Anhui Construction Engineering 2025 Annual Report Analysis: Revenue decreased by 13.79% to 83.2 billion, net cash flow from investing activities dropped by 32.22%

Core Profitability Indicator Interpretation

Operating Revenue: Scale Shrinking but Gross Margin Improving

In 2025, Anhui Construction achieved operating revenue of 83.198 billion yuan, a year-on-year decrease of 13.79%, primarily due to a decline in revenue from construction operations. By business segment, infrastructure investment and engineering revenue was 67.316 billion yuan, down 11.83% year-on-year; real estate revenue was 5.488 billion yuan, down 15.82% year-on-year; and other business revenue was 8.048 billion yuan, down 25.79% year-on-year. However, thanks to a greater reduction in costs than the decline in revenue, the overall gross margin increased compared to the previous year, with the gross margin for infrastructure investment and engineering rising by 3.13 percentage points to 13.51%, and the gross margin for real estate rising by 1.90 percentage points to 9.30%.

Net Profit: Profit Growth Amid Revenue Decline

The company achieved a net profit attributable to shareholders of the listed company of 1.526 billion yuan in 2025, a year-on-year increase of 13.45%; total profit was 3.076 billion yuan, a year-on-year increase of 16.01%. Against the backdrop of declining revenue, profit growth was mainly attributed to effective cost control, with operating costs dropping by 16.16% year-on-year, a decline greater than that of revenue, while the optimization of the expense structure also contributed to profit margins.

Net Profit Excluding Non-Recurring Items: Resilience of Core Business Profitability

The net profit attributable to shareholders of the listed company, excluding non-recurring gains and losses, was 1.375 billion yuan, a year-on-year increase of 9.31%, lower than the net profit growth rate, mainly due to non-recurring gains and losses reaching 150 million yuan in 2025, an increase of 73.6% year-on-year, of which the reversal of impairment provisions for accounts receivable subject to individual impairment testing contributed significantly to non-recurring gains and losses. The growth in net profit excluding non-recurring items indicates that the core business still has profit resilience.

Earnings Per Share: Slight Increase in Basic Earnings, Slight Decline in Excluding Non-Recurring Earnings

The basic earnings per share in 2025 was 0.80 yuan/share, a year-on-year increase of 2.56%; the basic earnings per share excluding non-recurring gains and losses was 0.71 yuan/share, a year-on-year decrease of 2.74%. The difference in changes between the two was mainly due to the increase in non-recurring gains and losses, and the slight decline in earnings per share excluding non-recurring items reflects that the growth in core business profitability was weaker than the overall growth rate of net profit.

Analysis of Period Costs Structure

Total Expenses: Scale Shrinking, Structure Optimizing

In 2025, the company’s total period expenses amounted to 6.594 billion yuan, a year-on-year decrease of 4.02%. Among these, selling expenses, financial expenses, and R&D expenses all saw varying degrees of decline, while management expenses saw a slight increase. The overall expense structure showed signs of optimization, and the decline in financial expenses effectively alleviated the company’s financial burden.

Selling Expenses: Slight Decline, Stable Control

Selling expenses were 271 million yuan, a year-on-year decrease of 0.97%, primarily due to a reduction in advertising and sales agency fees. The scale of selling expenses remained stable, accounting for 0.33% of revenue, roughly in line with the previous year, indicating that the company’s control over the sales side has not relaxed.

Management Expenses: Slight Increase, Salaries as Main Factor

Management expenses were 2.548 billion yuan, a year-on-year increase of 7.66%, primarily due to increased employee salaries. Management expenses accounted for 3.06% of revenue, an increase of 0.31 percentage points compared to the previous year. In the context of declining revenue, the growth of management expenses requires attention to subsequent control efficiency.

Financial Expenses: Significant Decline, Notable Relief Effects

Financial expenses were 1.823 billion yuan, a year-on-year decrease of 9.68%, primarily due to reduced net interest expenses. The company fully leveraged its AAA credit rating advantage, expanded financing channels, and reduced financing costs. The decline in financial expenses directly enhanced profit margins.

