Executive Summary

First Tractor Company Limited (“the Company”) has released its audited annual report for the financial year ended 31 December 2025. The report provides a comprehensive overview of the Company’s financial performance, corporate governance, dividend policy, risk factors, and strategic developments, all of which are crucial for current and prospective investors to assess the Company’s value and potential share price movement.

Key Financial Highlights

• Operating Revenue: RMB 10.82 billion in 2025, down 9.09% from RMB 11.90 billion in 2024.
• Net Profit Attributable to Shareholders: RMB 811.95 million, down 11.94% from RMB 922.02 million in 2024.
• Net Profit after Non-Recurring Items: RMB 707.67 million, a decrease of 18.37% year-on-year.
• Net Cash Flows from Operating Activities: RMB 915.72 million, down 24.70% from 2024.
• Total Assets: RMB 15.10 billion, up 2.76% from the previous year.
• Net Assets Attributable to Shareholders: RMB 7.66 billion, up 5.58% year-on-year.
• Basic Earnings per Share: RMB 0.7226, down from RMB 0.8206 in 2024.
• Weighted Average Return on Net Assets: 10.86% (down from 13.22% in 2024).

These figures reflect a challenging year for the Company, with declining revenue and profits, but continued growth in net assets and total assets.

Dividend Policy and Shareholder Returns

• Proposed Cash Dividend: RMB 1.9746 per 10 shares (inclusive of tax) for 2025, totaling approximately RMB 298.78 million.
• Dividend Payout Ratio: The cash dividend represents 36.8% of net profit attributable to shareholders, in line with the Company’s policy of distributing no less than 25% of annual distributable profits as cash dividends.
• Interim Dividend: For the first time, the Company implemented an interim dividend during the year to reward long-term investors.
• No Capitalization from Capital Reserves: There will be no bonus shares or capitalization from capital reserves for 2025.

The ongoing commitment to shareholder returns, including an interim dividend and a high payout ratio, is a positive for investor sentiment and could support the share price, especially given the Company’s stable cash position and absence of unrecovered losses at the parent company.

Strategic and Corporate Developments

• Governance Enhancements: The Company revised seven core governance documents and continued to strengthen information disclosure. It received an A-grade rating from the Shanghai Stock Exchange and an AA ESG rating from Wind.
• ESG Recognition: The Company was honored with the Best ESG Pioneer Award at the Hong Kong International ESG Awards and multiple investor relations awards, underlining its commitment to sustainability and transparent communications.
• Market Capitalization Management: The Board launched a strategy aimed at high-quality growth, value delivery, and enhanced investor returns. An H share repurchase mandate was approved, signaling confidence in the Company’s valuation.
• Investor Engagement: The Company deepened both institutional and retail investor engagement, increasing transparency and market confidence. Nearly 50 investor engagement activities were conducted during the year, and a new online voting service was introduced for minority shareholders.

Risk Factors and Outlook

• Operational and Macroeconomic Risks: The Company cites ongoing challenges in the global economic environment, including geopolitical tensions, trade protectionism, and currency fluctuations, which may affect overseas revenue and profitability.
• Exchange Rate Exposure: The Company’s export activities expose it to USD, EUR, AUD, XOF, and ZAR currency risk. Measures such as financial derivatives are being used to mitigate this risk.
• Financial Asset Management: Structured deposit income contributed RMB 10.91 million, reflecting prudent fund management in a low-interest environment.
• R&D Investment: Increased by RMB 33 million year-on-year, reflecting a strategic focus on high-end agricultural machinery and equipment technology.
• No Major Asset Disposals or Acquisitions: No significant equity or non-equity investments, or asset disposals, were reported for the year.

Investors should monitor the external risks closely, as any significant deterioration could affect earnings, cash flow, and ultimately share value.

Shareholder Structure and Share Capital

• Share Capital: No change during the year; total A and H shares outstanding: 1,123,645,275.
• Top Shareholders: YTO Group Corporation remains the controlling shareholder with 48.81% of shares. HKSCC Nominees Limited holds 34.66%. No treasury shares were held or repurchased.
• Public Float: The Company maintained the prescribed public float under the Hong Kong Listing Rules.

Corporate Integrity and Compliance

• No Misappropriation of Funds or Irregular Guarantees: No violations or misappropriation by controlling shareholders or related parties.
• No Material Litigation or Regulatory Penalties: The Company and its directors, management, and controlling shareholders had no adverse credit records or compliance breaches during the year.
• Audit Opinion: The financial statements received a standard unqualified opinion from ShineWing Certified Public Accountants LLP, confirming their accuracy and compliance.

Additional Financial Details

• Debt Restructuring Gains: The Company recognized RMB 36.22 million in gains from debt restructuring activities.
• No Major Changes in Accounting Policies: No significant changes in accounting policies or estimates, nor material corrections of accounting errors.
• Key Financial Ratios: Gearing ratio improved to 45.48% (down 1.58 percentage points). Current and quick ratios increased, reflecting improved liquidity.
• Segment Reporting: The Company’s main businesses remain consistent year-over-year, with no new reportable segments or material changes in business scope.

Conclusion: Implications for Shareholders and Potential Share Price Impact

While First Tractor Company Limited faced a challenging year with declining revenue and profits, its balance sheet remains robust, and its commitment to shareholder returns is evident through steady dividend payouts and enhanced investor engagement. The repurchase mandate, strong ESG performance, and transparent governance could underpin investor confidence and provide share price support, especially amid broader market volatility.

However, the drop in revenue and net profit, coupled with macroeconomic and currency risks, may weigh on the share price if external conditions deteriorate. Investors should watch for any further strategic updates, changes in dividend policy, or material asset transactions in the coming quarters that could be catalysts for share price movement.