Sifangda 2025 Annual Report Analysis: Non-GAAP Net Profit Plummets 46.68%, Operating Cash Flow Turns Negative

Interpretation of Core Profitability Indicators

Operating Revenue: Up slightly by 7.98%, with a clear divergence in structure

In 2025, the company recorded operating revenue of RMB 567 million, up 7.98% year over year, with the growth rate slowing compared with the previous year. By product category, revenue from resource extraction/engineering contracting was RMB 304 million, down 5.69% year over year, which is the main drag on revenue growth; revenue from precision machining was RMB 167 million, down slightly by 4.90% year over year; and other business revenue was RMB 96 million, up 249.35% year over year, becoming the only growth driver. It is presumed that this mainly came from the contribution of the CVD diamond business of a subsidiary.
By region, domestic revenue was RMB 335 million, up 15.48% year over year, while overseas revenue was RMB 232 million, down 1.27% year over year, indicating weak performance in overseas markets.

Net Profit: Down 20.77% year over year; Non-recurring gains provide notable support

In 2025, the company’s net profit attributable to shareholders of listed companies was RMB 93.1839 million, down 20.77% year over year. Net profit after deducting non-recurring profit and loss was RMB 50.8908 million, down significantly by 46.68% year over year, showing a marked weakening in core profitability.

Non-recurring profit and loss became an important support for net profit. Total non-recurring profit and loss for the full year was RMB 42.2931 million, up 90.83% year over year. It mainly came from gains from changes in the fair value of financial assets of RMB 25.8360 million and government subsidies of RMB 16.9517 million.

Earnings per Share: Declining in tandem; the decline in the non-recurring measure is even larger

Basic earnings per share were RMB 0.1918 per share, down 20.74% year over year. Basic earnings per share after deducting non-recurring items were RMB 0.1053 per share, down 46.69% year over year. This is basically consistent with the decline in non-recurring net profit, reflecting a deterioration in the company’s earnings quality.

Expense Structure Analysis

Selling Expenses: Slightly down by 2.78%; structure optimized

In 2025, selling expenses were RMB 43.6703 million, slightly down 2.78% year over year. Of this, staff costs were RMB 31.8758 million, down 4.21% year over year; consulting service fees were RMB 999.8k, down 48.39% year over year, which is the main reason for the decrease in selling expenses. At the same time, marketing promotion expenses such as exhibition fees and advertising expenses increased somewhat, indicating that the company’s investment in expanding the market has not weakened.

Administrative Expenses: Basically flat; audit and consulting fees increased

Administrative expenses were RMB 72.0818 million, up only 0.32% year over year, remaining broadly stable overall. Of this, audit and consulting fees were RMB 7.0813 million, up 17.85% year over year, mainly because the company strengthened internal audit and management consulting expenditures; staff costs, depreciation and amortization, and other fixed expenditures were basically flat.

Finance Expenses: Turned from negative to positive; interest expense increased

Finance expenses were RMB 1.2461 million, up significantly by 114.10% year over year, turning from last year’s negative RMB 8.8382 million to a positive number. The main reason is that interest expense rose sharply by 309.91% year over year to RMB 8.7994 million, while interest income only increased by 9.04% to RMB 9.0690 million. Meanwhile, exchange rate movements resulted in an exchange loss of RMB 1.1450 million, compared with an exchange gain of RMB 3.4766 million last year.

R&D Expenses: Down 8.08%; personnel investment reduced

R&D expenses were RMB 57.4328 million, down 8.08% year over year. Of this, staff costs were RMB 27.7362 million, down 4.40% year over year; consulting service fees were RMB 683k, down 88.27% year over year, which is the main reason for the decline in R&D expenses. Material consumption was RMB 19.0912 million, up 16.22% year over year, indicating that the company’s material input for R&D projects is still increasing.

R&D Personnel Profile

In 2025, the company had 204 R&D personnel, down 10.92% year over year; R&D personnel as a proportion were 26.77%, down 1.36 percentage points year over year. By education level, there were 71 R&D personnel with a master’s degree or above, down 29.00% year over year, which is the main group experiencing a reduction in R&D headcount; there were 6 PhD-level R&D personnel, up 20.00% year over year. By age structure, there were 61 R&D personnel under 30 years old, down 35.11% year over year, indicating a relatively noticeable loss of younger R&D personnel.

Cash Flow Analysis

Operating Cash Flow: Turned from positive to negative; funding pressure becomes apparent

In 2025, the net cash flow from operating activities was negative RMB 47.2914 million, down 291.14% year over year, turning from last year’s net inflow of RMB 24.7413 million to a net outflow. The main reason is that cash paid for the purchase of goods and receipt of labor increased sharply by 106.02% year over year to RMB 342 million, while cash paid to employees and for employees increased sharply by 7.44% year over year to RMB 220 million. In contrast, cash received from selling goods and providing labor only rose 13.25% year over year to RMB 547 million. The growth rate of cash outflows from operating activities is far higher than that of inflows.

