Wasion Holdings Limited

Income statement

Sources: AR21–AR25 headline lines; operating income, cost of sales (FY2021–FY2023) and D&A from SA/S&P. EBITDA excludes amortisation of capitalised development costs (RMB151.3m in FY2025), consistent with S&P's treatment; including it would add about RMB124–151m per year. FY2021–FY2023 cost of sales is derived as revenue minus gross profit.

Sources: AR21–AR25; HKEX cash dividend forms (28 Mar 2022, 27 Mar 2023, 15 Mar 2024). FY2021–FY2023 diluted equals basic per the filings. Payout is derived from declared dividend in RMB divided by attributable profit. FY2025 uses RMB420.47m; FY2024 uses RMB346.68m. Earlier years are approximated using RMB-equivalent dividends paid in the following year.

Revenue CAGR FY2021–FY2025: 21.7% (analyst-derived). Attributable net profit CAGR: 41.0%.

Commentary: trends, inflections and drivers.

Growth: Revenue has compounded above 20% for four years, decelerating gradually from 27.6% (FY2022) to 15.6% (FY2025). The drivers rotated:

• FY2022: ADO grew 64% on distribution-network and storage demand.

• FY2023: Power AMI grew 29% as the SGCC meter replacement cycle peaked.

• FY2024: C&F AMI grew 24%, led by Willfar.

• FY2025: DES grew 23% on data centres and overseas distribution, while domestic grid orders fell sharply.

H1 2026 re-accelerated to +23%, but entirely through DES (+98%).

Margins: Gross margin stepped up in FY2023 (+2.7pp) on mix and cost-down, dipped in FY2024 as storage diluted DES, and recovered to 35.7% in FY2025. The bigger story is operating leverage. Opex fell from 21% of revenue (FY2024) to 19% (FY2025) and 18% (H1 2026), per AR25 and IR26. R&D expense was nearly flat in FY2025 (+0.5%) while revenue rose 16%. Impairment charges halved (RMB48.6m vs RMB99.4m). The FY2025 operating margin of 16.0% is a decade high.

H1 2026 inflection (negative): Gross margin fell 3.85pp to 31.28%. Attributable profit grew only 1% to RMB445.9m, and basic EPS fell to RMB44.4 cents from RMB44.5 cents on placement dilution. Three factors explain this:

1. Mix shift toward DES. The DES segment margin is higher than a year ago, but DES gross margin is structurally below Willfar's.

2. SGS and AIEE margin compression.

3. NCI share rising to 31.5% of profit (RMB205.0m vs RMB146.1m), because Willfar's earnings now flow less to the parent and Wayon has a new minority holder.

Other gains swung to a RMB30.2m loss (FX losses, "changes of expected redemption amounts", delivery penalties).

Balance sheet

Sources: AR25 balance sheet for FY2024–FY2025; SA/S&P for FY2021–FY2023 and the net-debt series. Net debt in SA/S&P includes leases and excludes pledged deposits (RMB416.8m in FY2025). On a filing basis, FY2025 bank borrowings were RMB2,486.9m against cash of RMB3,015.2m, giving net cash of RMB528.3m.

At 30 June 2026 (IR26):

• Total assets RMB20,521m.

• Cash RMB3,659.5m, plus RMB135m structured deposits and RMB200m current FVTPL assets.

• Bank borrowings RMB2,344.7m (RMB1,440.3m current, RMB904.3m non-current); gearing (borrowings/total assets) 11%, down from 14%.

• Total equity RMB8,940.3m, of which attributable RMB6,438.7m and NCI RMB2,501.6m.

• Net current assets RMB7,143.1m.

• Trade and bills receivables RMB8,448.8m, up 19% in six months.

• Inventories RMB2,046.9m, up 42%.

• Non-current "other payables and accruals" jumped to RMB1,482.7m from RMB27.4m. This was not explained in the announcement. Together with the reference to "changes of expected redemption amounts" in other losses, it suggests a redemption-type liability linked to investor rights in a subsidiary (plausibly the Wayon pre-IPO investment). This is unconfirmed and is flagged as a monitorable.

Cash flow

Source: SA/S&P (S&P Global). FCF after capitalised development is analyst-derived. 2026 buybacks: HK$18.98m in June 2026 (IR26), with cumulative repurchases about HK$193m (12.93m shares) by 8 Oct 2026 (Lixinger/HKEX next-day returns). H1 2026 cash flow statement detail is not included in the interim announcement and is therefore not publicly disclosed in the sources reviewed.

Commentary. Cash conversion is volatile because receivables absorb most incremental revenue. Receivables plus contract assets rose RMB1,384m in FY2025 and RMB1,298m in FY2024, partly offset by supplier credit (payables up RMB885m and RMB1,078m). OCF/net profit (incl. NCI) was 0.95x in FY2025, 0.90x in FY2024 and 1.97x in FY2023. Capex is modest at 4–6% of revenue; management guided RMB500m for FY2025 (H1 2025 call). The FY2025 dividend (about RMB420m) is covered roughly 1.8x by FCF after capitalised development.

Ratios

Sources: ROE, ROA, ROIC, current ratio, debt/equity and asset turnover from SA/S&P. Coverage and working-capital days are analyst-derived from year-end balances (receivables include contract assets).

Commentary. Returns have more than doubled since FY2021. ROE rose from 7.3% to 18.9%, driven by margin expansion and better asset turnover rather than leverage, since debt/equity fell from 0.47x to 0.30x. The cash conversion cycle has collapsed from 97 to about 19 days. The group effectively finances customer credit (DSO of about 273 days) with supplier credit (DPO of about 335 days). That is efficient but fragile if suppliers tighten terms.

