[Important Notice](index=3&type=section&id=%E4%B8%80%E3%80%81%E9%87%8D%E8%A6%81%E6%8F%90%E7%A4%BA) The company's board of directors, supervisory board, and senior management ensure the truthfulness, accuracy, and completeness of this quarterly report, which remains unaudited - The company's Board of Directors, Supervisory Board, and senior management guarantee the truthfulness, accuracy, and completeness of this quarterly report, free from false statements, misleading representations, or material omissions[7](index=7&type=chunk) - The company's principal officer, head of accounting, and head of the accounting department ensure the truthfulness, accuracy, and completeness of the financial statements[7](index=7&type=chunk) - This company's Q1 2018 report is unaudited[7](index=7&type=chunk) [Company Profile](index=3&type=section&id=%E4%BA%8C%E3%80%81%E5%85%AC%E5%8F%B8%E5%9F%BA%E6%9C%AC%E6%83%85%E5%86%B5) This section provides an overview of the company's key financial data and shareholder structure as of the end of the reporting period [Key Financial Data](index=3&type=section&id=2.1%20%E4%B8%BB%E8%A6%81%E8%B4%A2%E5%8A%A1%E6%95%B0%E6%8D%AE) In Q1 2018, the company's operating revenue slightly increased by 2.32% year-over-year, but net profit attributable to shareholders and non-recurring net profit both declined, with negative operating cash flow indicating cash pressure Key Financial Data for Q1 2018 | Indicator | Current Period (RMB) | Prior Period (RMB) | Year-over-year Change (%) | | :--- | :--- | :--- | :--- | | Operating Revenue | 456,190,230.99 | 445,839,309.06 | 2.32 | | Net Profit Attributable to Shareholders | 38,985,100.55 | 40,889,298.56 | -4.66 | | Net Profit Attributable to Shareholders (Excluding Non-recurring Items) | 36,747,150.68 | 39,854,657.11 | -7.80 | | Basic Earnings Per Share (RMB/share) | 0.3797 | 0.5310 | -28.49 | | Weighted Average Return on Net Assets (%) | 3.95 | 10.07 | decrease by 6.12 percentage points | | Net Cash Flow from Operating Activities | -63,245,931.36 | -1,264,223.16 | N/A | Non-recurring Gains and Losses for Q1 2018 | Item | Amount (RMB) | Explanation | | :--- | :--- | :--- | | Gains/Losses from Entrusted Investments or Asset Management | 2,633,070.72 | Investment income from wealth management products | | Government Grants | 50,000.00 | - | | Net Non-operating Income and Expenses | -43,133.46 | - | | **Total** | **2,237,949.87** | - | [Shareholder Information as of the End of the Reporting Period](index=4&type=section&id=2.2%20%E6%88%AA%E6%AD%A2%E6%8A%A5%E5%91%8A%E6%9C%9F%E6%9C%AB%E7%9A%84%E8%82%A1%E4%B8%9C%E6%80%BB%E6%95%B0%E3%80%81%E5%89%8D%E5%8D%81%E5%90%8D%E8%82%A1%E4%B8%9C%E3%80%81%E5%89%8D%E5%8D%81%E5%90%8D%E6%B5%81%E9%80%9A%E8%82%A1%E4%B8%9C%EF%BC%88%E6%88%96%E6%97%A0%E9%99%90%E5%94%AE%E6%9D%A1%E4%BB%B6%E8%82%A1%E4%B8%9C%EF%BC%89%E6%8C%81%E8%82%A1%E6%83%85%E5%86%B5%E8%A1%A8) As of the end of the reporting period, the company had 13,427 shareholders, with a highly concentrated equity structure where the top two shareholders collectively held 75% of the shares, and Chairman Yang Weijian is the actual controller - As of the end of the reporting period, the company had **13,427 shareholders**[9](index=9&type=chunk) Shareholding of Top Two Shareholders | Shareholder Name | Number of Shares Held | Shareholding Percentage (%) | | :--- | :--- | :--- | | Ruineng Industrial Co., Ltd. | 69,078,947 | 67.28 | | Pingtan Jierun Equity Investment Management Partnership (Limited Partnership) | 7,921,053 | 7.72 | - Mr. Yang Weijian, the company's Chairman, indirectly holds a combined **68.96%** of the company's equity through Ruineng Industrial Co., Ltd. and Pingtan Jierun, making him the actual controller[10](index=10&type=chunk) [Significant Events](index=6&type=section&id=%E4%B8%89%E3%80%81%E9%87%8D%E8%A6%81%E4%BA%8B%E9%A1%B9) This section details major changes in the company's financial statement items and indicators, along with explanations for these fluctuations [Analysis of Significant Changes in Key Financial Statement Items and Financial