After her father built the company from electricity meters into solar and energy storage, the daughter who took over as general manager must first confront the profit and funding pressures left behind by rapid expansion.

In June 2025, Jiangsu Linyang Energy Co.,Ltd. (ASX: 601222) founder Lu Yonghua stepped down as chairman and general manager of the listed company during a board reshuffle, and his daughter Lu Danqing became vice chairwoman and general manager.

More than a year later, the company's revenue and net profit attributable to shareholders have rebounded, but non-recurring net profit is still declining and operating cash flow remains in net outflow. The energy storage subsidiary continues to lose money and still needs the listed company to provide guarantees for bank financing.

On October 8, Linyang Energy announced it would renew a 200 million yuan guarantee for its wholly owned subsidiary Jiangsu Linyang Energy Storage Technology Co., Ltd. The subsidiary lost 91.35 million yuan in 2025 and continued to lose 22.18 million yuan in the first half of this year, with an asset-liability ratio of about 83.79% at the end of June.

As of the disclosure date, the total external guarantees of Linyang Energy and its controlled subsidiaries stood at 10.823 billion yuan, accounting for 70.98% of audited net assets at the end of 2025. The renewed guarantee amount is not the most striking figure in the announcement. The bigger contrast is that the company is promoting asset turnover by selling power stations, yet still needs to extend credit support for a loss-making energy storage subsidiary. Recovering funds from existing projects and supporting financing for new businesses are two tasks weighing on the operating statements at the same time.

From expanding the map to digesting the investment

The Linyang that Lu Danqing took over is very different from the company her father founded. Linyang was established in 1995, with electricity meters as its starting point. In 2011, the company listed on the A-share market under the name Linyang Electronics. Since then, its new energy business gradually unfolded: a new energy technology company was set up in 2012, a solar technology company in 2014, the listed company was renamed Linyang Energy in 2016, and in 2020 it further expanded into energy storage. As the company name changed from Electronics to Energy, its way of doing business also changed.

Manufacturing electricity meters centers on products, orders and delivery; building solar power stations requires upfront capital and then recovering the investment through operation or sale; entering energy storage adds new product and system businesses. As business boundaries extend, the profit cycles, cash collection rhythms and financing arrangements of different projects must all be coordinated by the group.

Lu Yonghua's solar layout began even earlier than the A-share listing. According to the prospectus of Linyang Electronics, another overseas solar company he had invested in listed on Nasdaq in 2006; in 2010, Yonghua BVI sold all its Linyang Cayman shares to Hanwha Chemical. That belonged to a different corporate structure, but it was also part of Lu Yonghua's new energy investment experience.

On the listed company platform, Linyang later continued to expand its energy business. At the end of 2022, the company signed an agreement with the Nantong Economic and Technological Development Zone to invest 10 billion yuan in building 20GW high-efficiency N-type TOPCon solar cells and related projects. Planned investment does not equal actual investment, but the scale of 10 billion yuan recorded the company's push at the time to extend into the upstream of the industrial chain.

By the year Lu Danqing took over as general manager, the operating statements had already revealed pressure. In 2025, Linyang Energy's revenue was 4.876 billion yuan, down 27.69% year on year; net profit attributable to shareholders was 244 million yuan, down 67.56% year on year. In the previous two years, attributable net profit was 1.031 billion yuan and 753 million yuan respectively. Two consecutive years of profit contraction meant that the first task for the new management was to repair the existing business.

The handover did not mean the founder fully exited. After Lu Yonghua stepped down from his listed company roles, Yin Biao became chairman, while Lu Danqing took charge of operations and management. At the group's annual meeting in February this year, Lu Yonghua still appeared as group founder and president alongside the two. The positions were handed over, but the projects, assets and financing arrangements accumulated over the long term continued.

Energy storage is one link that has yet to achieve stable profitability. In 2025, Linyang Energy's energy storage business revenue was 511 million yuan, down 44.40% year on year; gross margin was 12.86%, down 4.78 percentage points year on year. Revenue contracted and gross profit space also declined, and this new business has not yet provided stable profit support for the group.

The October 8 announcement further brought the pressure down to a specific subsidiary. On a standalone basis, Linyang Energy Storage had revenue of 534 million yuan and a loss of 91.35 million yuan last year; in the first half of this year, revenue was 306 million yuan and the loss was 22.18 million yuan. These figures cannot replace the performance of the entire energy storage segment, but they are enough to show the operating condition of the entity receiving the guarantee.

Beyond the loss, its assets and liabilities are also changing. At the end of June this year, Linyang Energy Storage's total assets increased from 1.119 billion yuan at the end of last year to 1.296 billion yuan, liabilities rose from 887 million yuan to 1.086 billion yuan, and net assets fell from 232 million yuan to 210 million yuan. The asset-liability ratio rose from about 79.24% to 83.79%. Asset scale expanded while equity shrank, meaning asset expansion was supported more by liabilities. For an energy storage subsidiary that keeps losing money and has an asset-liability ratio above 80%, when can it rely on its own profits to reduce its dependence on the parent company's credit?

The two renewed guarantees are each 100 million yuan, corresponding to credit arrangements with Huaxia Bank's Nanjing Jiangbei New Area Branch and Bank of Ningbo's Nanjing Branch, both being joint liability guarantees without counter-guarantees. Excluding this guarantee, Linyang Energy's actual guarantee balance for Linyang Energy Storage was 534 million yuan. Financing support has been continued, while the profitability problem remains to be solved.

