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Regarding the Reply to the 2025 Annual Report Inquiry Letter of Shenwu Energy Saving Co., Ltd.
Zhonghuan Zhuanzi (2026) No. 0101566
Shenzhen Stock Exchange:
Zhongshun Zhonghuan Certified Public Accountants (Special General Partnership) (hereinafter "the Firm" or "we"), as the audit institution for the 2025 financial statements of Shenwu Energy Saving Co., Ltd. (hereinafter "Shenwu Energy Saving" or "the Company"), issued an unqualified audit report, Zhonghuan Shenzi (2026) No. 0102420, on April 28, 2026.
On May 7, 2026, the Listed Company Management Department of the Shenzhen Stock Exchange issued the "Inquiry Letter Regarding the 2025 Annual Report of Shenwu Energy Saving Co., Ltd." (hereinafter "the Inquiry Letter"). Based on the audit work performed on the relevant financial statements of Shenwu Energy Saving, we have performed verification procedures on the relevant issues in the Inquiry Letter that require a response from our Firm. The verification results are explained as follows:
Question 1:
The annual report shows that your company achieved operating income of 331 million yuan during the reporting period, a year-on-year increase of 537.52%, with operating income after deductions of 330 million yuan. In the fourth quarter of the reporting period, your company achieved operating income of 261 million yuan, accounting for 78.91% of the operating income for the reporting period. Your company's net profit after deducting non-recurring gains and losses (hereinafter "net profit after non-recurring gains and losses") has been negative for 8 consecutive years, and the unrecovered losses have reached one-third of the total paid-in capital. Please explain:
(1) Explain the specific details of the top ten projects for which revenue was recognized in 2025, including customers, business types, product attribution and transfer arrangements, pricing policies with customers and suppliers, contract amounts, revenue recognition amounts and timing, project cycles, project acceptance timing and status, whether the execution progress is inconsistent with the agreement, main terms and modes of settlement and acceptance, basis for revenue recognition, whether the over-time or point-in-time method is used and the basis, whether the gross or net method is used and the basis, whether there is a related party relationship between the project's customers and suppliers, project payment collection amounts and timing, whether there are situations where payment collection differs from the time and method agreed in the contract, and the subsequent operation of the project, etc. Explain whether the revenue recognition method and basis differ from the revenue recognition policies of previous years and whether they comply with the provisions of the "Accounting Standards for Business Enterprises";
(2) Compare with the specific items mentioned in "Matters Related to Operating Income Deduction" in our Firm's "Guidelines for Self-Regulation of Listed Companies No. 1 - Business Handling," and combine the above-mentioned top ten projects for which revenue was recognized to explain one by one whether they include business income unrelated to the main business and income without commercial substance, as well as the specific amounts, and whether there are situations where deductions should have been made but were not;
(3) Please list the names of major projects for which revenue was recognized in the fourth quarter, project content, contract amounts, project cycles and delivery times, revenue recognition policies, settlement arrangements, and payment collection status. Explain whether your company has situations of cross-period revenue recognition, and whether the relevant projects belong to incidental, temporary, or non-commercial substance operating income that should be deducted, and the basis for judgment;