In-Depth Analysis Report on the Divergence Between Operating Cash Flow and Net Profit of Jianghua Microelectronics (603078)

Based on the obtained financial data and market information, I have prepared this in-depth analysis report on the divergence between operating cash flow and net profit of Jianghua Microelectronics.

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According to the 2025 Q3 report data of Jianghua Microelectronics [1][2], the company showed a typical divergence pattern of “soaring cash flow, declining profits”:

Core Indicators	First Three Quarters of 2025	Year-on-Year Change	Divergence Interpretation
Operating Revenue	RMB 910 million	+10.9%	Continuous expansion of business scale
Net Profit Attributable to Parent Company	RMB 78.78 million	-8.7%	Profitability under pressure
Net Operating Cash Flow	RMB 149 million	+159.2%	Significant improvement in cash flow
Operating Cash Flow/Net Profit	189%	+114 percentage points	Significant divergence

: The growth rate of operating cash flow differs from that of net profit by nearly 168 percentage points. This extreme divergence is rare in the semiconductor materials industry and warrants in-depth analysis [1].

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Through quarterly financial data analysis, I found that the main driving factors for operating cash flow continuing to exceed net profit are as follows:

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Reporting Period	Net Profit (RMB million)	Operating Cash Flow (RMB million)	Deviation Degree	Depreciation and Amortization	Change in Accounts Receivable	Change in Inventory	Change in Accounts Payable
2025-Q3	30.71	59.74	+94.5%	14.82	-5.23	8.45	12.31
2025-Q2	0.00	58.95	N/A	15.10	2.56	15.23	21.45
2025-Q1	26.82	31.30	+16.7%	13.45	-8.12	5.67	9.23
2024-Q4	0.00	51.08	N/A	14.56	3.45	12.34	18.67

In recent years, the company has continued to make capital expenditures, with fixed asset depreciation and intangible asset amortization being the main non-cash expense items. The average quarterly depreciation and amortization is approximately RMB 14-15 million, which directly increases operating cash flow but does not affect net profit [0].

1. Improved Accounts Payable Management
   : The company improved its cash flow by extending the payment cycle to suppliers, with accounts payable increasing by an average of RMB 12-21 million per quarter, effectively alleviating capital pressure.
2. Improved Inventory Turnover
   : Against the trend of localization of semiconductors, the company’s inventory management efficiency has improved. The inventory changes in Q2 and Q4 were +15.23M and +12.34M respectively (a negative number indicates that inventory consumption increases cash flow).

Net profit is shown as 0 in some quarters, which may be due to financial reclassification or seasonal factors. The actual profitability needs to be comprehensively judged in combination with annual data.

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Reporting Period	Operating Revenue (RMB million)	Year-on-Year Growth Rate	Gross Profit Margin	Net Profit Margin	Changes in Profitability
2025-Q3	329.44	+10.3%	28.37%	9.32%	Improved gross profit margin, net profit margin under pressure
2025-Q2	305.00	+12.5%	25.44%	6.97%	Revenue growth without profit growth
2025-Q1	275.44	+8.7%	25.31%	9.74%	Profitability recovered
2024-Q4	278.96	+5.2%	22.72%	4.44%	Cyclical low point

: The company’s revenue maintained double-digit growth, indicating strong demand from downstream semiconductor and flat panel display sectors. However, fluctuations in gross profit margin and net profit margin reflect the impact of cost-side pressures and intensified industry competition [2].

Financial Indicators	Value	Industry Comparison	Evaluation
ROE (Return on Equity)	1.58%	Mid-tier in the industry	Relatively low, still has room for improvement
Asset-Liability Ratio	17.25%	Relatively low	Robust financial structure
Current Ratio	4.50	Relatively high	Strong short-term solvency
P/E (Price-to-Earnings Ratio)	82.36x	Relatively high	High market expectations

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Net operating cash flow surged 159.2% year-on-year to RMB 149 million, indicating a significant improvement in the company’s main business cash collection capacity. This is particularly rare against the backdrop of a downward cycle in the semiconductor materials industry, reflecting the company’s enhanced bargaining power in the industrial chain [1].

The increase in accounts payable and improvement in inventory turnover indicate that the company’s supply chain management and cash management capabilities have improved. Such improvements are sustainable and help reduce operational risks.

The low asset-liability ratio (17.25%) and high current ratio (4.50) provide the company with sufficient financial buffers to withstand industry cyclical fluctuations and respond to potential risks.

Net profit attributable to parent company decreased by 8.7% year-on-year, mainly affected by the following factors:

• Pressure from rising raw material costs
• Increased R&D investment (year-on-year increase of 24.69%)
• Increase in financial expenses due to higher borrowing interest expenses

Operating revenue grew by 10.9% in the first three quarters but net profit decreased by 8.7%. If this scissors gap persists, it will affect the company’s long-term valuation [2].

Fluctuations in the prosperity of the semiconductor industry may affect downstream demand, which in turn may impact the company’s revenue growth.

Dimension	Evaluation	Explanation
Cash Flow Quality	Excellent	Significant improvement in operating cash flow, strong coverage capacity
Profitability	Average	Net profit declined, cost control deserves attention
Growth Potential	Good	Revenue maintained double-digit growth
Financial Robustness	Excellent	Low asset-liability ratio, sufficient liquidity

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The divergence between operating cash flow and net profit of Jianghua Microelectronics mainly stems from:

1. Cumulative effect of non-cash expenses such as depreciation and amortization
   - Capital expenditures converted into cash inflows
2. Continuous optimization of working capital management
   - Improvement in accounts payable and inventory management
3. Industry characteristics
   - The semiconductor materials industry is capital-intensive, and divergence between cash flow and profit is relatively common

, indicating that the company has strong cash flow generation capacity and good financial health. However, if net profit continues to decline, it may affect the valuation level in the long run.

• Whether net profit can stabilize and rebound in subsequent quarters
• Whether gross profit margin can continue to improve
• Output efficiency of R&D investment
• Changes in the prosperity of the semiconductor industry

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[1] Eastmoney - “Jianghua Microelectronics’ Net Profit Attributable to Parent Company Decreased 8.7% Year-on-Year to RMB 78.78 Million in the First Three Quarters” (https://wap.eastmoney.com/a/202510243543625159.html)

[2] Sina Finance - “Brief Analysis of Jianghua Microelectronics (603078) 2025 Q3 Report: Revenue Growth Without Profit Growth, Company’s Accounts Receivable…” (https://cj.sina.cn/articles/view/1850649324/6e4eaaec0200227ce)

[0] Jinling AI Financial Database - Company Financial Statement Data