China National Software and Service Corporation Limited (600536)

Equity Research Report　|　Industry: Basic Software and Digital Services for Government and Enterprises　|　Report Date: September 13, 2026　|　As of the September 11, 2026 close; market data as of 15:00:03 on September 11, 2026.

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

1. Executive Summary

China National Software is currently in a phase characterized by “revenue under pressure, narrowing losses but no stable profitability yet”: revenue in 1H2026 was RMB 1.792 billion, down 20.05% year on year, while net profit attributable to shareholders was a loss of RMB 12.4019 million, representing a significant narrowing of the loss from the same period last year. However, net cash flow from operating activities remained negative at RMB 913 million. The company’s closing price on September 11, 2026 was RMB 31.49, with a forward-looking P/E of approximately 1,419.78x, implying high valuation requirements for future earnings realization.

The company’s core value lies in the Kylin operating system and its basic-software ecosystem, its government and enterprise customer resources, and its positioning as an independent and secure software provider. In 2025, basic-software revenue was RMB 1.632 billion, up 13.47% year on year, with an average gross margin of 81.13%. However, revenue from core Party and government application solutions, which represents a relatively large share of revenue, declined 7.72%, with a gross margin of 23.56%. The business structure therefore continues to show a clear divergence between high-margin basic software and low-margin project delivery.

The main drivers of potential earnings improvement are a rising share of basic software, commercialization of the operating-system ecosystem, productization of project-based businesses, and tighter control of expenses and working capital. Overall gross margin rose to approximately 42.38% in 2025, while the attributable net loss narrowed from RMB 413 million in 2024 to RMB 41.41 million. However, revenue continued to decline in 1H2026, and part of the profit improvement was attributable to the high impairment base for equity assets in the same period last year, as well as temporary factors such as asset disposals and impairment reversals. A reversal in core operating profitability remains to be verified.

Technically, the share price is below the MA5, MA10 and MA20, while the MACD green bars have expanded. The stock has weakened for five consecutive trading days, indicating a weak short-term structure. The RMB 31.0–31.3 area is close to recent lows and the lower Bollinger Band, while RMB 33.2–33.5 represents a concentrated moving-average resistance zone. Future price movements will still need to be assessed together with trading volume, fund flows and earnings realization.

2. Company Overview

2.1 Basic Information

2.2 Main Businesses and Product Portfolio

• Basic software: Centered on operating systems and operated by the controlled subsidiary Kylinsoft. Products include desktop operating systems, server operating systems and mobile operating systems, with extensions into intelligent-computing operating systems and industrial operating systems.
• Core Party and government application solutions: Serving central government ministries and commissions, local governments, central state-owned enterprises, state-owned enterprises and key industry customers, providing software development, systems integration, industry applications, technical services and operations and maintenance services.
• Basic-software revenue was RMB 1.632 billion in 2025, up 13.47% year on year, with an average gross margin of 81.13%, down 4.66 percentage points year on year.
• Revenue from core Party and government application solutions was RMB 3.439 billion in 2025, down 7.72% year on year, with an average gross margin of 23.56%, up 5.24 percentage points year on year.
• The company’s business model is primarily project-based, relying on public tendering and sole-source procurement. It also sells proprietary software products and provides software development, systems integration, informatization consulting and operations and maintenance services.

2.3 Position in the Upstream and Downstream Value Chain and Cost-Profit Structure

China National Software is positioned in the upper-middle portion of the information-technology application innovation (“Xinchuang”) value chain. Upstream, it connects with domestic CPUs, servers, databases, middleware, security software and cloud infrastructure. Midstream, it provides the Kylin operating system, basic software products, industry platforms and core application solutions. Downstream, it serves government agencies, central state-owned enterprises, state-owned enterprises, financial institutions, power companies, transportation companies, tax authorities and customs, among other critical-industry customers. Internally, the company displays a clear “smile curve” split: basic software is closer to the platform and intellectual-property end, while core Party and government application solutions are closer to project delivery and systems integration.

