Shahe Co., Ltd. 2025 Annual Report Analysis: Net profit attributable to the parent company plummets by 1014.24% to -150 million yuan; operating cash flow shifts from negative to positive

Core Profitability Indicators Turn Deeply Negative, Profit Quality Under Pressure

Operating Revenue Declines 13.35% Year-over-Year, Regional Disparities Evident

In 2025, Shahe Co., Ltd. achieved operating revenue of 310 million yuan, down 13.35% from 358 million yuan in 2024, marking two consecutive years of decline. From the revenue structure, real estate sales remain the main source, generating 302 million yuan, accounting for 97.40%, but down 12.72% year-over-year; property leasing income was 7.02 million yuan, a 35.05% decrease; property management income was 1.046 million yuan, a slight increase of 3.02%.

Regionally, revenue shows significant divergence: Shenzhen, Guangdong, revenue reached 81.97 million yuan, a 121.62% surge, mainly due to the sale of approximately 83 million yuan worth of office properties at Hetangling Garden; meanwhile, revenue in Changsha, Hunan, and Xinxiang, Henan, was 219 million yuan and 8.78 million yuan, respectively, down 24.99% and 69.11%, primarily due to weak demand in local real estate markets.

Net Profit Attributable to Parent Turns Loss, Plummeting 1014.24% YoY

In 2025, net profit attributable to shareholders of the listed company was -1.50 billion yuan, compared to a profit of 16.45 million yuan in the same period of 2024, a sharp decline of 1014.24%, marking the first annual loss. After excluding non-recurring gains and losses, net profit was -1.50 billion yuan, down 992.10% YoY, close to the net profit attributable to parent, indicating that the loss mainly stems from core operations with minimal impact from non-recurring items.

Looking at subsidiaries, Changsha company became the main loss source, with full-year revenue of 219 million yuan and a net loss of 112 million yuan; the headquarters achieved revenue of 80.81 million yuan and a net loss of 36 million yuan; only Xinxiang company recorded a profit, with net income of 2.504 million yuan.

Earnings Per Share Turn Negative, Overall Profitability Weakens

In 2025, basic earnings per share (EPS) were -0.62 yuan/share, compared to 0.07 yuan/share in 2024, a decrease of 985.71%; non-recurring EPS was also -0.62 yuan/share, down 990.00%. The significant turn to negative EPS directly reflects a deep decline in the company’s profitability, substantially reducing shareholder returns.

Significant Changes in Expense Structure, Management Control and Cost Pressures Coexist

Sales Expenses Surge 46.82%, Tied to Sales Collections

In 2025, sales expenses totaled 14.08 million yuan, up 46.82% from 9.59 million yuan in 2024. The main reason is that real estate sales commissions increased with sales volume during the period, with sales commissions reaching 12.29 million yuan, up 119.61%, accounting for 87.31% of sales expenses, indicating increased channel investment to boost sales, aligning with positive cash flow from operations.

Management Expenses Drop 44.33%, Control Effect Evident

Management expenses in 2025 were 34.15 million yuan, down 44.33% from 61.34 million yuan in 2024, mainly due to reductions in management personnel salaries and related costs. Employee compensation fell from 416 million yuan to 17.91 million yuan, a decrease of over 56%, showing significant cost-cutting amid losses and effective expense management.

Financial Expenses Turn Positive, Interest Expenditure Soars

In 2025, financial expenses were 1.38 million yuan, compared to -4.21 million yuan in 2024, an increase of 132.80%, mainly due to increased interest expenses on related-party borrowings. Interest on related-party loans reached 3.64 million yuan, 11.12 times the 0.33 million yuan in 2024; combined with interest income dropping from 4.67 million yuan to 2.65 million yuan, this caused financial expenses to shift from profit to loss.

R&D Investment Zero, No R&D Personnel

During the reporting period, the company did not conduct any R&D investments nor employ related R&D personnel, consistent with its current focus on traditional real estate development and sales, with no new business areas requiring R&D.

Cash Flow Turns Positive, Significant Reduction in Investment and Financing Outflows

Operating Cash Flow Turns Positive, YoY Increase of 153.46%

In 2025, net cash flow from operating activities was 75.77 million yuan, compared to -142 million yuan in 2024, a substantial increase of 153.46%, achieving a turnaround from negative to positive. The main reason is increased cash inflows from real estate sales, with total operating cash inflow rising from 1.58 billion yuan to 3.58 billion yuan, up 127.06%; meanwhile, total operating cash outflows decreased from 2.99 billion yuan to 2.82 billion yuan, down 5.80%.

Investment Cash Outflows Significantly Reduced, Net Narrowed

In 2025, net cash flow from investing activities was -8,850 yuan, compared to -878,000 yuan in 2024, an improvement of 89.94%. This is mainly due to a decrease in investment cash outflows from 882,000 yuan to 92,600 yuan, a reduction of 89.50%, reflecting a significant cut in investment spending.

Financing Cash Outflows Greatly Reduced, Net Outflow Shrinks 92.38% YoY

In 2025, net cash flow from financing activities was -4.40 million yuan, compared to -57.73 million yuan in 2024, an improvement of 92.38%. The main reason is that the company did not distribute cash dividends during the period, reducing financing outflows from 57.73 million yuan to 440,000 yuan.

Executive and Director Compensation: Core Management Compensation Shows Divergence

During the period, Chairman Chen Yong (resigned) received a pre-tax total compensation of 563,500 yuan from the company for the period January to July 2025; General Manager Yang Ling received 925,700 yuan; Vice General Manager Le Xingshuo received 803,700 yuan; the CFO’s compensation was not disclosed separately, and related information was not listed among senior management.

Compared to others, core executives Yang Ling and Le Xingshuo have higher compensation, while former Chairman Chen Yong’s compensation was relatively low, indicating stable remuneration arrangements for current management, with no significant salary increases during loss years.

Multiple Risks Emerge, Transformation Pressures Mount

Project Profitability Difficulties Increase

As the real estate industry shifts from incremental to stock-based markets, demand in second- and third-tier cities like Changsha and Xinxiang remains weak with high inventory, slowing project absorption and pressuring prices, significantly compressing profit margins. In 2025, gross profit margin of real estate sales was -1.10%, a sharp decline from 52.33% in 2024.

Rising Investment Risks

Market segmentation intensifies; the company’s land reserves are limited to 25,400 square meters in Xingyang, Zhengzhou, with future project development facing regional and product mismatches. Continued market downturns could lead to high uncertainty in new project profitability.

Insufficient Land Reserves, Development Constraints

As of the end of 2025, the company only held 25,400 square meters of land in Xingyang, Zhengzhou, with remaining developable area of 92,400 square meters, and no new land reserves during the period. The limited land bank hampers long-term development, risking a “lack of resources” for future growth.

Uncertain Transformation Process

The company plans to acquire a 70% stake in Shenzhen Jinghua Display Electronics Co., Ltd. to shift toward advanced manufacturing, but the transaction still requires approval and decision-making procedures, with uncertainties involved; additionally, the company currently lacks sufficient technological, talent, and management resources in new fields, making the transformation’s success uncertain.

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