Chutian Dragon (003040)

Equity Research Report | Industry: Smart Cards & Digital Security | Report Date: September 13, 2026 | Market and technical indicators mainly as of the close on September 11, 2026; shareholder structure data latest reporting period is March 31, 2026, subject to quarterly lag; latest clearly readable MACD data as of August 28, 2026, which cannot represent the current status as of September 11, 2026.

This report is automatically compiled and generated by AI based on public information, for reference only and does not constitute investment advice.

I. Core Summary

The most decision-relevant fact about Chutian Dragon is that its performance remains in a clear downturn and loss-making phase: for H1 2026, operating revenue was RMB 319 million, down 30.21% year-on-year; net profit attributable to shareholders was a loss of RMB 62.1242 million; net profit excluding non-recurring items was a loss of RMB 65.685 million, further widening the loss compared to the same period last year. Meanwhile, net cash flow from operating activities turned to a net outflow of approximately RMB 115 million. The company's FY2025 net profit attributable to shareholders was only RMB 7.1509 million, and net profit excluding non-recurring items was only RMB 459,600, indicating an extremely weak profitability base.

The company's main business remains dominated by embedded security products, which accounted for 82.73% of revenue in H1 2026, but revenue declined 28.45% year-on-year with a gross margin of 21.45%; smart hardware and software & services revenue declined 53.20% and 72.47% year-on-year respectively, with software & services gross margin at -4.95%. The traditional smart card business faces pressure from stock replacement and tender price reductions. The company is in a "squeezed from both ends" position — constrained by upstream chip costs and facing strong bargaining power from downstream bank and government customers. The FY2025 consolidated gross margin has fallen to 25.8%, with net margin attributable to shareholders at only approximately 0.7%.

The company still has certain directions for business transformation and structural improvement, including third-generation social security cards, eSIM, digital RMB hard wallets, IoT security modules, smart terminals and software platforms. It disclosed winning head-office-level projects from multiple banks in H1 and being shortlisted for third-generation social security card projects in multiple regions, with eSIM-related technologies obtaining domestic and international certifications. However, digital RMB-related revenue has not yet reached 5% of total revenue, new businesses have not yet offset the contraction in traditional businesses, and the decline in smart hardware and software & services in H1 2026 indicates that transformation realization still needs to be observed.

As of September 11, 2026, the stock price was RMB 17.46, total market capitalization approximately RMB 8.051 billion, price-to-book ratio approximately 5.81–5.85x, and dynamic P/E unavailable due to losses. The stock price rose approximately 101% intraday from August 20 to September 8, then pulled back to RMB 17.46, below MA5 and MA10 but slightly above MA20 at approximately RMB 17.19; large and extra-large order fund flows were generally net outflows over the past 5 days, reflecting high-level divergence and rapid chip exchange. There is a clear divergence between market performance and current loss-making fundamentals.

II. Company Overview

2.1 Basic Information

2.2 Main Business and Product Layout

• Embedded security products: smart cards (financial social security cards, standard bank IC cards, communication cards/SIM cards/super SIM cards, transportation cards, etc.) and personalization data services, as well as digital RMB hard wallets, eSIM, eSE, IoT security modules and other multi-form new products; independently developed COS and national cryptographic security capabilities.
• Smart hardware: self-service terminals, cabinet-type/portable instant card issuance equipment, AI multimodal interaction terminals (consultation and guidance, digital employees, AI digital humans), etc., targeting government affairs and bank customers.
• Software & services: social security "all-in-one card" platform, smart archives (digital processing and O&M), digital RMB marketing/split accounting/smart contract platforms and operational services; wholly-owned subsidiary Hongwan Technology's equity-based service business is growing rapidly.

2.3 Industry Chain Position and Cost-Profit Structure

Chutian Dragon is positioned in the mid-stream processing segment of the value chain: "upstream security chip design and wafer fabrication — mid-stream card/security product packaging manufacturing and personalization + software platform services — downstream banks/governments/telecom operators as powerful buyers." Upstream chip procurement accounts for the majority of costs but the company has no bargaining power; downstream tender centralized procurement pushes prices down year by year with long collection cycles — a typical "squeezed from both ends" mid-stream manufacturer + service provider.