Warning sign. At 30 June 2026, receivables aged 181–365 days doubled to RMB2,593m from RMB1,296m six months earlier (IR26 note 8).

Management guidance (latest)

SGS: domestic grid contract value expected up more than 30% in FY2026. H1 2026 domestic orders rose 46%, and grid bids rose 53%.

Pricing: unit prices expected to rise under the new SGCC/CSG meter specifications; higher share in centralised procurement expected.

International: cost benefits from the new-generation meter platform expected to show in H2 2026.

DES: continued globalisation; mass production of HVDC, CDU and SST; Americas, Europe, APAC and South Africa distribution expansion.

Quantitative FY2026 revenue or profit guidance: not publicly disclosed.

Consensus expectations

Pre-interim consensus implied FY2026E P/E of about 12.6x at HK$20.10, i.e. EPS of about HK$1.60 (about RMB1.40, +31% YoY). H1 2026 EPS of RMB0.444 (−0.2% YoY) makes that trajectory look stretched. Updated post-interim consensus is not publicly disclosed in the sources reviewed.

Bull case

1. The order book has decoupled from revenue. Overseas orders of RMB4.44bn (+108%) and DES orders of RMB4.47bn (+101%) in H1 2026, plus Wayon's above RMB4bn overseas YTD and RMB1.25bn in the Middle East in October. Together these point to strong FY2027 revenue visibility, likely above 25% growth if converted.

2. The domestic meter cycle is turning up from a trough. 2025 procurement was below average; SGCC's 15th FYP envelope is +40%; new specifications lift unit prices; Wasion ranks #1. Recovering SGS volumes plus in-house relays should rebuild segment margins toward the FY2025 level of 16.4%.

3. The valuation embeds little growth. About 10.5x TTM P/E, about 5.8x EV/EBITDA, about 4% yield, net cash and an active buyback. The Wayon spin-off (Boyu mark about RMB4.75bn post-money) plus the 59.55% Willfar stake may approach or exceed Wasion's entire market cap, an evident holdco discount.

Bear case

1. Growth is not translating into earnings. H1 2026: revenue +23%, attributable profit +1%, gross margin −3.85pp, EPS down. The mix shift to lower-margin DES and overseas EPC-style work, together with rising NCI, may cap EPS growth even if revenue compounds.

2. Working-capital quality is deteriorating. Receivables RMB8.45bn (+19% in six months), with the 181–365-day bucket doubled. Inventories +42%. Payables above one year nearly tripled. A large unexplained RMB1.48bn non-current payable appeared. Cash conversion could disappoint sharply in FY2026.

3. Capital allocation and governance signals are mixed. Equity was raised at HK$30 in April, then shares bought back at HK$12–20 from June. There are connected-party dealings, only 33% INEDs, and 17–25% dissent on key resolutions. The Wayon spin-off timeline is uncertain, with the A1 lapse risk inferred.

Catalysts and monitorables (next 12 months)

1. Wayon spin-off: A1 renewal, hearing and listing, or abandonment. Watch also the nature of the RMB1.48bn non-current liability.

2. FY2026 results (expected late March 2027): H2 gross-margin recovery; OCF vs profit; receivable ageing.

3. SGCC/CSG 2026–27 tender rounds: volume, price and Wasion/Willfar ranking.

4. Willfar quarterly results (688100.SH): a proxy for AIEE recovery.

5. Conversion of overseas orders (Mexico CFE, Brazil reclosers, Middle East RMB1.25bn, Southeast Asia DC) into revenue and margin.

6. US AMI entry after ANSI certification: first contracts.

7. Buyback pace against the remaining 10% mandate; FY2026 dividend payout.

8. Placement-proceeds deployment: HVDC and relay capacity; identity and performance of the acquired energy-management company.

9. FX and tariff developments affecting Mexico, US and EU exports.

Analyst verdict

Wasion has done the hard part of a transformation that few Chinese meter makers have attempted. In five years it has taken revenue from RMB4.6bn to RMB10.1bn, quadrupled attributable profit, lifted ROE from 7% to 19%, and built a genuinely international, vertically integrated platform. It now sits at the intersection of three structural themes: China's RMB5tn grid build-out, emerging-market electrification, and AI-data-centre power. The H1 2026 order book is the strongest in the company's history. Overseas and DES orders doubled, and the October announcements extend that momentum.

The market's reaction (shares down about 64% from the April peak) is not irrational, though. H1 2026 showed for the first time that incremental growth comes at visibly lower margins and with heavier working capital. More of the profit is also accruing to minorities in Willfar and Wayon. Attributable EPS was flat despite 23% top-line growth. Receivables and inventories swelled, a sizeable non-current liability appeared without explanation, and capital-allocation decisions oscillated within weeks. Pre-interim sell-side targets (HK$26.80–32.60) look stale against these facts.

At about 10.5x trailing earnings, about 1.7x book and a roughly 4% yield with net cash, the valuation already discounts much of the margin and quality concern. The sum-of-parts (Willfar stake plus a Wayon mark) offers a tangible floor argument if the spin-off progresses. Our synthesis: constructive on fundamentals, but conditional on evidence. The investment case rests on H2 2026 delivering three things:

1. Gross-margin stabilisation above 33%.

2. Positive operating cash flow despite order-driven inventory build.

3. Clarity on the Wayon listing and related liabilities.

Absent those, Wasion risks being re-rated from "AIDC-enabled grid-technology compounder" back to "cyclical meter maker with a working-capital problem." The next two disclosures, the FY2026 results and any Wayon prospectus refresh, are decisive.

All figures in RMB unless stated. "Not publicly disclosed" denotes data not found in primary filings or reliable sources reviewed as of 17 October 2026. Analyst-derived metrics are calculations from cited sources and are not company guidance.