Zhonghui Certified Public Accountants (Special General Partnership) Special Explanation on Financial Issues Related to the Shenzhen Stock Exchange's Inquiry Letter Regarding Guangzhou Ruili Kemi Automotive Electronics Co., Ltd.
Zhonghui CPA Letter [2026] No. 8334
Shenzhen Stock Exchange:
We acknowledge receipt of the Inquiry Letter [2026] No. 130008 issued by your esteemed office on April 10, 2026, regarding the share issuance application for asset acquisition by Guangzhou Ruili Kemi Automotive Electronics Co., Ltd. (hereinafter referred to as "Ruili Kemi" or "the listed company"). As the accountants for the asset restructuring declaration of Ruili Kemi, we have conducted a prudent verification of the financial issues requiring our response in the inquiry letter. We hereby respond to the financial issues raised in the inquiry letter as follows:
Question 1: Regarding the Operating Model of the Target Assets
The application documents indicate that:
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Product Sales: Wuhan Ruili Kedes Automotive Electronics Co., Ltd. (hereinafter referred to as "Wuhan Kedes" or "the target asset") primarily engages in the design, development, and sales of PCBA products for hydraulic electronic braking systems, which are the core control units of the listed company's hydraulic braking systems. Each hydraulic ABS or hydraulic ESC product sold by the listed company is accompanied by a PCBA product produced by the target asset. During the reporting period, the listed company did not procure any PCBA related to hydraulic braking products externally.
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Technical Services: The listed company and its affiliates are responsible for business coordination and contract signing with end vehicle manufacturers, undertaking customer-facing technical service functions. The target asset, based on its technical capabilities in electronic braking system matching and calibration, undertakes and implements specific technical service work, mainly responsible for the execution of technical solutions.
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During the reporting period, the two largest customers of the target asset were the listed company's wholly-owned subsidiary, Wenzhou Ruili Kemi Automotive Electronics Co., Ltd. (hereinafter referred to as "Wenzhou Kemi"), and the listed company itself.
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The PCBA products sold by the target asset to the listed company and its affiliates are highly customized core automotive electronic components, with no publicly available third-party market prices for direct comparison. The final transaction prices are determined through negotiation between both parties, based on industry gross margin levels; technical services are priced using a combination of "base fee + value-added service fee."
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As of the end of the reporting period, the target asset holds 37 authorized patents, with 10 patents set to expire in 2027, 2028, and 2029, respectively.
The listed company is requested to supplement the disclosure as follows:
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In conjunction with the industry competitive landscape and marketization level, provide information on major enterprises in the industry and their market shares, market supply and demand conditions and reasons for changes, trends in industry profit levels and reasons for changes, recent three-year changes in market share of the target asset's products and services, and future trends, and explain the core competitiveness and industry position of the target asset in light of the above.
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Disclose whether there are differences in the products and services sold by the target asset to Wenzhou Kemi and the listed company, and if so, please disclose the differences.
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Provide information on the customers, amounts, and proportions of sales achieved by the target asset through the listed company and its affiliates.
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Analyze the specific impact of changes in sales volume, price, and structure of major products or services on revenue changes, the reasons for revenue fluctuations of the target asset during the reporting period, and whether there are significant differences in revenue change trends and ratios compared to comparable companies in the industry.