• Core cost item is security chips: According to the IPO prospectus (2017-2019 basis), chip procurement amounts accounted for 74.03%, 64.86%, and 55.93% of main business costs respectively; average chip procurement unit price fell from RMB 1.7/piece to RMB 1.29/piece; in 2019, the largest supplier was China Electronics Huada Electronics (chips, annual procurement approximately RMB 260 million, approximately 60% of total chip procurement that year). This cost ratio is based on historical prospectus data; annual reports no longer disclose this after listing, and the latest exact ratio cannot be verified.
• Other raw materials include PVC and other card base materials, inks and other auxiliary materials. The 2021 annual report explicitly stated: chip supply shortages and significant price increases in PVC, inks and other raw and auxiliary materials made it difficult to pass on chip and other raw material price increase pressures to downstream customers within project contract periods.
• Supplier concentration (annual report basis): FY2025 top five suppliers total procurement of RMB 343 million, accounting for 61.22%, of which the largest supplier procured RMB 232 million, accounting for 41.48% (the annual report did not disclose its name; inferred to be a chip supplier, this is speculation); FY2023 top five accounted for 58.75% (largest 46.34%). Only two named suppliers are Guangzhou companies (Shinuorui Technology, Mingsen Technology), inferred to be equipment/auxiliary materials, business not verified.
• Weak cost pass-through ability: The company is a chip price taker. The 2026 interim report stated that "affected by rising semiconductor raw material prices and climbing wafer fabrication and packaging/testing costs, the company finds it difficult to timely pass on product price reduction pressures to upstream chip suppliers and other upstream parties, with operating cost decline lower than operating revenue decline."
• Customer structure: banks (state-owned major banks/joint-stock banks/provincial rural credit unions/city commercial banks), local human resources and social security departments (third-generation social security cards, all-in-one cards), three major telecom operators and broadcasting (SIM/IoT cards/eSIM), local governments (government affairs smart hardware and platforms); all operate under tender/centralized procurement/framework agreement models.
• Industry demand has entered a stock period: According to the company's 2026 interim report citation, as of end-Q1 2026, national bank cards totaled 10.261 billion; as of end-June 2026, social security card holders totaled 1.39 billion, mobile phone users 1.844 billion; incremental growth mainly comes from third-generation social security card replacement, eSIM commercialization, digital RMB and IoT cards.
• Pricing dynamics: Downstream are powerful buyers such as banks/governments/operators, using centralized tendering + framework agreement procurement, with prices declining year by year. The company stated multiple times in 2025-2026 that "traditional smart cards have entered a stock replacement cycle with intensifying price competition"; the company is essentially a price taker vis-à-vis downstream. Note: This industry does not apply the automotive parts "annual price reduction" clause template; actual pressure comes from tender pricing and competitive price reductions.
• Overseas is a marginal highlight: FY2025 overseas revenue RMB 21 million (2.06% of total, YoY +42.26%, gross margin 33.22%); H1 2026 overseas revenue RMB 17 million (5.44% of total).
• Accounts receivable are large in scale and high in proportion: FY2025 year-end accounts receivable book value RMB 430 million (430,086,113 level), approximately 43% of annual revenue and approximately 60x annual net profit attributable; FY2024 year-end was RMB 570 million. The FY2025 annual report disclosed "accounts receivable decreased from RMB 569.9201 million to RMB 430.0861 million, a decrease of RMB 139.834 million." Operating cash flow is notably better than book profit: FY2025 net operating cash flow RMB 153 million, FY2024 RMB 224 million, mainly driven by collection of receivables. The conclusive evidence is that downstream bank/government customers occupy significant company funds in the form of receivables, placing the company in a weak/fund-occupied position in the industry chain capital flow.
• Customer concentration: FY2025 top five customers total sales RMB 493 million, accounting for 49.38% of revenue (largest customer 17.21%, second 10.38%, third 9.05%, fourth Bank of China 6.43% — the only named one among top five, fifth 6.31%); FY2024 top five customers accounted for 51.77% (source: Tongdaxin F10/Chaguwang, updated 2026-09-02, consistent with annual report disclosure basis). Limitation note: Customer names are highly anonymous, proportion details come from a single F10 source, and could not be cross-verified item by item with the annual report; specific data should be based on the original annual report.

One-sentence positioning: Chutian Dragon is in a "squeezed from both ends" mid-stream processing segment — upstream chip costs account for more than half but the company has no bargaining power; downstream tender centralized procurement pushes prices down year by year with slow collection (best historical year net margin attributable approximately 10%, falling to 0.7% in 2025). The real drivers of future gross margin improvement are not industry-wide recovery but: ① chip cost cycle decline; ② revenue structure migration toward higher-gross-margin emerging forms (eSIM platform-based operations, digital RMB hard wallets, digital ID cards, software & services) and increasing overseas proportion (FY2025 software & services gross margin 31.12%, overseas gross margin 33.22%, higher than traditional card business, evidence of "smiling curve shift to the right"); ③ smart manufacturing cost reduction and expense control. However, note: H1 2026 smart hardware and software & services revenue declined significantly year-on-year (-53.20% and -72.47% respectively) with gross margins turning negative/inverted (6.14%, -4.95%), indicating low transformation realization at present.

