Parker New Materials 2025 Annual Report Interpretation: Financial Expenses Drop 282.65%, Operating Cash Flow Surges 39.49%

Core Revenue and Profitability Analysis

Operating Revenue: Growth of 10.28% Against the Trend

In 2025, the company achieved an operating revenue of 3.543 billion yuan, a year-on-year increase of 10.28% from 3.213 billion yuan in 2024. By business segment, power forging revenue was 1.389 billion yuan, a significant increase of 25.37%, becoming the main driver of revenue growth; aerospace forging revenue was 904 million yuan, up 7.60%; while petrochemical forging revenue was 550 million yuan, down 10.93%, the only segment with a decline.

Net Profit: Slight Decline of 4.37%

In 2025, net profit attributable to shareholders was 252 million yuan, down 4.37% from 264 million yuan in 2024. Non-recurring net profit was 216 million yuan, a sharp decrease of 13.13%, with the decline exceeding that of net profit mainly due to non-recurring gains and losses reaching 36.07 million yuan in 2025, a 142% increase from 14.91 million yuan in 2024, including government subsidies of 375.8 million yuan, up 282%, which partially offset the decline in core business profitability.

Earnings Per Share: Decline in Line with Net Profit

Basic earnings per share in 2025 were 2.0828 yuan, down 4.37% from 2.1780 yuan in 2024; non-recurring EPS was 1.7851 yuan, a decrease of 13.13%, consistent with the decline in non-recurring net profit.

In-Depth Cost Structure Analysis

Total Expenses: Driven by R&D Investment

In 2025, total expenses (sales + management + R&D + financial) amounted to 2.817 billion yuan, a slight decrease of 1.64% from 2.864 billion yuan in 2024, mainly due to a significant reduction in financial expenses. The key change was a substantial increase in R&D expenses.

Selling Expenses: Steady Growth of 2.89%

Selling expenses in 2025 were 64.38 million yuan, up 2.89% from 62.57 million yuan in 2024, mainly due to employee compensation rising from 31.92 million to 34.13 million yuan (+6.9%), while business entertainment expenses remained stable at 15.67 million yuan.

Management Expenses: Slight Increase of 3.04%

Management expenses in 2025 were 87.24 million yuan, up 3.04% from 84.66 million yuan in 2024, mainly driven by employee compensation increasing from 34.38 million to 46.04 million yuan (+33.9%), while business entertainment expenses decreased from 13.70 million to 6.83 million yuan (-50.2%), partially offsetting salary growth.

Financial Expenses: Sharp Decrease of 282.65%

Financial expenses in 2025 were -37.48 million yuan, a significant decrease of 282.65% from -9.79 million yuan in 2024, mainly due to exchange gains turning positive from a loss of 10.17 million yuan in 2024 to a gain of 27.33 million yuan in 2025, along with interest income dropping from 35.83 million to 28.48 million yuan, and interest expenses rising from 14.13 million to 16.61 million yuan.

R&D Expenses: Increase of 12.54%

R&D expenses in 2025 were 168 million yuan, up 12.54% from 149 million yuan in 2024, with material consumption rising from 76.27 million to 97.51 million yuan (+27.9%), and employee compensation increasing from 49.65 million to 50.28 million yuan (+1.3%), indicating a significant increase in material investment for R&D.

R&D Team Composition

In 2025, the company’s R&D team comprised 380 personnel, accounting for 31.20% of total staff. Among them, 2 PhDs, 54 master’s degree holders, and 156 undergraduates, totaling 55.8% of R&D staff. Age-wise, 195 are aged 30-40 (51.3%), and 132 are under 30 (34.7%). The team is relatively young, with over half holding high academic qualifications, supporting the company’s technological innovation.

Cash Flow Overview

Operating Cash Flow: Significant Increase of 39.49%

In 2025, net cash flow from operating activities was 829 million yuan, up 39.49% from 594 million yuan in 2024, mainly due to cash received from sales of goods and services increasing from 3.255 billion to 3.584 billion yuan, while cash paid for purchases rose from 2.421 billion to 2.502 billion yuan, with receivables growth outpacing payables.

Investing Cash Flow: Outflows Reduced by 79.86%

Net cash used in investing activities was -174 million yuan, a decrease of 79.86% from -865 million yuan in 2024, mainly due to investment payments dropping from 1.720 billion to 510 million yuan, and investment recoveries decreasing from 1.434 billion to 1.066 billion yuan, reflecting a significant contraction in investment scale.

Financing Cash Flow: Turned Positive

Net cash from financing activities was 161 million yuan, a sharp increase of 421.73% from -50 million yuan in 2024, mainly because proceeds from borrowings increased from 756 million to 1.09 billion yuan, while debt repayments rose from 565 million to 811 million yuan. The company’s borrowing scale expanded, turning net financing positive.

Potential Risks

Raw Material Price Fluctuation Risk

The company’s main raw materials are carbon steel, stainless steel, and alloy steel, with direct materials accounting for over 60% of main business costs. Significant increases in raw material prices without timely cost pass-through could directly squeeze profit margins.

Technology Iteration Risk

Downstream industries like aerospace and power increasingly demand advanced product technologies. If the company’s R&D capabilities cannot keep pace with customer upgrades and fail to overcome technical challenges, it risks losing clients and market share.

Macroeconomic Risks

International geopolitical conflicts, exchange rate fluctuations, and other factors may impact the company’s overseas operations. Additionally, risks related to intellectual property infringement and international payment settlements could affect the company’s brand reputation and financial health.

Executive Compensation

In 2025, Chairman Yu Feng received a pre-tax total compensation of 855,000 yuan; General Manager Liu Bo received 700,000 yuan; Vice President Liu Feng also received 700,000 yuan; CFO Fan Yasheng received 680,000 yuan. The compensation of core executives aligns with the company’s profitability and remains relatively stable.

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