Energy Conservation Guozhen 2025 Annual Report Analysis: Revenue Down 4.30%, Net Profit Excluding Non-Recurring Items Decreased by 5.84%

Operating Revenue: Slight Contraction in Revenue Scale, Clear Business Segmentation

In 2025, the company achieved operating revenue of 3.67B yuan, a year-on-year decrease of 4.30%. By business segment, operational service revenue was 2.5B yuan, up 1.82%, becoming a “stabilizer” for revenue; engineering construction service revenue was 1.06B yuan, down 10.11% year-on-year; equipment manufacturing sales and service revenue was 104 million yuan, a significant drop of 47.51%, the main drag on revenue decline.

By product, comprehensive water environment management services revenue was 3.08B yuan, a slight decrease of 0.03% year-on-year, still the core source of revenue; industrial wastewater treatment comprehensive services revenue was 316 million yuan, down 36.38% year-on-year, a key factor in revenue decline; small town environmental management services revenue was 261 million yuan, up 5.58%, maintaining steady growth.

By region, Anhui revenue was 1.43B yuan, down 12.27% year-on-year; East China revenue was 254 million yuan, down 28.57%; South China revenue was 226 million yuan, up 14.46%; Northwest, North China, and Northeast regions combined revenue was 999 million yuan, up 5.75%; overseas revenue was 256 million yuan, a sharp increase of 44.73%, showing strong overseas market performance.

Net Profit: Slight Decrease in Profit Scale, Larger Decline in Net Profit Excluding Non-recurring Gains and Losses

In 2025, net profit attributable to shareholders of the listed company was 356 million yuan, down 2.89% year-on-year; net profit after deducting non-recurring gains and losses was 345 million yuan, down 5.84%, a larger decline than net profit, indicating that the profitability of the company’s main business has decreased more significantly.

Earnings Per Share: Basic Earnings Per Share Also Declined, Significant Drop in Non-recurring EPS

In 2025, basic earnings per share was 0.5228 yuan/share, down 2.90% year-on-year; the EPS excluding non-recurring items also declined by 5.84%, reflecting that the decline in core business profitability has had a greater impact on per-share earnings.

Expenses: Total Expenses Decreased Year-on-Year, Structural Optimization

In 2025, total costs and expenses amounted to 3.1B yuan, a decrease of 150 million yuan from the previous year, indicating a contraction in overall expense scale.

Selling Expenses: Up 11.90% Year-on-Year, Increased Investment in Expansion

In 2025, selling expenses were 66.92 million yuan, an increase of 7.11 million yuan or 11.90%. Mainly due to increased market project expansion costs and labor costs, including bidding agency fees for the successful bid of Feidong TOT project, and increased market personnel rewards under the market incentive system, showing increased investment in market expansion.

Management Expenses: Down 3.56% Year-on-Year, Cost Reduction and Efficiency Gains Show Results

In 2025, management expenses were 171 million yuan, down 6.31 million yuan or 3.56%. Mainly due to strict implementation of cost reduction and efficiency measures, optimizing personnel allocation in business and management, leading to reductions in business and labor costs, and improved management efficiency.

Financial Expenses: Down 5.68% Year-on-Year, Lower Financing Costs

In 2025, financial expenses were 216 million yuan, a decrease of 13.03 million yuan or 5.68%. Mainly due to a decrease in the average financing cost, effectively reducing the company’s financial burden.

R&D Expenses: Down 3.77% Year-on-Year, Projects Entering Final Stages

In 2025, R&D expenses were 24.17 million yuan, down 950k yuan or 3.77%. Mainly because ongoing projects have entered the conclusion phase, leading to a temporary reduction in R&D investment.

R&D Personnel: Significant Reduction in R&D Staff, Organizational Restructuring and Optimization

In 2025, the company had 147 R&D personnel, a decrease of 140 people or 48.78%; R&D staff accounted for 5.37%, down 5.18 percentage points from the previous year. The main reason is that the company carried out organizational restructuring in 2025 to optimize personnel allocation and improve organizational efficiency, and adjusted related personnel and work arrangements based on project progress.

Cash Flow: Net Increase in Cash and Cash Equivalents Significantly Reduced

In 2025, net increase in cash and cash equivalents was 20.21 million yuan, a decrease of 52.03 million yuan or 72.03%, mainly due to increased investment activities expenditure.

Net Cash Flow from Operating Activities: Slight Decline, Overall Still Steady

In 2025, net cash flow from operating activities was 950k yuan, a decrease of 737M yuan or 0.97%. Total cash inflows from operating activities were 7M yuan, up 0.01%; total cash outflows were 3.39B yuan, up 0.29%. The outflow growth slightly exceeded inflows, leading to a small decline in net cash flow, but overall remaining at a high level, indicating steady operating cash flow.

Net Cash Flow from Investing Activities: Significant Increase in Outflows

In 2025, net cash flow from investing activities was -982 million yuan, an increase of 459 million yuan or 87.67% in net outflows. Mainly due to increased investments in franchise rights projects and expenditures on the headquarters R&D base under construction, with total cash outflows of 984 million yuan, up 41.85%; while total cash inflows from investing activities were only 1.91 million yuan, a sharp decrease of 98.88%, resulting in a substantial expansion of net outflows.

Net Cash Flow from Financing Activities: Turned Positive, Financing Pressure Eases

In 2025, net cash flow from financing activities was 264 million yuan, an increase of 410 million yuan, turning from negative to positive. Mainly because the repayment of maturing working capital loans decreased year-on-year, with total cash outflows from financing activities at 2.66B yuan, down 21.40%; total cash inflows were 3.54 billion yuan, down 11.98%. The larger decrease in outflows compared to inflows resulted in a positive net cash flow from financing activities, easing the company’s financing pressure.

Potential Risks: Multiple Risks Coexist, Need to Be Vigilant of Operating Pressure

2. Market Competition Risk: The existing competitors in the industry are increasing in scale and competitiveness. After large state-owned enterprises and central enterprises enter the environmental protection industry, competition becomes more intense. If industry policies and regulatory policies change unfavorably, it will impact the company’s operations.
3. Project Operation and Management Risks: Strengthening of national environmental inspections poses risks of reduced revenue due to performance assessment issues; increased emission standards may cause some wastewater plants to exceed indicators before upgrading, risking notices, rectifications, or administrative penalties.
4. Rising Operating Costs Risk: Increased inflow water quality leads to higher reagent and electricity costs; employee salaries, business insurance, safety expenses, etc., are also rising, compressing profit margins.
5. Accounts Receivable Collection Risk: Local government financial constraints and reliance on special bonds for project funding increase the difficulty of receivables collection, raising the risk of uncollected accounts.
6. Inventory Impairment Risk: The company’s EPC business requires pre-investment and subsequent collection, resulting in large inventories. The efficiency of inventory settlement depends on local government fiscal health, with risks of delayed settlement and impairment.

Senior Management Compensation: Some Departed Executives Have High Compensation, Current Executives Show Variance

In 2025, the chairman Peng Yunqing received a pre-tax total compensation of 0 yuan (possibly paid by related parties); general manager Cheng Qun received 355.7k yuan pre-tax; vice president Ye Dong received 798.2k yuan pre-tax; CFO Luo Jinhui received 805.1k yuan pre-tax. Among departed executives, Shi Xiaofeng received 973.2k yuan pre-tax, Yin Hao 884.3k yuan, and Xu Benyong 988.8k yuan, with relatively high compensation.

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