Driven by the storage boom cycle, Longsys’ Q1 revenue increased by 133% year-on-year, with net profit of 3.86 billion yuan turning from loss to profit, marking the strongest single quarter since its listing｜Financial Report Insights

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The storage chip industry cycle is materializing with unexpected intensity, and Longsys has delivered its strongest quarterly report since its listing.

According to the company's first quarter 2026 report, operating revenue reached 9.909 billion yuan, up 132.79% year-on-year; net profit attributable to shareholders was 3.862 billion yuan, a surge of 2644.05% year-on-year; basic earnings per share were 9.21 yuan, a qualitative leap from the loss of 0.37 yuan in the same period last year.

Profit quality also draws attention. Net profit excluding non-recurring gains and losses was 3.943 billion yuan, a year-on-year increase of 2051.40%, and higher than the attributable net profit, showing the core business profitability is more solid. The weighted average return on net assets reached 39.40%, up more than 41 percentage points year-on-year.

From the external environment, explosive AI demand is driving the global storage semiconductor industry to maintain high prosperity. The company has seized the opportunity to renew LTAs and MOUs with multiple original manufacturers, deeply locking in core supply chain resources. On the technology side, flagship products such as UFS4.1 have been shipped at scale; ePOP4x has entered the supply chain of a leading North American wearable technology giant; mSSD has entered import tests with top PC manufacturers, and the AI storage ecosystem on the device side is accelerating.

However, behind the rapid expansion, there are financial signals worth noting: net cash outflow from operating activities was 2.875 billion yuan; inventory scale soared to about 18 billion yuan; long-term loans surged 115% from the beginning of the year to 9.431 billion yuan. Scale and leverage are rising in tandem, testing the company's cash flow management capability.

Scale Effects Released, Operating Profit Turns Around by Over 4.7 Billion Yuan

First quarter revenue was 9.909 billion yuan, up 132.79% from 4.256 billion in the same period last year. Meanwhile, total operating cost was 5.2 billion, an increase of about 17.8% year-on-year and far lower than revenue growth, indicating that scale effect and price premium are being released simultaneously.

Operating profit was 4.762 billion yuan, compared with a loss of 149 million yuan in the same period last year—a year-on-year increase of more than 3303%. Total profit was 4.761 billion yuan; net profit was 3.979 billion yuan (including 117 million yuan in minority interest). Income tax expense was as high as 782 million yuan, a sharp leap from the negative value in the same period last year, indirectly confirming the reality and scale of profits.

It is worth noting that non-recurring gains and losses this period were -80 million yuan, mainly due to fair value change losses (about -105 million yuan), caused by valuation reduction of other non-current financial assets and losses from forward exchange contracts. Net profit excluding non-recurring items was higher than attributable net profit, indicating the core business' profitability is robust and not dependent on one-off gains.

In addition, Brazil's PADIS tax preferential policy drove other gains to 199 million yuan, up 148.53% year-on-year, becoming an important supplement to the income statement and also reflecting that the company's global policy dividends are gradually being realized.

Inventories Rise to 18 Billion, Strategic Stockpiling and Leverage Expansion

As of the end of March 2026, the company’s total assets reached 35.946 billion yuan, an increase of 58.00% from the beginning of the year; equity attributable to shareholders was 12.184 billion yuan, an increase of 55.13%.

Inventory is the most notable variable in this quarter's balance sheet. Inventory balance jumped from 11.678 billion yuan at the beginning of the year to 17.961 billion, an increase of 53.81%, accounting for nearly 50% of total assets. The company explained this as “active inventory procurement”, which, given the industry cycle and original manufacturer LTA renewals, is clearly strategic stockpiling—locking in resources before price increases. But such large inventories also mean that, should storage prices reverse, the risk of impairment will become a major pressure.

Prepayments soared from 658 million yuan to 3.551 billion yuan, an increase of 439.97%, confirming the company’s fast pace in locking in upstream supply. Contract liabilities (advance receipts) rose from 355 million to 2.217 billion yuan, an increase of 525.14%, indicating that downstream customers are also actively locking in future supply and demand remains robust.

On the liabilities side, short-term borrowings were 6.212 billion yuan, and long-term loans jumped from 4.377 billion at the beginning of the year to 9.431 billion, an increase of 115.46%, with net cash inflow from financing activities of 6.133 billion. The company is financing its inventory and prepayments by aggressively expanding interest-bearing debt, and financial leverage has increased significantly. Finance expenses reached 155 million yuan this period, up 384.61% year-on-year, with the impact of exchange losses not to be ignored.

Large-Scale Stockpiling Drags Operating Cash Flow, 6.1 Billion Net Financing Inflow Supports Expansion

Net cash outflow from operating activities was 2.875 billion yuan, a sharp contrast to net inflow of 153 million yuan in the same period last year—a YoY change of -1978%.

Breaking it down, cash received from sales of goods was about 11.237 billion yuan, basically matching revenue; but cash used for purchasing goods and labor services was as high as 13.301 billion yuan, far exceeding procurement for the period, which reflects large-scale stockpiling and prepayment in the cash flow. In short, the company actively “over-bought”—purchasing much more than confirmed sales, causing net cash outflow from operations.

Net cash outflow from investing activities was 576 million yuan, mainly for acquisition of subsidiaries (including full acquisition of Brazil's Zilia Eletrônicos for USD 46.08 million) and routine capital expenditures. Net cash inflow from financing activities was 6.133 billion yuan, heavily dependent on bank loans. Ending cash and equivalents rose to 4.149 billion yuan, up 180.63% from the beginning of the year, and liquidity remains sufficient.

Self-Developed Technology Drives Transformation, Multiple Storage Products Enter Top Supply Chains

Longsys is transforming from a traditional storage module distributor to a high-value-added storage platform company with independent R&D. The company has built a differentiated technological barrier around self-developed chips (SPU storage processing unit), self-developed firmware, iSA intelligent storage array, and HLC advanced cache technology, complemented by its own high-end packaging and testing capacity.

On the product side, flagship UFS4.1 is mass shipped; ePOP4x is widely used in wearable devices of a leading North American smart wearable tech giant, and has simultaneously entered the supply chains of Xiaomi, Alibaba Quark, XREAL, Rokid, and other top smart glasses and smart watch brands at home and abroad. Automotive-grade storage is directly supplied to North American smart auto and autonomous driving tech giants, and has entered several renowned global OEM ecosystems. mSSD products have been officially launched, challenging traditional SSDs with higher integration and superior physical properties, and have entered import tests with leading PC brands. The company expects to achieve large-scale replacement of traditional SSDs by 2026.

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