宏盛股份(603090) - 2025 Q2 - 季度财报

Important Notice The company's board of directors, supervisory board, and senior management guarantee the truthfulness, accuracy, and completeness of the semi-annual report, with no false records, misleading statements, or major omissions - The semi-annual report is unaudited[5] - There is no profit distribution plan or capital reserve to share capital plan for the reporting period[6] - Forward-looking statements regarding future plans and projections in this report are subject to uncertainties and do not constitute a substantive commitment to investors; investors should be aware of investment risks[6] - There are no non-operating funds occupied by controlling shareholders or other related parties[7] - There are no external guarantees provided in violation of prescribed decision-making procedures[8] Section I Definitions This section defines key terms used in the report, including the reporting period and major subsidiaries, and lists the company's product certifications - The reporting period refers to January 1, 2025, to June 30, 2025[12] - The company's main subsidiaries include Wuxi Guanyun Heat Exchanger Co., Ltd., Wuxi Hongsheng Intelligent Loading Technology Co., Ltd., and Wuxi Hongsheng New Energy Co., Ltd[12] - The company's products have obtained ASME 'U'/'UM' stamp certification, NBBI 'NB' certification system, EU 'CE' certification mark, EN15085 certification, and ISO/TS16949:2009 international automotive quality technical specification system certification[12] Section II Company Profile and Key Financial Indicators This section provides an overview of the company's basic information, contact details, changes in fundamental status, information disclosure, stock summary, and key financial performance metrics I. Company Information This section outlines the company's basic registration details, including its Chinese name, abbreviation, foreign name, and legal representative - The company's Chinese name is Wuxi Hongsheng Heat Exchanger Manufacturing Co., Ltd., abbreviated as Hongsheng Co., Ltd., with Niu Faqing as the legal representative[14] II. Contacts and Contact Information This section provides contact details for the company's Board Secretary and Securities Affairs Representative, including names, addresses, phone numbers, fax numbers, and email addresses - The company's Board Secretary is Gong Shaoping, and the Securities Affairs Representative is Yao Li, both located at No. 8 Liang Kang Road, Mashan, Binhu District, Wuxi City[15] III. Brief Introduction to Changes in Basic Information This section briefly introduces the company's registered and office addresses, noting a change in the registered address on September 24, 2019 - The company's registered and office addresses are both No. 8 Liang Kang Road, Mashan, Binhu District, Wuxi City, with the registered address having changed on September 24, 2019[16] IV. Brief Introduction to Changes in Information Disclosure and Document Availability Locations This section specifies the company's designated newspapers and website for information disclosure, as well as the location for semi-annual report availability, with no changes during the reporting period - The company's designated newspapers for information disclosure are "China Securities Journal" and "Shanghai Securities News", with the website being the Shanghai Stock Exchange website (http://www.sse.com.cn)[17](index=17&type=chunk) V. Company Stock Overview This section provides basic information about the company's stock, including its type, listing exchange, stock abbreviation, and stock code - The company's stock type is A-shares, listed on the Shanghai Stock Exchange, with the stock abbreviation Hongsheng Co., Ltd. and stock code 603090[18] VI. Other Relevant Information This section discloses information about the accounting firm engaged by the company, including its name, office address, and the names of the signing accountants - The accounting firm engaged by the company is Zhongxinghua Certified Public Accountants (Special General Partnership), with Zhang Xiaoping and Yang Hui as the signing accountants[19] VII. Company's Key Accounting Data and Financial Indicators This section presents the company's key accounting data and financial indicators for the first half of 2025, showing significant growth in operating revenue, total profit, net profit attributable to shareholders, and net cash flow from operating activities 2025 Half-year Key Accounting Data | Item | Current Period (Jan-Jun) (RMB) | Prior Period (RMB) | Change from Prior Period (%) | | :--- | :--- | :--- | :--- | | Operating Revenue | 357,880,865.19 | 319,316,018.48 | 12.08 | | Total Profit | 54,388,192.65 | 37,777,777.40 | 43.97 | | Net Profit Attributable to Shareholders of Listed Company | 45,789,719.99 | 30,737,521.46 | 48.97 | | Net Profit Attributable to Shareholders of Listed Company After Deducting Non-recurring Gains and Losses | 44,681,900.87 | 30,435,027.52 | 46.81 | | Net Cash Flow from Operating Activities | 46,828,263.60 | 23,642,141.92 | 98.07 | | Net Assets Attributable to Shareholders of Listed Company (Period-end) | 594,769,718.88 | 578,485,274.03 | 2.82 | | Total Assets (Period-end) | 914,494,755.03 | 879,505,893.87 | 3.98 | 2025 Half-year Key Financial Indicators | Item | Current Period (Jan-Jun) | Prior Period | Change from Prior Period (%) | | :--- | :--- | :--- | :--- | | Basic Earnings Per Share (RMB/share) | 0.46 | 0.31 | 48.39 | | Diluted Earnings Per Share (RMB/share) | 0.46 | 0.31 | 48.39 | | Basic Earnings Per Share After Deducting Non-recurring Gains and Losses (RMB/share) | 0.45 | 0.30 | 50.00 | | Weighted Average Return on Net Assets (%) | 7.84 | 5.34 | Increase by 2.50 percentage points | | Weighted Average Return on Net Assets After Deducting Non-recurring Gains and Losses (%) | 7.65 | 5.29 | Increase by 2.36 percentage points | VIII. Differences in Accounting Data Under Domestic and Overseas Accounting Standards This section states that the company has no differences in accounting data under domestic and overseas accounting standards IX. Non-recurring Gains and Losses Items and Amounts This section details the composition and amounts of non-recurring gains and losses for the reporting period, totaling RMB 1,107,819.12 2025 Half-year Non-recurring Gains and Losses Items | Non-recurring Gains and Losses Item | Amount (RMB) | | :--- | :--- | | Gains/Losses from Disposal of Non-current Assets | -115,572.82 | | Government Grants Recognized in Current Profit/Loss | 1,469,545.04 | | Gains/Losses from Fair Value Changes and Disposal of Financial Assets and Liabilities | -141,930.69 | | Gains/Losses from Debt Restructuring | 64,435.82 | | Other Non-operating Income and Expenses | -62,314.06 | | Less: Income Tax Impact | 97,890.54 | | Impact on Minority Interests (After