Eagle Electric's 2025 revenue rises but profits do not: inventory and accounts receivable surge, and the debt ratio climbs

$Eaglerise Electric & Electronic (002922.SZ)$$Eaglerise Electric & Electronic (CHINA) Co., Ltd. (811123.HK)$

Amid strong momentum for A+H listings, Eagle Electric Co., Ltd. (hereinafter referred to as 'Eagle Electric,' SZSE: 002922) is also pushing ahead with its listing on the Hong Kong Stock Exchange, with Guotai Haitong Securities serving as the sole sponsor.

Eagle Electric’s Hong Kong listing plan dates back to November 2025. On November 24, 2025, the company issued a 'Notice Regarding the Planning of an H-share Offering and Listing on The Stock Exchange of Hong Kong Limited,' stating that the rationale for the Hong Kong listing is to further advance its internationalization strategy and enhance its global profile and overall competitiveness.

Revenue growth without corresponding profit growth in 2025; conditions improved in the first quarter

According to its prospectus and Tianyancha, Egor was founded in 1999 and is a global supplier of power equipment and solutions. The company offers products spanning renewable energy, data centers, power distribution, industrial control, and lighting. It specializes in transformer equipment, power devices, and magnetic components. Additionally, the company provides integrated solutions tailored to specific application scenarios, aiming to enable reliable and efficient operations for its global customers.

In 2024, the top five Chinese suppliers in the global medium-voltage transformer equipment industry accounted for 9.7% of the market by revenue, with Egor ranking second among these Chinese suppliers, holding a 2.2% market share.

During the historical reporting period, Egor’s revenue primarily derived from transformer equipment products, lighting products, and other products. Specifically, transformer equipment products include offerings for renewable energy, data centers, power distribution, and industrial control applications.

For the reporting periods covering 2023, 2024, and January–September 2025 (hereinafter referred to as the 'Reporting Periods'), revenue from transformer equipment products amounted to RMB 2.627 billion, RMB 3.39 billion, and RMB 2.782 billion, respectively, representing 72.6%, 73.7%, and 73.8% of total revenue in each period—consistently accounting for over 70% of total revenue, demonstrating stable contribution.

During the Reporting Periods, lighting products generated revenue of RMB 812 million, RMB 978 million, and RMB 661 million, respectively, accounting for 22.4%, 21.3%, and 17.5% of total revenue, making it the company’s second-largest revenue source.

Additionally, approximately 5% of the company's revenue came from other products. During the Reporting Periods, revenue from other products totaled RMB 178 million, RMB 234 million, and RMB 327 million, respectively, representing 5%, 5%, and 8.7% of total revenue—remaining relatively low.

Overall, during the Reporting Periods, Egor recorded total revenue of RMB 3.616 billion, RMB 4.602 billion, and RMB 3.769 billion, and net profit of RMB 217 million, RMB 300 million, and RMB 188 million, respectively, reflecting generally robust operational performance.

Notably, during the Reporting Periods, the company’s gross profit margins were 21.7%, 20.1%, and 17.8%; net profit margins were 6.0%, 6.5%, and 5.0%; and return on equity (weighted average) stood at 9.3%, 9.3%, and 5.5%, respectively. In January–September 2025, key profitability metrics all declined.

According to Egor’s A-share financial reports,In 2025, the company reported revenue of RMB 5.264 billion, an increase of 13.4% year-over-year (YoY); attributable net profit was RMB 2 billion, down 31.45% YoY; and adjusted attributable net profit was RMB 1.84 billion, down 26.32% YoY. For the full year of 2025, both attributable net profit and adjusted attributable net profit declined significantly, diverging from the growth in revenue.

Additionally, the company’s gross margin in 2025 was 17.78%, down 2.55 percentage points YoY. The decline in gross margin was primarily driven by lower selling prices for certain new energy products. Over a longer time horizon, both revenue and net profit declines marked some of the company’s worst performance in recent years.

In the first quarter of 2026, the company reported revenue of RMB 1.276 billion, up 17.71% YoY; attributable net profit of RMB 686.739 million, up 63.53% YoY; and adjusted attributable net profit of RMB 522.615 million, up 89.82% YoY.

According to a research report from Dongwu Securities, after excluding foreign exchange losses, the company’s attributable net profit and adjusted attributable net profit rose by 142% and 225% YoY, respectively, indicating robust underlying operational performance. Reported earnings exceeded the midpoint of the company’s prior guidance and surpassed market expectations.

Profit upside from overseas operations is expected to materialize progressively throughout 2026, and newly acquired major customers will create significant long-term growth potential. 2025 marked the company’s strategic transition year—from relying on large domestic clients to directly expanding overseas. Following the gradual ramp-up of overseas manufacturing facilities, the proportion of direct overseas sales began increasing steadily starting in Q3 2025.

