Let’s focus on Shenzhen Inovance Technology Co., Ltd. (stock abbreviation: Inovance Technology), a leading domestic third-party electric drive system company.
The company was founded in 2003 and listed on the Shenzhen Stock Exchange GEM in September 2010.
Inovance Technology focuses on automation, digitization, and intelligence in the industrial field, focusing on the core technologies of “information layer, control layer, drive layer, execution layer, and sensing layer” and is committed to the research, development, production, and sales of industrial automation control products.
In 2025, Inovance Technology’s revenue will increase by 21.8% year-on-year, which is the same as the growth rate in 2024.
In the past six years, the two-year cycle has formed three levels of 55%, 30% and 22%. Although they are all in a state of rapid growth, the growth rate has declined as the revenue scale has expanded.
The year-on-year growth rate will decline again in the first quarter of 2026. Even if it is only for one quarter, there is reason to believe that the growth rate in subsequent years will most likely continue to decline.
In 2025, the income of the intelligent manufacturing industry will increase by nearly 20%, the income of the new energy vehicle industry will grow faster, and the income distribution of the two major industries will be more balanced.
The “new energy vehicle power system” product corresponds to the automotive industry business, that is, the electric drive business; the intelligent manufacturing industry is divided into two specific businesses.
The domestic market grew by more than 20%, and the overseas market grew by nearly 30%. However, after the increase, the overseas market accounted for only 5.9%, which is still low and needs to be improved in terms of international competitiveness.
Net profit performance in the past four years has been lower than revenue growth in the same period. After falling in 2024, the growth rate in 2025 will also be lower than revenue in the same period.
However, a new record is still possible in 2025.
The gross profit margin has declined step by step, and has retreated to a platform of around 29% in the past two years. Although it has declined from previous years, it is still at a relatively high level in the industry.
Net sales profit margin and return on equity are at excellent levels, and have also declined in the past two years, consistent with the downward trend of gross profit margin.
The gross profit margin of the intelligent manufacturing industry is more than double that of the new energy vehicle industry, and will still grow slightly in 2025, while the gross profit margin of new energy vehicles has declined.
Comparing only the gross profit margin of the new energy vehicle industry business, Inovance Auto is only slightly ahead of its peers.
“Industrial automation and digitalization” business is the core business of the intelligent manufacturing industry, with higher gross profit margin. It is its core advantageous business and has stronger profitability than “emerging businesses”.
The gross profit margin in both domestic and overseas markets is growing, and the growth rate in overseas markets is greater, leading to a further widening of the gap between the two places.
It has been previously proposed that expanding the overseas market is a direction that Inovance Technology can work towards. Although it has achieved results so far, it is not as significant as the domestic market.
When domestic market growth may hit a ceiling, overseas markets may be a direction worth considering.
The profit margin of the main business will increase by 0.2 percentage points in 2025, which is caused by slight fluctuations in gross profit margin and period expenses as a proportion of revenue.
The profit margin of the main business will continue to decline in 2023 and 2024, mainly due to the decline in gross profit margin. Although the ratio of expenses to revenue during the period has an offsetting effect, it is not a decisive factor.
In the first quarter of 2026, the ratio of expenses to revenue during the period increased, resulting in a decline in the profit margin of the main business. Considering that the first quarter is the off-season for Inovance Technology, this profit performance is basically normal and requires continued observation.
The expense structure changed during the period, the proportion of sales expenses and administrative expenses continued to be reduced, and the proportion of R&D expenses increased steadily.
Judging from the year-on-year increases and decreases in each project, only R&D expenses will increase more than revenue in 2025.
Other income in 2025 will be 190 million yuan less than in 2024. Asset impairment losses and credit impairment losses are generally balanced. There is not much difference in government subsidies and investment income. The main difference is the decrease in asset disposal income of 170 million yuan in 2024.
This difference of less than 200 million yuan translates into a net profit growth rate of about 3-4 percentage points. If restored, the net profit growth rate in 2025 will not be slower than revenue.
