Ganhua Science & Industry (000576)

Stock Analysis Report　|　Industry: Defense Equipment and Components　|　Report Date: 2026-10-19　|　Market data as of the 2026-10-19 close

This report was automatically compiled and generated by AI based on publicly available information. It is for reference only and does not constitute investment advice.

Key Conclusion: Revenue expansion has yet to translate into profit and cash flow, while the current valuation still requires long-term earnings delivery

Market data as of the 2026-10-19 close

1. Key Investment Points

• First-half revenue expanded significantly faster than profit: Revenue in the 2026 interim report was RMB 514 million, up 117.41% year over year; net profit attributable to shareholders was RMB 36 million, up 5.36%. Gross margin was 34.19%, down 9.51 percentage points year over year.
• Alloy volume growth and stable high-margin power supplies are key growth drivers: Revenue from special alloys grew 56.05% in 2025, but gross margin fell 7.83 percentage points. Power supplies accounted for 49.64% of revenue, with a 65.89% gross margin; optoelectronic imaging was consolidated for only part of the year.
• The share price is near the middle of its historical range, but earnings delivery expectations are demanding: The closing price on October 19 was RMB 9.65, with PE-TTM of 54.29x and PB of 2.50x; these respectively correspond to the 46th and 44th percentiles over the past 5.2 years, while PS of 5.38x is at the 5th percentile.

Market Expectations and Evidence

• What the market is pricing in: The current PE implies an annualized market expectation of approximately 22.8% EPS growth over ten years; no institutional earnings forecasts are available for the past six months, preventing direct comparison with consensus growth expectations.
• What the evidence shows: Strong interim revenue growth was mainly driven by alloy growth and the consolidation of Ganxin Technology, but growth in attributable net profit lagged significantly; gross margin declined and operating cash flow was negative. Long-term earnings growth remains unproven.

Evidence bias: Bearish; confidence: Medium (no institutional earnings forecasts; some financial data fields still lack official verification or disclosure dates)

Revenue growth is supported by consolidation and higher alloy volumes, but gross margin and cash conversion of earnings remain weak, and there are no institutional earnings forecasts to validate the long-term growth assumption.

2. Business and Competitiveness

2.1 Business Mix

The company sells specialized power supplies, special alloy products, and optoelectronic imaging systems to prime contractors, system integrators, defense companies, and research institutes.

2.2 Competitive Advantages

Competitive advantage strength: Medium

• Defense-industry certifications and experience supporting specific models: Power supply products have been used in domestic front-line equipment models.
• Niche product capabilities: The company says Shenyang Hanne is a major supplier of certain prefabricated fragments for munitions.
• R&D track record: As of the end of 2025, the main subsidiaries had a combined 215 patents and software copyrights.

Key threats: Rising prices for tungsten and other raw materials, customer price reviews, and collection cycles could squeeze profits. Customer and supplier concentration, earnings delivery from acquired businesses, and goodwill impairment also warrant attention.

2.3 Value-Chain Position and Profitability Trends

• Tungsten is a key raw material for special alloy products. Power supplies and microcircuit modules involve electronic components, but the annual report does not disclose the specific procurement mix or proportions.
• In 2025, raw materials accounted for 76.34% of manufacturing costs; the top five suppliers accounted for 62.13% of procurement, with the largest supplier accounting for 37.98%.
• Customers include defense companies, defense factories, research institutes, and equipment system integrators. Model qualification and reliability requirements increase the cost of switching suppliers.
• Defense-product price reviews, acceptance, and collection cycles may constrain pricing power; available disclosures do not support applying the annual price-reduction model used in the auto-parts industry.
• The 2025 annual report disclosed that the top five customers accounted for 58.69% of sales, with the largest customer accounting for 14.35%. This is currently based on a single year, and customer names and related businesses have not been disclosed.
• Accounts receivable at year-end 2025 were approximately RMB 399.9 million, or 79.1% of annual revenue; estimated using the average of beginning- and end-of-period balances, turnover was approximately 225 days. Consolidation of Ganxin Technology affects comparability.

The company sits in the middle of the defense industry value chain. Model qualification and certification create niche entry barriers, but the company does not control the pricing of tungsten and other raw materials. Profit improvement depends on controlling raw material costs, improving the pass-through of alloy costs, stabilizing the high-margin power supply business, and realizing earnings from the optoelectronics business.

2.4 Industry and Peer Comparison

Defense equipment and components businesses depend on model qualification and delivery capabilities. The company’s alloy revenue grew rapidly in 2025, but gross margin declined; cost pass-through and earnings delivery from the newly consolidated optoelectronics business are key.

The company’s competitive strengths center on defense-industry qualifications, model-support experience, and niche component capabilities, but there is no independent evidence of market share. Compared with peers, its business is more diversified and smaller in scale, its customers and suppliers are concentrated, and alloy profits are vulnerable to raw material cost pressures.