III. Financial Data and Valuation Analysis

3.1 Recent Operating Performance

FY2025 net profit excluding non-recurring items only RMB 459,600 (YoY approximately -97%); H1 FY2025 had a loss of RMB 39.7688 million, relying on Q4 single-quarter approximately +RMB 51.12 million to bring the full year back to profitability. H1 2026 net profit attributable -RMB 62.1242 million, within the 2026-07-14 earnings forecast range [-RMB 65 million, -RMB 50 million]; excluding non-recurring items -RMB 65.685 million, loss widened approximately 58.9% compared to the same period last year. 2026Q1 and 2026H1 are same-year single-quarter and cumulative bases; Q2 estimated loss approximately RMB 49.85 million, deteriorating quarter-on-quarter. H1 2026 operating cash flow net outflow approximately RMB 115 million (same period last year approximately RMB 133 million); as of 2026-06-30, net assets attributable to shareholders approximately RMB 1.38 billion, net assets per share approximately RMB 3.00. FY2024 dividend was RMB 0.3 per 10 shares (tax inclusive); FY2025 dividend was RMB 0.1 per 10 shares (tax inclusive, implemented June 2026, record date 2026-06-01). Data from company periodic reports/earnings forecasts (disclosed 2025-04-18, 2026-04-24, 2026-07-14, 2026-08-25, etc.). Also: China Fund News 2026-09-01 report wrote H1 non-recurring as -RMB 65.8731 million, inconsistent with the interim report/most media basis of -RMB 65.685 million; determined to be a typographical error and discarded.

Chutian Dragon's performance has declined continuously in recent years: FY2023 net profit attributable approximately RMB 70 million (YoY -57.6%), FY2024 fell to RMB 21.555 million (YoY -69.38%), FY2025 further fell to RMB 7.1509 million (YoY -66.82%), with non-recurring at only RMB 459,600. 2026Q1 turned to a loss of -RMB 12.2791 million; H1 2026 revenue declined 30.21% year-on-year to RMB 319 million, net profit attributable loss widened to -RMB 62.1242 million. By product, embedded security products (82.72% of revenue) declined 28.45%, smart hardware declined 53.20%, software & services declined 72.47%, across-the-board contraction. By quarter, Q1 lost approximately RMB 12.28 million, Q2 lost approximately RMB 49.85 million, deteriorating quarter-on-quarter. H1 2026 had no dividend, operating cash flow turned to net outflow. The company's main business is digital security and digital intelligence services; digital RMB-related revenue proportion is less than 5% according to the company's own statement.

3.2 Earnings Forecast

Tonghuashun F10 earnings forecast page shows "no institutional performance forecast for the current year"; Tencent Finance reported that as of May 2026 only 1 institution published an earnings forecast, but no specific figures were given. Public channels currently have no effective multi-institution consensus earnings forecast or consensus target price. Some third-party pages previously showed 2026E EPS 0.26, 2027E EPS 0.31, but implied 2026 net profit of approximately RMB 120 million, severely contradicting the disclosed H1 2026 loss of RMB 62.1242 million and FY2025 net profit of RMB 7.1509 million, and the source date cannot be verified, so it is not adopted, and the forecast table is therefore left blank.

3.3 Valuation Level and Institutional Ratings

Valuation market data as of 2026-09-02 close: closing price RMB 19.20 (that day -9.09%), total market capitalization approximately RMB 8.85 billion, circulating market capitalization RMB 8.772 billion; TTM net profit attributable estimated approximately -RMB 15.2 million, PE(TTM) negative and meaningless; static PE (based on FY2025 net profit RMB 7.1509 million) approximately 1,238x; PB approximately 6.4x (based on 2026-06-30 net assets attributable approximately RMB 1.38 billion). Late August stock price surged on digital RMB policy catalysts: 8/21-8/26 four consecutive limit-ups cumulative +46.4%, 8/25 close RMB 15.48/market cap RMB 7.138 billion, 8/31 limit-up RMB 19.58/market cap RMB 9.029 billion, 9/2 pulled back to RMB 19.20; this trend clearly diverges from loss-making fundamentals. 52-week range approximately RMB 9.78–26.58 (2026-08-24 snapshot). Currently no broker consensus earnings forecast/target price; some third-party self-media based on "reasonable PB 1.8-2.5x" reference valuation gave a reasonable range of approximately RMB 5.41–7.51/share (single author's view, not market consensus), indicating relatively elevated valuation. Overall valuation lacks earnings support and should be treated with caution.

IV. Recent News and Announcements

4.1 2026 Interim Earnings Forecast: Expected Loss of RMB 50 Million to RMB 65 Million

Announcement No. 2026-028, board date July 15, 2026. Expected H1 2026 net profit attributable -RMB 65 million to -RMB 50 million (same period last year -RMB 39.7688 million, YoY decline 25.73%~63.44%); net profit excluding non-recurring items -RMB 68.6 million to -RMB 53 million (same period last year -RMB 41.3286 million); basic earnings per share -RMB 0.11 to -RMB 0.14/share. Reason: intensifying industry competition and price declines on some products led to revenue and gross margin decline. The company also listed four positive developments: winning head-office-level projects from multiple state-owned major banks/joint-stock banks in H1, being shortlisted for third-generation social security card projects in multiple cities; eSIM and other self-developed technologies obtaining domestic and international certifications; cost reduction and efficiency improvement, intelligent transformation showing initial results. Not pre-audited by certified public accountants, no disagreement in pre-communication with accountants.

