Huaqin Technology: Gross profit margins across four major businesses decline simultaneously, acquisition-driven expansion increases debt, and after a large dividend payout, plans to go public in Hong Kong.

Recently, Huajin Technology (603296.SH) released its annual report for 2025. Although the company achieved growth in both revenue and profit, there are still underlying concerns behind this performance.

Securities Star noted that under the “buy-sell model,” there is a high overlap between the company’s customers and suppliers, which compresses the bargaining power on both sides. This has limited the growth of the company’s gross profit margin, and the gross profit margins of its four major business segments have all declined. Meanwhile, as the business scale expands, the company’s inventory and accounts receivable have both risen to high levels, resulting in its operating cash flow turning negative. Against the backdrop of rising debt ratios and pressure on the capital chain, the company aims to explore new financing channels through a listing in Hong Kong. However, the large cash outs by the employee stock ownership platform and substantial dividends have drawn market attention.

Declining Gross Profit Margin, Negative Cash Flow

Public information shows that Huajin Technology, as a smart product platform enterprise, has a product line covering mobile terminals, laptops, data centers, AIOT, automotive electronics, and robotics.

The 2025 annual report shows that the company achieved total operating revenue of 171.437 billion yuan, a year-on-year increase of 56.02%; the net profit attributable to shareholders was 4.054 billion yuan, a year-on-year increase of 38.55%, with both revenue and net profit growing.

By business segment, Huajin Technology’s mobile terminal business, computing and data center business, AIoT business, and innovation business achieved revenues of 80.21 billion yuan, 75.475 billion yuan, 7.885 billion yuan, and 3.484 billion yuan, respectively, accounting for 46.8%, 44%, 4.6%, and 2% of total revenue.

Securities Star noted that the gross profit margins of the company’s four major business segments have all declined, with corresponding gross profit margins of 9.24%, 6.26%, 11.13%, and 14.05%, down 0.79 percentage points, 1.57 percentage points, 6.1 percentage points, and 5.42 percentage points year-on-year, respectively. As a result, the company’s overall gross profit margin decreased by 1.33 percentage points year-on-year to 7.97%, marking a decline for two consecutive years.

Market analysis suggests that the “buy-sell model” adopted by Huajin Technology is the main reason for the pressure on its gross profit margin. Under this model, the company needs to first purchase raw materials and components from customers, complete manufacturing, and then sell the finished products back to the same customers, with the sales price including the cost of the materials purchased earlier.

Therefore, there is an overlap between customers and suppliers. The Hong Kong Stock Exchange prospectus disclosed that in 2025, four of the company’s top five customers were also listed among its top five suppliers, collectively contributing 79.9 billion yuan in revenue, accounting for 47% of the company’s total revenue. Notably, while the company’s largest customer contributed 25.5 billion yuan in sales, the company’s purchases from it also reached 18.9 billion yuan.

Although the company stated that this model helps ensure material specifications and quality and assists customers in hedging against price fluctuations, the dual role of customers as suppliers also means that the company’s bargaining power is compressed from both sides, limiting the growth of gross profit margins.

Securities Star noted that Huajin Technology’s inventory and accounts receivable have risen in tandem with the expansion of its business scale, further affecting its cash flow performance.

As of the end of 2025, the company’s inventory and accounts receivable stood at 14.624 billion yuan and 34.18 billion yuan, respectively, with growth rates of 27.43% and 34.52%, both reaching new highs since the company went public. At the same time, due to an increase in cash paid for raw material purchases, the company’s cash flow from operating activities saw a significant decline to -222.3 million yuan, turning negative year-on-year.

Significant Increase in Short-term Loans, Pressure on Capital Chain

Less than three years after its IPO on the A-share market, Huajin Technology has initiated a listing in Hong Kong. Currently, the company has updated the financial data in its prospectus for the Hong Kong Stock Exchange.

It is reported that the company raised 5.85 billion yuan in its IPO in August 2023, exceeding the target by 230 million yuan. After adjusting the use of the raised funds, the company has planned eight fundraising projects. By the end of December 2025, only the Shanghai Emerging Technology R&D Center and the second phase of the Huajin Technology Wuxi R&D Center had announced completion, while the remaining six projects had not yet reached a usable state, with 60% of the excess funds still not deployed.

