Reply of Tianheng Certified Public Accountants (Special General Partnership) to the Inquiry Letter on the Review of Nanjing San Chao New Materials Co., Ltd.'s Application for Issuance of Shares to Specific Objects (Revised Draft)

Inquiry Letter

Issue 1:

From 2023 to 2025, the company's operating revenue was RMB 47,936.83 million, RMB 34,438.36 million, and RMB 22,387.97 million, respectively. Among them, electroplated diamond wire business revenue was RMB 38,856.01 million, RMB 23,982.08 million, and RMB 13,112.31 million. The gross profit margin was 26.02%, 8.22%, and 7.53%, respectively, showing a downward trend year-on-year. From 2023 to 2025, the diamond grinding wheel business revenue was RMB 5,580.81 million, RMB 7,113.53 million, and RMB 7,520.16 million, respectively. The gross profit margin was 48.89%, 52.94%, and 51.21%, respectively. The net profit attributable to shareholders of the parent company was RMB -16,807.08 million, RMB -1,759.44 million, and RMB -1,680.08 million, showing a downward trend in losses in the past two years. The company's main products are mainly used in the photovoltaic, sapphire, and semiconductor industries. In recent years, the company's top five customers have changed significantly. The revenue from the top five customers in the same period has increased significantly.

In 2023, the accounts receivable were RMB 18,800.24 million, RMB 14,029.24 million, and RMB 10,460.09 million. The accounts payable were RMB 1,038.93 million, RMB 1,399.57 million, and RMB 929.00 million. According to the report, the accounts receivable turnover rate was 2.83, 2.30, and 2.06, which is significantly lower than the industry average. From 2023 to 2025, the company's inventory was RMB 23,418.56 million, RMB 21,342.20 million, and RMB 21,327.28 million, respectively. The inventory turnover was 1 year, RMB 20,426.77 million, RMB 14,491.03 million, and RMB 9,446.72 million. The inventory turnover was RMB 1,660.03 million, RMB 7,989.33 million, and RMB 8,792.77 million.

From 2025 to 2025, the company's fixed assets were RMB 60,514.64 million, RMB 62,552.27 million, and RMB 56,829.69 million. The accumulated depreciation was RMB 2,723.28 million, RMB 9,521.78 million, and RMB 11,640.77 million. From 2023 to 2025, the company's electroplated diamond wire business revenue and gross profit margin showed a downward trend, and the diamond grinding wheel business revenue and gross profit margin showed an upward trend. The company's electroplated diamond wire revenue and gross profit margin in 2023-2025 continued to decline, and rose in January-March 2026. The revenue of diamond grinding wheel products increased year by year from 2023 to 2025, and the gross profit margin remained at a high level. In the past two years, it has increased compared with 2023, and slightly decreased in January-March 2026. The overall trend in the reporting period is a small fluctuation. The specific analysis is as follows:

1. Changes in major product and raw material prices.

(1) Changes in major product prices

1. Electroplated diamond wire products