Special Explanation from Asia-Pacific (Group) CPA Firm on Inquiry Letter Regarding the 2022 Annual Report of Kairuide Holdings Co., Ltd.
Shenzhen Stock Exchange: We acknowledge the inquiry letter titled "Inquiry Letter Regarding the 2022 Annual Report of Kairuide Holdings Co., Ltd." (Company Department Annual Report Inquiry Letter [2023] No. 1, hereinafter referred to as the Inquiry Letter) forwarded by Kairuide Holdings Co., Ltd. (hereinafter referred to as the Company or Kairuide). We have conducted a careful review of the financial matters requiring our explanation in the Inquiry Letter and respond to the issues raised as follows:
- Regarding Gross Margin. During the reporting period, your company's coal trading revenue and sales gross margin were 359 million yuan and 3.11%, respectively, representing year-on-year increases of 206.48% and a decline of 15.08%. Among these, the sales gross margin under the self-operated model for coal business was 3.06%, a year-on-year decline of 6.73%. Please explain the reasons for the increase in coal trading business revenue and the specific reasons for the significant decline in gross margin, considering industry characteristics, operational conditions, price fluctuations in upstream and downstream products, and cost allocation. Additionally, please explain the sustainability of the coal trading business based on current orders and whether there are significant uncertainties regarding the company's ongoing operations.