4.2 2026 Interim Report: Revenue RMB 319 Million, Down 30.21% YoY; Net Profit Attributable Loss of RMB 62.1242 Million

Board date August 24, 2026, disclosed August 26, 2026. H1 2026 operating revenue RMB 319 million, YoY -30.21%; net profit attributable -RMB 62.1242 million (same period last year -RMB 39.7688 million, loss widened approximately 56% YoY); basic earnings per share -RMB 0.13. Actual value falls within the forecast range of -RMB 50 million to -RMB 65 million. H1 2026 main business structure (as of 2026-06-30): embedded security products RMB 264.0 million (82.73% of total, gross margin 21.45%), smart hardware RMB 21.09 million, software & services RMB 9.122 million (gross margin -4.95%); overseas revenue RMB 17.35 million (5.44% of total, gross margin 28.35%). Interim report risk disclosures include intensifying industry competition, raw material price volatility, new technology R&D and commercial application falling short of expectations, and rising labor costs leading to profit decline.

4.3 FY2025 Annual Report: Revenue RMB 998 Million, Down 4.82% YoY; Net Profit Attributable RMB 7.1509 Million, Down 66.82% YoY

Disclosed around April 24, 2026. FY2025 operating revenue RMB 998 million, YoY -4.82%; net profit attributable RMB 7.1509 million, YoY -66.82%; Q4 single quarter turned profitable quarter-on-quarter, full year overall profitable. FY2025 smart hardware business revenue RMB 130 million, YoY +29.32% (this segment data from 2026-05-13 investor relations activity record, single source, recommend verifying against annual report by-product table).

4.4 2025 Q3 Report: First Three Quarters Net Profit Attributable Loss of RMB 43.9686 Million

Announcement 2025-042, October 28, 2025. First three quarters revenue RMB 685 million (-1.52%), net profit attributable -RMB 43.9686 million (-55.45%); of which Q3 revenue RMB 228 million (+5.89%, QoQ +14.06%), Q3 embedded security product orders QoQ +36.86%.

4.5 Termination of 2026 Private Placement of A-Shares to Specific Investors

On February 9, 2026, the 12th meeting of the board of directors approved resolutions related to the 2026 private placement of A-shares to specific investors; the preliminary plan was disclosed on Cninfo on February 11, 2026; on February 26, 2026, the first extraordinary general meeting of 2026 approved the resolution authorizing the board to fully handle the matter. On August 24, 2026, the 15th meeting of the third board of directors and the third special meeting of independent directors in 2026 deliberated and approved the "Resolution on Terminating the 2026 Private Placement of A-Shares to Specific Investors," announced on August 25, 2026 (No. 2026-031). The termination reason was stated as in-depth communication with the sponsor institution and relevant intermediaries, comprehensively considering the company's future development plans and other circumstances; the company stated it would not have a material adverse impact on daily production and operations. The fundraising amount and specific contents of the investment projects for this private placement did not appear in the retrieved announcement summaries; recommend directly retrieving the original February 11, 2026 preliminary plan for verification. Whether the termination is related to the H1 2026 loss or market price factors was not explained by the company.

4.6 Stock Trading Abnormal Fluctuation Announcement: Two Consecutive Days of Cumulative Price Deviation Exceeding 20%, Noting Digital RMB Business Revenue Proportion Below 5%

No. 2026-037, disclosed September 3, 2026. The company's stock closing price deviation cumulatively exceeded 20% over two consecutive trading days (September 1 and September 2, 2026); turnover rates during these two abnormal periods were as high as 20.56% and 32.33% respectively; the company explicitly noted that current digital RMB-related business revenue accounts for a relatively small proportion of operating revenue, not reaching 5%, and that application scenarios and market size of some projects and products still face uncertainty, with potential risk of commercial application results falling short of expectations; and stated that the P/E ratio exceeds the industry P/E ratio, secondary market trading volatility risk is increasing, and investors should invest rationally and beware of market speculation. Upon verification, the controlling shareholder and concerted parties, and actual controllers did not buy or sell company shares during the abnormal period, and there are no undisclosed material matters that should be disclosed. There were consecutive limit-ups in late August, with August 25, 2026 close at RMB 15.48. Specific closing prices and daily market cap/PE during the September 1-2 abnormal period were not obtained from authoritative sources. No exchange inquiry letters/regulatory letters targeting the company were retrieved in this round.

4.7 Shareholder Reduction: Wenzhou Yima Reduced 4.5796 Million Shares; Controlling Shareholder and Concerted Parties' Combined Holding Fell to 47.99%

Reduction announcement No. 2025-053, board date December 26, 2025/disclosed December 27. Shareholder Wenzhou Yima Enterprise Management Center (limited partnership, concerted party of controlling shareholder Wenzhou Xianghongwan) reduced 4.5796 million shares through centralized bidding and block trades from October 30, 2025 to December 25, 2025, accounting for 0.99% of total shares; after the change, the controlling shareholder and concerted parties' combined holding ratio decreased from 48.99% to 47.99% (combined holding before change was 225.888299 million shares). The reduction-related announcement timeline shows sustained, multiple rounds of reductions throughout 2025 (2025-02-13 pre-disclosure, 2025-05-09 reaching 1%, 2025-06-10, 2025-08-29 pre-disclosure, 2025-09-11, 2025-10-31 reaching 1%, 2025-12-27 plan period expiration and implementation status). The company's stated reason for the major shareholder reduction was that the shareholder's reduction was mainly based on its own funding needs.

