Changde Technology has seen its revenue climb from 1.064 billion yuan to 1.601 billion yuan over three years, with cumulative net profits attributable to shareholders reaching approximately 238 million yuan, yet it has also delivered a cumulative operating cash flow of roughly negative 22 million yuan. The polyether amine business, once hailed as a promising "wind power new material," posted a gross margin of -0.51% in 2025, turning into an operation that loses money on every ton sold. These issues are now set to face scrutiny from the listing committee.

On the balance sheet of its "turning waste into treasure" model, the per-ton losses on polyether amine sit alongside negative cash flows. Along the petrochemical corridor in Yueyang, Hunan, Changde New Material Technology Co., Ltd. (hereinafter "Changde Technology") converts wastewater, exhaust gases, and by-products from upstream caprolactam producers into epoxycyclohexane, n-pentanol, and cement additives—this is the most compelling "green circular economy" story the company tells the capital markets. However, a closer look at the latest prospectus reveals another set of stark figures: the overall gross margin has fallen by 7.6 percentage points over two years, the polyether amine product margin has turned from positive to negative, net operating cash flow stood at negative 104 million yuan in 2024, and procurement from a single supplier system once exceeded 82%. As the company faces questioning from the Beijing Stock Exchange listing committee on September 4, its financials are now laid bare for investors to examine.

Profitability Truth

Changde Technology's main business focuses on comprehensive resource utilization and new material manufacturing. The company's revenue grew from 1.064 billion yuan in 2023 to 1.601 billion yuan in 2025, representing a compound annual growth rate of approximately 22.8%. However, net profit has not kept pace—in 2024, it actually declined, with net profit attributable to shareholders falling 10.4% year-on-year to 71.469 million yuan, before recovering to 86.7585 million yuan in 2025. According to the reviewed data for January to June 2026 disclosed in the prospectus, the company recorded revenue of 906 million yuan and net profit attributable to shareholders of 60.9871 million yuan in the first half, up 26.04% and 23.82% year-on-year respectively. The company forecasts net profit attributable to shareholders of between 92 million and 97 million yuan for January to September 2026, representing year-on-year growth of 25.24% to 32.05%. While performance shows signs of recovery, the quality of that growth still raises questions.

Changde Technology operates two main business segments: comprehensive resource utilization and new material manufacturing. The former has genuine barriers to entry, while the latter is exposed to brutal price competition. During the reporting period of 2023 to 2025 (hereinafter referred to as the "reporting period"), the company's overall gross margin fell from 19.91% to 12.28%, a decline of nearly 40%. Breaking this down, the new materials segment is the primary drag. Among its products, the polyether amine series saw its revenue share drop from 21.75% in 2023 (the largest business) to 15.27% in 2025 (the third-largest, just behind the second-largest at 15.42%), while its gross margin fell from 17.51% to -0.51%. The average selling price dropped from 15,370 yuan per ton to 10,208 yuan per ton, a decline of 33.6% over two years, falling below the unit cost of 10,261 yuan per ton.

The contradiction here lies in the industry backdrop: according to Wind and the National Energy Administration, domestic wind power installed capacity during the reporting period was 75.9 GW, 79.34 GW, and 119.33 GW respectively, with 2025 hitting a record high. As a key raw material for epoxy resin curing agents in wind turbine blades, polyether amine demand should have risen accordingly, but price wars instead intensified. The prospectus explains that the wind power boom attracted collective capacity expansion by peers, resulting in "temporary overcapacity in polyether amine supply relative to demand." This raises a question worth exploring: why did the company fall into per-ton losses in the year when industry sentiment was at its peak? If this is attributed to common industry issues, how does one explain why Akelai (with a 2025 polyether amine gross margin of 3.67%) in the same track managed to maintain marginal profitability? The gap between the company's own cost curve and that of expansion-minded competitors such as Wanhua Chemical and Zhengda New Materials is likely what the market truly wants Changde Technology to explain.

Equally noteworthy is the company's extreme sensitivity to raw material prices. During the reporting period, direct material costs accounted for 82.77%, 83.46%, and 83.49% of the company's main business costs respectively, a very high proportion. Extreme sensitivity analysis in the prospectus shows that a 10% increase in raw material prices would reduce operating profit by 75.56%, 137.72%, and 118.42% across the reporting period. This means that if raw material prices rise by 10%, the company's operating profit for 2024 and 2025 would be completely wiped out. In the first quarter of 2026, the company had already experienced "a year-on-year increase in operating revenue alongside a slight decline in net profit" due to rising propylene oxide prices and falling polyether amine and n-pentanol prices.