• Major inputs include software R&D personnel and project implementation personnel, as well as servers, PCs, chips, network equipment and other hardware; databases, middleware, security software and cloud-computing services; external software licenses, technical services and systems integration services; and office space, cloud resources, computing power and infrastructure services.
• The main costs of the basic-software business are R&D personnel compensation, R&D investment, product maintenance and ecosystem adaptation, with relatively low traditional raw-material costs. The average gross margin of basic software was 81.13% in 2025, reflecting the high-margin characteristics of software intellectual property and licensing businesses.
• Costs in core Party and government application solutions are more concentrated in project implementation, software development, systems integration, outsourced hardware and software, and on-site services. The average gross margin was 23.56% in 2025, significantly below that of basic software.
• Procurement from the top five suppliers was RMB 1.115 billion in 2025, representing 30.82% of total annual procurement; procurement from related parties was RMB 258 million, representing 7.12% of total annual procurement. These figures are on a consolidated basis from the 2025 annual report. The research memorandum does not provide data for other years for cross-comparison.
• The company disclosed that no single supplier accounted for more than 50% of total procurement and that it was not heavily dependent on a small number of suppliers. However, it has some external dependence on general hardware, databases, middleware and third-party technical services.
• The company has strong control over the core technologies of its proprietary operating system. Its cost bargaining power in basic software is stronger than in integration projects. The company has not disclosed a complete cost breakdown by product line, so the above cost assessment cannot replace internal cost-accounting data.
• Major customers include central government ministries and commissions and local governments; government departments responsible for taxation, finance and customs; central state-owned enterprises, state-owned enterprises and large financial institutions; key industries such as power, transportation and communications; large systems integrators; and ecosystem partners.
• Sales to the top five customers were RMB 1.880 billion in 2025, representing 36.85% of total annual sales; sales to related parties were RMB 1.120 billion, representing 21.96% of total annual sales. These figures are on a consolidated basis from the 2025 annual report. The research memorandum does not provide data for other years for cross-comparison.
• The top five customers in 2025 included China Electronics Corporation, China National Building Materials Group Corporation and Digital China Group Co., Ltd. Because of consolidated disclosure, the proportion of the top five customers cannot precisely represent the concentration of individual legal-entity customers.
• The company disclosed that no single customer accounted for more than 50% of revenue and that it was not heavily dependent on a small number of customers. However, the top five customers accounted for 36.85% of sales and related-party sales accounted for 21.96%, so customer and group-ecosystem concentration should continue to be monitored.
• In basic software, the Kylin operating system benefits from its proprietary brand, adaptation ecosystem and Xinchuang certification advantages, giving it some product pricing power in the domestic substitution of government and critical-industry systems. Kylin operating-system products have ranked first in China’s Linux market share for 14 consecutive years, although the specific statistical methodology and market boundaries require further verification.
• Core Party and government application solutions are generally procured through public tendering or sole-source procurement. Project prices and delivery conditions are affected by budgets, tender competition, acceptance milestones and customer collection cycles. The company’s bargaining power is weaker than in standardized basic software.
• As of December 31, 2025, accounts receivable were RMB 1.207 billion, equivalent to approximately 23.66% of 2025 revenue; contract assets were RMB 308 million, equivalent to approximately 6.04% of revenue; inventories were RMB 1.256 billion, equivalent to approximately 24.62% of revenue; and prepayments were RMB 206 million, equivalent to approximately 4.05% of revenue. Accounts receivable and contract assets totaled approximately RMB 1.515 billion, equivalent to approximately 29.70% of revenue, indicating that project-based operations and acceptance-based settlement occupy a certain amount of working capital. As the company recorded a net loss attributable to shareholders in 2025, the accounts-receivable/net-profit indicator has no positive interpretive value. The company also has accounts payable and contract liabilities, but has not fully disclosed accounts-receivable turnover days, average customer credit terms or average supplier credit terms by business segment. Public data are therefore insufficient to conclude that the company has strong bargaining power over downstream customers.
• Concentration data are all on a consolidated basis as disclosed in the 2025 annual report: purchases from the top five suppliers accounted for 30.82% of total procurement, while sales to the top five customers accounted for 36.85% of total sales. Related-party purchases and sales accounted for 7.12% and 21.96%, respectively. The research memorandum provides only 2025 data and does not cross-check against other years. In addition, China Electronics, China National Building Materials and Digital China are subject to consolidated disclosure, so the data cannot be used to precisely assess the concentration of individual legal-entity customers. The latest annual report shall prevail.

China National Software is positioned in the upper-middle portion of the Xinchuang value chain. Basic software such as the Kylin operating system belongs to the relatively upstream platform and intellectual-property businesses, with high gross margins, low marginal costs and clear ecosystem barriers. Core Party and government application solutions belong to the midstream project delivery and systems integration businesses, with relatively large revenue scale but high labor and implementation costs, making collections and project acceptance more important. Future profit improvement will depend primarily on a rising share of high-margin basic software, commercialization of the operating-system ecosystem, productization of project-based businesses, and control of accounts receivable and period expenses, rather than traditional capacity expansion.

