Gansu Jiu Steel Group Hongxing Iron & Steel Co Ltd

Jiuquan Iron and Steel Hongxing released its 2026 interim report. Total operating revenue was 16.159 billion yuan, up 3.61 percent year on year. Net profit attributable to the parent company was negative 216 million yuan, an improvement of 432 million yuan compared with the same period last year, marking a second consecutive year of increase. Net cash inflow from operating activities was 407 million yuan, up 2.022 billion yuan from a year earlier. The company's latest asset-liability ratio was 89.68 percent, gross margin was 9.42 percent, ranking second among disclosed peers, return on equity was negative 4.07 percent, and diluted earnings per share was negative 0.03 yuan. The company had 185,500 shareholders, and the top ten shareholders held 61.38 percent of the shares.

The Shanghai Stock Exchange recently issued a regulatory inquiry regarding JISCO Hongxing's 2025 annual report, focusing on the company's two-way transactions with related party Jiayuguan HSBC Industrial Products Co., Ltd. The inquiry letter pointed out that in 2024 and 2025, the company's purchases from HSBC Industrial reached 4.205 billion yuan and 4.473 billion yuan respectively, while sales reached 4.692 billion yuan and 4.549 billion yuan, with the amounts being highly similar. However, purchases are expected to plummet to 120 million yuan and sales to 195 million yuan in 2026, and the company was asked to explain the transaction background, commercial substance, accounting treatment, and the reasons for the dramatic change in amounts. JISCO Hongxing replied that the core of the transactions involves the company selling steel coil raw materials to HSBC Industrial, which then completes shearing and packaging processing. Most of the products are repurchased by the company's sales subsidiary for external sale, while a small portion is processed by HSBC Industrial and sold directly to external parties. The company itself lacks deep steel processing capabilities, while HSBC Industrial has geographical and cost advantages. The related transactions have genuine commercial substance, with pricing based on market prices or a cost-plus model, and there is no transfer of benefits. In terms of accounting treatment, the portion sold directly by HSBC Industrial is recognized as revenue on a gross basis, while repurchased products are offset at the consolidated statement level. This treatment complies with corporate accounting standards. The corresponding accounts receivable of 6.2618 million yuan at the end of 2025 had been fully collected before May 2026, with no signs of impairment. The significant decline in related-party transaction scale in 2026 is mainly due to the upgrade of the company's CSP production line, an increase in the proportion of direct supply to end customers, downstream customers building their own processing capacity, and a slowdown in demand for photovoltaic steel in the northwest region. The business model and accounting methods between the two parties have not changed.

JISCO Hongxing disclosed its earnings forecast, expecting a net loss attributable to the parent company of 210 million yuan in the first half of 2026, compared to a loss of 649 million yuan in the same period last year. The net loss after deducting non-recurring items is expected to be 251 million yuan, compared to a loss of 665 million yuan a year earlier. The company stated that the domestic steel industry is facing weak supply and demand, with steel product prices fluctuating at low levels, while prices of raw materials such as iron ore and coal remain high, putting pressure on industry profitability. Facing the severe situation, the company has accelerated product mix adjustments, deepened cost reduction and efficiency improvement efforts, and promoted green and low-carbon development and digital transformation, thereby narrowing the loss compared to the same period last year.