Jiangsu HHCK

All figures are in RMB millions unless stated otherwise, under PRC Accounting Standards for Business Enterprises. FY2022–FY2025 figures come from the annual reports and the IPO prospectus series. FY2021 revenue was RMB 347 million (IPO prospectus). Hengsuo Huawei is included from 1 November 2025.

Income statement

Revenue CAGR from FY2022 to FY2025 was 14.7%. FY2021 revenue of RMB 347 million was a cyclical peak. Revenue then declined for two years before recovering.

FY2025 operating profit was RMB 20.8 million, down 48.6%. Profit before share-based payment was RMB 49.1 million, up 10.8% from RMB 44.3 million. That points to share-based compensation of roughly RMB 25 million in FY2025. Operating income and EBITDA are not reported as separate lines.

2025 and 2026 quarterly trend

For 9M 2026, revenue was RMB 763.1 million (+173.1%), attributable net profit RMB 78.3 million (+290.5%) and recurring net profit RMB 73.2 million (+290.0%). Basic EPS was RMB 0.55 on the post-bonus share base. H1 2026 gross margin rose to 30.34%. H1 2026 net profit before share-based payment was RMB 46.8 million, up 85.2%.

Balance sheet

Cash and equivalents were RMB 569 million at end-2025 and fell to RMB 196 million by 31 March 2026. That reflects payments for fundraising projects and working-capital build after consolidation. At 31 March 2026, notes and accounts receivable were RMB 420 million and inventory RMB 188 million.

Goodwill from the Hengsuo Huawei acquisition stands at about RMB 993 million, roughly 32% of total assets. The restructuring report had estimated it at RMB 1.081 billion on a pro forma basis.

Interest-bearing debt consists of bank loans plus directed convertible bonds with a face value of RMB 480 million (4,799,900 bonds) issued to the Hengsuo vendors. Interest on these bonds added to finance costs in 2026. The short- and long-term split of borrowings has not been published outside the full annual report. At 30 June 2026, equity attributable to shareholders was RMB 2.264 billion and total assets exceeded RMB 3.0 billion.

Cash flow and capital returns

Operating cash flow was −RMB 23.4 million in Q1 2026 and +RMB 11.1 million for H1 2026, compared with −RMB 2.7 million in H1 2025. Investing cash outflow in H1 2026 was RMB 301.8 million, mostly subsidiaries spending fundraising proceeds on capacity.

In FY2025, dividends plus buybacks totalled RMB 56.0 million, equal to 231% of net profit. Cumulative cash dividends since the 2023 listing reached RMB 64.5 million across four distributions.

Ratios

The annualised H1 2026 total asset turnover was about 0.30x; for the half year alone it was 0.15. Inventory turnover for H1 2026 was 1.72 times.

Commentary

Revenue. Revenue has moved through three phases. FY2021 was a pandemic-era peak of RMB 347 million. FY2022 and FY2023 saw two years of decline as consumer electronics and discrete demand fell and customers destocked. Since FY2024 there has been a recovery: domestic packaging volumes revived, and high-performance EMC gained share from imports. The step-change came from consolidating Hengsuo Huawei from November 2025. Q4 2025 revenue nearly doubled year on year, and 9M 2026 revenue was 2.7 times the prior-year level.

Margins. Gross margin has stayed in a narrow 25–27% band. That reflects a mix still dominated by commodity discrete grades and pass-through of epoxy and phenolic resin costs; in Q3 2024, resin prices rising 1–6% quarter on quarter compressed margin by 0.2 points. The H1 2026 rise to 30.3% is the first clear sign of mix improvement from QFN/BGA, memory and automotive grades.

Profit. Net margin fell from 13.6% in FY2022 to 5.3% in FY2025. Management attributed the FY2025 fall to share-based payment charges, depreciation on new IPO-funded plants, deal advisory fees and higher interest. FY2025 profit of RMB 24.3 million was also well below the roughly RMB 63 million that analysts had expected.

These drags largely reversed in 2026. A full year of Hengsuo Huawei earnings, at a 12–14% net margin in 2025–2026, plus operating leverage on new lines lifted the Q3 2026 net margin to 13.1%.

Balance sheet. The balance sheet more than doubled in FY2025. The acquisition added about RMB 1 billion of goodwill, and the RMB 800 million placement plus the share consideration doubled equity. Leverage remains modest, with liabilities at 31% of assets. However, the balance sheet is now dominated by an intangible whose value depends on Hengsuo's earnings.

