EDA GROUP HLDGS (02505) issues a profit warning, expecting a mid-term net loss of approximately 42.2 million yuan.

EDA GROUP HLDGS (02505) announced that the Group expects to turn from profit to loss for the six months ending June 30, 2026, with a net loss of approximately RMB 42.2 million, compared to a net profit of approximately RMB 19.3 million for the same period in 2025. The Group anticipates an adjusted net loss (non-Hong Kong Financial Reporting Standards measure, defined as net loss adjusted for share-based payment expenses related to the share award scheme) of approximately RMB 41.1 million during the reporting period, whereas in 2025, the adjusted net profit was approximately RMB 22.2 million. The above losses are primarily attributable to the following factors: (1) Overseas warehouse strategic investment: With the addition of six new leased overseas warehouses in 2025 and the first half of 2026, these warehouses typically require a ramp-up period before becoming profitable. However, related costs and expenses have significantly increased, mainly due to the amortization of the related right-of-use assets and the interest expenses recognized for the lease liabilities. The Board believes that this strategic investment will benefit the Group's long-term sustainable development; (2) A further decline in gross profit, mainly due to the increased share of the semi-managed model, which generally has a lower gross margin; and during the reporting period, the Group aggressively expanded its European business, where gross margins are generally lower due to high labor and compliance costs; (3) Rising overseas logistics and labor costs led to a substantial increase in the Group's overall costs during the reporting period; (4) Due to the continuous depreciation of the US dollar against the RMB, the Group incurred foreign exchange losses of approximately RMB 19 million during the reporting period (compared to a foreign exchange gain of RMB 240,000 for the same period in 2025).