3. Financial Data and Valuation Analysis

3.1 Recent Operating Performance

The latest formally disclosed financial report is the China National Software 2026 Semi-Annual Report, disclosed on August 26, 2026. The data in this memorandum are as of the September 11, 2026 close. Basic EPS in 1H2026 was negative RMB 0.01, compared with negative RMB 0.09 in the same period last year.

Revenue declined 20.05% year on year in 1H2026, mainly due to the company’s focus on its core cybersecurity and information-technology business, business-structure transformation, the concentration of settlement by certain key customers in the second half of the year, and the reduction of non-core, low-margin businesses. Total profit was RMB 75.1594 million, up 352.82% year on year, while operating profit was RMB 78.8715 million, up 382.57% year on year. However, attributable net profit remained negative, and part of the profit improvement reflected the relatively high equity-asset impairment base in the same period of 2025. It therefore cannot yet be fully regarded as a reversal in core operating profitability. Net cash flow from operating activities was negative RMB 913.12 million, while short-term borrowings increased to RMB 1.27075 billion. Financial and working-capital pressure remains a concern. Basic-software revenue was approximately RMB 1.632 billion in 2025, up 13.47% year on year, with an average gross margin of approximately 81.13%. Revenue from core Party and government application solutions was approximately RMB 3.439 billion, down 7.72% year on year, with an average gross margin of approximately 23.56%.

3.2 Earnings Forecasts

As of August 18, 2026, THS had recorded only one institution’s latest earnings forecasts, which cannot be regarded as a sufficiently representative multi-institution consensus estimate. The forecast from Huachuang Securities was released on May 12, 2026, while the forecast from Guolian Minsheng Securities was released on September 9, 2026. The forecast from Guotou Securities was released on December 10, 2025, substantially before the 2026 semi-annual report and therefore represents a historical view. Forecasts differ significantly among institutions: the forecast range for 2026 attributable net profit is RMB 36 million–74 million, and the range for 2028 is RMB 151 million–218 million.

3.3 Valuation and Institutional Ratings

As of September 11, 2026, the company’s closing price was RMB 31.49. Total shares outstanding were approximately 934 million, implying a total market capitalization of approximately RMB 29.4 billion based on the closing price. The 52-week price range was approximately RMB 26.82–56.09. Because attributable net profit was negative in both 2025 and 1H2026, static and trailing P/E ratios are distorted. Different platforms show a trailing P/E of more than 1,400x, with some platforms showing approximately 1,436–1,467x, while CFi.cn shows a dynamic P/E of approximately 1,437x. Based on net assets attributable to shareholders of RMB 3.58838 billion as of June 30, 2026 and approximately 934 million shares, net assets per share were approximately RMB 3.84. At a closing price of RMB 31.49, the P/B ratio was approximately 8.2x, while different platforms show P/B ratios of approximately 4.85–8.47x. Based on institutional forecasts, the single-institution THS forecasts imply forward P/E ratios of approximately 787x, 315x and 197x for 2026–2028, respectively; the Guolian Minsheng Securities forecasts imply approximately 399x, 260x and 135x. The company is currently in a phase of revenue pressure, narrowing losses and awaiting earnings realization. Revenue declined 20.05% year on year in 1H2026, attributable net profit was a loss of RMB 12.4019 million, and net operating cash flow was negative RMB 913.12 million, indicating that the fundamentals have not fully reversed. At the same time, the current trailing P/E exceeds 1,400x and the P/B ratio is approximately 8x, placing high requirements on future earnings realization. If revenue recovers, operating cash flow improves and full-year profitability is achieved in 2H2026, valuation would have some basis for absorption through earnings. If earnings realization falls below institutional expectations, the current P/B and forward P/E ratios both indicate elevated valuation. As of now, no unified latest target-price range has been confirmed from recent publicly available and cross-verifiable institutional research reports. The RMB 45–68 range circulating online is not included in the core valuation conclusion.

4. Recent News and Announcements

4.1 No New Major Announcements Identified in September 2026

As of September 13, 2026, no new major earnings preannouncement, share repurchase, increase or reduction in holdings by the controlling shareholder, major merger or restructuring, or major regulatory penalty announcement by the company was identified in the Shanghai Stock Exchange announcement system. Public information in September mainly concerned software-copyright registrations and ESG ratings on third-party platforms. No separate disclosure by the company as a major event was identified.

