Northern Navigation 2025 Annual Report Analysis: Parent Net Profit Increased by 104.30%, Investment Cash Flow Turned from Positive to Negative

Core Profitability Indicator Analysis

Operating Revenue: Scale and Structure Both Increase, Military Products Remain Core

In 2025, the company achieved operating revenue of 4.192 billion yuan, a year-on-year increase of 52.56%, setting a new high in recent years. From the revenue structure perspective, the military products division contributed 4.127 billion yuan, accounting for 99.84% of the main business revenue, while the civilian products division contributed only 0.064 billion yuan, indicating that military product business remains the absolute pillar of the company’s performance. By region, revenue in Beijing reached 3.365 billion yuan, a year-on-year increase of 78.84%, making it the main driver of revenue growth; Henan region’s revenue was 0.341 billion yuan, down 8.81% year-on-year, with gross margin declining significantly by 23.23 percentage points to 13.11%, indicating obvious pressure on profitability in that area.

Net Profit Attributable to Shareholders: Doubling Growth, Non-Recurring Gains Contribute Significantly

Net profit attributable to shareholders of the listed company was 121 million yuan, a substantial year-on-year increase of 104.30%, achieving a doubling. The net profit excluding non-recurring gains was 87 million yuan, a year-on-year increase of 116.65%, reflecting strong growth in core business profitability. The total non-recurring gains amounted to 33.4027 million yuan, including government subsidies of 21.1119 million yuan and entrusted operation management fee income of 7.5472 million yuan, contributing 27.69% to net profit, which has somewhat enhanced current period performance.

Earnings Per Share: Increased Alongside Profitability

Basic earnings per share was 0.08 yuan/share, a year-on-year increase of 100%; the diluted earnings per share was 0.06 yuan/share, also a year-on-year increase of 100%, perfectly matching the net profit growth rate, reflecting that profitability growth is directly translated into shareholder returns.

Expense Structure Breakdown

Sales Expenses: Slight Increase Along with Revenue Scale

Total sales expenses for the year were 62.6641 million yuan, a year-on-year increase of 6.33%, with the growth rate significantly lower than that of revenue. The main factor was the increase in sales revenue driven by the subsidiary Zhongbing Hanglian, which led to an increase in sales expenses, with the sales expense ratio dropping from 2.14% in 2024 to 1.49% in 2025, indicating improved expense control efficiency.

Management Expenses: Employee Compensation Growth is the Main Reason

Management expenses amounted to 254 million yuan, a year-on-year increase of 4.17%, with employee compensation expenditure reaching 167 million yuan, a year-on-year increase of 8.0%, which is the core factor in the growth of management expenses. The management expense ratio fell from 8.87% in 2024 to 6.06%, showing continuous optimization of expense ratio due to scale effects.

Financial Expenses: Loss Narrowed, Interest Income and Expenditure Changes Dominated

Financial expenses amounted to -8.766 million yuan, narrowing year-on-year (from -14.2259 million yuan in 2024), mainly due to a decrease in time deposits this year leading to a year-on-year decline of 36.59% in interest income to 9.3229 million yuan, while interest expenses recognized for leasing increased by 33.10% to 0.5187 million yuan, resulting in the narrowing of financial expense losses.

R&D Expenses: Continued High Investment to Strengthen Technical Barriers

R&D expenses totaled 235 million yuan, a year-on-year increase of 18.22%, with the total R&D investment accounting for 7.36% of operating revenue, including 272 million yuan in expense recognition and 37 million yuan in capitalized expenditure, with a capitalization ratio of 11.89%. R&D focus was directed toward key areas such as navigation control and military communications, and throughout the year, the company received several scientific research awards, including the Second Prize for National Defense Science and Technology Progress, while high-precision optical lens groups entered the quantum computer market, achieving breakthroughs in technology transfer.

R&D Personnel Situation: Stable Team, Optimized Structure

The number of R&D personnel in the company is 774, accounting for 35.0% of the total workforce. In terms of educational background, there are 244 individuals with a master’s degree or higher, accounting for 31.5% of R&D personnel; regarding age structure, there are 323 R&D personnel under the age of 30, accounting for 41.7%, providing sufficient youthful R&D strength to support continuous innovation.