Cash conversion. Cash conversion is a weak point. Operating cash flow covered only 7% of net profit in FY2024 and 32% in FY2025. Hengsuo Huawei itself reported negative operating cash flow of RMB 1.2 million in FY2024 against net profit of RMB 45.7 million, because Chinese OSAT customers routinely pay with bank acceptance notes and long credit terms.

Guidance

Management does not issue numeric guidance. Its qualitative outlook calls for strong 2026 semiconductor growth driven by AI, with structurally tight supply and rising volumes and prices. 2026 priorities are advanced packaging, memory, automotive grades and high-reliability adhesives, plus overseas expansion. A run-rate of RMB 763 million of revenue in the first nine months implies full-year 2026 revenue above RMB 1 billion if Q4 matches Q3. That would be more than double FY2025.

Bull case

1. Earnings inflection is real. Q3 2026 net margin reached 13.1%, against 2.3% in Q4 2025, and gross margin has risen to 30%. Hengsuo now earns at a 12–14% net margin, and the drag from share-based payments is easing.

2. Mix upgrade. GMC and GR910 are in batch supply, QFN, BGA and LQFP grades are qualified at JCET and Tongfu, and HBM grades are in development. These point toward the higher-margin advanced-packaging category that Japanese suppliers dominate today.

3. Global platform. The Hysol brand, Korean and Malaysian subsidiaries, and multinational IDM accounts give a route to raise the overseas share from 2.55% toward the 8–18% seen at domestic peers.

Bear case

1. Goodwill and no earn-out. About RMB 993 million of goodwill, around 32% of assets, sits on the balance sheet without vendor protection. A downturn at Hengsuo would hit equity directly.

2. Valuation. At about 116 times trailing earnings and 10 times sales, the shares price in successful advanced-packaging penetration that has not yet shown up in reported product splits.

3. Cash conversion and selling. Profits have not turned into cash, with negative operating cash flow in Q1 2026. Founders, Huatian and other insiders have been selling into strength.

Catalysts and things to watch (next 12 months)

• FY2026 preliminary results and full-year revenue above RMB 1 billion — Expected timing: Feb–Mar 2027

• FY2026 annual report: product split, overseas revenue and goodwill impairment test — Expected timing: Mar–Apr 2027

Volume orders for BGA, FOWLP or LMC at a top OSAT: Expected timing: Rolling

Qualification of HBM high-thermal EMC: Expected timing: Rolling

• Start-up of the automotive-grade and advanced-packaging smart lines — Expected timing: 2027

Completion of Huatian's exit and further insider sales: Expected timing: Ongoing

Gross margin holding at 30% or above: Expected timing: Quarterly

Operating cash flow turning sustainably positive: Expected timing: Quarterly

Analyst verdict

HHCK has transformed itself in eighteen months. A sub-scale domestic EMC challenger earning RMB 40 million a year has become, through the RMB 1.6 billion purchase of Hengsuo Huawei, a consolidated national champion. It ships more than 25,000 tonnes a year, owns the Hysol brand and serves both China's leading OSATs and global power-semiconductor IDMs.

The 2026 numbers show the strategic logic working. Nine-month revenue nearly tripled to RMB 763 million, net profit rose nearly fourfold to RMB 78 million, and gross margin improved to the low 30s as automotive, memory and early advanced-packaging grades fed into the mix. A business that historically traded commodity discrete compounds at mid-20s gross margins is starting to look more like a specialty-materials franchise.

The open question is quality. Goodwill accounts for nearly a third of assets, and the vendors gave no earn-out. Cash conversion has lagged reported profit for three years. The highest-value categories (BGA, SiP, fan-out, liquid molding and HBM encapsulants) remain at small-batch or testing stage, where Sumitomo Bakelite, Resonac and Shin-Etsu still dominate. Insider and strategic shareholders, including the founding OSAT investor Huatian, have chosen this period to sell.

At about 116 times trailing earnings, the market is paying in advance for a successful high-end transition. A justified rating requires three things to happen together:

• sustained net margins in the low-to-mid teens on a revenue base above RMB 1 billion;

• disclosed, rising revenue from advanced packaging and overseas sales;

• operating cash flow that finally tracks net income.

If FY2026 results confirm all three, HHCK has a credible claim to be China's long-term answer to the Japanese EMC incumbents and a structural winner from AI and EV packaging demand. If margins stall or Hengsuo's earnings falter, the goodwill and the multiple leave little margin for error. On balance, HHCK is a strategically well-placed but fully valued leader in domestic substitution. Its execution on advanced packaging over the next four quarters will decide whether the 2025 acquisition premium was justified.