On the evening of April 22, Shandong Denghai Seeds Co., Ltd. (SZ 002041) disclosed its annual report for the year 2025. The report revealed that the company achieved approximately 1.102 billion yuan in operating revenue, representing a year-on-year decrease of 11.55%. Despite this contraction in revenue, the company's net profit experienced counter-trend growth, increasing by 30.35% compared to the previous year. The net profit attributable to shareholders of the parent company rose significantly by 61.86% to approximately 91.6534 million yuan.
Behind the substantial increase in net profit for 2025 lies a decline in the profitability of Shandong Denghai Seeds' core operations. Both the sales volume and revenue of the company's main product, corn seeds, decreased. Non-recurring gains and losses, amounting to a substantial 72.1497 million yuan (primarily consisting of government subsidies and financial investment income), became the key pillar supporting the company's performance. The company's net profit after deducting non-recurring items was only about 19.5037 million yuan.
The annual report indicated a noticeable contraction in Shandong Denghai Seeds' overall revenue scale for 2025. Specifically, the company's operating revenue of 1.102 billion yuan compared to 1.246 billion yuan in 2024, marking an 11.55% decline. This revenue decrease was primarily attributed to weak sales in its core main business.
Shandong Denghai Seeds' performance is highly dependent on the agricultural seed industry, particularly its hybrid corn seed business. In 2025, revenue from corn seed products reached 936 million yuan, accounting for a significant 84.97% of total operating revenue. However, this revenue stream declined by 12.71% year-on-year. From a production and sales perspective, the overall sales volume of the agricultural seed business decreased by 15.92%, while production volume fell sharply by 38.81%.
Despite the contraction in production and decline in revenue, Shandong Denghai Seeds delivered strong results on the profit front. The company's net profit grew by 30.35% compared to the same period last year, while net profit attributable to parent company shareholders reached 91.6534 million yuan, a substantial increase of 61.86%.
How did net profit achieve significant growth despite the decline in main business revenue? Shandong Denghai Seeds provided an explanation in its financial report: the primary reason was a lower provision for inventory depreciation in the current period compared to the same period last year. Financial data confirms this: the company's asset impairment losses (mainly inventory depreciation losses) decreased by 67.05% year-on-year in 2025. The significantly reduced provision for inventory depreciation alleviated pressure on the income statement, directly boosting the reported net profit for the period.
Although the rapid growth in net profit appears impressive on the surface, a deeper look beyond the superficial financial data reveals the continued weakness in the true profitability of Shandong Denghai Seeds' core operations. The metric most reflective of the main business's operating condition—net profit attributable to shareholders of the listed company after deducting non-recurring gains and losses—showed that Shandong Denghai Seeds achieved only 19.5037 million yuan in this category for 2025. While this represents an improvement compared to the loss reported in 2024, it is a significant contraction from the 177 million yuan in adjusted net profit achieved in 2023, indicating clearly insufficient momentum for the core business to generate pure profit.
With the core business lacking momentum, substantial "non-recurring gains and losses" became the absolute main driver lifting Shandong Denghai Seeds' 2025 performance. The total amount of non-recurring gains and losses for Shandong Denghai Seeds in 2025 reached 72.1497 million yuan. Specifically, these revenues, which have low direct correlation with main business operations, primarily included the following items: government subsidies recognized in current profit or loss amounting to approximately 49.0745 million yuan; fair value changes and investment income from holding and disposing of transactional financial assets, totaling about 29.3909 million yuan; and gains or losses on the disposal of non-current assets of approximately 5.4875 million yuan.
This means that a large majority of Shandong Denghai Seeds' net profit attributable to parent company shareholders, which exceeded 91 million yuan, was contributed by non-recurring items such as government subsidies and financial investments. The core business's own ability to generate profit remains a concern.
The continued pressure on the profitability of the main business is closely related to the deterioration of the macro industry environment and frequent natural disasters. Shandong Denghai Seeds acknowledged in its financial report that the current supply-demand ratio for corn seeds is as high as 175%, indicating significant inventory pressure across the industry and challenges posed by market supply-demand imbalance.
Concurrently, the seed production industry's inherent vulnerability to weather conditions was further amplified in 2025. During the reporting period, the Huang-Huai-Hai region experienced extreme weather conditions including drought, high temperatures, waterlogging, and prolonged overcast and rainy days. This led to a succession of adversities such as poor corn kernel setting, bacterial wilt, ear rot, and lodging. These conditions not only negatively impacted corn cultivation but also posed significant challenges to the disease resistance, stress tolerance, and market sales of numerous corn varieties.
Facing severe external environmental and internal operational pressures, Shandong Denghai Seeds implemented corresponding self-help measures. The company stated that during the reporting period, it diligently carried out cost reduction and efficiency improvement initiatives, achieving positive results. It extensively promoted company-wide cost reduction and efficiency enhancement activities, saved on expenses to increase benefits, strengthened the optimization of seed production process management, and worked to improve per-unit yield in seed production. The comprehensive gross profit margin for the reporting period was 29.81%, an increase of 1.46 percentage points from the previous year. Specifically, the gross profit margin for corn seeds was 32.09%, an increase of 2.59 percentage points year-on-year.
Furthermore, Shandong Denghai Seeds' annual report indicated that during the reporting period, the company and its subsidiaries independently developed a total of 13 new corn varieties that passed national certification. The company advanced market development in the Huang-Huai-Hai, Northeast, Northwest, and Southern regions, segmented markets based on variety adaptability, expanded sales channels, and increased sales volume. It also seized opportunities presented by the expanded demonstration of genetically modified corn varieties, strengthened promotional efforts, and increased sales of transgenic varieties.
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