C STRATEGIC TEC (01725) subsidiary intends to sell all shares of Steady Elite Limited for HK$3.696 million

C STRATEGIC TEC (01725) announces that on 30 September 2026 (after trading hours), the seller, Total United Holdings Limited (a wholly-owned subsidiary of the Company), entered into an agreement with the buyer, Mr. Huang Hu, pursuant to which the seller has conditionally agreed to sell, and the buyer has conditionally agreed to acquire, the sale shares, being the entire issued shares of the target company Steady Elite Limited, for a consideration of HK$3.696 million. As at the date of this announcement, the target company is wholly owned by the seller. Upon completion, the seller will no longer hold any equity interest in the target company, and each member company of the target group will cease to be a subsidiary of the Company. Accordingly, upon completion, the financial results of the target group will no longer be consolidated into the consolidated financial statements of the Group. Due to continuously evolving trade policies, geopolitical tensions, supply chain restructuring and intensifying price competition, customers of the Group's EMS business are facing severe operational and macroeconomic challengesin particular, rising production costs in the PRC and increasing global raw material prices. Despite the above headwinds, the Group has actively pursued business expansion initiatives and successfully expanded the revenue base of its EMS business. Revenue from the EMS business increased significantly by approximately 103.4% from approximately RMB316 million for the year ended 31 December 2024 to approximately RMB643 million for the year ended 31 December 2025. Such growth was primarily driven by a significant increase in demand from the banking and financial industry as well as the launch of new products. This upward trend continued into 2026, with revenue for the six months ended 30 June 2026 increasing by approximately 14.0% from approximately RMB173 million for the six months ended 30 June 2025 to approximately RMB197 million, continuously benefiting from demand from the banking and financial industry. Despite the strong revenue growth, the Group's profitability has faced severe compression. Overall gross profit margin narrowed from approximately 15.2% for the year ended 31 December 2024 to approximately 5.9% for the year ended 31 December 2025. Such compression was directly attributable to the competitive pricing strategy adopted by the Group, aimed at retaining existing customers, deepening market penetration and expanding its customer base. This declining gross profit margin trend continued into the first half of 2026, with the gross profit margin of the EMS business decreasing significantly from approximately 21.0% for the six months ended 30 June 2025 to approximately 8.5% for the six months ended 30 June 2026. Such contraction was primarily due to the increase in cost of sales outpacing revenue growth under the Group's stable pricing strategy. Meanwhile, in its efforts to maintain market competitiveness, the management of the Company has been actively evaluating various strategic options to optimize the profitability of the EMS business and mitigate the impact of rising cost pressures on the Group's consolidated financial results. As stated in the Company's annual report for the year ended 31 December 2025, the Group will continue to actively optimize supply chain processes, enhance production efficiency and adjust procurement strategies to maintain the competitiveness and operational efficiency of the EMS business. In line with the above initiatives, the Group intends to consolidate the management resources of the PRC companies in the EMS business into better-performing subsidiaries and outsource production to qualified independent subcontractors to reduce production overhead costs. This strategic shift further drives the Group to continuously transform its EMS business towards higher value-added activities, including the procurement of quality and cost-effective materials, research and development of customized solutions for customers, and quality control and after-sales support to ensure product reliability and reputation. Through the disposal of the loss-making PRC companies, the Group expects to reduce its manufacturing cost burden and eliminate underperforming subsidiaries, thereby enhancing the overall profitability and financial performance of the EMS business. According to the annual report, the Group is also actively seeking growth opportunities in the aerospace business, precision business and energy storage business, including investing in and constructing grid-side energy storage power stations, research and development and production of energy storage systems and core equipment, industrialization of aerospace titanium materials and satellite data application projects, as well as the gradual advancement of the new energy shipbuilding industry. The Company believes that the disposal is in line with the Group's development strategy of focusing on (i) the EMS business, which provides mid-to-high-end electronic manufacturing services to customers; and (ii) the overall development of the aerospace, precision and energy storage businesses. Ultimately, the disposal aligns the Group's operational strategy with the goal of maximizing sustainable long-term shareholder returns for CKH HOLDINGS.