Tax) | 8,453.63 | | Total | 1,107,819.12 | X. Companies with Equity Incentive or Employee Stock Ownership Plans May Choose to Disclose Net Profit After Deducting Share-based Payment Impact This section clarifies that the company has no equity incentive or employee stock ownership plans, thus no disclosure of net profit after deducting share-based payment impact is required XI. Other This section states that there are no other matters requiring disclosure Section III Management Discussion and Analysis This section provides a comprehensive review of the company's industry, main business, operating performance, core competitiveness, and risk factors during the reporting period I. Explanation of the Company's Industry and Main Business During the Reporting Period The company primarily engages in the R&D, design, production, and sales of aluminum plate-fin heat exchangers and related products, widely used in engineering machinery, compressors, wind power equipment, and data centers; it has also developed power battery systems and pioneering fuel cell products to adapt to electrification trends - The company's main business is the research, development, design, production, and sales of aluminum plate-fin heat exchangers and related products[25] - To adapt to the electrification trend of industry customers, the company began developing power battery systems in 2021[25] - The company's cooling system solutions are widely used in compressors, engineering machinery, railway vehicles, agricultural and forestry machinery, hydraulic systems, wind power equipment, generator sets, and data centers[26] - The company has successfully developed pioneering products such as liquid-air intercoolers, humidifiers, electronic water pumps, and ATS cooling systems in the fuel cell sector, serving as a key component supplier in the hydrogen energy bus market[37] - The company's high-efficiency dry coolers are applied in industrial and power sectors, while Cooling Distribution Units (CDU) and in-row air conditioners are used in data center liquid cooling systems[40][41] II. Discussion and Analysis of Operating Conditions During the reporting period, the company achieved operating revenue of RMB 358 million and net profit of RMB 46.5077 million, with core heat exchanger business growing by approximately 10%, rapid growth in new energy sector shipments, continued cultivation of lithium battery PACK business, and progress in overseas expansion with North American factory operations and European factory construction initiation - During the reporting period, the company achieved operating revenue of RMB 358 million and net profit of RMB 46.5077 million[48] - The heat exchanger business achieved operating revenue of RMB 330 million, a year-on-year increase of approximately 10%, with rapid growth in new energy sector shipments[48] - The lithium battery PACK business is a new venture the company began cultivating in 2021, primarily for industrial and power energy storage[48] - The company's overseas expansion has progressed, with the Hongsheng North America factory commencing operations and planned expansion, and the European factory construction initiated[48] III. Analysis of Core Competitiveness During the Reporting Period The company's core competitiveness stems from its robust product R&D and design capabilities, stringent quality control system, and strong customer relationships, supported by advanced R&D equipment, extensive databases, multiple international quality certifications, and long-term partnerships with renowned multinational corporations - The company possesses industry-leading large wind tunnel experimental systems and advanced equipment for fatigue, thermal fatigue, and vibration tests, and has established a "plate-fin heat exchanger heat transfer and flow resistance parameter database," significantly enhancing design accuracy and efficiency[49] - The company has obtained ASME 'U' stamp, 'UM' stamp, and NBBI 'NB' certification, and passed EU 'CE' certification, EN15085 certification, and ISO/TS16949:2009 certification[49] - Leveraging its product quality and technological R&D capabilities, the company has become a global procurement system supplier for renowned domestic and international companies such as Atlas Copco, Hydac, Siemens, Weichai, and Sany[50] IV. Main Operating Conditions During the Reporting Period This section provides a detailed analysis of the company's main operating conditions during the reporting period, including financial changes in its main business, asset and liability status, investment situation, and the operating performance of major holding and participating companies, confirming no significant profit changes due to non-core businesses and no controlled structured entities (I) Main Business Analysis The company's operating revenue increased by 12.08% this period, primarily driven by growth in the heat exchanger business; operating costs rose with revenue, selling and administrative expenses increased, while financial expenses significantly decreased due to higher exchange gains, and net cash flow from operating activities grew substantially by 98.07% Financial Statement Related Item Fluctuation Analysis Table | Item | Current Period (RMB) | Prior Period (RMB) | Change (%) | | :--- | :--- | :--- | :--- | | Operating Revenue | 357,880,865.19 | 319,316,018.48 | 12.08 | | Operating Costs | 262,100,844.93 | 227,938,327.17 | 14.99 | | Selling Expenses | 14,458,766.98 | 12,057,343.50 | 19.92 | | Administrative Expenses | 20,455,326.74 | 18,037,526.50 | 13.40 | | Financial Expenses | -7,210,317.94 | -1,313,226.21 | -449.05 | | R&D Expenses | 15,824,242.29 | 14,861,957.95 | 6.47 | | Net Cash Flow from Operating Activities | 46,828,263.60 | 23,642,141.92 | 98.07 | | Net Cash Flow from Investing Activities | -8,109,086.06 | -10,995,759.34 | 26.25 | | Net Cash Flow from Financing Activities | -25,925,139.85 | -40,163,603.47 | 35.45 | | Other Income | 1,556,131.05 | 372,499.84 | 317.75 | | Credit Impairment Losses | 3,329,766.15 | -3,239,634.74 | 202.78 | | Asset Impairment Losses | | -4,457,262.75 | N/A | - The increase in operating revenue was primarily due to the growth in the heat exchanger business during the current period[52] - The significant decrease in financial expenses was mainly due to an increase in exchange gains during the current period[52] - Net cash flow from operating activities increased by 98.07%, primarily due to increased operating cash inflows during the current period[52] (II) Explanation of Significant Profit Changes Due to Non-core Businesses During the reporting period, the company's profit did not experience significant changes due to non-core businesses - There were no significant changes in the company's business type, profit structure, or sources of profit during the current