Financial Information

Material fluctuations of the consolidated statement of profit or loss items are explained below:

Revenue

The Group’s revenue for the financial year ended 31 December 2025 (“FY2025” or the “Reporting Period”) decreased by approximately RMB272.8 million, or approximately 10.8% from approximately RMB2,520.0 million in the previous financial year ended 31 December 2024 (“FY2024”) to approximately RMB2,247.2 million in FY2025.

The reason for the decrease in revenue for FY2025 comparing FY2024 is due to the fierce market competition of the Telecommunications business segment. The revenue of the Telecommunications business segment decreased by approximately RMB320.8 million or 15.3% from FY2024’s approximately RMB2,095.7 million to approximately RMB1,774.9 million for FY2025. On the other hand, revenue generated from the New Energy and Services business segment in FY2025 was approximately RMB205.2 million, representing an increase of approximately RMB19.2 million or 10.3% from previous year’s approximately RMB186.0 million. Such increase is mainly attributed to the increase in revenue from solar thermal power generation and provision of operations and maintenance services from Zhejiang Zhongguang New Energy Technology Co., Ltd. and its subsidiaries (“Zhongguang New Energy”). The revenue from the Integrated Circuits and Digital Technology business segment increased by approximately RMB28.8 million or 12.1% from FY2024’s approximately RMB238.3 million to FY2025’s approximately RMB267.1 million.

Integrated Circuits and Digital Technology

During FY2025, Nanjing Zhangyu Information Technology Co., Ltd. (“Nanjing Zhangyu”) and Shanghai Zhangyu Information Technology Co., Ltd. (“Shanghai Zhangyu”) (collectively, the “Zhangyu Companies”) have recorded revenue of approximately RMB267.1 million (representing an increase of approximately RMB28.8 million or 12.1% from approximately RMB238.3 million during FY2024), of which revenue from (i) design services was approximately RMB84.6 million (FY2024: approximately RMB58.7 million); (ii) tape-out service was approximately RMB92.4 million (FY2024: approximately RMB102.1 million); and (iii) digital technology, cloud computing and services were approximately RMB90.1 million (FY2024: approximately RMB77.5 million).

New Energy and Services

In FY2025, Zhongguang New Energy have recorded revenue of approximately RMB151.6 million (FY2024: RMB144.2 million) from the sales of solar power from the business segment’s 50MW and 10MW power generating facilities. In FY2025, the 50MW power plant has operated 4,973 hours (representing an increase of approximately 1.2% year-on-year) and generated 143.04 MkWh of electricity (representing an increase of approximately 2.1% year-on-year), of which the grid-connected power generated was 140.24 MkWh (representing a decrease of approximately 1.4% year-on-year). The revenue in FY2025 also included revenue from the operation and maintenance (“O&M”) and others of approximately RMB53.6 million (FY2024: RMB41.8 million). The development of the O&M business will not only enrich the income base of the New Energy and Services business segment, but also create a sustainable and stable stream of revenue to the Group. The New Energy and Services business segment has witnessed a steady growth, with the increased effort of the Group to deepen its development in O&M and provision of other services, the New Energy and Services business segment will provide the Group with solid and stable income to fuel its future development plan.

Telecommunications

As mentioned above, the market competition faced by the Telecommunications business segment in FY2025 was unprecedented. Revenue decreased by approximately RMB320.8 million or 15.3% from FY2024’s approximately RMB2,095.7 million to approximately RMB1,774.9 million for FY2025. Despite the Group’s increased effort on market exploration with more competitive pricing strategy and broadening its products mix width, all products have recorded significant decrease in revenue, of which RC coaxial cables and antennas were the most affected products in FY2025.

Gross profit margin

The Group achieved an overall gross profit margin of approximately 20.6% for FY2025 compared to approximately 18.5% for FY2024, representing an increase of approximately 2.1 percentage points year-on-year. By separating the Integrated Circuits and Digital Technology business segment and New Energy and Service business segment, the rest of the Telecommunications business segment achieved a combined gross profit margin of approximately 16.0% during FY2025, representing an increase of approximately 1.7 percentage points from the previous year’s gross profit margin of approximately 14.3%. The enhancement in Telecommunications business segment’s gross profit margin is mainly due to the Company’s continued effort on implementing efficient production materials usage and stringent costs control measures.

