Response from Gongzheng Tianye Certified Public Accountants on Feedback Regarding Changzhou Qianhong Biochemical Pharmaceutical Co., Ltd.'s Convertible Bond Application Documents

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 have received 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 conducted a thorough review of the issues raised in your inquiry letter and provide the following responses:

Note:

1. Unless otherwise stated, 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."
2. Any discrepancies between the total amounts and the sum of individual items in this response are due to rounding.
3. The font styles in this report represent the following meanings:
   • Issues listed in the inquiry letter: Regular font (not bold)
   • Responses to the issues in the inquiry letter: Song font (not bold)
   • Modifications or supplements to the application documents: Kai font (bold)

Gongzheng Tianye Certified Public Accountants, SGP
Wuxi, Jiangsu, China
Tel: 86 (510) 68798988
Fax: 86 (510) 68567788
E-mail: mail@gztycpa.cn

Question 1

For the reporting periods, the company's operating revenues were 2,303.55 million yuan, 1,814.27 million yuan, 1,526.24 million yuan, and 1,215.02 million yuan, respectively. Among these, the revenue from the formulation series was 1,181.52 million yuan, 1,114.50 million yuan, 1,079.08 million yuan, and 812.19 million yuan, while the revenue from the raw material series was 1,116.80 million yuan, 692.03 million yuan, 443.40 million yuan, and 393.82 million yuan. The gross profit margins were 38.59%, 43.26%, 54.85%, and 57.71%, respectively. The gross profit margins for the formulation series were 61.41%, 61.52%, 61.82%, and 69.96%, while those for the raw material series were 14.19%, 13.37%, 37.67%, and 32.62%. According to the application documents, there is a risk of declining gross profit margins if there is a significant increase in raw material prices or a substantial decrease in product prices due to centralized procurement.

For the reporting periods, the company's foreign sales revenues were 995.45 million yuan, 557.09 million yuan, 352.11 million yuan, and 317.35 million yuan, accounting for 43.23%, 30.79%, 23.11%, and 26.18% of the main business revenue, respectively. The company's foreign exchange gains and losses for the reporting periods were 74.02 million yuan, 1.26 million yuan, 3.73 million yuan, and -6.61 million yuan, indicating a certain impact of exchange rate fluctuations on the company's performance.

During the reporting periods, the company adopted an agency model in some remote areas to sell products through distributors, who assisted in marketing and sales. Some enzyme products were promoted through retail and OTC channels to complete sales in the terminal market.

For the reporting periods, the sales to the top five customers accounted for 51.81%, 50.60%, 50.73%, and 48.50% of total sales, respectively. The book value of accounts receivable was 565.08 million yuan, 225.03 million yuan, 254.39 million yuan, and 249.22 million yuan, respectively. The procurement from the top five suppliers accounted for 47.44%, 42.21%, 31.68%, and 41.88% of total purchases, respectively. The amounts of prepayments at the end of each reporting period were 27.67 million yuan, 3.90 million yuan, 11.72 million yuan, and 39.99 million yuan, respectively.

For the reporting periods, the company's non-operating income and expenses were 65.21 million yuan, 38.38 million yuan, 87.03 million yuan, and 112.18 million yuan, mainly due to the reversal of bad debt losses on other receivables and gains from the disposal of fixed assets.

At the end of each reporting period, the book value of inventory was 536.48 million yuan, 602.01 million yuan, 426.81 million yuan, and 382.97 million yuan, with inventory turnover rates of 3.02 times, 1.79 times, 1.32 times, and 1.26 times, respectively. The provisions for inventory impairment were 616,300 yuan, 1,242,000 yuan, 357,070 yuan, and 57,790 yuan, respectively.