AUX ELECTRIC's inaugural financial results since listing have proven disappointing. According to the performance announcement, the company achieved total revenue of 30.049 billion yuan in 2025, a mere 1.0% increase compared to 2024. This contrasts sharply with the growth rates of 27.2% and 19.8% recorded during 2022-2024. Net profit attributable to shareholders was 2.235 billion yuan, a sharp decline of 23.2% from 2024 and even 252 million yuan lower than the 2023 figure.
The capital market showed no leniency. On the day of the results release, AUX's stock price fell to a low of 9.02 HKD per share. The company subsequently announced a cash dividend of 1.06 yuan per share, distributing a total of 1.684 billion yuan, which accounted for approximately 75.3% of its current net profit. However, its stock price remained at low levels. AUX ELECTRIC listed on the Hong Kong Stock Exchange in September 2025 and immediately fell below its issue price. After being included in the Hong Kong Stock Connect program towards the end of the year, its stock price continued a volatile downward trend, now nearly halved compared to the IPO price. As of the latest closing price, the company's market capitalization was approximately 14.818 billion HKD, having evaporated over ten billion HKD since its listing.
Profitability has persistently weakened, signaling a concerning trend in AUX's annual report. Based on the prospectus and the latest financial report, the company's gross profit margin in 2025 was approximately 18.8%, down 2.2 percentage points year-on-year. Compared to the 21.8% margin in 2023, the cumulative decline reached 3 percentage points. When compared horizontally with three major white goods listed companies on the A-share market whose main business is also air conditioners—Midea Group, Gree Electric Appliances, and Hisense Home Appliances—their gross margins for the reporting period were 26.4%, 28.4% (first three quarters of 2025), and 21.3% respectively, with changes of -0.03%, +1.27%, and +0.53% compared to the same period in 2024. In other words, AUX ELECTRIC's gross margin not only showed a declining trend for two consecutive years but also lagged significantly behind its peers.
Examining the causes reveals two main factors. Firstly, the company's product structure is highly concentrated and susceptible to fluctuations in raw material prices. In 2025, revenue from AUX's household air conditioners totaled 25.235 billion yuan, contributing a substantial 87.3% to total revenue. Within this, wall-mounted unit revenue was 22.413 billion yuan, accounting for about 85.4% of household air conditioner revenue and approximately 74.6% of total revenue. Adding central air conditioners, the annual revenue from its air conditioning category exceeded 98% of total revenue, up 0.3 percentage points year-on-year.
According to industry research, key components of air conditioners such as compressors, condensers, and connecting pipes primarily use raw materials including copper, steel, and plastic panels. Copper has the highest proportion among single materials, accounting for about 16% of total costs. By model type, the copper content by weight in wall-mounted units is approximately 20.5%, significantly higher than the 15.1% in floor-standing units and 12%-18% in portable air conditioners. From 2024 to 2025, influenced by tightening copper mine supply, production cuts in smelting, and the pace of U.S. Federal Reserve interest rate cuts, global copper prices generally trended upwards, with the LME spot copper price rising from an average of $9,143 per ton to $9,704 per ton.
Given that AUX's performance pillar is wall-mounted household air conditioners, the impact of rising copper prices on its production costs is easily foreseeable. Concurrently, the company has long competed in a saturated market based on low prices. The average selling price of its household air conditioners fluctuates around 1,500 yuan, far below the 3,000-5,000 yuan average of mainstream brands. Pressured from both cost and revenue sides, the gross profit from AUX's household air conditioners decreased by 15.6% year-on-year in 2025, with the gross margin dropping from 19.2% in 2024 to 16.0%. Compared to 2023, the cumulative decline in the gross margin for household air conditioners reached 4.5 percentage points.
Secondly, the overseas market, which held high expectations, performed below par. Affected by external uncontrollable factors, AUX ELECTRIC's overseas business expansion came to an "abrupt halt" in 2025, with revenue growth plummeting to just 0.4%, a stark contrast to the double-digit growth rates seen from 2022-2024. During the reporting period, revenue from the European market decreased by 6.3% year-on-year, falling below 10% of total revenue. Revenue from the North American market plummeted by 30.7% year-on-year, accounting for less than 5% of total revenue. The South American market, which had previously shown strong growth, saw revenue increase by only 2.019 million yuan compared to 2024.
