Longquan Co., Ltd. 2025 Annual Report Analysis: Revenue increased by 27.34% to 1.46B yuan; net profit excluding non-recurring gains and losses decreased by 45.28%

Interpretation of Core Profitability Indicators

Operating Revenue

In 2025, the company achieved operating revenue of 1,459,936,542.05 yuan, up 27.34% year over year. By business segment, revenue from pipeline businesses such as PCCP was 1.093 billion yuan, accounting for 74.90% and up 12.62% year over year; revenue from metal pipe fittings was 106 million yuan, accounting for 7.26% and down 30.66% year over year; and revenue from the newly added industrial valve business was 241 million yuan, accounting for 16.48%. By region, revenue in the Northwest region was 653 million yuan, up 101.27% year over year; revenue in the East China region was 386 million yuan, up 143.08% year over year, becoming the main driver of revenue growth.

Net Profit

Net profit attributable to shareholders of the listed company was 47,469,922.78 yuan, down 27.63% year over year. The decline in net profit was mainly due to a decrease in non-recurring gains and losses and losses incurred by some subsidiaries, while the impairment provisions accrued during this period also eroded profits to a certain extent.

Non-GAAP Net Profit

Non-GAAP net profit attributable to shareholders of the listed company (net profit after deducting non-recurring gains and losses) was 34,623,221.96 yuan, down 45.28% year over year, a sharp decline that was much greater than that of net profit. The main reasons are the deterioration in profitability of the metal pipe fittings business, and although the newly added industrial valve business in this period contributed revenue, its integration costs from the prior stage were relatively high; at the same time, the scale of the company’s overall asset impairment provisions increased.

Basic Earnings Per Share and Non-GAAP Earnings Per Share

Basic earnings per share were 0.09 yuan/share, down 25.00% year over year; non-GAAP earnings per share were 0.06 yuan/share, down 45.28% year over year. This matches the trend of change in non-GAAP net profit, reflecting a clear weakening of the company’s profitability in its core operating business.

Interpretation of Period Expenses and R&D Investment

Overall Expense Situation

In 2025, the company’s total period expenses were 268,974,464.31 yuan, up 24.76% year over year. The growth rate of expenses was lower than that of revenue, and the overall effect of expense control was fairly good; however, the expenses by item showed clear structural changes.

Selling Expenses

Selling expenses were 56,685,362.41 yuan, up 31.55% year over year, mainly because in this period the company newly consolidated Tongping City Power Station Valve Co., Ltd., and the incorporation of its original sales system led to an increase in expenses.

Administrative Expenses

Administrative expenses were 172,673,109.79 yuan, up 23.53% year over year, mainly due to higher compensation for management teams after the expansion of the company’s business scale, increased office and operating costs, and integration costs for the newly acquired companies.

Financial Expenses

Financial expenses were 20,090,724.82 yuan, down 8.65% year over year, mainly because the interest income increased by 4,650,518.24 yuan in this period, and the growth rate of interest expense was brought under control after optimizing the debt structure.

R&D Expenses

R&D expenses were 19,525,267.29 yuan, up 30.27% year over year, mainly because after the newly consolidated Tongping City Power Station Valve Co., Ltd., its R&D projects and related investments were included in the consolidated scope. The company’s main R&D projects include AP-series nuclear power straight pipe fittings for banded segments, Q345D high-pressure seamless eccentric tees for jacket applications, etc. Many projects are in the testing or small-batch trial stage, and in the future the company will further enhance its technological competitiveness in nuclear power and high-end pipe fittings.

R&D Personnel Profile

In 2025, the number of R&D personnel was 151, up 41.12% year over year, and the proportion of R&D personnel rose to 13.64%. In terms of education structure, the number of master’s degree holders increased from 5 to 10, doubling year over year; other education groups also grew significantly, indicating that after the merger and acquisition, the company integrated more R&D resources and also increased its recruitment efforts for R&D personnel to build talent reserves for technological innovation.

