Revenue has increased, but profits have been halved. How does "price butcher" AUX's accounting add up?

Ask AI: Does insufficient R&D investment undermine AUC?iax’s product competitiveness?

AUC?iax Electric’s 2025 annual report has been released: revenue was 30.049 billion yuan, up slightly year over year by about 1%, but incremental growth was less than 100 million yuan. However, net profit was 2.235 billion yuan, down sharply 23.2% year over year, showing a rare contrast of slight revenue growth paired with a clear profit contraction.

The pressure comes first and foremost from higher input material prices. Copper prices rose 33%—40% over the full year. Copper products account for about 30% of the total cost of air conditioners; as a result, the copper material cost for a single 1.5-ton air conditioner increased by 120 to 240 yuan, directly dragging down the gross margin. For refrigerants, the prices of R32 and R410A surged by 61.9% and 40.6%, respectively. The refrigerant cost per air conditioner increased by another more than 30 yuan. The financial report shows that in 2025, the company’s consolidated gross margin was 18.8%, down 2.1 percentage points year over year. For AUC?iax, which already operates with thin margins, a drop of more than two points in gross margin is especially noticeable. Export sales also showed weakness. In the second half of 2025, overseas ODM customers became more cautious in placing orders, causing export revenue to plunge 37.1% year over year in the second half. Full-year overseas revenue was barely flat, but the abrupt order slump in the second half clearly weighed on overall profitability. In AUC?iax’s overseas business, ODM contract manufacturing accounts for about 80%, and the gross margin of the contract manufacturing business is only around 12%. Customers have strong pricing power, and order stability is relatively weak.

Internal expenses have also continued to climb. In 2025, due to the establishment of a newly set up overseas sales company, selling expenses increased. Coupled with higher warehousing and logistics costs and increased depreciation from the new base, the period expense ratio rose from 10.1% to 11.2%. In the fourth quarter, operating cash flow for the quarter also turned from positive to negative.

Another issue that cannot be ignored is long-term insufficient R&D investment. In the first half of 2025, R&D spending was 312 million yuan, only 38.6% of sales expenses in the same period. The R&D expense ratio was 1.55%, far below Gree’s 4.01% and Midea’s 3.47%. Insufficient R&D investment directly affects the pace of product iteration. The change in online market share is especially intuitive: in 2024, AUC?iax air conditioners’ online market share was 7.35%, ranking fifth in the industry. In the first half of 2025, it fell to 6.55% and the rank dropped to seventh, as it was overtaken by value-for-money brands such as Xiaomi and Hualing.

AUC?iax’s core problem is not simply the decline in profits, but rather that the marginal effect of its low-price strategy is gradually diminishing, while its technical strength and brand premium have not yet formed effective support. Of course, the market is not entirely negative. Haitong International gave an “outperform the market” rating, with a target price of HKD 21.3, looking favorably on the company’s overseas OBM business expansion and improvements in domestic channel efficiency. Huatai Securities maintained a “buy” rating, but lowered its earnings forecast and target price to HKD 12.04. In addition, the company has committed that the dividend payout ratio from 2025 to 2027 will not be less than 75%; based on the current share price, the dividend yield is expected to exceed 10%, which is attractive to investors seeking cash returns.

In its announcement, AUC?iax attributes the profit decline to rising raw material prices, high channel inventory, and weak end-market demand. These factors certainly exist, but the deeper challenge is this: when the price advantage of the “price butcher” is no longer sharp, what will it rely on to keep consumers? There are clear shortcomings in R&D, branding, and channels that urgently need to be addressed. In 2026, whether AUC?iax can improve product competitiveness while controlling costs will be the key question that determines its trajectory.