The "Twin Giants" of China's A-share industrial drones are expected to have impressive performance in 2025: their fourth-quarter results all surged, but their operating cash flow is "bleeding"

Ask AI · Why Do Cash Flows Show Net Outflows Despite Strong Performance Growth in Industrial Drone Giants?

By Reporter: Xu Shuai Edited by: Wei Wenyu

As Zongheng Co., Ltd. disclosed its 2025 annual report on the evening of March 31, the performance results of two leading industrial drone companies—Zongheng Co. (SH688070, stock price 46.94 yuan, market value 4.11B yuan) and China Drones (SH688297, stock price 49.80 yuan, market value 33.61B yuan)—have been released.

The “Daily Economic News” reporter (hereinafter “the reporter”) noted that both companies achieved significant year-over-year growth in revenue and net profit in 2025, with Zongheng successfully turning losses into profits, and China Drones recording over 3 billion yuan in revenue and more than doubling net profit.

It is worth mentioning that both Zongheng Co. and China Drones experienced concentrated performance surges in the fourth quarter of last year. However, behind this high growth, both companies’ operating cash flows showed net outflows. This reflects that while the industry is expanding rapidly, receivables collection has not kept pace.

Revenue and net profit surged, supported by structural factors

The annual report shows that Zongheng Co. achieved operating revenue of 620 million yuan in 2025, a 30.94% increase year-over-year; net profit attributable to shareholders of the listed company was 10.68 million yuan, turning from loss to profit.

Image source: Zongheng Co. 2025 Annual Report

Earlier, on March 16, another industrial drone company, China Drones, also delivered impressive results: revenue of 3.02B yuan in 2025, up 340.11%; net profit attributable to shareholders was 88.57 million yuan, up 264.28%.

Image source: China Drones 2025 Annual Report

The reporter’s review found that, besides the simultaneous increase in revenue and profit, the change in Zongheng’s gross profit margin is also noteworthy. In 2025, Zongheng’s comprehensive gross profit margin was 49.91%, an increase of 7.71 percentage points year-over-year. This improvement mainly stems from product structure optimization, with high-margin “无人值守系统” (Unmanned Monitoring Systems) revenue accounting for 26.8% of total revenue, up from 5.81% the previous year. Additionally, growth in overseas training services and specialized aviation services also positively impacted gross margin.

Meanwhile, China Drones’ substantial revenue growth and significant changes in financial structure also indicate that the industry is in a rapid expansion phase. During the reporting period, the company’s drone system product and service revenue surged 340.11% year-over-year, mainly due to a significant increase in product delivery volume compared to the previous year.

In response, Li Xiaoyan, Secretary of the Board of Zongheng Co., told the reporter that the increase in gross profit margin was mainly due to two factors: first, the rapid development of the low-altitude digital economy market; second, the company’s ongoing deepening of integrated solutions, increasing the proportion of software and overseas sales, and strengthening cost and expense control.

Performance exploded in Q4 2025, but cash flow “bled” out

The reporter compared the quarterly financial data of the two companies and found that both experienced concentrated performance surges in the fourth quarter of 2025.

Zongheng’s quarterly data shows that in Q4 2025, the company achieved operating revenue of 299 million yuan, nearly half of the total annual revenue; net profit attributable to shareholders was 30.49 million yuan, successfully reversing the loss in the first half of the year.

Image source: Zongheng Co. 2025 Annual Report

China Drones’ Q4 2025 revenue was 1.47B yuan, nearly reaching the total of the first three quarters combined; its net profit attributable to shareholders in Q4 was 54.73 million yuan, also the main contributor to the annual performance.

Image source: China Drones 2025 Annual Report

Zongheng stated that its end customers, including state-owned enterprises, government agencies, public institutions, and universities, typically formulate procurement plans in the first half of the year, followed by approval, bidding, and project implementation, with concentrated delivery and acceptance at year-end. Based on this pattern, the company’s sales revenue shows seasonal fluctuations.

Despite the performance boom driven by concentrated deliveries and acceptance in Q4 2025, financial data reveals a commonality: both companies experienced net outflows in the core financial indicator “net cash flow from operating activities.”

Zongheng’s net cash flow from operating activities last year dropped significantly to -68.47 million yuan. The company explained that the expansion of operational scale led to a large increase in cash outflows from operating activities, while receivables collection did not increase proportionally.

China Drones’ net cash flow from operating activities last year was -1.39B yuan, with accounts receivable also increasing sharply. The company stated that this was affected by adjustments in customer payment arrangements, and that the company continued to increase inventory investment to ensure timely delivery of subsequent products, both contributing to the decline in net cash flow from operating activities compared to the previous year.

Both companies also mentioned their operational plans for this year. Zongheng said it will continue to deepen its presence in domestic and international industry markets, boost low-altitude digital economy applications in county-level government governance and vertical industries, and focus on the implementation and delivery of key projects like Zongheng Yunlong.

China Drones also stated it will actively explore new fields, target new users, and develop new products, accelerating the shift from “product competition” to “ecosystem competition” in the civilian market. It aims to build a platform-based, scenario-oriented integrated service system to enhance overall market responsiveness and operational capacity.

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Daily Economic News