Interpretation of Cash Flow

Overall Cash Flow Situation

In 2025, the company’s net increase in cash and cash equivalents was 64,776,455.16 yuan, down 62.87% year over year, mainly due to increased cash outflows from investing activities and decreased cash inflows from financing activities.

Net Cash Flow from Operating Activities

Net cash flow from operating activities was 328,412,896.18 yuan, up significantly by 163.07% year over year. The main reason was an increase in collections this period, especially an improvement in project collections for the PCCP pipeline business; meanwhile, the newly consolidated valve business also contributed stable operating cash flows.

Net Cash Flow from Investing Activities

Net cash flow from investing activities was -202,331,501.10 yuan, down 31.12% year over year, mainly because the company paid equity transfer consideration of 160,938,558.73 yuan for Tongping City Power Station Valve Co., Ltd. in this period, and at the same time, spending on the purchase/construction of fixed assets and other long-term assets also increased.

Net Cash Flow from Financing Activities

Net cash flow from financing activities was -61,448,842.46 yuan, down 130.14% year over year. The main reason was that the amount of new loans decreased in this period, and at the same time the scale of loan repayments increased, resulting in net cash outflows from financing activities.

Interpretation of Risk Factors

Industry Policy and Project Release Timing Risk

The PCCP pipe business depends on the bidding schedule of water conservancy projects; the metal pipe fittings business depends on investment in nuclear power and petrochemical industries; and the power station valve business depends on demand for thermal power installed capacity. If relevant industry policies change or project releases do not meet expectations, it will directly affect the company’s order acquisition and revenue growth. Response measures: Expand the product mix, increase market layout in areas such as urban pipeline network renovation and new energy supporting projects, and reduce reliance on a single industry.

Risk of Delayed Contract Supply

Construction of large engineering projects can be affected by factors such as weather and geology, which may lead to delayed supply and in turn affect the recognition of sales revenue. Response measures: Strengthen communication and coordination with customers, dynamically adjust production plans, optimize supply chain management, and improve supply flexibility.

Risk of Fluctuations in Raw Material Prices

Fluctuations in raw material prices such as steel and cement will affect the company’s cost-control capabilities, especially because the PCCP pipeline and metal pipe fittings businesses are highly sensitive to raw material costs. Response measures: Implement a centralized procurement strategy and sign long-term cooperation agreements with core suppliers, while also exploring risk management tools such as raw material hedging.

Market Competition Risk

Competition among companies in the industry intensifies. If the company’s ability to innovate technologically and control costs is insufficient, its market share may be squeezed. Response measures: Continuously increase R&D investment, enhance technical barriers of products, promote lean production, implement a total cost leadership strategy, and at the same time optimize the customer structure and expand orders with high added value.

Risk of Accounts Receivable Collection

The company has a relatively large scale of accounts receivable. Some project retention/quality guarantee funds have long collection cycles. If customers’ financial conditions deteriorate, bad debt risk may arise. Response measures: Strengthen full-process management of accounts receivable, establish a customer credit rating system, intensify efforts to collect overdue amounts, and meanwhile explore ways such as accounts receivable factoring to accelerate cash collection.

Risk of Management Integration

After acquiring the power station valve company, if management and cultural integration are not carried out properly, it may affect its operating efficiency and the realization of synergy effects. Response measures: Deploy core management teams, advance standardization of management systems, strengthen corporate culture integration, and gradually achieve synergy among business, finance, and human resources.

Interpretation of Compensation for Directors, Supervisors, and Senior Management

During the reporting period, the total pre-tax compensation paid by the company to Chairman Fu Bo was 2.2037 million yuan; the compensation for the General Manager (served concurrently by Fu Bo) is included in the Chairman’s compensation. The total pre-tax compensation for Vice President Wang Xiaojun was 1.4288 million yuan; and the total pre-tax compensation for the finance director (Fang Linqing) was 0.7957 million yuan. The compensation levels are basically aligned with the company’s performance and the industry level. At the same time, the company ties the interests of the directors, supervisors, and senior management with the company’s long-term interests through a restricted stock incentive plan.

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Editor: Xiaolang Express