Although gross profit margin has recorded a slight year-on-year increase, the decrease in revenue has offset the effect from the increase in gross profit margin. The Group’s gross profit for FY2025 was approximately RMB462.7 million, representing a slight decrease of approximately RMB4.6 million or 1.0% from FY2024’s approximately RMB467.3 million.

Gross profit contribution for the Telecommunications business segment in FY2025 has recorded a year-on-year slight decrease of approximately RMB16.4 million or 5.5% from FY2024’s RMB300.1 million to FY2025’s RMB283.7 million.

The Integrated Circuits and Digital Technology business segment has achieved a gross profit margin of approximately 32.2% during FY2025 (approximately 31.8% during FY2024), representing an increase of approximately 0.4 percentage point year-on-year. Due to the nature of digital technology, cloud computing and services businesses, gross profit margins are generally higher than the Telecommunications business segment. Because of the change in products mix in FY2025 comparing FY2024, the Integrated Circuits and Digital Technology business segment has recorded an increase in gross profit margin and gross profit contribution in FY2025 was approximately RMB85.4 million, representing an increase of approximately RMB9.7 million or approximately 12.8% from FY2024’s approximately RMB75.7 million.

During FY2025, the New Energy and Service business segment has achieved a gross profit margin of 45.2% (approximately 49.2% for FY2024), representing a decrease of approximately 4.0 percentage points year-on-year. The decrease in the gross profit margin for the New Energy and Services business segment is because during FY2025, additional costs were incurred to develop the O&M business, therefore lowering the overall gross profit margin of the business segment. As the Telecommunications business segment has recorded an increase in gross profit margin year-on-year, such increase together with the year-on-year increase in gross profit margin of the Integrated Circuits and Digital Technology and New Energy and Services business segments, the Group recorded a slight increase in the combined gross profit margin year-on-year.

In order to further improve the Group’s gross profit margin, the Group will enhance product profitability by increasing investment in new product research and development and the application of new technologies and the development of high value-added services. On the other hand, the Group will continue to promote intelligent, information-based and lean development. In addition to micro-innovation and micro operating activities, the Group will also continue to improve output efficiency, reduce labor and materials consumption, control procurement costs and strengthen inventory management, thereby breaking through the bottleneck of costs improvement and maintaining an appropriate gross profit margin to cope with market competition pressure. With the growing importance of using low cost, safe, green and renewable energy in the Chinese mainland market and the growing demand on integrated circuits and digital technology with the intense competition among international industry players in advancing artificial intelligence and related frontier technologies, the Group envisages that the further development of the two new business segments, the Integrated Circuits and Digital Technology and New Energy and Services business segments will further contribute to the sustainable long term development and profitability of the Group.

Other operating income

Other operating income decreased by approximately RMB10.0 million or approximately 27.8% from approximately RMB36.0 million in FY2024 to approximately RMB26.0 million in FY2025. The decrease is primarily due to:

1. a decrease in government grants and subsidies of approximately RMB5.0 million;
2. an increase in net gain on financial assets measured at FVPL of approximately RMB2.2 million; and
3. a decrease in net gain on commodity future contracts relating to the purchase of raw materials of the Telecommunications business segment of approximately RMB4.2 million.

Selling and distribution expenses

Selling and distribution expenses decreased by approximately RMB9.1 million or approximately 7.0% from approximately RMB131.2 million in FY2024 to approximately RMB122.0 million in FY2025. The decrease is due to the decrease in revenue of the Group and in particular, the significant decrease in transportation costs of the Telecommunications business segment.

Administrative expenses

Administrative expenses increased slightly by approximately RMB0.5 million or approximately 0.5% from approximately RMB99.8 million in FY2024 to approximately RMB100.3 million in FY2025. No significant fluctuation was noted.

