Shen Textile A 2025 Annual Report Analysis: Net profit attributable to parent company down 23.44%, Operating cash flow up 50.39%

Core Profitability Indicator Interpretation

Operating Revenue: Slight Decline, Polarizing Film Business Under Pressure

In 2025, the company achieved operating revenue of RMB 3.241 billion, representing a year-on-year decrease of 2.82%. By business segment, the polarizing film business generated revenue of RMB 3.068 billion, down 2.97% year-on-year, which is the main reason for the revenue decline. This was mainly affected by intensifying industry competition, insufficient orders for certain high-end OLED polarizing films, and the resulting “increase in volume but decrease in price” trend. Property leasing and other business revenue was RMB 174 million, down slightly by 0.06% year-on-year, remaining basically stable.

By region, domestic revenue was RMB 2.872 billion, down 9.49% year-on-year, while overseas revenue was RMB 369 million, up significantly by 127.91% year-on-year. Overseas business became an important supplement to operating revenue.

Net Profit and Profit After Non-recurring Items: Both Decline, Profitability Under Pressure

In 2025, the net profit attributable to shareholders of the listed company was RMB 68 million, down 23.44% year-on-year; net profit after deducting non-recurring gains and losses was RMB 63 million, down 17.65% year-on-year. The decline in net profit was greater than the decline in operating revenue. This is mainly because the gross margin of the polarizing film business declined. Although period expenses decreased, they were not able to fully offset the pressure on operating revenue and gross profit.

Regarding non-recurring gains and losses, in 2025, the net amount of non-recurring gains and losses was RMB 4.9846 million, mainly coming from gains from disposal of non-current assets, government subsidies, reversals of provisions for impairment of receivables, etc. The contribution to net profit was lower than RMB 12.3426 million in 2024.

Earnings Per Share: Declines in Line With Net Profit

In 2025, basic earnings per share were RMB 0.14/share, down 22.22% year-on-year. After deducting non-recurring items, earnings per share were RMB 0.13/share, down 16.67% year-on-year. This is consistent with the trend of net profit movements, reflecting that the company’s earnings per share decreased as overall profitability declined.

Interpretation of Period Expenses

Total Expenses: Slight Decline, Initial Results From Cost Control

In 2025, the company’s total period expenses were RMB 280.4867 million, down 4.11% from RMB 292.5814 million in 2024. Some effectiveness has been achieved in expense control, with a particularly noticeable decline in selling expenses.

Selling Expenses: Sharp Decline; Reduction in Service Fees Is the Main Reason

In 2025, selling expenses were RMB 34.66 million, down 17.99% year-on-year. This was mainly because selling service fees during the reporting period decreased significantly, falling from RMB 19.4919 million in 2024 to RMB 14.0668 million, down RMB 5.4251 million year-on-year. In addition, employee compensation also declined slightly.

Administrative Expenses: Slight Decrease; Employee Compensation Remains the Main Expenditure

In 2025, administrative expenses were RMB 128.6121 million, down 4.27% year-on-year, with a relatively small decline. Among them, employee compensation was RMB 91.9247 million, up slightly by 1.80% year-on-year, and still is the main component of administrative expenses. Professional service fees decreased from RMB 10.5209 million to RMB 5.5406 million, down 47.34% year-on-year, which is the main reason for the decline in administrative expenses.

Financial Expenses: Slight Increase; Increase in Exchange Differences

In 2025, financial expenses were RMB 13.2397 million, up 9.23% year-on-year. The main reason is that exchange differences increased from RMB -3.7730 million in 2024 to RMB 9.2665 million, an increase of RMB 13.0395 million year-on-year. This offset the impact of the decline in interest expense (interest expense decreased from RMB 17.8580 million to RMB 7.1212 million).

R&D Expenses: Basically Flat; Continued Investment in Technology Development

In 2025, R&D expenses were RMB 103.9748 million, up only 0.16% year-on-year, basically in line with 2024. R&D investment is mainly used for polarizing film-related technology development, including projects such as ultra-generation VA TV high-optics products and AMOLED high-definition display products. During the reporting period, the company completed 15 new patent applications and obtained 8 authorized patents, including 1 invention patent.

