Executive Summary

• Revenue for FY2025 fell sharply to RMB882 million, representing an 11.9% year-on-year decrease.
• Net profit plummeted to RMB35.8 million, a dramatic 69.86% decrease from 2024.
• EU anti-dumping measures critically impacted the company’s performance.
• Strategic shift: Establishment of overseas factories to counter anti-dumping risks and diversify production base.
• Special dividend of HK\$0.05 per share declared and paid in December 2025.
• Cash and cash in bank surged 66.2% to RMB591 million, mainly due to increased bank borrowings.
• Major customer concentration: Top five customers account for 65.4% of total sales.
• Future risks include a post-balance sheet EU anti-dumping duty of 56.7% imposed in January 2026.
• Organizational transformation underway, focusing on youth and professional leadership.

Financial Performance & Price-Sensitive Highlights

Revenue and Profits

• Revenue fell to RMB882 million, reflecting an 11.9% drop—company attributes this to EU anti-dumping action and macroeconomic pressures.
• Net profit was RMB35.8 million, down nearly 70%, signaling severe margin compression.
• This decline is likely to have a negative impact on share value, especially in light of further EU regulatory risks.

Cash Position and Borrowings

• Cash and cash equivalents increased by RMB235.5 million to RMB591 million, primarily due to new bank borrowings.
• Bank borrowings rose significantly to RMB474.5 million from RMB270.9 million.
• Gearing ratio remains healthy; net cash position maintained.

Dividends

• No final dividend recommended for 2025 due to profit decline.
• Special dividend of HK\$0.05 per share was paid in December 2025, offering some shareholder returns despite weak profits.

Customer and Supplier Concentration

• Sales to top five customers constitute a substantial 65.4% of revenue, with the largest customer at 26.7%—potential risk if any major customer reduces orders.
• Top five suppliers account for 30% of purchases, largest at 12.2%—exposure to supplier risks.

Strategic and Operational Developments

• Rapid response to EU anti-dumping: Establishment of overseas factories (notably in Vietnam and Wuhu City, Anhui Province) to mitigate regulatory risk and stabilize operations.
• Increased administrative expenses (up 19% YoY) due to expansion and newly established production bases.
• Transformation of organizational structure: Focus on youth and professionalism, with the aim to inject new vitality and drive future growth.
• Enhanced R&D investment and scenario-based marketing to capture health and emotional value in aromatic products.
• Vigorous expansion planned in domestic and North American markets for diversification.

Taxation and Regulatory Risks

• Tax rates across jurisdictions: Hong Kong (8.25% up to HKD2M, 16.5% above), Vietnam (20%), PRC (25%), Cayman Islands and BVI (tax-exempt).
• Post-report event: On 26 January 2026, European Commission imposed a 56.7% anti-dumping duty on PRC-origin candles, including products from Kwung’s Aroma.
• This is highly price-sensitive and may materially impact future profitability and share value.

Other Notable Items

• Charitable contributions of RMB500,000 made in 2025.
• Directors and major shareholders: Jin Jianxin (Chairman and substantial shareholder) holds 66.75% share capital.
• Share option scheme: 40 million options available for grant, representing 9.9% of issued shares.
• No significant changes to constitutional documents during 2025.
• Risk management and internal controls reviewed and confirmed by the Board.
• Cash flow hedges and derivative instruments are not used for hedge accounting.

Events After Balance Sheet Date

• On 5 January 2026, the Group subscribed RMB50 million in an investment fund, aiming to boost income from idle funds.
• On 4 March 2026, reservation deposits of THB44,058,300 paid for land in Thailand—potential expansion or diversification.

Potential Share Price Movers

• Severe profit erosion and revenue decline—negative for share price.
• EU anti-dumping duty of 56.7% for PRC candles—significant regulatory risk, likely negative for share price.
• Large increase in borrowings—may raise concerns about leverage, despite improved cash position.
• High customer concentration—potential volatility if major customers change their purchasing behavior.
• Dividend payout (special dividend) may offer short-term support, but no final dividend could disappoint investors.
• Expansion into Thailand and investment in funds could be positive in the long term, but near-term regulatory threats overshadow these moves.