Revenue side: Sales growth cannot offset price decline, strategic price reduction for market exchange

In depth analysis of the reasons for Tianyue Advanced's performance loss in 2025, the revenue side is the first to face difficulties. From the information disclosed by the company itself, the sales of substrate products in 2025 are actually showing a growth trend, which indicates that Tianyue Advanced has not made any achievements in market expansion, and the products still have a certain demand foundation in the market. However, in the competitive market environment, the growth of sales has not been converted into revenue growth. At its root, the significant decrease in product prices has become the biggest obstacle. The fierce competition in the domestic silicon carbide substrate market has reached a white hot stage by 2025. With numerous companies entering the silicon carbide field, the supply of substrate products in the market has surged. In order to compete for limited market share, companies have to engage in fierce price wars. As an important participant in the industry, Tianyue Advanced is also unable to stand alone. In order to avoid being eliminated by the market, the company has taken the initiative to adopt a strategic adjustment of "exchanging price for market". The core of this strategy is to expand market share by lowering product prices and attracting more customers. In the short term, this approach does help increase product sales and give Tianyue Advanced a foothold in the market share competition. However, in terms of long-term revenue performance, it has brought about significant negative impacts. The significant decrease in the average price of products has resulted in a decrease in revenue per product sold, and even with an increase in sales, the overall revenue scale has inevitably experienced a year-on-year decline. This situation of "increasing income without increasing profits" has put Tianyue Advanced in a dilemma, struggling to balance market share and revenue growth. Although in the global conductive silicon carbide substrate market, Tianyue Advanced has maintained its market share in the top three by 2024 with its own technological strength and market accumulation, which undoubtedly affirms the company's product quality and market recognition. However, under the impact of the price war, high market share has not been transformed into substantial profit returns. The expansion of market share is mostly achieved through low price strategies, which greatly reduces the company's profitability on the revenue side and lays hidden dangers for performance losses in 2025.

Cost side: Double increase in R&D and sales expenses, squeezing profit margins

In addition to the difficulties on the revenue side, the pressure on the cost side is also constantly intensifying, further squeezing Tianyue Advanced's profit margin. In the technology intensive industry of silicon carbide, technological innovation is the core element for enterprises to maintain competitiveness. In order to maintain a leading technological position in the industry, Tianyue Advanced has continuously increased its research and development investment, especially in the development of 8-inch and 12 inch large-sized substrates and new processes, investing a large amount of manpower, material resources, and financial resources. According to the data for the first half of 2025, the company's research and development expenses reached 75.8467 million yuan, an increase of 34.93% year-on-year, and the proportion of revenue also increased from the previous to 9.55%. The increase in this proportion intuitively reflects the company's emphasis on research and development, as well as the growth rate of research and development investment. Large scale substrate technology represents the future development direction of the silicon carbide substrate industry. Compared to traditional small-sized substrates, large-sized substrates of 8 inches and 12 inches have significant advantages in production efficiency, cost control, and application field expansion. However, the development of large-scale substrate technology is not achieved overnight. It requires overcoming a series of technical challenges, such as controlling the uniformity of crystal growth and reducing defect density. Every technological breakthrough requires a large amount of capital and time investment, and Tianyue Advanced is willing to invest heavily in research and development in order to seize the opportunity in this field, which undoubtedly increases the company's cost burden in the short term. In terms of new process research and development, the company also spares no effort. The research and development of new processes aims to improve product quality, reduce production costs, and thereby enhance the competitiveness of products in the market. However, there are many uncertainties involved in the development and mass production of new processes, and continuous financial support is required. Although Tianyue Advanced's investment in this area may bring technological and cost advantages in the long run, it has become a "devourer" of profits in the short term. In addition to the increase in research and development expenses, the simultaneous rise in sales expenses has also added to the cost pressure of Tianyue Advanced. In order to expand the market share of large-sized products in new application markets, the company needs to carry out a large number of marketing activities. This includes participating in various industry exhibitions, holding product promotion events, investing in advertising and promotional expenses, etc. Every marketing promotion activity requires a significant amount of funds, and these expenses are ultimately included in sales expenses. In the new application market, customers have relatively low awareness and acceptance of large-sized silicon carbide substrates. The company needs to invest more resources in market education and customer cultivation, which further drives up sales expenses. The increase in sales expenses, although helpful in expanding the market to some extent, has also compressed the company's profit margin in the short term, creating a dual pressure with the growth of research and development expenses, making it difficult for Tianyue Advanced to control costs.

Additional impact: tax payment supplement+exchange losses add insult to injury

While facing the dual dilemma of declining revenue and rising costs in its main business, Tianyue Advanced has also suffered additional impacts from non operational factors, which are like adding insult to injury and further expanding the company's performance losses. Tax arrears have become an important non operational factor affecting company performance. The company discovered issues during its self inspection of tax related matters in 2019-2020, requiring a total of 82.97 million yuan in additional income tax and late fees to be paid, all of which will be included in the current period's profit and loss for 2025. This supplementary payment is undoubtedly a heavy burden for Tianyue Advanced, which already has meager profits. It directly reduced the company's net profit in 2025, making the company's performance on financial statements even worse. Tax arrears are not caused by poor company management, but by historical tax issues. However, they have had a negative impact on the company's current performance, causing the company to be distracted from dealing with this sudden financial expenditure while dealing with the main business difficulties. The fluctuation of the RMB exchange rate has also brought considerable exchange losses to Tianyue Advanced. With the continuous expansion of the company's business, especially in the international market, the company's foreign currency business is also increasing. In 2025, there was a significant fluctuation in the RMB exchange rate, which resulted in exchange losses for the company when settling foreign currency. Although exchange losses are not directly related to the company's main business, they have a tangible impact on the company's financial condition. Every exchange rate fluctuation may lead to a decrease in the company's profit on financial statements, and in 2025, this exchange loss will further exacerbate the company's performance losses. The decrease in product prices has also led to an increase in asset impairment provisions. Due to the continuous decline in the price of silicon carbide substrates, the value of substrate products in the company's inventory has also decreased. In order to accurately reflect the true value of assets, the company has to make provisions for asset impairment in accordance with accounting standards. The increase in provision for asset impairment means a decrease in the book value of the company's assets and also a reduction in the company's profits. In 2025, this factor, combined with non operational factors such as tax arrears and exchange losses, has had a serious impact on Tianyue Advanced's performance, further expanding the company's losses and posing even more severe challenges in market competition.