Indicators](index=6&type=section&id=3.1%20%E5%85%AC%E5%8F%B8%E4%B8%BB%E8%A6%81%E4%BC%9A%E8%AE%A1%E6%8A%A5%E8%A1%A8%E9%A1%B9%E7%9B%AE%E3%80%81%E8%B4%A2%E5%8A%A1%E6%8C%87%E6%A0%87%E9%87%8D%E5%A4%A7%E5%8F%98%E5%8A%A8%E7%9A%84%E6%83%85%E5%86%B5%E5%8F%8A%E5%8E%9F%E5%9B%A0) This period saw notable changes across various financial statement items, including a 31.83% increase in notes receivable and a 64.71% increase in other receivables, while management expenses rose by 31.25% due to increased R&D investment, and financial expenses significantly decreased by 274.88% due to exchange gains Major Balance Sheet Item Changes | Item | Change (%) | Primary Reason | | :--- | :--- | :--- | | Notes Receivable | 31.83 | Increase in notes receivable from customers due to rising operating revenue | | Prepayments | -41.35 | Due to settlement of prepayments from the prior period in the current period | | Other Receivables | 64.71 | Due to increased rental deposits and intercompany balances | | Taxes Payable | 57.95 | Due to increased corporate income tax and VAT payable at the end of the current period | Major Income Statement and Cash Flow Statement Item Changes | Item | Change (%) | Primary Reason | | :--- | :--- | :--- | | Administrative Expenses | 31.25 | Due to increased R&D investment by the company | | Financial Expenses | -274.88 | Due to increased net exchange gains in the current period | | Asset Impairment Losses | 38.12 | Due to increased provision for bad debts on receivables in the current period | | Investment Income | N/A | Due to income generated from purchasing wealth management products with temporarily idle raised funds | | Net Cash Flow from Operating Activities | N/A | Due to increased settlement of goods payments by notes and increased payments for inventory stocking in the current period | [Other Significant Matters](index=7&type=section&id=3.2%20%E9%87%8D%E8%A6%81%E4%BA%8B%E9%A1%B9%E8%BF%9B%E5%B1%95%E6%83%85%E5%86%B5%E5%8F%8A%E5%85%B6%E5%BD%B1%E5%93%8D%E5%92%8C%E8%A7%A3%E5%86%B3%E6%96%B9%E6%A1%88%E7%9A%84%E5%88%86%E6%9E%90%E8%AF%B4%E6%98%8E) During the reporting period, the company had no significant matter developments, overdue unfulfilled commitments, or requirements to issue major performance change warnings - No significant matter developments required explanation during the reporting period[18](index=18&type=chunk) - No overdue unfulfilled commitments during the reporting period[18](index=18&type=chunk) - The company has not forecasted a cumulative net loss or significant change in net profit from the beginning of the year to the end of the next reporting period compared to the prior year[18](index=18&type=chunk) [Appendix](index=7&type=section&id=%E5%9B%9B%E3%80%81%E9%99%84%E5%BD%95) This appendix includes the company's unaudited consolidated and parent company balance sheets as of March 31, 2018, along with the consolidated and parent company income statements and cash flow statements for Q1 2018 [Financial Statements](index=7&type=section&id=4.1%20%E8%B4%A2%E5%8A%A1%E6%8A%A5%E8%A1%A8) This section presents the company's unaudited consolidated and parent company financial statements, including balance sheets, income statements, and cash flow statements for the first quarter of 2018 [Consolidated Balance Sheet](index=7&type=section&id=%E5%90%88%E5%B9%B6%E8%B5%84%E4%BA%A7%E8%B4%9F%E5%80%BA%E8%A1%A8) As of March 31, 2018, the company's consolidated total assets were **RMB 1.42 billion**, a 3.28% increase from the beginning of the year, with total liabilities at **RMB 418.7 million** and owners' equity attributable to the parent company at **RMB 1.00 billion** Key Consolidated Balance Sheet Data (March 31, 2018) | Item | Period-end Balance (RMB) | Beginning-of-year Balance (RMB) | | :--- | :--- | :--- | | Total Assets | 1,421,177,346.83 | 1,376,092,509.70 | | Total Liabilities | 418,707,132.97 | 403,748,531.25 | | Total Owners' Equity Attributable to Parent Company | 1,001,279,743.44 | 971,032,517.32 | [Parent Company Balance Sheet](index=10&type=section&id=%E6%AF%8D%E5%85%AC%E5%8F%B8%E8%B5%84%E4%BA%A7%E8%B4%9F%E5%80%BA%E8%A1%A8) As of March 31, 2018, the parent company's total assets were **RMB 977.8 million**, an 8.47% increase from the beginning