Traditional Core Business Profit Hits Bottom, New Business Yet to Scale Up, Guanhao Hi-Tech Faces Over 300 Million Yuan Loss in 2025

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Source: Securities Star

In 2025, the domestic paper industry falls into a cyclical low due to overcapacity, weak demand, and falling prices, putting overall profitability under pressure. Against this backdrop, key companies in the specialty paper and white card paper sectors, such as Guanhao High-tech (600433.SH), are also struggling to withstand the industry winter. The recently released annual report shows that the company’s revenue declined in 2025, and it even posted a loss.

Securities Star notes that, facing continued industry downturn, Guanhao High-tech is experiencing a dual dilemma: pressure on its traditional main business and the lack of scale in new businesses. On one hand, as domestic paper capacity continues to expand and external demand recovers weakly, the company’s main business profit margins are shrinking; at the same time, asset impairment losses from shutting down old production lines further drag down current performance. On the other hand, new products such as reverse osmosis membrane support materials and carbon paper raw materials are still in market entry verification, without stable income sources. During this critical phase of transitioning from old to new drivers, the failure of new businesses to generate cash flow and the ongoing drain on traditional main business result in high liquidity risk for the company.

1. Core main business profits hit bottom, asset impairments drag down earnings

According to Guanhao High-tech’s 2025 annual report, the company’s performance showed a clear decline. Data indicates that in 2025, the company achieved revenue of 7.152 billion yuan, down 5.75% year-over-year; net profit attributable to shareholders was a loss of 304 million yuan, a sharp decrease of 265.29% compared to the previous year. This is the second annual net loss recorded by Guanhao High-tech in nearly four fiscal years.

Looking at quarterly operations, the overall trend was worsening. The first quarter saw a small profit, with net profit attributable to shareholders of 647,200 yuan; in the second quarter, losses began to appear, with a quarterly loss of 58.57 million yuan; the third quarter’s loss narrowed to 36.4 million yuan; but in the fourth quarter, losses surged to 209 million yuan, dragging down the full-year performance.

Regarding the shift from profit to loss, the company stated in the annual report that macro and industry pressures were the main factors. The overall capacity of the domestic paper industry continues to expand, coupled with weak external demand, leading the industry into a correction cycle. Prices for main products like white card paper and specialty paper have been under continuous downward pressure, directly compressing the company’s profit margins.

Specifically, in the business segments, the core specialty paper segment generated revenue of 5.757 billion yuan, a slight increase of 0.23% year-over-year, accounting for over 80% of total revenue. However, profitability in this segment declined significantly, with gross margin down 4.57 percentage points to 3.51%. Meanwhile, another main business, specialty materials, achieved revenue of 1.268 billion yuan, down 9.74% year-over-year, with gross margin decreasing by 2.6 percentage points. The simultaneous decline in gross margins of these two major businesses caused the overall gross margin to fall to 4.91%, nearly 5 percentage points lower than the previous year, reaching a new low since the company’s listing.

Securities Star observes that, amid shrinking profit margins in core businesses, the company’s various period expenses increased year-over-year, further intensifying profit pressure. Data shows that in 2025, sales expenses were 77.71 million yuan, up 10.50%; management expenses reached 225 million yuan, up 6.68%; financial expenses were 79.33 million yuan, up 14.87%. Additionally, R&D expenses decreased by 35.32% to 236 million yuan.

Beyond expense pressures, large asset impairments also significantly impacted performance. To optimize capacity and divest inefficient assets, Guanhao High-tech shut down two old production lines at its controlling subsidiary, Zhuhai Hongta Renheng, and made corresponding asset impairment provisions based on prudent principles. Financial data shows that in 2025, the company recorded asset impairment provisions of about 220 million yuan and credit impairment losses of 37.9 million yuan, totaling a reduction of approximately 258 million yuan in profit, directly leading to a large annual loss.

