Zhejiang Shibao Company Limited Announces 2025 Annual Results: Strong Profit Growth, Dividend, and Strategic Expansion

Key Financial Highlights

• Net Profit: The Group reported a net profit of RMB201.15 million for 2025, up from RMB168.83 million in 2024, representing a significant year-on-year increase.
• Net Profit Attributable to Shareholders: RMB180.52 million, up from RMB149.12 million.
• Earnings Per Share: Basic and diluted earnings per share were RMB0.2194, with a weighted average return on net assets of 8.99%.
• Dividend: The Board has proposed a cash dividend of RMB0.60 per 10 shares (tax inclusive), totaling RMB49.36 million, pending approval at the AGM. No bonus shares or conversion of capital reserve into share capital will be made.
• Revenue and Cost Performance: Parent company revenue reached RMB544.04 million (up from RMB417.37 million), while cost of sales increased to RMB456.57 million (from RMB351.31 million).
• Strong R&D Commitment: Group R&D expenses surged to RMB215.70 million (from RMB159.71 million), reflecting major investment in new technologies and capacity expansion in intelligent and electrified steering systems.

Strategic and Operational Developments

• Successful Fund Raising: In 2024, Zhejiang Shibao raised RMB349.99 million through a private placement of 32.99 million A-shares at RMB10.61 per share, netting RMB346.50 million after fees. These funds are being deployed across three major projects:
  • Annual production of 600,000 automotive intelligent steering system technology transformation project (investment: RMB130 million, 71.22% invested).
  • Automotive intelligent steering system and key components development project (adjusted investment: RMB104.09 million, 36.33% invested; timeline extended to end-2026).
  • Intelligent network-connected automobile steer-by-wire technology R&D center project (RMB50 million, 67.78% invested).
• Industry Positioning and Market Trends: The company is aligning product structure to capitalize on the surging demand for new energy vehicles (NEVs) and intelligent steering systems. NEV production in China exceeded 10 million units in 2024, with domestic NEVs accounting for over 40% of production, up dramatically from under 2% in 2015. Zhejiang Shibao’s expansion and upgrades are aimed at capturing large-scale orders and securing its competitive position.

Balance Sheet and Capital Management

• Asset Structure: No significant changes in asset composition. Notable growth in financing receivables (up from 3.78% to 11.18% of total assets) and investment property value.
• Gearing Ratio: The company’s gearing ratio remains negative at -10.20% (2024: -7.25%), indicating net cash status (cash and cash equivalents exceed total borrowings).
• Borrowing: Total loans increased to RMB109.47 million (from RMB81.10 million), mainly due to more pledge and mortgage loans. Fixed-rate loans rose to RMB34.10 million.

Profit Drivers and Non-Recurring Items

• Government Grants and Tax Incentives: RMB24.45 million in government grants and an additional RMB24.67 million in VAT super deductions were recognized as income.
• Impairments and Provisions: Credit impairment losses rose sharply (up 88.01% to RMB25.63 million) due to increased bad debt provisions. Asset impairment losses decreased by 20.17% to RMB53.05 million, mainly from lower inventory impairment.
• Disposal Gains: The company recorded RMB6.36 million in gains from the disposal of property, plant, and equipment.
• Investment Gains: Investment gains declined by 7.29% to RMB2.81 million, mainly due to losses on discounted financing receivables.

Risks and Shareholder-Sensitive Matters

• Industry and Policy Risks: The company’s fortunes are closely tied to the cyclicality of the automotive industry and national policies. Any downturn or policy shift could impact earnings.
• Product Quality Risk: As the company produces critical safety components (steering systems), quality failures could have severe financial and reputational consequences.
• Overseas Expansion Risks: While the company is achieving export growth, increased exposure to international markets brings risks from geopolitical, policy, and currency changes.
• Management and Scale Risks: Rapid expansion from fund-raising projects may strain management capacity and operational efficiency if not systematically addressed.
• Accounts Receivable and Inventory Risks: Both accounts receivable (RMB1.16 billion, 30.29% of assets) and inventories (RMB506 million, 13.19% of assets) remain high, posing future cash flow and impairment risks if customer financial health or market conditions deteriorate.
• No Material Acquisitions or Disposals: There were no significant acquisitions or disposals of subsidiaries or associates in 2025.
• No Interim Dividend: No interim dividends were paid in 2025; the cash dividend is annual, subject to AGM approval.
• Shareholder Structure: Shibao Holding remains the controlling shareholder with 44.67% of A shares (32.9% of total share capital).
• Compliance: The Group remains in full compliance with PRC laws and Hong Kong and Shenzhen Stock Exchange requirements.

Corporate Governance and Shareholder Rights

• Dividend Policy: The company prioritizes cash dividends, with a minimum of 20% of distributable profits to be paid annually, provided profits are available and there are no audit reservations or going concern uncertainties.
• Corporate Governance: The company is compliant with most Hong Kong CG Code provisions, except for directors’ liability insurance, which the Board reviews periodically.
• Shareholder Engagement: Shareholders holding >10% can propose EGMs, and those with >3% can table resolutions. The company maintains robust communication policies and public float above listing requirements.

Outlook and Strategic Intent

• Capacity and Technology Upgrades: Major investments are underway to increase capacity and move into higher-end, intelligent steering systems for NEVs, in line with national EV trends.
• R&D Focus: Continuing strong investment in R&D, especially in steer-by-wire and intelligent networked vehicle technologies.

Potential Share Price Sensitivities

• The strong profit growth, robust dividend, and large-scale capacity expansion are all potentially positive for share value.
• However, investors should closely monitor rising credit and inventory risks, along with industry cyclicality and management capacity as the business scales up.
• Any significant changes in NEV policy, macroeconomic conditions, or product quality incidents could materially affect financial results and the share price.

Disclaimer

The above article is prepared for informational purposes only and does not constitute investment advice. Investors should carefully review the full annual report and consider their own financial circumstances and risk tolerances before making any investment decisions. Past performance is not indicative of future results. Zhejiang Shibao Company Limited’s actual results may differ materially from those discussed due to various risk factors and uncertainties.

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