Eighteen-Year Non-GAAP Loss Curse Unbroken, Huasheng Group Crosses Over to Bet on Computing Power Track

Investing in stocks? Check out Golden Kylin Analysts’ Reports—authoritative, professional, timely, comprehensive—helping you discover potential thematic opportunities!

Source: Securities Star

With the release of the 2025 annual report, Huasheng Co., Ltd. (600156.SH) once again presented investors with a less-than-impressive performance report. In 2025, the company achieved revenue of 799 million yuan, a slight increase of 2.5% year-over-year; thanks to a gain of 22.27 million yuan from the sale of its shares in Xiangcai Securities, Huasheng’s net profit attributable to shareholders still recorded a loss of 35.22 million yuan, though it was less than the loss in the same period last year. Excluding non-recurring gains and losses, the company’s net profit after deducting non-recurring items was a loss of 72.47 million yuan, down 18.05% year-over-year.

Behind this awkward performance is Huasheng’s long-standing core business stagnation spanning eighteen years. Since 2008, the company’s net profit excluding non-recurring items has been in continuous loss, accumulating significant losses. During this period, the company’s revenue has also fluctuated greatly, generally showing a shrinking trend. To improve performance and cultivate a second growth curve, this old state-owned enterprise, originally rooted in ramie fiber business, is seeking to transform and upgrade by acquiring Yixin Technology, a computing power company. However, Securities Star notes that the target company has a history of unmet performance commitments, and with the current tight financial situation of the listed company, whether it can effectively support the future development of the target remains to be seen.

1. Low gross margin hovering at the bottom, main business consistently losing money

Huasheng’s main business involves spinning, weaving, dyeing, garment manufacturing, and home textile product research, design, and sales, primarily targeting overseas markets. Looking at the company’s financial data over the years, in 2008, its net profit attributable to shareholders after deducting non-recurring items was a loss of 15.51 million yuan. Since then, losses in core operations have become the norm. By 2025, excluding non-recurring gains and losses, Huasheng has failed to turn a profit from its main business for 18 consecutive years.

One reason for the persistent pressure on its core business is the deep crisis in its traditional textile sector. Securities Star found that although the company owns several brands such as “Xuesong,” “Dongting,” and “DT Ramie Yarn,” its second-largest revenue-generating textile manufacturing segment has maintained a gross margin in the low single digits for many years. Specifically, from 2020 to 2022, the gross margins of its textile business were -3.27%, -22.79%, and -22.81%, respectively, indicating severe losses.

In 2022, Huasheng ceased production at Dongma, a company with an annual loss of about 50 million yuan. The following year, the gross margin of its textile business recovered to 7.92%. However, since this segment mainly involves brand processing and low-value-added products, lacking pricing power and autonomous brand premium, the margin recovery has been limited, making it difficult to fundamentally reverse the ongoing losses in its main business. By 2025, the gross margin from textile manufacturing was 7.22%.

Although textile trading is the company’s largest revenue source, its profitability is even weaker. Over the past decade, the highest profit margin in this segment was less than 7% in 2023; by 2025, this figure had fallen further to just 2.84%.

From an industry perspective, in recent years, the overall profitability of the textile and apparel industry has been squeezed due to macroeconomic slowdown, weak domestic and international consumer demand, intensified industry competition, and rising raw material and labor costs. Additionally, since the company’s products are mainly exported, they are also affected by international tariffs and supply chain adjustments, facing significant operational pressure amid demand fluctuations.

2. Financial pressure from self-built model

With the persistent difficulties in its main business, finding a second growth curve has shifted from an “option” to a “must-answer.” Huasheng has turned its attention to one of the hottest sectors today—computing power. According to the “Acquisition Report (Revised Draft)” released by Huasheng in March this year, the company plans to acquire 97.40% of Yixin Technology through a combination of share issuance and a capital injection of 331 million yuan, and raise an additional 662 million yuan. Yixin’s main business includes AIDC integrated services and providing intelligent computing center solutions, covering server hosting, heat management system design, and heat management equipment R&D.

From the target asset perspective, Yixin Technology is indeed attractive. Securities Star notes that its self-built Shenzhen Baiwangxin Intelligent Computing Center has a low PUE value of 1.21 and has been awarded the “National Green Data Center” title, indicating certain technological barriers in energy-saving. Huasheng clearly hopes to leverage this acquisition to leap from traditional textile manufacturing into the promising digital infrastructure field, aiming for business transformation and enhanced profitability.

However, this cross-industry move also carries significant risks.

The foremost is the listed company’s own financial pressure. Yixin Technology mainly operates through self-built intelligent computing centers. Compared to leasing models, self-building requires larger upfront investments, and project development is heavily influenced by funding availability. Besides the already completed centers, the construction of two other centers in Zixing and Haikou still requires substantial capital. As of the end of 2025, Huasheng’s cash holdings were 125 million yuan; as of mid-2025, Yixin’s cash was only 27 million yuan. With limited cash resources, how Huasheng can support the continuous expansion of the target company is a real challenge.

Huasheng responded to exchange inquiries that it will rely on the target company’s own accumulated resources, introduce external cooperation, and phase investments to support the construction of its intelligent computing centers in a controlled manner, facilitating business transformation.

It’s also important to note that the performance commitment for this transaction involves a bet agreement: Yixin Technology must achieve a cumulative net profit after deducting non-recurring items of 162 million yuan from 2026 to 2028. Securities Star notes that the company has a history of unmet performance commitments. Since 2017, it has made several profit promises ranging from 24 million to 65 million yuan, but except for the 2017 target, the commitments from 2018 to 2020 were not fulfilled. The target company explained that the underperformance was mainly due to large investments in transforming into a self-built data center, high depreciation of fixed assets, which eroded profits.

In 2025, Yixin Technology achieved revenue of 274 million yuan and net profit attributable to shareholders of 2.62 million yuan. Huasheng also issued risk warnings: if future industry competition intensifies, leading to a decline in prices of the target’s main products and services, or if the new intelligent computing centers’ cabinet utilization rates do not meet expectations, the gross profit margin of its main business could decline, adversely affecting its operating performance. (This article first published on Securities Star, author | Wu Fan)

• End -