BDO China Shu Lun Pan Certified Public Accountants LLP
Response to the Audit Inquiry Letter Regarding the Application for Issuance of Shares to Specific Targets by Tianjin Guoan MGL New Material Technology Co., Ltd.
Letter No. [blank] [2026] ZA396
Shenzhen Stock Exchange:
We have received the "Audit Inquiry Letter Regarding the Application for Issuance of Shares to Specific Targets by Tianjin Guoan MGL New Material Technology Co., Ltd." (Audit Letter [2026] No. 020046) (hereinafter referred to as the "Audit Inquiry Letter") issued by your exchange on May 20, 2026. BDO China Shu Lun Pan Certified Public Accountants LLP (hereinafter referred to as "BDO," "we," or "us") was engaged by Tianjin Guoan MGL New Material Technology Co., Ltd. (hereinafter referred to as "MGL," "the Issuer," or "the Company") to serve as the accountant for its application for the issuance of shares to specific targets.
In accordance with your requirements, we have prudently reviewed the issues raised in the Audit Inquiry Letter and hereby respond as follows:
Note 1: Unless otherwise specified, the abbreviations or definitions used in this response report are the same as those in the "Prospectus for the Issuance of Shares to Specific Targets and Listing on the Chi-Next Market of Tianjin Guoan MGL New Material Technology Co., Ltd. (Declaration Draft)." In this response report, any discrepancies between the sum of individual figures and the total are due to rounding.
Note 2: BDO audited the financial statements of MGL for the years 2023-2025 and issued audit reports, specifically Letter No. [blank] [2024] ZA11481, Letter No. [blank] [2025] ZA11762, and Letter No. [blank] [2026] ZA11392.
Problem 1
- According to the application documents, the Company is primarily engaged in the R&D, production, and sales of cathode materials for new energy batteries, with lithium cobalt oxide and ternary cathode materials as its main products. During the reporting period, the Company's lithium cobalt oxide was mainly applied in consumer electronics such as smartphones and laptops, while ternary materials were primarily targeted at the small power battery sector, represented by power tools and electric two-wheelers. Currently, the Company's ternary materials focus on high-nickel and ultra-high-nickel series, while lithium cobalt oxide focuses on high-voltage series. Simultaneously, the Company plans to invest in a fourth-generation and above lithium iron phosphate integrated project to develop related high-compaction density products.
For the years 2023-2025, the Company's operating income was 2,316.08 million yuan, 1,793.91 million yuan, and 2,320.91 million yuan, respectively. Net profit attributable to owners of the parent company after deducting non-recurring gains and losses was 47.09 million yuan, -85.48 million yuan, and 13.78 million yuan, respectively. The gross profit margin of the main business was 7.22%, 5.79%, and 7.83%, respectively, indicating performance volatility.
In the last three years, sales revenue from the top five customers accounted for 71.83%, 76.20%, and 68.38% of operating income, respectively. Procurement from the top five suppliers accounted for 72.88%, 79.09%, and 70.24% of total procurement, respectively, with high procurement amounts from Lanzhou Jinchuan and its affiliates, accounting for 27.88%, 40.52%, and 32.74% of total procurement.
The Company's sales pricing model is "main raw material cost + processing fee." During the reporting period, market prices for major upstream raw materials such as cobaltosic oxide, lithium carbonate, ternary precursors, and lithium hydroxide fluctuated significantly, leading to significant fluctuations in the sales prices of the Company's main products.
At the end of the last three years, the book value of the Company's fixed assets was 926.46 million yuan, 898.24 million yuan, and 886.38 million yuan, respectively. In the last three years, the capacity utilization rate for lithium cobalt oxide was 60.78%, 65.32%, and 95.13%, respectively, and the capacity utilization rate for ternary materials was 29.75%, 61.62%, and 67.12%, respectively.