Eagle Eye Warning: Hunan Investment Operating Income Declines

Sina Finance Listed Company Research Institute | Earnings Hawk-Eye Early Warning

On April 4, Hunan Investment released its 2025 annual report. The audit opinion was a standard unqualified audit opinion.

The report shows that the company’s full-year operating revenue in 2025 was RMB 519 million, down 17.71% year over year; its net profit attributable to shareholders was RMB 42.0673 million, down 48.33% year over year; its non-recurring items net profit attributable to shareholders was RMB 43.7137 million, down 43.75% year over year; and basic earnings per share was RMB 0.0843 per share.

Since being listed in December 1993, the company has made cash dividends 16 times, with cumulative cash dividends implemented totaling RMB 378 million. The announcement shows that the company plans to distribute cash dividends of RMB 0.3 per 10 shares to all shareholders (including tax).

The listed company earnings hawk-eye early warning system performs intelligent quantitative analysis on Hunan Investment’s 2025 annual report across four major dimensions: earnings quality, profitability, capital pressure and safety, and operating efficiency.

I. Earnings Quality

During the reporting period, the company’s revenue was RMB 519 million, down 17.71% year over year; net profit was RMB 42.0673 million, down 48.33% year over year; and net cash flow from operating activities was -RMB 89.0893 million, down 182.3%.

From the overall performance perspective, it is necessary to focus on:

• Operating revenue declined. During the reporting period, operating revenue was RMB 520 million, down 17.71% year over year.

• The growth rate of net profit attributable to shareholders continues to decline. In the past three periods of annual reports, the year-over-year changes in net profit attributable to shareholders were 320.09%, -45.25%, and -48.34% respectively, with a continuously decreasing trend.

• The growth rate of non-recurring items net profit attributable to shareholders continues to decline. In the past three periods of annual reports, the year-over-year changes in non-recurring items net profit attributable to shareholders were 251.24%, -39.66%, and -43.75% respectively, with a continuously decreasing trend.

From the perspective of the matching between revenue, costs, and period expenses, it is necessary to focus on:

• Operating revenue and taxes and surcharges moved in opposite directions. During the reporting period, operating revenue changed -17.71% year over year, while taxes and surcharges changed 20.69% year over year, indicating a divergence between the movements of operating revenue and taxes and surcharges.

Combining operating asset quality, it is necessary to focus on:

• The accounts receivable-to-operating revenue ratio continues to grow. In the past three periods of annual reports, the accounts receivable-to-operating revenue ratio was 1.67%, 4.58%, and 5.96% respectively, showing continued growth.

From the perspective of cash flow quality, it is necessary to focus on:

• Net cash flow from operating activities continues to decline. In the past three periods of annual reports, net cash flow from operating activities was RMB 378 million, RMB 110 million, and -RMB 90 million respectively, continuing to decline.

• Net profit diverges from net cash flow from operating activities. During the reporting period, net profit was RMB 0.4 billion, while net cash flow from operating activities was -RMB 0.9 billion; net profit and net cash flow from operating activities diverged.

• The net cash flow from operating activities to net profit ratio is below 1. During the reporting period, the ratio of net cash flow from operating activities to net profit was -2.118, below 1, indicating weak earnings quality.

• The ratio of net cash flow from operating activities to net profit continues to deteriorate. In the past three semiannual reports, the ratio of net cash flow from operating activities to net profit was 2.54, 1.33, and -2.12 respectively, continuing to decline, with earnings quality showing a downward trend.

II. Profitability

During the reporting period, the company’s gross margin was 43.19%, up 4.7% year over year; net margin was 8.1%, down 37.22% year over year; and return on net assets (weighted) was 2.06%, down 49.01% year over year.

Combining the company’s operating performance, it is necessary to focus on:

• Sales net margin dropped significantly. During the reporting period, the sales net margin was 8.1%, down sharply by 37.22% year over year.

• Sales gross margin continues to grow, while the accounts receivable turnover ratio keeps declining. In the past three periods of annual reports, the sales gross margin was 31.05%, 41.25%, and 43.19% respectively, showing continuous growth; while the accounts receivable turnover ratio was 56.92 times, 25.37 times, and 17.35 times respectively, continuing to decline.

• Sales gross margin grows, but sales net margin declines. During the reporting period, the sales gross margin increased from 41.25% in the same period last year to 43.19%, while the sales net margin decreased from 12.9% in the same period last year to 8.1%.

