Zhonggong High-Tech 2025 Annual Report Analysis: Operating Cash Flow Surges by 49.5%, Non-GAAP Net Profit Increases by 6.46%

Operating Revenue: Steady Growth, with Fourth Quarter Contribution Exceeding 70%

In 2025, Zhonggong Hi-Tech achieved operating revenue of RMB 274 million, up 5.56% year over year. Judging from quarterly data, the company’s revenue shows a clear seasonal pattern: fourth-quarter single-quarter revenue reached RMB 186 million, accounting for 67.67% of full-year revenue, while the combined revenue of the first three quarters was only RMB 89 million.

From the business structure perspective, the decision-making and consulting services for road maintenance remain the core source of revenue, generating RMB 190 million for the full year, up 11.87%; revenue from R&D, production, and sales of rapid traffic condition detection equipment was RMB 60 million, down 11.91% year over year; revenue from R&D, development, and sales of road maintenance information systems was RMB 17 million, slightly up 0.34% year over year.

Net Profit: Slight Increase, with Non-recurring Items Adjusted Showing Better Performance

In 2025, the company’s net profit attributable to shareholders of listed companies was RMB 45.60 million, up 2.19% year over year; net profit after deducting non-recurring gains and losses was RMB 44.76 million, up 6.46% year over year. The growth rate of non-recurring-adjusted net profit is notably higher than that of net profit, indicating an improvement in the profitability of the company’s core business.

Regarding non-recurring items, in 2025 the net amount of non-recurring gains and losses was RMB 0.8347 million, down significantly from RMB 2.5707 million in 2024. This was mainly because government subsidy income decreased from RMB 2.6228 million to RMB 1.1949 million.

Earnings Per Share: Growing in Sync; Non-recurring-Adjusted Metrics Are Strong

In 2025, the company’s basic earnings per share were RMB 0.68 per share, up 1.49% year over year; basic earnings per share after deducting non-recurring gains and losses were RMB 0.67 per share, up 6.35% year over year, matching the growth rate of non-recurring-adjusted net profit.

Expenses: Overall Stable; R&D Investment Continues to Increase

In 2025, the company’s total operating expenses amounted to RMB 73.53 million, up 4.22% year over year. The growth rate of expenses was lower than the growth rate of operating revenue, and the effects of expense control became evident.

Selling Expenses: Slight Increase, with Stable Structure

Full-year selling expenses were RMB 5.2455 million, up 2.36% year over year. Selling expenses are mainly composed of employee compensation, consulting service fees, labor service fees, and others. Among them, employee compensation was RMB 4.0923 million, accounting for 78.02% of selling expenses, up 35.71% year over year—this is the main reason for the growth in selling expenses.

Administrative Expenses: Slight Increase, with Stable Scale

Administrative expenses were RMB 52.1275 million, up 1.28% year over year. Administrative expenses mainly include employee compensation, depreciation expense, office expenses, and others. Employee compensation was RMB 30.5864 million, accounting for 58.67% of administrative expenses, up 2.22% year over year; depreciation expense was RMB 9.7962 million, accounting for 18.79%, down 5.06% year over year.

Finance Expenses: Expanded Returns; Interest Contribution Improves

Finance expenses were RMB -2.4306 million, further expanding compared with RMB -1.6663 million in 2024. This was mainly because interest income increased from RMB 1.6955 million to RMB 2.4627 million, indicating improved efficiency in the company’s capital utilization.

R&D Expenses: Continued Escalation; Share of Revenue Increases

R&D expenses were RMB 18.5895 million, up 8.08% year over year. R&D expenses accounted for 6.77% of operating revenue, up from 6.62% in 2024. R&D expenses were mainly used for employee compensation, project outsourcing fees, materials and spare parts, and others. Among them, employee compensation was RMB 13.4380 million, accounting for 72.29% of R&D expenses.

R&D Personnel Profile: Stable Team, Optimized Structure

As of end-2025, the company had 68 R&D personnel, accounting for 28.45% of the company’s total headcount. In terms of educational background, among the R&D staff there were 2 doctoral degree holders, 33 master’s degree holders, 32 bachelor’s degree holders, and 1 junior college degree holder. The proportion of master’s degree and above is 51.47%, and the overall educational level of the R&D team is relatively high.