of the year, with total liabilities at **RMB 161.7 million** and owners' equity at **RMB 816.2 million** Key Parent Company Balance Sheet Data (March 31, 2018) | Item | Period-end Balance (RMB) | Beginning-of-year Balance (RMB) | | :--- | :--- | :--- | | Total Assets | 977,826,120.38 | 901,477,170.72 | | Total Liabilities | 161,669,148.05 | 114,128,621.50 | | Total Owners' Equity | 816,156,972.33 | 787,348,549.22 | [Consolidated Income Statement](index=12&type=section&id=%E5%90%88%E5%B9%B6%E5%88%A9%E6%B6%A6%E8%A1%A8) In Q1 2018, the company achieved total operating revenue of **RMB 456.2 million**, a 2.32% year-over-year increase, while net profit attributable to parent company shareholders was **RMB 39.0 million**, a 4.66% year-over-year decrease Key Consolidated Income Statement Data (Q1 2018) | Item | Current Period Amount (RMB) | Prior Period Amount (RMB) | | :--- | :--- | :--- | | Total Operating Revenue | 456,190,230.99 | 445,839,309.06 | | Operating Profit | 46,870,232.10 | 48,438,768.70 | | Net Profit Attributable to Parent Company Shareholders | 38,985,100.55 | 40,889,298.56 | | Basic Earnings Per Share (RMB/share) | 0.3797 | 0.5310 | [Parent Company Income Statement](index=14&type=section&id=%E6%AF%8D%E5%85%AC%E5%8F%B8%E5%88%A9%E6%B6%A6%E8%A1%A8) In Q1 2018, the parent company's operating revenue reached **RMB 139.3 million**, up 9.57% year-over-year, with net profit at **RMB 28.8 million**, a slight decrease of 2.65% year-over-year Key Parent Company Income Statement Data (Q1 2018) | Item | Current Period Amount (RMB) | Prior Period Amount (RMB) | | :--- | :--- | :--- | | Operating Revenue | 139,255,666.47 | 127,096,323.43 | | Operating Profit | 33,477,611.94 | 34,628,757.67 | | Net Profit | 28,808,423.11 | 29,591,830.28 | [Consolidated Cash Flow Statement](index=15&type=section&id=%E5%90%88%E5%B9%B6%E7%8E%B0%E9%87%91%E6%B5%81%E9%87%8F%E8%A1%A8) In Q1 2018, net cash flow from operating activities was **negative RMB 63.25 million**, a significant year-over-year decrease, while net cash flow from financing activities turned positive at **RMB 33.66 million** Key Consolidated Cash Flow Statement Data (Q1 2018) | Item | Current Period Amount (RMB) | Prior Period Amount (RMB) | | :--- | :--- | :--- | | Net Cash Flow from Operating Activities | -63,245,931.36 | -1,264,223.16 | | Net Cash Flow from Investing Activities | -3,444,765.61 | -291,339.08 | | Net Cash Flow from Financing Activities | 33,661,110.15 | -22,698,266.00 | | Cash and Cash Equivalents at Period End | 179,128,093.78 | 124,118,963.37 | [Parent Company Cash Flow Statement](index=17&type=section&id=%E6%AF%8D%E5%85%AC%E5%8F%B8%E7%8E%B0%E9%87%91%E6%B5%81%E9%87%8F%E8%A1%A8) In Q1 2018, the parent company's net cash flow from operating activities was **negative RMB 8.65 million**, a shift from positive in the prior year, with net cash flow from financing activities at **RMB 13.91 million** Key Parent Company Cash Flow Statement Data (Q1 2018) | Item | Current Period Amount (RMB) | Prior Period Amount (RMB) | | :--- | :--- | :--- | | Net Cash Flow from Operating Activities | -8,648,949.95 | 7,390,537.62 | | Net Cash Flow from Investing Activities | -18,902,827.52 | -12,595,648.00 | | Net Cash Flow from Financing Activities | 13,906,727.77 | -5,010,421.88 | | Cash and Cash Equivalents at Period End | 118,542,177.31 | 39,588,493.15 | [Audit Report](index=18&type=section&id=4.2%20%E5%AE%A1%E8%AE%A1%E6%8A%A5%E5%91%8A) This quarterly financial report has not been audited - This quarterly report is unaudited[34](index=34&type=chunk)