Investing Cash Flow: Net outflow narrowed; financial management scale declined

The net cash flow from investing activities was negative RMB 51.8988 million, up 74.63% year over year, with the scale of net outflow narrowing significantly. The main reason is that cash paid for the purchase and construction of fixed assets, intangible assets, and other long-term assets fell by 60.56% year over year to RMB 73.8377 million. At the same time, cash paid for investments declined by 25.97% year over year to RMB 402 million, as the company reduced fixed-asset investment and the scale of its financial management products.

Financing Cash Flow: Net inflow doubled; borrowings increased

The net cash flow from financing activities was RMB 168.6847 million, up 102.11% year over year, with the scale of net inflow doubling. The main reason is that cash received from obtaining borrowings increased sharply by 145.68% year over year to RMB 256 million; the company supplemented liquidity by increasing borrowings.

Risk Factor Interpretation

Risk of Macroeconomic Fluctuations

The global economic environment is complex and changeable, and international trade frictions continue. The company’s overseas business exceeds 40% of its total, exposing it to relatively significant risk of macroeconomic fluctuations. The company responds by expanding domestic and overseas markets, improving its industrial structure, and extending the industrial chain, but global economic uncertainty will still affect the company’s operating performance.

Risk of Market Expansion for New Products

The company continues to launch innovative products, but the market’s recognition of new products develops slowly, which may prevent it from achieving expected levels of returns. The company drives sales of new products through multiple channels, such as expanding distribution channels and improving process levels, but there is still uncertainty regarding market promotion for new products.

Risk of Accounts Receivable

As the company expands its business scale, the accounts receivable balance has increased. At the end of 2025, accounts receivable were RMB 204 million, down slightly by 0.66% year over year. Under conditions of economic fluctuations, the risk of bad debts on accounts receivable will increase, which may affect the company’s capital turnover efficiency. The company responds by improving credit management policies and controlling the aging of accounts receivable, but there is still some risk of bad debts.

Risk of Exchange Rate Fluctuations

The company has a relatively high proportion of overseas business, so exchange rate fluctuations have a significant impact on its operating performance. In 2025, the company incurred an exchange loss of RMB 1.1450 million, compared with an exchange gain of RMB 3.4766 million last year. The uncertainty from exchange rate fluctuations increases the company’s financial risk. The company reduces the impact of exchange rate fluctuations by strengthening cooperation with financial institutions, but two-way exchange rate movements will still affect the company’s profitability.

Compensation for Executives and Supervisors

Chairman’s Compensation: RMB 1.0050 million

During the reporting period, Fang Haijiang, chairman, received a total pre-tax remuneration of RMB 1.0050 million from the company, basically the same as last year.

General Manager’s Compensation: RMB 0.9655 million

During the reporting period, Gao Hua, general manager, received a total pre-tax remuneration of RMB 0.9655 million from the company, basically the same as last year.

Deputy General Manager’s Compensation: Clear differentiation

During the reporting period, Xu Jingbin, deputy general manager, received a total pre-tax remuneration of RMB 0.6814 million from the company; Shi Jinbang, deputy general manager, received RMB 1.0946 million; and Liu Pengpeng, deputy general manager, received RMB 0.9631 million. There is a large pay difference among deputy general managers, mainly related to their respective responsibilities and performance contributions.

Chief Financial Officer’s Compensation: RMB 1.0751 million

During the reporting period, Li Yanzhen, chief financial officer, received a total pre-tax remuneration of RMB 1.0751 million from the company, and also serves as the secretary of the board of directors. The compensation level is comparable to that of the general manager.

Summary and Risk Warning

In 2025, the company’s four sides achieved a slight increase in operating revenue, but non-recurring profit and loss adjusted net profit fell significantly. Core profitability weakened, and non-recurring profit and loss became an important support for net profit. The expense structure remained stable overall, but finance expenses turned from negative to positive, while R&D expenses declined somewhat. Operating cash flow turned from positive to negative, and funding pressure became apparent; the company supplemented liquidity by increasing borrowings.

The company faces risks such as macroeconomic fluctuations, market expansion for new products, accounts receivable and exchange rate fluctuations, and there is also a relatively noticeable loss of core R&D personnel, which may affect the company’s innovation capability. Investors should pay attention to changes in the company’s earnings quality, cash flow conditions, and the effectiveness of its risk response measures.

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