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• | | Number of Patent Authorizations (items) | 8 |
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R&D Personnel: Stable Size of the R&D Team

As of the end of 2025, the number of R&D personnel at the company was 161, accounting for 11.47% of the total number of employees, slightly down from 12.53% in 2024. However, the overall scale remained stable, providing personnel support for the company’s technology R&D.

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• | | Proportion of R&D Personnel | 11.47% | 12.53% | -1.06 percentage points |

Cash Flow Interpretation

Overall Cash Flow: Net Increase in Cash and Cash Equivalents Shifts From Negative to Positive

In 2025, the company’s net increase in cash and cash equivalents was RMB 147 million, whereas in 2024 it was a net decrease of RMB 159 million. The cash flow situation improved, mainly due to a significant increase in cash flow from operating activities and a turnaround to positive cash flow from financing activities.

Cash Flow From Operating Activities: Significant Growth; Decrease in Cash Paid for Purchase of Goods

In 2025, the net cash flow generated from operating activities was RMB 348 million, up 50.39% year-on-year. The main reason is that the cash flow for purchasing goods decreased during the reporting period. Operating cash outflows decreased from RMB 3.268 billion to RMB 3.107 billion, down 4.93% year-on-year, while operating cash inflows only declined slightly by 1.27%. As a result, the net cash flow improved significantly.

Cash Flow From Investing Activities: Turns From Positive to Negative; Increase in Purchase and Construction of Fixed Assets

In 2025, the net cash flow from investing activities was RMB -233 million, while in 2024 it was RMB 75.20 million. Year-on-year it decreased by 409.20%. The main reason is that cash paid for purchasing fixed assets, intangible assets, and other long-term assets increased from RMB 29.4412 million to RMB 238.9699 million, up 711.67% year-on-year during the reporting period. Meanwhile, cash inflow from investing activities decreased from RMB 1.7101 billion to RMB 1.1700 billion, down 31.59% year-on-year.

Cash Flow From Financing Activities: Turns From Negative to Positive; New Loans Provide Support

In 2025, the net cash flow from financing activities was RMB 45.67 million, compared with RMB -466.3584 million in 2024, an increase of 109.79% year-on-year. The main reason is that, during the reporting period, new loans of RMB 142 million were added, causing cash inflow from financing activities to change from 0 to RMB 142 million. At the same time, the repayment of loan principal decreased, so cash outflow from financing activities decreased from RMB 466.3584 million to RMB 96.08 million, down 79.40% year-on-year.

Risk Factor Interpretation

In 2025, the company faces the following major risks:

1. Macroeconomic Risk: The international environment is complex and severe, with tense geopolitical conditions. Fluctuations in the macroeconomy may affect the company’s performance.
2. Market Risk: The acceleration of domestic substitution in the polarizing film industry is underway, but demand for technology upgrades is urgent. If the company cannot keep up with technology trends in a timely manner, or if competition in the industry intensifies and leads to panel price declines, it will have an adverse impact on the company’s operations.
3. Raw Material Risk: Core raw materials for polarizing films, such as PVA films and TAC films, are mostly monopolized by overseas manufacturers. Raw material prices are influenced by suppliers’ production capacity, market demand, and exchange rates, which may increase the company’s production costs.
4. Risk of Intensifying Competition: Domestic polarizing film manufacturers continue to expand capacity. If downstream demand recovers less than expected, industry competition will further intensify, which may squeeze the company’s profit margins.

Compensation Interpretation for Senior Executives and Board Members

Chairman’s Total Pre-tax Compensation

In 2025, Chairman Li Gang (appointed in September during the reporting period) had a total pre-tax compensation amount of RMB 0 received from the company. His compensation was mainly received from related parties.

General Manager’s Total Pre-tax Compensation

In 2025, General Manager Ma Jie had a total pre-tax compensation amount of RMB 0.7269 million received from the company.

Vice General Manager’s Total Pre-tax Compensation

In 2025, Vice General Manager Lin Xia had a total pre-tax compensation amount of RMB 0.6504 million, and Vice General Manager Wang Zihan also had a total pre-tax compensation amount of RMB 0.6504 million; upon departure, former Vice General Manager Wang Chuan had a total pre-tax compensation amount of RMB 0.1345 million.

Chief Financial Officer’s Total Pre-tax Compensation

In 2025, CFO Liu Yu had a total pre-tax compensation amount of RMB 1.1472 million received from the company. Among senior executives, his compensation is relatively high, mainly because he also serves as a director.

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