1. Financial Performance and Highlights

• Revenue: The Group recorded revenue of RMB 2,247.2 million in FY2025, a decline from RMB 2,519.9 million in FY2024, indicating a contraction in sales, particularly from regions outside of PRC, which saw a drop to RMB 83.1 million (3.7% of total revenue) from RMB 166.9 million (6.6%) in FY2024.
• Profitability: Profit before taxation fell sharply to RMB 51.7 million (FY2024: RMB 88.7 million). Notably, the Group reported a loss attributable to equity shareholders of RMB 42.4 million, compared to a profit of RMB 42.2 million in the prior year. This is a significant negative swing and will likely impact investor sentiment.
• Gross Profit Margin: Despite the revenue decline, gross profit margin increased to 20.6% (FY2024: 18.5%), suggesting improved cost management or price adjustments.
• Balance Sheet: Total assets increased to RMB 4,927.0 million, while total liabilities rose to RMB 2,619.0 million. The debt-to-assets ratio climbed to 53% (FY2024: 50%), reflecting increased leverage and financial risk.
• Earnings Per Share: The Group reported a basic EPS of RMB -0.097 (FY2024: RMB 0.097), indicating a net loss per share.
• Net Asset Value Per Share: Dropped to RMB 3.26 per share from RMB 3.35, reflecting erosion in shareholder value.
• No Dividend: The Board has not recommended a final dividend for FY2025, similar to FY2024. This is a critical point for income-focused investors.

2. Strategic Developments and Outlook

• Overseas Localization 2.0: The Group is accelerating its “Overseas Localization 2.0” strategy, establishing integrated bases for R&D, production, sales, and services in key regions to mitigate geopolitical risks and stay closer to end markets.
• Organizational Agility: A major restructuring initiative is underway to build agile, platform-based, project-driven teams. The Group is implementing the “Future Leadership Talent Program” to recruit and cultivate global talent.
• ESG Commitment: The Group is embedding Environmental, Social, and Governance (ESG) principles into business operations, with a focus on enabling low-carbon transformation for customers and society.
• 2026 as a Critical Year: Management has signalled 2026 as a pivotal year for testing strategic resolve and execution efficiency, with plans to leverage technological innovation and risk management to create long-term value.

3. Key Transactions and Corporate Actions

• Major Transaction: The Group has entered into an equity transfer agreement to sell a 39% equity interest in Jiangsu Hengxin to Hengtong Group. The transaction constitutes a major disposal under the Hong Kong Listing Rules, approved at the EGM in January 2026. This disposal may materially affect the Group’s future earnings and structure.
• Placing of New Shares: In 2024, the Company issued 77.6 million new shares, raising net proceeds of HK\$72.6 million. These funds were fully utilized in 2025 for research and development in AI modules, expansion of integrated circuits and new energy businesses, and general working capital.
• Share Award Scheme: Adopted in October 2024, the scheme aims to incentivize employees and service providers. No shares have been awarded under the scheme as of end-2025.
• Connected Transactions: The Company has continued to enter into connected and continuing connected transactions, all reviewed and confirmed as fair and reasonable by independent non-executive directors and auditors. Notably, transactions with substantial shareholders (Kingever, owned by Mr. Cui Wei, holding 23.38%) and related parties are closely scrutinized.
• Changes in Board Composition: Several new appointments and resignations occurred in 2025, including notable changes in independent director positions. This may impact governance and strategic direction.

4. Risks and Uncertainties

• Business and Industry Risks: The integrated circuits industry faces cyclical downturns, intense competition, and risks of falling product prices. The new energy segment faces reputational and market competition risks as more solar thermal energy projects come online.
• Financial Risks: The Group’s debt-to-assets ratio is at a multi-year high, raising concerns about financial leverage and interest cover (down to 1.9x from 2.7x), indicating reduced ability to cover interest expenses from earnings.
• Foreign Currency Risk: Increased international operations expose the Group to significant exchange rate volatility, especially as RMB internationalization impacts settlement policies.
• Technology and Commodity Price Risks: Rapid technology evolution and price volatility in chips and energy markets could impact margins and competitiveness.

5. Corporate Governance and Shareholder Rights

• Governance Practices: The Company remains committed to high standards of corporate governance, with full compliance with the Hong Kong Code. Board effectiveness, risk management, and stakeholder engagement have been reviewed and deemed robust.
• Dividend Policy: The Board reiterates its policy to balance shareholder rewards and prudent capital management, but has not declared any dividends in 2024 or 2025.
• Public Float: The Company maintains more than 25% public float as required by the Listing Rules.
• Shareholder Communication: Multiple channels are in place for shareholder engagement, including annual reports, AGMs, and disclosures on corporate websites.

6. Auditor’s Confirmation

• Audit Opinion: The external auditor, Rongcheng (Hong Kong) CPA Limited, issued an unqualified opinion with no material misstatements or weaknesses in internal controls noted.
• Key Audit Matters: Impairment assessments, fair value measures, and compliance with IFRS standards were highlighted, but no issues were found to materially impact the financial statements.

7. Price-Sensitive Highlights for Investors

• Net Loss and No Dividend: The swing to a net loss and the absence of dividends are likely to be viewed negatively by the market.
• Major Disposal: The sale of a large equity interest in Jiangsu Hengxin may have a significant impact on future earnings, cash flow, and business focus.
• Increased Financial Leverage: The rising debt-to-assets ratio and declining interest coverage signal increased financial risk.
• Strategic Shift: The “Overseas Localization 2.0” and restructuring initiatives signal a strategic pivot, which, depending on execution, could either create value or add risk.
• Share Award Scheme: While currently not dilutive, future awards may impact share capital and earnings per share.
• Board Changes: Multiple director changes could affect governance stability.

Conclusion

The 2025 annual report of Hengxin Technology Ltd. presents a mixed picture with significant challenges, including a swing to losses, increased debt, and strategic shifts. Major transactions, particularly the disposal of a key equity interest, as well as aggressive expansion and restructuring plans, are pivotal developments. Investors should closely monitor the Group’s execution of its new strategies, financial health, and management changes, as these factors may materially affect future share value.

Disclaimer: This article is based on publicly disclosed information in the Hengxin Technology Ltd. annual report for FY2025 and is intended for informational purposes only. It does not constitute investment advice. Investors are advised to conduct their own due diligence and consult professional advisors before making investment decisions.

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