Financial Performance - The company's operating revenue for 2017 was RMB 1,909,424,909.13, representing a 22.50% increase compared to RMB 1,558,730,230.57 in 2016[21]. - The net profit attributable to shareholders of the listed company reached RMB 141,319,858.22, a 51.27% increase from RMB 93,420,536.10 in the previous year[21]. - The net profit after deducting non-recurring gains and losses was RMB 135,669,351.14, up 50.41% from RMB 90,200,860.76 in 2016[21]. - The total assets of the company increased by 71.87% to RMB 1,376,092,509.70 at the end of 2017, compared to RMB 800,646,432.81 at the end of 2016[21]. - The net assets attributable to shareholders of the listed company rose by 151.58% to RMB 971,032,517.32 at the end of 2017, compared to RMB 385,976,753.40 at the end of 2016[21]. - Basic earnings per share for 2017 was CNY 1.5731, an increase of 29.65% compared to 2016[23]. - The weighted average return on equity decreased by 6.33 percentage points to 20.91% in 2017[23]. - The company reported a significant decrease in net cash flow from operating activities, which was RMB 1,594,024.23, down 97.05% from RMB 53,957,339.58 in 2016[21]. - The company achieved operating revenue of RMB 1,909.42 million in 2017, representing a year-on-year growth of 22.50%[47]. - The net profit attributable to shareholders was RMB 141.32 million, reflecting a year-on-year increase of 51.27%[47]. Market Position and Strategy - The company held approximately 60% market share in the domestic knitting equipment control system market in 2017[31]. - The company operates a dual business model focusing on knitting equipment control systems and IC product distribution[31]. - The company plans to leverage the growth in smart manufacturing and smart grid sectors to boost demand for IC products[77]. - The company aims to expand its product line by introducing embroidery machine computer control systems and enhancing its control product offerings in the sewing machinery sector[91]. - The domestic knitting equipment control system market is expected to grow due to rising demand for high-efficiency, automated, and multifunctional knitting equipment driven by consumer trends[87]. - The company emphasizes a dual business strategy focusing on manufacturing knitting equipment control systems and distributing IC products, aiming for collaborative growth[90]. Research and Development - The company has invested in a comprehensive quality management system based on ISO9001:2008 standards[44]. - The company’s R&D expenditure increased by 47.18% to CNY 36,299,785[54]. - The company obtained 12 invention patents, 2 utility model patents, and 2 software copyrights during the reporting period[53]. - The company launched several new technology and product development projects, including a single-segment needle control system and an R100 control system[48]. - The company initiated the development of a new knitting sock machine control system, utilizing integrated drive control technology[49]. Operational Risks and Challenges - The company has no significant operational risks that could materially affect its production and operations during the reporting period[8]. - The company faces risks related to market demand fluctuations, particularly in the knitting equipment sector, which is heavily influenced by the downstream demand for knitted products[93]. - The company’s manufacturing costs are significantly impacted by raw material price volatility, particularly for integrated circuits and other electronic components[94]. - Currency exchange rate fluctuations could impact the company's profits due to its involvement in foreign currency transactions related to IC product distribution and foreign loans[96]. Shareholder and Governance Matters - The company plans to distribute a cash dividend of RMB 4.5 per 10 shares, along with a capital reserve transfer of 4 shares for every 10 shares held[6]. - The company’s cash dividend policy is clearly defined and aligns with regulatory requirements, ensuring a structured approach to profit distribution[100]. - The company has committed to a stable cash dividend policy, distributing no less than 30% of the average distributable profit over three years in cash if there are no major plans or cash expenditures[129]. - The company emphasizes the protection of minority shareholders' rights and maintains effective communication channels with them[200]. - The company has established a governance structure that ensures effective operation in accordance with relevant laws and regulations[198]. Corporate Social Responsibility - The company participated in a poverty alleviation project, donating RMB 250,000 to support charitable efforts in Gansu