In terms of age structure, there were 41 R&D personnel aged 30–40, accounting for 60.29%, which is the core strength of the R&D team; 13 personnel under age 30, accounting for 19.12%, injecting fresh blood into the team; 14 personnel over age 40, accounting for 20.59%, ensuring the accumulation of R&D experience.

Cash Flow: Operating Cash Flow Improves Significantly; Quality Enhances

In 2025, the net increase in cash and cash equivalents was RMB 63.9673 million. The balance of cash and cash equivalents at period-end was RMB 334 million, with sufficient capital reserves.

Cash Flow from Operating Activities: Up 49.5%; Collection Quality Improves

The net cash flow generated from operating activities was RMB 76.2065 million, up 49.50% year over year. The main reason is that cash received from selling goods and providing labor services increased from RMB 265 million to RMB 305 million, while the collection status of accounts receivable was also relatively good. The growth rate of cash flow from operating activities is significantly higher than the growth rates of operating revenue and net profit, and the company’s profitability quality improved substantially.

Cash Flow from Investing Activities: Substantial Decrease in Outflows; Project Construction in Wrap-Up

The net cash flow generated from investing activities was RMB -1.0806 million, narrowing significantly compared with RMB -6.3541 million in 2024. This was mainly because the Baoding company paid the prior period’s engineering construction final payment, and investing outflows decreased in the current period.

Cash Flow from Financing Activities: Dividends Increase; Net Amount Slightly Decreases

The net cash flow from financing activities was RMB -11.1586 million, slightly down compared with RMB -10.7037 million in 2024. This was mainly because the company’s dividend amount increased from RMB 10.3154 million to RMB 11.1556 million.

Potential Risks: Multiple Challenges Coexist; Watch Out for Operating Pressure

Risk of Declining Gross Margin

As the company’s business develops, its headcount increases, and compensation levels rise, operating costs increased 7.62% year over year, exceeding the revenue growth rate of 5.56%. This creates a risk that the company’s overall gross margin may decline further. In 2025, the company’s overall gross margin was 51.03%, down from 52.00% in 2024.

Risk of Loss of Core Technical Personnel

The industry the company operates in is knowledge- and technology-intensive, and the company depends heavily on technical personnel. The loss of core technical personnel may weaken the company’s technical advantages and affect its competitiveness.

Risk of Market Competition

Growth in demand in the road maintenance market attracts more competitors to enter, and the company faces risks of intensified market competition. This may lead to declines in market share and profitability.

Risk in Market Expansion

The promotion of the scientific decision-making philosophy for road maintenance still takes time. Traditional decision-making approaches may affect the company’s business expansion, and there is uncertainty in market expansion.

Industry Policy Risk

The road maintenance industry is strongly affected by policy. If in the future policies emerge that are unfavorable to market-oriented development of the industry, the company’s operations will face challenges.

Compensation for Senior Executives: Core Executive Pay Stable; Overall Slightly Down

In 2025, the total pre-tax compensation received from the company by the company’s directors and senior management was RMB 5.8092 million, down compared with RMB 7.9353 million in 2024.

Chairman Compensation

The Chairman, Cheng Ning, received a total pre-tax compensation of RMB 1.1318 million from the company during the reporting period.

General Manager Compensation

The General Manager, Pan Zongjun, received a total pre-tax compensation of RMB 1.1240 million from the company during the reporting period.

Deputy General Manager Compensation

Deputy General Manager, Cao Jiang, received a total pre-tax compensation of RMB 0.8685 million during the reporting period. Deputy General Manager, Xu Quanliang, received a total pre-tax compensation of RMB 0.8325 million during the reporting period.

Chief Financial Officer Compensation

CFO Liu Haodong received a total pre-tax compensation of RMB 0.7872 million during the reporting period; former CFO Cui Lianying received a total pre-tax compensation of RMB 0.1969 million during the reporting period.

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