Securities Investment Risk Control Analysis Report of Leo Group Co., Ltd. (002131.SZ)

Now, based on the collected information, I will prepare an in-depth analysis report on the securities investment risk control of Leo Group Co., Ltd.

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Leo Group Co., Ltd. (Securities Abbreviation: Leo Co., Ltd., Securities Code: 002131.SZ) is a comprehensive enterprise focusing on industrial machinery and digital marketing businesses. In recent years, while maintaining its traditional advantages in pump manufacturing, the company has actively expanded its digital marketing service business, forming a dual-drive pattern of “Manufacturing + Services” [0].

According to the “Announcement on Conducting Securities Investment” released by the company on August 8, 2025, Leo Group Co., Ltd. convened the 12th Meeting of the 7th Board of Directors on the same day, and reviewed and approved the “Proposal on Using Own Funds for Securities Investment”. Pursuant to the proposal, the company and its subsidiaries are authorized to use

(or equivalent foreign currency at the time of investment) of own funds for securities investment. This authorization is valid for 12 months from the date of approval by the Board of Directors, and does not require submission to the general meeting of shareholders for review [1].

This investment quota accounts for a relatively high proportion of the company’s net asset scale at that time, reflecting the company’s emphasis on the securities investment business, while also indicating that the corresponding risk management pressure has increased significantly.

According to the announcement, the scope of the company’s securities investment includes:

Investment Category	Details
Equity Investments	New share placement or subscription, stocks and depositary receipts investment
Fixed Income Investments	Bond investments
Asset Management Products	Entrusted wealth management (entrusting professional wealth management institutions such as banks, trusts, securities, funds, futures, and insurance asset management institutions)
Other	Other investment behaviors recognized by the Shenzhen Stock Exchange

It should be noted that the scope of this entrusted wealth management

the investment varieties mentioned in the “Announcement on Using Part of Idle Own Funds for Cash Management” released by the company on April 29, 2025, indicating that the company has clearly distinguished between securities investment and cash management [1].

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The company has established a relatively complete securities investment decision-making system:

According to the announcement, the company authorizes the chairman to select suitable candidates to establish a

, which is responsible for the decision-making and implementation of the company’s securities investment and other related work. As the core decision-making body for securities investment, the Leading Group is responsible for determining investment directions, making major investment decisions, risk monitoring, and other duties [1].

As the top decision-making level, the Board of Directors reviews and approves major securities investment matters. The authorization of the RMB 3 billion investment quota was reviewed and approved by the Board of Directors, and the Board retains the approval right for investments exceeding the quota [1].

Under the guidance of the Leading Group, the management is responsible for specific investment operations, including screening investment targets, timing of purchases and sales, daily management, etc.

However, from historical data, the company’s securities investment performance has obvious volatility:

Year	Net Profit Attributable to Shareholders (in RMB 100 million)	Net Profit After Deducting Non-Recurring Items (in RMB 100 million)	Securities Investment Profit/Loss
2021	-10.12	-14.63	Loss
2022	-4.41	1.42	Loss
2023	19.66	0.55	Profit
2024	-2.59	1.61	Loss

• The company suffered
  securities investment losses in 3 out of the past 4 years (2021-2024)
  [1]
• The profit achieved in 2023 was mainly due to the improvement of the overall market environment
• The recurrence of losses in 2024 reflects the
  instability
  of investment returns

According to the announcement and public information, the risk control measures disclosed by the company mainly include:

The company clearly specifies that the funds for securities investment are

, which must be “idle funds”, and emphasizes that it shall not use raised funds or leveraged funds such as loans for securities investment [1].

By setting an investment ceiling of RMB 3 billion, the company controls the exposure scale of a single type of investment and avoids excessive concentration on securities investment [1].

A decision-making mechanism of the Leading Group has been established, requiring major investments to be decided through collective discussion to avoid moral risks caused by individual decision-making [1].

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On July 5, 2023, the Shenzhen Stock Exchange (SZSE) issued a “Regulatory Letter to Wang Xiangrong and Wang Zhuangli”. Upon investigation, Yan Suyun, the mother of Wang Xiangrong, Chairman of Leo Group Co., Ltd., and Wang Zhuangli, Vice Chairman, purchased 484,200 shares of Leo Group Co., Ltd. between March 22 and March 24, 2023, with a cumulative transaction amount of RMB 1,237,160, and sold 484,200 shares on May 30, 2023, with a transaction amount of RMB 1,113,660. The interval between the above purchase and sale is less than six months, which constitutes short-term trading as stipulated in Article 44 of the Securities Law [1].

This incident reflects loopholes in the company’s

. Although the short-term trading resulted in a loss of RMB 123,500 in the end, it exposed weaknesses in the risk control system.

Based on publicly disclosed information, the company’s detailed provisions on specific risk control systems for securities investment (such as stop-loss line setting, single target concentration limits, investment portfolio risk limits, stress testing mechanisms, etc.) are relatively limited, making it difficult for investors to comprehensively evaluate the company’s risk management level for securities investment.

