Eagle Eye Warning: Hongchang Technology's Operating Revenue and Net Profit Diverge

Sina Finance Listed Companies Research Institute | Earnings Hawk-Eye Early Warning

On April 6, Hongchang Technology released its 2025 annual report, and the audit opinion was a standard unqualified audit opinion.

The report shows that the company’s operating revenue for 2025 was RMB 1.15B, up 11.68% year over year; net profit attributable to the parent was RMB 32.8364 million, down 37.41% year over year; net profit after deducting non-recurring items attributable to the parent was RMB 15.6989 million, down 59.72% year over year; and basic earnings per share were RMB 0.27 per share.

Since the company’s listing in May 2021, it has paid cash dividends 4 times, with cumulative cash dividends already implemented totaling RMB 131 million. The announcement shows that the company plans to distribute cash dividends of RMB 0.28 per 10 shares to all shareholders (including tax).

The Listed Company Financial Report Hawk-Eye Early Warning System conducts intelligent quantitative analysis of Hongchang Technology’s 2025 annual report across four major dimensions: performance quality, profitability, capital pressure and safety, and operating efficiency.

I. Performance Quality

During the reporting period, the company’s operating revenue was RMB 1.15B, up 11.68%; net profit was RMB 32.6162 million, down 36.97% year over year; and net cash flow from operating activities was RMB 173 million, up 104.33% year over year.

From the overall performance perspective, the following requires key attention:

• Material decline in net profit attributable to the parent. During the reporting period, net profit attributable to the parent was RMB 30M, down significantly by 37.41% year over year.

• The growth rate of net profit after deducting non-recurring items attributable to the parent continues to decline. In the past three annual reports, the year-over-year changes in net profit after deducting non-recurring items attributable to the parent were 39.96%, -49.4%, and -59.72%, and the declining trend has continued.

• Operating revenue and net profit move in opposite directions. During the reporting period, operating revenue increased by 11.68% year over year, while net profit decreased by 36.97% year over year, indicating a divergence between movements in operating revenue and net profit.

In combination with the quality of operating assets, the following requires key attention:

• Inventory growth rate is higher than the growth rate of cost of sales. During the reporting period, inventories increased by 25.65% compared with the beginning of the period, while cost of sales increased by 15.89% year over year; the inventory growth rate is higher than the growth rate of cost of sales.

• Inventory growth rate is higher than the growth rate of operating revenue. During the reporting period, inventories increased by 25.65% compared with the beginning of the period, while operating revenue increased by 11.68% year over year; the inventory growth rate is higher than the growth rate of operating revenue.

II. Profitability

During the reporting period, the company’s gross margin was 13.2%, down 19.29% year over year; net profit margin was 2.84%, down 43.56% year over year; and return on net assets (weighted) was 2.49%, down 47.02% year over year.

In combination with performance at the operating level, the following requires key attention:

• Gross margin on sales continues to decline. In the past three annual reports, gross margin on sales was 20.22%, 16.35%, and 13.2%, with a continuously declining trend.

• Sales net profit margin continues to decline. In the past three annual reports, sales net profit margin was 9.73%, 5.04%, and 2.84%, with a continuously declining trend.

In combination with the company’s asset-side performance, the following requires key attention:

• Average return on net assets over the recent three years is below 7%. During the reporting period, the weighted average return on net assets was 2.49%, and the weighted average return on net assets averaged below 7% across the most recent three accounting years.

• Return on net assets continues to decline. In the past three annual reports, the weighted average return on net assets was 8.04%, 4.7%, and 2.49%, with a continuously declining trend.

• Return on invested capital is below 7%. During the reporting period, the company’s return on invested capital was 2.68%, and the average across the three reporting periods was below 7%.

From non-recurring gains and losses, the following requires key attention:

• Cash inflows from disposing of equity or assets are relatively large. During the reporting period, the ratio of net cash inflows from disposing of equity in subsidiaries or real estate, etc., to net profit was 51.15%.

From dimensions such as customer concentration and minority shareholders, the following requires key attention:

• The proportion of revenue from the top five customers is relatively high. During the reporting period, the ratio of sales amount from the top five customers / total sales was 68.61%, indicating customers are overly concentrated.

III. Capital Pressure and Safety

During the reporting period, the company’s asset-liability ratio was 32.55%, down 27.5% year over year; the current ratio was 2.28, and the quick ratio was 2.01; total debt was RMB 364 million, of which short-term debt was RMB 364 million. Short-term debt accounted for 100% of total debt.

From the overall financial condition, the following requires key attention:

• The current ratio continues to decline. In the past three annual reports, the current ratio was 2.96, 2.68, and 2.28 respectively, indicating weakening short-term solvency.

From short-term capital pressure, the following requires key attention:

• The short-to-long debt ratio increases significantly. During the reporting period, the short-term debt / long-term debt ratio increased significantly to 42.84.

• The cash ratio continues to decline. In the past three annual reports, the cash ratio was 1.76, 1.66, and 1.34 respectively, showing a continuous decline.

From the perspective of capital management and control, the following requires key attention:

• Interest income / cash and cash equivalents is less than 1.5%. During the reporting period, cash and cash equivalents were RMB 600 million, and short-term debt was RMB 60 million. The company’s average interest income / cash and cash equivalents ratio was 0.715%, which is below 1.5%.

• Other receivables / current assets ratio continues to grow. In the past three annual reports, the other receivables / current assets ratio was 0.06%, 0.19%, and 0.2% respectively, showing continuous growth.

• Accounts payable bills have changed significantly. During the reporting period, accounts payable bills were RMB 300 million, with a period-beginning change rate of 36.26%.

IV. Operating Efficiency

During the reporting period, the company’s accounts receivable turnover was 2.99, up 2.18%; inventory turnover was 5.8, up 1.94%; and total asset turnover was 0.53, up 6.05%.

From operating assets, the following requires key attention:

• The inventory / total assets ratio continues to increase. In the past three annual reports, the inventory / total assets ratio was 7.42%, 7.42%, and 8.55% respectively, showing continuous growth.

From long-term assets, the following requires key attention:

• Construction in progress has changed significantly. During the reporting period, construction in progress was RMB 80 million, up 80.96% compared with the beginning of the period.

• Long-term deferred expenses have changed significantly compared with the beginning of the period. During the reporting period, long-term deferred expenses were RMB 20 million, up 286.86% compared with the beginning of the period.

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Introduction to Sina Finance Listed Company Financial Report Hawk-Eye Early Warning: Listed Company Financial Report Hawk-Eye Early Warning is a professional intelligent analysis system for listed company financial reports. Hawk-Eye Early Warning gathers a large number of authoritative financial experts from accounting firms and listed companies, and tracks and interprets the latest financial reports of listed companies across multiple dimensions such as company performance growth, earnings quality, capital pressure and safety, and operating efficiency. It also uses charts and text to highlight potential financial risk points. It provides technical solutions for professional, efficient, and convenient identification and early warning of financial risks of listed companies for financial institutions, listed companies, regulatory authorities, and others.

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