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Guangdong Dongfang Zirconium Industry Technology Co., Ltd.
Audit Report
Huaxing Shen Zi [2026] No. 25016400018
Huaxing Certified Public Accountants (Special General Partnership)
To the Shareholders of Guangdong Dongfang Zirconium Industry Technology Co., Ltd.:
I. Audit Opinion
We have audited the financial statements of Guangdong Dongfang Zirconium Industry Technology Co., Ltd. (hereinafter referred to as "Dongfang Zirconium" or the "Company"), which comprise the consolidated and parent company balance sheets as of December 31, 2025, and the 2025 consolidated and parent company income statements, cash flow statements, and statements of changes in owners' equity, as well as notes to the financial statements.
In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated and parent company financial position of Dongfang Zirconium as of December 31, 2025, and its consolidated and parent company operating results and cash flows for the year 2025 in accordance with the Accounting Standards for Business Enterprises.
II. Basis for Audit Opinion
We conducted our audit in accordance with the Auditing Standards for Certified Public Accountants of China. Our responsibilities under these standards are further described in the "Certified Public Accountant's Responsibilities for the Audit of the Financial Statements" section of the audit report. We are independent of Dongfang Zirconium in accordance with the Code of Ethics for Certified Public Accountants of China and have fulfilled our other ethical responsibilities. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
III. Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, we do not provide a separate opinion on these matters.
(I) Revenue Recognition
- Matter Description
As described in Note III (31) and Note V (36) to the financial statements, Dongfang Zirconium's operating revenue for 2025 was 1,244.88 million yuan, a decrease of 298.06 million yuan or 19.32% compared to 2024 operating revenue of 1,542.94 million yuan. Operating revenue is one of Dongfang Zirconium's key performance indicators. There is an inherent risk of material misstatement in revenue recognition; therefore, we identified revenue recognition as a key audit matter.
- Audit Response
(1) Understand and evaluate the design and operating effectiveness of key internal controls related to management's revenue recognition;
(2) Select samples to inspect sales contracts, perform a "five-step" analysis, determine the timing of the satisfaction of performance obligations and the transfer of control, and evaluate whether Dongfang Zirconium's revenue recognition timing complies with the requirements of the Accounting Standards for Business Enterprises;
(3) Inspect supporting documents related to revenue recognition, including contracts with customers, sales orders, delivery notes, sales invoices, shipping documents, accounting vouchers, and payment collection records; confirm the authenticity of recognized revenue by sending confirmation letters to customers regarding account balances and current period sales;
(4) Verify the existence of related-party relationships between customers and the Company by checking the industrial and commercial information of major customers and inquiring with relevant company personnel;
(5) Obtain records of returns in the current period and after the period from the company's management system and inspect them to confirm whether there are any significant abnormal returns affecting revenue recognition;
(6) Perform analytical procedures on revenue and gross profit margins, including monthly and annual analytical reviews of revenue and gross profit margins, to compare whether fluctuations between months and years are abnormal;
(7) Perform cut-off tests on revenue transactions recorded before and after the balance sheet date, selecting samples and checking them against delivery notes and other supporting documents to evaluate whether revenue was recorded in the appropriate accounting period.