Chengsheng Co., Ltd. 2025 Annual Report Analysis: Revenue increased by 1.04% to 2.22 billion yuan, net profit attributable to the parent decreased by 8.10%

Operating Income: Minor Increase Behind Volume, Price, and Structural Changes

In 2025, the company achieved operating income of 2,220,371.1 thousand yuan, with a year-on-year growth of only 1.04%, a significant slowdown compared to the previous two years. While revenue slightly increased, the sales volume of silica sand grew by 4.59% year-on-year, reaching a new historical high. The increase in volume did not lead to significant revenue growth, mainly offset by multiple factors:

• Product pricing: Affected by the decline in prices of bulk raw materials such as soda ash, the average selling price of silica sand slightly decreased;
• Business structure: The subsidiary Dongwo Chemical’s significant increase in sulfuric acid revenue was driven by soaring sulfur prices, but the rise in sulfur prices also increased production costs at the company’s four production bases;
• New business contributions: High-demand specifications for high-dispersible silica, biomass (rice husk) silica, and new products such as silica for toothpaste became new revenue increments.

Profit Indicators: Double Decline in Profits, Significant Drag from Non-recurring Gains and Losses

Net Profit Attributable to Shareholders: Year-on-year decline of 8.10% to 497 million yuan

In 2025, the net profit attributable to shareholders of the listed company was 496,991.7 thousand yuan, a year-on-year decrease of 8.10%. The decline in profit was mainly due to: cost pressures from raw material price fluctuations, exchange losses resulting from a high proportion of overseas sales, and the drag from non-recurring gains and losses.

Net Profit Excluding Non-recurring Gains and Losses: Decline Narrowed to 3.55%

The net profit attributable to shareholders of the listed company, excluding non-recurring gains and losses, was 507,822.3 thousand yuan, a year-on-year decrease of 3.55%, significantly less than the decline in net profit attributable to shareholders. This was mainly due to a non-recurring loss of -10,830.7 thousand yuan this period, compared to a gain of 14,317.5 thousand yuan in 2024, with the significant decrease in non-recurring gains and losses being an important factor in the decline of net profit attributable to shareholders.

Earnings per Share: Declining in Sync with Net Profit

Basic earnings per share were 1.21 yuan/share, a year-on-year decrease of 8.33%; net profit excluding non-recurring gains and losses per share was 1.24 yuan/share, a year-on-year decrease of 3.13%. The changes in earnings per share were consistent with the trend in net profit changes, and the calculation has already deducted the 2 million shares from the repurchase account.

Expense Analysis: Continued Increase in R&D Investment, Financial Costs Under Pressure

Overall Expenses: Total Scale Not Disclosed, Structure Clearly Differentiated

During the reporting period, the company’s expense structure exhibited significant differentiation, with sales and management expenses being relatively stable while R&D investments continued to increase, and financial costs fluctuated due to exchange rate factors.

Sales Expenses: Specific Amount Not Disclosed, Estimated to Match Revenue

During the reporting period, the company did not disclose specific data on sales expenses but estimated that the scale of sales expenses was roughly in line with the slight increase in revenue, primarily used to maintain existing customer resources and expand clients in new areas such as silica for toothpaste.

Management Expenses: Specific Amount Not Disclosed, Stable Control Capability

Management expenses data was not separately disclosed, but given the company’s status as a mature manufacturing enterprise and its continuous promotion of digital transformation and intelligent upgrades, management expenses are expected to remain relatively stable, reflecting good internal control capabilities.

Financial Expenses: Exchange Losses as Major Pressure

The company has a high proportion of overseas sales, and in 2025, the significant appreciation of the renminbi against the US dollar and the baht brought about certain exchange losses, suggesting that financial expenses increased compared to the previous year, becoming one of the factors contributing to the decline in profit.

R&D Expenses: Over 3% of Revenue, Continuous Strengthening of Technical Barriers

In recent years, the proportion of R&D expenses to operating income has remained above 3%. In 2025, the company continued to invest in R&D, focusing on high-dispersible silica, biomass silica, silica for toothpaste, and silica microspheres, currently holding 59 invention patents and 144 utility model patents, highlighting the advantages of its technical platform and supporting product high-end and series development.

R&D Personnel Situation: Specific Data Not Disclosed, Team Supports Innovation

The reporting period did not disclose specific data on the number and proportion of R&D personnel, but based on the company’s continuous R&D investment, rich patent reserves, and industry-leading technical level, it is believed that the company has a stable and professional R&D team supporting its technological leadership in the field of precipitation silica.

Cash Flow: Operating Cash Flow Steady but Declining, Investment and Financing Focused on Capacity

Operating Cash Flow: Net Amount of 570 million yuan, Year-on-year Decline of 2.61%

In 2025, the net cash flow from operating activities was 570,014.7 thousand yuan, a year-on-year decrease of 2.61%, still maintaining a sufficient state overall, mainly due to increased cash inflow driven by product sales growth, but fluctuations in raw material prices and exchange rate factors had a certain impact on cash flow.

Investment Cash Flow: Specific Net Amount Not Disclosed, Focused on Capacity Expansion

During the reporting period, the company promoted the construction of the second phase project in Thailand, the first phase project in Binhai, the thickener project, and the silica microsphere project, actively seeking domestic and foreign capacity expansion opportunities. It is estimated that the outflow of investment cash was relatively large, mainly used for fixed asset investment and capacity layout.

Financing Cash Flow: Specific Net Amount Not Disclosed, Likely Matching Capital Operations

The company did not disclose specific data on financing cash flow, but in conjunction with the dividend plan (4 yuan for every 10 shares) and capacity expansion needs, it is estimated that financing activities mainly revolved around profit distribution and possible debt financing, ensuring the stability of the company’s cash flow.

Potential Risks: Multiple Challenges from Internal and External Environments

Industry and Market Risks

• Fluctuation in External Demand: The rise of global trade protectionism and the decline in export markets for downstream industries such as tires may affect the company’s overseas sales;
• Overcapacity Risks: Some industries have overcapacity, and if downstream demand falls short of expectations, it may lead to intensified product price competition;
• Policy Change Risks: Stricter domestic and international environmental protection and carbon reduction policies, such as the EU’s ESPR regulations and CBAM mechanism, will increase the company’s production and compliance costs.

Operational and Cost Risks

• Raw Material Price Fluctuations: The volatility of prices for bulk raw materials such as sulfur and soda ash will directly impact the company’s production costs and profitability;
• Exchange Rate Fluctuation Risks: With a high proportion of overseas sales, fluctuations in the renminbi exchange rate will result in exchange losses, affecting the company’s profits;
• New Project Construction Risks: If the progress of projects such as the second phase in Thailand and silica microspheres does not meet expectations or market demand changes, there may be risks of investment returns not meeting expectations.

Technical and Competitive Risks

• Technology Iteration Risks: If the company fails to continuously promote technological innovation, it may be replaced by new technologies and products in the industry;
• Market Competition Risks: New entrants to the industry or existing competitors upgrading their technologies may weaken the company’s market share and profitability.

Compensation for Directors and Supervisors: Specific Data Not Disclosed, Governance Transparency Needs Improvement

During the reporting period, the company did not disclose the total pre-tax remuneration of senior management personnel such as the chairman, general manager, vice general manager, and financial director, making it impossible to analyze the matching of management compensation with the company’s performance, indicating room for improvement in governance transparency.

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