Response to the Audit Inquiry Letter Regarding the Application for Issuance of Shares to Specific Targets by Shanxi Huohua Group Co., Ltd.
XYZH/2026BJAG1F0698 Shanxi Huohua Group Co., Ltd.
To: Listing Audit Center of the Shenzhen Stock Exchange:
ShineWing Certified Public Accountants (LLP) (hereinafter referred to as "this firm" or "ShineWing") has been engaged by Shanxi Huohua Group Co., Ltd. (hereinafter referred to as the "Issuer," "the Company," or "Huohua Shares") to serve as the reporting accountant for the 2025 A-share issuance to specific targets (hereinafter referred to as "this issuance"). In accordance with the requirements of your "Audit Inquiry Letter regarding the Application for Issuance of Shares to Specific Targets by Shanxi Huohua Group Co., Ltd." [Audit Letter (2026) No. 120006] and the Company's relevant explanations, we hereby provide our response based on the work we have performed:
Question 1. During the reporting period, the Company's operating income was 963.8523 million yuan, 1,313.8705 million yuan, 1,101.1211 million yuan, and 969.6685 million yuan, respectively; net profit attributable to the parent company was 121.3059 million yuan, 204.6812 million yuan, 140.0181 million yuan, and 145.5487 million yuan, respectively, indicating volatility in operating performance. During the reporting period, the Company utilized both direct sales and distribution models. At the end of each period, the book value of the Company's accounts receivable was 211.5573 million yuan, 240.0421 million yuan, 297.2111 million yuan, and 411.7774 million yuan, respectively, accounting for 22.92%, 23.09%, 32.08%, and 39.46% of current assets at the end of the same period; the balance of prepayments was 10.7325 million yuan, 11.7696 million yuan, 13.8383 million yuan, and 46.69 million yuan, respectively; the book value of goodwill was 72.5419 million yuan, 78.6399 million yuan, 76.5842 million yuan, and 184.0989 million yuan, respectively. In March 2025, the Company acquired Hebei Tianning Chemical Co., Ltd. (hereinafter "Tianning Chemical") through a business combination not under common control, resulting in goodwill of 108.2383 million yuan. At the end of each period, the book value of the Company's fixed assets was 232.3075 million yuan, 287.3353 million yuan, 455.5736 million yuan, and 555.8042 million yuan, respectively, accounting for 29.15%, 31.75%, 41.03%, and 42.16% of non-current assets at the end of the same period. The Company's fixed assets primarily consist of buildings and machinery.