Core Viewpoint - ST Huaxi (002630.SZ) has faced significant scrutiny following a public reprimand from the Shenzhen Stock Exchange due to a major discrepancy between its 2024 performance forecast and the audited net profit, indicating serious internal control deficiencies [1][3]. Group 1: Performance Discrepancy - ST Huaxi initially projected a net profit of 35 million yuan for 2024, but later revised this to a loss of 3.81 billion yuan, ultimately reporting a net loss of 3.48 billion yuan [2][3]. - The drastic change in performance led to market panic, with the stock price hitting the daily limit down prior to the annual report release, resulting in significant investor losses [2][3]. Group 2: Regulatory Actions - The Shenzhen Stock Exchange issued a public reprimand to ST Huaxi and its executives for failing to fulfill their duties, highlighting the violation of relevant laws due to the significant difference between the performance forecast and actual results [3]. - This is not the first regulatory action against ST Huaxi; the company had previously received a warning due to an internal control audit that was deemed unable to express an opinion [3]. Group 3: Management Changes - Following the regulatory scrutiny, there were significant changes in the management team, including the resignation of Chairman and CEO Li Renchao, who faced legal issues [4]. - The company’s Secretary of the Board, Meng Haitao, also resigned due to the public reprimand but will continue in other executive roles [4]. Group 4: Financial Performance - Despite revenue growth of 117.30% in 2023 and 38.91% in 2024, ST Huaxi has not managed to escape its loss-making situation, with a reported revenue decline of 29.50% in the first three quarters of 2025 [5][6]. - The cumulative losses over five years from 2020 to 2024 amount to approximately 24.46 billion yuan, with annual losses ranging from 1.93 billion to 7.57 billion yuan [4][5]. Group 5: Remedial Actions - In response to the internal control issues and regulatory penalties, ST Huaxi has established a rectification leadership team and is actively working on a comprehensive overhaul of its internal control systems [6][7]. - Some corrective measures have been completed, including the standardization of payment accounts and related party transactions, but the company acknowledges that other issues are still in the process of being addressed [6][7]. Group 6: Future Outlook - The company faces a critical year in 2025, as failure to rectify internal control issues could lead to delisting risks, emphasizing the urgency of their remedial actions [7]. - ST Huaxi's main business segments include equipment manufacturing, engineering contracting, and investment operations, with a revenue composition heavily reliant on total contracting projects [8].

Core Viewpoint - ST Huaxi reported a significant decline in revenue and net profit for the first half of 2025, indicating ongoing financial challenges and operational inefficiencies [1][3]. Financial Performance - Total revenue for the first half of 2025 was 1.022 billion yuan, a decrease of 31.08% compared to 1.483 billion yuan in the same period of 2024 [1]. - Net profit attributable to shareholders was 36.17 million yuan, down 41.76% from 62.11 million yuan in the previous year [1]. - The gross margin improved to 21.88%, up 13.95% year-on-year, while the net margin decreased to 3.44%, down 4.43% year-on-year [1]. Cost Structure - The combined expenses (selling, administrative, and financial) rose significantly, accounting for 20.06% of total revenue, an increase of 32.71% year-on-year [1]. - Total expenses amounted to 205 million yuan, reflecting the company's struggle to manage costs effectively [1]. Cash Flow and Debt - Operating cash flow per share increased to 0.06 yuan, a 109.89% rise year-on-year, attributed to improved collection efforts on receivables [1][3]. - The company’s interest-bearing liabilities increased slightly by 2.22% to 5.038 billion yuan [1]. Asset and Investment Analysis - The company’s cash and cash equivalents decreased by 20.25% to 168 million yuan, indicating liquidity concerns [1]. - The return on invested capital (ROIC) has been historically low, with a median of 1.37% over the past decade, and a particularly poor performance in 2022 with a ROIC of -7.27% [4][5]. Financial Health Indicators - The company has a low liquidity ratio, with a current ratio of only 0.56, raising concerns about its ability to meet short-term obligations [5]. - The ratio of interest-bearing debt to operating cash flow averaged over the past three years reached 25.81%, indicating potential financial strain [5].