period[53] (III) Analysis of Assets and Liabilities The company's total assets increased by 3.98%, and net assets attributable to shareholders of the listed company increased by 2.82%; construction in progress significantly decreased by 93.83%, right-of-use assets and lease liabilities substantially increased due to more leased factory buildings, and notes receivable held at period-end rose by 141.94% Asset and Liability Fluctuation | Item Name | Current Period-end (RMB) | Proportion of Total Assets (%) | Prior Year-end (RMB) | Proportion of Total Assets (%) | Change from Prior Year-end (%) | Explanation | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Cash and Cash Equivalents | 191,071,073.47 | 20.89 | 172,989,005.15 | 19.67 | 10.45 | | | Receivables | 245,385,554.95 | 26.83 | 257,821,852.78 | 29.31 | -4.82 | | | Inventories | 146,673,901.96 | 16.04 | 120,567,756.15 | 13.71 | 21.65 | | | Construction in Progress | 464,799.69 | 0.05 | 7,536,674.96 | 0.86 | -93.83 | Decrease in construction in progress for production equipment | | Right-of-Use Assets | 20,924,094.67 | 2.29 | 9,589,110.79 | 1.09 | 118.21 | Increase in leased factory buildings | | Short-term Borrowings | 111,126,445.51 | 12.15 | 99,698,861.44 | 11.34 | 11.46 | | | Lease Liabilities | 16,755,256.20 | 1.83 | 7,804,005.61 | 0.89 | 114.70 | Increase in leased factory buildings | | Notes Receivable | 7,345,854.78 | 0.80 | 3,036,216.88 | 0.35 | 141.94 | Increase in commercial bills held at period-end | | Prepayments | 3,668,009.55 | 0.40 | 7,712,780.48 | 0.88 | -52.44 | Decrease in prepayments for purchases at period-end | - Overseas assets amounted to RMB 46,799,567.94, accounting for 5.12% of total assets[55] (IV) Analysis of Investment Status The company's overall equity investments remained stable, primarily in several subsidiaries including Wuxi Hongsheng Heat Exchange System Co., Ltd. and Wuxi Guanyun Heat Exchanger Co., Ltd., with shareholding percentages ranging from 65% to 100% Overall Analysis of External Equity Investments | No. | Subsidiary Name | Shareholding (%) | Total Investment (RMB) | Cumulative Investment as of Period-end (RMB) | | :--- | :--- | :--- | :--- | :--- | | 1 | Wuxi Hongsheng Heat Exchange System Co., Ltd. | 100 | 200,000,000.00 | 160,141,283.29 | | 2 | Wuxi Guanyun Heat Exchanger Co., Ltd. | 90.22 | 108,225,800.00 | 108,225,800.00 | | 3 | Wuxi Hongsheng New Energy Co., Ltd. | 65 | 19,500,000.00 | 19,500,000.00 | | 4 | Wuxi Hongsheng Intelligent Loading Technology Co., Ltd. | 80 | 8,000,000.00 | 3,240,000.00 | | 5 | Shanghai Pengchu Trading Co., Ltd. | 100 | 1,000,000.00 | 1,000,000.00 | | 6 | Hongsheng GmbH | 100 | 500,000.00 | 355,000.00 | | 7 | Wuxi Hongsheng New Energy Operation Technology Co., Ltd. | 100 | 20,000,000.00 | 11,570,974.61 | | 8 | Aolithium Inc | 100 | 500,000.00 | 5,000.00 | | 9 | HongSheng North America Inc | 80 | 3,200,000.00 | 3,200,000.00 | (V) Significant Asset and Equity Disposals During the reporting period, the company did not undertake any significant asset or equity disposal matters - There were no significant asset and equity disposal matters during the reporting period[59] (VI) Analysis of Major Holding and Participating Companies Major subsidiaries Hongsheng Heat Exchange System and Guanyun Heat Exchanger performed well in heat exchanger manufacturing and sales, contributing most of the operating revenue and net profit, while Hongsheng New Energy also achieved profitability in battery manufacturing and sales Key Financial Information of Major Subsidiaries | Company Name | Company Type | Main Business | Registered Capital (RMB) | Total Assets (RMB) | Net Assets (RMB) | Operating Revenue (RMB) | Operating Profit (RMB) | Net Profit (RMB) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Hongsheng Heat Exchange System | Subsidiary | Heat exchanger manufacturing, sales | 200,000,000.00 | 587,718,994.54 | 304,163,244.73 | 281,601,994.46 | 54,119,193.13 | 46,447,428.40 | | Guanyun Heat Exchanger | Subsidiary | Heat exchanger manufacturing, sales | 46,000,000.00 | 205,143,402.42 | 173,664,689.04 | 68,579,532.82 | 14,072,196.29 | 12,212,280.98 | | Hongsheng New Energy | Subsidiary | Battery manufacturing, sales | 30,000,000.00 | 24,273,872.60 | -30,557,381.93 | 17,501,114.43 | 382,521.64 | 380,913.68 | (VII) Information on Structured Entities Controlled by the Company During the reporting period, the company did not control any structured entities - There were no structured entities controlled by the company during the reporting period[61] V. Other Disclosure Matters This section details seven categories of potential risks the company faces, including macroeconomic fluctuations, reliance on overseas customers, exchange rate volatility, raw material price fluctuations, changes in tax policies, foreign trade and tariff policy risks, and technological advancement risks (I) Potential Risks The company faces risks from macroeconomic fluctuations, significant reliance on overseas customers (approximately 60%), exchange rate volatility due to US dollar settlement, aluminum price fluctuations (accounting for about 50% of costs), changes in export tax rebate and high-tech enterprise tax incentive policies, shifts in trade policies of major importing countries, and potential loss of competitiveness due to insufficient technological innovation - The company's main business is affected by macroeconomic fluctuations, and a global economic downturn could lead to reduced orders and slower collections[61] - The company's export business accounts for approximately 60%, indicating a high dependence on overseas customers and exposure to risks of declining foreign market demand[62] - Primarily settling in US dollars, a significant appreciation of the RMB against the US dollar could erode the price competitiveness of export products[62] - Aluminum accounts for approximately 50% of product manufacturing costs, and a substantial increase in raw material prices would lead to higher costs and lower gross profit margins[62] - The company faces risks from changes in export tax rebate policies and adjustments to high-tech enterprise tax incentive policies[62] - Shifts towards trade protectionism in the foreign trade and tariff policies of major product importing countries (United States, South Korea, European Union, India) could impact export sales revenue[63] - Failure to continuously increase investment in technological R&D may lead to competitors offering products with superior performance, quality, or price[63][64] (II) Other Disclosure Matters This section indicates no other matters requiring disclosure - There are no other disclosure matters in this section[65] Section IV Corporate Governance, Environment, and Society This section covers changes in the company's directors, supervisors, and senior management, profit