Eagle Eye Warning: Huarong Chemical's accounts receivable growth rate exceeds revenue growth rate

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

On March 20, Huarong Chemical released its 2025 annual report, and the audit opinion was a standard unqualified audit opinion.

The report shows that the company’s operating revenue for 2025 totaled RMB 1.687 billion, up 39.8% year over year; net profit attributable to shareholders was RMB 71.7895 million, down 28.57% year over year; non-recurring profit and loss attributable to shareholders was RMB 44.4992 million, down 16.89% year over year; basic earnings per share were RMB 0.15 per share.

Since the company was listed in March 2022, it has issued cash dividends 6 times, with total implemented cash dividends of RMB 259 million. The announcement shows that the company plans to pay all shareholders a cash dividend of RMB 1 per 10 shares (including tax).

The listed company financial report eagle-eye warning system conducts an intelligent quantitative analysis of Huarong Chemical’s 2025 annual report across four major dimensions: performance quality, profitability, capital pressure and security, and operational efficiency.

I. Performance Quality

During the reporting period, the company’s operating revenue was RMB 1.687 billion, up 39.8%; net profit was RMB 71.7895 million, down 28.57%; and net cash flow from operating activities was RMB 23.0905 million, up 216.14%.

From an overall performance perspective, attention should be focused on:

• The growth rate of net profit attributable to shareholders continues to decline. In the past three annual reports, the year-over-year changes in net profit attributable to shareholders were 13.53%, -27.53%, and -28.57%, respectively, with the downward trend continuing.

• Operating revenue continues to grow while net profit continues to fall. In the past three annual reports, operating revenue year-over-year changes were -6.67%, 13.89%, and 39.8%, showing sustained growth; net profit year-over-year changes were 13.53%, -27.53%, and -28.57%, showing sustained decline; the trends of operating revenue and net profit move in opposite directions.

From the ratio of revenue cost and period expenses, attention should be focused on:

• There is a significant difference between changes in selling expenses and changes in operating revenue. During the reporting period, operating revenue year-over-year changed by 39.8%, while selling expenses year-over-year changed by -3.46%, showing a large discrepancy between selling expenses and operating revenue changes.

Based on the quality of operating assets, attention should be focused on:

• The growth rate of accounts receivable is higher than the growth rate of operating revenue. During the reporting period, accounts receivable increased by 124.07% compared with the beginning of the period, while operating revenue grew by 39.8% year over year; the growth rate of accounts receivable is higher than that of operating revenue.

Based on the quality of cash flows, attention should be focused on:

• The ratio of net cash flow from operating activities to net profit is below 1. During the reporting period, the ratio of net cash flow from operating activities to net profit was 0.322, below 1, indicating weak earnings quality.

II. Profitability

During the reporting period, the company’s gross margin was 9.21%, down 41.82% year over year; net margin was 4.26%, down 48.9% year over year; and return on net assets (weighted) was 4.17%, down 28.6% year over year.

From the company’s operating side and the returns, attention should be focused on:

• Selling gross margin continues to decline. In the past three annual reports, selling gross margin was 18.93%, 15.83%, and 9.21%, respectively, with the downward trend continuing.

• Selling net margin continues to decline. In the past three annual reports, selling net margin was 13.09%, 8.33%, and 4.26%, respectively, with the downward trend continuing.

From the company’s asset side and the returns, attention should be focused on:

• The average return on net assets over the last three years is below 7%. During the reporting period, the weighted average return on net assets was 4.17%; the weighted average return on net assets over the most recent three accounting years averaged below 7%.

• Return on net assets continues to decline. In the past three annual reports, the weighted average return on net assets was 8.19%, 5.84%, and 4.17%, respectively, with the downward trend continuing.

• Return on invested capital is below 7%. During the reporting period, the company’s return on invested capital was 3.67%, and the average value across the three reporting periods was below 7%.

From non-recurring items, attention should be focused on:

• Non-recurring income has a high share. During the reporting period, the ratio of non-recurring income to net profit was 44.3%. (Note: Non-recurring income = net investment gains + net fair value change gains + non-operating income + losses from disposal of non-current assets).

III. Capital Pressure and Security

During the reporting period, the company’s asset-liability ratio was 29.59%, up 9.58% year over year; the current ratio was 2.88, and the quick ratio was 2.76; total debt was RMB 476 million, of which short-term debt was RMB 476 million; short-term debt as a proportion of total debt was 100%.

From the perspective of capital management, attention should be focused on:

• The ratio of interest income to cash and cash equivalents is below 1.5%. During the reporting period, cash and cash equivalents were RMB 260 million, short-term debt was RMB 290 million, and the company’s average ratio of interest income to cash and cash equivalents was 0.734%, below 1.5%.

• Prepayments fluctuate significantly. During the reporting period, prepayments were RMB 170 million, with a change rate of 86.37% compared with the beginning of the period.

• The ratio of prepayments to current assets continues to grow. In the past three annual reports, the ratio of prepayments to current assets was 1.86%, 4.52%, and 8.18%, respectively, showing continued growth.

• The growth rate of prepayments is higher than the growth rate of operating costs. During the reporting period, prepayments increased by 86.37% compared with the beginning of the period, operating costs increased by 50.8% year over year, and the growth rate of prepayments is higher than that of operating costs.

From the perspective of capital coordination, attention should be focused on:

• Capital expenditures continue to exceed net cash inflows from operating activities. In the past three annual reports, the cash paid for the purchase and construction of fixed assets, intangible assets, and other long-term assets was RMB 50 million, RMB 40 million, and RMB 30 million, respectively; the company’s net cash flow from operating activities was RMB 40 million, RMB -20 million, and RMB 20 million, respectively.

IV. Operational Efficiency

During the reporting period, the company’s accounts receivable turnover was 13.37, down 16.61% year over year; inventory turnover was 18.91, up 8.08% year over year; and total asset turnover was 0.7, up 41.07% year over year.

From operating assets, attention should be focused on:

• The accounts receivable turnover rate continues to decline. In the past three annual reports, accounts receivable turnover was 18.37, 16.04, and 13.37, respectively, indicating that the company’s accounts receivable collection capability is weakening.

• The proportion of accounts receivable to total asset value continues to increase. In the past three annual reports, the ratio of accounts receivable to total assets was 2.91%, 3.28%, and 7.11%, respectively, showing continuous growth.

• The ratio of inventory to total assets continues to rise. In the past three annual reports, the ratio of inventory to total assets was 1.76%, 3.05%, and 3.66%, respectively, showing continued growth.

Click Huarong Chemical’s eagle-eye warning to view the latest warning details and a visualized preview of the financial report.

Sina Finance Listed Company Financial Report Eagle-Eye Warning Overview: The listed company financial report eagle-eye warning is a specialized, intelligent analytical system for listed companies’ financial reports. By pooling a large number of authoritative financial experts from accounting firms and listed companies, the eagle-eye warning tracks and interprets the latest financial reports of listed companies across multiple dimensions such as corporate earnings growth, earnings quality, capital pressure and security, and operational efficiency, and highlights potential financial risk points in a visual format with text and charts. It provides professional, efficient, and convenient technical solutions for identifying and issuing early warnings on financial risks of listed companies for financial institutions, listed companies, regulatory authorities, and more.

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Responsible Editor: Xiao Lang Express