With demand shrinking and costs pushing back, how long can the leading halo of Xidamen's dragon head last?

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Source: Jiemian News

Reporter: Tao Zhixian

As a leading enterprise in China’s specialized sun-shading materials segment, Xidamen (605155.SH) delivered a contradictory report card for 2025: increased revenue but no profit growth, declining production and sales, high expense growth, and shrinking R&D investment.

Under the triple pressures of deep real estate adjustments, aggressive localization by international giants, and fierce industry competition, this leading company, which once exported to over 70 countries worldwide, is now caught in a multi-layered dilemma of demand contraction, overcapacity, and continuous profit squeeze.

Sales expenses increased by 39.5%, while R&D expenses declined against the trend

In 2025, Xidamen’s operating revenue was 882 million yuan, up 7.98% year-on-year; net profit attributable to shareholders was 112 million yuan, down 8.66%; net profit after deducting non-recurring gains and losses was 103 million yuan, down 12.5%. It is clear that the company’s revenue grew slightly, but profits declined, indicating a weakening profit quality.

More concerning is the sharp drop in quarterly performance. In Q4 2025, net profit attributable to shareholders was 23.74 million yuan, down 33% year-on-year, weaker than the annual average level.

“Revenue growth mainly comes from product structure adjustments and support from some overseas orders, but cost, expense, and price pressures have simultaneously intensified, leading to sustained profit pressure,” said Wu Yuchuan, an analyst who has long followed the building materials industry, to Jiemian News.

Behind the increase in revenue but no profit growth is the operational reality of simultaneous contraction in production and sales. In 2025, Xidamen’s production of sun-shading fabrics decreased by 17.78% compared to the previous year; sales volume dropped by 16.47%; inventory decreased by 3.26%. The company explained that the main reason was a decrease in sales volume of sun-shading fabrics, with production volume decreasing accordingly, and inventory slightly declining year-on-year.

Data source: Company announcements, Jiemian News Research Department

“Both production and sales fell by over 15%, indicating the company is actively shrinking capacity and passively responding to demand decline. This contrasts sharply with the typical scale expansion and market share growth expected of leading enterprises,” Wu Yuchuan said. “During a period of overall industry demand pressure, simultaneous declines in production and sales often reflect the true operating condition more accurately than slight revenue growth.”

Xidamen explicitly stated in its annual development strategy: “In technological R&D, focus on frontier technologies such as zero-carbon environmental protection, and continue increasing R&D investment.” However, financial data shows a disconnect between strategy and action.

In 2025, the company’s sales expenses reached 198 million yuan, up 39.5% year-on-year; R&D expenses were 29.9 million yuan, down 3.76%. The growth rate of sales expenses is nearly five times that of revenue growth, and R&D investment not only stagnates but declines, creating a stark contrast.

Data source: Company announcements, Jiemian News Research Department

“The sharp rise in sales expenses is mainly due to increased investment in e-commerce platforms, but with only a 7.98% revenue increase, such high marketing expenditure efficiency is clearly insufficient,” Wu Yuchuan analyzed. “If marketing investments cannot be continuously converted into revenue and orders, profit margins will be squeezed further, creating a vicious cycle of ‘more investment, more losses’.”

Even more worrying is the contraction of R&D investment. As a high-tech enterprise and leader in its niche, Xidamen’s core competitiveness should be built on functionality, energy-saving, and intelligence. But the decline in R&D expenses indicates reduced efforts in new materials, new processes, and new applications.

While loudly advocating for zero-carbon environmental protection and frontier technology breakthroughs, the company is simultaneously cutting R&D budgets. Such inconsistent behavior is rare among manufacturing industry leaders. Short-term, it may save costs, but in the long run, it will widen the technological gap with industry leaders and gradually weaken competitiveness in high-end markets.

What is more perplexing is that, despite declining production and sales and weak demand in 2025, Xidamen still pushes forward with large-scale capacity expansion, resulting in a serious mismatch between shrinking demand and expanding supply.

After the company’s fundraising projects reach full capacity, it is expected to add an annual production capacity of 16.5 million square meters of new sun-shading materials and 2 million square meters of sun-shading finished products. Regarding related risks, the company states, “The rapid expansion of capacity may lead to differences between actual economic benefits, market development, and forecasted sales prices after project completion, possibly resulting in idle production equipment, underutilized capacity, and the risk of not achieving expected returns.”