Province[152]. - The total amount allocated for poverty alleviation efforts was RMB 250,000, with no material contributions in kind reported[154]. - The company aims to actively respond to national poverty alleviation policies and fulfill its corporate social responsibility[155]. Employee and Management Structure - The company has a total of 677 employees, with 311 holding a bachelor's degree or higher[193]. - The company has established a training system focusing on leadership and professional skills, targeting core talents in management, R&D, and marketing for continuous improvement[195]. - The management team includes experienced professionals with backgrounds in technology and finance, enhancing the company's strategic direction[188]. - The company has maintained a stable management structure, with key personnel holding long-term positions, contributing to operational consistency[189]. Financial Management and Asset Management - The company has engaged in cash asset management, with a total of CNY 27,000,000 in principal for guaranteed floating income and CNY 30,000,000 in principal for guaranteed returns[146]. - The company has structured deposits with various banks, with amounts ranging from CNY 1,000,000 to CNY 9,000,000 and annualized returns between 3.50% and 4.20%[147]. - The company has not reported any overdue amounts from cash asset management activities[146]. - All cash management activities have been conducted in compliance with legal procedures[147].

[Important Notice](index=3&type=section&id=Important%20Notice) The company's management guarantees the report's accuracy and completeness, noting that the third-quarter report is unaudited - Company management guarantees the **truthfulness, accuracy, and completeness** of the quarterly report content and assumes corresponding legal responsibilities[4](index=4&type=chunk) - This company's **2017 third-quarter report** has not been audited[5](index=5&type=chunk) [Company Basic Information](index=3&type=section&id=Company%20Basic%20Information) As of September 30, 2017, the company reported significant growth in total assets and net profit, with improved operating cash flow [Key Financial Data](index=3&type=section&id=Key%20Financial%20Data) As of September 30, 2017, the company reported significant growth in total assets and net profit, with improved operating cash flow Key Financial Indicators for Q1-Q3 2017 | Indicator | End of Current Period/Year-to-Date | End of Prior Year/Prior Year-to-Date | Change (%) | | :--- | :--- | :--- | :--- | | **Balance Sheet:** | | | | | Total Assets (RMB) | 1,345,052,501.85 | 800,646,432.81 | 68.00 | | Net Assets Attributable to Parent Company Shareholders (RMB) | 963,476,656.67 | 385,976,753.40 | 149.62 | | **Income Statement (Jan-Sep):** | | | | | Operating Revenue (RMB) | 1,493,744,169.92 | 1,124,142,088.24 | 32.88 | | Net Profit Attributable to Parent Company Shareholders (RMB) | 130,543,243.86 | 67,482,688.52 | 93.45 | | Net Profit Attributable to Parent Company Shareholders (Excl. Non-recurring) (RMB) | 127,925,279.50 | 65,399,684.36 | 95.61 | | Basic Earnings Per Share (RMB/share) | 1.5258 | 0.8764 | 74.10 | | **Cash Flow Statement (Jan-Sep):** | | | | | Net Cash Flow from Operating Activities (RMB) | -11,451,006.46 | -69,100,351.13 | 83.43 | Non-Recurring Gains and Losses for Q1-Q3 2017 | Item | Year-to-Date Amount (Jan-Sep) (RMB) | | :--- | :--- | | Disposal gains/losses on non-current assets | -52,773.80 | | Government grants recognized in current profit/loss | 1,992,105.88 | | Gains/losses from entrusted investments or asset management | 1,181,666.67 | | Other non-operating income and expenses | -64,360.35 | | Impact on minority interests (after tax) | 34,530.82 | | Income tax impact | -473,204.86 | | **Total** | **2,617,964.36** | [Shareholder Information](index=4&type=section&id=Shareholder%20Information) The company has 12,275 shareholders, with a highly concentrated equity structure where the controlling shareholder holds 67.28% - As of the end of the reporting period, the total number of shareholders was **12,275**[7](index=7&type=chunk) - Controlling shareholder