4.8 Top Ten Non-Restricted Shareholders as of 2026-06-30

Disclosed in the 2026 interim report: Wenzhou Xianghongwan 210,000,000 shares (45.54%); Wenzhou Yima 7,987,799 shares (1.73%); Hong Kong Central Clearing 4,082,270 shares; Huabao CSI Financial Technology Theme ETF 3,179,839 shares; Goldman Sachs International-Proprietary Funds 2,229,242 shares; CICCFT3(R) 1,309,005 shares; Han Ningning 1,301,197 shares; Hu Yuansheng 1,119,479 shares; Cheng Haozhong 1,100,000 shares; Zhang Wuning 773,100 shares. Author's calculation (must be noted as estimation, not company disclosure): based on total shares of 461,135,972, as of 2026-06-30 Xianghongwan + Wenzhou Yima combined 217,987,799 shares approximately 47.27%, lower than 47.99% at end-2025, suggesting further reductions may have occurred in H1 2026 (approximately 0.72 percentage points); however, no original 2026 reduction announcement text was retrieved, this is only a note, recommend verifying the Shenzhen Stock Exchange reduction announcement list.

4.9 FY2025 Profit Distribution Plan: RMB 0.10 per 10 Shares, Explicitly No Share Buyback Implemented

Announcement 2026-015, board date April 23, 2026, disclosed April 25, 2026. Based on total shares of 461,135,972, cash dividend of RMB 0.10 per 10 shares (tax inclusive), totaling RMB 4,611,359.72, no bonus shares, no capital reserve conversion; accounting for 64.49% of FY2025 net profit attributable. The announcement explicitly stated that the company did not implement share buybacks in FY2025. FY2024 distribution (announcement 2025-008, April 19, 2025): RMB 0.30 per 10 shares, totaling RMB 13,834,079.16, accounting for 64.18% of FY2024 net profit attributable; similarly, the company did not implement share buybacks in FY2024, cumulative buyback and cancellation total RMB 0.00, no share buybacks implemented since listing. Investor relations basis: when asked whether there are buyback measures given the low stock price, the company replied it would focus on its main business, the company has formulated a "Market Value Management System," and will timely fulfill disclosure obligations if there are relevant measures (no buyback commitment).

4.10 External Investment: Investment in Red Tea Mobile; No New 2026 M&A Transaction Announcements Found

The company stated it made an external investment in Red Tea Mobile in 2025 based on its development strategy; the target's main business is providing cellular network connectivity services and one-stop eSIM end-to-end solutions for globally diverse consumer and IoT devices, with continuous business growth since 2025, the company obtained investment income, and through industry-finance mutual promotion with the target, enhanced eSIM technology and service capabilities (2026-05-13 investor relations activity record). Company strategic statement: adhere to both organic growth and extensional development, actively carry out external investment and industry chain M&A cooperation, fill business gaps, and broaden growth boundaries. No new 2026 M&A/equity participation transaction announcements were found in this round; the above content comes from management communication records rather than transaction announcements; investment amount and shareholding ratio are unknown.

4.11 2026 Daily Related-Party Transactions Forecast, Cash Management, Credit Facilities and Auditor Reappointment and Other Board Resolutions

The 11th meeting of the third board of directors (December 9, 2025, announcement 2025-051, disclosed December 10) approved: ① 2026 daily related-party transactions forecast (related directors Chen Liying, Su Chen, Wu Chunsheng recused); ② 2026 use of no more than RMB 600 million idle own funds for cash management (structured deposits, etc., revolving for 12 months from January 1, 2026); ③ 2026 application to banks for comprehensive credit facilities not exceeding RMB 1 billion; ④ reappointment of Tianjian Certified Public Accountants as FY2025 audit institution; ⑤ formulation/revision of internal governance systems.

4.12 2025 Second Extraordinary General Meeting Resolutions and 15th Meeting of the Third Board of Directors Resolutions

2025 second extraordinary general meeting (held December 26, 2025, announcement 2025-052, disclosed December 27): deliberated and approved reappointment of auditor, 2026 credit facility limit, formulation/revision of "Related-Party Transaction Management System," "External Investment Management System," "External Guarantee Management System," "Independent Director Working System," "Fundraising Fund Management Measures," "Accounting Firm Selection Measures," "Director and Senior Management Compensation Management System," "Profit Distribution Management System," "System for Preventing Controlling Shareholder and Related Parties from Occupying Company Funds," "Cumulative Voting Implementation Rules" and other sub-resolutions; on-site attending shareholders represented 48.6469% of shares, online voting 0.2902%, total 48.9371%. 15th meeting of the third board of directors (August 24, 2026, announcement 2026-031 etc.): deliberated 2026 interim report, revision of certain internal governance systems, termination of 2026 private placement.