The Cash Flow Question: Why Hasn't the Money Stayed

More worthy of deeper examination than the declining gross margin is the long-standing mismatch between the company's profits and its cash flows. Over three years, the company's (consolidated) net profit totaled approximately 248 million yuan, while net operating cash flows were 19.5292 million yuan, -104.0827 million yuan, and 62.4337 million yuan respectively, cumulatively around -22 million yuan. In 2024 alone, net profit was 74.67 million yuan against operating cash flow of -104 million yuan, a divergence of 179 million yuan for that single year. The prospectus attributes this to "a high proportion of customer bill collections," with the combined balance of notes receivable and financing receivables surging by about 169 million yuan that year. Bill collections are not inherently abnormal, but the structure deserves attention. Of the 236 million yuan in accounts receivable at the end of 2024, 114 million yuan consisted of "digital accounts receivable debt certificates"—electronic debt certificates issued by supply chain platforms such as Sany Jinpiao, CCB Rongtong, and Zhongqi Yunlian. The redemption of such certificates is highly dependent on the creditworthiness of the accepting party, and their discounting, endorsement, and actual redemption directly determine the "quality" of the company's book profits.

Furthermore, the company's post-period collection rate on accounts receivable fell from 94.54% in 2023 to 84.11% in 2025, and the accounts receivable turnover ratio dropped from 10.53 times per year to 8.46 times per year. Meanwhile, a new name appeared among the top five customers—trader Yantai Yitai Chemical, whose purchases from the company were just 6.635 million yuan in 2024 but surged to 58.4331 million yuan in 2025, expanding nearly nine-fold in a single year. Combined with the fact that direct sales to traders now account for more than half (55.16%) of revenue, the potential risks of "distributor stockpiling" and "expanding scale by relaxing credit terms" in the company's revenue need to be scrutinized thoroughly.

It is worth noting that the cash flow problem has not been resolved by the 2026 performance recovery. According to the reviewed data for January to June 2026 disclosed in the prospectus, the company's net operating cash flow in the first half was still negative 42.3144 million yuan, a further deterioration of 986.57% compared to the negative 3.8943 million yuan in the same period last year. With net profit of 61.1611 million yuan in the first half of 2026, the gap between book profits and cash collections continues to widen, and the underlying "increased revenue without increased cash" pattern shows no sign of reversing.

More Than 80% of Procurement Tied to the Sinopec System

Even more concentrated than the customer base is the company's supplier structure. During the reporting period, procurement from the Sinopec Group for raw and auxiliary materials accounted for 75.64%, 82.05%, and 69.65% respectively, with the top five suppliers consistently accounting for over 81% of total purchases. Procurement of propylene oxide and ethanol from the Sinopec system reached as high as 92.66%–100% and 100% respectively. The company's "co-located construction and wall-to-wall supply" model with Hunan Petrochemical and other large chemical enterprises—with direct pipeline connections—is both a cost advantage and a testament to single-source dependence. This dependence manifested in two incidents: when Hunan Petrochemical initiated a relocation in 2023, the company's move along with it led to a capacity ramp-up at the new base, directly dragging down 2024 performance; and during the major maintenance shutdown at Hunan Petrochemical from April to June 2025, the company was forced to temporarily switch to alternative suppliers. The prospectus acknowledges that in extreme scenarios where upstream raw materials and energy supplies fail, the company may be forced to "reduce or even halt production."

Subtly, Sinopec Capital acquired a stake in the company in February 2025 at 11.68 yuan per share, investing 75 million yuan and becoming a shareholder. The company's largest supplier system has thus become a significant part of its shareholding structure, creating a dual "equity plus business" binding.

High Prosperity Coexisting with Intense Competition

Objectively speaking, Changde Technology's moat is not fabricated, but it shows a clear divergence in thickness across its operations. In the comprehensive resource utilization segment, the company has built a technological first-mover advantage with 91 patents (including 89 invention patents) and has secured procurement channels covering over 50% of domestic caprolactam production capacity. Some by-products are classified as hazardous waste, and cross-provincial transportation restrictions objectively raise barriers for potential entrants, resulting in a "winner-takes-all" industry landscape. The genuine barriers in this segment are an important pillar supporting the company's valuation.

However, in the new materials segment, the company's moat is noticeably shallower. The polyether amine track faces first-mover pressure from Huntsman and BASF (which together account for approximately 45% of global capacity), as well as collective capacity expansion by listed companies such as Wanhua Chemical, Zhengda New Materials, Chenhua Co., and Akelai. The n-pentanol track competes against Dow Chemical and Nuoao Chemical. The ethyl acetate newly brought online in 2024 is a bulk solvent, with gross margins of only about 2% for Changde Technology, relying on volume to drive revenue. Industry competition has shifted from individual products to systematic solutions, and the R&D and brand advantages of international giants remain gaps that domestic companies will find difficult to close in the short term.

Particularly concerning is the contraction in R&D investment. During the reporting period, the company's R&D expenses fell from 27.8978 million yuan to 21.2192 million yuan, with R&D as a percentage of operating revenue dropping from 2.62% to 1.33%. By 2025, this was noticeably lower than comparable companies such as Yuanli Technology (4.11%), Kaimeite Gases (5.54%), Akelai (5.36%), and Haike Xinyuan (3.75%). Longhua New Materials had an R&D ratio of 0.32% in 2025, below Changde Technology's 1.33%. Industry insiders note that Changde Technology's business is genuine and its technology has roots, but growth is slowing, profitability is thinning, and supply chain dependence is overly concentrated.