.02 per share, down 33.33% year over year; earnings per share after deducting non-recurring gains and losses (non-GAAP) was RMB 0.01 per share, down 50.00% year over year. This is fully consistent with the trends of declines in net profit and non-GAAP net profit, reflecting the company’s broad-based retreat in profitability.

Expense Structure Analysis

Total Expenses: Up Slightly by 0.61%, with a Clearly Divergent Structure

In 2025, the company’s total period expenses were RMB 307 million, up slightly by 0.61% year over year. Among them, selling expenses and administrative expenses decreased, while finance expenses and R&D expenses increased, showing a clearly split expense structure.

Selling Expenses: Down 22.86%, with Evident Effect from Cost Control

Selling expenses in 2025 were RMB 14.73 million, down 22.86% year over year, mainly because compensation for sales personnel and business expenses decreased. From the breakdown, staff compensation decreased from RMB 14.18 million to RMB 11.95 million. Travel expenses, business entertainment expenses, and others also declined to varying degrees, indicating that the company achieved clear results in controlling sales-side expenses.

Administrative Expenses: Down 7.10%, Mainly Due to Reduced Intermediary Fees

Administrative expenses were RMB 84.91 million, down 7.10% year over year, mainly benefiting from lower intermediary agency fees. In the reporting period, staff compensation within administrative expenses actually increased 11.40% year over year to RMB 42.13 million. Meanwhile, intermediary agency fees decreased from RMB 10.05 million to RMB 5.17 million, becoming the core driver behind the decline in administrative expenses.

Finance Expenses: Up 26.83%, with Clear Drag from Foreign Exchange Losses

Finance expenses were RMB 39.54 million, up 26.83% year over year, mainly due to an increase in foreign exchange losses during the period, while the previous period recorded foreign exchange gains. In 2024, the company generated net foreign exchange gains of RMB 10.48 million, whereas in 2025 it incurred net foreign exchange losses of RMB 3.79 million. In addition, bank service charges, discounting interest, and other items also increased to varying degrees, pushing up finance expenses.

R&D Expenses: Up 3.51%, Ongoing Investment in Technological Innovation

R&D expenses were RMB 168.05 million, up 3.51% year over year, mainly due to an increase in R&D investment in the current period. The company continues to invest in areas such as high-strength, high-conductivity copper alloys and high-speed copper connection components. In the reporting period, total R&D investment accounted for 3.54% of operating revenue, highlighting the company’s emphasis on technological innovation.

R&D Personnel Profile: Stable Team, Optimized Structure

At the end of 2025, the company had 292 R&D personnel, accounting for 22.21% of the company’s total headcount. The team size remained stable. In terms of education structure, the number of R&D personnel with a bachelor’s degree or above was 86, representing 29.45%, an increase from the previous year; personnel with a junior college degree or below were 206, representing 70.55%. In terms of age structure, R&D personnel aged 30–50 totaled 184, representing 63.01%, forming the core force of the R&D team and providing stable talent support for the company’s technological innovation.

Cash Flows: Funding Side Pushing Forward; Operating and Investing Cash Flows Both Flow Out

Net Cash Flow from Operating Activities: Net Outflow Expands to RMB 92.86 million

In 2025, net cash flow from operating activities was -RMB 92.86 million. Compared with the same period last year, the net outflow expanded by RMB 28.34 million, mainly due to an increase in operating receivables. In the reporting period, cash paid for purchasing goods and receiving services increased 31.13% year over year to RMB 5.163 billion; cash received from selling goods and providing services increased 29.35% year over year to RMB 5.096 billion. The growth rate of cash inflows was lower than that of cash outflows. Meanwhile, taxes and various payments increased sharply 174.88% year over year to RMB 69.49 million, further intensifying pressure on operating cash flow.

Net Cash Flow from Investing Activities: Net Outflow of RMB 235.00 million, Concentrated Investment in Project Construction

Net cash flow from investing activities was -RMB 235.00 million, with the net outflow expanding by RMB 175.10 million year over year. The main reason was that the company concentrated payments for project construction management fees for the Guangxi Xinke project. In the reporting period, cash paid for purchasing and constructing fixed assets, intangible assets, and other long-term assets reached RMB 233.00 million, up 167.56% year over year, indicating the company was in a peak period of project investment.

Net Cash Flow from Financing Activities: Net Inflow of RMB 406.32 million, Borrowing Scale Surges

Net cash flow from financing activities was RMB 406.32 million, up significantly by 501.60% year over year, mainly due to an increase in bank borrowings during the period. In the reporting period, cash received from obtaining loans reached RMB 1.295 billion, up 53.75% year over year. At the same time, cash paid for repaying debts was RMB 844 million, up 34.19% year over year. The company offset the cash shortfall on the operating and investing sides by expanding its borrowing scale.

Risk Warning: Four Major Risks to Watch

Risk of Volatility in Raw Material Prices

The company’s production relies heavily on non-ferrous metal raw materials such as copper, zinc, and nickel, which account for a large share of costs. As non-ferrous metals are bulk commodities, their prices are affected by multiple factors including the macroeconomy and futures markets, leading to sharp fluctuations that will directly impact the company’s production costs and profitability levels. Although the company hedges risks through hedging and offsetting operations, it still cannot fully avoid the impact caused by price volatility.

Technical R&D Risk

The non-ferrous metal alloy materials industry has a long R&D cycle and requires substantial investment. The company’s R&D projects in areas such as high-strength, high-conductivity copper alloys and high-speed copper connection components involve the risk that they may not yield results in the short term or may even fail. If R&D outcomes fall short of expectations, it will adversely affect the company’s technological advantages and future development.

Accounts Receivable Risk

As sales scale expands, the company’s accounts receivable balance increased 24.93% year over year to RMB 675 million. If downstream customer operating conditions deteriorate or credit defaults occur, accounts receivable may not be collected in a timely manner, which will put pressure on the company’s asset quality and cash flow liquidity.

Risk of Exchange Rate Fluctuations

The company has a certain scale of export business. Fluctuations in the RMB exchange rate will directly affect the pricing competitiveness of export products and foreign exchange gains and losses. In 2025, the company incurred net foreign exchange losses of RMB 3.79 million. In the future, if the RMB exchange rate fluctuates significantly, it will further affect the company’s profitability.

Compensation for Executives and Supervisors: Chairman’s Pay Tops at RMB 1.6676 million

During the reporting period, the chairman, Song Zhigang, had total pre-tax compensation received from the company of RMB 1.6676 million, up significantly year over year. This is mainly because he began serving as chairman in November 2025, and his compensation includes the full-year duties-based compensation. The general manager, Wang Sheng, had pre-tax compensation of RMB 1.1536 million. Vice general manager Zhang Long had pre-tax compensation of RMB 0.9478 million. Vice general manager Wang Xiyuan had pre-tax compensation of RMB 0.3620 million. Financial director Xi Lijuan had pre-tax compensation of RMB 0.5403 million. Overall, the compensation of key executives shows a certain inversion relative to the company’s performance; attention should be paid to optimizing the linkage mechanism between future compensation and performance.

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