[Zhongyuan Automobile] Feilong Co., Ltd. ( 002536 ) Annual Report Review: Significant Transformation Results, New Business Gradually Coming to Fruition

Event:

The company released its 2025 annual report. In 2025, the company achieved operating revenue of 4.55 billion yuan, a year-on-year decrease of 3.8%. Net profit attributable to the parent was 320 million yuan, down 3.9% year-on-year, and non-recurring net profit attributable to the parent was 330 million yuan, down 7.0% year-on-year; net cash flow from operating activities was 370 million yuan, down 1.7% year-on-year; basic earnings per share were 0.55 yuan, a decrease of 3.85% year-on-year; weighted average return on net assets was 9.28%, down 0.76 percentage points; the proposed cash dividend is 3 yuan per 10 shares (tax included).

Among them: Q4 achieved operating revenue of 1.31 billion yuan, a quarter-on-quarter increase of 21.5%, and a year-on-year increase of 6.5%. Net profit attributable to the parent was 30 million yuan, a quarter-on-quarter decrease of 60.4%, and a year-on-year decrease of 52.1%.

Investment Highlights:

The company’s new energy vehicle and liquid cooling revenue maintained growth, with significant transformation results.

In 2025, the company achieved operating revenue of 4.55 billion yuan, a decrease of 3.8% year-on-year, mainly due to the contraction of traditional fuel vehicle business and overseas direct sales, but new business growth was strong, and transformation results were evident:

(1) Revenue from engine thermal management key components was 1.66 billion yuan, a decrease of 10.5% year-on-year, accounting for 36% of revenue.

(2) Revenue from engine thermal management energy-saving and emission reduction components was 2.11 billion yuan, down 6.2% year-on-year, accounting for 46% of revenue.

(3) Revenue from new energy vehicle and civilian liquid cooling components was 670 million yuan, up 28.1% year-on-year, increasing its share of revenue to 15%, nearly 4 percentage points higher than last year, becoming the company’s core growth driver.

Gross profit margin of traditional business improved, demonstrating cost control ability and operational resilience.

In 2025, the company’s gross profit margin was 23.96%, up 2.42 percentage points year-on-year. The gross profit margin of traditional engine thermal management components increased by over 2 percentage points; net profit margin was 6.65%, down 0.28 percentage points year-on-year. Regarding period expenses, in 2025, the company’s period expense ratio was 15.31%, up 1.1 percentage points year-on-year, with sales, management, R&D, and financial expense ratios at 1.93%, 7.34%, 6.58%, and -0.54%, respectively, decreasing or increasing slightly compared to last year. Management and R&D expenses slightly increased. The company continued to increase R&D investment, with R&D expenses reaching 299 million yuan, up 9.93% year-on-year, focusing on R&D of new energy thermal management components. Four specialized R&D centers have been established to support the transition to new technology fields.

Core automotive business remains stable, with comprehensive promotion of transformation and upgrading.

Automotive thermal management components, as the company’s core business, have seen significant improvement in gross margin through cost control and efficiency enhancement, demonstrating strong operational resilience. Meanwhile, the company is actively promoting transformation and upgrading, focusing on high-value-added core categories, vigorously promoting products such as electronic pumps, temperature control modules, and variable oil pumps, and expanding into new energy thermal management fields. The customer base in new energy thermal management continues to grow, with supply or contact established with over 90 companies including Chery, Li Auto, NIO, GAC Aion, and Seres, further strengthening the company’s competitive advantage. The company’s Thailand manufacturing base, Longtai, was completed and began trial production in June 2025, with an annual planned output of over 4 million units of turbine housings, exhaust manifolds, water pumps, etc., effectively mitigating international trade risks and serving as a gateway to expand into Southeast Asian and other overseas markets, continuously enlarging its global business scale.

Liquid cooling business accelerates realization, deeply integrating with the global AI industry chain.

The company leverages its first-mover advantage in liquid cooling technology, vigorously expanding markets in high-growth frontier areas such as server liquid cooling and data center (IDC) liquid cooling. Relying on self-developed liquid cooling pump technology and large-scale delivery capacity, it has established deep partnerships with leading domestic and international clients. The company has 80 customers in the liquid cooling field, over 120 projects underway, some already in mass production. It has become a leading domestic enterprise in server liquid cooling pumps and is deeply integrated into the global AI industry chain: domestically, collaborating with top CDU manufacturers like InnoVik, Shenling Environment, and GCL; internationally, entering the supply chains of Delta Electronics, Cooler Master, Vertiv, and others, and successfully joining the supply systems of world-class tech giants. To accelerate civilian liquid cooling development, the company spun off its subsidiary Wuhu Feilong in 2025, establishing a wholly owned subsidiary, Anhui Hangyi Technology, focusing on server liquid cooling and data center frontier fields, which helps to focus the business and improve operational efficiency.

Expanding into PC liquid cooling and robotics, opening long-term growth space.

As the power of personal computers (PCs) continues to increase and products become more miniaturized, gaming PCs are gradually adopting liquid cooling solutions. Liquid cooling technology is advancing into high-end e-sports products. The company accurately captures market demand, developing small-sized, low-power, high-performance liquid cooling pumps tailored to PC product features. These products are now in contact with end customers, with some projects progressing steadily, promising rapid penetration into the PC liquid cooling market. Meanwhile, the company regards robotics as a key strategic direction for future development, planning two development paths: “core component extension” and “liquid cooling scheme layout.” Leveraging existing automotive customer resources (such as Seres, Xpeng), the company actively explores R&D cooperation with vehicle manufacturers in robotics, demonstrating strong business synergy. With the rapid development of embodied intelligence industries, the company is expected to leverage its expertise in precision manufacturing and thermal management to secure a position in the robotics market.

Maintain the company’s “Buy” investment rating.

It is estimated that in 2026, 2027, and 2028, the company will achieve net profits attributable to the parent of 495 million yuan, 572 million yuan, and 688 million yuan, respectively, with EPS of 0.86 yuan, 1.00 yuan, and 1.20 yuan, corresponding PE ratios of 33.97x, 29.42x, and 24.47x. The company is a leading enterprise in China’s automotive thermal management field, with a stable core business, while expanding application scenarios. The “Automotive + Pan-Industrial” dual-drive strategy has begun to show results. AI liquid cooling is moving from order acquisition to performance realization, and robotics opens broader long-term growth space. We maintain a “Buy” investment rating.

Risk warnings: risks of market demand falling short of expectations; intensified industry competition; exchange rate fluctuations; significant raw material price volatility.

Securities analyst commitment:

The analyst signing this report holds a securities analyst qualification granted by the China Securities Industry Association, and my position complies with relevant regulatory requirements. Based on a diligent and prudent professional attitude, rigorous research methods, and analytical logic, I have independently and objectively prepared this report. The report accurately reflects my research views, and I am responsible for its content and viewpoints, ensuring the information sources are legal and compliant.

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