Hewang Electric 2025 Annual Report Analysis: Net Profit Excluding Non-Recurring Gains Up 32.34%, Financing Cash Flow Surges 1363.43%

Interpretation of Core Profitability Indicators

Steady Growth in Operating Revenue

In 2025, the company achieved an operating revenue of 4.17B yuan, an increase of 11.64% year-over-year, mainly due to higher revenue from the new energy electronic control business. From quarterly data, revenue in the fourth quarter reached 1.39 billion yuan, accounting for 33.35% of the annual total, making it the largest contributor to the full-year performance, indicating strong business demand in the second half of the year.

Dual Improvement in Net Profit and Net Profit Excluding Non-Recurring Items

• Net Profit: The net profit attributable to shareholders of the listed company for the year was 531 million yuan, up 20.53% year-over-year, with profit scale further expanding.
• Net Profit Excluding Non-Recurring Items: After deducting non-recurring gains and losses, net profit was 525 million yuan, a significant increase of 32.34% year-over-year, far exceeding the growth rate of net profit, indicating a notable improvement in the profitability quality of the company’s main business and a weakening of the impact of non-recurring gains and losses on net profit.

Per-Share Earnings Also Improved

• Basic Earnings Per Share: In 2025, basic earnings per share were 1.17 yuan, up 17.00% year-over-year.
• Diluted Earnings Per Share (excluding non-recurring items): 1.16 yuan per share, an increase of 28.89%, matching the high growth rate of net profit excluding non-recurring items, reflecting that the company’s profit improvement has effectively translated into per-share gains.

Analysis of Period Expenses

Overall Cost Structure Optimization

In 2025, the company’s total period expenses amounted to 927 million yuan, an increase of 5.22%, with a growth rate lower than revenue, indicating initial success in cost control. The specific expense items are as follows:

Growth in Selling Expenses with Business Expansion

Selling expenses grew slightly faster than revenue, mainly because the company increased investment in market expansion, brand influence, market promotion, and customer maintenance, aligning with the expansion pace of the new energy electronic control business.

Significant Effectiveness in Management Expense Control

Management expenses decreased by 15.72% year-over-year, demonstrating that the company effectively reduced operating costs and improved management efficiency through optimizing internal processes and streamlining management expenditures.

Modest Rise in Financial Expenses

The increase in financial expenses was mainly due to higher foreign exchange gains/losses influenced by RMB exchange rate fluctuations. The company’s overseas business foreign exchange costs rose, but overall scale remained relatively manageable.

Continued Increase in R&D Investment

R&D expenses grew by 6.93% year-over-year. The company continued to increase R&D investment in new energy electronic control and engineering transmission fields, helping to consolidate technological advantages and lay a foundation for future product iterations and market expansion.

R&D Personnel Status

As of the end of 2025, the company had 812 R&D personnel, accounting for 31.69% of the total workforce. The R&D team size remained stable. Regarding educational background, 32.39% held master’s degrees or above, providing strong support for technological innovation; age-wise, 59.98% were under 30, showing a young team with strong innovative vitality.

In-Depth Cash Flow Analysis

Significant Improvement in Operating Cash Flow

Net cash flow from operating activities was 416 million yuan, up 52.73% year-over-year, mainly due to increased cash received from sales of goods and services. Revenue growth improved collection quality, enhancing the company’s ability to support net profit with operating cash flow.

Narrowing of Investment Cash Outflows

Net cash flow from investing activities was -25 million yuan, reducing losses by 134 million yuan year-over-year, mainly because of decreased cash payments for investments. The company slowed external investment pace temporarily, adopting a more cautious approach to fund usage.

Surge in Financing Cash Flows

Net cash flow from financing activities was 459 million yuan, a sharp increase of 1363.43% year-over-year, mainly due to increased cash received from fundraising. The company raised funds through equity financing and other methods, providing ample capital for business development.

Potential Risks

Industry Policy Risks

The new energy power generation industry relies on policy planning and supportive policies. Policy adjustments may impact market demand for new energy power generation equipment; some sectors in electrical transmission are affected by macroeconomic cycles, and fluctuations in manufacturing investment may lead to changes in product demand.

Risks of Product Price and Gross Margin Decline

As product technology matures and market competition intensifies, product prices tend to decline. If cost control does not meet expectations or the company cannot continuously launch high-margin new products, overall gross profit margins may face downward pressure.

Accounts Receivable Bad Debt Risks

The company has a large scale of accounts receivable. If customers encounter operational difficulties leading to delayed payments, bad debts may occur, affecting cash flow and profitability.

Tax Incentive Changes Risks

The company enjoys high-tech enterprise income tax benefits, VAT refunds, and other policies. If future policies no longer provide these benefits, it could negatively impact operational performance.

Raw Material Price Fluctuation Risks

Prices of major raw materials like copper and aluminum fluctuate significantly. Continued increases in raw material prices would directly raise procurement costs, squeezing profit margins.

Management and Directors’ Compensation

• Chairman: Han Yu received a pre-tax total of 937.6k yuan during the reporting period.
• General Manager: Zheng Dapeng received a pre-tax total of 2.7721 million yuan, and exercised stock options for an additional 300k shares.
• Vice Presidents: Xiao Anbo earned 2.0582 million yuan pre-tax; Liang Longwei, Chen Wenfeng, and Zhou Dangsheng each earned around 2.07 million yuan; Wang Yan earned 1.6641 million yuan.
• Chief Financial Officer: Chen Wenfeng (also Vice President) received 2.0701 million yuan pre-tax.

The compensation system for directors, supervisors, and senior management aligns with company performance and individual responsibilities. Equity incentives for core management also help bind their long-term interests with the company, promoting stable development.

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