No pursuit of permanence, only seizing the present moment. The legacy halo of the established bicycle brand cannot shield against the harsh winds of international markets and internal cost pressures. On August 15, Zhonglu.Co.,Ltd., the parent company of the veteran bicycle brand "Permanent," released its 2025 interim report. The report revealed that the company achieved total operating revenue of 574 million yuan in the first half, representing a 10.66% year-on-year increase. However, net profit attributable to shareholders posted a loss of 8.3091 million yuan, plummeting 434.16% compared to the same period last year. Non-recurring net profit also turned negative with a loss of 8.51 million yuan.
According to available information, Zhonglu.Co.,Ltd. currently operates under a dual-business model, primarily engaging in bicycle manufacturing and external equity investment activities. The company's brand portfolio includes "Permanent," "NINETEENFORTY," and "FOREVER BLU."
In-depth analysis reveals that the company's business structure remains stable. Main business revenue reached 553 million yuan, accounting for 96.4% of total revenue, while other business income was only 21 million yuan. By geographic segment, domestic revenue totaled 394 million yuan and overseas revenue 172 million yuan, indicating the company's considerable dependence on international markets.
Zhonglu.Co.,Ltd.'s gross margin declined from 15.53% in the same period last year to 14.93%, while net margin further deteriorated from -0.10% to -1.89%. This continued compression of profit margins signals red flags for the company's profitability.
Single-quarter data presents an even more severe picture. Second-quarter revenue reached 324 million yuan, growing merely 1.91% year-on-year, while net profit attributable to shareholders recorded a loss of 5.0761 million yuan, declining 162.24% year-on-year. The accelerating pace of performance decline demonstrates mounting operational pressures.
Examining the core reasons behind Zhonglu.Co.,Ltd.'s losses, the substantial surge in administrative expenses takes center stage. The interim report shows administrative expenses reaching 51.9233 million yuan, increasing 51.09% compared to the previous year. This abnormal growth primarily stems from increased intermediary service fees related to the company's cross-border equity investment activities.
In the first half of 2025, Zhonglu.Co.,Ltd. completed its equity investment in high-end bicycle brand Factor. Its controlling company Zhonglu Advantage acquired a 21.15% stake in Factor Bikes Pty Ltd for $15.2639 million through a wholly-owned subsidiary. This investment was completed before the report disclosure date, with the company planning to leverage this acquisition to extend into upstream and downstream segments including component manufacturing, sales channels, and racing operations. However, the upfront investments in these strategic initiatives directly impacted current period profits.
Beyond administrative expenses, other cost indicators also present concerning trends. Sales expenses reached 31.67 million yuan, up 7.38% year-on-year, mainly due to increased costs related to new product launches. Financial expenses totaled 1.0025 million yuan, rising 24.24% year-on-year primarily due to exchange rate fluctuations. R&D expenses stood at 10.92 million yuan, declining 5.16% year-on-year mainly due to a shift toward university collaboration in research and development.
Total period expenses reached 95.5293 million yuan, an increase of 19.3371 million yuan compared to the previous year, with the period expense ratio reaching 16.65%, up 1.95 percentage points year-on-year. Combined three expenses (sales, administrative, and financial expenses) totaled 84.6025 million yuan, representing 14.74% of revenue and growing 18.22% year-on-year.
Zhonglu.Co.,Ltd.'s overseas challenges are closely linked to changes in the global trade environment. In April 2025, the United States imposed a 32% reciprocal tariff on Taiwanese goods, later reduced to 20% but officially implemented on August 7. The tariff policy severely impacted the bicycle industry. The US market accounts for 33% of Taiwan's total bicycle exports, making it the second-largest market after the EU. Following the tariff implementation, regular bicycles face a 53% tax rate when exported to the US, while e-bikes encounter a 42% rate.
In its 2024 annual report, Zhonglu.Co.,Ltd. had expressed intentions to actively expand markets and seek overseas opportunities in 2025. In March this year, the company announced a multi-million dollar investment in high-end bicycle brand Factor, representing a key strategic move in its premium bicycle export strategy.
However, reality proves harsh. Zhonglu.Co.,Ltd. candidly acknowledged in its interim report that "overall demand in European and American markets remains weak." The US market faces sluggish demand and lackluster recovery due to tariff impacts and commercial uncertainties, while the European market shows clear differentiation with overall demand still appearing weak.
The only bright spot emerges in Southeast Asian markets. Driven by multiple catalysts including policy, consumption, and cultural factors, the region demonstrates overall resilience, becoming a new growth pillar for the bicycle industry. However, questions remain whether Southeast Asian markets can compensate for losses in European and American markets.
Facing operational difficulties, Zhonglu.Co.,Ltd. is seeking breakthrough through premiumization and diversification strategies. In terms of premiumization, the company entered the high-end carbon fiber bicycle market through its Factor equity acquisition. Founded in 2009, Factor specializes in designing, manufacturing, and selling high-performance full carbon fiber road bikes, with products covering European, American, and Asian markets, renowned for lightweight design, aerodynamics, and race-level performance.
Regarding diversification, Zhonglu.Co.,Ltd. continues investing in high-altitude wind power generation technology. In May 2024, the company established a joint research center with Tsinghua University for high-altitude umbrella ladder energy collection technology, conducting basic and applied research in high-altitude wind power generation. By the end of 2024, the company held 41 patents related to high-altitude wind energy.
However, achieving full commercialization of high-altitude wind energy projects still requires considerable time.
Zhonglu.Co.,Ltd.'s future development faces the dual challenge of internal improvement and external expansion. Internally, the company has experienced continuously declining revenue growth rates in recent years, indicating weakness in core business growth requiring urgent breakthrough. The company's net asset condition also raises concerns. As of the end of the second quarter, net assets attributable to shareholders totaled 570 million yuan, declining 3.2% from year-end. Net assets per share reached 1.77 yuan, down 6.72% year-on-year.
Zhonglu.Co.,Ltd.'s median ROIC (Return on Invested Capital) over the past 10 years was merely 3.27%, with the worst performance in 2022 reaching as low as -12.13%.
From an external environment perspective, global bicycle market recovery remains uncertain. In the first half of 2025, the global bicycle market exhibited structural adjustment trends. Facing industry changes, bicycle companies are actively adjusting their global strategies. Giant Group indicated at its shareholders' meeting that the market has emerged from inventory pressures of the previous two years but still faces overall headwinds. Merida also noted that European markets are gradually warming up, but the US market remains uncertain due to tariff policy impacts.
Riding uphill, no progress means retreat. Facing intense market competition, questions remain whether Zhonglu.Co.,Ltd. can successfully break through. The success of the Factor acquisition and high-altitude wind energy initiatives will determine whether this veteran enterprise can restore the former glory of "Permanent."
Comments