Results Review

2025 results miss our expectations

Jinggong Steel announced its 2025 results: Revenue rose 12.69% YoY to Rmb20.84bn and net profit attributable to shareholders grew 18.23% YoY to Rmb605mn. In 4Q25, revenue fell 2.56% YoY to Rmb6.28bn and net profit attributable to shareholders fell 57.88% YoY to Rmb15mn, slightly missing our expectations due to lower-than-expected gross margin in 4Q25.

Steel structure business growing rapidly driven by industrial buildings; overseas expansion paying off: In 2025, revenue from the steel structure business grew 17.2% YoY to Rmb19.11bn, with revenue from industrial buildings and public buildings up 27.3% and down 5.5% YoY to Rmb14.34bn and Rmb4.77bn. The firm’s overseas business expansion paid off in 2025, with overseas revenue rising 57.3% YoY to Rmb4.05bn, accounting for 19.6% of total revenue (+5.5ppt YoY) and 25.7% of total gross profit (+9.6ppt YoY).

Efforts to reduce costs and improve efficiency paying off, but profitability slightly under pressure: The firm continued to refine its management in 2025. Its expense ratios fell 0.5ppt YoY to 7.5% in 2025, with selling, G&A, R&D, and financial expense ratios falling 0.02ppt, 0.16ppt, 0.25ppt, and 0.04ppt YoY. Gross margin fell 1.8ppt to 10.38%. We attribute the decline in profitability to intensifying competition in the domestic market.

Cash flow improving; dividend payout ratio rising sharply: In 2025, the firm recorded a net operating cash inflow of Rmb789mn (+Rmb18mn YoY), reflecting continued improvement in the quality of payment collection. The firm plans to pay a dividend of Rmb438mn in 2025, implying a dividend payout ratio of 72.4% (+41ppt YoY). Its current stock price implies a dividend yield of 6.1% and 6.6% in 2026 and 2027.

Trends to watch

We expect overseas business to become an important source of growth, and the profitability of overseas business to be higher than that of the domestic business. Gross margins of overseas and domestic business were 13.5% and 9.5% in 2025. We expect overseas high-margin business to boost its profitability

Financials and valuation

Given the downward pressure faced by the domestic business, we cut our 2026e and 2027e attributable net profit forecasts 17.2% and 21.4% to Rmb654mn and Rmb704mn. The stock is trading at 11.8x 2026e and 11.0x 2027e P/E. We maintain an OUTPERFORM rating and cut our TP 4.2% to Rmb5.0, corresponding to 15.2x 2026e and 14.1x 2027e P/E and implying 28.9% upside.

Risks

Disappointing payment collection and/or order delivery, domestic business competition intensified.