Impairment loss on trade and other receivables

The impairment loss on trade and other receivables for FY2025 is approximately RMB20.4 million (FY2024: impairment loss of approximately RMB7.0 million). The increase in the impairment loss on trade and other receivables is mainly due to the additional impairment loss made for the long outstanding trade receivables relating to the state-owned telecommunication enterprises in the PRC of the Telecommunications business segment.

Other operating expenses

Other operating expenses increased by approximately RMB3.2 million or approximately 2.0% from approximately RMB159.2 million in FY2024 to approximately RMB162.4 million in FY2025. Such change is mainly due to:

1. the increase in research and development (“R&D”) expenses by approximately RMB10.8 million or approximately 7.3% year-on-year from FY2024’s approximately RMB148.3 million to approximately RMB159.1 million in FY2025. During FY2025, approximately RMB135.2 million (representing an increase of approximately RMB16.3 million or 13.7% year-on-year) of R&D is attributable to the continuing R&D activities undertaken for the modifications and improvements to the Group’s telecommunications products during FY2025; approximately RMB18.5 million is due to the R&D undertaken by the Zhangyu Companies during FY2025; and approximately RMB5.4 million is due to the R&D undertaken by Zhongguang New Energy during the FY2025; and
2. the decrease in the loss on write-off/disposals of property, plant and equipment from last year’s approximately RMB9.1 million to approximately RMB0.2 million in FY2025, representing a decrease of approximately RMB8.9 million.

Interest expense

Interest expense increased by approximately RMB6.0 million or approximately 11.7% from approximately RMB51.5 million in FY2024 to approximately RMB57.5 million in FY2025, which is mainly due to the year-on-year increase in average outstanding interest-bearing borrowings in FY2025.

Profit before taxation

Profit before taxation decreased by approximately RMB37.0 million or approximately 41.7% from approximately RMB88.7 million in FY2024 to approximately RMB51.7 million in FY2025.

Income tax

The Group’s main subsidiaries, Jiangsu Hengxin Technology Co., Ltd. (“Jiangsu Hengxin”), Zhangyu Companies and the subsidiary of Zhongguang New Energy, Qinghai Zhongkong Solar Power Co., Ltd., have been subject to an incentive tax rate of 15% in FY2025 as they qualify as a high-tech enterprise in the PRC. Income tax expense increased by approximately RMB78.8 million or approximately 511.6% from approximately RMB15.4 million in FY2024 to approximately RMB94.2 million in FY2025. The increase is mainly due to the increase in withholding tax paid for the intra-group dividend payment made in the PRC during the first half of FY2025.

Profit Attributable to Owners of the Company

In view of the above, after taking into account of the effect of non-controlling interests, the Group recorded a loss attributable to owners of the Company of approximately RMB42.4 million comparing the profit attributable to owners of the Company of approximately RMB42.2 million for FY2024.

Consolidated Statement of Financial Position

Material fluctuations of the consolidated statement of financial position items are explained below:

Intangible assets

Intangible assets amounted to approximately RMB209.6 million as at 31 December 2025 (as at 31 December 2024: RMB227.5 million), representing a decrease of approximately RMB17.9 million or approximately 7.9% and mainly represent customer relationship, patents, intellectual property resources and licence. The decrease is mainly due to the amortisation during FY2025.

Goodwill

As at 31 December 2025, goodwill amounted to approximately RMB201.6 million (as at 31 December 2024: RMB201.6 million), of which RMB155.1 million was due to the acquisition of the Zhangyu Companies during the year ended 31 December 2022 and RMB46.5 million was due to the acquisition of Zhongguang New Energy during the year ended 31 December 2023 Based on the independent valuation performed by an external valuation firm engaged by the Group, no impairment on goodwill was required for FY2025.

Inventories and other contract costs

Inventories and other contract costs (comprising raw materials, work-in-progress, finished goods and other contract costs) decreased by approximately RMB29.0 million or approximately 12.8% from approximately RMB227.2 million as at 31 December 2024 to approximately RMB198.2 million as at 31 December 2025. The decrease was mainly due to the decrease in finished goods for the Telecommunications business segment because during the year ended 31 December 2024, there were significant amounts of goods-in-transit close to the year end date.

