Core Viewpoint - Zhejiang Huakang Pharmaceutical Co., Ltd. received an inquiry letter from the Shanghai Stock Exchange regarding its 2024 annual report, prompting the company to clarify issues related to its construction projects and investment performance, particularly concerning the erythritol production project which has underperformed financially due to market conditions [1][2]. Summary by Sections Construction Projects and Investment - In 2024, the company invested 1.43 billion yuan in fixed assets, intangible assets, and other long-term assets, marking a 106.99% increase year-on-year. The fixed assets reached 2.25 billion yuan, up 45.13%, while construction in progress surged by 357.58% to 1.33 billion yuan, primarily due to the Zhoushan Huakang project [1]. - The erythritol production project generated revenue of 72.44 million yuan in 2024 but incurred a gross loss of 1.72 million yuan, continuing to fall short of initial projections since its trial operation began in May 2022 [1][2]. Erythritol Project Details - The total investment for the erythritol project is estimated at 350.41 million yuan, with cumulative investment reaching 362.68 million yuan by the end of 2024. The project aims to produce 30,000 tons of high-purity erythritol annually [5][6]. - In 2024, the company produced 6,834.50 tons of erythritol, achieving a sales rate of 97.96%. The market price for erythritol was approximately 13,000 yuan per ton by December 2024 [6][11]. Market Conditions and Competition - The erythritol market has faced significant challenges, including declining prices and increased competition, leading to a supply-demand imbalance. The price of erythritol has been under pressure since 2023, with some manufacturers exiting the market [7][11]. - The company noted that the market for erythritol was initially promising, but the influx of new competitors and expanded capacities led to a significant drop in prices, affecting profitability [7][11]. Inventory and Trade Business - By the end of 2024, the company's inventory reached 697 million yuan, a 147.26% increase year-on-year, primarily due to increased raw material reserves for the Zhoushan project. The raw materials accounted for 448 million yuan, up 385.15% [15][16]. - The cash flow from trade business payments was 1.15 billion yuan, reflecting a 198.58% increase, driven by the anticipated demand for corn from the Zhoushan project [15][16].