distribution plans, equity incentive schemes, environmental information, and efforts in poverty alleviation and rural revitalization I. Changes in Company Directors, Supervisors, and Senior Management The company appointed Guo Jianbing as its Deputy General Manager on June 10, 2025 - Guo Jianbing was appointed as the company's Deputy General Manager on June 10, 2025[67] II. Profit Distribution or Capital Reserve to Share Capital Plan The company has no profit distribution or capital reserve to share capital plan for the semi-annual period - The proposed profit distribution plan and capital reserve to share capital plan for the semi-annual period are "No"[68] III. Information on Company Equity Incentive Plans, Employee Stock Ownership Plans, or Other Employee Incentive Measures and Their Impact During the reporting period, the company did not disclose any equity incentive plans, employee stock ownership plans, or other employee incentive measures - There were no equity incentive plans, employee stock ownership plans, or other employee incentive measures during the reporting period[69] IV. Environmental Information of Listed Companies and Their Major Subsidiaries Included in the List of Enterprises Required to Disclose Environmental Information The company is not on the list of enterprises required to disclose environmental information, but it actively fulfills environmental responsibilities, continuously promotes energy conservation and emission reduction, has established a comprehensive environmental management system and emergency plans, obtained ISO14001:2015 environmental management system certification, and conducts regular environmental monitoring - The company is not included in the list of enterprises required to disclose environmental information[69] - The company actively implements national industrial development policies, enhances environmental protection equipment, and continuously promotes energy conservation, emission reduction, and comprehensive resource utilization[70] - The company has established a sound environmental protection management system and an "Emergency Plan for Environmental Incidents," and enhances environmental awareness among all employees through environmental training[70] - The company has obtained the ISO14001:2015 environmental management system certificate and regularly commissions professional monitoring stations to test water quality monthly and air quality semi-annually[70] V. Specific Information on Consolidating and Expanding Poverty Alleviation Achievements, Rural Revitalization, and Other Work During the reporting period, the company did not disclose specific information regarding its efforts in consolidating and expanding poverty alleviation achievements or rural revitalization - There is no specific information disclosed regarding consolidating and expanding poverty alleviation achievements, rural revitalization, or other work during the reporting period[71] Section V Significant Matters This section details the fulfillment of commitments, non-operating fund occupation, illegal guarantees, audit status, changes in non-standard audit opinions, bankruptcy reorganization, significant litigation, violations, integrity status, related party transactions, significant contracts, use of raised funds, and other important matters I. Fulfillment of Commitments The company's controlling shareholders and actual controllers, Niu Faqing and Niu Yuxia, strictly fulfilled their commitments regarding share lock-up, resolution of horizontal competition, and related party transactions, with no violations during the reporting period - Director Niu Faqing committed to transferring no more than 25% of his total shares in the issuer annually during his tenure, not transferring shares within six months after leaving office, and transferring no more than 50% within twelve months thereafter; this commitment was strictly fulfilled during the reporting period[73] - Controlling shareholders and actual controllers Niu Faqing and Niu Yuxia committed to resolving horizontal competition, not producing or developing products or businesses that compete with the company, and avoiding competition when the company expands its business; this commitment was strictly fulfilled during the reporting period[73][74] - Controlling shareholders and actual controllers Niu Faqing and Niu Yuxia committed to resolving related party transactions, avoiding and reducing related party transactions with the company, and strictly adhering to market principles for fair and reasonable pricing; this commitment was strictly fulfilled during the reporting period[74] - Actual controllers Niu Faqing and Niu Yuxia committed not to occupy company funds and resources through any direct or indirect means in the future; this commitment was strictly fulfilled during the reporting period[74] II. Non-operating Occupation of Funds by Controlling Shareholders and Other Related Parties During the Reporting Period During the reporting period, the company had no non-operating funds occupied by controlling shareholders or other related parties - There was no non-operating occupation of funds by controlling shareholders or other related parties during the reporting period[75] III. Illegal Guarantees During the reporting period, the company had no illegal guarantees - There were no illegal guarantees during the reporting period[75] IV. Half-year Report Audit Status This semi-annual report is unaudited - This semi-annual report is unaudited[5] V. Changes and Handling of Matters Involving Non-standard Audit Opinions in the Previous Annual Report During the reporting period, there were no changes or handling of matters involving non-standard audit opinions in the company's previous annual report - There were no changes or handling of matters involving non-standard audit opinions in the previous annual report[76] VI. Bankruptcy and Reorganization Matters During the reporting period, the company had no bankruptcy or reorganization matters - There were no bankruptcy or reorganization matters during the reporting period[76] VII. Significant Litigation and Arbitration Matters During the reporting period, the company had no significant litigation or arbitration matters - The company had no significant litigation or arbitration matters during this reporting period[76] VIII. Information on Listed Company, Its Directors, Supervisors, Senior Management, Controlling Shareholders, and Actual Controllers Suspected of Violations, Penalties, and Rectification During the reporting period, the listed company, its directors, supervisors, senior management, controlling shareholders, and actual controllers were not involved in any suspected violations, penalties, or rectification situations - During the reporting period, the listed company, its directors, supervisors, senior