New stock preview | Financial mirror fracture: decoding the growth logic paradox behind the Shanghai Jizhi "smart manufacturing" narrative.

Against the background of the wave of intelligent manufacturing reshaping the global industrial landscape, China's manufacturing industry is transitioning from the "stacking of machines" stage of scale equipment integration to the "intelligent collaboration" stage driven by data and system coupling. In this process, the role of the capital market is becoming increasingly critical, serving as an important engine to promote technological iteration and model upgrade. On January 22, Shanghai Jingzhi Industry Co., Ltd. (hereinafter referred to as "Shanghai Jingzhi"), which specializes in optimizing end-to-end solutions for manufacturing processes, officially submitted its application for listing on the HKEX main board. Financial mirror image in the midst of transformation pains In the grand narrative of China's manufacturing industry transitioning to "intelligent collaboration," Shanghai Jingzhi is pushing towards the Hong Kong Stock Exchange as an "end-to-end solution service provider" in an attempt to achieve capital escalation and value reassessment. However, its latest disclosed financial data reveals a less optimistic picture: beneath the facade of revenue growth, profitability is facing structural pressure, and risks are hidden in cash flow and cost control, highlighting the urgent need to scrutinize the core financial support of its "smart manufacturing" story. On the surface, the company's revenue has been growing: with full-year revenue reaching 68.29 billion RMB in 2023 and 74.60 billion RMB in 2024. However, a deeper analysis of its short-term performance shows signs of fatigue in the growth momentum. Revenue in the first nine months of 2025 was 41.83 billion RMB, a decrease of approximately 11.1% compared to the same period in 2023. This indicates that the company may face pressures from market demand fluctuations or intensified competition in the second half of 2024, casting doubt on the sustainability of its growth. More concerning is the significant decline in profitability. In 2023, the company achieved a pre-tax profit of 550 million RMB and a net profit of 503 million RMB. By the first nine months of 2025, pre-tax profit plummeted to 84.79 million RMB and net profit was only 107 million RMB. Compared to the same period in 2024 when pre-tax profit was 249 million RMB and net profit was 215 million RMB, the decrease was approximately 66% and 50%, respectively. The speed of profit decline far exceeds the decline in revenue, highlighting the deterioration in its profit quality. Furthermore, gross profit margin is a key indicator of the core competitiveness of manufacturing enterprises. Shanghai Jingzhi's gross profit margin was 21.5% in 2023 (gross profit of 14.65 billion RMB/revenue of 68.29 billion RMB) and slightly increased to 22.2% in the first nine months of 2025 (gross profit of 8.32 billion RMB/revenue of 41.83 billion RMB). This slight improvement may be attributed to product structure optimization or initial effectiveness in cost control, but the absolute gross profit amount decreased due to the decline in revenue. What truly erodes profit is the rigid growth of operating expenses, especially in the context of declining revenue: research and development expenses reached 300 million RMB in the first nine months of 2025, close to the full-year level of 319 million RMB in 2024, and as a percentage of revenue, it surged from 4.7% in 2024 to 7.2% in the first nine months of 2025. Although this aligns with the narrative of high research and development investment in "smart manufacturing," the substantial research and development expenses have become a heavy burden on profitability during a period of revenue contraction. Administrative expenses amounted to 558 million RMB in the first nine months of 2025, a sharp increase of 41.3% compared to the same period in 2024, far exceeding the changes in revenue. This may reflect a sharp rise in management costs paid for pursuing an IPO and business expansion, or indicate a decrease in internal operational efficiency. While sales and marketing expenses slightly decreased year-on-year, considering the decline in revenue, the sales expense ratio actually increased. The combined ratio of the three major operating expenses (research and development, administrative, and sales) as a percentage of revenue soared from approximately 16.0% in the first nine months of 2024 to around 23.5% in the same period in 2025. The sharp increase in expense ratios directly eroded gross profit and became one of the main reasons for the cliff-like decline in net profit. It is worth noting that several abnormal items in the financial statements further amplified the instability of profitability. For instance, other income and expense items recorded a significantly high positive income of 191 million RMB in the first nine months of 2025, compared to a loss of 6.15 million RMB in the same period in 2024. This category typically includes non-recurring items