Response to the Inquiry Letter Regarding Souyute Group Co., Ltd.'s 2022 Annual Report
To the Listing Company Management Department of the Shenzhen Stock Exchange:
We have received the "Inquiry Letter Regarding Souyute Group Co., Ltd.'s 2022 Annual Report" (Company Department Annual Report Inquiry Letter [2023] No. 106) forwarded by Souyute Group Co., Ltd. (hereinafter referred to as "Souyute" or "the Company"). We have conducted a prudent review of the financial matters requiring our explanation in the inquiry letter, and we now report the findings as follows:
1. Annual Report Inquiry Letter
- It was mentioned: "The annual report shows that your company achieved a net profit of -1.901 billion yuan in 2022, continuing to incur significant losses following a loss of 3.41 billion yuan in 2021. During the reporting period, an additional asset impairment provision totaling 1.233 billion yuan was made, mainly including a provision for bad debts of 836 million yuan for accounts receivable, a provision for impairment of long-term equity investments of 245 million yuan, a provision for bad debts of 116 million yuan for other receivables, and a provision for inventory depreciation of 30 million yuan, among others. Your company’s provision for bad debts on accounts receivable of 836 million yuan significantly increased from 467 million yuan in the same period last year. Among them, the provision ratio for individually assessed accounts receivable was 89.19%, a substantial increase from the initial ratio of 40.88%; the provision ratio for collectively assessed accounts receivable was 29.44%, with ratios of 20.36% and 73.04% for the wholesale and retail industry and commercial factoring industry, respectively. The annual audit accountant believes that through the implementation of confirmation letters, interviews, and document checks, sufficient and appropriate audit evidence regarding the recoverability of the above amounts could not be obtained, and therefore it cannot be determined whether adjustments to the relevant account balances and bad debt provisions are necessary. Please provide the company with the following: (1) In a tabular format, explain the business background, aging situation, contractually agreed payment terms, reasons for delays in collection, and the reasonableness of the measures taken or planned to collect the receivables (if any), whether the transactions involved have commercial substance, whether there were any fictitious transactions in previous years, and provide the names of the customers involved in the aforementioned accounts receivable, indicating whether there are any related party relationships or other relationships that may lead to conflicts of interest with your company, your company’s directors, supervisors, senior management, or shareholders holding more than 5%; (2) Explain the reasons and reasonableness for the significant increase in the provision ratio for bad debts on accounts receivable compared to the beginning of the period, and whether the provisions for the relevant amounts in previous years were prudent and sufficient; (3) Explain the reasons and classification basis for the provision for bad debts on accounts receivable classified by the wholesale and retail industry and commercial factoring industry, the method for determining the provision ratios, the reasons and reasonableness for the significant differences in provision ratios, and based on this, explain whether the relevant provisions are prudent and sufficient; (4) Explain the business background, operational status, and performance capability of the top five accounts receivable by debtor at the end of the period, and whether the top five debtors have any related party relationships or other relationships that may lead to conflicts of interest with your company, your company’s directors, supervisors, senior management, or shareholders holding more than 5%. Please have the annual audit accountant verify the above issues and provide a clear opinion."
The company responds: Regarding the above issues (1), the company replies as follows: