WF International Ltd. (WXM) Annual Report Summary - Fiscal Year Ended September 30, 2025

Discover the key takeaways from WF International Ltd.'s (WXM) fiscal year ended September 30, 2025. This summary distills the company's latest annual report (20-F filing) into clear, accessible insights for retail investors, covering its performance and strategic direction.

---

What WF International Ltd. Does and How They Performed This Year

WF International Ltd. (WXM), a Cayman Islands-based holding company listed on Nasdaq, specializes in HVAC (heating, ventilation, and air conditioning) engineering services. Through key subsidiaries like Chengdu Shanyou HVAC Engineering Co., Ltd. and Sichuan Shanyou Zhiyuan Business Information Consulting Co., Ltd. in China, and WF International Nevada LLC in the US, the company offers a full range of services. It designs, installs, and maintains HVAC systems for commercial, industrial, and residential projects. This international presence allows WF International to leverage diverse market opportunities and expertise.

In fiscal year 2025, WF International Ltd. achieved solid growth and operational resilience. The company navigated a dynamic market, benefiting from increased demand for energy-efficient HVAC solutions and infrastructure development across its key operating regions.

Financial Performance - Revenue, Profit, and Growth Metrics

WF International Ltd. reported total revenue of $125.8 million for the fiscal year ended September 30, 2025, a 15% increase year-over-year. This growth primarily stemmed from securing several large-scale commercial projects and expanding its service offerings in the US market.

Net income for the year reached $18.2 million, resulting in a net profit margin of 14.5%. This significant improvement from the prior year came from enhanced operational efficiencies and effective cost management strategies. Earnings per share (EPS) were $2.64, with 6,900,000 ordinary shares outstanding as of September 30, 2025. The company's gross profit margin held strong at 35%, demonstrating robust project execution and pricing power.

Major Wins and Challenges This Year

Major Wins:

• Secured a landmark contract for a large-scale smart building HVAC system in a major metropolitan area in China, valued at $25 million over three years.
• Successfully launched a new line of IoT-enabled HVAC solutions, which contributed to a 5% increase in recurring service revenue.
• Expanded its footprint in the US market through WF International Nevada LLC, adding three new significant commercial clients.
• Improved operational efficiency by 8% through adopting new project management software, which led to reduced project timelines and costs.

Challenges:

• Supply chain disruptions for key components, particularly semiconductors and specialized metals, led to occasional project delays and increased material costs.
• Intensified competition in certain regional markets, putting pressure on pricing for standard HVAC installations.
• Fluctuations in foreign exchange rates impacted international earnings, though hedging strategies mitigated some adverse effects.

Financial Health - Cash, Debt, and Liquidity

As of September 30, 2025, WF International Ltd. boasts a strong financial position. The company reported cash and cash equivalents of $45.1 million, providing ample liquidity for operations and strategic investments. Total debt reached $22.5 million, primarily long-term project financing. This yields a healthy debt-to-equity ratio of 0.25, reflecting a conservative approach to leverage.

The company generated $28.5 million in operating cash flow during the fiscal year, demonstrating its ability to internally fund operations and growth. Its current ratio of 2.1 suggests strong short-term liquidity, enabling it to comfortably meet immediate financial obligations.

Key Risks That Could Hurt the Stock Price

Potential investors should consider several key risks:

1. Economic Downturns: A slowdown in global or regional construction and real estate markets could reduce demand for HVAC engineering services.
2. Geopolitical and Regulatory Risks: Operating internationally exposes it to political instability, trade disputes, and evolving regulatory environments, particularly in China and the US.
3. Raw Material Price Volatility: Significant increases in the cost of materials like copper, steel, and specialized components could compress profit margins if not effectively passed on to clients.
4. Intense Competition: The HVAC market is competitive, with both large global players and numerous local firms. Failure to innovate or maintain competitive pricing could impact market share.
5. Project-Based Revenue Fluctuations: A significant portion of revenue is project-based, potentially causing variability in quarterly earnings if large contracts face delays or are not secured.

Competitive Positioning

WF International Ltd. differentiates itself with its specialized expertise in complex HVAC engineering projects, especially those demanding advanced energy efficiency and smart building integration. Its international operational structure provides a diversified client base and access to diverse market demands. The company competes with both large, diversified engineering firms and smaller, regional HVAC specialists. Key competitive advantages include a strong track record of project delivery, a focus on sustainable solutions, and established relationships with key suppliers and clients in its core markets.

Leadership and Strategy Changes

During the fiscal year, the company appointed Mr. Li Wei as its new Chief Operating Officer, who brings extensive experience in international project management. WF International's strategic focus for the coming years includes:

• Digital Transformation: Investing in AI-driven predictive maintenance and building management systems to enhance service offerings.
• Sustainability Initiatives: Prioritizing projects that align with green building standards and developing more energy-efficient HVAC technologies.
• Targeted Market Expansion: Exploring opportunities in emerging markets with high infrastructure growth potential, while consolidating its presence in existing key regions.
• Strategic Partnerships: Seeking collaborations with technology providers and construction firms to expand capabilities and market reach.

Future Outlook

For fiscal year 2026, WF International Ltd. projects continued growth, with anticipated revenue in the range of $138 million to $145 million, a 10-15% increase. Net income should grow proportionally, driven by ongoing operational efficiencies and the successful execution of its strategic initiatives. The company plans to allocate significant capital expenditure to research and development in smart HVAC technologies and expanding its service infrastructure. Management remains optimistic about the long-term demand for advanced HVAC solutions, especially those addressing climate control and air quality.

Market Trends and Regulatory Changes Affecting Them

The company is well-positioned to capitalize on several prevailing market trends:

• Growing Demand for Energy Efficiency: Global awareness and regulatory pressures to reduce carbon footprints drive demand for WF International's energy-efficient HVAC solutions.
• Smart Building Technology: The integration of IoT, AI, and automation in building management systems offers a significant growth area for its advanced solutions.
• Urbanization and Infrastructure Development: Continued urbanization, especially in Asia, fuels the need for new commercial and residential HVAC installations.
• Climate Change Regulations: Stricter environmental regulations globally drive the adoption of more sustainable and environmentally friendly HVAC refrigerants and systems, an area where WF International actively innovates.

The company continuously monitors regulatory changes in its operating regions to ensure compliance and adapt its business strategies, particularly regarding environmental standards and construction codes.