4.2 1H2026 Results: Revenue Declined but Loss Narrowed Significantly

The company disclosed its semi-annual report on August 26, 2026. Revenue in 1H2026 was RMB 1.792 billion, down 20.05% year on year. Net profit attributable to shareholders was a loss of RMB 12.4019 million, compared with a loss of RMB 74.5263 million in the same period last year, representing a reduction in loss of RMB 62.1243 million year on year. Non-recurring-adjusted net profit was a loss of RMB 25.5805 million, compared with a loss of RMB 76.7537 million in the same period last year. Basic EPS was negative RMB 0.01. Actual results were broadly consistent with the earnings preannouncement, but the company remained loss-making.

4.3 Operating Cash Flow Remained Significantly Negative

Net cash flow from operating activities was negative RMB 913 million in 1H2026, compared with negative RMB 887 million in the same period last year. Although the attributable net loss narrowed year on year, revenue declined and operating cash flow did not improve materially. A narrower loss does not mean that the quality of core operations has recovered.

4.4 Cash Management of Idle Raised Funds Amounting to RMB 1.5 Billion

On July 30, 2026, the company’s board approved the use of part of its temporarily idle raised funds for cash management. On August 4, 2026, it disclosed a progress announcement. Investment products included large-denomination certificates of deposit and time deposits, with an investment amount of RMB 150,000 ten-thousand, or RMB 1.5 billion. Third-party announcement summaries indicated that some arrangements included a RMB 550 million time deposit subscribed on July 31, 2026, with an expected annualized yield of 1.00% and a term of 180 days, as well as a RMB 50 million time deposit with an expected annualized yield of 0.80% and a term of 90 days. The specific product portfolio and balance should be based on the company’s original announcements and subsequent maturity and redemption announcements.

4.5 Proportional Capital Reduction in Zhongruan Jintou with Related Parties

On July 30, 2026, the company disclosed a related-party transaction announcement regarding a capital reduction in a jointly invested enterprise with related parties. After the capital reduction, Zhongruan Jintou’s capital contribution decreased from RMB 311.3478 million to RMB 48.2457 million. The company’s subscribed capital contribution decreased from RMB 103.7722 million to RMB 16.0803 million, a reduction of RMB 87.6919 million. Zhongruan Jincheng’s subscribed capital contribution decreased from RMB 31,100 to RMB 4,800. The ownership percentages of all partners remained unchanged. The company stated that the scope of the consolidated financial statements would not change after the capital reduction, and that the transaction would not have a material impact on overall business development or profitability and did not constitute a major asset restructuring.

4.6 Temporary Gains from Asset Disposals and Impairment Reversals

On August 26, 2026, the company disclosed several asset appraisal reports involving related raw materials, finished goods and inventory assets. Together with the semi-annual report, the company recognized total asset-disposal gains of approximately RMB 11.9380 million during the reporting period, including approximately RMB 11.2398 million from the disposal of fixed assets and approximately RMB 698,200 from the disposal of other long-term assets. It also recognized a reversal of approximately RMB 6.8043 million in impairment provisions for certain receivables. These items had a positive impact on attributable net profit in 1H2026, but were non-recurring or temporary in nature.

4.7 No New Share Repurchase or Major Shareholder Trading Announcements Identified

As of September 13, 2026, no new major share-repurchase plan, repurchase progress announcement or additional repurchase cancellation announcement disclosed by the company from June to September 2026 was identified. The 2026 semi-annual report disclosed that the number of shareholders was 143,643 as of June 30, 2026, down 6,556 from the previous period. As of March 31, 2026, the special repurchase securities account held 3,104,143 company shares, representing approximately 0.33% of total shares. As of the date of this search, no new announcement regarding an increase or reduction in holdings by the controlling shareholder, actual controller or shareholder holding more than 5% was identified. However, this does not imply that major shareholders engaged in no transactions.

4.8 Parent Company Penalized for Issues in Government-Procurement Bidding

The company disclosed on June 13, 2026 that its parent company received an administrative penalty decision from the Ministry of Finance on June 12, 2026 for violating tendering and bidding regulations in certain sales businesses. According to the announcement and related summaries, the Ministry of Finance determined that the company and other suppliers had multiple instances of abnormally identical content in their tender documents, constituting malicious collusion in government procurement. Penalties included total fines of approximately RMB 40,500, inclusion on the list of entities with records of misconduct, a one-year ban on the parent company participating in government procurement activities, and an order to rectify the violations. The company stated that its subsidiaries could continue participating in government procurement during the ban period. Based on preliminary statistics, revenue from the parent company’s direct participation in government procurement in 2025 accounted for approximately 11% of the company’s total revenue, and the company expected no material adverse impact on overall production or operations. This remains a key compliance risk to monitor.

