Meizhi Co., Ltd. expects to have negative net assets in 2025 and may be designated as *ST

Meizhi Co., Ltd. (SZ002856, stock price 13.40 RMB, market value 1.813 billion RMB) released a revised forecast for 2025 performance. The company originally expected a net profit of -113 million to -75 million RMB for 2025, revised to -198 million to -132 million RMB, compared to -257 million RMB in the same period last year; the original estimate for non-recurring net profit was -95.8237 million to -58.8237 million RMB, revised to -214 million to -148 million RMB, compared to -282 million RMB last year; the original expected basic earnings per share was -0.83 to -0.44 RMB, revised to -1.46 to -0.98 RMB.

Image source: Announcement of Meizhi Co., Ltd. (002856)

Meizhi also stated that the latest estimate of total equity attributable to the parent company for 2025 is between -75 million and -40 million RMB, compared to approximately 106 million RMB at the end of last year. According to relevant regulations of the Shenzhen Stock Exchange, these matters will trigger a delisting risk warning.

After consultation with auditors, three major financial adjustments were made

The announcement shows that this downward revision of performance is based on preliminary calculations by Meizhi Co., Ltd. As of today, the company’s 2025 annual report audit is still ongoing. However, the company has pre-communicated with its annual audit accounting firm regarding the revision of performance, and there are no major disagreements between the two parties on this matter. The final financial data will be based on the officially disclosed 2025 annual report. The 2025 annual report is expected to be disclosed by April 29, 2026.

Regarding the reasons for the significant downward revision, Meizhi stated that during the progress of the 2025 financial audit, after full communication with the annual audit firm and based on prudence and professional judgment, combined with the company’s current operating conditions and future profit expectations, the company has written down its previously recognized deferred tax assets.

Additionally, Meizhi re-evaluated its investment value based on the operating conditions of its equity subsidiaries, industry environment, and future earnings prospects. The company also thoroughly reviewed and assessed accounts receivable collection status, customer credit risks, billing cycle structure, as well as the performance risk, settlement progress, and recoverable amount of long-term unbilled projects, prudently increasing provisions for impairment of accounts receivable and contract assets.

“The above matters will lead to an estimated negative value of the equity attributable to the parent company at the end of the period,” said Meizhi in the announcement. Based on preliminary estimates, the company expects its net assets at the end of 2025 to be negative. According to relevant regulations of the Shenzhen Stock Exchange, if the company’s net assets attributable to the parent company at the end of 2025 are negative, the stock will be subject to delisting risk warning after the 2025 annual report is disclosed (the stock abbreviation will be prefixed with “*ST”).

To fully alert investors of these risks, Meizhi will disclose at least two more risk warning announcements before releasing the 2025 annual report, in accordance with relevant regulations.

The company’s net profit attributable to the parent and non-recurring net profit have been negative for four consecutive years

According to Meizhi’s 2025 semi-annual report, the company is a specialized building decoration design and construction enterprise integrating architectural decoration, curtain walls, mechanical and electrical engineering, electronics and intelligent systems, equipment installation, fire facilities, and environmental protection projects. Its main business involves design and construction of building decoration projects, serving large clients such as transportation agencies, cultural industries, financial real estate, government agencies, large general contractors, and high-end hotel groups, providing comprehensive cross-field engineering services. The projects mainly include public building decoration, residential fine decoration, and curtain wall decoration.

Financial reports show that in recent years, the building decoration industry, as a downstream segment of real estate, has been deeply impacted by ongoing adjustments in the property market. Declines in new home sales and construction area directly led to a shrinking number of new renovation projects, longer payment cycles, and credit defaults by some real estate clients, putting pressure on the cash flow and profits of decoration companies that rely heavily on project settlements.

According to Wind Financial Terminal, from 2021 to 2024, Meizhi’s net profit attributable to the parent and non-recurring net profit have been negative for four consecutive years.

Image source: Wind

A reporter from Daily Economic News noted that many listed companies in the A-share decoration and renovation industry are seeking solutions. On March 16, Zhongtian Decoration (SZ002989) announced plans to sell some assets, including residential units, apartments, shops, and parking spaces, with a total transaction amount not exceeding 400 million RMB. The purpose of the asset sale is to activate existing assets, improve operational efficiency, and enhance economic benefits.

Cover image source: Meiri Media Library

(Edited by Zhao Yanping HF094)

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