Kain Co., Ltd. 2025 Annual Report Analysis: Net profit attributable to parent company increases by 452.16%, operating cash flow drops by 50.24%

Core Profitability Indicators Analysis

Operating Revenue: Steady Growth, Paper-Based Business as the Mainstay

In 2025, the company recorded operating revenue of 626,924,421.72 yuan, up 6.17% year-on-year. The revenue scale continued to expand steadily. Judging from the revenue structure, the paper-based functional materials business generated 587,181,573.00 yuan, accounting for 93.66%, and is the company’s core pillar for revenue; other business income was 39,742,848.72 yuan, up 19.17% year-on-year. Its growth rate is faster than the main business, becoming a new incremental point for revenue.

Net Profit Attributable to Parent: Up 452.16%, Non-Recurring Gains and Losses Are the Main Driver

In 2025, net profit attributable to shareholders of the listed company was 31,698,253.95 yuan, up 452.16% year-on-year, with a leap forward in profitability scale. However, after deducting non-recurring gains and losses, net profit attributable to shareholders of the listed company was only 9,992,819.11 yuan, down 34.07% year-on-year. The main business’s profitability ability, instead, declined.

Non-Recurring-Deductions Net Profit: Main Business Profitability Under Pressure, Down 34.07% YoY

The decline in non-recurring-deductions net profit reflects the profitability pressure faced by the company’s main business. The main reasons include rising raw material costs and intensifying industry competition, which squeeze the profit space of the main business. Meanwhile, the high growth in net profit mainly relies on non-recurring gains and losses, and the quality of earnings needs to be improved.

Earnings Per Share: Tracking Net Profit’s High Growth, Non-Recurring Metrics Weak

In 2025, basic earnings per share was 0.07 yuan/share, up 600.00% year-on-year; basic earnings per share excluding non-recurring items was 0.02 yuan/share, down 71.43% year-on-year. The divergence in earnings per share also reflects problems in the company’s earnings structure, with the main business’s contribution to earnings per share weakening.

Expense Side: Fine-Tuned Management Shows Results, R&D Spending Trending Slightly Down

Total Expenses: Down 2.74% YoY, With Some Contraction in Scale

In 2025, the company’s total expenses (sales + management + finance + R&D) totaled 72,932,376.08 yuan, compared with 75,032,672.28 yuan in 2024. Total expenses declined 2.74% year-on-year. The contraction in expense scale partially offset the decline in main business profitability.

Selling Expenses: Slight Increase of 8.30%, Market Expansion Progressing Steadily

Selling expenses were 12,560,852.94 yuan, up 8.30% year-on-year, mainly used for market development and customer maintenance. Judging from the expense structure, market development expenses (including business expenses) accounted for over 70%. While the company continues to stabilize its existing customer base, it also steadily pushes forward market expansion, providing support for revenue growth.

Administrative Expenses: Sharp Decrease of 18.29%, Results Seen from Fine-Tuned Management

Administrative expenses were 44,962,706.66 yuan, down 18.29% year-on-year, which is the main driver of the decline on the expense side. The company, through fine-tuned management, optimized expense spending on office and intermediary institutions, improved management efficiency, and effectively reduced operating costs.

Finance Costs: Slight Increase of 5.14%, Mainly Due to Reduced Interest Income

Finance costs were -11,005,649.52 yuan, up 5.14% year-on-year (loss narrowed). This was mainly because interest income decreased from 14,069,659.88 yuan to 12,471,595.12 yuan, while interest expense decreased from 2,360,562.26 yuan to 903,478.10 yuan. The decrease in interest income exceeded the decrease in interest expense.

R&D Expenses: Down 8.95%, While Still Maintaining a High Investment Scale

R&D expenses were 26,414,465.90 yuan, down 8.95% year-on-year, but they still remained at a high level. Expenses mainly went to employee compensation and direct expenditures. The company continues to conduct technological R&D in the specialty paper field, maintaining the technical competitiveness of its products.