4.13 Participation in 2026 Guangdong Jurisdiction Investor Collective Reception Day and Interim Report Earnings Briefing

Announcement dated September 9, 2026. Will participate in the 2026 Guangdong Jurisdiction Investor Collective Reception Day and Jurisdiction Listed Company Interim Report Earnings Briefing from 15:30–17:00 on September 15, 2026.

4.14 Items to Review and Data Gap Notes

1) This memo covers recent period from October 2025 to September 9, 2026; 2026 Q3 report not yet disclosed, latest complete financial period is 2026 interim report (disclosure date 2026-08-26). 2) Private placement details missing: fundraising amount and investment projects of the 2026-02-11 preliminary plan did not appear in retrieved summaries, need to check original text. 3) Whether there are still reduction announcements in 2026: no original 2026 new reduction announcement text was retrieved, but top ten shareholders' combined holding as of 2026-06-30 shows further decline from end-2025 (estimated approximately 47.27% vs 47.99%), recommend verifying against Shenzhen Stock Exchange/Cninfo announcement list. 4) Price data: this round only confirmed August 25, 2026 close at RMB 15.48; specific closing prices and daily market cap/PE during September 1-2 abnormal period were not obtained from authoritative sources; a market page showing real-time quote +1.920 (+10.000%) does not match RMB 15.48, not adopted. 5) Single-source information: Red Tea Mobile investment, FY2025 smart hardware revenue RMB 130 million (+29.32%), company's number of digital RMB partner institutions and scenarios, etc., mainly from company investor relations activity records/interactive Q&A, are company unilateral statements without independent cross-verification. 6) Items not found: this round did not retrieve 2026 exchange inquiry letters/regulatory letters, equity incentives, share buybacks, convertible bonds and other matters targeting 003040; not finding them does not equate to non-existence.

V. Stock Price Trend and Technical Analysis

5.1 Price Overview

5.2 Technical Indicators

Chutian Dragon rose rapidly from August 20 to September 8, 2026, then pulled back continuously. As of September 11, 2026 close at RMB 17.46, stock price below MA5 and MA10, but still slightly above MA20 and Bollinger middle band at approximately RMB 17.19; short-term technical pattern biased weak, RMB 17 area is an important observation zone. Recent 5 trading days turnover approximately RMB 1.325–2.502 billion, turnover rate 15.55%–25.01%, chip exchange significantly accelerated; however, combined with recent 5-day extra-large and large order overall net outflows, current volume mainly reflects high-level divergence and chip exchange, and cannot yet be directly interpreted as sustained fund accumulation.

5.3 Short-Term Trend Outlook (Next Week, Scenario Analysis, For Reference Only)

⚠️ Risk Warning: The following content is solely subjective scenario analysis based on data as of September 11, 2026 close, does not constitute investment advice, and does not constitute a deterministic prediction of future prices.

① Key Technical Levels

② Next Week Scenarios (Subjective Weighting, Not Statistical Probability)

• Consolidation (relatively higher weight, approximately 60%; this weight is a subjective judgment based on current technical and fund flow conditions, not statistical probability): Reference price range approximately RMB 16.8–19.2. Trigger conditions include support at RMB 17 area, turnover gradually declining from recent RMB 1.3–2.5 billion highs, narrowing large order net outflow and no more consecutive large bearish candles. If valid, stock price may oscillate repeatedly around RMB 17 area and attempt to rebound toward the RMB 18.90–19.70 resistance zone, but rebound sustainability still needs volume confirmation.
• Weaker Downside (moderate weight; this weight is a subjective judgment based on current technical and fund flow conditions, not statistical probability): Reference price range approximately RMB 15.0–17.0. Trigger conditions include closing price effectively breaking below RMB 17, continued large order net outflows, widening single-day decline with turnover still above RMB 1 billion, and continued risk appetite decline in technology and computer/communications/electronics sectors. If RMB 17 is breached, RMB 15.50–16.00 is the next observation zone; if this zone breaks down with volume, further support seeking toward RMB 14 area cannot be ruled out.
• Rebound Strengthening (lower weight; this weight is a subjective judgment based on current technical and fund flow conditions, not statistical probability): Reference price range approximately RMB 19.0–21.0. Trigger conditions include stock price re-establishing above RMB 19 with consecutive closing confirmation, turnover re-expanding to recent highs, large order funds shifting from net outflow to sustained net inflow, and improvement in market hotspots or company-related catalyst news; also need to observe whether it can recover the RMB 20 area where MA5 and MA10 are located. If only single-day spike without sufficient turnover and main funds still net outflow, it is more akin to an oversold rebound and cannot be directly viewed as a trend reversal.