From December 31, 2025 to January 15, 2026, the cumulative deviation of the closing price increase of Leo Group Co., Ltd.'s stock reached

in 10 consecutive trading days, indicating abnormal stock price fluctuations. The company’s stock was suspended from trading at the opening on January 16, 2026, to accept the exchange’s investigation [2].

Time Period	Price Increase Deviation	Market Performance
10 Trading Days	96.77%	Significantly higher than the SZSE Composite Index

According to the SZSE announcement, Leo Group Co., Ltd. (002131) has been included in the

, with the monitoring period from January 16, 2026 to January 29, 2026. Multiple securities companies have successively issued risk warning announcements to remind investors to pay attention to trading risks [3][4].

According to the company’s announcement, as of January 15, 2026, the price-to-book (PB) ratio of the “L72 Business Services” sector under the China Association of Listed Companies’ industry classification is 2.32x, and the trailing price-to-earnings (PE) ratio is 33.71x. In contrast, Leo Group Co., Ltd.'s latest PB ratio is

, and its trailing PE ratio is , which are significantly higher than the industry average [2].

From the financial data, the company faces certain operational pressure:

Indicator	Value	Evaluation
Free Cash Flow (2024)	-RMB 467 million	Negative Value
Net Operating Cash Flow (Past 4 Years)	All Negative	Continuous Cash Outflow
ROE (Return on Equity)	3.74%	Relatively Low
Net Profit Margin	2.47%	Relatively Low

• The company’s net cash flow from operating activities has been continuously negative in recent years [0]
• Against the backdrop of tight cash flow from the main business, large-scale securities investment may face liquidity risk
• If significant losses occur in securities investment, it may have a major impact on the company’s overall financial condition

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It is recommended that the company establish a more comprehensive securities investment risk management system, including but not limited to:

• Single target concentration limit (recommended not to exceed 10%-20% of the total investment quota)
• Stop-loss line setting (e.g., mandatory stop-loss when losses reach 10%-15% of the investment quota)
• Investment portfolio risk limits (monitoring of risk indicators such as VaR)
• Regular stress testing mechanism

It is recommended that the company disclose details of its securities investment in periodic reports, including:

• Investment targets and position distribution
• Investment profit and loss status and reasons for changes
• Implementation status of risk control indicators
• Implementation status of investment decision-making processes

Strengthen the registration and management of insiders of confidential information to avoid recurrence of similar short-term trading incidents; improve the connected transaction monitoring mechanism to ensure that all related transactions are compliant and transparent.

The company’s current trailing PE ratio of 143.98x and PB ratio of 5.32x are both significantly higher than the industry average, posing a relatively high risk of valuation correction [2].

The volatility of securities investment returns may lead to significant fluctuations in the company’s overall performance. Historical data shows that the company suffered losses from securities investment in 3 out of the past 4 years [1].

Against the backdrop of continuously negative cash flow from the main business, large-scale losses in securities investment may put pressure on the company’s liquidity [0].

The company has been included in the key monitoring list, and its transactions may be subject to stricter regulatory restrictions. Investors need to pay attention to changes in subsequent regulatory measures [3][4].

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Leo Group Co., Ltd. plans to use no more than RMB 3 billion of its own funds for securities investment. Although it has established a basic decision-making structure (the Securities Investment Leading Group), based on historical performance and recent market conditions, its risk control system still has obvious deficiencies:

1. Unstable historical performance
   : The company suffered securities investment losses in 3 out of the past 4 years
2. Loopholes in compliance management
   : Short-term trading incident occurred involving relatives of the actual controller
3. Insufficient information disclosure
   : Limited disclosure of risk control details
4. Main business under pressure
   : Continuous negative cash flow limits risk bearing capacity
5. Prominent recent valuation risk
   : PE/PB ratios significantly deviate from industry averages

When evaluating the investment value of Leo Group Co., Ltd., investors should fully consider the above risk factors and make investment decisions prudently. At the same time, it is recommended that the company further improve its securities investment risk control system, enhance information disclosure, and effectively protect the rights and interests of medium and small investors.

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[0] Jinling API - Company Overview and Financial Data of Leo Group Co., Ltd. (https://api.jinling.com/data)

[1] China Economic Net - Leo Group Co., Ltd. Plans RMB 3 Billion for Securities Investment, Suffered Losses in 3 Out of 4 Years; Actual Controller Received Regulatory Letter in 2023 (http://finance.ce.cn/stock/gsgdbd/202508/t20250811_2437725.shtml)

[2] Leo Group Co., Ltd. Announcement - Announcement on Suspension of the Company’s Stock Trading (https://pdf.dfcfw.com/pdf/H2_AN202601151817070577_1.pdf)

[3] Northeast Securities - Risk Warning Announcement on Securities Trading of Leo Group Co., Ltd. (002131) (https://www.nesc.cn/main/a/20260116/82178.shtml)

[4] Nanjing Securities - Reminder on Trading Risk of Leo Group Co., Ltd. (002131) (https://www.njzq.com.cn/njzq/xwzx/xwzx_template.jsp?docId=9581002)