Guocheng Mining reports two consecutive losses in net profit excluding non-recurring gains and losses, with titanium dioxide continuing to "bleed" financially.

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Source: Securities Star

Recently, Guocheng Mining Industry (Rights Protection) (000688.SZ) delivered a performance report showing both revenue and net profit attributable to the parent company increased. Its net profit attributable to the parent company rose sharply by 138.46% year over year. However, behind the impressive growth in performance, Guocheng Mining Industry relied on mergers and acquisitions as well as the sale of subsidiaries; its non-recurring gains and losses totaled about RMB 1.33B, becoming a core driving force behind profitability. In the same period, its net profit after excluding non-recurring items actually fell by RMB 257 million, down 185.42% year over year.

Securities Star noted that the newly consolidated molybdenum concentrate business of Guocheng Mining Industry, supported by a sizable revenue scale, accounts for half of the company’s business; however, it failed to reverse the decline trend in revenue from the company’s traditional non-ferrous metals mining and processing business. Although the titanium dioxide pigment achieved explosive growth in both sales volume and revenue scale, it fell into a loss quagmire due to price constraints, becoming one of the important reasons hindering the main business’s profitability level.

01. Insufficient “quality of performance”; the debt-to-asset ratio hits a new stage high

In 2025, Guocheng Mining Industry achieved revenue of RMB 4.81B, up 17.13% year over year; its net profit attributable to the parent company was RMB 1.08B, up sharply by 138.46% year over year.

A deeper analysis shows that non-recurring gains and losses became the core driving force behind Guocheng Mining Industry’s high growth in performance. Data show that in 2025, the company’s non-recurring gains and losses were as high as RMB 1.33B. Among them, net profit and loss from newly consolidated subsidiaries contributed RMB 1.15B, and non-current asset disposal gains and losses resulting from the sale of subsidiary equity totaled RMB 772 million.

On December 26, 2025, Guocheng Mining Industry spent RMB 3.17B to complete the acquisition of 60% equity of Inner Mongolia Guocheng Industrial Co., Ltd., the controlling shareholder’s company (hereinafter referred to as “Guocheng Industrial”). The data show that Guocheng Industrial achieved net profit of RMB 1.15B in 2025; based on the 60% equity stake, it increased the net profit attributable to shareholders of the listed company by RMB 688 million, becoming an important component of Guocheng Mining Industry’s profits for the period.

It is worth mentioning that although this acquisition transaction, which required considerable investment, boosted performance and thickened earnings, it also brought significant financial pressure. To complete the acquisition smoothly, Guocheng Mining Industry applied to banks for merger and acquisition loans totaling RMB 1.9B. The loan term was 84 months, leading to a year-over-year increase in long-term borrowings by 155.16% to RMB 2.28 billion in 2025.

To make matters worse, Guocheng Mining Industry’s short-term debt repayment pressure was also high. In 2025, the company’s short-term borrowings and non-current liabilities due within one year were RMB 1.12B and RMB 503 million, respectively, up 396.54% and 13.15% year over year. Obviously, the RMB 907 million in cash and cash equivalents on the books is insufficient to cover the short-term debt gap. The expansion of the debt scale directly pushed up financial costs. At the end of 2025, finance expenses increased 20.2% year over year to RMB 154 million. Of these, interest expense rose from RMB 129 million in 2024 to RMB 160 million. As the debt scale climbed, Guocheng Mining Industry’s asset-liability ratio rose to 69.55% in 2025, the highest stage level since 2012.

In addition, on January 14, 2025, Guocheng Mining Industry sold 65% equity of Chifeng Yubang Mining Industry Co., Ltd. (hereinafter referred to as “Yubang Mining Industry”) for a transaction consideration of RMB 1.6 billion. After the transaction, the company no longer held any equity in Yubang Mining Industry. The sale of Yubang Mining Industry’s equity was confirmed to generate an investment gain of RMB 776 million, affecting the net profit attributable to the parent company in 2025 by approximately RMB 658 million. The data show that Yubang Mining Industry’s own profitability is not stable; in 2023 and 2024 it recorded net profits of -RMB 94.25 million and RMB 8.97 million, respectively, contributing limited profit to the main business.

