Wingtech Technologies' Net Profit Surged Over 80% YoY in Q1, Divests Integrated Business; Wingtech Convertible Bonds Close Slightly Higher Today

Wingtech Technologies (600745.SH) released its 2024 annual report and Q1 2025 results. In 2024, due to significant impairment losses, Wingtech Technologies incurred a loss of RMB 2.833 billion. However, in March this year, Wingtech Technologies divested its loss-making integrated business to focus on its semiconductor business, resulting in an 82.29% YoY increase in net profit for Q1. Wingtech Technologies currently has one outstanding convertible bond with a balance of RMB 8.6 billion.

According to the Q1 2025 report, Wingtech Technologies achieved operating revenue of RMB 13.099 billion in Q1, with a net profit attributable to shareholders of publicly listed firms of RMB 261 million, up 82.29% YoY. The semiconductor business emerged as the highlight in Q1, generating revenue of RMB 3.711 billion, up 8.40% YoY, with a gross profit margin climbing to 38.32%, up over seven percentage points YoY, and contributing a net profit of RMB 578 million.

Public information indicates that Wingtech Technologies is a semiconductor enterprise integrating R&D, design, and manufacturing, primarily providing global customers with R&D and design services for semiconductor power devices and analog chips, as well as wafer fabrication, packaging, and testing services. It also offers R&D and manufacturing services for end-use products such as mobile phones, tablets, laptops, AIoT devices, and automotive electronics.

The company's concurrently released annual report shows that Wingtech Technologies' net profit attributable to shareholders in 2024 was a loss of RMB 2.833 billion, down 339.83% YoY. In terms of loss amount, it ranked first in the A-share semiconductor sector and was the only company in the sector last year with losses exceeding RMB 1 billion.

Regarding the reasons for the losses, the company stated that at the end of last year, Wingtech Technologies was included in the Entity List by relevant US departments. Suppliers and customers interpreted and implemented the expansion of the Entity List, which had a comprehensive adverse impact on the product integration business of the publicly listed firm. There were signs of impairment in the product integration business assets of companies within the consolidated financial statements at the end of 2024. The company conducted impairment tests on relevant assets in accordance with accounting standards and subsequently recognized impairment losses, totaling RMB 949 million.

However, Wingtech Technologies has divested its loss-making integrated business through multiple equity transfers of its subsidiaries this year. Following the transfer of equity in three subsidiaries—Jiaxing Yongrui, Shanghai Wingtech Electronics, and Shanghai Wingtech Information—to Luxshare ICT (Shanghai) Co., Ltd. (referred to as "Luxshare ICT") in January 2025, the company announced a major asset sale plan in March, proposing to transfer 100% equity in six subsidiaries, including Kunming Wingtech, Huangshi Wingtech, and Shenzhen Wingtech, as well as the business asset package of three companies, including Wuxi Wingtech, to Luxshare Precision and its wholly-owned subsidiary, Luxshare ICT. The preliminary estimated transaction consideration is approximately RMB 4.608 billion.

Regarding the equity transfer in March, Wingtech Technologies stated that before this transaction, the company's main businesses included two segments: product integration and semiconductor businesses. After the completion of this transaction, the company will divest its product integration business and focus on its semiconductor business.

In June last year, China Chengxin International Credit Rating Co., Ltd. downgraded Wingtech Technologies' rating from AA+ to AA. The rating report cited the stagnation of the optical business, obstacles to product diversification and industry chain extension, leading to asset impairment and disposal losses. The scale of goodwill remained high, and the decline in the performance of acquired subsidiaries increased the risk of goodwill impairment. The company's share price remained persistently low, significantly below the conversion price, posing a risk of convertible bond conversion failure.

In terms of assets and liabilities, as of the end of Q1 2025, Wingtech Technologies' total assets were RMB 70.742 billion, including RMB 21.498 billion in goodwill. Total liabilities were RMB 35.71 billion, with an asset-liability ratio of 50.48%. Among these, current liabilities were RMB 23.238 billion, primarily consisting of notes payable and accounts payable totaling RMB 11.907 billion.

In terms of cash flow, in Q1 2025, Wingtech Technologies' net cash flow from operating activities was RMB 2.523 billion, a significant increase of 1,195.83% YoY in net inflow. This was mainly due to a 6.81% YoY increase in cash received from the sale of goods and provision of services to RMB 17.264 billion, coupled with a 6.98% YoY decrease in cash paid for the purchase of goods and acceptance of services to RMB 12.727 billion, demonstrating significant improvements in operating cash flow management.

Currently, Wingtech Technologies has one outstanding bond, namely the "Wingtech Convertible Bond," with a current balance of RMB 8.597 billion, a remaining term of 2.25 years, and a coupon rate of 1.5%. Today, the "Wingtech Convertible Bond" opened higher and fluctuated, eventually closing up 0.10% at RMB 109.275, with the latest conversion premium rate at 41.63%.