Core Business Stalls, Emerging Operations Struggle to Lead; CITIC Heavy Industry's Year-on-Year Net Profit Attributable to Parent Nearly Flat

Securities Star Lu Wenyen

Recently, heavy equipment manufacturer CITIC Heavy Industries (601608.SH) disclosed its 2025 financial report. The company’s revenue and net profit attributable to shareholders grew by less than 1%, with net profit after non-recurring gains and losses increasing by 2.36%, indicating that growth has nearly stagnated. Facing sluggish growth, CITIC Heavy Industries has implemented cost-cutting measures, with R&D expenses experiencing the largest decline.

Securities Star notes that both revenue and gross profit margins for traditional mining and heavy equipment have declined, dragging down overall performance and weakening the “ballast” role. Meanwhile, the three emerging business segments show mixed results: only new energy equipment saw revenue and gross margin growth, but this was not enough to offset the pressure from other products with sluggish growth. Additionally, two major core private placement projects have been delayed or temporarily halted, forcing the company to “step on the brakes” on capacity expansion, further restricting development pace.

Performance Growth Nearly Stalled, R&D Shrinks

Data shows that CITIC Heavy Industries mainly develops, manufactures, and sells large equipment, complete sets of technical equipment, and key components in fields such as mining, heavy machinery (including engineering complete sets), robotics and intelligent equipment, new energy equipment, and special materials. The company’s downstream customers are primarily in cyclical industries like mining, metallurgy, building materials, and coal.

As the domestic heavy machinery manufacturing industry enters a phase of transformation and upgrading, leading companies are expanding growth space by leveraging their core capabilities into related fields. Product boundaries are becoming increasingly blurred, and market competition is intensifying.

Looking back at 2024, CITIC Heavy Industries experienced notable fluctuations. That year, revenue was 8.034 billion yuan, down 15.93% year-on-year; net profit attributable to shareholders was 375 million yuan, down 2.36%; and net profit after non-recurring gains and losses was 398 million yuan, up 34.41%. Increased competition in wind power equipment and coal equipment markets, along with delays in some projects affected by industry cycles, were the main reasons for the revenue decline in 2024.

In 2025, CITIC Heavy Industries achieved revenue of 8.107 billion yuan, up 0.91%; net profit attributable to shareholders was 375 million yuan, up 0.24%; and net profit after non-recurring gains and losses was 407 million yuan, up 2.36%. All three core indicators grew by less than 3%, indicating a stage of bottleneck in operational development.

In the context of nearly stagnant revenue growth, CITIC Heavy Industries proactively reduced expenses. In 2025, excluding financial expenses which increased, selling, administrative, and R&D expenses were 262 million yuan, 514 million yuan, and 392 million yuan respectively, decreasing by 7.08%, 5.88%, and 19.56% year-on-year. R&D expenses saw the largest decline, mainly because some R&D projects entered development stages, resulting in capitalized expenditures.

Overall R&D investment in 2025 totaled 553 million yuan, accounting for 6.82% of revenue. In 2024, R&D spending was 574 million yuan, representing 7.14% of total revenue. The R&D team also shrank, with 1,633 R&D personnel at the end of 2025, down 101 from 1,734 at the end of 2024, reducing the proportion of R&D staff to 22.54%. Both investment amount and intensity slightly declined in 2025.

Securities Star observes that, besides intensified competition, CITIC Heavy Industries’ non-operating expenses in 2025 include an estimated debt and litigation loss of up to 62.06 million yuan, indicating ongoing legal risks from historical issues. This expense relates to a guarantee lawsuit involving its wholly owned subsidiary, Luoyang Mining Machinery Engineering Design Research Institute Co., Ltd. (“Mining Research Institute”), which provided a guarantee for a loan to Customer A. When Customer A failed to repay the principal as agreed, they were sued. The court ordered Customer A to pay 124 million yuan in principal plus interest, with the Mining Research Institute bearing joint liability. This is not an isolated case; in 2024, CITIC Heavy Industries faced estimated liabilities and litigation losses totaling up to 112 million yuan due to multiple lawsuits.

Gross Margin Declines, Capacity Expansion “Slowed Down”

CITIC Heavy Industries has stated it will continue to strengthen the “ballast” role of mining and heavy equipment while accelerating the cultivation of three emerging sectors: robotics and intelligent equipment, new energy equipment, and special materials.

As a pillar of revenue, mining and heavy equipment generated 5.039 billion yuan in 2025, down 9.73% year-on-year, accounting for 62.15% of total revenue, the largest decline among all products, directly dragging down overall revenue. Gross profit margin for this segment was 21.42%, down 2.47 percentage points year-on-year. The weakening profitability of core products has increased operational pressure and highlighted the diminishing “ballast” role of traditional main business.

The three emerging sectors underperformed expectations and failed to fully offset the slowdown of main business. Revenue from robotics and intelligent equipment and special materials was 862 million yuan and 1.248 billion yuan, respectively, down 4.67% and 6.73%. Their gross margins were 24.38% and 12.98%, decreasing by 0.63 and 6.77 percentage points respectively.

Although new energy equipment saw a remarkable year-on-year increase of 357.49%, its revenue was only 958 million yuan, representing 11.82% of total revenue, making it difficult to offset the impact of declining revenues from other products in the short term. Notably, the high growth in this sector largely stems from a low base in 2024, when revenue dropped as much as 78.74%, and has not yet recovered to 2023 levels.

Meanwhile, the gross margin for new energy equipment was 2.19%, up 3.01 percentage points from -0.82% in 2024. However, due to the decline in gross margins across key sectors, CITIC Heavy Industries’ overall gross margin in 2025 decreased by 4.51 percentage points to 18.17%.

Securities Star notes that, amid business pressures, capacity expansion has also faced uncertainties. In 2024, CITIC Heavy Industries raised approximately 816 million yuan through private placements, with 368 million yuan and 153 million yuan invested in the panel box production line project (“Panel Box Project”) and the high-end wear-resistant parts manufacturing automation project (“High-end Wear-resistant Parts Project”), respectively. These projects are key to expanding and improving the company’s basic component capacity.

The Panel Box Project’s scheduled operational date was postponed from June 30, 2025, to December 31, 2026. The delay was mainly due to the adoption of advanced production processes, with some equipment being non-standard and requiring imports. The company decided to delay based on actual conditions, market, and overall layout. By the end of 2025, the project had received a total of 125 million yuan in funding, about 34% of the planned investment.

The High-end Wear-resistant Parts Project was also affected by changes in the industry environment, leading the company to re-evaluate and temporarily suspend its implementation. The originally planned investment of 153 million yuan has not yet been utilized.