UGREEN Technology's performance is improving, but gross profit margin is declining: operating cash flow has plummeted, and shareholders have been continuously cashing out nearly 1 billion.

Ask AI · Is the fact that shareholders cashed out nearly 1 billion reflecting a lack of long-term confidence in the company?

Harbor Business Observation by Shi Zifu Wang Lu

At the end of March, well-known consumer electronics company UGREEN Technology (301606.SZ) disclosed its 2025 annual report. Although the company’s performance shows strong growth, high inventory and a decline in gross margin have also become some concerns along its development path.

Meanwhile, shareholders’ continuous selling down clearly is not conducive to restoring investors’ confidence, especially as the company is currently pushing to list in Hong Kong.

1

Good performance growth, but gross margin keeps falling

In 2025 (the reporting period), UGREEN Technology achieved total operating revenue of RMB 9.49B, up 53.83% year over year. It recorded net profit attributable to shareholders of listed companies of RMB 705 million, up 52.42% year over year. The company plans to distribute cash dividends of RMB 249 million for 2025, accounting for 35% of net profit attributable to shareholders.

Looking in detail, during the reporting period, the company’s charging creative products achieved sales revenue of RMB 4.36B, up 47.28% year over year, accounting for 45.90% of total revenue; intelligent office products achieved sales revenue of RMB 2.43B, up 38.41% year over year, accounting for 25.62%; intelligent audio-visual products achieved sales revenue of RMB 1.47B, up 38.83% year over year, accounting for 15.51%; and intelligent storage products achieved sales revenue of RMB 1.23B, up 213.18% year over year, accounting for 12.92%.

From the perspective of revenue mix, these four “carriages” are overall fairly balanced except that charging products account for nearly half. A research report from Soochow Securities noted that in 2025, the company’s domestic market achieved revenue of RMB 3.66B, up 39.71%, with a gross margin of 27.55%, down 0.75 percentage points year over year; the overseas market achieved revenue of RMB 5.82B, up 64.27%, with a gross margin of 43.00%, down 1.11 percentage points year over year. The company has successfully entered core retail channels such as the U.S. Walmart, Costco, and BestBuy, Europe’s Media Markt, and Japan’s BicCamera. The company has also established localized subsidiaries in major markets including Hong Kong, the U.S., Germany, and Japan to strengthen local services overseas, which is expected to further unleash overseas growth potential.

Indeed, while both revenue and profits are growing strongly, UGREEN Technology’s gross margin continues to decline—especially since 2019, when the decline has been even larger.

From 2019 to 2025, the company’s gross margin was 49.67%, 38.01%, 37.15%, 37.38%, 37.59%, 37.38%, and 37.01%, meaning that over 7 years the company’s gross margin fell by 12.66 percentage points.

It is reported that the main reasons for the gross margin decline in 2025 include a significant increase in the revenue share of low-gross-margin intelligent storage products and the impact of rising raw material costs, among other factors.

Some industry analysts believe that the consumer electronics industry has long been heavily affected by raw materials, while also facing clear shocks from market competition. UGREEN Technology has a relatively high proportion of low-margin products. Although this may help boost sales, the gross margin will still face considerable pressure. If it is unable to improve gross margin, that also implies there is a noticeable shortcoming in the company’s core competitiveness.

In its annual report, UGREEN Technology said that in 2025, the macroeconomic environment of the consumer electronics industry showed a pattern of “improvement and upgrading at home, and intensifying challenges abroad.” On the international front, geopolitical conflicts continued to intensify, with frequent unilateral protectionist trade policies. Weak global economic recovery put pressure on terminal demand growth, and trade barriers increased constraints on industry exports.

By the end of 2025, the company’s domestic distribution network had covered all provinces, autonomous regions, and municipalities directly under the central government. Its overseas distribution network covered about 73 countries and regions. By leveraging distributors’ familiarity with local markets, it achieves deeper market penetration and expands customer coverage.

2

Operating cash flow drops sharply, and shareholders keep cashing out nearly 1 billion

Of note is that during the reporting period, net cash flow from operating activities was -RMB 35.3272 million, down 105.66% year over year, mainly because cash paid for purchases of goods and other daily operating activities increased.

