Huahai Chengke 2025 Annual Report Interpretation: Revenue Increased 38.12% to 458 Million Yuan, Net Income Attributable to Parent Company Decreased 39.47% to 24.2521 Million Yuan

Operating Revenue: Industry Boom Drives Scale Expansion

In 2025, the company achieved operating revenue of 458.0559 million yuan, a year-on-year increase of 38.12%, mainly due to the improved prosperity of the downstream semiconductor packaging industry and the consolidation of Hengsuo Huawei. By product, epoxy plastic packaging materials generated revenue of 428.389 million yuan, up 35.61%, remaining the core revenue pillar; adhesive sales reached 27.806 million yuan, a significant increase of 83.29%, becoming a new growth highlight; Qingrun mold materials, a new product, contributed 1.6074 million yuan. Regionally, domestic sales were 446.1154 million yuan, up 34.76%; export sales reached 11.6872 million yuan, a surge of 52,611.81%, marking a breakthrough in overseas market expansion.

Profitability Indicators: Expenses Erode Profits, Non-Recurring Profit Declines Significantly

The company’s profitability declined notably due to increased expenses from mergers, acquisitions, and business expansion. The decline in non-recurring net profit was greater than that of net profit, indicating that non-operating gains and losses provided some support to net profit. In 2025, non-recurring gains and losses totaled 4.5645 million yuan, mainly from government subsidies and gains from financial asset disposals. The earnings per share also declined in tandem, primarily because revenue growth did not fully offset increased expenses and share capital expansion (total shares increased from 80.6965 million to 96.0143 million).

Expenses: Significant Growth in Multiple Areas Erodes Profitability

In 2025, total operating expenses reached 130.5296 million yuan, up 81.33%, far exceeding revenue growth, which is the main reason for profit decline. Management and financial expenses grew especially rapidly, mainly due to costs from the merger with Hengsuo Huawei and increased borrowing costs from expanded loan scales.

R&D Investment: Strengthening Technology Layout with Dual Growth in Personnel and Expenses

R&D Staff and Investment

In 2025, total R&D expenditure was 50.0568 million yuan, up 89.57%, accounting for 10.93% of operating revenue, an increase of 2.97 percentage points from the previous year. R&D personnel numbered 170, a rise of 102.38%, mainly due to integrating Hengsuo Huawei’s R&D team and ongoing talent recruitment; average annual salary was 169,500 yuan, up 32.32%, reflecting the company’s emphasis on R&D talent.

Progress of Ongoing Projects

The company had 28 ongoing projects in the year, with a total investment of 66.0252 million yuan, focusing on advanced packaging materials, automotive-grade materials, and high-thermal-conductivity materials. Notably, the “Research and Development of Epoxy Plastic Encapsulation Material for Large-Size QFN Chips” has completed pilot testing and large-scale production; “Development of MUF Plastic Encapsulation Material” finalized formulation and process optimization with stable supply; “Resin System Development for XL Package Bottom Filling” passed customer validation and achieved mass production. These projects will support future product upgrades and market expansion.

Cash Flow: Significant Net Inflow from Financing Activities, Improved Operating Cash Flow

The significant increase in net cash from operating activities was mainly due to higher receivables from expanded sales and government subsidies, improving cash flow quality. The larger outflow from investing activities was primarily due to the cash payment of 320 million yuan for the acquisition of Hengsuo Huawei. The substantial inflow from financing activities was mainly from the issuance of shares, convertible bonds, and related fundraising, totaling about 794 million yuan, providing strong financial support for mergers and expansion.

Risks Faced

Core Competitiveness Risks

2. Advanced Packaging Material Industrialization Not Meeting Expectations: Products like BGA, SiP, and FOWLP/FOPLP materials are still in customer validation stages, not yet mass-produced. Slow industrialization could impact long-term development.
3. R&D Delay Risks: The company’s technological level still lags behind foreign competitors. Failure to keep pace with industry trends and launch new products timely could affect revenue growth.
4. Key Technical Personnel Loss Risks: As the semiconductor packaging industry is highly technical, loss of core personnel or leakage of key technology could weaken the company’s competitiveness.

Operational Risks

2. Customer Development and Validation Risks: Customer certification cycles for semiconductor packaging materials are long, with foreign firms dominating high-performance and advanced packaging markets. Difficulties in passing customer validation could hinder market expansion.
3. Market Competition Risks: Foreign competitors have advantages in technology, branding, and customer resources, with domestic new entrants increasing. Failure to effectively respond could impact market share and performance.
4. Accounts Receivable Collection Risks: As of the end of 2025, accounts receivable stood at 311.1904 million yuan, up 129.43%. If downstream customers’ payment ability declines, there is a risk of bad debts.

Financial Risks

2. Gross Margin Fluctuation Risks: Gross margins are affected by raw material prices, product mix, and market competition. Rising raw material costs or falling product prices could cause margin volatility.
3. Exchange Rate Fluctuation Risks: The company imports some raw materials settled in USD and JPY, so exchange rate fluctuations may impact procurement costs and operating performance.

Other Risks

2. Industry Cycle Risks: The semiconductor industry is highly cyclical. A downturn in downstream demand could affect business development and performance.
3. M&A Integration Risks: Post-acquisition of Hengsuo Huawei, integration of technology, personnel, and culture involves uncertainties. Poor integration could impair synergy effects.
4. Fundraising Project Risks: Changes in market environment or technological development during project implementation could lead to outcomes below expectations.

Senior Management Compensation: Stable Core Leadership Salaries

Chairman and General Manager Han Jianglong’s pre-tax salary is 1.8 million yuan; Vice President Cheng Xingming’s is 1.5 million yuan. Compensation for core management remains largely unchanged from last year. Dong Dongfeng, also serving as Secretary of the Board and Financial Officer, receives 286,000 yuan pre-tax, mainly basic salary and performance bonus. Compensation for directors, supervisors, and senior managers is aligned with company policies and linked to performance and responsibilities.

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