management, controlling shareholders, and actual controllers were not involved in any suspected violations, penalties, or rectification situations[76] IX. Explanation of the Integrity Status of the Company, Its Controlling Shareholders, and Actual Controllers During the Reporting Period During the reporting period, the company, its controlling shareholders, and actual controllers maintained a good integrity status, with no unfulfilled obligations from effective court judgments or overdue significant debts - During the reporting period, the company, its controlling shareholders, and actual controllers had no unfulfilled obligations from effective court judgments or significant overdue debts[76] X. Significant Related Party Transactions This section discloses the company's transactions with related parties in areas such as goods purchase and sale, service provision, leasing, guarantees, and asset transfers, and lists key management personnel compensation and receivables/payables from/to related parties Related Party Transactions for Purchase of Goods/Acceptance of Services | Related Party | Related Transaction Content | Current Period Amount (RMB) | Prior Period Amount (RMB) | | :--- | :--- | :--- | :--- | | Wuxi Fengsheng Auto Parts Co., Ltd. | Purchase of goods | 315,678.33 | 502,015.24 | | Wuxi Fengsheng Auto Parts Co., Ltd. | Acceptance of services | 17,483.27 | | Related Party Transactions for Sale of Goods/Provision of Services | Related Party | Related Transaction Content | Current Period Amount (RMB) | Prior Period Amount (RMB) | | :--- | :--- | :--- | :--- | | Wuxi Hehongzhi Heat Dissipation Technology Co., Ltd. | Provision of services | 1,285,903.24 | | | Wuxi Qijingfa Industrial Technology Co., Ltd. | Sale of goods | 16,464.60 | | Related Party Lease Information (as Lessor) | Lessee Name | Type of Leased Asset | Lease Income Recognized in Current Period (RMB) | Lease Income Recognized in Prior Period (RMB) | | :--- | :--- | :--- | :--- | | Wuxi Carbon Investment Environmental Technology Co., Ltd. | Building Lease | | 70,642.20 | Related Party Guarantee Information (as Guarantee Recipient) | Guarantor | Guaranteed Amount (RMB) | Guarantee Start Date | Guarantee End Date | Guarantee Fulfilled | | :--- | :--- | :--- | :--- | :--- | | The Company | 28,913,999.52 | 2024/6/20 | 2025/10/21 | No | | The Company, Niu Faqing, Niu Yuxia | 30,000,000.00 | 2024/9/19 | 2025/9/25 | No | | The Company | 5,000,000.00 | 2024/3/20 | 2025/3/20 | Yes | Related Party Asset Transfer and Debt Restructuring | Related Party | Related Transaction Content | Current Period Amount (RMB) | Prior Period Amount (RMB) | | :--- | :--- | :--- | :--- | | Hangzhou Hongsheng Zhonghong New Energy Co., Ltd. | Equity Transfer | | 820,000.00 | Key Management Personnel Compensation | Item | Current Period Amount (RMB 10,000) | Prior Period Amount (RMB 10,000) | | :--- | :--- | :--- | | Key Management Personnel Compensation | 234.61 | 197.78 | Receivables from Related Parties | Item Name | Related Party | Period-end Book Balance (RMB) | Provision for Bad Debts (RMB) | Period-beginning Book Balance (RMB) | Provision for Bad Debts (RMB) | | :--- | :--- | :--- | :--- | :--- | :--- | | Accounts Receivable | Wuxi Hehongzhi Heat Dissipation Technology Co., Ltd. | 1,449,109.97 | 72,455.50 | 141,813.82 | 7,090.69 | | Accounts Receivable | Wuxi Qijingfa Industrial Technology Co., Ltd. | 132,346.39 | 13,234.64 | 134,314.39 | 13,333.04 | Payables to Related Parties | Item Name | Related Party | Period-end Book Balance (RMB) | Period-beginning Book Balance (RMB) | | :--- | :--- | :--- | :--- | | Accounts Payable | Hangzhou Hongsheng Zhonghong New Energy Co., Ltd. | 543,980.00 | 635,480.00 | | Accounts Payable | Wuxi Fengsheng Auto Parts Co., Ltd. | 430,403.94 | 187,015.11 | XI. Significant Contracts and Their Fulfillment During the reporting period, the company had no significant entrustment, contracting, or leasing matters requiring disclosure, nor any significant guarantees or other major contracts - There were no significant entrustment, contracting, or leasing matters during the reporting period[79] - There were no significant guarantee situations during the reporting period[80] - There were no other significant contracts during the reporting period[80] XII. Explanation of Progress in Use of Raised Funds During the reporting period, the company did not disclose any progress in the use of raised funds - There was no explanation of progress in the use of raised funds during the reporting period[80] XIII. Explanation of Other Significant Matters During the reporting period, the company had no other significant matters requiring explanation - There was no explanation of other significant matters during the reporting period[80] Section VI Share Changes and Shareholder Information This section details changes in the company's share capital, shareholder information, and the status of directors, supervisors, and senior management I. Changes in Share Capital During the reporting period, there were no changes in the company's total share capital or share structure - During the reporting period, there were no changes in the company's total share capital or share structure[82] II. Shareholder Information As of the end of the reporting period, the company had 8,971 ordinary shareholders, with Niu Yuxia as the largest shareholder holding 47.68% of shares, and Niu Faqing and Niu Yuxia acting in concert - As of the end of the reporting period, the total number of ordinary shareholders was 8,971[83] Top Ten Shareholders' Shareholding as of Period-end | Shareholder Name | Shares Held at Period-end (shares) | Proportion (%) | Shareholder Nature | | :--- | :--- | :--- | :--- | | Niu Yuxia | 47,675,000 | 47.68 | Domestic Natural Person | | Zhongke Zhaoshang Investment Management Group Co., Ltd. - Changzhou Zhongke Jiangnan Equity Investment Center (Limited Partnership) | 2,859,400 | 2.86 | Domestic Non-state-owned Legal Person | | Niu Faqing | 2,643,700 | 2.64 | Domestic Natural Person | | Chen Hui | 657,700 | 0.66 | Domestic Natural Person | | Goldman Sachs International - Proprietary Funds | 591,500 | 0.59 | Unknown | - Niu Faqing and Niu Yuxia are persons acting in concert[86] III. Information on Directors, Supervisors, and Senior Management During the reporting period, there were no changes in the shareholdings of the company's directors, supervisors, and senior management, nor were they granted any equity incentives - During the reporting period, there were no changes in the shareholdings of current and former directors, supervisors, and senior management[87] - During the reporting period, directors, supervisors, and senior management were not granted any equity incentives[87] IV. Changes in Controlling Shareholders or Actual Controllers During the