③ Fund and Liquidity Background

As of September 11, 2026, turnover rate was 16.64%, turnover was RMB 1.325 billion; most recent 5 trading days turnover approximately RMB 1.325–2.502 billion, turnover rate approximately 15.55%–25.01%, average turnover approximately RMB 1.83 billion, average turnover rate approximately 19.4%. Compared to mid-August turnover levels of approximately RMB 100–300 million, recent trading activity has increased significantly; under normal trading this is not a low-liquidity state, but high turnover coinciding with consecutive sharp declines indicates rapid chip exchange does not equate to sustained fund inflow. On shareholder structure, Tonghuashun's latest readable reporting period is March 31, 2026: top ten shareholders combined holding approximately 233 million shares, 50.49%, largest shareholder Wenzhou Xianghongwan Enterprise Management Co., Ltd. holding 45.54%; among top ten shareholders, institutional or channel holdings visible include Huabao CSI Financial Technology Theme ETF, Hong Kong Central Clearing Co., Ltd., CITIC Securities Asset Management (Hong Kong) Co., Ltd.-Client Funds and Guohai Securities Co., Ltd., etc., but individual proportions are all relatively low, equity structure still mainly dominated by controlling shareholder. This shareholder data is approximately half a year from September 11, 2026; institutional holdings and short-term chips may have changed during this period and cannot be regarded as real-time structure.

If subsequent consecutive two trading days maintain turnover above RMB 1.5 billion, while closing price re-establishes above RMB 18.90–19.00 and large order funds turn to consecutive net inflows, this can be viewed as a confirmation signal of strengthened short-term fund support; if turnover expands but price continues to break below RMB 17, it is more akin to volume-heavy distribution or panic exchange signal.

④ Key Points to Watch (Observation Ideas Only, Not Trading Instructions)

• Observation idea, not trading instruction: Watch whether RMB 17.00–17.50 area can stabilize, especially whether volume-shrinking stabilization appears.
• Observation idea, not trading instruction: Watch RMB 18.90–19.70 rebound resistance zone, observe whether breakout is accompanied by simultaneous improvement in turnover and large order funds.
• Observation idea, not trading instruction: If RMB 17 is breached, focus on support strength at RMB 15.50–16.00 area.
• Observation idea, not trading instruction: Track whether "turnover exceeding RMB 1.5 billion, price recovering RMB 19, large order funds consecutive net inflows" appear simultaneously.

The above scenario analysis is based on data as of September 11, 2026 close and historical price, technical indicator calculations. Short-term stock prices are also affected by multiple factors including news, fund flows, and overall market environment. Technical indicators themselves have lag and limitations, do not constitute a guarantee of actual future trends, and do not constitute buy or sell recommendations. Please make independent judgments based on the latest market information and bear investment risks yourself.

VI. Industry Landscape and Competitor Analysis

6.1 Industry Status

The domestic smart card market is in a structurally differentiated period of "traditional card stock replacement + price war, new-form cards (eSIM/super SIM/digital currency hard wallets/IoT cards) volume growth." The total market ceiling is evident: bank cards 10.261 billion (2026Q1), social security card holders 1.39 billion, mobile users 1.844 billion; incremental growth mainly comes from third-generation social security card replacement, eSIM commercialization (2025-10 three major operators' eSIM mobile phone commercial trial approved), digital RMB (as of end-December 2025, pilot cumulative transaction amount RMB 19.5 trillion) and IoT cards.

6.2 Competitive Landscape

• Domestic player tiers: Eastcompeace, Chutian Dragon, Hengbao are the traditional top three manufacturers, plus the marginalized *ST Tianyu, OEM-focused Chengtian Weiye, Hong Kong-listed Goldpac, etc.
• Broker and industry materials (sohu reposted in-depth report, 2026-08, second-hand research report) consensus: Eastcompeace is No. 1 in the communication SIM industry (backed by central SOE China Electronics Technology Group); Chutian Dragon ranks high in scale and delivery capability for social security cards, digital RMB hard wallets and government affairs all-in-one card projects.
• Chutian Dragon claims "No. 1 in social security card issuance volume, market share continuously increasing" (2025-07 investor exchange meeting, company basis), and has set the goal "to maintain No. 1 market share in third-generation social security card issuance represented by Beijing Minsheng Card" (2025-09 investor relations record). These are self-statements; no authoritative third-party market share data has been found for cross-verification.
• Landscape change notes: *ST Tianyu FY2025 revenue plummeted 79.7%, huge loss of RMB 605 million, essentially exited effective competition; another research report mentioned bill printing company Donggang Co. entering with high-growth smart card business (Shenwan Hongyuan view relayed through "three cobblers" and other second-hand platforms, original text not verified, noted only).

6.3 Major Competitors

On a FY2025 annual report basis horizontal comparison, Chutian Dragon's revenue scale is mid-range (RMB 998 million), profitability is the smallest among comparables (net profit attributable RMB 7 million), gross margin 25.8% is lower than Hengbao's card manufacturing gross margin (33.98%) and weaker than Eastcompeace's overall profitability; after traditional card business entered stock price war, Chutian Dragon's gap with Eastcompeace in eSIM platform certification/overseas layout, and gap with Hengbao in gross margin, are key to determining competitive position in the next phase. Hong Kong-listed Goldpac (bank card/digital currency visual hard wallet manufacturer) is also comparable; no data verification was done this time.

