Eagle Eye Warning: Hengrun Co., Ltd.'s net cash flow from operating activities remains continuously negative

Sina Finance Listed Company Research Institute | Financial Report Eagle Eye Warning

On March 25, Hengrun Co., Ltd. (rights protection) released its 2025 annual report.

The report shows that the company’s total operating revenue for 2025 is 3.96 billion yuan, a year-on-year increase of 129.43%; net profit attributable to parent company is 83.4821 million yuan, up 160.37%; non-recurring net profit attributable to parent is 89.7516 million yuan, up 165.19%; basic earnings per share are 0.1904 yuan/share.

Since its listing in April 2017, the company has paid cash dividends 7 times, totaling 287 million yuan.

The listed company financial report Eagle Eye warning system conducts intelligent quantitative analysis of Hengrun Co., Ltd.'s 2025 annual report from four dimensions: performance quality, profitability, capital pressure and safety, and operational efficiency.

1. Performance Quality Level

During the reporting period, the company’s revenue was 3.96 billion yuan, a year-on-year increase of 129.43%; net profit was 85.8337 million yuan, up 162.11%; net cash flow from operating activities was -63.7043 million yuan, up 39.98%.

From the overall performance perspective, key points to focus on:

• Revenue growth rate has been continuously declining over the last three quarters. During the reporting period, revenue increased by 26.17% year-on-year, with growth rates decreasing over the last three quarters.

• Net profit turned profitable for the first time in two years. In the last three annual reports, net profits were -40 million yuan, -140 million yuan, and 90 million yuan, showing volatility.

• Net profit is volatile. In the last three annual reports, net profits were -40 million yuan, -140 million yuan, and 90 million yuan, with year-on-year changes of -137.97%, -283.95%, and 162.11%, respectively, indicating fluctuation.

From revenue, cost, and period expense ratio analysis, focus on:

• Significant difference between sales expense changes and revenue changes. During the reporting period, revenue increased by 129.43% year-on-year, while sales expenses increased by 13.38%, showing a large discrepancy.

Regarding cash flow quality, key points include:

• Net cash flow from operating activities remains negative. During the reporting period, it was -60.7 million yuan, continuing three years of negative cash flow.

• Discrepancy between net profit and net cash flow from operating activities. During the reporting period, net profit was 90 million yuan, while cash flow from operating activities was -60 million yuan, indicating divergence.

• The ratio of net cash flow from operating activities to net profit is below 1. During the reporting period, this ratio was -0.742, indicating weak earnings quality.

• The ratio of net cash flow from operating activities to net profit continues to decline. In the last three half-year reports, the ratios were 3.18, 0.77, and -0.74, showing a downward trend in profitability quality.

2. Profitability Level

During the reporting period, the company’s gross profit margin was 8.98%, an increase of 71.69% year-on-year; net profit margin was 2.17%, up 127.07%; return on equity (weighted) was 2.57%, up 160.9%.

From the company’s operational earnings perspective, focus on:

• Gross profit margin shows volatility. In the last three annual reports, gross profit margins were 8.24%, 5.23%, and 8.98%, with year-on-year changes of -24.61%, -36.54%, and +71.69%, indicating abnormal fluctuations.

Regarding asset-side profitability, focus on:

• The average return on net assets over the past three years is below 7%. During the reporting period, the weighted average return on net assets was 2.57%, with the three-year average below 7%.

• Return on invested capital is below 7%. During the reporting period, the company’s return on invested capital was 2.93%, with the three-period average below 7%.

3. Capital Pressure and Safety

During the reporting period, the company’s asset-liability ratio was 42.6%, an increase of 41.4% year-on-year; current ratio was 1.28, quick ratio was 0.82; total debt was 1.66B yuan, with short-term debt at 1.64B yuan, accounting for 98.84% of total debt.

From overall financial status, focus on:

• Significant increase in asset-liability ratio. During the period, the ratio increased by 41.4% from the beginning of the period, reaching 42.6%.

Regarding short-term capital pressure, focus on:

• Sharp increase in short-term to long-term debt ratio. During the period, short-term debt to long-term debt rose sharply to 67.97.

• Large short-term debt, with a funding gap. During the period, broad monetary funds were 710 million yuan, short-term debt was 1.38 billion yuan, and the broad monetary funds to short-term debt ratio was 0.52, indicating funds are insufficient.

• Significant short-term debt pressure, with a strained capital chain. During the period, broad monetary funds were 710 million yuan, short-term debt was 1.38 billion yuan, net cash flow from operating activities was -60 million yuan, and there are gaps between short-term debt, financial expenses, monetary funds, and cash flows.

Regarding long-term funding pressure, focus on:

• Gradual decrease in cash coverage ratio of total debt. In the last three annual reports, broad monetary funds to total debt ratios were 0.76, 0.56, and 0.51, decreasing steadily.

From capital management perspective, focus on:

• Interest income to monetary funds ratio below 1.5%. During the period, monetary funds were 570 million yuan, short-term debt was 1.38 billion yuan, and the average interest income to funds ratio was 0.591%, below 1.5%.

• Total debt/total liabilities ratio over 20%, interest expense/net profit ratio over 30%. During the period, total debt to liabilities was 57.64%, interest expenses accounted for 52.3% of net profit, significantly impacting company performance.

• Significant change in notes payable. During the period, notes payable were 250 million yuan, a change rate of 90.98% from the beginning of the period.

From capital coordination perspective, focus on:

• Capital expenditures consistently exceed net cash inflows from operating activities. In the last three annual reports, cash paid for fixed assets, intangible assets, and other long-term assets were 1.09 billion yuan, 200 million yuan, and 80 million yuan, respectively, while net cash flows from operating activities were -110 million, -110 million, and -60 million yuan.

• Funds are coordinated but with payment difficulties. During the period, operating capital was 560 million yuan, with a demand of 1.29 billion yuan; the funds from investment and financing activities cannot fully cover the company’s operating needs, with cash payment capacity at -730 million yuan.

4. Operating Efficiency Level

During the reporting period, accounts receivable turnover was 5.91, up 108.71%; inventory turnover was 4.68, up 63.51%; total asset turnover was 0.77, up 112.46%.

From operating assets perspective, focus on:

• Continuous increase in inventory/total assets ratio. In the last three annual reports, inventory/total assets ratios were 10.85%, 13.19%, and 16.36%, showing a steady rise.

Regarding long-term assets, focus on:

• Significant change in deferred expenses. During the period, deferred expenses were 2.8M yuan, an increase of 46.24% from the beginning of the period.

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Sina Finance Listed Company Financial Report Eagle Eye Warning Introduction: The Eagle Eye Warning system is an intelligent professional analysis system for listed company financial reports. It gathers authoritative financial experts from accounting firms and listed companies to track and interpret the latest financial reports from multiple dimensions such as performance growth, earnings quality, capital pressure and safety, and operational efficiency, providing visual prompts of potential financial risks. It offers professional, efficient, and convenient technical solutions for financial risk identification and early warning for financial institutions, listed companies, and regulatory authorities.

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