reporting period, there were no changes in the company's controlling shareholders or actual controllers - There were no changes in controlling shareholders or actual controllers during the reporting period[87] V. Preferred Share-Related Information During the reporting period, the company had no preferred share-related information to disclose - There was no preferred share-related information during the reporting period[87] Section VII Bond-Related Information This section covers information related to the company's corporate bonds, enterprise bonds, non-financial enterprise debt financing instruments, and convertible corporate bonds I. Corporate Bonds (Including Enterprise Bonds) and Non-financial Enterprise Debt Financing Instruments During the reporting period, the company had no corporate bonds (including enterprise bonds) or non-financial enterprise debt financing instruments - During the reporting period, the company had no corporate bonds (including enterprise bonds) or non-financial enterprise debt financing instruments[89] II. Convertible Corporate Bonds During the reporting period, the company had no convertible corporate bonds - During the reporting period, the company had no convertible corporate bonds[89] Section VIII Financial Report This section presents the company's unaudited financial statements for the first half of 2025, including the audit report, balance sheets, income statements, cash flow statements, and statements of changes in equity, along with detailed notes on accounting policies, taxation, and financial items I. Audit Report This semi-annual report is unaudited - This semi-annual report is unaudited[5] II. Financial Statements This section includes the company's unaudited consolidated and parent company balance sheets, income statements, cash flow statements, and statements of changes in equity for the first half of 2025, comprehensively presenting the company's financial position and operating results Consolidated Balance Sheet As of June 30, 2025, the company's consolidated total assets amounted to RMB 914.49 million, total liabilities to RMB 301.27 million, and total equity attributable to parent company owners to RMB 594.77 million Consolidated Balance Sheet Key Data (June 30, 2025) | Item | June 30, 2025 (RMB) | December 31, 2024 (RMB) | | :--- | :--- | :--- | | Cash and Cash Equivalents | 191,071,073.47 | 172,989,005.15 | | Accounts Receivable | 245,385,554.95 | 257,821,852.78 | | Inventories | 146,673,901.96 | 120,567,756.15 | | Total Current Assets | 605,636,754.41 | 577,790,184.51 | | Fixed Assets | 150,714,443.06 | 146,790,267.93 | | Total Non-current Assets | 308,858,000.62 | 301,715,709.36 | | Total Assets | 914,494,755.03 | 879,505,893.87 | | Short-term Borrowings | 111,126,445.51 | 99,698,861.44 | | Total Current Liabilities | 279,176,485.84 | 271,771,852.29 | | Total Liabilities | 301,266,865.05 | 284,418,259.53 | | Total Equity Attributable to Parent Company Owners | 594,769,718.88 | 578,485,274.03 | | Total Equity | 613,227,889.98 | 595,087,634.34 | Parent Company Balance Sheet As of June 30, 2025, the parent company's total assets amounted to RMB 399 million, total liabilities to RMB 7.389 million, and total equity to RMB 392 million Consolidated Income Statement In the first half of 2025, the company's consolidated total operating revenue was RMB 358 million, net profit was RMB 46.5077 million, net profit attributable to parent company shareholders was RMB 45.7897 million, and basic earnings per share were RMB 0.46 Consolidated Income Statement Key Data (Jan-Jun 2025) | Item | 2025 Half-year (RMB) | 2024 Half-year (RMB) | | :--- | :--- | :--- | | Total Operating Revenue | 357,880,865.19 | 319,316,018.48 | | Total Operating Costs | 308,689,388.43 | 274,161,783.94 | | Total Profit | 54,388,192.65 | 37,777,777.40 | | Net Profit | 46,507,688.36 | 31,552,286.02 | | Net Profit Attributable to Parent Company Shareholders | 45,789,719.99 | 30,737,521.46 | | Basic Earnings Per Share (RMB/share) | 0.46 | 0.31 | | Diluted Earnings Per Share (RMB/share) | 0.46 | 0.31 | Parent Company Income Statement In the first half of 2025, the parent company's operating revenue was RMB 15.0022 million, and its net profit was -RMB 11.6580 million, representing an expanded loss compared to the prior year Consolidated Cash Flow Statement In the first half of 2025, the company's net cash flow from operating activities was RMB 46.8283 million, net cash outflow from investing activities was RMB 8.1091 million, and net cash outflow from financing activities was RMB 25.9251 million Consolidated Cash Flow Statement Key Data (Jan-Jun 2025) | Item | 2025 Half-year (RMB) | 2024 Half-year (RMB) | | :--- | :--- | :--- | | Net Cash Flow from Operating Activities | 46,828,263.60 | 23,642,141.92 | | Net Cash Flow from Investing Activities | -8,109,086.06 | -10,995,759.34 | | Net Cash Flow from Financing Activities | -25,925,139.85 | -40,163,603.47 | | Effect of Exchange Rate Changes on Cash and Cash Equivalents | 3,812,165.92 | 1,426,281.33 | | Net Increase in Cash and Cash Equivalents | 16,606,203.61 | -26,090,939.56 | | Cash and Cash Equivalents at Period-end | 171,868,753.47 | 129,123,282.47 | Parent Company Cash Flow Statement In the first half of 2025, the parent company's net cash flow from operating activities was -RMB 34.8740 million, net cash flow from investing activities was RMB 70.3085 million, and net cash flow from financing activities was -RMB 30 million Consolidated Statement of Changes in Equity As of June 30, 2025, the company's consolidated total equity was RMB 613.23 million, an increase of RMB 18.1403 million from the beginning of the period, primarily due to an increase in total comprehensive income and capital contributions from minority shareholders Parent Company Statement of Changes in Equity As of June 30, 2025, the parent company's total equity was RMB 392 million, a decrease of RMB 41.6580 million from the beginning of the period, mainly due to negative total comprehensive income and profit distribution during the period III. Company Overview Wuxi Hongsheng Heat Exchanger Manufacturing Co., Ltd., listed on the Shanghai Stock Exchange on August 31, 2016, primarily engages in the R&D, design, production, and sales of aluminum plate-fin heat exchangers and related products within the general equipment manufacturing industry; these financial statements were approved for issuance by the Board of Directors on August 27, 2025 - Wuxi Hongsheng Heat Exchanger Manufacturing Co., Ltd. was listed on the Shanghai Stock Exchange on August 31, 2016, with stock code: 603090[121] - The company belongs to the general equipment manufacturing industry, primarily engaged in the research, development, design, production, and sales of aluminum plate-fin heat exchangers and related products[121] - These