4.9 No New Major Mergers, Restructurings or Changes in Control Identified

As of September 13, 2026, no new announcement regarding a major merger, asset restructuring or change in control in September 2026 was identified. The recent event most relevant to capital operations was the proportional capital reduction in Zhongruan Jintou in July 2026. In substance, this represented a reduction in the capital committed to a jointly invested enterprise and optimization of capital allocation and asset structure, rather than an acquisition or expansionary merger.

5. Share-Price Trend and Technical Analysis

5.1 Price Overview

5.2 Technical Indicators

As of September 11, 2026, China National Software closed at RMB 31.49, approximately 43.9% below its 52-week high of RMB 56.09 and approximately 17.4% above its 52-week low of RMB 26.82. The share price was below the MA5, MA10 and MA20, while the MACD green bars changed color and expanded and the RSI weakened over the past 5 days, indicating a weak short-term technical structure. At the same time, the share price was close to the lower Bollinger Band at RMB 31.23 but had not decisively broken below it. Average turnover value and turnover rate over the past 5 trading days were approximately RMB 467 million and 1.70%, respectively, compared with turnover value of RMB 422 million and a turnover rate of 1.59% on September 11. Trading did not expand notably during the decline, more closely resembling a low-volume adjustment. In the short term, key factors to monitor are support at RMB 31.0~31.3, moving-average resistance at RMB 33.2~33.5, and whether a price breakout is confirmed by higher turnover.

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

⚠️ Risk warning: The following is only a subjective scenario analysis based on closing data as of September 11, 2026. It does not constitute investment advice or a definitive forecast of future prices.

① Key Technical Levels

② Scenarios for the Next Week (Subjective Weightings, Not Statistical Probabilities)

• Range-bound consolidation (relatively higher weighting, approximately six-tenths; a subjective heuristic weighting based on current technical and fund-flow conditions, not a statistical probability): Observation range of approximately RMB 31.0~33.4. Trigger conditions include support emerging near RMB 31.0~31.3, no sustained expansion in turnover value and failure to decisively break through RMB 33.3~33.5. Moving-average resistance and lower-Bollinger-Band support may create range-bound trading.
• Weak downside move (medium weighting; a subjective heuristic weighting based on current technical and fund-flow conditions, not a statistical probability): Observation range of approximately RMB 29.3~31.0. Trigger conditions include a decisive close below RMB 31.0 accompanied by daily turnover materially above the recent average, or simultaneous weakness in the software and Xinchuang sectors. If strong support at RMB 30.4~30.8 fails, the RMB 29.3~30.0 area should be monitored.
• Stronger rebound (low weighting; a subjective heuristic weighting based on current technical and fund-flow conditions, not a statistical probability): Observation range of approximately RMB 33.5~35.0. Trigger conditions include reclaiming RMB 33.3~33.5, a consecutive increase in turnover value to approximately RMB 600 million or above, and a clear contraction or reversal of the MACD green bars. If RMB 34.0~34.6 is subsequently broken, the potential for an extension toward RMB 35 should be monitored. Without high-volume confirmation, a one-day rebound may still represent only a technical recovery.

③ Fund-Flow and Liquidity Background

The most recent 5 trading days were September 7–11, 2026, with turnover value of approximately RMB 325 million–545 million and turnover rates of approximately 1.20%–1.94%. Average turnover value and average turnover rate were approximately RMB 467 million and 1.70%, respectively. On September 11, turnover value was approximately RMB 422 million, the turnover rate was 1.59%, and main-fund net outflow, measured as the combined flow from extra-large and large orders, was approximately RMB 31.64 million. Trading volume was approximately 85.68 million shares and 67.28 million shares on August 19 and August 20, respectively, compared with approximately 13.44 million shares on September 11. The stock is therefore not currently in a high-turnover phase of rapid repositioning. Regarding shareholder structure, as of June 30, 2026, with the announcement date of August 26, 2026, the top ten holders of tradable shares held approximately 346.1866 million shares, representing approximately 37.07% of tradable shares. China Electronics Corporation and China Electronics Corporation together accounted for approximately 32.92%. The top ten holders of tradable shares included institutional or quasi-institutional funds such as Stock Connect, software ETFs, artificial-intelligence ETFs, basic-pension funds and Goldman Sachs’ proprietary funds. However, the high proportion held by a single state-owned shareholder means that the actually tradable float is not equivalent to the entire tradable share capital. The above shareholder data are more than two months old as of September 11, 2026, and the ownership structure may have changed during that period; they should not be treated as real-time holdings data. For short-term monitoring, current turnover value and turnover rate are below those during the high-volatility period from August 18 to August 21, limiting volume confirmation of price movements. Trading-volume units and turnover-rate definitions may vary slightly across historical market-data websites.