Ruineng Industrial Co., Ltd. holds **67.28%** of shares, indicating highly concentrated equity[7](index=7&type=chunk) - Actual controller Mr. Yang Weijian indirectly controls the company through Ruineng Industrial Co., Ltd. and Pingtan Jierun[8](index=8&type=chunk) [Significant Matters](index=5&type=section&id=Significant%20Matters) The company experienced significant changes in financial indicators, driven by IPO proceeds, business expansion, and improved profitability [Analysis of Significant Changes in Key Financial Statement Items and Indicators](index=5&type=section&id=Analysis%20of%20Significant%20Changes%20in%20Key%20Financial%20Statement%20Items%20and%20Indicators) Significant changes in financial indicators were driven by IPO proceeds, business expansion, and improved profitability [Balance Sheet Item Variation Analysis](index=5&type=section&id=Balance%20Sheet%20Item%20Variation%20Analysis) Balance sheet expanded significantly, with total assets up 68.00% from wealth management, property, and IPO proceeds Key Balance Sheet Item Changes | Item | Period-End Balance (RMB) | Year-Start Balance (RMB) | Change (%) | Primary Reason | | :--- | :--- | :--- | :--- | :--- | | Other Current Assets | 397,745,495.11 | 4,367,971.46 | 9005.95 | Purchase of RMB 390 million principal-protected bank wealth management products | | Fixed Assets | 57,529,448.88 | 19,958,885.74 | 188.24 | Acquisition of properties | | Intangible Assets | 20,285,275.84 | 5,103,736.27 | 297.46 | Acquisition of land use rights | | Capital Reserve | 498,088,458.39 | 52,554,062.17 | 847.76 | IPO premium issuance of new shares | | Total Owners' Equity Attributable to Parent Company | 963,476,656.67 | 385,976,753.40 | 149.62 | IPO issuance of new shares | [Income Statement and Cash Flow Statement Item Variation Analysis](index=6&type=section&id=Income%20Statement%20and%20Cash%20Flow%20Statement%20Item%20Variation%20Analysis) Q1-Q3 2017 operating revenue grew 32.88%, boosting profits; investing cash flow saw large outflows for wealth management, and financing cash flow surged from IPO proceeds Key Income Statement and Cash Flow Statement Item Changes | Item | Current Period Amount (Jan-Sep) (RMB) | Prior Year Same Period Amount (Jan-Sep) (RMB) | Change (%) | Primary Reason | | :--- | :--- | :--- | :--- | :--- | | Operating Revenue | 1,493,744,169.92 | 1,124,142,088.24 | 32.88 | Growth in manufacturing and distribution business sales scale | | Operating Profit | 155,572,722.21 | 75,152,601.49 | 107.01 | Revenue growth, increased gross profit, and higher other income | | Net Profit Attributable to Parent Company | 130,543,243.86 | 67,482,688.52 | 93.45 | Revenue growth, increased gross profit, and higher other income | | Investment Income | 1,775,335.54 | -11,516.91 | 15515.03 | Income generated from purchasing bank wealth management products | | Net Cash Flow from Investing Activities | -432,136,340.96 | -2,196,593.37 | -19573.02 | Purchase of RMB 390 million bank wealth management products | | Net Cash Flow from Financing Activities | 434,501,888.70 | 26,051,882.01 | 1567.83 | IPO proceeds received | [Progress of Significant Matters](index=8&type=section&id=Progress%20of%20Significant%20Matters) The company completed its IPO on July 6, 2017, raising RMB 471 million, and used RMB 390 million of idle proceeds for cash management - The company completed its A-share IPO on **July 6, 2017**, with net proceeds of **RMB 471 million**[13](index=13&type=chunk) - The company has multiple financing guarantees provided for its subsidiaries and related parties[13](index=13&type=chunk) - As of the report disclosure date, the company used **RMB 390 million** of idle raised funds to purchase bank wealth management products for cash management[13](index=13&type=chunk)[14](index=14&type=chunk) [Performance Forecast](index=9&type=section&id=Performance%20Forecast) Based on strong Q1-Q3 performance, the company anticipates a significant increase in full-year 2017 cumulative net profit - The company expects its cumulative net profit for the **full year 2017** to significantly increase compared to the same period last