AUX ELECTRIC has released its inaugural annual financial report since going public, revealing severe challenges for the air conditioning manufacturer known for its aggressive pricing strategy. In 2025, the company's revenue grew by a mere 0.97%, nearly stagnating, while net profit attributable to shareholders plummeted by 23.2%.
The company's budget-friendly HuaSuan sub-brand experienced a sharp revenue decline of 39% in 2025. International operations also suffered, with sales in Europe and North America falling by 6.3% and 30.7% respectively. These results indicate growing difficulties for AUX ELECTRIC's value-oriented and global expansion narratives.
In response to these pressures, AUX ELECTRIC reduced its workforce by 4,163 employees in 2025 and cut research and development expenditures by 3.0%. The company launched two new brands—AUFIT targeting younger consumers and ShinFlow aimed at the premium market—as part of its turnaround efforts. However, AUFIT currently suffers from low brand recognition and overlaps with HuaSuan's value positioning, while ShinFlow has yet to generate significant revenue.
The company's market performance has been equally disappointing. Since its Hong Kong listing on September 2, 2025, at HK$17.42 per share, AUX ELECTRIC's stock price has consistently traded below the offering price. By April 1, the share price had fallen to HK$9.48, representing a decline of over 45% from the IPO price. Market capitalization has shrunk from an initial HK$27.6 billion to approximately HK$15 billion, evaporating more than HK$12.6 billion in value.
The near-zero revenue growth contrasts sharply with AUX ELECTRIC's pre-IPO performance. Between 2022 and 2024, the company demonstrated robust growth with revenues increasing from RMB19.53 billion to RMB29.76 billion and net profits rising from RMB1.44 billion to RMB2.91 billion.
The revenue stagnation primarily resulted from the sharp decline in HuaSuan brand sales and weakened performance in overseas markets. While the main AUX brand saw modest growth of 2.5% to RMB15.91 billion, HuaSuan revenue crashed from RMB1.36 billion to RMB829 million. The company's ODM business declined by 3.8%, with other operations falling 16.3%.
Geographically, domestic sales edged up just 1.5%, while international markets showed mixed results with European sales down 6.3%, North American sales plunging 30.7%, and South American sales barely growing by 0.1%. The company's gross margin compressed to 18.8% from 21.0% in 2024, which management attributed to intense competition, rising raw material costs, and high inventory levels in certain regions.
Cost-cutting measures included reducing the workforce from 19,794 to 15,631 employees, though total employee costs remained nearly unchanged at approximately RMB2.36 billion. Research spending decreased to RMB689 million, which the company said reflected optimized R&D efficiency.
Paradoxically, sales and distribution expenses surged by 25.5% to RMB1.09 billion, driven by overseas expansion and increased marketing investments. The new AUFIT brand generated RMB996 million in revenue during its launch year but faced consumer confusion, with some customers mistaking it for an inferior product and requesting returns. This forced some retailers to clarify AUFIT's relationship with the parent company.
The company remains heavily dependent on air conditioning products, which account for 98.2% of total revenue. With the overall Chinese air conditioning market contracting by 1.3% in 2025 and price competition intensifying, diversification has become increasingly urgent. AUX ELECTRIC plans to expand into new home appliance categories through brand licensing and OEM arrangements.
The company also faces fierce competition from industry leader Gree, with ongoing patent disputes between the two manufacturers. A recent court ruling required an AUX ELECTRIC affiliate to transfer eight patents to Gree and pay RMB3.5 million in compensation, though the decision is being appealed.
Internationally, AUX ELECTRIC aims to strengthen its position in established markets while entering new territories like Japan, Indonesia, and Argentina. However, tariff policies and trade uncertainties have already significantly impacted overseas performance, creating substantial challenges for the company's global strategy. Management acknowledged that potential tariff increases could further raise export costs, reduce price competitiveness, and constrain profitability.
Comments