Knowledge Atlas Technology Joint Stock Company Limited: 2025 Annual Report – Investor Highlights

Major Financial Developments

• Net Losses Deepen: The Group reported a net loss of RMB4,718.2 million for 2025, a substantial increase from RMB2,958.0 million in 2024. This was primarily due to significant increases in research and development (R&D) investment. Adjusted net loss (non-IFRS measure) for 2025 stood at RMB3,181.97 million, excluding share-based compensation, changes in financial instrument carrying amounts, and listing expenses.
• Shareholders’ Equity Declines Further: Shareholders’ equity decreased from RMB-3,955.1 million at the end of 2024 to RMB-8,111.0 million at the end of 2025, reflecting continued expansion of net losses and heavy R&D spending.
• Liquidity Position: Cash and cash equivalents were RMB2,259.1 million as of 31 December 2025, a slight decrease (RMB10.1 million) from the previous year, mainly due to operational consumption.
• Debt Levels: Total borrowings increased sharply to RMB689.5 million as of 31 December 2025, up by RMB552.2 million, indicating increased leverage.
• Impairment Losses and Finance Costs: Impairment loss on financial assets rose by 27.1% to RMB21.6 million, while finance costs nearly doubled to RMB74.3 million, driven by a shift from exchange gains in 2024 to exchange losses in 2025.
• Changes in Fair Value and Investment Portfolio: Fair value gains from financial assets measured at FVPL fell sharply from RMB66.3 million in 2024 to RMB25.3 million in 2025, due to portfolio adjustments. The carrying amount of financial instruments issued to investors rose from RMB468.9 million to RMB937.4 million, mainly from new equity financing with redemption rights.
• IPO and Share Listing: In January 2026, Knowledge Atlas successfully listed its H Shares on the Hong Kong Stock Exchange, raising net proceeds of approximately HK\$4,896 million (including the full exercise of the over-allotment option). This significantly increased the company’s net assets and converted major financial instruments issued to investors into equity, resolving a substantial balance sheet liability.

Operational and Strategic Highlights

• Business Segments: The company operates in two major segments: On-premise deployment (customized large model services at client infrastructure) and Cloud-based deployment (cloud-based large model services). Segment revenue for 2025 was RMB724.3 million, up significantly from RMB312.4 million in 2024. Gross profit increased to RMB296.6 million (from RMB175.9 million).
• Customer and Supplier Concentration: The five largest customers accounted for 26.51% of revenue; the largest single customer represented 7.90%. The five largest suppliers accounted for 52.34% of purchases; the largest supplier was 20.92%.
• Employee Incentive Schemes: The company has implemented robust incentive schemes including employee shareholding platforms and equity awards, aimed at retaining key technical and management talent. Share-based compensation expenses surged to RMB558.3 million in 2025.
• R&D Investment: The company’s R&D spending continues to grow, underpinning its strategy as a leading LLM and AI company. The continuous investment is a double-edged sword: it drives innovation but exacerbates short-term losses.
• Risk Management: The Board confirms the effectiveness of the company’s risk management and internal control systems during the reporting period and commits to continuous improvement.
• Corporate Governance: Knowledge Atlas has established a comprehensive governance structure, including Audit, Remuneration, Nomination, and ESG Committees. The company adheres to Hong Kong Listing Rules and the Corporate Governance Code, with a focus on transparency, Board diversity, and shareholder engagement.
• ESG Initiatives: The company has created an ESG and Strategy Committee, chaired by Dr. Li Juanzi. It emphasizes data security, privacy protection, and employee welfare, and actively participates in social responsibility and public welfare activities.

Important Price-Sensitive Information for Shareholders

• IPO and Conversion of Financial Instruments: The successful IPO in Hong Kong and conversion of RMB10.07 billion in financial instruments issued to investors into equity (upon listing) resolved a major balance sheet risk. The termination of special rights for pre-IPO investors (including redemption and pre-emptive rights) ensures no further obligation for the company to redeem shares, which could be price sensitive.
• Ongoing Losses and R&D Spending: The company’s deepening losses and aggressive R&D investment are potentially price sensitive. Investors should monitor whether these losses continue to widen or if R&D investments begin to pay off in future commercial success.
• Debt and Liquidity Risks: The sharp increase in borrowings and negative equity position as of year-end, despite the IPO proceeds, are key risk factors. Management expects sufficient liquidity for the next 12 months, but continued losses and high leverage could impact share values if not managed.
• Exchange Rate Exposure: The company faces foreign exchange risks, primarily RMB/USD fluctuations, and currently does not hedge against these risks. Any adverse currency movements could impact financial results.
• No Dividend Declared: No dividends were declared or paid for 2025, as the company prioritizes reinvestment and liquidity. Future dividend policies will depend on operational results and capital needs.
• Tax Incentives: The company enjoys a preferential 15% income tax rate for high and new technology enterprise status, subject to review every three years. Changes in this status could affect future profitability.
• Risk Factors: The Board highlights risks including the fast-evolving AI industry, regulatory uncertainties in China, IP protection challenges, commercialization hurdles, and market competition. Any negative developments in these areas could materially affect the share price.
• Shareholder Rights and Governance: Shareholders are empowered to propose resolutions and convene extraordinary meetings. The company has committed to maintaining robust information disclosure and investor communication.

Other Notable Points

• No Material Legal Proceedings: No material legal, arbitration, or administrative proceedings were pending or ongoing as of the reporting period.
• No Dividend or Convertible Bonds Issued: The company did not issue any convertible bonds or treasury shares, nor did it purchase or redeem any listed securities during the period.
• Audit and Compliance: The company’s financial statements were audited by KPMG, with total auditor remuneration of RMB2.63 million for 2025.
• Future Accounting Changes: The company expects minimal impact from new accounting standards (IFRS 18, IFRS 19, etc.) set to take effect in 2026-2027.

Conclusion: Share Price Implications

The 2025 Annual Report for Knowledge Atlas Technology contains several potentially price-sensitive factors:

• Resolution of major balance sheet liabilities and risks through IPO and conversion of investor instruments into equity.
• Deepening net losses and continued heavy R&D investment, raising questions about the path to profitability.
• Significant increase in borrowings and negative equity, offset by IPO proceeds.
• Termination of pre-IPO investor rights, enhancing governance stability post-listing.
• Ongoing risks related to industry disruption, regulation, and commercialization.
• No dividend payout, indicating a focus on growth and liquidity over short-term shareholder returns.

Investors should closely monitor the company’s ability to translate R&D spending into commercial success, manage liquidity and debt, and navigate regulatory and competitive challenges. These factors are critical to future share price performance.

Disclaimer: This article is based on publicly available information from the 2025 Annual Report of Knowledge Atlas Technology Joint Stock Company Limited. It is provided for informational purposes only and does not constitute financial advice or a recommendation to buy or sell securities. Investors should conduct their own due diligence and consult with professional advisors before making investment decisions.

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