Dongwu Securities forecasts that as the share of direct overseas sales continues to rise in 2026, the company’s quarterly profitability is likely to maintain a sequential upward trend. On the new customer front, the company is actively collaborating with leading European and U.S. photovoltaic and energy storage integrators. These partnerships are expected to translate into tangible orders and revenue in the second half of 2026, with volume scaling beginning in 2027 to unlock substantial long-term growth potential.

Dongwu Securities noted: The company launched its high-performance Juno-series SST products, which were showcased in the U.S. to accelerate overseas sampling. In April 2026, the company successfully introduced the Juno-series SST products featuring a conversion efficiency of at least 98.4%, a power density of 250 kW/m², and support for 800+ VDC output—demonstrating outstanding performance. To expedite the overseas rollout of SST products, the company exhibited them immediately after launch at a U.S. data center expo, significantly enhancing its international brand recognition. Sampling in overseas markets is expected in the second half of 2026, enabling the company to capture early market share, followed by limited production in 2027 and meaningful incremental contributions from 2028 onward.

Dongwu Securities maintains its forecasts for Eiger’s attributable net profit at RMB 480 million, RMB 740 million, and RMB 1.18 billion for 2026–2028, representing YoY growth of +139%, +54%, and +60%, respectively. Based on current share prices, this implies price-to-earnings (P/E) multiples of 36x, 24x, and 15x, and the firm reiterates its 'Buy' rating.

Changjiang Securities also pointed out:On the revenue side, the company’s Q1 2026 performance was primarily driven by its overseas business. Domestic new energy revenue likely faced headwinds due to a high base effect: in Q1 2025, domestic new energy deliveries were elevated amid the 'May 31' policy-driven installation rush. Overseas, especially in the U.S. market, demand for transformers has been rising steadily, supported by infrastructure build-out for AI computing capacity. The company is actively executing a global strategic layout, operating nine manufacturing bases worldwide—four of which are located overseas (Thailand, the United States, Malaysia, and Mexico). Its smart transformer manufacturing facility in Texas, USA, commenced production in October 2025 and, together with capacity in Mexico, will establish localized supply capabilities for the North American market, significantly improving delivery reliability and shortening lead times.

Inventory and accounts receivable surged, and the debt ratio also climbed.

Aside from business-related factors, Eger’s sharp rise in expense ratios may also be a key reason for its shrinking profitability.

During the reporting periods, the company’s R&D expenses were RMB 186 million, RMB 191 million, and RMB 174 million, accounting for 5.1%, 4.2%, and 4.6% of revenue in the respective periods; general and administrative expenses were RMB 225 million, RMB 306 million, and RMB 225 million, representing 6.22%, 6.65%, and 5.97% of revenue; and sales expenses were RMB 88.491 million, RMB 110 million, and RMB 102 million, or 2.45%, 2.39%, and 2.71% of revenue.

In 2025, Eger’s sales expenses amounted to RMB 126 million, up 14.91% year-over-year; administrative expenses reached RMB 313 million, up 12.43%; financial expenses totaled RMB 49.5482 million, surging 103.16%; and R&D expenses came in at RMB 239 million, an increase of 25.05%. Overall, the company’s period expenses rose by RMB 124 million year-over-year, or 20.54%.

Regarding the reasons for the increases, Eger stated in its annual report: sales expenses increased by RMB 16.3348 million year-over-year, primarily due to higher employee compensation resulting from revenue growth in 2025; administrative expenses rose by RMB 34.6324 million, mainly because of expanded operations leading to higher office, travel, depreciation, and amortization costs for management staff; R&D expenses grew by RMB 47.8957 million, reflecting the company’s strong emphasis on technological innovation and new product development, with continued investment to enhance technical barriers and competitiveness; and financial expenses increased by RMB 25.1596 million, largely driven by higher foreign exchange losses and increased interest expenses on bank borrowings.

In the first quarter of 2026, the company’s sales expenses were RMB 34.5001 million, up 2.5% year-over-year; administrative expenses were RMB 64.7487 million, up 17.48%; R&D expenses were RMB 50.186 million, up 1.45%; and financial expenses were RMB 38.2789 million, soaring 1,331.74% year-over-year. Period expense ratios all increased, primarily due to higher financial expenses stemming from foreign exchange losses.

In addition to volatile profitability, Eger also faces the challenge of managing its sharply rising inventory and collecting outstanding accounts receivable.

At the end of each reporting period, the company’s inventory stood at RMB 484 million, RMB 734 million, and RMB 799 million, with inventory turnover days of 54, 59.6, and 66.8, respectively; trade receivables and notes receivable were RMB 13.38 billion, RMB 20.93 billion, and RMB 16.54 billion, with corresponding turnover days of 124.6, 134.2, and 134.2.

As of September 30, 2025, inventory of RMB 7.99 billion represented approximately 342.3% of net cash flow from operating activities during the same period, significantly tying up operating capital. Such elevated inventory levels heighten the company’s exposure to risks from market demand volatility, pricing pressure, and product obsolescence—particularly in the renewable energy and power infrastructure sectors, where technologies evolve rapidly and investment patterns are cyclical.