It is understood that the shut-down lines had long been troubled by overcapacity, intensified market competition, and aging equipment, and had been operating at a loss for some time. Although the company states that shutting down old lines is a strategic adjustment to “focus on core businesses and improve quality and efficiency,” this move caused a short-term impact on performance and has not yet resulted in substantial cost savings.

Under multiple factors, the company’s core profitability faces severe challenges. The financial report shows that in 2025, Guanhao High-tech’s net profit attributable to shareholders after non-recurring items was a loss of 280 million yuan, a decline of nearly 650%. This indicates that, excluding non-recurring gains such as asset disposals and government subsidies, the main business has effectively entered a loss state, and its self-sustaining ability is under test.

2. New businesses have yet to generate cash flow, and liquidity gaps remain unfilled

In response to current operational difficulties, Guanhao High-tech is attempting to break through by advancing integrated pulp and paper layout and expanding new materials businesses. In the high-end product field, the company is focusing on high-tech products such as reverse osmosis membrane support materials, fuel cell carbon paper, and specialty fiber composites, aiming to create a second growth curve through technological upgrades.

Progress includes the Zhanjiang Zhongzhi 400,000-ton pulp project, which was brought into production ahead of schedule at the end of November 2025 and is now in capacity ramp-up, potentially enhancing the company’s raw material cost control. Meanwhile, the trial production line for specialty fiber composites was also put into operation in December 2025, currently in sample testing and market entry verification. However, it should be noted that these new businesses have not yet achieved scaled sales revenue, making it difficult to offset the revenue and profit declines from traditional main businesses in the short term.

It is important to point out that the development of new materials from R&D, sampling, verification to mass supply generally takes a long time and faces challenges such as strict certification and slow customer onboarding. Guanhao High-tech has admitted during investor relations activities that all projects are still in construction stages, and the timeline and benefits of mass production depend on technological validation and market development.

Securities Star notes that, amid ongoing losses in core businesses, the simultaneous push for integrated pulp and paper and new materials further increases the company’s capital pressure.

Financial data shows that the net cash flow from operating activities shifted from a net inflow of 294 million yuan in 2024 to a net outflow of 312 million yuan in 2025, a sharp decline of 206.37%. The cash flow pattern indicates that in the first half of the year, net cash outflow from operations was as high as 922 million yuan, representing the main part of the annual cash pressure; although the second half saw some easing due to improved receivables, the overall annual situation remained tight. The company explained that this was mainly due to declining operating efficiency, reduced income, narrower gross margins, and increased rigid costs such as raw material procurement.

While operating cash flow was continuously negative, investment activities also faced significant cash outflows. Data shows that in 2025, net cash flow from investing activities was -713 million yuan, down 820.79% year-over-year. The company stated this was mainly due to increased capital expenditure on the pulp project, which entered a phase of concentrated investment, and the previous year’s large cash inflow from divestment of subsidiaries’ equity, which created a high base effect and further amplified the decline.

Faced with weakened operational self-sufficiency and high investment outlays, the company has had to increase financing to ease liquidity pressures. In 2025, net cash flow from financing activities was 572 million yuan. However, this also means an involuntary increase in interest-bearing debt. As a result, the company’s financial expenses rose by 11.77% to 84.79 million yuan.

From the asset-liability structure, debt repayment pressure is already high. As of the end of the reporting period, short-term loans amounted to 1.892 billion yuan, non-current liabilities due within one year were 526 million yuan, and long-term loans reached 2.074 billion yuan, while cash reserves were only 740 million yuan. Short-term debt repayment capability is under significant stress.

In the industry’s winter, Guanhao High-tech’s traditional main business is suffering from multiple factors and posting losses. Although new businesses are being developed, they are still in verification stages and cannot support performance in the short term. Coupled with tight cash flow and high debt repayment pressure, the company faces unprecedented operational challenges. Whether it can turn around through the implementation of integrated pulp and paper and breakthroughs in new materials remains to be seen, depending on industry recovery and project execution. (This article first published by Securities Star, author | Xia Fenglin)

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