Every year, “net profit after deduction” is lower than “net profit attributable to the parent company”. In 2025, the gap will be only 100 million yuan, which is significantly narrower than in previous years.
In 2025, the year-on-year growth rate of “non-net profit deducted” will be 22.7%, which is higher than the year-on-year growth rate of revenue and “net profit attributable to the parent company”.
Revenue has increased year-on-year in each quarter, but the growth rate has slowed down in the past two quarters.
The year-on-year changes in net profit alternate between increases and decreases every three quarters, and the year-on-year decline in the past two quarters has been larger.
The sharp year-on-year drop in net profit in the first quarter of 2026 may be related to the year-on-year drop in gross profit margin.
The gross profit margin declined quarter by quarter, and then increased in the first quarter of the following year. In the first quarter of 2026, the gross profit margin increased only slightly from the previous quarter, and still fell year-on-year. Combined with the slowdown in quarter-to-quarter fluctuations in gross profit margin in 2025, the subsequent performance situation may change significantly.
Net cash flow from operating activities performed well, and the slight year-on-year decline in 2025 does not represent a change in trend.
The scale of fixed asset investment in 2025 will reach a new high, but it will be within the range that Inovance Technology can afford.
Fixed assets and operating long-term assets are growing rapidly every year, and the scale of projects under construction will reach 1.12 billion yuan by the end of 2025.
Projects such as the “Jinan Huichuan Base New Construction Project”, “Huichuan Energy Storage and Power System Manufacturing Base Project” and “Three Bases Phase I” will be completed before the end of 2025.
“Equipment under installation” has the largest balance but the project cannot be identified; “United Power R&D Center Construction and Platform R&D Project (Suzhou)” has a higher balance, with a project progress of 30.51% and an estimated investment of 700 million yuan to complete.
The total budget of other projects with lower progress is only more than 1 billion yuan. If there are not many subsequent large-scale new projects started, the scale of fixed asset investment may gradually decrease.
Receivable items and inventories continue to increase the occupation of working capital, offset by the increase in payable items.
In the past few years, the occupation amount was greater than the offset amount. In the past two years, the situation has been opposite. This is the main reason why the net cash flow from operating activities has been higher than the net profit in the past two years. At the same time, the depreciation recovery funds of fixed assets also have a certain impact.
Inventory scale continues to grow, but inventory turnover days decrease. Inovance Technology has improved inventory turnover efficiency while expanding scale.
“Notes receivable and accounts receivable” and “notes payable and accounts payable” have continued to grow, and the occupation of payables has been obvious in the past two years, which is consistent with cash flow performance.
The turnover days of accounts receivable have lengthened amid fluctuations, and the performance of accounts receivable management is not as good as inventory management. This may be related to the increase in the proportion of business in the automotive industry.
At the end of 2025, “contract liabilities” and other advance payments will decrease, corresponding to the decline in revenue growth in the first quarter of 2026.
Contract liabilities will increase in the first quarter of 2026, and revenue growth will theoretically accelerate in subsequent quarters. The actual situation may not deviate significantly.
Huichuan Technology’s asset-liability ratio dropped significantly at the end of 2025, and was still declining at the end of the first quarter of 2026. Its long-term solvency is strong and continues to improve.
The current ratio and quick ratio are maintained at a medium level that takes into account financial security and operational efficiency. Considering its strong ability to create net cash flow from operating activities, it is actually still conservative.
The scale of Inovance Technology’s interest-bearing liabilities is stable but declining. It can not only meet the needs of increasing working capital under the rapid growth of revenue, but also reduce leverage and financial expenses. It is a high-quality listed company in the market that has its own “hematopoietic function” and can maintain rapid growth.
In general, Inovance Technology’s revenue will maintain a rapid growth of more than 20% in 2025, but it will begin to slow down in the first quarter of 2026.
Profitability performance for four consecutive years shows that the company has shown signs of transitioning from a growth stage to a mature stage.
If we want to continue to maintain rapid growth, we may need to make efforts in overseas markets, but it is unlikely to achieve significant results in the short term.