Observable volume-confirmation signals: If daily turnover value subsequently remains above approximately RMB 600 million while the share price reclaims RMB 33.3~33.5, this could serve as an observation signal for renewed short-term fund participation. If the share price breaks below RMB 31 while turnover value simultaneously rises above RMB 600 million, attention should be paid to failed support and increased downside volatility.

④ Key Points to Monitor (Observation Framework Only, Not Trading Instructions)

• Observe whether the RMB 31.0~31.3 area can stabilize and whether the closing price decisively breaks below the lower-Bollinger-Band area; this is an observation framework, not a trading instruction.
• Observe whether the RMB 33.2~33.5 concentrated moving-average area can be reclaimed, without treating an intraday move above it alone as confirmation; this is an observation framework, not a trading instruction.
• Observe whether main-fund flows turn from net outflows to simultaneous net inflows in extra-large and large orders; this is an observation framework, not a trading instruction.
• Observe whether turnover value can remain above approximately RMB 600 million and appear alongside a price breakout; this is an observation framework, not a trading instruction.

The above scenario analysis is based on closing data as of September 11, 2026 and calculations using historical prices and technical indicators. Short-term share prices may also be affected by news, fund flows, broader market conditions and other factors. Technical indicators are inherently lagging and limited. This analysis does not guarantee actual future price movements and does not constitute a buy or sell recommendation. Investors should make independent judgments based on the latest market information and bear investment risks themselves.

6. Industry Landscape and Competitor Analysis

6.1 Industry Conditions

The company belongs to the software and information-technology services industry, with coverage spanning basic software, operating systems, government informatization, industry solutions, systems integration and IT services. In 2025, China’s software and information-technology services industry generated software-business revenue of RMB 15,483.1 billion, up 13.2% year on year, and total profit of RMB 1,884.8 billion, up 7.3% year on year. Revenue from basic software products was RMB 214.6 billion, up 11.1% year on year, while revenue from information-technology services was RMB 10,636.6 billion, up 14.7% year on year.

6.2 Competitive Landscape

• Basic-software layer: Operating systems, databases, middleware and security software have high technological and ecosystem barriers. Key competitive factors include underlying technology capabilities, the number of hardware and software adaptations, developer ecosystems, customer certifications, project experience and continuous R&D investment.
• Government and critical-industry solutions layer: Competitors include software groups backed by central state-owned enterprises and state-owned enterprises, as well as specialized private IT service providers. Key competitive factors include qualifications, customer relationships, industry know-how, project delivery capabilities, tendering capabilities and localized service networks.
• Systems integration and IT services layer: There are many participants and relatively clear business homogeneity. Project price competition is relatively intense, gross margins are generally lower than those of standardized software products, and collections and project acceptance have a significant impact on cash flow.
• Xinchuang value-chain layer: China National Software operates within an ecosystem comprising domestic CPUs, operating systems, databases, middleware, office software, complete machines and application software. It has a strong position in operating systems and core Party and government applications, but its integration and application projects still face competition from multiple large IT service providers.
• The industry remains in a growth phase, but industry profit growth was lower than revenue growth in 2025. Technological iteration, labor costs, project competition and customer budget constraints are compressing the profit elasticity of some companies.
• The company has not disclosed absolute sales, licensing volumes or a specific market share for operating systems in China as a whole. It has only disclosed that it has ranked first in China’s Linux market share for 14 consecutive years. This ranking cites CCID Consulting statistics, but the specific statistical methodology and market boundaries require further verification.