R&D Personnel Overview: Team Size Up Steadily

The number of the company’s R&D personnel increased from 45 in 2024 to 51 in 2025, up 13.33%; the proportion of R&D personnel increased from 17.11% to 18.02%. The R&D team scale expanded steadily. In terms of educational background, the number of R&D personnel with undergraduate or higher degrees increased from 14 to 19, with their proportion rising from 31.11% to 37.25%. The educational level of the R&D team further improved, providing talent support for the company’s technological R&D.

Cash Flow: Operating Cash Flow Drops Significantly; Financing Cash Flow Turns from Negative to Positive

Overall Cash Flow: Net Decrease of 10.76 Million Yuan in Cash and Cash Equivalents

In 2025, the company’s net increase in cash and cash equivalents was -10,764,661.20 yuan, with a year-on-year reduction in loss of 94.25%. Cash outflow pressure eased compared with the previous year, but it still remained in a net outflow position.

Cash Flow from Operating Activities: Down 50.24%, Procurement Expenditure Increases Significantly

Net cash flow from operating activities was 35,137,281.92 yuan, down 50.24% year-on-year. The main reason is that the cash paid for the purchase of goods and receipt of labor increased significantly year-on-year, resulting in the outflow growth rate of operating cash flow (15.49%) far exceeding the inflow growth rate (6.58%), indicating that the main business’s cash-generating ability weakened.

Cash Flow from Investing Activities: Net Outflow Narrows by 8.91%, Investment Pace Slows Down

Net cash flow from investing activities was -118,674,148.33 yuan, up 8.91% year-on-year (net outflow scale narrows). This was mainly because cash paid for investments decreased from 1,215,213,051.99 yuan to 996,839,900.00 yuan, meaning the investment pace slowed down. At the same time, cash received from the redemption/return of investments also decreased.

Cash Flow from Financing Activities: Turns from Negative to Positive, Financing Scale Expands

Net cash flow from financing activities was 72,980,831.45 yuan; in 2024 it was -127,860,935.30 yuan. It turned from negative to positive. The main reason is that cash received from borrowings increased from 119,738,939.88 yuan to 163,915,578.08 yuan, expanding the financing scale; meanwhile, cash paid for repayment of debts decreased from 232,184,279.84 yuan to 148,111,908.91 yuan, easing repayment pressure.

Compensation of Management: Compensation of Core Management Stable

In 2025, the total pre-tax remuneration amount received by Liu Xi, the chairman, from the company was 890,000 yuan; the remuneration for Liu Xi, the general manager (also), was also 890,000 yuan. The pre-tax remuneration for Yang Zhaoyu, vice president, was 650,000 yuan; the pre-tax remuneration for Yang Zhaoyu, financial controller (also), was 650,000 yuan. Management compensation remained stable, showing a certain degree of matching with the company’s performance growth.

Risk Warning: Dual Pressure on Main Business Profitability and Cash Flow

Main Business Profitability Depends on Non-Recurring Gains and Losses, Earnings Quality Low

The company’s high growth in net profit mainly comes from non-recurring gains and losses, including gains from disposal of non-current assets of 10,736,576.31 yuan, and gains from disposal of financial assets of 6,215,038.15 yuan, etc. Meanwhile, the company’s non-recurring-deductions net profit for the main business declined 34.07% year-on-year. If non-recurring gains and losses decrease in the future, the company’s profitability will face significant pressure.

Operating Cash Flow Drops Significantly, Capital Chain Under Pressure

Net cash flow from operating activities decreased sharply by 50.24%, weakening the main business’s cash-generating ability. At the same time, the company still has relatively large investment and debt repayment expenditures, and the capital chain faces certain pressure. If the cash flow continues to deteriorate afterward, it may affect the company’s normal operations.

Risk of Fluctuations in Raw Material Prices

The company’s main raw materials are such as wood pulp. The proportion of raw material costs in product costs is high. Fluctuations in raw material prices will directly affect the company’s product costs and profit levels. If global supply chain tensions intensify, the company’s raw materials will face significant cost pressure.

Risk of Intensifying Industry Competition

Competition in the specialty paper industry is becoming increasingly fierce. Competitors continuously launch new products and new services. If the company cannot continuously improve its product competitiveness and expand its market share, it may lead to a decline in market share and further squeeze profit margins.

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Editor: Xiao Lang Kuai Bao