“Currently, the industry is already oversupplied. Xidamen’s counter-cyclical expansion is essentially a gamble on a future demand recovery and market share increase. But in the downward cycle of real estate and the stock competition pattern, this gamble has low odds of success and high risks,” said Chen Xingyao, a building materials industry analyst, to Jiemian News. “If the new capacity cannot be effectively absorbed, it will directly lead to higher unit costs, increased depreciation, further profit erosion, and even idle capacity and asset impairment.”

Jiemian News contacted Xidamen regarding the rationality of its large-scale expansion, how to ensure effective absorption of new capacity, and the reasons behind the contradiction between declining R&D investment and strategic statements. As of press time, no response was received.

A fierce battle among over 3,000 domestic companies

After years of development, China’s architectural sun-shading industry still lacks a highly concentrated market pattern, characterized by “small, scattered, chaotic” features and a “low-end crowded, high-end lacking” core characteristic.

By the end of 2022, there were about 3,000 enterprises in China’s functional building sun-shading industry, but only around 180 had annual sales exceeding 82.8k yuan. Large-scale enterprises are very few, mostly small and medium-sized, focusing mainly on general sun-shading material production and processing, serving the domestic mid- and low-end markets.

More severe is the acceleration of localization by international giants, directly squeezing the survival space of domestic leaders. Industry leader Hunter Douglas established Hunter Architectural Products (China) Co., Ltd. in Suzhou, serving as the core manufacturing and R&D base for the Asia-Pacific region. The company’s positioning is clear: a localized production center for China and Asia-Pacific markets, covering architectural sun-shading, metal curtain walls, and window decoration systems, no longer relying on overseas imports of complete machines. Core fabrics, finished curtains, and shading systems are all manufactured locally. Multiple reports indicate that Hunter’s local production ratio in China is at least 75%.

In January 2026, Hunter held a national marketing conference in Xiamen, clarifying that the Chinese market will be the core growth engine for the next five years.

“Localization of international giants’ capacity, cost reduction, and channel sinking directly compete with domestic leaders like Xidamen,” Chen Xingyao said. “In the past, domestic companies relied on cost performance to capture the mid- and low-end markets, while high-end markets were dominated by foreign capital. Now, foreign capital’s local manufacturing, proximity costs, and service sinking are directly snatching high-end clients and project orders from domestic leaders, pushing industry competition into a fierce phase.”

Xidamen also stated, “As domestic companies improve their technology and foreign companies leverage technological and capital advantages to accelerate their layout in China, competition between domestic and foreign markets will become increasingly intense. The company’s market share and profitability may face certain adverse impacts in the future.”

Additionally, Xidamen’s pressure also stems from the deep adjustments in the upstream real estate industry. As a supplier of architectural sun-shading materials, the company’s demand is highly dependent on new housing starts, completions, deliveries, and renovation chains.

In development investment, in 2025, national real estate development investment was 8.28 trillion yuan, with residential investment at 6.35 trillion yuan. Developers’ willingness to acquire land and start projects is low, and new construction supply continues to shrink, directly reducing engineering orders for sun-shading materials. Engineering projects are a major revenue source for companies like Xidamen; a decline in real estate starts means long-term orders will continue to weaken.

On the demand side, in January-February 2026, the sales area of commercial housing was 92.3 million square meters, down 13.5% year-on-year. Even more worrying is the growing inventory: at the end of 2025, the unsold commercial housing area was 766 million square meters, rising to 799 million square meters by the end of February 2026. The sharp drop in new housing deliveries directly reduces the demand for home decoration and fine decoration supporting products. Both the B2B engineering side and the B2C retail side are under significant pressure.

The “2025 and Beyond: Data Analysis and Competitive Strategy Study of China’s Sun-Shading Fabric Market” report shows that in 2025, residential applications accounted for 41.3% of the functional sun-shading materials market, ranking first. Commercial office, public buildings, and industrial facilities accounted for about 32%, 22%, and 5%, respectively. This means over 40% of demand is directly tied to residential real estate. Meanwhile, the combined demand from commercial offices, public buildings, and industrial facilities, about 58%, is also affected by real estate investment, rental rates, and construction start rates.

“Downward cycles in the real estate chain pose systemic and long-term pressures on Xidamen,” Chen Xingyao said. “The previous reliance on high real estate growth is no longer valid. Whether stock renewal, old community renovation, or public building energy-saving upgrades can take over remains uncertain.”