6.3 Major Competitors

China National Software has no single listed company with a completely identical business mix, as it covers operating systems, basic software and core Party and government application solutions simultaneously. Compared with ThunderSoft and Kylin Security, the company is more prominent in control of the Kylin operating system, government and critical-industry customer resources and the basic-software ecosystem. Compared with Taiji Computer, Neusoft and Nantian Information, the company has a stronger proprietary basic-software profile, but its core Party and government applications, systems integration and IT services continue to face pressure from project pricing, delivery, labor investment and collection cycles. The companies differ in business structure. The comparison represents an analysis of business comparability and competitive relationships and should not be interpreted as a strict ranking of pure industry peers.

7. Risk Factors

• Risk that earnings recovery falls short of expectations: Revenue declined 20.05% year on year in 1H2026, while attributable net profit remained a loss of RMB 12.4019 million. Different institutions forecast 2026 attributable net profit of RMB 36 million–74 million, a wide range. If revenue recognition or project acceptance in the second half falls short of expectations, full-year profitability may be below forecasts.
• Operating cash-flow and working-capital risk: Net cash flow from operating activities was negative RMB 913 million in 1H2026. As of the end of 2025, accounts receivable and contract assets totaled approximately RMB 1.515 billion, equivalent to approximately 29.70% of 2025 revenue. Project acceptance, settlement and collection may continue to tie up capital.
• Project-based business profitability risk: Revenue from core Party and government application solutions declined 7.72% year on year in 2025, with an average gross margin of only 23.56%, below the 81.13% gross margin of basic software. The business is affected by tender competition, project implementation costs, acceptance milestones and customer budget constraints. Revenue declines or fluctuations in project gross margins could drag on overall profitability.
• High-valuation risk: As of the September 11, 2026 close, the share price was RMB 31.49, with a dynamic P/E of approximately 1,419.78x and a P/B ratio of approximately 4.79x. Because current earnings are small, the valuation depends heavily on rapid future profit realization. If the pace of earnings recovery falls below expectations, valuation volatility may increase.
• Compliance and government-procurement risk: The company’s parent was determined by the Ministry of Finance to have engaged in malicious collusion in government procurement in certain sales businesses. It received fines of approximately RMB 40,500, was placed on a list of entities with records of misconduct and was prohibited from participating in government procurement activities for one year. Although the company stated that its subsidiaries could continue participating and that the related business accounted for approximately 11% of total revenue in 2025, the matter could still affect the parent company’s direct participation in projects and subsequent compliance management.
• Customer concentration and related-party transaction risk: Sales to the top five customers accounted for 36.85% of total annual sales in 2025, while related-party sales accounted for 21.96%. Major customers include related parties such as China Electronics Corporation. Customer and group-ecosystem concentration is relatively high. Changes in procurement schedules, settlement arrangements or related-party business scale among key customers could affect revenue and collections.
• R&D investment and capitalization risk: R&D investment was RMB 1.142 billion in 2025, representing 22.38% of revenue, including RMB 417 million in capitalized R&D investment. Continued high R&D investment supports the development of the operating-system and basic-software ecosystems. However, if product commercialization, ecosystem adaptation or revenue conversion falls short of expectations, period-expense pressure may increase and related assets may face impairment risk.
• Technical and margin-trading volatility risk: As of September 11, 2026, the share price was below the MA5, MA10 and MA20, while combined extra-large and large orders recorded a net outflow of approximately RMB 31.64 million. The margin-financing balance was approximately RMB 1.542 billion, representing approximately 5.71% of float market capitalization. If the share price continues to weaken, margin-fund withdrawals may amplify short-term price volatility.

8. Conclusion and Outlook

The company’s long-term growth foundations are its China Electronics group background, control of Kylinsoft, operating-system intellectual property, and customer resources among central government ministries and commissions, local governments, central state-owned enterprises and state-owned enterprises. The basic-software business continues to grow and has a high gross margin. If the share of high-margin product revenue continues to rise and the project profitability of core Party and government application solutions gradually improves, overall margins and earnings quality may continue to recover. Institutional forecasts for 2026–2028 attributable net profit vary significantly, reflecting the lack of a unified market view on the pace of earnings realization.

Near-term operating performance remains subject to substantial uncertainty. Revenue declined in 1H2026, operating cash flow recorded a significant net outflow, and short-term borrowings increased to RMB 1.271 billion. Settlement by certain key customers is concentrated in the second half of the year, making full-year results particularly sensitive to revenue recognition, project acceptance and collection progress in 2H2026. The current market capitalization is approximately RMB 29.4 billion. Static and trailing P/E ratios are distorted by the small earnings base, but the P/B ratio of approximately 4.79x and forward valuation are also relatively high. If earnings fall short of expectations, valuation digestion pressure may persist.

