20-F: Samfine Holdings Reports 2025 Net Loss Amid Rising Costs

Samfine Creation Holdings Group Limited reported a significant net loss in 2025, driven by increased operating expenses despite revenue growth.

Summary

• Revenue increased by 10.6% to HK$169,791,077 (US$21,814,793) in 2025 from HK$153,493,065 in 2024.
• Gross profit decreased by 0.8% to HK$35,049,668 (US$4,503,189) in 2025 from HK$35,326,931 in 2024.
• Gross profit margin decreased by 2.4 percentage points to 20.6% in 2025 from 23.0% in 2024, primarily due to continuous strategic price reductions implemented to drive sales volume.
• Net loss increased significantly by 644.8% to HK$19,815,422 (US$2,545,890) in 2025 from HK$2,660,408 in 2024.
• Operating expenses rose substantially, with selling and marketing expenses up 27.7% to HK$17,799,754 and general and administrative expenses up 63.9% to HK$38,847,212.
• Key drivers for increased expenses include marketing and promotion (up 76.4% to HK$6,802,764) and research and development (up 42.1% to HK$6,449,820).
• The company completed a 1-for-5 share consolidation effective February 27, 2026, to regain compliance with Nasdaq's minimum bid price requirement.
• Samfine SZ renewed a lease for its Shenzhen Factory from May 2, 2025, to May 1, 2031, with an initial monthly rent of RMB275,000, increasing by 5% biennially.
• Samfine SZ obtained a renewal of preferential tax concession as a high and new technology enterprise, entitling it to a 15% PRC Enterprise Income Tax rate for three years starting 2024.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a negative report due to the substantial increase in net loss and declining gross profit margin, despite revenue growth. The increased operating expenses and credit loss provisions are concerning, though strategic investments and regaining Nasdaq compliance offer some positive notes.

Positives

• Revenue grew by 10.6% to HK$169,791,077 (US$21,814,793) in 2025, driven by strategic price reductions to boost sales volume.
• Successfully completed an IPO on the Nasdaq Capital Market in October 2024, raising net proceeds of approximately HK$63.9 million (US$8.2 million).
• Regained compliance with Nasdaq's minimum bid price requirement as of March 13, 2026, following a share consolidation.
• Samfine SZ secured a renewal of preferential tax concession as a high and new technology enterprise, reducing its PRC Enterprise Income Tax rate to 15% for three years starting 2024.
• Increased investment in plant and equipment (HK$7,185,164 in 2025) and research and development (HK$6,449,820 in 2025) to enhance productivity and save costs.

Negatives

• Net loss significantly increased by 644.8% to HK$19,815,422 (US$2,545,890) in 2025 from HK$2,660,408 in 2024.
• Gross profit margin declined by 2.4 percentage points to 20.6% in 2025, primarily due to strategic price reductions.
• Selling and marketing expenses increased by 27.7% to HK$17,799,754 (US$2,286,916) in 2025.
• General and administrative expenses increased by 63.9% to HK$38,847,212 (US$4,991,098) in 2025.
• Allowance for expected credit losses increased by 200.1% to HK$105,834 (US$13,598) in 2025, attributed to deteriorated credit quality of long-aged accounts receivables.
• Net cash used in operating activities increased to HK$21,064,036 (US$2,706,311) in 2025.
• High customer concentration persists, with three customers accounting for 27.2%, 27.1%, and 22.1% of total revenue in 2025.

