Liuhua Shares: Proactively Addressing Risks to Strengthen Foundations, Soaring with High-End Development and Scale Expansion

Recently, Liuhua Co., Ltd. (600423) disclosed its 2025 annual report. Due to revenue falling below 300 million yuan and negative net profit, the company's stock was placed under delisting risk warning. However, looking beyond the surface of the financial data, it's not hard to see this established chemical company is undergoing a transformative strategic adjustment: clearing out historical burdens in one go, striding towards the electronic-grade high-purity chemical market, and launching a capacity doubling plan. Against the backdrop of an approaching cyclical turning point in the chemical industry, Liuhua's proactive risk mitigation and strategic layout are building the foundation for a revaluation of the company's worth.

Financial Cleanup: Shedding the Burden, Advancing Lightly

The annual report shows that in 2025, Liuhua's operating revenue was 137 million yuan, with a net profit attributable to the parent company of -25.7125 million yuan. However, a closer look reveals that the main cause of the loss was not a break in operating cash flow or deterioration of core business, but rather the company's provision for fixed asset impairment on the long-term operating asset group of its Luzhai branch, based on the principle of prudence. At the same time, the company implemented a highly courageous financial restructuring—using capital reserve of 1.652 billion yuan and surplus reserve of 89 million yuan to cover past losses. This combination of moves significantly cleared historical loss carryovers and greatly optimized the structure of owner's equity. As of the end of 2025, the company's asset-liability ratio was only 10.53%, with monetary funds as high as 433 million yuan and no significant interest-bearing debt whatsoever. Such a financial foundation is relatively rare in the chemical industry and differs from other companies that have been "star-capped" due to deteriorating financial conditions.

After the 2025 financial cleanup, ample cash reserves and a healthy debt structure provide sufficient ammunition for the subsequent construction of 200,000 tons of new capacity and the development of the high-end product market. Overall, the 2025 book loss is a typical case of "bad news being cleared out," aiming to make future financial reports cleaner and lay the groundwork for subsequent capital operations, especially dividends.

High-End Breakthrough: Electronic-Grade Hydrogen Peroxide Opens Growth Space

For a long time, Liuhua has been viewed by the market as a cyclical industrial-grade hydrogen peroxide producer, with its valuation suppressed by excessive product competition. However, in 2025, the company achieved a breakthrough from 0 to 1 in its high-end transformation. The annual report points out that the company's 20,000-ton-per-year electronic-grade hydrogen peroxide project has stably produced G1/G2 grade ultra-high-purity products and successfully entered the supply chain of leading photovoltaic manufacturers in South China. Moreover, in December 2025, the company exported 152.48 tons of electronic-grade hydrogen peroxide to Vietnam for the first time, earning foreign exchange of $48,000. This marks the company's debut in the international high-end chemical market, verifying that its product quality is capable of competing globally.

According to industry data, the global electronic-grade hydrogen peroxide market is expected to expand at a compound annual growth rate of nearly 10%, driven by the continuous rise in demand for semiconductor localization and precision cleaning of photovoltaic cells. By leveraging existing facilities to enter this high-value-added track, Liuhua is expected to significantly improve its product profit structure and mitigate the impact of price cyclical fluctuations in industrial-grade products. The company's management clearly stated in the annual report that in 2026, it will leverage the China-ASEAN Expo platform to focus on the Southeast Asian market and cultivate new export growth points. The high-end strategy has moved from blueprint to reality.

Scale Expansion: 200,000-ton Fluidized Bed Project Reshapes Industry Position

While achieving a high-end breakthrough, Liuhua has not neglected the importance of economies of scale. In March 2026, the company officially launched a project for a 200,000-ton-per-year fully acidic fluidized bed hydrogen peroxide production unit, with a total investment of approximately 290 million yuan and a construction period of 24 months. Upon completion, the company's total 27.5% hydrogen peroxide capacity will leap from the current 160,000 tons to over 360,000 tons. This capacity leap has multiple implications: First, the significant increase in scale enhances the company's bargaining power and supply stability with downstream customers. Second, the adoption of the advanced fully acidic fluidized bed process offers greater inherent safety compared to older acid-base fixed bed processes, with lower raw material consumption and better operating costs. The synergy between scale expansion and high-end upgrading fundamentally improves the company's sustainable operation capability and profit elasticity.

Industry Inflection Point Resonates with Local Dividends

From an industry cycle perspective, after four years of downturn, the basic chemical industry is expected to see a cyclical inflection point in 2026. On the supply side, the pace of new capacity additions is slowing, while policy is accelerating the elimination of outdated capacity. On the demand side, with steady economic recovery, downstream sectors such as papermaking, photovoltaics, and new energy are seeing a rebound in activity. The hydrogen peroxide industry presents a structural pattern of "overall surplus, high-end shortage," where companies with advanced processes and high-purity product lines will benefit first. At the regional level, Liuzhou City has listed "green chemicals" as one of its ten pillar industries and clearly implemented a "production value doubling plan," promoting the expansion and quality improvement of chemical parks like Luzhai and Liucheng. As a core enterprise in the park, Liuhua is well-positioned to benefit from policy dividends, providing a stable external environment for its long-term development.

The market cannot ignore the delisting risk warning imposed after the disclosure of the company's 2025 annual report. However, this warning more reflects the concentrated digestion of historical legacy issues, rather than a real decline in the company's current operational capabilities. On the contrary, the company is taking clear countermeasures: optimizing financial indicators, expanding the high-end product line, and enhancing scale-based competitive advantages. Moreover, ample monetary funds and a debt-free balance sheet mean the company has sufficient funds and capability to resolve this phase-specific risk.

Liuhua's 2025 annual report can be better understood as a turning point in its development process: proactively clearing historical burdens, resolutely advancing into high-end chemicals, and decisively launching scale expansion. At the inflection point of the industry cycle's recovery, the company, with a healthy and lean balance sheet and a clear development strategy, has opened a new stage of value revaluation. For investors focused on the industry's essence rather than short-term fluctuations, the inflection point signal from Liuhua is worth continued attention.