Going forward, key areas to monitor include whether basic-software revenue and gross margin can continue to improve, whether core Party and government application solutions can stabilize, whether operating cash flow can improve, and the actual impact of R&D investment, project delivery and customer collections on profitability. The parent company’s government-procurement penalty, related-party transactions and customer concentration should also be continuously evaluated in conjunction with subsequent announcements and financial data.

Data Sources

• China National Software (600536)_Company Announcements_China National Software: 2025 Annual Report_Sina Finance_Sina.com
• China National Software (600536) - Fundamental Research Report - iGuigu
• China National Software (600536): Proprietary Software Gross Margin Rises; Kylinsoft Revenue and Profit Both Improve__Sina Finance_Sina.com
• China National Software and Service Corporation Limited　　2024 A-Share Stock Offering Prospectus to Specific Investors
• Taiji Computer (002368)_Company Announcements_Taiji Computer: Summary of 2025 Annual Report_Sina Finance_Sina.com
• Neusoft (600718)_Company Announcements_Neusoft: 2025 Annual Report_Sina Finance_Sina.com
• Nantian Information (000948)_Company Announcements_Nantian Information: 2025 Annual Report_Sina Finance_Sina.com
• China National Software (600536)_Company Announcements_China National Software: 2026 Semi-Annual Report_Sina Finance_Sina.com
• China National Software: 2025 Annual Report_Stock Channel_Securities Star
• China National Software (600536) Earnings Forecasts_F10_THS Financial Services
• China National Software (600536) 1H2026 Results Review: Domestic Operating-System Leader with Deep Long-Term Core-Business Barriers__Sina Finance_Sina.com
• China National Software (600536) Historical Stock Data: Historical Quotes, Prices and Charts_Investing.com
• China National Software (600536)_Stock Quotes, Quotes Homepage_CFi.cn
• China National Software (600536)_Company Announcements_China National Software: Summary of 2025 Annual Report_Sina Finance_Sina.com
• China National Software (600536)_News and Updates_Securities Star
• China National Software (600536) Company Announcements_Sina Finance_Sina.com
• China National Software (600536)-Major Announcements
• China National Software (600536)_Company Announcements_China National Software: Summary of 2026 Semi-Annual Report_Sina Finance_Sina.com
• China National Software: 1H2026 Net Loss Narrowed by RMB 62.1243 million Year on Year _Eastmoney
• China National Software and Service Corporation Limited Announcement on the Progress of Cash Management Using Part of Temporarily Idle Raised Funds_Sina Finance_Sina.com
• China National Software_Individual Stock Calendar_Eastmoney_Data Channel
• China National Software (600536)_Company Announcements_China National Software: Related-Party Transaction Announcement Regarding Capital Reduction in Jointly Invested Enterprise with Related Parties_Sina Finance_Sina.com
• China National Software (600536)_Company Announcements_China National Software: 2026 Semi-Annual Report_Sina Finance_Sina.com
• Stock Code: 600536 Stock Abbreviation: China National Software Announcement No.: 2026-015
• Stock Code: 600536
• China National Software Parent Penalized for Violating Tendering and Bidding Regulations in Certain Sales Businesses_Eastmoney
• China National Software (600536)_Stock Quotes, Quotes Homepage_CFi.cn
• China National Software (600536)_Stock Quotes, Quotes Homepage_CFi.cn
• China National Software (600536) P/E|Valuation|Fundamentals - Lixinger
• China National Software (600536) Historical Stock Data: Historical Quotes, Prices and Charts_Investing.com
• China National Software (600536) Price Trend Analysis | Dingcrab
• China National Software (600536)_Fund Flows_Securities Star
• China National Software (600536) Individual Stock Fund-Flow Query_Individual Stock Quotes_THS Finance
• China National Software (600536) - Historical Trading Data | Dabanke
• China National Software (600536) - Tradable Shareholders - Stock Quotes Center - Sohu Securities
• China National Software (600536) - Historical Trading Data | Dabanke

This report was automatically researched, compiled and generated by AI based on publicly available information. The information is current as of the September 11, 2026 close; market data are as of 15:00:03 on September 11, 2026. Timing differences may exist. Specific data should be based on the company’s formal announcements and authoritative data terminals. This report is for information collation and research reference only and does not constitute investment advice. Investors should make independent judgments and bear investment risks themselves.