Explanation of Financial Matters in the Inquiry Letter Regarding the Application of Zhejiang Songyuan Automotive Safety System Co., Ltd. for Issuance of Convertible Bonds to Unspecified Targets
Shenzhen Stock Exchange:
We acknowledge receipt of the "Inquiry Letter Regarding the Application of Zhejiang Songyuan Automotive Safety System Co., Ltd. for Issuance of Convertible Bonds to Unspecified Targets" (Inquiry Letter [2026] 020054, hereinafter referred to as the Inquiry Letter) transferred from Zhejiang Songyuan Automotive Safety System Co., Ltd. (hereinafter referred to as Songyuan Safety Company or the Company). We have prudently reviewed the financial matters mentioned in the Inquiry Letter and hereby report as follows.
I. Regarding the Fundraising Projects
The application materials show that the total amount of funds to be raised in this issuance shall not exceed RMB 1,055,000,000, of which RMB 738,500,000 will be used for the construction of a comprehensive industrial chain supporting project for the production of 15.2 million sets of automotive safety system core components (Phase II of the No. 3 Reservoir, Linshan Town), and RMB 316,500,000 will be used to supplement working capital. The safety system project has a construction period of 3 years. Upon completion, it is planned to add 11.2 million sets of automotive seat belts, 2 million sets of automotive airbags, and 2 million sets of automotive steering wheels. Upon reaching full production capacity, it is expected to achieve an operating revenue of RMB 1,332,000,000 and a return on equity of 13.49%. In the first quarter of 2026, the production capacity utilization rates for the issuer's seat belts, airbags, and steering wheels were 54.33%, 76.12%, and 52.91% respectively, which are significantly lower than the projected capacity utilization rate for 2025.
The issuer's previous fundraising project, "Project for the Production of 13.3 Million Sets of Automotive Safety Systems and Supporting Components (Phase I)," reached its intended usable state in August 2025. The projected economic benefits for 2025 and the first quarter of 2026 have not yet been fully realized, so they are not applicable for benefit calculation. The production workshop originally planned for steering wheel production has been repurposed for airbag product manufacturing, with a total of RMB 40,511,400 in raised funds being reallocated. As of March 31, 2026, the capacity utilization rate was 76.59%.