At the same time, the company’s inventory was RMB 2B, accounting for 40.59% of total assets; numerically, it has also reached a new high in many years.

From 2021 to 2024, the company’s inventory was RMB 726.2 million, RMB 739.4 million, RMB 995.8 million, and RMB 1.24B, respectively. UGREEN Technology stated that the increase in inventory in 2025 was mainly due to increased inventory demand resulting from the expansion of the company’s business scale.

As for accounts receivable and accounts payable, the company has also kept setting new highs. From 2021 to 2025, accounts receivable were RMB 30.74 million, RMB 62.41 million, RMB 137.3 million, RMB 98.38 million, and RMB 345.8 million, respectively, while accounts payable were RMB 245.2 million, RMB 298.4 million, RMB 355.8 million, RMB 554.1 million, and RMB 805.6 million, respectively.

A research report from China Galaxy Securities stated that, due to the expected increase in consumer electronics accessory costs, the company increased procurement and inventory, which affected operating cash flow. At the end of 2025, the company’s book balances for raw materials/inventory goods were RMB 180 million and RMB 1.31 billion, respectively, up 124.0% and 58.7% compared with the beginning of the period.

The aforementioned analysts believe that inventory, accounts receivable, and accounts payable being excessively high may affect the company’s cash flow and may lead to increased inventory write-downs and bad debt situations.

Regarding UGREEN Technology’s development outlook, a research report from Orient Securities said that, considering the expectation that the company’s charging and storage categories will likely maintain high growth and that its profitability will improve, the forecast for the company’s net profit attributable to the parent for 2026–2028 is RMB 1.001/1.319/1.66B (previously predicted for 2026–2027 were RMB 0.982/1.32B; this time it newly added an 2028 forecast). Using comparable companies’ adjusted average 34x PE for 2026 as the 2026 valuation, the corresponding target price is about RMB 81.94, maintaining a “Buy” rating. Risk reminders: risk of international trade environment and friction; risk of intensifying industry competition; risk that NAS product development will not meet expectations; risk of storage price increases.

A report from GTJA Securities expects: The company continues to invest in R&D and global channel development. In the short term, fee rates may remain high, but in the long run, product structure optimization, improved brand strength, and scale effects are expected to continuously improve the quality of the company’s earnings. Investment recommendation: In the short term, the company’s growth in core categories is steady, and strong momentum is provided by a significant increase in the NAS business. In the long term, expansion into new categories such as AINAS and smart living opens up the growth ceiling, and further deepening of the global channel layout is expected to continuously contribute incremental growth. It is expected that the company’s net profit attributable to the parent for 2026–2028 will be RMB 1.00/1.30/1.79 billion, maintaining a “Buy” rating.

Even if future expectations look good, at the reality level, the relevant shareholders of UGREEN Technology are taking “a crazy exit first.”

On March 23, UGREEN Technology issued an announcement stating that major shareholder Zhuhai Xiheng Investment Partnership (Limited Partnership) (hereinafter referred to as “Zhuhai Xiheng”) reduced its holdings of the company’s stock by a total of 8.0343 million shares between December 24, 2025 and March 20, 2026 through centralized bidding and block trades. Based on the average selling price in the announcement, Zhuhai Xiheng cashed out RMB 509 million. Behind Zhuhai Xiheng is Gaoling Capital, the largest external shareholder of UGREEN Technology.

On January 28, UGREEN Technology announced that major shareholder Shenzhen UGREEN Management Consulting Partnership (Limited Partnership) (hereinafter referred to as “UGREEN Management”) and its acting-in-concert party Shenzhen Heshun No. 4 Management Consulting Partnership (Limited Partnership) (hereinafter referred to as “Heshun No. 4”) reduced their combined holdings of the company’s stock by a total of 6.2237 million shares between November 6, 2025 and January 27, 2026. Based on the average selling price in the announcement, UGREEN Management and Heshun No. 4 cashed out a combined RMB 472 million. (Produced by Harbor Finance)