Leishen Technology disclosed its first-half 2026 results on August 10, showing a 41.27% year-on-year increase in net profit attributable to shareholders to approximately 20.25 million yuan, with revenue rising 4.10% to 1.445 billion yuan. The company's core profit figure, excluding non-recurring items, also grew by 47.10% to 19.51 million yuan. While the profit growth was impressive, net cash flow from operating activities turned sharply negative, reaching -136 million yuan, a significant 379.94% decline from the prior year, highlighting underlying pressures on earnings quality and operational efficiency.

From a business segment perspective, revenue from the company's traditional core business, notebook computers, fell 26.24% to 647 million yuan, decreasing its share of total revenue. Management attributed this to the ongoing demand adjustment pressures facing the PC industry, with global shipments continuing to decline. However, revenue from the desktop and server business surged 44.60% to 231 million yuan, while peripheral and other business revenue rose 31.82% to 238 million yuan, partially offsetting the weakness in the notebook segment. Notably, the information technology application innovation (Xinchuang) business performed strongly, generating approximately 180 million yuan in revenue in the first half, becoming a key growth driver.

Behind this shift in business mix, inventory risks are accumulating. As of the end of the first half, the company's inventory balance had surged to 931 million yuan, a significant increase from the start of the year. The inventory turnover rate correspondingly dropped from 2.12 times in the same period last year to 1.57 times. The company explained that the increase was mainly due to stockpiling of core raw materials such as CPUs, memory, and hard drives. Yet, with notebook revenue falling nearly 30%, the sharp rise in inventory levels is concerning. If downstream demand recovery falls short of expectations, the risk of inventory write-downs could increase.

The cash flow situation is a more critical signal. The negative operating cash flow of 136 million yuan in the first half sharply contrasts with the positive net profit growth. The company attributed this to a significant increase in payments to suppliers for core raw material stockpiling. Concurrently, short-term borrowings increased to 703 million yuan. As of the end of the first half, the company's asset-liability ratio rose to 57.09%, a 7.7 percentage point increase from 49.39% at the end of last year.

High customer concentration also presents a collection risk. The top five customers accounted for 46.84% of total revenue in the first half, while their share of the company's year-end accounts receivable was as high as 80.89%, indicating a high degree of customer dependence. Although the total accounts receivable decreased from the beginning of the year, this concentrated structure means that any change in the procurement pace or payment cycle of major customers could directly impact the company's cash flow.

The contraction of the overseas business is also noteworthy. Overseas sales revenue in the first half fell 31.84% year-on-year to 217 million yuan. The company had previously adopted a localization strategy to promote its brand overseas, but fluctuations in overseas market demand and intensified competition have weighed on short-term revenue. Meanwhile, financial expenses decreased significantly due to the appreciation of the Chinese yuan against the US dollar and lower exchange losses. If the exchange rate reverses in the future, the profit margin of the overseas business could face renewed pressure.