Eagle Eye Warning: Sangfor's operating activities' net cash flow to net profit ratio continues to decline

Sina Finance Listed Company Research Institute | Earnings Eye Early Warning

On March 31, SInoFlight disclosed its 2025 annual report.

The report shows that the company’s operating revenue for all of 2025 was RMB 8.043 billion, up 6.96% year over year; net profit attributable to shareholders was RMB 393 million, up 99.52% year over year; net profit after deducting non-recurring gains and losses attributable to shareholders was RMB 304 million, up 296.38% year over year; and basic earnings per share were RMB 0.93 per share.

Since listing in April 2018, the company has issued cash dividends 6 times, with cumulative cash dividends already implemented of RMB 297 million.

The listed company Earnings Eye early warning system conducts intelligent quantitative analysis of SInoFlight’s 2025 annual report across four major dimensions: performance quality, profitability, funding pressure and security, and operating efficiency.

I. Performance Quality

During the reporting period, the company’s revenue was RMB 8.043 billion, up 6.96%; net profit was RMB 393 million, up 99.69%; and net cash flow from operating activities was RMB 1.342 billion, up 65.29%.

From the overall performance perspective, it is necessary to重点关注:

• Net profit fluctuations in the fourth quarter. During the reporting period, net profit was RMB 390 million, and the first three quarters were RMB -80 million, turning from negative to positive in the fourth quarter.

| Item | 20250331 | 20250630 | 20250930 | 20251231 | | Net profit (RMB) | -250 million | -228 million | -80.56 million | 393 million |

From the quality of operating assets, it is necessary to重点关注:

• The growth rate of accounts receivable bills is higher than the growth rate of operating revenue. During the reporting period, accounts receivable bills increased by 103.63% compared with the beginning of the period; operating revenue increased by 6.96% year over year; and the growth rate of accounts receivable bills is higher than that of operating revenue.

| Item | 20231231 | 20241231 | 20251231 | | Operating revenue growth rate | 3.36% | -1.86% | 6.96% | | Growth rate of accounts receivable bills versus beginning of period | 72.03% | 372.13% | 103.63% |

• Inventory growth rate is higher than cost of revenue growth rate. During the reporting period, inventory increased by 152.94% compared with the beginning of the period; cost of revenue increased by 12.95% year over year; and inventory growth rate is higher than that of cost of revenue.

| Item | 20231231 | 20241231 | 20251231 | | Inventory growth rate versus beginning of period | 39.96% | -11.1% | 152.94% | | Cost of revenue growth rate | -0.39% | 8.46% | 12.95% |

• Inventory growth rate is higher than operating revenue growth rate. During the reporting period, inventory increased by 152.94% compared with the beginning of the period; operating revenue increased by 6.96% year over year; and inventory growth rate is higher than that of operating revenue.

| Item | 20231231 | 20241231 | 20251231 | | Inventory growth rate versus beginning of period | 39.96% | -11.1% | 152.94% | | Operating revenue growth rate | 3.36% | -1.86% | 6.96% |

From the quality of cash flows, it is necessary to重点关注:

• The ratio of net cash flow from operating activities to net profit continues to decline. In the last three semi-annual reports, the ratio of net cash flow from operating activities to net profit was 4.76, 4.13, and 3.42 respectively; it continues to decline, showing a downward trend in earnings quality.

II. Profitability

During the reporting period, the company’s gross margin was 59.31%, down 3.51% year over year; net profit margin was 4.88%, up 86.7% year over year; and return on net assets (weighted) was 4.17%, up 87.84% year over year.

From the company’s operating-side returns, it is necessary to重点关注:

• Sales gross margin continues to decline. In the last three annual reports, sales gross margin was 65.13%, 61.47%, and 59.31% respectively, and the downward trend continues.

• Sales gross margin continues to decline, while sales net profit margin continues to grow. In the last three annual reports, sales gross margin was 65.13%, 61.47%, and 59.31% respectively, continuing to decline; sales net profit margin was 2.59%, 2.62%, and 4.88% respectively, continuing to grow.

From returns on the company’s asset base, it is necessary to重点关注:

• The average return on net assets for the last three years is below 7%. During the reporting period, the weighted average return on net assets was 4.17%; the weighted average return on net assets for the most recent three accounting years averaged below 7%.

• Return on invested capital is below 7%. During the reporting period, the company’s return on invested capital was 4.09%, and the average for the three reporting periods was below 7%.

III. Funding Pressure and Security

During the reporting period, the company’s asset-liability ratio was 41.76%, up 4.99% year over year; the current ratio was 1.89, and the quick ratio was 1.72; total debt was RMB 1.924 billion, of which short-term debt was RMB 732 million, and short-term debt as a proportion of total debt was 38.05%.

From the perspective of funding control, it is necessary to重点关注:

• The growth rate of advances to suppliers is higher than the growth rate of cost of revenue. During the reporting period, advances to suppliers increased by 19.96% compared with the beginning of the period; cost of revenue increased by 12.95% year over year; and the growth rate of advances to suppliers is higher than that of cost of revenue.

| Item | 20231231 | 20241231 | 20251231 | | Growth rate of advances to suppliers versus beginning of period | 28.01% | -4.17% | 19.96% | | Cost of revenue growth rate | -0.39% | 8.46% | 12.95% |

• Accounts payable bills changed significantly. During the reporting period, accounts payable bills were RMB 690 million, with a period-beginning change rate of 60.74%.

From the perspective of funding coordination, it is necessary to重点关注:

• Free cash flow is negative. In the last three annual reports, free cash flow was -250 million yuan, -110 million yuan, and -1.29 billion yuan respectively, and it has continued to be negative.

| Item | 20231231 | 20241231 | 20251231 | | Free cash flow (RMB) | -250 million | -108 million | -1.294 billion |

IV. Operating Efficiency

During the reporting period, the company’s accounts receivable turnover ratio was 12.3, up 31.61% year over year; inventory turnover ratio was 5.45, down 32% year over year; and total asset turnover ratio was 0.5, up 1.52%.

From operating assets, it is necessary to重点关注:

• Inventory turnover ratio continues to decline. In the last three annual reports, inventory turnover ratio was 8.14, 8.01, and 5.45 respectively, and inventory turnover capability is weakening.

• Accounts receivable bills continue to grow. In the last three annual reports, the ratio of accounts receivable bills to current assets was 0.3%, 1.44%, and 2.16% respectively, continuing to grow; the ratio of other cash received related to operating activities to accounts receivable bills was 1238.51%, 745.34%, and 328.54% respectively, continuing to decline.

From long-term assets, it is necessary to重点关注:

• Changes in deferred income tax assets are relatively large, and income tax expense is negative. During the reporting period, deferred income tax assets were RMB 110 million, up 371.56% compared with the beginning of the period; and income tax expense was RMB -10 million.

• The proportion of other non-current assets is high. During the reporting period, other non-current assets / total assets was 28.83%.

Click SInoFlight’s Earnings Eye early warning to view the latest warning details and a visual preview of financial statements.

Sina Finance Listed Company Earnings Eye Early Warning System Introduction: Earnings Eye Early Warning is an intelligent, specialized analysis system for listed company financial reports. By aggregating a large number of authoritative financial experts from accounting firms and listed companies, among others, Earnings Eye early warning tracks and interprets the latest financial reports of listed companies across multiple dimensions—including company earnings growth, earnings quality, funding pressure and security, and operating efficiency—and highlights potentially existing financial risk points in the form of text and graphics. It provides a professional, efficient, and convenient technology solution for identifying and issuing early warnings on financial risks for financial institutions, listed companies, regulatory authorities, and others.

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