year[14](index=14&type=chunk) [Appendix](index=11&type=section&id=Appendix) This appendix contains the company's unaudited consolidated and parent company financial statements for Q3 2017 [Financial Statements](index=11&type=section&id=Financial%20Statements) This appendix contains the company's unaudited consolidated and parent company financial statements for Q3 2017 [Consolidated Balance Sheet](index=11&type=section&id=Consolidated%20Balance%20Sheet) As of September 30, 2017, total assets were RMB 1.345 billion, with parent company equity significantly increasing to RMB 963 million, primarily due to IPO proceeds Key Consolidated Balance Sheet Items (September 30, 2017) | Item | Period-End Balance (RMB) | Year-Start Balance (RMB) | | :--- | :--- | :--- | | **Assets:** | | | | Total Current Assets | 1,253,880,990.76 | 744,563,826.37 | | Total Non-Current Assets | 91,171,511.09 | 56,082,606.44 | | **Total Assets** | **1,345,052,501.85** | **800,646,432.81** | | **Liabilities and Owners' Equity:** | | | | Total Current Liabilities | 378,463,127.18 | 412,146,524.87 | | Total Non-Current Liabilities | 2,138,909.25 | 1,145,864.51 | | **Total Liabilities** | **380,602,036.43** | **413,292,389.38** | | Total Owners' Equity Attributable to Parent Company | 963,476,656.67 | 385,976,753.40 | | **Total Owners' Equity** | **964,450,465.42** | **387,354,043.43** | | **Total Liabilities and Owners' Equity** | **1,345,052,501.85** | **800,646,432.81** | [Consolidated Income Statement](index=15&type=section&id=Consolidated%20Income%20Statement) Q1-Q3 2017 total operating revenue reached RMB 1.494 billion, up 32.88%, with net profit attributable to parent company owners at RMB 131 million, up 93.45% Key Consolidated Income Statement Items (January-September 2017) | Item | Year-to-Date Amount (Jan-Sep) (RMB) | Prior Year Year-to-Date Amount (Jan-Sep) (RMB) | | :--- | :--- | :--- | | Total Operating Revenue | 1,493,744,169.92 | 1,124,142,088.24 | | Operating Profit | 155,572,722.21 | 75,152,601.49 | | Total Profit | 157,447,693.94 | 80,565,316.07 | | Net Profit | 130,139,762.58 | 66,132,594.28 | | Net Profit Attributable to Parent Company Owners | 130,543,243.86 | 67,482,688.52 | | Basic Earnings Per Share (RMB/share) | 1.5258 | 0.8764 | [Consolidated Cash Flow Statement](index=20&type=section&id=Consolidated%20Cash%20Flow%20Statement) Q1-Q3 2017 operating cash flow improved to -RMB 11.45 million; investing activities had a significant outflow, while financing activities saw a large inflow from IPO proceeds Key Consolidated Cash Flow Statement Items (January-September 2017) | Item | Year-to-Date Amount (Jan-Sep) (RMB) | Prior Year Year-to-Date Amount (Jan-Sep) (RMB) | | :--- | :--- | :--- | | Net Cash Flow from Operating Activities | -11,451,006.46 | -69,100,351.13 | | Net Cash Flow from Investing Activities | -432,136,340.96 | -2,196,593.37 | | Net Cash Flow from Financing Activities | 434,501,888.70 | 26,051,882.01 | | Net Increase in Cash and Cash Equivalents | -12,527,214.18 | -45,898,088.83 | | Cash and Cash Equivalents at Period End | 136,805,255.60 | 34,720,204.56 |

Financial Performance - The company's operating revenue for the first half of 2017 reached ¥978,434,246.61, representing a 35.14% increase compared to ¥723,997,759.05 in the same period last year[21]. - The net profit attributable to shareholders of the listed company was ¥83,703,649.86, a significant increase of 98.72% from ¥42,122,025.58 in the previous year[21]. - The net profit after deducting non-recurring gains and losses was ¥82,379,919.65, up 101.25% from ¥40,934,601.01 in the same period last year[21]. - The net cash flow from operating activities was ¥53,190,792.83, compared to a negative cash flow of ¥21,606,944.48 in the previous year[21]. - The total assets at the end of the reporting period were ¥1,388,893,180.61, an increase of 73.47% from ¥800,646,432.81 at the end of the previous year[21]. - The net assets attributable to shareholders of the listed company increased by 138.44% to ¥920,331,239.38 from ¥385,976,753.40 at the end of the previous year[21]. - Basic earnings per share for the first half of 