Core Viewpoint - The response report from Mudanjiang Hengfeng Paper Co., Ltd. addresses the inquiries from the Shanghai Stock Exchange regarding the issuance of shares for asset acquisition and related transactions, detailing the purpose and management of the transaction, as well as the financial implications and operational integration plans. Group 1: Transaction Purpose and Management - The transaction aims to enhance operational efficiency by integrating the target company's production capabilities with Hengfeng Paper's existing operations, addressing capacity constraints and maximizing operational benefits [2][4]. - The management structure during the entrusted operation includes a joint management committee to oversee significant decisions, with profit-sharing based on the target company's audited net profit [2][4]. - The target company has a specialized production license for cigarette paper, which is expected to align with Hengfeng Paper's strategic goals in the tobacco industry [2][4]. Group 2: Financial Implications - The acquisition is projected to lead to a decrease in Hengfeng Paper's net profit and earnings per share due to increased depreciation and amortization from the target company's long-term assets [2][4]. - The financial data referenced in the report pertains to consolidated financial statements for the years 2022, 2023, and 2024, indicating a thorough financial analysis of the transaction's impact [1][2]. Group 3: Operational Integration Plans - Post-acquisition, Hengfeng Paper plans to integrate business operations, assets, and personnel with the target company to enhance overall efficiency and market competitiveness [2][4]. - The operational model will shift to a commissioned processing approach, where Hengfeng Paper will handle product development and sales, while the target company will focus on production management [6][7]. - The collaboration is expected to leverage the target company's geographical advantages for logistics and distribution, significantly reducing transportation costs for Hengfeng Paper's products [11][12]. Group 4: Industry Context - The special paper industry is experiencing steady growth, with global consumption projected to reach 29.5 million tons by 2028, indicating a favorable market environment for Hengfeng Paper's expansion [25][26]. - The tobacco industry is evolving towards higher-end and environmentally friendly products, creating opportunities for Hengfeng Paper to enhance its market share and product offerings [25][26]. - The competitive landscape is characterized by a concentration of market share among leading firms, necessitating strategic partnerships and regional expansions to meet growing demand [25][26].

Overview - The demand for environmentally friendly packaging materials is increasing due to rising living standards and environmental awareness in China [1][11] - Laminated steel, known for its excellent wear resistance, corrosion resistance, moisture resistance, and aesthetic appeal, is gaining popularity among downstream customers [1][11] - The projected sales volume of laminated steel in China is expected to reach 182,600 tons by 2024, with a market size of 1.528 billion yuan [1][11] Industry Development - Laminated steel is produced by combining PP or PET films with tinplate, offering superior properties compared to traditional tinplate [2][3] - The production process of laminated steel is cost-effective, with lower material costs and energy consumption compared to traditional methods [3][5] - The industry has evolved since 2006, with domestic companies like Orijin leading the way in technology and production capacity [5][20] Supply Chain - The upstream of the laminated steel industry includes suppliers of steel substrates, plastic films, and production equipment [7] - The downstream market encompasses various sectors, including food and beverage packaging, daily chemical packaging, pharmaceutical packaging, and chemical product packaging [7] Market Demand - The food and beverage packaging sector accounts for over 60% of the laminated steel demand in China [9] - The revenue of large-scale food manufacturing enterprises in China reached 894.49 billion yuan in the first five months of 2025, indicating a growing market for laminated steel [9] Competitive Landscape - The laminated steel market in China is highly concentrated, with leading companies like Orijin and Baosteel Packaging holding over 50% market share [13][18] - New entrants face high technical and financial barriers, making it challenging to compete with established players [13] Key Players - Orijin Technology Co., Ltd. focuses on providing comprehensive packaging solutions and is expected to generate 13.67 billion yuan in revenue in 2024, with 88.66% from metal packaging products [16] - Baosteel Packaging Co., Ltd. is a leading manufacturer in the metal packaging sector, with projected revenue of 8.318 billion yuan in 2024, primarily from metal beverage cans [18] Future Trends - The demand for laminated steel is expected to grow as it finds applications in high-end sectors like electric vehicle battery casings [20] - Increasing environmental regulations and support for new material industries will drive companies to adopt more sustainable production practices [20]