Cash Flow Deep Dive

Operating Cash Flow: Narrowing Gap, Improved Collection Ability

The net cash flow generated from operating activities was -165 million yuan, still a net outflow but significantly narrowed compared to -548 million yuan in 2024, mainly due to an increase in product deliveries leading to a year-on-year increase of 81.82% in sales collections to 389.6 million yuan, while cash paid for purchasing goods increased by 69.03% to 309.6 million yuan, indicating improved cash flow support capability from revenue growth.

Investment Cash Flow: Turned Negative, Significant Decrease in Time Deposits

The net cash flow generated from investment activities was -16 million yuan, compared to a net inflow of 383 million yuan in 2024, a significant decline. This was mainly due to a decrease in time deposits of the parent company compared to the same period last year, with cash recovered from investments dropping from 1.39 billion yuan to 882 million yuan, while expenditures for the purchase and construction of fixed assets still reached 140 million yuan, leading to a shift from positive to negative investment cash flow.

Financing Cash Flow: Turned Positive, Decreased Dividend Expenditure

The net cash flow generated from financing activities was 10 million yuan, compared to a net outflow of 34 million yuan in 2024, achieving a turnaround. This was mainly due to cash dividends paid this year amounting to 38.5689 million yuan, a decrease of 60.31% compared to 97.1633 million yuan in 2024, while cash inflow from stock option exercises amounted to 53.4533 million yuan, jointly driving financing cash flow positive.

Risk Warning

Technological Innovation Risk

In the context of accelerated iteration of weaponry and equipment, the tasks of strengthening the military and winning battles are daunting, and the demand for technological self-improvement is urgent. The company needs to continuously improve talent training mechanisms and optimize project responsibility systems, leading product structure upgrades through technological innovation and enhancing new product contribution rates and core competitiveness, otherwise it may face risks of lagging technological iteration and declining product competitiveness.

Quality Risk

The quality requirements for equipment construction are continuously increasing, and the company needs to accelerate the establishment of a quality management system for new-era equipment construction, strengthen quality control over external suppliers, and optimize the supply chain model. If quality control is insufficient, it may lead to product quality issues, affecting military product order delivery and corporate reputation.

Price Risk

Changes in military product pricing policies may lead to product price fluctuations, affecting the company’s operating performance. The company needs to improve the cost accounting system, promote comprehensive cost control of “series-product-price,” and strengthen process breakthroughs for cost reduction and efficiency enhancement, otherwise it may face cost pressures that cannot be transmitted downward, compressing profit margins.

Market Marketing Risk

Competition in the military product market is intensifying, while there is uncertainty in the expansion of civilian and military trade markets. The company needs to actively connect with the military and overall assembly units to secure orders and cultivate strategic emerging industries. If market expansion is below expectations, it may lead to a slowdown in order growth and performance pressure.

Subsidiary Management Risk

Some subsidiaries, such as Zhongbing Communication, reported a loss of 56 million yuan in 2025, which dragged down the consolidated profits. The company needs to strengthen coordination and interactive management between the parent and subsidiaries and enhance financial supervision and process control; if the operational difficulties of subsidiaries persist, it may further affect overall profitability.

Executive Compensation Situation

• Chairman Li Haitao: Total pre-tax remuneration received from the company during the reporting period was 1.2227 million yuan; due to personal capital needs, he reduced his shareholding by 41,400 shares.
• General Manager Hu Xiaojun: Total pre-tax remuneration was 1.1220 million yuan, increasing his shareholding by 74,800 shares through stock option exercises.
• Vice General Managers: Wang Xueyin received pre-tax remuneration of 1.0257 million yuan; Lou Ying received pre-tax remuneration of 1.0434 million yuan; Yu Tao received pre-tax remuneration of 845,100 yuan; Liu Changyi received pre-tax remuneration of 616,300 yuan since taking office in November 2025.
• Chief Financial Officer: Former CFO Zhou Jing received pre-tax remuneration of 1.0616 million yuan; the newly appointed Tan Chen, due to starting in December, received pre-tax remuneration of 0 during the reporting period.

Overall, North Navigation achieved simultaneous increases in revenue and profitability in 2025, with strong support from core military product business, but cash flow still faces pressure, and issues such as subsidiary losses and regional business profitability declines need to be monitored. In the future, continuous focus on technological innovation, strengthening quality and cost control, and optimizing subsidiary management will be necessary to address industry risks and promote steady performance growth.

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