Have Chunqiu Electronics' 'growth phase' returned in Q1 2025 and Q1 2026?

A friend asked me to review Chunqiu Electronics’ financial reports—so here it is. Suzhou Chunqiu Electronics Technology Co., Ltd. (stock abbreviation: Chunqiu Electronics) was founded in 2012 and listed on the Shanghai Stock Exchange Main Board in December 2017. The company provides customers with one-stop services covering design, manufacturing, and production of structural component modules for consumer electronics products, as well as related precision molds. Chunqiu Electronics’ headquarters is located in Kunshan City, Jiangsu Province. It operates 11 subsidiaries, including Hefei Jingwei Electronics Technology Co., Ltd., Shanghai Weihong Molding & Plastic Technology Co., Ltd., Chunqiu International Limited (Hong Kong), and Chunqiu Electronics (Vietnam) Co., Ltd. In 2025, Chunqiu Electronics’ revenue increased by 11.3% year-on-year; growth accelerated further in Q1 2026. Its performance over the past two-plus years has been quite impressive. Its core business—‘PCs and Broad-Spectrum Intelligent Lightweight Structural Components’—grew by 18.7% in 2025, accounting for over 90% of total revenue and serving as the primary growth driver. Meanwhile, revenues from communications electronics and mold-related businesses declined. Domestic market revenue fell by over 30%, while overseas market revenue rose by 26.7%. The domestic market’s share of total revenue dropped from over one-quarter in the prior year to just 15.9% in 2025—making Chunqiu Electronics a genuinely export-oriented company today. Net profit over the past two-plus years has grown faster than同期 revenue—but even at this rapid pace, 2025 net profit still fell short of the 2021 level. This is mainly because 2023 marked an extreme trough; the company remains in a recovery phase. Judging by its strong Q1 2026 performance, full-year 2026 net profit may reach a new high—but only if subsequent quarters sustain Q1’s momentum. Gross margin bottomed out in 2024 and rebounded sharply in 2025, approaching previous peak levels. In Q1 2026, gross margin rose further—surpassing the performance of the prior seven years. Except for 2023, both net profit margin and ROE have consistently ranked among the top tier across all other years. ROE peaked in 2020 and 2021—even nearly triggering the ‘Sunflower Manual’ phenomenon (ROE exceeding gross margin). However, the outstanding performance of the past two-plus years still falls short of that seen between 2019 and 2021. In 2025, gross margins across all three major businesses rose year-on-year. Notably, communications electronics and mold businesses finally recovered from near-breakeven levels back into normal profitability. Yet the dominant, most competitive segment remains ‘PCs and Broad-Spectrum Intelligent Lightweight Structural Components’—its 2025 revenue growth, higher revenue share, and improved gross margin were the core drivers behind the company’s substantial overall profitability improvement. Both domestic and overseas markets saw rising gross margins—but the increase was markedly stronger in overseas sales. As a result, domestic operations’ contribution to total profit plunged to just 11.9%, lower than its 15.9% share of total revenue. In 2025, the gross profit margin on core operations expanded significantly by 7.6 percentage points—higher than any of the prior three years. Gross margin improvement was the main contributor, though rising SG&A expenses (as a share of revenue) offset 1.2 percentage points. In Q1 2026, these same two factors continued to exert influence—but instead of further expansion, operating profit margin edged slightly downward. The primary reason for the rise in SG&A expenses as a share of revenue was a sharp increase in financial expenses—both in absolute amount and as a proportion of revenue. Excluding financial expenses, the combined share of the other three SG&A expense categories actually declined year-on-year.

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• Non-recurring profit rose steadily from around RMB 200 million at listing to nearly RMB 1.9 billion in 2024. • Gross margin hovers around 35%; net profit margin exceeds 20%—an exceptionally strong performance. • Institutional analysts expect continued profit growth: RMB 2.3 billion in 2025, rising to approximately RMB 3 billion three years later. • The company demonstrates outstanding profitability—achieving roughly 20% ROE despite maintaining debt-to-assets ratio of only ~15%. III. Company Valuation Analysis • High-quality companies are instantly recognizable—hence major shareholders are reluctant to sell. Consequently, nearly 60% of the company’s shares are held by executives and are not freely tradable. To acquire shares, investors must pay a premium—meaning even modest buying interest can quickly lift the stock price. Similar cases include Shanghai International Port Group (China’s largest export port operator) and Bull Group (China’s leading socket manufacturer), where over 80% of shares are held by controlling shareholders. • From a profit-based valuation perspective: current visible annual profit stands at ~RMB 1.8 billion, with future expectations reaching ~RMB 3 billion. Applying a 20x P/E multiple yields a reasonable market capitalization range of RMB 36–60 billion. Since listed companies release their annual reports in Q1 of the following year, pricing typically begins incorporating next-year earnings—and often even those of the following two years—well before year-end. This reflects capital markets’ forward-looking function (though most stock prices tend to front-run actual earnings). • Thus, as of mid-2024, the market is already pricing in 2025, 2026, and 2027 earnings. Based on the above expectations, the company’s reasonable market cap lies between RMB 46–60 billion—provided its projected earnings materialize over the next three years. • From an asset-premium perspective: a sustained ROE of ~20% supports a P/B ratio of at least 3.4x. With current book value per share at RMB 13, a share price of RMB 43 (implying a ~RMB 35 billion market cap) would represent a 3x P/B entry point—a historically risk-free buy-and-hold threshold (no losses ever incurred when purchasing below 3x P/B).

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