However, expenses related to supply chain construction for localized operations in overseas markets, such as sales promotions and logistics, did not decrease correspondingly. A comprehensive analysis based on disclosed financial data indicates that the company's selling and distribution expenses increased by 25.5% year-on-year to 1.603 billion yuan in 2025, pushing the selling expense ratio to 5.3%. This metric had remained around 4.0% from 2022-2024. A key reason for the significant expense increase was the establishment of new sales companies and local teams overseas.
Furthermore, AUX ELECTRIC's overseas business primarily relies on the ODM model, which typically carries lower gross margins. The prospectus showed that from 2022-2024, ODM business revenue accounted for over 80% of its total overseas revenue and over 97% of its total ODM revenue. In 2025, AUX's ODM revenue reached 11.781 billion yuan. Estimating based on the 2024 proportion suggests that overseas ODM revenue accounted for about 77.5% of its overseas revenue for the period, highlighting the pressure on gross margins.
To reduce costs and improve efficiency, AUX did not hesitate to implement substantial workforce reductions. The financial report shows that as of December 31, 2025, the company had 15,631 employees, a net decrease of 4,163 compared to the end of 2024. According to the prospectus, as of March 31, 2025, the number of full-time employees was as high as 22,408. This implies a net reduction of 6,777 employees within just nine months, representing approximately 30.2% of the pre-layoff workforce.
Interestingly, the total employee compensation cost at AUX ELECTRIC did not change significantly as a result. In 2025, the total compensation cost was approximately 2.359 billion yuan, essentially flat compared to 2024, with a decrease of only about 2 million yuan. Public reports indicated that AUX was exposed before its listing for multiple rounds of "forceful layoffs," with most affected employees being new hires who had just passed their probation period or were still in it. The compensation structure for these employees consisted of very low base salaries, social security contributions, and relatively high performance/overtime pay. However, the company reportedly only compensated based on the base salary during layoffs. While this approach drastically reduced severance costs, it allegedly involved "illegal termination of labor relations," potentially creating latent legal risks.
In terms of expense control, R&D investment was the only cost category that was reduced in 2025. During the reporting period, AUX's R&D expenses decreased by 3.0% year-on-year to 689 million yuan due to workforce optimization. This amounted to about 42.9% of its selling expenses and 63.4% of its administrative expenses for the same period. The R&D expense ratio was approximately 2.3%, down 0.1 percentage points from 2024. This stands in clear contrast to the consistently stable R&D expense ratios of around 4% maintained by leading competitors like Midea Group, Gree Electric Appliances, and Hisense Home Appliances.
AUX's product competitiveness was already a weakness, and insufficient R&D investment directly leads to lagging product iteration and marginalization of its brand position. The prospectus disclosed that the core component compressors for AUX air conditioners have consistently been supplied by Panasonic. The first phase of its self-built Wuhu factory only officially commenced operations in June 2025. On consumer complaint platforms, there are nearly 4,000 complaints related to frequent product malfunctions and difficulties obtaining repairs.
Market retail monitoring data shows that from January to December 2025, based on sales value, the market share of AUX's main brand, AUX, was approximately 4.8% online and 1.6% offline, ranking seventh and eighth respectively. The market share of its budget sub-brand, Huasuan, was less than 0.1% both online and offline, ranking outside the top 20. The market share of its youth-oriented brand, AUFIT, was about 0.5% online, but it had almost no presence offline. Its brand targeting the high-end market, ShinFlow, was not even included in the statistics.
Since the beginning of 2026, AUX ELECTRIC has issued two consecutive price increase notices. First, it announced a 3%-8% price increase for household air conditioners and residential central air conditioners effective January 19. Subsequently, it announced a 6%-10% price increase for the entire AUX central air conditioner series effective March 1.
Admittedly, pressured by rising raw material costs, AUX is not the only white goods company announcing price hikes. However, the air conditioning market has now fully entered an era of competition for existing market share. According to industry statistics, in the first quarter of 2026, domestic air conditioner retail sales value and volume across all channels decreased by 13.8% and 13.0% year-on-year, respectively. Particularly in March, all-channel retail sales value fell 17.3% year-on-year, while retail volume dropped 18.4% year-on-year. With AUX ELECTRIC's products lacking differentiated selling points and its high-end transformation showing unclear results, it remains uncertain whether consumers will accept this attempt at raising prices.
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