Combining the company’s asset-side performance, it is necessary to focus on:

• Average return on net assets over the last three years is below 7%. During the reporting period, the weighted average return on net assets was 2.06%, and the weighted average return on net assets averaged below 7% over the most recent three accounting years.

• Return on net assets continues to decline. In the past three periods of annual reports, the weighted average return on net assets was 7.71%, 4.04%, and 2.06% respectively, with a continuously decreasing trend.

• Return on invested capital is below 7%. During the reporting period, the company’s return on invested capital was 2.14%, and the average over the three reporting periods was below 7%.

III. Capital Pressure and Safety

During the reporting period, the company’s asset-liability ratio was 15.53%, down 38.69% year over year; the current ratio was 4.02, and the quick ratio was 2.27; total debt was RMB 95.7605 million, of which short-term debt was RMB 95.7605 million; the ratio of short-term debt to total debt was 100%.

From the perspective of short-term capital pressure, it is necessary to focus on:

• The ratio of short-term to long-term debt continues to grow. In the past three periods of annual reports, the ratio of short-term debt to long-term debt was 0.05, 0.39, and 1.94 respectively, with an upward trend in the ratio.

• The ratio of net cash flow from operating activities to current liabilities continues to decline. In the past three periods of annual reports, the ratio of net cash flow from operating activities to current liabilities was 0.49, 0.21, and -0.29 respectively, continuing to decline.

From the perspective of capital management, it is necessary to focus on:

• Interest income/cash and cash equivalents ratio is less than 1.5%. During the reporting period, cash and cash equivalents were RMB 600 million, short-term debt was RMB 100 million, and the average ratio of interest income to cash and cash equivalents was 0.669%, below 1.5%.

• The ratio of advance payments to current assets continues to grow. In the past three periods of annual reports, the ratio of advance payments to current assets was 0.14%, 0.17%, and 0.19% respectively, continuing to grow.

• The growth rate of advance payments is higher than the growth rate of operating cost. During the reporting period, advance payments increased by -11.83% compared with the beginning of the period, operating costs同比 increased by -20.42%, and the advance payments growth rate is higher than the operating cost growth rate.

From the perspective of capital coordination, it is necessary to focus on:

• Net cash flow from operating activities cannot meet funding needs for capital expenditures; financing channels are tightening. During the reporting period, the sum of net cash flow from operating activities and net cash flow from investing activities was -RMB 120 million, and net cash flow from financing activities was -RMB 90 million. Net cash flow from operating activities could not cover the funding needs for investing, and financing channels are tightening.

• CFO, CFI, and CFF are all negative. During the reporting period, net cash flow from operating activities, net cash flow from investing activities, and net cash flow from financing activities are all negative, at -RMB 90 million, -RMB 30 million, and -RMB 90 million respectively; it is necessary to pay attention to risks to the capital chain.

IV. Operating Efficiency

During the reporting period, the company’s accounts receivable turnover ratio was 17.35, down 31.6% year over year; inventory turnover ratio was 0.5, up 18.13% year over year; and total asset turnover ratio was 0.2, down 8.65% year over year.

From operating assets, it is necessary to focus on:

• The accounts receivable turnover ratio continues to decline. In the past three periods of annual reports, the accounts receivable turnover ratios were 56.92, 25.37, and 17.35 respectively, and the accounts receivable turnover capacity is weakening.

• The accounts receivable/total assets share continues to increase. In the past three periods of annual reports, the accounts receivable/total assets ratios were 0.69%, 1.06%, and 1.27% respectively, continuing to grow.

From long-term assets, it is necessary to focus on:

• The total asset turnover ratio continues to decline. In the past three periods of annual reports, the total asset turnover ratios were 0.39, 0.22, and 0.2 respectively, and the total asset turnover capacity is weakening.

• Unit fixed-asset revenue productivity declines year by year. In the past three periods of annual reports, the ratio of operating revenue to original value of fixed assets was 7.13, 1.82, and 1.6 respectively, continuously declining.

• Construction in progress has significant changes. During the reporting period, construction in progress was RMB 60 million, up 3165.36% from the beginning of the period.

Click Hunan Investment’s Hawk-Eye Early Warning to view the latest early-warning details and a visual preview of the financial report.

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Responsible editor: Xiao Lang Express