R&D Expenses: Scale Shrinking, Yet High Investment Maintained

R&D expenses were 1.953 billion yuan, a year-on-year decrease of 8.92%, primarily due to reduced research and development investments. However, R&D expenses still accounted for 2.35% of revenue. The company established one provincial-level enterprise technology center, one high-tech enterprise, and four specialized and innovative small and medium-sized enterprises, obtaining 138 invention patents and 227 utility model patents, demonstrating the effectiveness of technology conversion from R&D investments.

R&D Personnel and Innovation Capability

The company has implemented the “Talent Strong Enterprise” strategy in depth, employing nearly 2,500 research personnel. It has established a multi-layered innovation matrix led by a national-level technology center and a postdoctoral research workstation, with a high-tech research institute at its core and provincial-level technology centers as support. In 2025, the company deepened cooperation with multiple universities and research institutions, receiving 28 provincial and ministerial-level and industry-level science and technology progress awards, with significant achievements in the transformation of scientific and technological results. Technologies such as unmanned intelligent paving and low-carbon energy-saving heating for asphalt mixtures have been promoted and applied in projects, achieving cost reduction and efficiency enhancement.

Cash Flow and Capital Operation

Operating Activity Cash Flow: Slight Improvement, Stable Self-Sufficiency

The net cash flow generated from operating activities was 1.288 billion yuan, a year-on-year increase of 6.07%, primarily due to increased net inflows from construction projects. The positive growth of operating cash flow indicates that the company’s core business self-sufficiency remains stable, providing a basic guarantee for daily operations.

Investment Activity Cash Flow: Large Net Outflow, Increased Expansion Efforts

The net cash flow from investment activities was -13.113 billion yuan, a year-on-year decrease of 32.22%, primarily due to increased expenditures on highway investment projects. In 2025, the company independently or in partnership invested in 12 highways, with the self-funded Xu-Huai-Fu highway segments in Huai Bei and Suzhou having commenced operations. The intelligent manufacturing (Changfeng) industrial park phase one was fully completed and put into production. The large-scale investment layout indicates that the company is still actively expanding its business territory, but it has also brought significant financial pressure.

Financing Activity Cash Flow: Significant Growth, Ensuring Investment Funds

The net cash flow from financing activities was 13.707 billion yuan, a year-on-year increase of 24.03%, primarily due to increased net inflows from financing for highway investment projects. The company has secured funding for investment projects by broadening financing channels, and the increase in financing cash flow matches the substantial outflow from investment cash flow, supporting the company’s expansion strategy.

Risk Factor Reminder

Industry Cyclicality Risk

The construction industry is significantly influenced by macroeconomic factors and fixed asset investments. In 2025, the national construction industry’s added value decreased by 1.1% year-on-year, and the new contract value decreased by 5.51% year-on-year, putting pressure on the industry’s prosperity. If the growth rate of fixed asset investments continues to slow in the future, the company’s infrastructure investment and engineering business will face risks of narrowing market space and intensified competition.

Project Investment Risk

The company has made large-scale investments in infrastructure projects such as highways. These projects involve large investment amounts and long return periods. If the construction progress of projects does not meet expectations or operational revenues do not reach targets, it may face risks in capital recovery, which would also increase the company’s debt burden and financial risks.

Real Estate Transformation Risk

The company’s real estate business is transforming towards health care and technology parks, facing multiple uncertainties in market positioning, operational models, and policy regulations during the transformation process. If the transformation progress does not meet expectations, it may impact the profitability contribution from this segment.

Executive Compensation Situation

During the reporting period, the total pre-tax compensation for the company’s chairman, Qian Shenchun, was 801,600 yuan, the total pre-tax compensation for the general manager, Li Yougui, was 782,300 yuan, and the total pre-tax compensation range for the vice presidents was 553,200 yuan to 721,800 yuan. The total pre-tax compensation for the financial director, Liu Qiang, was 685,400 yuan. The overall compensation level is consistent with that of state-owned enterprises in the industry and is linked to the company’s operational performance to a certain extent, ensuring the stability of the management team.

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Editor: Xiao Lang Quick Report