VII. Risk Warnings

• Risk of continued losses: H1 2026 net profit attributable loss of RMB 62.1242 million, loss widened approximately 56% compared to the same period last year, of which Q2 estimated loss approximately RMB 49.85 million; if revenue and gross margin fail to improve, full-year performance may continue to face pressure.
• Traditional business price competition risk: Embedded security products accounted for 82.73% of H1 2026 revenue, but affected by traditional smart cards entering stock replacement cycle and intensified bank and government tender competition, product prices declined, revenue declined 28.45% year-on-year, gross margin fell to 21.45%.
• Upstream chip and raw material cost risk: Security chips are the company's core cost item; FY2025 top five suppliers accounted for 61.22% of procurement, largest supplier 41.48%; the company disclosed difficulty in timely passing on rising semiconductor raw material, wafer fabrication and packaging/testing costs to upstream, which may further compress gross margin.
• New business commercialization falling short of expectations risk: Digital RMB-related revenue accounts for less than 5% of company operating revenue; the company has noted uncertainty in application scenarios and market size of some digital RMB projects and products; eSIM, digital RMB hard wallets, software platforms and other businesses have not yet offset traditional business decline.
• Transformation business operating loss risk: H1 2026 smart hardware revenue declined 53.20% year-on-year, software & services revenue declined 72.47% year-on-year, software & services gross margin at -4.95%; if new business scale cannot increase, R&D, labor and market investment may continue to drag on profits.
• Accounts receivable and cash flow risk: FY2025 year-end accounts receivable book value approximately RMB 430 million, approximately 43% of annual revenue, approximately 60x annual net profit attributable; H1 2026 operating cash flow net outflow approximately RMB 115 million; if banks, governments and other customers slow collection pace, may increase capital occupation and liquidity pressure.
• Customer concentration risk: FY2025 top five customers combined sales accounted for 49.38% of revenue, largest customer 17.21%; major customers concentrated in banks, governments and operators under tender and centralized procurement; changes in single major customer orders, tender results or procurement price adjustments may significantly impact company revenue and profit.
• Valuation and stock price volatility risk: As of September 11, 2026, the company remains in a loss-making state, dynamic P/E unavailable, price-to-book approximately 5.81–5.85x; stock price after earlier rapid rise shows high turnover and volume-heavy pullback, past 5 days large and extra-large order funds generally net outflow; if performance recovery falls short of market expectations, stock price may continue to face significant volatility.
• Controlling shareholder reduction and equity structure change risk: Wenzhou Yima reduced 4.5796 million shares from October to December 2025, accounting for 0.99% of total shares; controlling shareholder and concerted parties' combined holding ratio decreased from 48.99% to 47.99%; shareholder holding changes may impact market expectations and trading sentiment.

VIII. Conclusion and Outlook

Chutian Dragon's medium-to-long-term growth logic mainly depends on migration of traditional card business to new forms and service-oriented businesses: third-generation social security card replacement, eSIM, digital RMB hard wallets, IoT security products, government affairs terminals and software platforms may bring new revenue sources; overseas revenue proportion also increased from 2.06% in FY2025 to 5.44% in H1 2026. If the company can increase the revenue proportion of high-gross-margin products and software services, and restore gross margin through smart manufacturing, expense control and chip cost improvement, there is room for profitability recovery.

However, as of the latest interim report, revenue, profit, cash flow and main businesses have not shown clear comprehensive improvement signals, and the company has terminated the 2026 private placement of shares to specific investors; subsequent business expansion and technology commercialization funding arrangements still need to be observed. Future judgment focus includes whether traditional embedded security products can stabilize, whether smart hardware and software services can resume growth, whether digital RMB and eSIM projects can generate meaningful revenue, and whether accounts receivable and operating cash flow can continue to improve. Current stock price valuation lacks stable earnings support, and technically it is in a high-volatility pullback phase; there remains a large gap between fundamental recovery and market expectations.

Data Sources

• https://www.9fzt.com/detail/sz_003040_9_ec1be8a4517992b9c4018b16332019de.html
• https://stock.quote.stockstar.com/corp/business_003040.shtml
• https://finance.eastmoney.com/a/202605143737200979.html
• http://ddx.gubit.cn/mango/jingying/003040.html
• https://stock.stockstar.com/notice/SN2026021000033374.shtml
• https://basic.10jqka.com.cn/003040/worth.html
• https://finance.eastmoney.com/a/202608253853451010.html
• http://stock.stockstar.com/RB2026071400032303.shtml
• https://news.qq.com/rain/a/20260826A0ASUG00
• https://push2.eastmoney.com/api/qt/stock/get?secid=0.003040&fields=f43,f44,f45,f46,f57,f58,f60,f116,f117,f162,f167,f9,f114,f23,f105
• https://data.cfi.cn/quote_003040.html
• http://quote.wap.stockstar.com/Stock/003040
• https://data.eastmoney.com/report/stock.jshtml?stockcode=003040
• https://www.163.com/dy/article/L57DMK51053792Q5.html
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