Linyang Energy said it has full control over the wholly owned subsidiary and can monitor its operations and financial condition, and that guarantee risk is generally controllable. The company has no overdue guarantees, and the total guarantee amount of 10.823 billion yuan cannot be equated with losses already incurred. But before the loss-making entity improves its operations, the listed company's credit still plays a role in supporting financing.

Such support is not limited to energy storage. The company's newly added guarantee quota for 2026 is 2.9 billion yuan, of which 2.05 billion yuan is for subsidiaries with asset-liability ratios above 70%, about 70% of the total. An authorized quota does not equal the amount actually used, but highly indebted subsidiaries remain the focus of group credit support.

Power stations sold, but cash and credit still need to be recovered

The group's total guarantees have not always been rising. At the end of April this year, Linyang Energy disclosed a total of 12.065 billion yuan, higher than the 10.823 billion yuan in this announcement. Part of the credit exposure has already been shrinking, while on the other side, financing for loss-making subsidiaries still needs to be renewed.

Closely related to this is the sale of power stations. For Linyang, which had continuously invested in power station construction, project transfers can revitalize assets and directly change the composition of current performance. In the first half of this year, Linyang Energy's revenue was 4.526 billion yuan, up 82.40% year on year; of that, power station sales revenue was 2.052 billion yuan, about 45% of total revenue. The company explained that the growth in revenue and related profit indicators was mainly related to increased power station sales.

The sale of Qidong Huaersheng New Energy Co., Ltd. is a concrete example of this change. Huaersheng's core asset is phase one of the Lusi sea area tidal flat fishery-solar complementary photovoltaic project, with an AC-side capacity of 400MW, which was fully connected to the grid in December 2025. About three months later, Linyang Energy announced the sale of 100% equity in the project company to Shanghai Energy, with an equity transaction price of 421 million yuan and a total project price of 2.071 billion yuan. The closeness of full grid connection and the launch of the sale makes asset turnover the most distinctive feature of this transaction.

The company cited revitalizing existing assets, reducing costs and controlling risks as reasons. As of early July, the first equity transfer payment of 294.7 million yuan had been received, accounting for 70% of the equity price, and the shareholder change registration had also been completed. The sale brought revenue, but indicators beyond revenue show that operating repair is still incomplete.

In the first half of this year, Linyang Energy's net profit attributable to shareholders was 427 million yuan, up 31.70% year on year, while non-recurring net profit attributable to shareholders fell 17.12% to 263 million yuan. Net non-recurring gains and losses were about 163 million yuan, about 38.29% of attributable net profit, including about 124 million yuan in fair value changes and disposal gains from financial assets, and about 50.21 million yuan in non-current asset disposal gains and losses. The two profit indicators moved in different directions, showing that the rebound in attributable net profit included the contribution of non-recurring gains, and after excluding these effects, profitability was still declining. Power station sales supported revenue growth, while profit support from the main business still needs further improvement.

Cash flow provides a more direct test. In the first half, the company's net operating cash outflow was 670 million yuan, compared with a net outflow of 613 million yuan in the same period last year; cash received from sales of goods and provision of services was 2.191 billion yuan, lower than 2.630 billion yuan in the same period last year. Revenue rose substantially, but sales cash collection did not grow in tandem, and operating cash flow has not yet turned positive. When revenue growth is mainly driven by power station sales, while non-recurring profit and operating cash flow have not improved, how much of this rebound can become sustainable operating results?

After power stations exit, financing responsibilities also need to be handled item by item. The half-year report showed that Huaersheng's equity change was completed in April, but as of the end of June, its bank loan balance was still 300 million yuan, and the guarantee provided by Linyang Energy had not been released. The company said it would complete the release procedures as soon as possible. The project exited the consolidation scope, but credit responsibility did not end at the same time.

This is also a step that must be implemented in the asset-light transformation: after selling a project, the company still needs to complete price recovery and guarantee release, so that funds invested and credit provided during the construction phase gradually exit. A transaction can first change revenue scale, while improvement in capital efficiency must be verified through follow-up execution.

In February this year, Linyang Energy disclosed a valuation enhancement plan. The trigger was that for 12 consecutive months in 2025, the closing price on every trading day was below the latest audited net assets per share. The company proposed a buyback plan of 150 million to 300 million yuan, while the controlling shareholder and actual controller proposed an increase plan of 50 million to 100 million yuan, and listed the transformation of the new energy business from heavy assets to light assets as a direction.

From a 10 billion yuan manufacturing project plan to selling power stations and advancing an asset-light transformation, Linyang has begun to address the issue of capital efficiency after expansion more clearly. After Lu Danqing took over, the test she faces has also shifted from how large the business map can be spread to how much profit existing businesses can retain and how much cash can be recovered.

The October 8 guarantee renewal announcement shows that the energy storage subsidiary still needs the parent company's credit support; the half-year report shows that the revenue rebound has not yet driven simultaneous improvement in non-recurring profit and operating cash flow. The map laid out by the father has already taken shape, and the daughter's next operating results will be answered by whether these businesses can continue to be profitable and whether assets can be successfully monetized.