3. Financial Quality

3.1 Operating Performance

Revenue and net profit attributable to shareholders are presented based on official reports for the same periods and with currencies clearly specified; adjusted earnings are compared separately from statutory profit. All six revenue and attributable net profit figures in the table have been individually checked against the issuer’s periodic reports. The six YoY growth rates were calculated from the current- and prior-period figures in the original text and are consistent with the table.

Strong revenue growth was mainly driven by growth in the special alloy business and the consolidation of Ganxin Technology. Rising tungsten powder prices caused manufacturing gross margin to fall 9.51 percentage points year over year, while slower receivables collection weighed on cash flow. Interim growth in attributable net profit diverged significantly from growth excluding non-recurring items, while quarterly profit improved sequentially.

3.2 Financial Health Check

4. Valuation and Market Expectations

4.1 Valuation

Valuation multiples are calculated programmatically using closing data as of 2026-10-19 (trailing 12-month basis); peer multiples are calculated on the same basis using closing data as of 2026-10-19.

Implied market expectations: At the current PE of 54.29x, if investors require an annualized return of 8% and assume a PE of 15x in ten years, EPS would need to grow at an annualized rate of approximately 22.8% (excluding dividends, a conservative assumption). Short-term institutional net profit forecasts differ in horizon and methodology from this long-term EPS growth rate and therefore cannot be directly compared.

PE-TTM is 54.29x, at the 46th percentile over the past 5.2 years and close to the median of 57.87x; PB of 2.50x is at the 44th percentile, while PS of 5.38x is only at the 5th percentile. The market implies ten-year annualized EPS growth of approximately 22.8%, but there are no consensus earnings forecasts, and interim profit and cash flow have yet to demonstrate that revenue expansion can translate sustainably into earnings.

4.2 Institutional Views

None.

5. Catalysts and Recent Events

5.1 Key Upcoming Milestones

5.2 Recent Key Events

• 2026-08-27 Interim report shows pressure on alloy gross margin (negative): The company said that a sharp rise in tungsten powder prices weighed on gross margin in the special alloy segment, while higher R&D and operating expenses caused profit growth to lag revenue growth significantly; revenue growth was also affected by the newly consolidated Ganxin Technology.
• 2026-10-12 Company responds to goodwill impairment risk (negative): The company said that the acquisition of Ganxin Technology includes performance commitments, compensation, and impairment testing arrangements, and that goodwill is tested for impairment annually; these arrangements do not eliminate the risk of impairment if performance falls short of expectations.
• 2026-09-15 Acquisition of remaining stake in Ganxin subject to conditions (neutral): The company said that acquisition of the remaining 35% stake in Ganxin Technology is contingent on meeting performance commitments in every year of the commitment period and no impairment occurring. There is currently no specific timetable, so this is not a near-term confirmed catalyst.

6. Bull-Bear Debate and Risks

6.1 Bull Case

• The power supply business provides strong earnings support: It accounted for 49.64% of 2025 revenue, with a 65.89% gross margin, and has experience supporting front-line equipment models.
• Alloy demand continues to expand: Revenue grew 56.05% in 2025; optoelectronic imaging systems contributed only revenue from the acquisition date through year-end 2025, leaving room for further contributions.

6.2 Bear Case

• Rising tungsten powder prices and higher expenses are squeezing profitability. Gross margin fell to 34.19% in the 2026 interim report, down 9.51 percentage points year over year.
• Earnings quality remains weak: Weighted ROE in the interim report was 2.14%, net operating cash flow/net profit was -1.22, and days sales outstanding reached 180.7 days.

6.3 Other Risks

• Supplier concentration and raw material price volatility → The top five suppliers accounted for 62.13% of procurement, with the largest accounting for 37.98%; rising prices for tungsten and other raw materials could further squeeze alloy gross margin.
• Ganxin Technology underperforms or incurs asset impairment → Although the company has performance commitments and impairment testing arrangements, goodwill impairment could still erode profits.
• High customer concentration → The top five customers accounted for 58.69% of sales; changes in demand or acceptance schedules at major customers could affect delivery revenue and collections.

7. Monitoring Checklist

8. Share Price and Short-Term Outlook (Next Week, Scenario Analysis for Reference Only)

⚠️ The following is a subjective scenario analysis based on current technical indicators and fund flows; the weights are not statistical probabilities. Short-term volatility may be high, so please exercise caution.

8.1 Technical Overview

The share price rose sharply on heavy volume and moved above the moving averages, with MACD strengthening; however, the close was above the upper Bollinger Band and RSI was elevated. Near-term attention should focus on buying support at elevated levels and potential pullbacks to support.

