Hongheheyuan Technology Change of Control First Annual Report: Net Profit Declined for Three Consecutive Years, Effectiveness of Multiple Measures Awaits Verification | Financial Report Analysis

On the evening of March 17, Honghe Technology (002955) disclosed its 2025 annual report, presenting a comprehensive decline in revenue, net profit, and operating cash flow: revenue decreased by 8.13% year-on-year to 3.238 billion yuan; net profit attributable to the parent plummeted by 76.67% to 51.76 million yuan; net cash flow from operating activities sharply dropped by 48.86% to 152 million yuan. Additionally, net profit attributable to the parent has declined for three consecutive years, highlighting the ongoing performance downturn.

Under performance pressure, the company completed a controlling stake transfer at the end of last year and announced a buyback plan of up to 100 million yuan on the same day as the annual report release. A series of capital operations and operational challenges depict a complex picture of Honghe Technology amid intensified industry competition and its own transformation pains.

Triple Metrics Decline, Profitability Resilience Continues to Be Under Pressure

The core features of Honghe Technology’s 2025 annual report are “comprehensive decline and structural differentiation.” Revenue, net profit, and operating cash flow all face pressure simultaneously. The three-year consecutive decline in net profit reflects the company’s operational difficulties under industry competition and external shocks.

During the reporting period, the company achieved an operating income of 3.238 billion yuan, down 8.13% year-on-year. This marks the fourth consecutive year of year-on-year revenue decline, indicating significant market pressure on the company’s main business. Profitability was even more bleak, with net profit attributable to the parent at only 51.76 million yuan, down 76.67% year-on-year, a sharp increase from declines of 18.56% in 2023 and 31.20% in 2024, forming a “three consecutive declines” trend with increasing severity each year, indicating continuous weakening of profitability and mounting pressure on resilience.

The significant contraction of operating cash flow further highlights operational pressures. In 2025, net cash flow from operating activities was 152 million yuan, a sharp decrease of 48.86% year-on-year.

Regarding the reasons for the performance decline, the company provided a clear explanation in its earnings forecast: on one hand, external factors such as fluctuations in overseas market demand and intensified domestic industry competition led to a year-on-year decline in total revenue, which in turn affected operational results; on the other hand, some raw materials experienced quality issues during the period, prompting the company to increase expense provisions based on prudence, further dragging down current profits. This explanation aligns with the overall industry environment and also exposes the company’s supply chain management and risk control shortcomings.

Gross profit margin for 2025 was 24.54%, down from 28.01% in 2024, a decrease of 3.47 percentage points. By industry, the education sector—Honghe’s core foundation—had a gross margin of 24.51%, down 4.39 percentage points year-on-year, becoming the main drag on overall profitability.

By product, the IWB (Interactive Whiteboard) product, a revenue pillar, achieved revenue of 2.335 billion yuan, accounting for 72.10% of total revenue, but declined 8.49% year-on-year. This product ranks second globally in the education market, with its overseas brand “Newline” holding the first market share in the U.S., but growth has been sluggish or even declining, reflecting internal and external challenges such as market saturation and intensified competition. Other smart interactive products generated revenue of 618 million yuan, down 14.52% year-on-year, becoming another major drag.

Ownership Transfer + Buyback Support, Uncertainty Remains Despite Reforms

Facing a three-year performance downturn, Honghe Technology made a key strategic move at the end of 2025: transferring its controlling stake.

After the transfer of shares was completed in 2025, Ruicheng Hongtu officially became the company’s controlling shareholder with a 25% stake. The actual controller of the company changed to “no actual controller.” This was not just a simple change of ownership but a significant industry consolidation case. According to the company, this was the first case since the release of the “Six Rules” for mergers and acquisitions, where industry capital held a listed company through a dedicated fund.

The transaction was led by Hefei Ruicheng, a subsidiary of Chery Capital, with participation from Anhui Province and Wuhu City industrial guidance funds. The underlying logic is to build an ecosystem of “industry capital strategic leadership, local government resource empowerment, and listed company platform integration.” Behind this, Chery Group achieved multiple historic breakthroughs in 2025, such as sales and exports, and is actively expanding into new energy, AI, robotics, and other “new productive forces” sectors.

On the governance front, the company’s third board of directors and senior management team completed a smooth transition at the end of 2025, ensuring organizational support for strategic transformation.

Meanwhile, the company announced a share buyback plan on the same day as the annual report, seen as a confidence boost to the market. The plan involves repurchasing shares with no more than 100 million yuan, at a price not exceeding 40 yuan per share. The closing price on that day was only 25.97 yuan, representing a premium of 54%. This move aims to optimize capital structure from a financial perspective, stabilize the stock price, and boost market confidence. Strategically, it also lays the groundwork for future implementation of equity incentives and talent retention.

A series of bold reforms injects strong expectations into Honghe Technology. However, whether these measures can truly reverse the downward trend remains uncertain, and time will tell. (Text | Company Observation, author | Zhou Jian, editor | Cao Shengyuan)