Trade and other receivables

1. Net trade and bills receivables decreased by approximately RMB350.8 million or approximately 27.1% from approximately RMB1,295.8 million as at 31 December 2024 to approximately RMB945.0 million as at 31 December 2025. The decrease is mainly due to the decrease in the revenue during FY2025.

   As at 31 December 2025, based on the invoice date and net of allowance for impairment, approximately 70.6% of the net trade and bills receivables are within 6 months as compared with that of approximately 73.9% as at 31 December 2024. For long aged net trade and bills receivables, as at 31 December 2025, approximately 8.1% were over two years (as compared with 5.8% as at 31 December 2024).

2. Net other receivables increased by approximately RMB530.4 million or approximately 521.0% from approximately RMB101.8 million as at 31 December 2024 to approximately RMB632.2 million as at 31 December 2025. The increase was mainly due to the prepayments made by the Company to certain purchasing agents in the Chinese Mainland in connection with the proposed acquisition of property, plant and equipment for the new energy and services business segment of the Company and related agency services (the “Proposed Transaction”) for an energy storage project in Chinese Mainland. The prepaid amounts are refundable in full should the Proposed Transaction not proceed. If the Proposed Transaction is completed, the prepaid amounts will be applied by the purchasing agents towards the property, plant and equipment purchase price and agency service fees, with the service fees portion to be finalized upon completion of the Proposed Transaction.

Trade and other payables

1. Trade payables decreased by approximately RMB165.9 million or approximately 26.2% from approximately RMB634.0 million as at 31 December 2024 to approximately RMB468.1 million as at 31 December 2025.

   The decrease in trade payables is mainly due to the decrease in the Group’s purchases for the Telecommunications business segment amid the decrease in revenue during FY2025 comparing the previous year.

2. Other payables recorded an increase of approximately RMB12.1 million or approximately 11.4% from approximately RMB106.1 million as at 31 December 2024 to approximately RMB118.2 million as at 31 December 2025. The increase is mainly due to (i) the increase in tender deposits of approximately RMB16.4 million; and (ii) the decrease in VAT and other taxes payable by approximately RMB2.7 million.

Current bank loans and non-current bank loans

The current and non-current bank loans as at 31 December 2025 amounted to approximately RMB1,895.1 million (as at 31 December 2024: approximately RMB1,498.0 million). The increase in total current and non-current bank loans is mainly due to the new unsecured bank loans in FY2025 to support the business development of the Company’s New Energy and Services business segment.

MAJOR OPERATING SUBSIDIARIES

The major operating subsidiaries of the Company are Jiangsu Hengxin, Jiangsu Hengxin Wireless Technology Co., Ltd, Hengxin Technology (India) Pvt Ltd, Hengxin Technology International Co., Limited, HODL PCC Limited, Jiangsu Hengxin Zhonglian Communication Technology Co., Ltd., Hengxin Metaverse Limited, Xin Ke Xin (Suzhou) Technology Co., Ltd., Yixing Tianyue Enterprise Management Consulting Partnership (Limited Partnership), Nanjing Zhangyu Information Technology Co., Ltd., Shanghai Zhangyu Information Technology Co., Ltd., Wuxi Sihai Technology Co., Ltd., Shanghai Zhangyu Semiconductor Co., Ltd., Hangzhou Longkong Zhongguang Enterprise Holding Enterprise Partnership (Limited Partnership), Zhejiang Zhongguang New Energy Technology Co., Ltd., Zhongguang (Qinghai) New Energy Science Technology Co. Ltd., Heli (Qinghai) Operation And Maintenance Technology Co., Ltd., Qinghai Zhongkong Solar Power Co., Ltd.,（青海中控太陽能發電有限公司）and Qinghai Zhongkong Solar Power Co., Ltd.（青海眾控太陽能發電有限公司）.

