Core Viewpoint - Shen Yu Communication Technology Co., Ltd. (Shen Yu Shares) is raising up to RMB 500 million for smart data line construction projects, with a focus on enhancing its core business in high-frequency RF coaxial cables [2][3]. Group 1: Financial Performance and Concerns - In 2024, Shen Yu Shares reported a significant discrepancy between raw material purchases (RMB 366.64 million) and the cost of coaxial cable production (RMB 457.69 million), resulting in a gap of RMB 91.05 million, raising questions about inventory management and cost reporting [4][6]. - The company's inventory increased from RMB 142.32 million at the end of 2023 to RMB 147.46 million at the end of 2024, contradicting claims of significant material consumption [6][7]. - The audit report issued by Tianzhi International raised concerns about the adequacy and effectiveness of the audit procedures, given the apparent inconsistencies in financial data [7]. Group 2: Business Strategy and Revenue Sources - Shen Yu Shares has a low-margin gold wire drawing business that contributed over 20% of its revenue from 2022 to 2024, despite a gross margin of around 2%, indicating a potential misalignment with core business strategies [8][9]. - The decision to reduce the scale of the gold wire drawing business coincides with the company's plan to issue convertible bonds, suggesting a strategic move to enhance its appeal to investors by focusing on core operations [9]. Group 3: Fundraising and Project Viability - The company plans to raise RMB 504 million for a smart data line project, which has a projected internal rate of return (IRR) of only 12.58%, significantly lower than industry standards of 16% to 25% [10][11]. - Shen Yu Shares has a history of project execution failures, including a previous project with an IRR of 19.84% that did not meet expected benefits, raising doubts about the feasibility of the new project [10][11]. - The company’s argument for absorbing new production capacity relies on optimistic market expectations, which may not account for potential price competition and margin erosion [12].