2017 were ¥1.0871, a 98.74% increase from ¥0.5470 in the same period last year[22]. - The weighted average return on net assets increased by 6.64 percentage points to 19.92% from 13.28% in the previous year[22]. Market Position and Strategy - The company achieved a market share of approximately 63.34% in the domestic market for its knitting machine computer control systems in 2016, ranking among the industry leaders[27]. - The company has established a strong market position in the IC distribution industry, recognized multiple times as a top local authorized distributor by industry publications[29]. - The company aims to expand its industrial electrical automation product distribution business to enhance its competitiveness in the system integration field[29]. - The company plans to expand its IC product applications in motor control, smart home, and industrial interconnect markets to enhance market share[51]. - The company is actively tracking and researching the latest knitting technology to ensure its control systems align with modern demands for high-quality and complex knitting patterns[41]. Research and Development - The company has maintained annual R&D investments exceeding 10 million yuan, demonstrating a commitment to innovation and technological advancement in knitting machine control systems[37]. - As of June 30, 2017, the company holds 30 invention patents, 53 utility model patents, and 55 software copyrights, showcasing its strong intellectual property portfolio[38]. - The company has implemented a talent incentive mechanism to attract and retain skilled professionals, ensuring a stable R&D team for sustainable growth[43]. - The company’s technology development team is well-rounded, covering hardware design, software design, and knitting process research, which enhances its ability to provide comprehensive solutions[37]. Financial Stability and Cash Flow - The company’s cash and cash equivalents increased by 271.54% to RMB 666.45 million, representing 47.98% of total assets[56]. - The company’s total liabilities decreased as a percentage of total assets, indicating improved financial stability[56]. - The company reported a net increase in cash and cash equivalents of ¥486,763,344.83, contrasting with a decrease of ¥15,715,287.61 in the same period last year[124]. - The total cash inflow from operating activities reached ¥910,828,786.88, up from ¥697,724,090.14 year-on-year, reflecting a growth of approximately 30.5%[123]. Corporate Governance and Shareholder Relations - The company has not proposed any profit distribution or capital reserve transfer plans for the half-year period, indicating a focus on reinvestment or retention of earnings[72]. - The company’s actual controller and shareholders have committed to not transferring or entrusting the management of their shares for 36 months post-listing, ensuring stability in shareholding[74]. - The company has established a commitment to repurchase shares if the prospectus contains significant misstatements, with a focus on simplifying the compensation process for affected investors[78]. - The company will publicly apologize and compensate investors if it fails to implement the promised compensation measures for losses incurred due to misleading information[78]. Legal and Compliance Matters - The company reported a revenue of 1,136,700 RMB from a lawsuit against Nan'an City Nanxing Industrial Machinery Co., Ltd. for unpaid goods[84]. - There are no significant litigation or arbitration matters reported for the current period[83]. - The company has committed to reducing and standardizing related party transactions, ensuring fair market practices[80]. Future Outlook - The company provided a positive outlook for the second half of 2017, projecting a revenue increase of 25% based on new product launches and market expansion strategies[75]. - The company expects a cumulative net profit growth of 60%-80% compared to the same period last year by the end of the next reporting period[64]. - The company has set a performance guidance of 1.8 billion RMB for the full year 2017, reflecting a growth target of 22%[75].