Huaxing Accounting Firm's Reply on the Inquiry Letter Regarding Jinsanjiang (Zhaoqing) Silicon Material Co., Ltd.'s Application for Issuing Convertible Bonds to Unspecified Objects
1. Response to Inquiry Letter
Shenzhen Stock Exchange: According to your inquiry letter dated November 14, 2025, regarding Jinsanjiang (Zhaoqing) Silicon Material Co., Ltd.'s application for issuing convertible bonds to unspecified objects, Huaxing Accounting Firm (Special General Partnership) (hereinafter referred to as "Huaxing" or "the accountants") has conducted a review and provides the following explanations regarding the issues raised.
2. Inquiry 1
During the reporting period, the company's gross profit margins were 38.22%, 32.84%, 34.51%, and 37.98%, which are higher than the industry average. The company's overseas revenue during the reporting period was 51.1647 million, 63.8237 million, 97.4204 million, and 48.3037 million, accounting for 18.35%, 21.72%, 25.35%, and 24.26% of total revenue, respectively. The sales amounts to the top five customers were 198.2806 million, 198.5680 million, 277.1263 million, and 138.2775 million, accounting for 70.94%, 67.45%, 71.88%, and 69.11% of total revenue, respectively. The total purchases from the top five suppliers were 113.1768 million, 114.5282 million, 131.5992 million, and 64.6425 million, accounting for 72.07%, 70.31%, 59.72%, and 60.44% of total purchases, indicating a high concentration of customers and suppliers.
At the end of each reporting period, the company's inventory book value was 40.8642 million, 42.5982 million, 60.5925 million, and 70.0623 million, accounting for 19.15%, 17.49%, 20.70%, and 27.41% of current assets, respectively. According to the application materials, toothpaste products fall under the cosmetics regulatory scope, which is strictly regulated by food and drug authorities. Toothpaste manufacturers conduct rigorous quality system certification management for suppliers.
In the last three years, the company's net cash flow from operating activities was 89.0572 million, 72.6221 million, and 100.8896 million, respectively. The issuer is requested to provide additional explanations on the following points:
- The reasons for the company's gross profit margin being higher than the industry average, considering changes in raw material prices and product sales prices during the reporting period, industry competition, changes in downstream customer gross margins, cost control, and the company's gross profit margin changes.
- An analysis comparing the prices of silica raw materials purchased by major downstream toothpaste industry customers with market prices, explaining any discrepancies and their reasonableness.
- Whether the changes in the issuer's overseas revenue are consistent with comparable companies in the industry, including confirmation and response situations from major customers over the past three years.
- The impact of international trade conditions and tariff policy changes on the issuer's operating performance and fundraising project benefits.
- The reasons for the concentration of the top five customers and whether it aligns with industry practices and the company's development strategy, including the stability of cooperation relationships and any significant dependency risks on relevant customers.
- Basic information about major suppliers, cooperation history, transaction content, credit policies, and any changes or new suppliers, along with an analysis of the reasons for high supplier concentration.
- The reasons for the growth of inventory and its reasonableness, including whether it matches revenue and orders, and whether the provision for inventory depreciation is sufficient.
3. Company Response
- The reasons for the company's gross profit margin being higher than the industry average are as follows:
- The company has a higher gross profit margin compared to comparable listed companies in the industry during the reporting period. The comparison is as follows:
| Company Name | 2025 (Jan-Sep) | 2024 | 2023 | 2022 |
|---|---|---|---|---|
| Longxing Technology | 8.62% | 10.71% | 9.58% | 8.71% |
| Quancheng Co., Ltd. | 35.64% | 33.95% | 29.44% | 28.57% |
| Yuanxiang New Materials | 29.16% | 22.23% | 20.37% | 25.18% |
| Average | 24.47% | 22.30% | 19.80% | 20.82% |
| Jinsanjiang | 39.55% | 34.60% | 32.90% | 38.32% |