Mica product production and sales slowdown, core business gross profit decline Zhejiang Rongtai Thailand robot project shifts to industrial screw production | Financial report analysis

Does the surge in goodwill caused by external acquisitions test financial health?

Cailian Press, April 1 (Reporter Wang Bin) In the niche segment of new energy vehicle thermal runaway protection, Zhejiang Rongtai (603119.SH) delivered a report card in 2025 featuring simultaneous growth in both revenue and profit. However, behind the impressive performance, the company’s growth in production and sales volumes for mica products slowed, and its strategic expansion into the field of robot precision structural components through external acquisitions also brought a significant increase in goodwill and short-term borrowings, posing new challenges to the company’s operating efficiency and financial structure.

During the reporting period, the company recorded operating revenue of 1.376 billion yuan, up 21.24% year on year; net profit attributable to shareholders of the parent company was 278 million yuan, up 20.90% year on year. According to the annual report, the company’s profit growth was mainly driven by increased revenue from new energy products and the consolidation contribution from the newly acquired precision structural components business.

Cailian Press reporters noted that, based on production and sales figures, in 2025 the company’s year-on-year growth rates for mica products’ production and sales were 5% and 4.78%, respectively—far lower than last year’s 33.47% and 34.41%. Meanwhile, inventory increased by 25.04% year on year, remaining high.

Zhejiang Rongtai’s main business is the research, production, and sales of various high-temperature resistant insulating mica products. Its main products include insulation components for thermal runaway protection in new energy vehicles, flame-retardant insulation components for small household appliances, and flame-retardant cable insulation tapes, among others. By business segment, last year mica composite materials and related products generated revenue of 1.274 billion yuan, up 13.92%, accounting for as much as 92.64% of total revenue. Among them, revenue from the core new energy products reached 1.075 billion yuan, up 19.77%, accounting for 78.16% of operating revenue.

Notably, although new energy product revenue grew, its gross margin fell by 2.94 percentage points year on year to 37.15%. At the same time, revenue from non-new-energy products (mainly from the home appliance and cable sectors) increased by 31.71% year on year, and gross margin rose significantly by 13.65 percentage points to 26.76%, becoming an important force balancing profit performance.

In terms of regions, the company’s domestic sales growth was stronger. During the reporting period, its domestic sales revenue was 734 million yuan, up 30.85%, with gross margin up by 2.3 percentage points; its export sales revenue was 640 million yuan, up 11.86%, but gross margin slightly declined by 0.56 percentage points.

In 2025, Zhejiang Rongtai acquired 51% of the equity of Shanghai Dizi Precision Machinery Co., Ltd. to make a major push into the robot precision structural components field, and also invested in and took equity participation in Guangdong Jinli Intelligent Transmission. A series of these actions resulted in 149 million yuan of goodwill, a sharp increase in management expenses, and a large cash outflow from investing activities.

The financial report shows that last year the company’s period expenses increased sharply: sales expenses and management expenses rose year on year by 28.87% and 53.56%, respectively, far exceeding the revenue growth rate. This was mainly due to increases in employee compensation. Financial expenses saw the most dramatic change: shifting from net income of 19.2801 million yuan in the prior year to net expenditure of 6.2207 million yuan in 2025, a change of 132.26%. This was mainly due to reduced interest income, exchange losses, and increased interest expenses.

Although the company’s net operating cash flow increased by 33.18% year on year to 279 million yuan during the reporting period, net cash outflow from investing activities was as high as 834 million yuan, widening by 47.12% year on year, mainly used for external investments and purchase and construction of assets. Net cash flow from financing activities reached 447 million yuan, surging by 625.57% year on year, mainly due to newly added borrowings. At the end of the period, short-term borrowings totaled 534 million yuan (0 in the prior year).

Of particular note is that Zhejiang Rongtai recently changed the Thailand robot component project that it had previously announced with fanfare three months ago to an industrial lead screw production project, sparking heated discussion in the market. According to the announcement, the company’s original “annual production of 14,000 tons of mica paper, 4,500 tons of mica products, and 7 million sets of robot components production project” was split into two independent projects: “annual production of 14,000 tons of insulating fireproof materials and 4,500 tons of deep-processing products production project” and “annual production of 7 million sets of industrial lead screw production project,” with the total investment reduced from approximately $77 million to $71.9 million. The company explained that this change is to meet the company’s business layout needs and related regulatory record-filing requirements.

(Cailian Press reporter Wang Bin)