CCCC(601800)COMMENTS ON FY25 EARNING RESULTS：EARNINGS UNDER PRESSURE DUE TO DECLINING GPM OPERATING CASH FLOW SIGNIFICANTLY IMPROVED

Key takeaway
In 2025, the company achieved an operating revenue of RMB 731.11 bn, down 5.3% YoY; net profit attributable to the parent company was RMB 14.75 bn, down 36.9% YoY. The decline was mainly due to a drop in GPM, increased impairment provisions, and significant pressure on 4Q earnings. The company's operating cash flow continued to improve, with a net inflow of RMB 15.33 bn, up 22.6% YoY. The value of newly signed contracts totaled RMB 1.8837 tn, basically flat compared to the previous year. Among them, newly signed overseas business reached RMB 392.4 bn, up 9.1% YoY, with its proportion rising to 21%, consolidating the company's leading position in overseas expansion. The company's dividend payout ratio increased to 21.5%, up 0.5 pct YoY, continuously optimizing shareholder returns.
Event
According to the company’s 2025 earnings results, achieving a full-year operating revenue of RMB 731.11 bn, a YoY decrease of 5.3%, and a net profit attributable to the parent company of RMB 14.75 bn, a YoY decrease of 36.9%. The company plans to distribute a cash dividend of RMB 0.7729 (tax inclusive) for every 10 shares to all shareholders. Together with the interim dividend, the total annual cash dividend is approximately RMB 3.17 bn, representing a dividend payout ratio of 21.5%.
Quick Take
Earnings under pressure due to declining GPM and increased impairments, while operating cash flow continued to improve. In 2025, the company achieved an operating revenue of RMB 731.11 bn, a YoY decrease of 5.3%, and a net profit attributable to the parent company of RMB 14.75 bn, a YoY decrease of 36.9%, with a significant decline in 4Q performance. Main reasons for the performance decline: 1) GPM declined, recording a full-year GPM of 11.4%, down 0.9 pct from the same period last year; 2) Total impairment provisions were RMB 1.52 bn higher than the previous year, causing a significant erosion of profits. The company's full-year operating cash flow saw a net inflow of RMB 15.33 bn, up 22.6% YoY, with a net operating cashflow to net profit ratio of 1.0, indicating continuous improvement in cash flow quality. The period expense ratio decreased by 0.3 pct YoY to 6.0%, showing good expense control.
The value of newly signed contracts remained stable, with impressive growth in energy engineering. In 2025, the company's newly signed contract value amounted to RMB1.88367 tn, a YoY increase of 0.1%, of which the newly signed contract value of overseas business was RMB392.4 bn, a YoY increase of 9.1%, accounting for 21%. In emerging fields, newly signed energy engineering projects amounted to RMB122.4 bn, a YoY increase of 50.4%; newly signed agriculture engineering projects amounted to RMB20.1 bn, a YoY increase of 135.9%. As of the end of 2025, the company's uncompleted contract value in execution reached RMB3.446tn, providing strong support for future performance development.
The dividend payout ratio continues to rise. The company plans to distribute a total dividend of RMB3.17 bn in 2025, with a dividend payout ratio of 21.5%, an increase of 0.5 pct over the previous year. Based on the current market cap, the dividend yield is about 2.6%. In addition to dividends, the company also maintains reasonable value through shareholder holdings increases and stock buybacks. From 2025 to date, CCCC Group has increased its holdings by RMB220 mn, and the company has repurchased RMB410 mn of stocks. With the continuous optimization of the dividend policy and holdings increases and stock buybacks, shareholder returns are expected to steadily improve.
Downgrade earnings expectations, maintain Buy rating. We expect the company's EPS for 2026-2028 to be RMB0.91/RMB0.93/RMB0.96(the original forecast for 2026-2027 EPS was RMB1.55/RMB1.59), and maintain the Buy rating and the target price of RMB13.31 unchanged.
Risks:
1. Construction progress is greatly affected by the availability of funds, natural conditions, etc., and delays may occur, thereby affecting revenue collection; overseas project progress is also affected by the local political and security environment.
2. The continued downturn in the real estate market may have various adverse effects on construction enterprises. The impact of real estate on construction enterprises is mainly reflected in: 1) The current land market is sluggish, and local government land transfer revenues have declined significantly, adversely affecting the sources of infrastructure funding; 2) The continued downturn in the real estate market, with significant declines in commercial housing sales and new starts, has affected the new orders of housing construction enterprises, while the decline in completed area has affected the orders of decoration enterprises, adversely affecting the business development of related sub-sector players; 3) The default of real estate enterprises brings impairment pressure to construction enterprises with receivables from real estate enterprises and inventory of real estate development projects.
3. New energy business expansion may fall short of expectations. Some traditional construction enterprises are expanding into new fields such as new energy consulting, engineering, and operations. However, these fields rely heavily on government resources and their own professional capabilities, and there may be a risk of expansion failure
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