such as fair value changes and gains or losses on asset disposals. While such substantial fluctuating income temporarily supported the profit and loss statement, it is unsustainable and masks the true decline in the profitability of the core business. Similarly, under the expected credit loss model, reversal of impairment losses of 34.18 million RMB was recorded in the first nine months of 2025, compared to a provision of 25.13 million RMB in the same period in 2024. This item also falls under non-cash and non-recurring items, adding to the "padding" of profits. In addition, the operating cash flow has been negative for three consecutive years, quick ratio is lower than 1, and signs of tight liquidity are evident, especially with high levels of inventory and accounts receivable which pose risks of a strained capital chain. From "equipment integration" to "intelligent collaboration": will it succeed? According to observations from the GMTEight financial app, Shanghai Jingzhi's development logic follows the mainstream narrative of the industry: on one hand, by increasing the proportion of "advanced equipment solutions" and "communication thermal management solutions" and reducing the traditional "other businesses," it aims to showcase its image as a technology-driven, high-value-added solution provider to the capital market. On the other hand, by emphasizing "end-to-end optimization," it seeks to cover the entire chain from research and development, design, production to service, binding customers with its system integration capabilities to enhance customer stickiness and order value. Additionally, the fundraising for the Hong Kong listing is intended to further invest in research and development, strengthen its capabilities in intelligence and digitization, and support the continuous iteration and commercial expansion of its solutions. This strategic logic theoretically aligns with the direction of industrial upgrading, aiming to obtain a higher valuation premium. However, the financial data reveals that its strategic logic is facing severe challenges in implementation. Firstly, Shanghai Jingzhi's core business is "slowing down," lacking stable growth engines. The "advanced equipment solutions" as the revenue cornerstone (accounting for over 40%) saw a 22.7% year-on-year decline in the first nine months of 2025. This suggests uncertainty in the reliability of its core growth engine, possibly due to periodic orders from major clients, the uncertainty of project-based deliveries, or facing fierce market competition. Although the emerging businesses "incrementally lucrative" communication thermal management solutions are growing rapidly, their gross profit margin has been consistently low (7.1% in the first nine months of 2025), indicating that they are essentially cost-driven businesses and have not reflected the technical premium of solutions. After a slight increase in 2024, total revenue decreased by 11.0% in the first nine months of 2025, showing that its business portfolio has not formed a sustainable internal growth momentum. More critically, the transformation has not brought a substantial improvement in the quality of profitability. The gross profit margin of "advanced equipment solutions" surged to an abnormal 33.2% in the first nine months of 2025, conflicting with the sharp decline in revenue. This implies that its profitability may depend on individual high-margin projects rather than a universal business model upgrade. The gross profit margin of "precision components" and "communication thermal management" plummeted significantly, reflecting widespread pressure on raw material costs, market competition, or pricing power. Apart from short-term fluctuations in individual business lines, the overall gross profit margin did not increase but rather decreased (from 21.0% in the same period in 2024 to 19.9% in the first nine months of 2025), indicating that the transition to solutions did not systematically enhance its bargaining power and profit level. As mentioned earlier, the company significantly increased research and development and administrative expenses during a revenue contraction period. This investment has not been able to drive revenue growth in the short term, but rather exacerbated the decline in profitability. The market may question whether the high investment has established effective technological barriers or commercialization, and whether the efficiency improvements match the scale of investment. In conclusion, Shanghai Jingzhi's journey to a Hong Kong listing coincides with a critical stress test period for its business transformation. From financial data to business structure, the company exhibits a significant gap between its strategic vision and operational reality. In today's capital market, which is equally demanding of "hard technology" and "real profitability," whether Shanghai Jingzhi can bridge this "data gap," transform its technology story into solid financial returns, and successfully navigate the deep waters of transformation to gain long-term capital recognition will be a key test.