Risk clearance accelerates: ST Chenming's 2025 annual report disclosure rectification and resumption of production progress

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On March 31, ST Chenming (000488) released its 2025 annual report. For the full year, revenue was RMB 6.19B, and attributable net profit was a loss of RMB 8.3B. Performance is still in the adjustment stage. During the reporting period, ST Chenming focused on key tasks including debt disposition, rectification of internal controls, and restarting and resuming production at its production bases. The types of audit opinions and the results of internal control assessments both improved compared with 2024. The company’s five major production bases in Shouguang, Zhanjiang, Huanggang, Jiangxi, and Jilin have fully resumed production, and its risk resolution efforts have achieved staged progress. Previously, ST Chenming had stated that after the relevant risk-warning factors are eliminated, it would, in accordance with relevant rules, apply to the Shenzhen Stock Exchange to revoke other risk warnings.

According to the announcement, during the reporting period, the quality of ST Chenming’s financial information disclosure improved step by step. The accounting firm Zhitong issued for the company’s 2025 annual financial statements an audit report with an unmodified opinion and an emphasis-of-matter paragraph. This represents a substantive improvement over the qualified opinion in 2024. In 2025, the audit institution held that the company’s financial statements have been prepared in accordance with corporate accounting standards in all material respects. The related matters subject to non-standard items in the prior period have been eliminated in the current period. Only matters still under disposition—such as certain debt defaults and pending lawsuits—are presented as matters for emphasis. This does not affect the validity of the audit opinion. With all five bases fully resuming production, the material uncertainty related to ST Chenming’s ability to continue as a going concern has been alleviated, the work of identifying and resolving financial risks is nearing completion, and a foundation has been laid for the subsequent application to revoke the risk warning.

ST Chenming stated that the company has completed rectification of its internal control system, and its governance structure has been standardized. In 2025, the company promoted systemic rectification, set up a special inspection team and an office of the disciplinary committee, and implemented a market-oriented adjustment mechanism for appointments and compensation assessments of leading cadres. Through the “dual entry and cross-appointments” approach, it strengthened the party committee’s prior study procedures, and improved the decision-making and risk-control processes. After the above rectification work was completed, the internal control audit opinion for 2025 was converted to a standard unmodified opinion. This indicates that the company’s internal control loopholes have been systematically addressed and that its governance and risk-management capabilities have been restored to a compliant level, providing institutional support for long-term operations.

At the same time, ST Chenming’s production and operating order has been fully restored, and its capacity utilization has returned to normal levels. In 2025, the Huanggang production base maintained continuous and stable production, while the Shouguang, Jiangxi, and Jilin three major bases gradually resumed operations. As of March 2026, the Zhanjiang base has completed full resumption of production, and all five production bases have achieved 100% capacity restoration. With full resumption on the production side, the company has again regained the ability for normal product supply and operational cash-flow generation. The factors that previously triggered other risk warnings due to shutdowns and production suspensions have been eliminated. The company is simultaneously advancing work including cost reduction and efficiency improvement, asset revitalization, and capital raising, gradually easing operational and capital pressures and pushing its operating status back to normal.

From an industry perspective, in 2025, China’s domestic paper-making industry remains in the bottom stage of the cycle. The industry faces challenges such as excess capacity, weak demand, and profit pressure, and some companies have experienced phased losses. On the supply side, the pace of new capacity additions has clearly slowed, and the year-on-year decline in the scale of new waste-paper-based and pulp-and-paper-based capacity has marginally eased supply pressure. On the demand side, with the macroeconomy running steadily, downstream sectors such as packaging and cultural printing have shown marginal improvement in demand. Combined with industry measures such as production curtailment and price support, prices of major paper types including corrugated packaging paper, white cardboard, and duplex board have gradually recovered since the second quarter, and the industry’s inventory level has been gradually returning to a reasonable range.

Multiple brokerage research reports believe that in the fourth quarter of 2025, profitability in the paper-making industry improved quarter-on-quarter. Products such as box-board and corrugated packaging paper and white cardboard benefited from cost support and a demand rebound, with prices rising steadily, while cultural paper is still in the process of bottoming out. After years of capacity expansion, with new capacity additions in 2026 expected to slow significantly, the industry’s trend of “anti-overcompetition (anti price war)” will drive paper prices back to more reasonable levels. The supply-demand landscape is expected to improve gradually, and leading companies have room for profit and valuation repair. In addition, currently both pulp prices and paper prices are at relatively low levels in history, so downside room is limited. In 2026, the industry is expected to see an upward turning point in the cycle. A demand rebound and supply optimization will jointly drive a repair of the industry’s fundamentals.

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