Securities Star notes that after excluding non-recurring items, Guocheng Mining Industry’s net profit after deducting non-recurring items in 2025 was a loss of RMB 257 million, down 185.42% year over year. Its net profit after excluding non-recurring items has been loss-making for two consecutive years. In 2024, the loss amount was RMB 90.1841 million, a decrease of 238.63%.

02. Weak growth in revenue from non-ferrous metals; molybdenum concentrate can’t carry the whole business alone

According to materials, Guocheng Mining Industry mainly engages in the mining and processing of non-ferrous metals and the comprehensive utilization of resources. Its main products include molybdenum concentrate, zinc concentrate, lead concentrate, copper concentrate, titanium dioxide pigment, sulfur concentrate, iron sulfide powder, industrial sulfuric acid, and secondary iron concentrate, etc. For its comprehensive utilization projects, the main product is rutile-type titanium dioxide pigment.

Securities Star notes that molybdenum concentrate demonstrated strong revenue contribution capacity in 2025. This product achieved a sales volume of 7,287.09 metric tons of metal and revenue increased 11.87% year over year to RMB 2.44 billion, accounting for more than half of total revenue. At the same time, its gross profit margin was as high as 70.33%, up 4.02 percentage points from 2024, becoming one of the few profit highlights in Guocheng Mining Industry’s main businesses. It is understood that molybdenum concentrate is the main product of Guocheng Industrial, which was newly consolidated. In 2025, Guocheng Industrial is handling procedures to expand the mining area’s mining rights, intending to increase production scale from 5 million tons per year to 8 million tons per year.

However, molybdenum concentrate’s impressive performance was unable to reverse the revenue downturn of the company’s traditional core business. As the company’s traditional core non-ferrous metal mining and processing business saw declines in both production and sales volume, it recorded 41,655.15 metric tons and 41,948.92 metric tons, respectively, down 23.99% and 23.03% year over year. Revenue was RMB 3.17B, down 11.15% year over year.

Looking at sub-products, revenue for zinc concentrate, lead concentrate, copper concentrate, and silver concentrate was RMB 448 million, RMB 119 million, RMB 71.62M, and RMB 35.0017 million, respectively, with year-over-year declines of 31.08%, 15.34%, 1.78%, and 91.29%, respectively.

The non-ferrous metals industry is cyclical, and product prices are greatly influenced by factors such as the global economy and supply-demand relationships. In 2025, the average annual spot price for zinc in the domestic market was RMB 23k per ton, down 2% from the previous year; the average annual price for lead was RMB 17k per ton, down 1.6% from the previous year.

On the other side, the titanium dioxide pigment segment showed a “two-sided” scenario. In 2025, titanium dioxide pigment sales volume surged 304.93% year over year to 128.6 thousand tons, with revenue increasing 260.94% year over year to RMB 23k—becoming the second-largest source of revenue after molybdenum concentrate. But its profitability remains concerning. Although gross profit margin improved from -24.86% in 2024 to -8.67%, it still failed to overcome the predicament of loss-making sales.

The root of this contradiction lies in the prolonged slump in titanium dioxide pigment prices. In 2025, the titanium dioxide pigment market was in a cyclical adjustment period. The market price of the product fell from RMB 14.9k per ton at the beginning of the year to RMB 13.7k per ton, a decline of 8.05%. The price trend showed mounting pressure. Meanwhile, its operating costs were as high as RMB 17k, surpassing the revenue level for the same period. As a result, despite a large jump in sales volume, the titanium dioxide pigment not only failed to become a point of profit growth for Guocheng Mining Industry, but instead dragged down overall profitability with negative gross margins. (This article was first published by Securities Star; author | Lu Weny an)

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责任编辑：杨红卜