Risks

• Regulatory developments in the PRC and Hong Kong may subject the company to additional review, disclosure requirements, and government interference, potentially increasing compliance costs and limiting service offerings.
• Trading in Class A Ordinary Shares may be prohibited under the HFCA Act if the company's auditors are not inspected by the PCAOB for two consecutive years, potentially leading to delisting from U.S. exchanges.
• The company may become subject to PRC laws and obligations regarding data protection and security, with any failure to comply potentially having a material adverse effect on business and share value.
• Failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject the company to penalties.
• Enforcement of stricter labor laws and regulations in the PRC may adversely affect the company's business and results of operations.
• Political risks associated with conducting business in Hong Kong, including the Hong Kong National Security Law and U.S. Hong Kong Autonomy Act, could materially affect business operations.
• Changes in international trade policies, trade disputes, or the emergence of a trade war may dampen growth in key markets (U.S. and Europe) and adversely affect the company's business.
• Fluctuations in exchange rates, particularly between HKD and RMB, could have a material adverse effect on results of operations and investment value.
• Uncertainties with respect to the PRC's legal system, including inconsistent interpretation and enforcement of laws, could materially and adversely affect the company.
• Operations may be subject to transfer pricing adjustments by taxation authorities, potentially resulting in higher overall tax liability.
• Reliance on dividends and other distributions from subsidiaries to fund cash and financing requirements, with limitations on subsidiaries' ability to make payments due to PRC regulations.
• Dependence on demand from customers who do not enter into long-term contracts, leading to sales fluctuations based on purchase patterns.
• Reliance on Hong Kong-based book traders whose customers are in international markets (U.S. and Europe), making operations vulnerable to changes in these markets.
• Substantial customer concentration, with a limited number of customers accounting for a significant portion of revenues, poses a risk if any major customer reduces purchases or terminates relationships.
• Business is substantially dependent on relationships with major suppliers; changes or difficulties could harm business and financial results.
• Risk of not meeting customer delivery schedules due to operational disruptions, equipment breakdowns, or external factors, potentially leading to revenue loss or compensation claims.
• Challenges from technological advancements in publishing and new forms of information dissemination (e.g., e-books) may reduce demand for printed products.
• Fierce competition in the printing service industry in Hong Kong and the PRC, potentially leading to reduced service fees and pressure on gross margins.
• Risks associated with the seasonality of the industry, with lower revenue in Q1 due to Chinese New Year and increased demand in Q4.
• Deterioration in the financial condition of customers may delay fee settlements and adversely affect cash flows and working capital.
• Data transfer risks in the production process may result in discrepancies in printing products, leading to additional costs or customer claims.
• Samfine SZ may be denied permits to print publications due to its wholly foreign-owned status if the current 'Practice' in Shenzhen is abolished.
• Failure to obtain or renew required licenses, permissions, and approvals for conducting operations could lead to business suspension or financial impact.
• Reliance on key management and professional staff; the loss of whom may affect operations.
• Dependence on the quality of raw materials supplied by vendors; defective materials could lead to delivery delays, product rejections, or claims.
• Exposure to litigation, arbitration, or other legal proceedings, which could result in substantial costs, liabilities, or reputational harm.
• Inability to adequately safeguard intellectual property or facing costly infringement claims that limit the ability to use such intellectual property.
• Dependence on the reliability of computer systems and the ability to implement and maintain information technology and security measures; disruptions could lead to data loss.
• Reputation may be damaged due to negative events concerning the business, including negative publicity, scandals, or regulatory actions.
• Inability to successfully implement future business plans due to factors beyond control, such as competition or resource limitations.
• Internal control system may become ineffective or inadequate, potentially affecting financial condition and results of operations.
• Vulnerability to natural disasters, health epidemics, and other outbreaks, which could significantly disrupt operations.
• A severe or prolonged downturn in the global economy could materially and adversely affect business and results of operations.
• Volatility in the price of Class A Ordinary Shares may subject the company to securities litigation.
• The market price of Class A Ordinary Shares may be subject to rapid and substantial volatility regardless of operating performance.
• Directors, officers, and principal shareholders have significant voting power, potentially taking actions not in the best interests of other shareholders.
• The dual-class voting structure concentrates voting control in Class B Ordinary Shares, limiting the ability of other shareholders to influence corporate matters and potentially affecting inclusion in stock market indices.
• As a controlled company, the company may follow certain exemptions from Nasdaq corporate governance requirements, which could adversely affect public shareholders.
• No dividends are intended to be paid for the foreseeable future, requiring shareholders to rely on price appreciation for return on investment.
• The board of directors may decline to register the transfer of Class A Ordinary Shares in certain circumstances.
• Disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
• Securities analysts may not publish favorable research or reports, which could cause Class A Ordinary Share price or trading volume to decline.
• Difficulties in effecting service of legal process, enforcing foreign judgments, or bringing actions in China or Hong Kong against the company or its directors.
• Shareholders may have more difficulties protecting their interests as a shareholder of a Cayman Islands corporation compared to a U.S. corporation.
• Cayman Islands economic substance requirements may have an effect on business and operations.
• Loss of foreign private issuer status in the future could result in significant additional costs and expenses.
• Increased costs as a result of being a public company, particularly after ceasing to qualify as an emerging growth company.
• Risk of being classified as a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes, which could result in adverse U.S. federal income tax consequences to U.S. investors.

Future Outlook

The company intends to strengthen its printing business in Hong Kong by recruiting suitable talents and improving remuneration packages. It plans to expand its market presence in other international markets, particularly the U.S., by establishing regional representative offices. The company also aims to purchase and upgrade machinery to enhance automation. Remaining net proceeds from the IPO will be used for additional working capital and general corporate purposes. The company expects to incur significant expenses for compliance with Sarbanes-Oxley Section 404 requirements after ceasing to be an emerging growth company. No cash dividends are expected in the foreseeable future, as earnings will be retained for operations and business growth.

Management Comments

• Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has performed an evaluation of the effectiveness of our disclosure controls and procedures... Based upon that evaluation, our management has concluded that, as of December 31, 2024, our disclosure controls and procedures were effective.
• Our management concluded that our internal control over financial reporting was effective as of December 31, 2024.
• Our management, however, will have significant flexibility and discretion to apply the net proceeds of this offering. If an unforeseen event occurs or business conditions change, we may use the proceeds of this offering differently than as described in this registration statement. We reserve the right to change the use of proceeds that we presently anticipate and describe in this annual report.

