ZG Group 2025 Annual Report: In-Depth Investor Analysis

Key Highlights and Strategic Developments

• Successful Listing After Prolonged Wait: ZG Group was officially listed on March 10, 2025, after a longer-than-expected approval period. Despite this delay, the company swiftly adapted to disruptions and is now advancing towards new strategic objectives.
• Industry-Leading Scale: ZG Group’s gross merchandise value (GMV) surpassed RMB 150 billion, confirming its leadership in the industrial products B2B market. The company’s scale-driven strategy is designed to capture service-related income and reduce marginal costs.
• Q4 2025 Recovery: After initial disruptions from the listing process, the company reported healthy growth in all business areas in the fourth quarter of 2025.
• Strategic Use of AI and Digitalization: ZG Group continues to invest in proprietary AI agents and digital platforms to support a full closed loop from data insight to transaction execution. Major service offerings include online steel transactions, logistics, warehousing, processing, big data analytics, and supply chain fintech services.

Financial and Operational Performance

• Non-IFRS Financial Measures: The company provides adjusted net loss and adjusted EBITDA (non-IFRS measures) to enable better year-on-year and peer comparisons. Adjustments include fair value changes of convertible preferred shares/warrants, share-based payments, and De-SPAC transaction expenses.
• Net Losses and Liabilities: ZG Group reported net losses and net current liabilities for the year. The company also experienced net operating cash outflow, highlighting liquidity risks and the need for careful financial management.
• Major Customers and Suppliers Concentration: The largest customer accounted for 21.3% of total revenue, and the top five customers together for 31.8%. The largest supplier accounted for 12.9% of purchases, and the top five suppliers for 32.1%. This concentration could impact results if relationships change.
• No Annual Dividend: The Board did not recommend an annual dividend for 2025, and the company has no formal dividend policy. Investors should not expect cash dividends in the foreseeable future.
• Charitable Donations: RMB 260,000 was donated during the period.
• Auditor’s Remuneration: Total auditor’s fees for 2025 were RMB 6.37 million.

Corporate Structure and Governance

• Weighted Voting Rights (WVR) Structure: The company uses a WVR structure where Class B shareholders hold 10 votes per share (except on reserved matters), enabling founders Wang Dong and Wang Changhui to retain substantial voting control despite not holding a majority of the company’s economic interests. This structure may limit the influence of other shareholders and poses governance risks.
• Strong Corporate Governance Framework: ZG Group maintains a robust governance framework, including an Audit Committee, Remuneration Committee, Nomination Committee, and Corporate Governance Committee. All audit and governance committee members are independent non-executive directors.
• Compliance and ESG: No material non-compliance or environmental, social, and governance (ESG) incidents were reported. The company emphasizes sustainable development, talent development, and supplier partnerships for carbon reduction.
• No Material Litigation: The company was not involved in any material litigation or arbitration during the reporting period.

Risks and Uncertainties

• Market Exposure: The company’s performance is highly sensitive to fluctuations in the supply and demand for steel products in China and internationally.
• Intense Competition: ZG Group faces stiff competition from current and new market entrants.
• Regulatory Risks: The company is exposed to regulatory changes, particularly around Internet finance, currency controls, and compliance with PRC and Hong Kong regulations. Stricter regulations could materially affect business operations.
• Technology and Data Security: The business relies heavily on innovative and evolving digital technologies. Any failure in technology or data protection could impact performance and reputation.
• Foreign Exchange Exposure: Operations in multiple currencies (RMB, USD, JPY, HKD) expose the company to FX risks.

Share Capital, Share Schemes, and Related Party Transactions

• Share Repurchases: 13,450,000 ordinary shares were repurchased on the Stock Exchange in 2025 for the new share award scheme.
• Share Option and Award Schemes: The 2023 Pre-Listing Share Option Scheme remains in force for options granted pre-listing. The 2025 Share Award Scheme was adopted but no restricted shares have yet been granted under it.
• No Significant Related Party Transactions: No related party transactions required disclosure as “connected transactions” under the Listing Rules.

Use of Proceeds from De-SPAC Transaction

• Net Proceeds: HK\$537.4 million was raised from the De-SPAC transaction. As of December 31, 2025, HK\$357.8 million had been utilized. Remaining proceeds are allocated for technology enhancement, cross-industry expansion, and working capital, with full utilization targeted by February 2030.

Fair Value and Financial Instrument Sensitivities

• Valuation Impact: The fair value of financial liabilities at FVTPL (including convertible preferred shares and warrants) is highly sensitive to changes in the equity value of the company and its affiliates. A 10% change in equity value would have altered after-tax loss by approximately RMB 1.96 million for FY 2025. This sensitivity is reduced after conversion of preferred shares to ordinary shares post-listing.
• No Transfers Between Fair Value Levels: There were no significant changes in fair value measurement hierarchy during the year.

Recent Developments and Outlook

• No Significant Post-Year-End Events: No material events occurred after December 31, 2025, that would affect the company or its financials.
• Outlook: ZG Group remains committed to expanding its digital platform, driving AI-led innovations, and enhancing service quality. Strategic investments in technology and cross-industry expansion are expected to position the company for sustained growth.

Potential Share Price Impact

• Shareholders should closely monitor:
  • Continued net losses and net liabilities, which may affect market sentiment and valuation.
  • Concentration of customers and suppliers, which introduces revenue and supply chain risks.
  • Risks related to the WVR structure, as founders retain high voting power despite not holding majority economic interest.
  • Absence of dividend payments in the foreseeable future, which may impact income-oriented investors.
  • Full utilization of De-SPAC proceeds and execution of technology and expansion strategies.

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