Sanyou New Materials 2025 Annual Report Interpretation: Revenue Declined 34.58% to 228 Million Yuan, Non-GAAP Net Loss Expanded by 15.95%

Operating Revenue: Significant Shrinkage, Core Business Under Pressure

In 2025, SanChao New Materials achieved operating revenue of ¥228,214,935.90, down 34.58% from ¥348,828,326.12 in 2024, indicating a substantial decline in scale. From a business structure perspective, the core superhard materials products business revenue was ¥206,324,713.30, down 33.65%; other business revenues totaled ¥21,890,222.60, down 42.20%, with all business lines showing noticeable declines.

By product, electroplated diamond wire revenue was ¥131,123,116.05, a 45.32% drop, becoming the main drag on revenue decline; diamond grinding wheel revenue was ¥75,201,597.25, a slight increase of 5.72%, offering limited support to revenue. In terms sales models, consignment sales revenue was ¥26,377,756.40, plummeting 65.81%, and direct sales also declined by 25.71%, reflecting a broad weakening in market demand for the company’s products.

Net Profit: Further Losses, Increased Profit Pressure

In 2025, net profit attributable to shareholders of the listed company was -¥159,065,285.69, an 12.86% increase in loss compared to -¥140,938,418.77 in 2024. Non-recurring net profit was -¥168,070,773.54, up 15.95% from -¥144,946,547.61, with losses exceeding net profit after adjustments, indicating a more severe profitability situation in core operations.

Quarterly data shows that in the first three quarters, quarterly losses ranged from ¥6 million to ¥6.6 million, while the fourth quarter’s loss soared to ¥139,718,860.31, becoming the main source of annual loss, mainly due to large impairment provisions for assets with signs of impairment.

Earnings Per Share: Declining Alongside Net Profit

In 2025, basic earnings per share (EPS) was -¥1.3927, down 12.86% from -¥1.234 in 2024; non-recurring EPS was -¥1.4716, a 15.0% decrease from -¥1.28 (estimated) in 2024. The trend in EPS mirrors that of net profit, reflecting ongoing deterioration in the company’s profitability.

Expenses: Overall Scale Shrinks, R&D Expenses Drop Significantly

In 2025, total operating expenses were ¥85,632,462.00, down 14.08% from ¥99,666,067.19 in 2024, with expense scale shrinking in tandem with revenue. The specific changes are as follows:

R&D Investment and Personnel: Both Decrease

In 2025, R&D expenditure was ¥23,140,666.66, down 36.32%, but R&D expenses accounted for 10.14% of operating revenue, slightly lower than 10.42% in 2024, remaining at a relatively high level. R&D personnel decreased from 112 in 2024 to 86, a 23.21% reduction, with the proportion of R&D staff dropping from 16.79% to 13.94%. Despite resource contraction, the company launched multiple new R&D projects, such as “Resin Bonded Polishing Wheels for Tool Industry” and “High-Precision Inner Coating Rolling Wheel,” and obtained 24 new patents, including 3 invention patents, totaling 129 authorized patents (32 invention patents). Innovation efforts continue steadily.

Cash Flow: Operating Cash Flow Improves, Financing Cash Flow Turns Negative

In 2025, net increase in cash and cash equivalents was -¥33,754,897.23, a significant decrease from ¥8,792,679.32 in 2024, indicating overall cash reserves shrank.

Operating Activities Cash Flow: Doubling

Net cash flow from operating activities was ¥24,718,661.76, more than doubling from ¥11,064,847.40 in 2024, a 123.40% increase. This was mainly due to a larger decrease in cash outflows (-41.70%) compared to cash inflows (-35.85%), as the company optimized procurement and controlled personnel costs, effectively reducing operating expenses and enhancing cash-generating capacity.

Investing Activities Cash Flow: Narrowed Net Outflow

Net cash flow from investing activities was -¥33,563,308.95, a 49.13% reduction from -¥65,977,626.72 in 2024. Cash inflows increased by 80.78%, mainly from matured financial products, while outflows increased by 57.24%, but the overall net outflow decreased, easing liquidity pressure.

Financing Activities Cash Flow: From Net Inflow to Outflow

Net cash flow from financing activities was -¥24,591,435.59, a sharp decline of 138.70% from a net inflow of ¥63,551,223.35 in 2024. This was mainly due to increased loan repayments and a 52.36% decrease in cash received from new borrowings, with debt repayment costs remaining high, leading to a significant drop in net financing cash flow.

Potential Risks: Multiple Pressures, Severe Operational Challenges

2. Industry Competition Risks: The diamond wire and diamond grinding wheel markets are highly competitive, with many players. The silicon wafer diamond wire prices in the photovoltaic industry remain low, with continued pressure on product prices and gross margins. Further intensification of competition could adversely affect the company’s market position, sales prices, and margins, leading to a sharp decline in operating profit.

3. Major Customer Operating Risks: During the reporting period, the top five customers accounted for 20.76% of sales, indicating high customer concentration. If these key customers face operational or financial difficulties, or if cooperation is disrupted and new large clients cannot be quickly developed, the company’s performance could be negatively impacted.

4. Accounts Receivable Collection Risks: As revenue fluctuates, accounts receivable amounts also vary. Although the company has strengthened receivables management and most receivables are within one year, adverse changes in the economy or downstream industries, or poor customer management, could lead to delays or defaults in receivables, impacting operations and cash flow.

5. Downstream Substitution or Technological Change Risks: In industries like photovoltaics, technological substitution or shifts—such as significant advances in perovskite solar cells—may erode the market share of crystalline silicon solar cells, affecting demand for the company’s existing products.

6. Macroeconomic Fluctuation Risks: Global economic uncertainties may lead customers to cut material procurement, reducing demand for the company’s products and impacting revenue.

7. New Product R&D Investment Risks: Continuous investment in R&D is necessary to maintain competitiveness. Insufficient R&D investment or misaligned R&D directions could hinder the timely launch of new products, adversely affecting market share and competitiveness.

8. Raw Material Price Increase Risks: The company’s main raw materials include nickel, diamond micro-powder, busbars, and aluminum substrates for grinding wheels. Rising raw material prices will directly impact costs and margins. During the reporting period, a significant increase in tungsten wire busbar prices affected the diamond wire business.

Executive Compensation: New Executives with Lower Salaries, Departing Executives with Higher Pay

In 2025, changes occurred among senior management, with the following compensation details:

• Chairman: The new Chairman, Liu Jingqi, received a pre-tax total of ¥0, mainly from related parties; the former Chairman, Zou Yuyao, received ¥520,200 pre-tax.
• General Manager: The new General Manager, Wu Hongkun, received ¥36,300 pre-tax; the former General Manager, Zou Yuyao, is included in the Chairman’s compensation.
• Vice Presidents: No new Vice President compensation data; among departing executives, Ji Guosheng (former Director and Board Secretary) received ¥269,500, and Zhou Haixin (former Director) received ¥867,100.
• Chief Financial Officer: The new CFO, Cao Hubin, received ¥147,200 pre-tax; the former CFO, Ji Kun, received ¥297,400.

Overall, new executives’ compensation levels are significantly lower than those of departing executives, partly due to shorter tenure and also reflecting stricter cost control under the new management team.

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