Securities Star noted that in seeking a dual listing in “A+H,” Huajin Technology is facing funding pressure.

In recent years, the company has accelerated its layout in fields such as robotics and integrated circuits, acquiring the robotics company Haocheng Intelligent and investing 2.4 billion yuan in a wafer foundry factory, Jinghe Integrated. At the same time, to promote its international development strategy, the company acquired Mexico’s PLAMEXSADECV last August.

As the company’s fixed asset investments in matching production capacity expansion and external equity investments have increased, the net cash flow from its investment activities amounted to -7.384 billion yuan, a year-on-year increase of 104%. With its own cash generation capability unable to keep pace with the expansion, Huajin Technology has increased external financing to fill the funding gap. In 2025, the net cash flow from financing activities reached 6.692 billion yuan, a year-on-year increase of 99.87%.

At the same time, the company’s debt ratio has shown a continuous upward trend. By the end of 2025, its debt ratio rose to 72.62%, an increase of 2.67 percentage points year-on-year. To support business scale expansion, the company has increased its bank financing, with short-term loans climbing to 14.421 billion yuan, a year-on-year increase of 81%. Coupled with 406 million yuan of non-current liabilities due within one year, the company’s short-term debt totals approximately 14.827 billion yuan.

It is noteworthy that the construction of the Shanghai Qinyi Huajin Global R&D Center is still underway. The 2025 annual report disclosed that the project budget is 1.566 billion yuan, and the current engineering progress is 84.31%, with approximately 246 million yuan in funding still required.

As of the end of the reporting period, the company’s cash and cash equivalents and trading financial assets totaled 14.878 billion yuan, which can cover short-term debts but cannot support the construction of the global R&D center. Against this backdrop, initiating an H-share listing to open new financing channels has become a key step for Huajin Technology to alleviate funding pressure.

Employee Stock Ownership Platform Cashes Out 3.5 Billion, Actual Controller Collects 1.3 Billion in Dividends

Securities Star noted that as Huajin Technology advances its Hong Kong listing, the company’s substantial dividends and the cashing out actions of its employee stock ownership platform have drawn external attention.

In September 2025, Huajin Technology announced the results of the share reductions by its shareholders. From August 28 to September 17, 2025, five shareholders, including Hainan Qinyuan, Hainan Chuangjian, Hainan Ruansheng, Hainan Huaxiao, and Hainan Mozhi, collectively reduced their holdings by 38.9559 million shares, accounting for 3.83% of the company’s total shares, cashing out a total of 3.578 billion yuan.

The managing partners of the aforementioned five shareholders are all executives of Huajin Technology, including Vice Chairman Cui Guopeng, Deputy General Manager Zou Zongxin, Director Chen Xiaorong, Director and Deputy General Manager Deng Zhiguo, and Director and Deputy General Manager Wu Zhenhai.

It is noteworthy that after the employee stock ownership platform cashed out, the company subsequently announced an equity incentive. In January of this year, in the restricted stock incentive plan for 2026, Deputy General Manager Zou Zongxin was listed as an incentive recipient, with a grant price of 47.95 yuan per share, significantly lower than the cash-out range of 83.02 yuan to 102.3 yuan per share.

Although the actual controller Qiu Wensheng did not cash out, he gained considerable returns through the company’s ongoing dividends. In 2025, the company proposed to distribute a cash dividend of 12 yuan (including tax) for every 10 shares to all shareholders, totaling approximately 1.216 billion yuan. In the previous years of 2023 and 2024, the company had already distributed a total of 1.781 billion yuan in dividends. Thus, the total dividends distributed by the company have reached approximately 3 billion yuan.

Considering the shareholding ratio, the actual controller Qiu Wensheng directly holds 4.8% of the shares and indirectly controls 31.63% and 5.58% of the shares through Shanghai Aoqin and Shanghai Haixian, totaling 42.01% of the company’s shares. This also means that nearly 1.3 billion yuan in dividends has flowed into Qiu Wensheng’s pocket. (This article was first published by Securities Star, Author | Li Ruohan)