By the end of 2025, Eger’s inventory further increased to RMB 9.58 billion, and accounts receivable rose to RMB 17.16 billion, primarily driven by higher customer collections and overall asset growth during 2025.

The company also noted that the continuous increase in inventory balances and days of inventory outstanding indicates rising pressure from holding inventory, reflecting the risk of slow product turnover or sluggish sales when market demand shifts.

As of the end of each reporting period, Egor’s net cash flow from operating activities amounted to RMB 173 million, RMB 179 million, and RMB 234 million, respectively, while its cash and cash equivalents at period-end stood at RMB 6.34 billion, RMB 5.52 billion, and RMB 9.77 billion, respectively.

In 2025, the company’s net cash flow from operating activities reached RMB 6.41 billion, an increase of 256.94% year-over-year, primarily driven by higher customer collections.

Regarding solvency, as of the end of each reporting period, Egor’s current ratios were 1.9, 1.2, and 1.2, respectively, and its asset-liability ratios were 41.3%, 56.3%, and 54.7%, respectively, indicating a rising debt level and increased debt repayment pressure. In 2025, the company’s asset-liability ratio rose to 57.94%, further climbing to 59.55% by the first quarter of this year.

The stock price has risen by more than 30% this year, and senior executives have announced a share reduction plan.

In terms of equity structure, as of the latest practicable date, Xiao Juncheng, founder and chairman of the board, directly held 11.5993 million A-shares of Egor, representing approximately 2.8% of the voting rights at the company’s shareholders’ meetings (excluding the 3.0799 million treasury A-shares held by the company as of the latest practicable date). MegaMax directly held 123 million A-shares, representing approximately 29.2% of the voting rights at the company’s shareholders’ meetings (excluding the 3.0799 million treasury A-shares held by the company as of the latest practicable date).

Since MegaMax is 100% controlled by Xiao Juncheng, Xiao Juncheng and MegaMax together constitute the company’s controlling shareholder group. As of the latest practicable date, Xiao Juncheng and MegaMax collectively had the right to exercise approximately 32.0% of the voting rights at the company’s shareholders’ meetings (excluding the 3.0799 million treasury A-shares held by the company as of the latest practicable date). Therefore, Xiao Juncheng and MegaMax form a group of controlling shareholders.

As of the end of each reporting period, Egor declared or paid cash dividends to shareholders amounting to RMB 75.2 million, RMB 116 million, and RMB 116 million, respectively, totaling RMB 3.072 billion in dividends.

Beyond its core business, during the critical window for its IPO on the Hong Kong Stock Exchange, Egor drew considerable external criticism over multiple senior executives reducing their stakes in the company.

On February 3, 2026, Egor issued a 'Pre-disclosure Announcement Regarding Share Reductions by Directors and Senior Management.' The announcement stated that Zhao Nannan (director and senior management), Liu Jingyuan, Huang Huijie, Chen Lijun, and Liang Lunshang (all senior management) held 773,000 shares, 221,300 shares, 176,400 shares, 234,000 shares, and 70,000 shares of the company, respectively, accounting for 0.1840%, 0.0527%, 0.0420%, 0.0557%, and 0.0167% of the company's total share capital (excluding shares held in the repurchase dedicated account, hereinafter the same). They plan to reduce their holdings by no more than 193,300 shares, 55,300 shares, 44,100 shares, 58,500 shares, and 17,500 shares, respectively, via centralized bidding or block trading within three months starting 15 trading days after the disclosure date (March 5, 2026, to June 4, 2026). The proposed reductions represent 0.0460%, 0.0132%, 0.0105%, 0.0139%, and 0.0042% of the company’s total share capital, respectively, with the reason cited as personal funding needs of the shareholders.

Bai Wenxi, Deputy Chairman of the China Enterprise Capital Alliance, stated: 'The recent executive share sales by Eigor do not affect the stability of its controlling rights or the compliance of its listed entity. However, they could prompt regulators to closely scrutinize management’s shareholding stability, confidence in the company’s development, and the effectiveness of internal governance—potentially leading to a slower review pace, downward pressure on offering valuation, and reduced investor participation, creating an ongoing governance-related negative focal point in the market.'

From a capital markets perspective, as of the close on May 22, the company's stock price has risen by more than 30% year-to-date.

In this IPO, Eigor plans to primarily allocate the proceeds toward overseas expansion and building a global sales network; advancing digital and intelligent upgrades at manufacturing facilities both domestically and abroad; implementing digital transformation at its domestic factories; research, development, and commercialization of next-generation solid-state transformers (SST) and Panama power systems; strategic investments and acquisitions across the upstream and downstream segments of its value chain and in key strategic sectors; and supplementing working capital and general corporate purposes. (Produced by Harbor Financial)

Harbor Business Observer, reporter Zifu Shi

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