Analysis of Operating Cash Flow and Earnings Quality of Yanshan Technology (002195)

Based on the collected financial data, I will conduct a systematic analysis of Yanshan Technology’s operating cash flow and earnings quality.

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Based on public financial data, the net cash flow from operating activities of Yanshan Technology has shown a continuous downward trend in recent years:

Reporting Period	Net Cash Flow from Operating Activities	Net Profit	Divergence Level
Full Year 2024	-RMB 199 million	RMB 32.46 million	Severe Divergence
First Three Quarters of 2024	-RMB 68.56 million	RMB 42.35 million	Divergence
Q1 2025	-RMB 103 million	RMB 31.56 million	Severe Divergence
Q2 2025	-RMB 120 million	RMB 67.11 million	Severe Divergence
Q3 2025	-RMB 201 million	RMB 183 million	Extreme Divergence

The data shows that there is a

between the company’s operating cash flow and net profit, and the degree of divergence further worsened in 2025. In the third quarter, net profit surged 330.92% year-on-year to RMB 183 million, while operating cash flow deteriorated to -RMB 201 million. This pattern of “high profit, low cash flow” raises deep concerns about earnings quality [1][2].

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According to the 2024 third quarterly report, the company’s cash inflow from operating activities has dropped significantly:

Item	Jan-Sep 2024	Jan-Sep 2023	Change Rate
Cash received from sales of goods and services	RMB 404 million	RMB 426 million	-5.11%
Cash received from interest, handling fees and commissions	RMB 19.74 million	RMB 51.62 million	-61.76%
Other cash received from operating activities	RMB 62.51 million	RMB 187 million	-66.63%

Main issues include:

• Shrinkage of non-standard investment business
  : Cash received from interest dropped sharply by 61.76%, reflecting the contraction of the company’s factoring and other quasi-financial business scale
• Reduced deposit interest
  : Other operating cash inflow decreased by 66.63%, indicating a sharp drop in cash management income
• Growing pains of business structure transformation
  : Internet information service business accounts for 94.58% of revenue, but the cash recovery cycle of this business may be prolonged [2]

Item	Jan-Sep 2024	Jan-Sep 2023	Change Rate
Cash paid for goods and services	RMB 267 million	RMB 216 million	+23.57%
Cash paid to and on behalf of employees	RMB 243 million	RMB 156 million	+55.39%
Various taxes and fees paid	RMB 58.10 million	RMB 28.32 million	+105.12%
Other cash paid for operating activities	RMB 62.60 million	RMB 191 million	-67.21%

Key issues include:

• Surge in R&D investment
  : R&D expenses are capitalized and included in costs. In 2024, R&D investment accounted for
  36.09%
  of operating revenue, an increase of 20.34 percentage points compared to the previous year
• Rising employee costs
  : Cash paid to employees increased by 55.39%, mainly due to the increase in the number of employees from the merger of subsidiaries such as Nu11max
• Expansion of R&D personnel
  : After the capital increase and acquisition of controlling stake in Nu11max (Cayman) Limited, the scale of the R&D team expanded significantly [1][2]

The company’s 2024 annual report clearly states: “There is a certain difference between the net cash flow generated from operating activities and the net profit of the current year, mainly due to the fact that the cash flow from wealth management income received by the company during the reporting period is included in the cash flow from investing activities.”

This reveals a core issue:

, leading to a serious disconnect between “paper profits” and “actual cash generation capacity” [2].

