Response from Gongzheng Tianye Certified Public Accountants on Feedback Regarding Changzhou Qianhong Biochemical Pharmaceutical Co., Ltd.'s Convertible Bond Application Documents
Shenzhen Stock Exchange:
We acknowledge receipt of your inquiry letter dated February 12, 2026, regarding Changzhou Qianhong Biochemical Pharmaceutical Co., Ltd.'s application to issue convertible bonds to unspecified objects (Inquiry Letter [2026] 120011). As the reporting accountants for this application, we have reviewed the issues raised in the inquiry letter and provide the following responses:
Notes:
- Unless otherwise specified, the abbreviations or terms used in this response have the same meanings as those in the "Prospectus for the Issuance of Convertible Bonds by Changzhou Qianhong Biochemical Pharmaceutical Co., Ltd. for Listing on the Main Board."
- Any discrepancies in totals due to rounding are unintentional.
- The font styles in this response represent the following meanings:
- Issues raised in the inquiry letter: Regular font (not bold)
- Responses to the issues raised: Regular font (not bold)
- Modifications or supplements to the application documents: Italics (bold)
Gongzheng Tianye Certified Public Accountants, SGP
Wuxi, Jiangsu, China
Tel: +86 (510) 68798988
Fax: +86 (510) 68567788
E-mail: mail@gztycpa.cn
1. Revenue and Gross Profit Analysis
For the reporting periods, the company's operating revenues were as follows:
| Period | Revenue (10,000 Yuan) | Formulation Series Revenue (10,000 Yuan) | Raw Material Revenue (10,000 Yuan) | Gross Margin (%) |
|---|---|---|---|---|
| 2025 | 230,354.78 | 118,151.83 | 111,679.65 | 38.59% |
| 2024 | 181,426.89 | 111,450.25 | 69,202.81 | 43.26% |
| 2023 | 152,624.28 | 107,908.32 | 44,339.61 | 54.85% |
| 2022 | 121,501.50 | 81,218.99 | 39,382.26 | 57.71% |
The gross profit margins were 38.59%, 43.26%, 54.85%, and 57.71% for the respective years. The formulation series maintained a higher gross margin compared to the raw material series. The company faces risks of declining gross margins due to potential increases in raw material prices and decreases in product prices due to centralized procurement policies.
2. Foreign Sales and Exchange Gains/Losses
The company's foreign sales revenues were as follows:
| Period | Foreign Sales Revenue (10,000 Yuan) | Percentage of Total Revenue (%) |
|---|---|---|
| 2025 | 99,544.91 | 43.23% |
| 2024 | 55,708.92 | 30.79% |
| 2023 | 35,211.06 | 23.11% |
| 2022 | 31,734.50 | 26.18% |
The company experienced exchange gains/losses as follows:
| Period | Exchange Gains/Losses (10,000 Yuan) | Net Profit (10,000 Yuan) | Percentage of Net Profit (%) |
|---|---|---|---|
| 2025 | -661.43 | 36,813.36 | -1.80% |
| 2024 | 372.62 | 33,318.25 | 1.12% |
| 2023 | 126.19 | 17,867.20 | 0.71% |
| 2022 | 7,401.60 | 31,991.08 | 23.14% |
3. Sales Model and Customer Management
The company employs a distribution model for sales, with specific criteria for selecting and managing distributors. The management system includes sales management at the terminal level, methods for adding and exiting distributors, and the basic content of distribution agreements.