Industry Context

StockSavvy.ai notes that the printing service industry is highly fragmented and competitive, facing challenges from technological advancements in publishing and the increased digitalization of information. The shift towards electronic media and platforms could impact demand for printed products. The company's strategy of investing in technology and expanding market presence is a direct response to these industry dynamics, aiming to maintain competitiveness in a rapidly evolving market.

Comparison to Industry Standards

• The filing does not provide specific comparable companies, projects, or results to global benchmarks for direct assessment against industry standards.

Management Changes

Corporate Governance

Legal Proceedings

• Not a party to, and not aware of any threat of, any legal or administrative proceeding that is likely to have a material adverse effect on the business, financial condition or operations.

Related Party Transactions

• Accounts receivable from Jiamei Cultural and Creative (Shenzhen) Co., Ltd. (controlled by Ms. Kwan Hung Cheng) amounted to HK$516,920 (US$66,414) as of December 31, 2025, with expected settlement in September 2026.
• Commissions payable to Mr. Wing Wah Cheng, Wayne amounted to HK$60,000 (US$7,709) as of December 31, 2025, with expected settlement in May 2026.
• Commissions payable to Ms. Kwan Hung Cheng amounted to HK$40,000 (US$5,139) as of December 31, 2025, with expected settlement in May 2026.
• Rental expenses of HK$3,470,080 (US$445,837) were paid to Ms. Kwan Hung Cheng and Mr. Zheng Hongrong in 2025 for the Shenzhen Factory lease.
• Sales commission of HK$1,038,745 (US$133,458) was paid to Ms. Kwan Hung Cheng in 2025.
• Sales commission of HK$255,377 (US$32,811) was paid to Mr. Wing Wah Cheng, Wayne in 2025.
• Samfine SZ entered into a 2-year borrowing of RMB8.46 million (US$1.08 million) with Ping An International Financial Leasing Co., Ltd. on May 5, 2025, guaranteed by Mr. and Mrs. Cheng and pledged by company machineries.
• Samfine SZ entered into a 1-year term loan of RMB9.5 million (US$1.3 million) with Bank of China on December 5, 2025, guaranteed by Mr. Cheng.
• Samfine SZ entered into a half-year term loan of RMB1.9 million (US$0.27 million) with Shenzhen Rural Commercial Bank on September 2, 2025, guaranteed by Mr. and Mrs. Cheng.
• Samfine HK obtained a banking facility of HK$10.0 million (US$1.19 million) from Livi Bank Limited on July 24, 2025, guaranteed by Mr. Cheng.

Stakeholder Impact

• **Shareholders**: Experienced a significant net loss and declining gross margin, which are negative. The share consolidation and regaining Nasdaq compliance are positive for maintaining listing status but reflect prior underperformance. The dual-class share structure concentrates voting power, potentially limiting influence for Class A shareholders. No dividends are expected in the foreseeable future.
• **Employees**: Staff costs increased in 2025, indicating salary and benefits enhancements and headcount increases, which is positive. However, the company faces risks related to stricter labor laws and potential penalties for inadequate employee benefit plan contributions.
• **Customers**: Strategic price reductions aim to boost sales volume, potentially benefiting customers with competitive pricing. High customer concentration poses a risk if major customers reduce orders or face financial difficulties.
• **Suppliers**: The company's dependence on major suppliers for raw materials carries risks if supply is disrupted or quality is defective.
• **Creditors**: Increased banks and other borrowings in 2025, with related party guarantees and asset pledges. The significant net loss could raise concerns about the company's ability to service its debt obligations.

Next Steps

• Strengthen printing business in Hong Kong by recruiting suitable talents and improving remuneration packages.
• Set up regional representative offices or centers in key strategic locations, particularly the East Coast of the U.S., to support future business development.
• Purchase machinery and upgrade production equipment to enhance the level of automation.
• Utilize remaining IPO net proceeds for additional working capital and other general corporate purposes.
• Comply with Section 404 of Sarbanes-Oxley and other SEC rules after ceasing to qualify as an emerging growth company.
• Continue to monitor changes in environmental regulations and compliance requirements.
• Samfine SZ may need to establish a new subsidiary and introduce Chinese investors to meet requirements for a printing operation license if the 'Practice' of WFOEs obtaining permits is abolished.

Key Dates

Recommendation

The substantial increase in net loss, coupled with a declining gross profit margin despite revenue growth, indicates significant operational challenges and cost pressures. While strategic investments and regaining Nasdaq compliance are noted, the overall financial performance for 2025 is concerning. High customer concentration and regulatory risks in the PRC further add to the uncertainty, making the stock a high-risk investment with a negative outlook based on this filing.

Keywords

Printing services, Commercial printing, Book products, Novelty products, Packaging products, Hong Kong, PRC, Shenzhen, SEC filing, 20-F, Financial results, Net loss, Revenue, Gross profit, Operating expenses, Nasdaq, Share consolidation, Related party transactions, Corporate governance, Risk factors, Foreign private issuer, PFIC