8.2 Key Price Levels

8.3 One-Week Range Based on Historical Volatility

Using the 2026-10-19 price of RMB 9.65 as the base, the closing price range for the next five trading days is estimated from the return distribution over the past 300 trading days (scaled by the current index-weighted daily volatility of approximately 4.0%, while retaining this stock’s own frequency of large rises and falls):

This range reflects only the recent volatility of this stock and does not indicate a direction of travel; actual performance could still fall outside the range in the event of a major announcement or a sharp market decline.

8.4 Scenarios for the Next Week (Subjective Weights, Not Statistical Probabilities)

• Consolidation at elevated levels (relatively higher weight, approximately 50%): If support at RMB 9.00–9.20 holds but the share price fails to move above RMB 10 on heavy volume, it may trade in the RMB 8.80–10.00 range. Based on historical volatility, the probability of the closing price one week from now falling within this range is approximately 60%.
• Moderate pullback (medium weight, approximately 30%): If the share price falls below RMB 9.00 on rising volume, it may retest RMB 8.30–8.60; if that level fails, watch RMB 7.60–7.80. Based on historical volatility, the probability of the closing price one week from now falling within this range is approximately 15%.
• Stronger rebound on heavy volume (relatively lower weight, approximately 20%): If the share price breaks above and holds RMB 10.00 on heavy volume, and third-quarter report-related information does not increase selling pressure, it could extend toward RMB 10.00–11.00. Based on historical volatility, the probability of the closing price one week from now falling within this range is approximately 25%.

Figures in parentheses are subjective weights; the probabilities at the end of each sentence are inferred from the volatility ranges above and reflect volatility only, not direction.

8.5 Fund Flows and Liquidity

Over the past 10 trading days (through 2026-10-19), daily trading value was approximately RMB 44 million–550 million and turnover ranged from 1.22% to 13.42%; the latest trading value was RMB 555 million and turnover was 13.42%. As of 2026-06-30, the top 10 tradable shareholders held a combined 41.15%, including controlling shareholder Delixi Group (35.98%), insurance products, funds, and QFII investors; shareholder disclosures are lagged, so the ownership structure may have changed. Trading activity has been brisk recently, but significantly higher turnover may also increase short-term price volatility and market impact.

If daily trading value remains above the upper end of the past 10-day range, approximately RMB 550 million, and the share price holds above RMB 10, this could be viewed as volume confirmation of a breakout.

The above scenario analysis is based on closing data, historical prices, and technical indicators as of 2026-10-19. Short-term share price performance will also be affected by multiple factors, including news, fund flows, and broader market conditions. Technical indicators themselves are lagging and limited, do not guarantee actual future performance, and do not constitute a buy or sell recommendation. Please make an independent assessment based on the latest market information and assume responsibility for your own investment risks.

Sources

• 甘化科工(000576)_公司公告_甘化科工：2025年年度报告新浪财经_新浪网
• 甘化科工(000576)_公司公告_甘化科工：关于深圳证券交易所年报问询函回复的公告(2023-29)新浪财经_新浪网
• 广东甘化科工股份有限公司2023 年度报告全文
• 甘化科工(000576)_公司公告_甘化科工：2024年年度报告新浪财经_新浪网
• 公司公告_新雷能：2025年财务决算报告新浪财经_新浪网
• 长城军工(601606)_公司公告_长城军工：2025年年度报告新浪财经_新浪网
• 武汉高德红外股份有限公司 2025 年年度报告全文
• 2026年半年度报告
• 2025年年度报告
• 2024年年度报告
• 2023年年度报告
• 腾讯财经行情（2026-10-19）
• 东方财富F10 合并资产负债表（2026中报）
• 东方财富 F10 盈利预测
• 甘化科工:2026年半年度报告
• 甘化科工：公司商誉按会计准则每年实施减值测试
• 甘化科工(000576.SZ)公司大事-PC_HSF10资料 - 大事提醒
• 甘化科工：收购甘鑫科技65%股权形成较高商誉，已约定业绩承诺与补偿等事项
• 甘化科工(000576)
• 甘化科工(000576)交易提示_证券之星
• 甘化科工(000576) - 全景图
• 临时公告 - 广东甘化科工股份有限公司
• Guangdong Ganhua Science & Industry Co.,Ltd.: Agenda Calendrier Financier et Publications de Résultats | 000576 | CNE0000005H6 | Zonebourse
• 东方财富 个股资金流向
• 东方财富 股东研究

This report was automatically researched, compiled, and generated by AI based on publicly available information. Information is current through the 2026-10-19 close and may differ in timeliness; please refer to the company’s official announcements and authoritative data terminals for specific figures. This report is for information collation and research reference only and does not constitute investment advice. Investors should make their own independent judgments and assume responsibility for their own investment risks.