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Profit Components	2024	2023	Change Explanation
Operating Revenue	RMB 662 million	RMB 565 million	+17.17%
Net Profit Attributable to Shareholders of Listed Company	RMB 32.46 million	RMB 332 million	-90.22%
Equity Incentive Expenses	RMB 64 million	-	New Cost
Fair Value Change Loss	RMB 63.73 million	-	Decline in Innomed Healthcare stock

In 2024, net profit decreased by 90.22% year-on-year, mainly impacted by the following non-recurring factors:

• Equity incentive expenses
  : RMB 64 million (recognized due to the implementation of the 2023 employee stock ownership plan)
• Fair value loss
  : RMB 63.73 million (stock price fluctuation of Innomed Healthcare passively held due to pledge transfer)
• Loss in artificial intelligence segment
  : RMB 68.09 million in R&D and other expenses [1][2]

Indicator	Q3 2025	Q3 2024	YoY Change
Operating Cash Flow Per Share (RMB)	-0.0354	-0.01	-254%
Net Profit Margin	39.14%	8.77%	+345.38%
Return on Equity (ROE)	1.83%	0.43%	+325.58%

Although net profit margin and ROE improved significantly in 2025,

, indicating that profit growth has not been converted into actual cash inflows, and earnings quality continues to be under pressure [1].

According to the revenue composition in the 2025 semi-annual report:

Business Segment	Operating Revenue	Proportion	Gross Profit Margin
Internet Business	RMB 300 million	94.58%	High
Artificial Intelligence Business	RMB 9.523 million	3.01%	Loss-making
Other Business	RMB 7.65 million	2.41%	-

: The internet business accounts for over 94% of total revenue, while the artificial intelligence business accounts for only 3% and is in a loss-making state. The lack of business diversification means that if there is a problem with the cash flow of the internet business, the company’s overall liquidity will face greater pressure [1].

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Risk Dimension	Risk Level	Assessment Basis
Sustainability of Operating Cash Flow	High Risk	Negative for 8 consecutive quarters with no improvement trend
Matching Degree of Profit and Cash Flow	High Risk	Q3 profit of RMB 183 million vs. cash flow of -RMB 201 million
Adequacy of Cash Reserves	Medium	RMB 1.625 billion in monetary funds, liquidity is acceptable
Stability of Business Structure	Medium-High Risk	Single business dependence exceeds 94%

Although the company’s current ratio (28.66) and quick ratio (28.59) are at high levels, indicating no short-term solvency issues,

. In 2024, the net increase in cash and cash equivalents was -RMB 438 million. If the trend continues, the company may face:

• Being forced to use cash flow from investing activities to supplement operating capital
• Reducing R&D investment or delaying project investment
• Facing financing pressure [2]

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The negative operating cash flow of Yanshan Technology indeed reflects

, which are specifically manifested as:

• Serious insufficiency in cash generation capacity
  : Negative operating cash flow for multiple consecutive periods, with the degree of divergence from net profit continuing to expand
• Non-cash-based profit sources
  : A significant portion of profit comes from wealth management investment income rather than cash generation from core business
• High cost of business transformation
  : Huge R&D investment in the artificial intelligence segment but no positive cash flow contribution yet
• Accumulation of structural risks
  : Extremely high dependence on a single business, slow progress in business diversification

Investors need to pay attention to the following risks:

• If operating cash flow continues to deteriorate, it may affect the company’s R&D investment and business expansion plans
• Slower-than-expected development of the artificial intelligence industry may lead to larger-scale impairment losses
• After the contraction of quasi-financial business, new profit growth drivers have not yet formed stable cash flow contributions
• Expenses such as equity incentives may continue to erode profits

For such companies with “high profit, low cash flow”, it is recommended that investors:

• Focus on marginal changes in operating cash flow rather than simply chasing net profit growth
• Evaluate the company’s progress in business diversification and the commercialization prospects of the artificial intelligence segment
• Pay attention to the specific measures and implementation effects of management’s cash flow improvement efforts
• Include cash flow status in the sensitivity analysis of valuation models

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[1] Sohu Securities - Yanshan Technology Company Information and Financial Indicators (https://q.stock.sohu.com/cn/002195/)

[2] Yanshan Technology 2024 Annual Report and Quarterly Reports (http://static.cninfo.com.cn/finalpage/)

[3] Eastmoney - Yanshan Technology Stock Quotes and F10 Profile (https://emweb.securities.eastmoney.com/)