Core Viewpoint - Changgao Electric New Technology Co., Ltd. has responded in detail to the Shenzhen Stock Exchange's inquiry regarding its application for issuing convertible bonds, addressing key issues such as business dependence and fundraising projects, which has attracted market attention [1] Customer Dependence and Response Strategy - The main business of Changgao Electric New includes power transmission and transformation equipment, as well as power survey design and engineering contracting services, with power transmission and transformation equipment being the core business. Sales revenue from State Grid and its subsidiaries accounted for over 85% during the reporting period. The company believes this high customer concentration aligns with industry characteristics, as the downstream market primarily consists of the power grid construction sector, where State Grid holds a significant market share. The investment plans and bidding policies of State Grid are stable, with total investments planned by State Grid and Southern Grid exceeding 825 billion yuan from 2022 to 2025 [2] - To mitigate potential performance volatility risks, the company has developed response strategies across three dimensions: product, technology, and market. In terms of products, it aims to expand its product line through three fundraising projects to cover all voltage levels and smart products. Technologically, it continues to increase investment in R&D and quality control. In the market dimension, it seeks to deepen multi-level market development, optimize customer structure, and actively expand customers outside the State Grid system [2] Profit Margin Analysis of Power Transmission and Transformation Equipment - From 2022 to 2024, the gross profit margins of Changgao Electric New's medium and high-voltage switches, closed combined electrical appliances, and complete electrical appliances showed an overall upward trend, with some fluctuations in the first half of 2025. Factors driving this include product structure optimization, State Grid policies driving price increases, declining raw material prices, and cost dilution from economies of scale. For example, the gross profit margin of closed combined electrical appliances increased from 2022 to 2024 due to price increases, economies of scale, and declining raw material prices, while it declined in the first half of 2025 mainly due to delivery cycles and raw material price changes. The gross profit margin of complete electrical appliances improved due to the growth of main product margins and an increase in the proportion of high-margin products, while it declined in the first half of 2025 due to procurement policy adjustments. The gross profit margin of high-voltage switch products overall increased due to the combined effects of raw material prices, product structure, and State Grid policies. Compared to peer companies, the trend of gross profit margin changes for Changgao Electric New is generally consistent, and future gross profit margin levels are expected to remain stable [3] Accounts Receivable and Goodwill Situation - As of March 31, 2025, Changgao Electric New had accounts receivable of 80.93 million yuan, other receivables of 514.25 thousand yuan, and contract assets of 19.19 million yuan from Chunhua Zhonglue Wind Power Co., Ltd. that have not been recovered. The 80MW wind power project meets the conditions for inclusion in the subsidy project list but has not yet been declared, and the electricity price subsidy has not been implemented. If the project is subsequently included in the subsidy project list and receives the electricity price subsidy, the related receivables will not face recovery risks; otherwise, there may be risks, but the company has made corresponding provisions for bad debts, which will have a minimal impact on performance and ongoing operations. Other similar projects do not face similar risks, and the receivables do not belong to non-operating fund occupation by related parties, with effective internal control measures in place [4] - The company assesses accounts receivable credit risk characteristics to make provisions for bad debts, with a higher overall provision ratio for accounts receivable over five years compared to China West Electric, aligning closely with the average of comparable companies. The provision for bad debts is deemed sufficient and reasonable. The book value of goodwill is 65.41 million yuan, arising from the acquisition of Hunan Changgao Electric Co., Ltd. and Hunan Changgao Senyuan Power Equipment Co., Ltd. Both companies have performed well during the reporting period, and goodwill impairment testing has shown that the relevant parameters and assumptions are reasonable, with no impairment occurring, making the lack of goodwill impairment provisions reasonable [5] Fundraising Project Details - On May 16, 2025, the board of directors of Changgao Electric New approved an increase in fundraising, which does not directly apply to the provisions of the "Securities and Futures Legal Application Opinion No. 18" but has followed internal review procedures. The fundraising projects involve multiple entities and are deemed reasonable, with the fundraising products aligning with the main business of the implementing entities, allowing for separate and accurate accounting of investments and benefits. The newly added product, mutual inductors, is closely related to existing products in terms of raw materials, technology, and customers. The company has mastered the key technologies for mutual inductors and possesses the capability for mass production and sales, with no significant uncertainties in the implementation of the fundraising projects. The fundraising will be directed towards the main business, ensuring self-control over mutual inductors, reducing costs, and enriching the product matrix. The scale of new production capacity from the fundraising projects has been cautiously evaluated, considering State Grid's centralized procurement policies, industry development, and competition, with minimal risks of being unable to digest the new capacity through State Grid's centralized procurement. The existing production capacity utilization rate was low in the first quarter due to seasonal and production mode impacts but significantly improved in the second quarter, with no idle risks for existing capacity and no impairment risks for related fixed assets. The pricing basis for each fundraising product is reasonable, with some products expected to have gross profit margins higher than similar products during the reporting period, which is deemed reasonable. The new depreciation and amortization from the fundraising projects will increase in the short term but is not expected to have a significant adverse impact on the company's performance [8][9]