Optical Module "Bull Stock" Huazhong Technology's 2025 Net Profit Nearly 1.5 Billion Yuan Still Falls Short of Institutional Expectations; Optoelectronic Device Series Products Gross Margin Increases Nearly 5 Percentage Points

Optical Module “Hot Stock” Huagong Tech (SZ000988, stock price 115.74 RMB, market cap 116.4 billion RMB) disclosed its 2025 annual report on the evening of March 25. In 2025, the company achieved approximately 14.355 billion RMB in revenue, a year-on-year increase of 22.59%; net profit attributable to shareholders of the listed company was 1.471 billion RMB, up 20.48%; non-recurring net profit was about 1.187 billion RMB, up 32.32%; basic earnings per share were 1.47 RMB, an increase of 21.49%. The company plans to distribute a cash dividend of 2.5 RMB per 10 shares (tax included) based on approximately 996 million shares, totaling about 249 million RMB in cash dividends, with no bonus shares or capital reserve conversion.

Image source: Huagong Tech Annual Report

Data shows that eight institutions’ consensus forecast for Huagong Tech’s 2025 net profit attributable to parent is about 1.833 billion RMB. Based on the disclosed data, the company’s performance is below expectations.

Core optoelectronic devices achieve nearly 6.1 billion RMB in revenue, up 53.39%

From a vertical perspective, Huagong Tech’s 2025 revenue of 14.355 billion RMB and net profit of 1.471 billion RMB both hit new highs for a single year. However, quarterly analysis shows that in Q4 2025, revenue was 3.317 billion RMB, down 2.7% quarter-over-quarter; net profit was 149 million RMB, down 63.55% quarter-over-quarter.

Image source: Huagong Tech Annual Report

In addition to performance growth, during the reporting period, net cash flow from operating activities reached 1.221 billion RMB, up 66.83%, indicating significant progress in sales collection and capital operation efficiency, and a more stable capital chain.

Looking at business segments, Huagong Tech’s optoelectronic devices (connection business) contributed prominently, achieving revenue of 6.097 billion RMB, up 53.39%, accounting for 42.48% of total revenue, becoming the main engine of performance growth.

Image source: Huagong Tech Annual Report

The annual report states that Huagong Tech is deeply focused on global AI computing infrastructure construction, achieving large-scale delivery of 800G silicon photonics LPO series and 1.6T optical module products, ranking among the top global providers. It also launched several cutting-edge optical engine products (such as 1.6T/3.2T), successfully transforming from a traditional telecom optical module supplier to a core competitor in the global AI optical interconnection field.

Regionally, Huagong Tech’s overseas revenue in 2025 reached 2 billion RMB, a significant increase of 45.52% year-over-year, accounting for 14% of total revenue. The company is shifting from “product going abroad” to “brand and capability going abroad.” Additionally, the company continues to expand global capacity deployment at overseas production bases in Thailand, Vietnam, and other countries, further optimizing the global supply chain system.

Image source: Huagong Tech Annual Report

In R&D, the company’s investment in 2025 reached 1.092 billion RMB, up 9.96%, representing 7.60% of revenue. The company has made multiple breakthroughs in basic and applied research, applying for 433 patents (including 220 invention patents).

Revenue and net profit attributable to parent fall short of institutional expectations

Despite many achievements during the reporting period and a rise in A-share stock prices, a reporter from Daily Economic News noted that Huagong Tech’s performance last year did not meet institutional expectations.

Data shows that eight institutions’ consensus forecast for Huagong Tech’s 2025 revenue and net profit attributable to parent are approximately 16.434 billion RMB and 1.833 billion RMB, respectively. Compared to the company’s disclosed revenue of 14.355 billion RMB and net profit of 1.471 billion RMB, both are below expectations, by 12.65% and 19.78%, respectively.

Although Huagong Tech maintained stable overall revenue and gross margin last year, product-wise, the gross margin of “laser processing equipment and intelligent manufacturing lines” decreased by 1.56 percentage points to 29.40%; “laser holographic film series” dropped 2.52 percentage points to 31.08%; “sensitive components” declined 1.24 percentage points to 24.46%. Only the optoelectronic device series saw a positive gross margin growth during the period.

Image source: Huagong Tech Annual Report

The report also shows that as of the end of the reporting period, Huagong Tech’s inventory book value was 3.581 billion RMB, up 36.63% from 2.621 billion RMB at the beginning of the year. The company explained that this was mainly to cope with increased orders and fluctuations in raw material supply, with strategic stockpiling. The inventory impairment provision at period-end was 176 million RMB (up from 126 million RMB at the start), indicating pressure in inventory management.

Huagong Tech’s net cash flow from financing activities in 2025 was -176 million RMB, compared to 554 million RMB in the same period last year. The company stated this was mainly due to increased loan repayments. Meanwhile, “non-current liabilities due within one year” reached 1.659 billion RMB, a significant increase of 46.7% from 1.131 billion RMB at the beginning of the period.

Although Huagong Tech is currently one of the focal optical module concept stocks in the A-share secondary market, the annual report also discloses related risks. The company explicitly lists “industry competition and technological iteration risks” as one of the core challenges: especially in optical communications, sensors, and laser equipment, competitors may have more abundant resources and technological accumulation.

(Source: Daily Economic News)