financial statements were approved for issuance by the company's Board of Directors on August 27, 2025[122] IV. Basis of Preparation of Financial Statements The company's financial statements are prepared on a going concern basis, confirming its ability to continue as a going concern for at least 12 months from the end of the reporting period - The company's financial statements are prepared on a going concern basis[123] - The company has the ability to continue as a going concern for at least 12 months from the end of the reporting period[124] V. Significant Accounting Policies and Estimates This section details the company's significant accounting policies and estimates for its aluminum plate-fin heat exchanger, cryogenic equipment, and lithium battery businesses, covering enterprise mergers, financial instruments, receivables, inventories, fixed assets, intangible assets, revenue recognition, government grants, deferred income tax, and leases - The company and its subsidiaries are engaged in the operation of aluminum plate-fin heat exchangers, cryogenic equipment, and lithium batteries[125] - The company adheres to enterprise accounting standards to truthfully and completely reflect its financial position[126] - The company defines 12 months as an operating cycle and uses it as the standard for classifying assets and liabilities as current or non-current[128] - The company provides detailed disclosures on the classification, recognition, and measurement of financial assets, including those measured at amortized cost, fair value through other comprehensive income, and fair value through profit or loss[147][148] - The company measures loss provisions for notes receivable, accounts receivable, and other receivables based on the expected credit loss amount over their entire lifetime[155][156][161] - Inventories are initially measured at actual cost, and when consumed or issued, they are measured using the weighted average method and at the lower of cost and net realizable value[162][163] - The company accounts for long-term equity investments in investees over which it has control, joint control, or significant influence using the cost method or equity method[172] - Fixed assets are depreciated using the straight-line method, with buildings and structures depreciated over 20 years, and machinery and equipment over 5-10 years[182] - Intangible assets, including land use rights, patent rights, software, and trademark rights, are amortized using the straight-line method over their useful lives[188] - Revenue is recognized when the customer obtains control of the related goods, with specific methods for equipment sales (domestic/export) and engineering services[208][210][211] - Government grants are classified as either asset-related or income-related, and are recognized as deferred income or included in current profit or loss, respectively[213] - Deferred income tax assets and liabilities are recognized using the balance sheet liability method[215] - The company applies simplified accounting treatment for short-term leases and leases of low-value assets, not recognizing right-of-use assets and lease liabilities[218] VI. Taxation This section details the company's main tax categories and rates, including VAT, urban maintenance and construction tax, education surcharge, and corporate income tax; some subsidiaries, as high-tech enterprises, enjoy a 15% corporate income tax preferential rate, and export sales VAT is subject to the "Exemption, Offset, Refund" policy Main Tax Categories and Rates | Tax Category | Tax Base | Tax Rate | | :--- | :--- | :--- | | Value-Added Tax (VAT) | Taxable income calculated at 13% for output VAT, and VAT paid on the difference after deducting deductible input VAT | 13% | | Urban Maintenance and Construction Tax | Calculated at 7% of actual VAT paid and VAT exempted/offset | 7% | | Education Surcharge | Calculated at 5% of actual VAT paid and VAT exempted/offset | 5% | Taxable Entities with Different Corporate Income Tax Rates | Taxable Entity Name | Income Tax Rate (%) | | :--- | :--- | | The Company | 25 | | Wuxi Guanyun Heat Exchanger Co., Ltd. | 15 | | Wuxi Hongsheng Heat Exchange System Co., Ltd. | 15 | | HongSheng North America Inc. | 26.5 | | Aolithium Inc | 28.5 | - Subsidiaries Wuxi Hongsheng Heat Exchange System Co., Ltd. and Wuxi Guanyun Heat Exchanger Co., Ltd., as high-tech enterprises, pay corporate income tax at a reduced rate of 15% for the current period[227] - The VAT rate for the company's export sales of goods is zero, implementing the "Exemption, Offset, Refund" tax management method, with an export tax rebate rate of 13% for heat exchangers[228] VII. Notes to Consolidated Financial Statement Items This section provides detailed notes for each item in the consolidated financial statements, including cash and cash equivalents, notes receivable, accounts receivable, inventories, fixed assets, intangible assets, short-term borrowings, employee compensation payable, operating revenue and costs, and R&D expenses, along with information on overseas operating entities Composition of Cash and Cash Equivalents | Item | Period-end Balance (RMB) | Period-beginning Balance (RMB) | | :--- | :--- | :--- | | Cash on Hand | 30,236.47 | 35,547.81 | | Bank Deposits | 171,838,517.00 | 152,323,138.65 | | Other Cash and Cash Equivalents | 19,202,320.00 | 20,630,318.69 | | Total | 191,071,073.47 | 172,989,005.15 | | Of which: Total funds deposited overseas | 4,893,939.06 | 8,211,156.08 | Details of Restricted Cash and Cash Equivalents | Item | Period-end Balance (RMB) | Year-beginning Balance (RMB) | | :--- | :--- | :--- | | Deposits | 17,000,000.00 | 15,007,557.23 | | Funds in Sealed Accounts | 2,202,320.00 | 2,718,898.06 | | Total | 19,202,320.00 | 17,726,455.29 | Categorization of Notes Receivable | Item | Period-end Balance (RMB) | Period-beginning Balance (RMB) | | :--- | :--- | :--- | | Commercial Acceptance Bills | 7,345,854.78 | 3,036,216.88 | Aging Analysis of Accounts Receivable | Aging | Period-end Book Balance (RMB) | Period-beginning Book Balance (RMB) | | :--- | :--- | :--- | | Within 1 year (inclusive) | 253,388,285.98 | 259,993,749.16 | | 1 to 2 years | 4,231,724.80 | 2,584,286.85 | | 2 to 3 years | 1,341,823.12 | 7,037,164.13 | | 3 to 4 years | 634,563.82 | 6,703,346.52 | | 4 to 5 years | 21,425.82 | 7,890.00 | | Total | 259,617,823.54 | 276,326,436.66 | Inventory Classification | Item | Period-end Book Value (RMB) | Period-beginning Book Value (RMB) | | :--- | :--- | :--- | | Raw Materials | 42,280,857.13 | 33,952,531.76 | | Work in Progress | 28,135,319.35 | 21,621,599.28 | | Finished Goods | 76,257,725.48 | 64,993,625.11 | | Total | 146,673,901.96 | 120,567,756.15 | Book Value of Fixed Assets | Item | Period-end Book Value (RMB) | Period-beginning Book Value (RMB) | | :--- | :--- | :--- | | Buildings and Structures | 80,621,377.37 | 84,115,715.21 | | Machinery and Equipment | 61,302,845.94 | 54,436,104.49 | | Transportation Equipment | 3,478,496.91 | 3,247,064.39 | | Electronic and Other Equipment | 5,311,722.84 | 4,991,383.84 | | Total | 150,714,443.06 | 146,790,267.93 | Book Value of Intangible Assets | Item | Period-end Book Value (RMB) | Period-beginning Book Value (RMB) | | :--- | :--- | :--- | | Land Use Rights | 32,268,915.05 | 32,769,018.77 | | Patent Rights | 848,366.23 | 1,321,152.66 | | Software | 725,791.35 | 810,869.80 | | Trademarks | 171,638.62 | 212,737.90 | | Total | 34,014,711.25 | 35,113,779.13 | Short-term Borrowings Classification | Item | Period-end Balance (RMB) | Period-beginning Balance (RMB) | | :--- | :--- | :--- | | Guaranteed Loans | 110,400,000.00 | 99,413,999.52 | | Interest Payable | 726,445.51 | 284,861.92 | | Total | 111,126,445.51 | 99,698,861.44 | Employee Compensation Payable | Item | Period-beginning Balance (RMB) | Increase During Period (RMB) | Decrease During Period (RMB) | Period-end Balance (RMB) | | :--- | :--- | :--- | :--- | :--- | | I. Short-term Compensation | 11,366,821.26 | 53,647,785.31 | 56,376,084.27 | 8,638,522.30 | | II. Post-employment Benefits - Defined Contribution Plans | 2,475.00 | 4,564,041.64 | 4,562,823.28 | 3,693.36 | | III. Termination Benefits | | 268,463.50 | 268,463.50 | | | Total | 11,369,296.26 | 58,480,290.45 | 61,207,371.05 | 8,642,215.66 | Operating Revenue and Operating Costs | Item | Current Period Revenue (RMB) | Current Period Cost (RMB) | Prior Period Revenue (RMB) | Prior Period Cost (RMB) | | :--- | :--- | :--- | :--- | :--- | | Main Business | 347,586,737.14 | 254,349,532.96 | 311,010,904.95 | 222,281,119.97 | | Other Business | 10,294,128.05 | 7,751,311.97 | 8,305,113.53 | 5,657,207.20 | | Total | 357,880,865.19 | 262,100,844.93 | 319,316,018.48 | 227,938,327.17 | Composition of R&D Expenses | Item | Current Period Amount (RMB) | Prior Period Amount (RMB) | | :--- | :--- | :--- | | Personnel Expenses | 9,962,166.58 | 10,395,822.22 | | Material Costs | 3,777,663.78 | 2,695,112.95 | | Depreciation and Amortization | 676,109.09 | 945,382.76 | | Other Expenses | 1,408,302.84 | 825,640.02 | | Total | 15,824,242.29 | 14,861,957.95 | VIII. Research and Development Expenses During the reporting period, the company's total R&D expenses amounted to RMB 15.8242 million, an increase from the prior period, primarily allocated to personnel and material costs, with all R&D expenditures expensed R&D Expenses by Nature of Expense | Item | Current Period Amount (RMB) | Prior Period Amount (RMB) | | :--- | :--- | :--- | | Personnel Expenses | 9,962,166.58 | 10,395,822.22 | | Material Costs | 3,777,663.78 | 2,695,112.95 | | Depreciation and Amortization | 676,109.09 | 945,382.76 | | Other Expenses | 1,408,302.84 | 825,640.02 | | Total | 15,824,242.29 | 14,861,957.95 | - All R&D expenses are expensed, with no capitalized R&D projects[373] IX. Changes in Consolidation Scope During the reporting period, the company's consolidation scope did not change due to non-common control business combinations, common control business combinations, reverse acquisitions, or disposal of subsidiaries - During the reporting period, there were no changes in the consolidation scope due to non-common control business combinations, common control business combinations, reverse acquisitions, or disposal of subsidiaries[374][375] X. Interests in Other Entities This section outlines the composition of the company's enterprise group, including the registered capital, main business, and shareholding percentages of its major subsidiaries, and provides key financial information for the significant non-wholly owned subsidiary, Wuxi Guanyun Heat Exchanger Co., Ltd Composition of Enterprise Group | Subsidiary Name | Registered Capital | Main Business | Direct Shareholding (%) | | :--- | :--- | :--- | :--- | | Wuxi Guanyun Heat Exchanger Co., Ltd. | 46,000,000.00 | Heat exchanger manufacturing, sales | 90.22 | | Wuxi Hongsheng Intelligent Loading Technology Co., Ltd. | 10,000,000.00 | Continuous handling equipment manufacturing, sales | 80.00 | | Shanghai Pengchu Trading Co., Ltd. | 1,000,000.00 | Mechanical equipment sales | 100.00 | | HONGSHENG GMBH | 25,000.00 (Euros) | Goods import and export | 100.00 | | Wuxi Hongsheng New Energy Co., Ltd. | 30,000,000.00 | Battery manufacturing, sales | 65.00 | | Wuxi Hongsheng Heat Exchange System Co., Ltd. | 200,000,000.00 | Heat exchanger manufacturing, sales | 100.00 | | HongSheng North America Inc | 4,000,000.00 (Canadian Dollars) | Heat exchanger manufacturing, sales | 80.00 | Key Financial Information of Significant Non-wholly Owned Subsidiary (Wuxi Guanyun Heat Exchanger Co., Ltd.) | Item | Period-end Balance (RMB) | Period-beginning Balance (RMB) | | :--- | :--- | :--- | | Current Assets | 145,994,293.48 | 122,749,303.73 | | Non-current Assets | 59,149,108.94 | 62,146,320.75 | | Total Assets | 205,143,402.42 | 184,895,624.48 | | Current Liabilities | 27,156,569.70 | 18,936,493.17 | | Non-current Liabilities | 4,322,143.68 | 4,506,723.24 | | Total Liabilities | 31,478,713.38 | 23,443,216.41 | | Operating Revenue | 68,579,532.82 | 69,381,087.34 | | Net Profit | 12,212,280.98 | 12,337,345.87 | | Total Comprehensive Income | 12,212,280.98 | 12,337,345.87 | | Cash Flow from Operating Activities | 16,197,882.13 | 6,503,769.98 | XI. Government Grants During the reporting period, the company recognized total government grants of RMB 1.4695 million in current profit or loss, with most being income-related and a smaller portion asset-related Government Grants Recognized in Current Profit/Loss | Type | Current Period Amount (RMB) | Prior Period Amount (RMB) | | :--- | :--- | :--- | | Related to Income | 1,437,905.36 | 293,500.00 | | Related to Assets | 31,639.68 | 31,639.68 | | Total | 1,469,545.04 | 325,139.68 | XII. Risks Related to Financial Instruments The company's main financial instruments are exposed to market risks (foreign exchange, interest rate, raw material prices), credit risk, and liquidity risk, which are managed by monitoring exchange rates, interest rates, and raw material price fluctuations, controlling credit limits, making provisions for bad debts, and forecasting cash flows - The company's main financial instruments include accounts receivable, accounts payable, and borrowings[385] - Market risks include foreign exchange risk (US dollar, Euro accounts receivable), interest rate risk (bank borrowings), and other price risks (aluminum price fluctuations, accounting for approximately 50% of product costs)[386][387] - Credit risk primarily arises from credit sales customers and is mitigated by controlling credit limits, credit approvals, and making provisions for bad debts[387][388] -