FOREIGN CURRENCY EXPOSURE

Renminbi (“RMB”) is the functional currency of the Group. Currencies other than RMB expose the Group to foreign currency risk. The Group has foreign currency sales and its revenue and costs are denominated in RMB, India Rupees (“INR”) and United States dollars (“USD”). Some of the Group’s bank balances are denominated in USD, Singapore dollars (“SGD”), Hong Kong dollars (“HKD”) and INR, whilst some costs may be denominated in HKD, SGD and INR. The Group has implemented a hedging policy to strike a balance between the uncertainty and the risk of opportunity loss in light of the growing significance of its exposure to the fluctuations in foreign currency, under which policy foreign exchange forward contracts may be used to eliminate the currency exposure. The Group has entered into certain forward contracts as at the end of the Reporting Period on hedging the expected fluctuations of the exchange rate of USD and will continue to monitor foreign exchange exposure and consider hedging other significant foreign currency exposure should the need arise.

DONATION AND CAPITAL COMMITMENTS

As at 31 December 2025, the capital commitments of the Group in respect of the purchase of property, plant and equipment were nil (31 December 2024: approximately RMB914,000).

The Group’s PRC subsidiary has signed an intention letter to donate RMB500,000 per annum from 2007 for a period of 20 years to a charitable organization in the PRC when making profit in the year. As at 31 December 2025, the donation commitment was nil (31 December 2024: approximately RMB1,000,000).

CHARGE OR PLEDGE OF ASSETS

As at 31 December 2025, deposits amounting to approximately RMB576,757,000 (2024: RMB403,659,000) were pledged to banks as guarantees for bidding of customer contracts and issuing letter of guarantee. Pledged bank deposits bear interest at an average effective interest rates at 1.2% (2024: 1.46%) per annum and for a tenure of approximately 4 to 60 months (2024: 4 to 60 months). Remaining pledged deposits is pertaining to the security deposit for the commodity future contracts entered to hedge the purchase of raw materials during the year.

As at 31 December 2025, certain deposits amounting to approximately RMB335,000,000 (2024: RMB35,000,000), electric generating facilities amounting to approximately RMB756,607,000 (2024: RMB790,562,000) and certain trade and bills receivables relating to income receipts right from the sales of electricity amounting to approximately RMB286,228,000 (2024: RMB277,050,000) were pledged to banks for secured bank loans and banking facilities at an interest rate of 2.6% – 3.65% (2024: 2.40% – 4.25%) per annum. Pledged bank deposits bear interest at an average effective interest rates at 3.00% (2024: 3.00%) per annum and for 25 to 48 months (2024: 25 months). The pledged deposits will be released by the expiry of relevant banking facilities.

LIQUIDITY AND FINANCIAL RESOURCES

As at 31 December 2025, the Group’s total assets were approximately RMB4,926,970,000 (2024: RMB4,666,187,000) (of which current assets were approximately RMB2,798,547,000 (2024: approximately RMB2,928,291,000) and non-current assets were approximately RMB2,128,423,000 (2024: approximately RMB1,737,896,000)), the total liabilities were approximately RMB2,619,041,000 (2024: approximately RMB2,319,095,000) (of which current liabilities were approximately RMB1,419,907,000 (2024: approximately RMB1,229,692,000) and non-current liabilities were approximately RMB1,199,134,000 (2024: approximately RMB1,089,403,000)), and shareholder’s equity attributable to owners of the Company reached approximately RMB1,519,179,000 (2024: approximately RMB1,561,877,000). As at 31 December 2025, the Group’s total cash, time deposits and pledged deposits were approximately RMB1,444,308,000 (31 December 2024: approximately RMB1,455,212,000). As at 31 December 2025, the Group has current bank loans due within one year of approximately RMB759,233,000 (2024: approximately RMB424,602,000) carrying fixed interest rates and non-current bank loans of approximately RMB1,135,883,000 (31 December 2024: approximately RMB1,073,417,000) carrying fixed interest rates.

The Group generally finances its operations from cash flows generated internally and short-term and long-term bank borrowings.