Key takeaway

The company achieved operating revenue of RMB22.07bn in 2025, up 2.6% YoY, and net profit attributable to shareholders of the parent company of RMB0.63bn, down 18.3% YoY, with performance decline mainly due to falling steel prices leading to lower gross margin and reduced government subsidies,while the R&D expense ratio declined significantly and the impact of intelligent transformation investment on performance gradually weakened, and operating cash flow improved significantly. The company’s annual steel structure output reached 5.021mn tons, up 11.3% YoY, hitting a record high; capacity utilization reached 96.6%, up 9.9 pcts YoY. The company has deployed nearly 3,000 welding robots and achieved external sales, with the effects of intelligent transformation gradually emerging.

Event

The company announced its 2025 results, achieving operating revenue of RMB22.07bn, up 2.6% YoY, and net profit attributable to shareholders of the parent company of RMB0.63bn, down 18.3% YoY.

Quick Take

Performance under pressure due to gross margin decline, with improved cash flow. The company achieved operating revenue of RMB22.07bn in 2025, up 2.6% YoY, and net profit attributable to shareholders of the parent company of RMB0.63bn, down 18.3% YoY,with the decline narrowing by 6.0 pcts compared to the first three quarters,and net profit attributable to shareholders of the parent company excluding non-recurring items of RMB0.43bn, down 9.8% YoY. Revenue growth but decline in performance and net profit excluding nonrecurring items was mainly due to: 1) In 4Q, declining steel prices led to lower gross margin, as the company uses the moving average method to calculate raw material costs, with a raw material + inventory turnover cycle of about half a year, and higher steel prices in 3Q and 4Q affected overall gross margin, with annual gross margin recorded at 9.9%, down 0.4 pcts YoY;

2) Decrease in government subsidies, with total government subsidies of RMB0.20bn for the year, down RMB0.09bn YoY. The company maintained good control over expense ratios, with the annual expense ratio at 6.4%, down 0.6 pcts YoY, among which the R&D expense ratio decreased by 0.8 pcts to 2.6%, and the impact of intelligent transformation on performance is weakening. In terms of cash flow, the company’s net operating cash flow was RMB1.37bn, an increase of RMB0.80bn compared with the previous year.

Output hits a record high, and capacity utilization rises significantly. In 2025, the company’s steel structure product output reached 5.021 million tons, up 11.3% year-on-year compared with 2024, setting a record high. Newly signed sales contracts for the year were approximately RMB 29.10bn, up 2.8% year-on-year; the annual capacity utilization rate reached 96.6%, up 9.9 percentage points from the previous year. By the end of the reporting period, the company’s annual steel structure capacity had reached 5.20 million tons, and based on fourth-quarter calculation, the theoretical annual output further increased to above 5.60 million tons. In 1Q26, the company’s newly signed contract value was RMB 7.41 billion, up 5.1% year-on-year, with implied order volume growth of 6.9%. Output in the first quarter increased by 14.7%, with orders and output continuing to rise. From the perspective of output and order volume, the company has passed the capacity bottleneck formed during intelligent transformation.

Intelligent transformation shows remarkable results, and robots achieve overseas sales. Since 2023, the company has been committed to the upgrade of intelligent equipment and has independently developed the “arc welding robot control system.” During the reporting period, nearly 3,000 lightweight welding robots and ground rail? type robot welding workstations have been deployed at scale across the top ten production bases, and have been applied in multiple processes such as welding, coating, and cutting, with capacity utilization rate gradually rebounding. The company’s robots have achieved overseas sales, exported to countries including India, Vietnam, Thailand, Israel, and Mexico, and are applied in steel structures, bridges, shipbuilding, and special equipment industries, opening up new growth opportunities.

We downgrade our earnings forecast for the company, but keep our “Buy” rating and target price of RMB 26.01 unchanged. The company’s 2025 performance declined due to gross margin pressure from steel price fluctuations, though output expansion and improved capacity utilization were notable. We now expect EPS for 2026–2028 to be RMB 1.17 / 1.35 / 1.48 (previous 2026–2027 forecast: RMB 1.25 / 1.39), while keeping our “Buy” rating and target price of RMB 26.01 unchanged.

Risks: The main risks to the company’s operations come from significant fluctuations in steel prices, economic recovery falling short of expectations, and capacity expansion falling short of expectations.

1) Steel prices have a significant impact on downstream demand. Large fluctuations or excessively high steel prices may lead customers to adopt a wait-and-see attitude, resulting in fewer newly signed contracts and a decline in orders. If steel prices rise too rapidly, it may put downward pressure on the company’s net profit attributable to shareholders of the parent company excluding non-recurring items;

2) The company’s downstream demand is mainly driven by manufacturing, infrastructure, and real estaterelated industries, and a slowdown in manufacturing fixed investment, weaker-than-expected formation of physical workload in infrastructure, and a slower-than-expected recovery in real estate sales will all suppress demand for the company’s products;

3) In terms of its own operations, a decline in the utilization rate of existing capacity and delays in the commissioning of intelligent manufacturing bases will also have a negative impact on medium- to longterm development.