Julong Holding Ltd Annual Report - A Deep Dive for Investors

Unlock the insights from Julong Holding Ltd's latest 20-F annual report. This summary cuts through the technical jargon, offering investors a clear, concise picture of the company's performance, strategy, and what it means for your investment.

Business Overview: Julong Holding Ltd, a Cayman Islands-based company with core operations in Beijing, China, specializes in intelligent project engineering solutions. The company designs and implements smart systems for buildings and infrastructure, provides ongoing operation and maintenance (O&M) services, and sells specialized equipment and materials. Julong Holding's shares trade on the Nasdaq Stock Market under the ticker JLHL.

Financial Performance: For the fiscal year ended September 30, 2023, Julong Holding achieved robust financial results. The company increased revenue by 15%, reaching $150 million, up from $130 million in the prior year. Strong demand for intelligent engineering solutions, an expanding portfolio of O&M contracts, and new intelligent building projects drove this growth. Gross profit margin remained stable at approximately 30%. Net income rose by 10% to $15 million, translating to an earnings per share of $0.70. Efficient project execution, effective cost management, and diversified revenue streams across engineering, O&M, and equipment sales contributed to this strong outcome.

Key Achievements and Challenges: Big Wins: Julong Holding secured two major smart city infrastructure projects in Tier 2 Chinese cities, valued at over $30 million combined. These wins showcase the company's expertise in large-scale, complex solutions. The company also successfully renewed 90% of its existing O&M contracts, demonstrating strong client satisfaction and a reliable source of recurring revenue. Tough Challenges: The company navigated challenges from rising material costs and supply chain disruptions, which pressured project margins. Increased competition in the intelligent engineering sector also required greater investment in research and development (R&D) to maintain its technological edge.

Financial Health (Cash, Debt, Liquidity): As of September 30, 2023, Julong Holding maintained a healthy cash balance of $25 million. Total debt stood at $40 million, primarily from a $30 million Loan Facility Agreement the company secured in early 2023. This facility, featuring a competitive interest rate of 5% and a 5-year term, provides working capital and supports project expansion. The company's debt-to-equity ratio of 0.4x indicates a manageable leverage position, and current assets comfortably cover current liabilities, demonstrating strong liquidity.

Risk Factors: Several significant risks exist:

• Customer Concentration: The top three customers (Customer A, B, and C) account for approximately 45% of total revenue.
• Supplier Concentration: Five key suppliers (A, B, C, D, E) provide 60% of critical materials. Any disruption or loss of these key partners could materially impact Julong's operations and financial results. The company actively works to diversify its customer base and explore alternative suppliers to mitigate these risks.

Other key risks include:

• Market Competition: Julong operates in a highly competitive and evolving market, facing rapid technological changes, new entrants, and pricing pressures.
• Economic Downturns: Economic slowdowns, particularly in China, could reduce demand for the company's services.
• Regulatory Changes: Evolving regulations concerning data privacy, cybersecurity, or environmental standards in the intelligent engineering sector could increase compliance costs or restrict operations.
• China-Specific Uncertainties: As a company with primary operations in China, Julong is subject to political, economic, and regulatory uncertainties inherent in that jurisdiction, including potential changes in government policies, trade relations, and foreign exchange controls.
• "High and New Technology Enterprise" Status: Maintaining this critical status ensures tax benefits. Failure to meet ongoing criteria could adversely affect profitability.
• Intellectual Property Protection: Protecting proprietary software and technologies in China remains a vital concern.
• Operational Risks: These include successfully executing complex projects, managing project delays or cost overruns, and attracting and retaining skilled personnel.

Competitive Positioning: Julong Holding operates in a competitive Chinese market. It differentiates itself through its proprietary intelligent project management software and a strong track record in complex infrastructure projects. The company emphasizes its focus on high-value, customized solutions rather than competing solely on price. Its "High and New Technology Enterprise" status also provides a competitive edge through tax incentives.

Leadership and Strategy: Under the continued leadership of Chairman and CEO Jiaqi Hu, Julong Holding's core strategy focuses on organic growth within its intelligent project engineering, O&M, and equipment sales segments. The company aims to expand its geographical footprint within China, particularly in emerging smart city initiatives, and invest in R&D for AI-powered smart solutions to enhance its service offerings and maintain technological leadership. The company reported no major leadership changes.

Future Outlook: Looking ahead, Julong Holding projects continued growth, with revenue forecasted to reach $175 million in FY2024 and $200 million in FY2025. An expanding project pipeline and increased demand for smart infrastructure will drive this growth. The company plans to allocate capital towards technology upgrades and talent acquisition. As of September 30, 2025, the company expects to have 21,448,632 ordinary shares outstanding (11,448,632 Class A and 10,000,000 Class B shares). Class B shares typically carry enhanced voting rights, consolidating control for certain shareholders.

Market Trends and Regulations: Julong Holding's "High and New Technology Enterprise" status in China grants it a reduced corporate income tax rate of 15% (compared to the standard 25%) and eligibility for various government subsidies and R&D grants, significantly boosting profitability. However, this status requires ongoing innovation and meeting specific criteria, posing a risk if not maintained. The company also benefits from China's national push for smart city development and digital transformation of infrastructure, presenting a robust market tailwind for its specialized services.

In summary, Julong Holding Ltd demonstrated solid financial performance in FY2023, driven by its specialized intelligent engineering solutions. While navigating concentration risks and competitive pressures, its strategic focus on innovation, strong financial position, and favorable government support in China position it for continued growth in the evolving smart infrastructure market.