Core Viewpoint - Changzhou Aohong Electronics Co., Ltd. is responding to the Shanghai Stock Exchange's inquiry regarding its application for issuing convertible bonds, specifically addressing financial and accounting issues related to its fundraising project for a production base in Thailand [1][2]. Group 1: Financing Scale and Effectiveness - The project aims to construct a production base in Thailand with a total investment of 595.04 million yuan, which includes building construction, site decoration, hardware equipment, and other costs. The project is expected to achieve an average annual revenue of 663.2 million yuan after reaching full production capacity, with a pre-tax internal rate of return of 13.77% and a payback period of 7.39 years [2][3]. - The project will have an annual production capacity of 1.2 million square meters for single-sided, double-sided, and multi-layer boards, with a total construction area of 70,574 square meters [8][10]. Group 2: Investment Breakdown - The investment breakdown for the project includes: - Construction costs: 157.51 million yuan, covering main factory buildings, auxiliary buildings, and employee living quarters [5][6]. - Hardware equipment costs: 384.28 million yuan, for production, testing, and storage equipment [6][7]. - Software tools: 2.5 million yuan for production management and control software [8]. - Other construction costs: 29.83 million yuan for land acquisition and management fees [8]. - Contingency costs: 2.82 million yuan, calculated as 0.5% of the project costs [8]. Group 3: Comparison with Industry Standards - The unit construction cost for the project is approximately 0.25 million yuan per square meter, which is within the reasonable range compared to similar projects in the region, where costs range from 0.21 to 0.45 million yuan per square meter [15][16]. - The project’s equipment investment per unit capacity is 320.23 yuan per square meter, which is lower than the average of 451.75 yuan per square meter for comparable projects in the industry, indicating a reasonable investment strategy [12][14].

Investment Rating - The report assigns an "Accumulate" rating for the company, marking its first coverage [5][8]. Core Views - The company focuses on the printed circuit board (PCB) business, with production bases in Kunshan and Dongtai, and is well-positioned to benefit from trends in consumer and automotive electronics, as well as the growth in server and optical module markets driven by AI [5][10]. - The company has optimized its product structure, increasing the revenue share of multilayer boards from 24% in 2021 to 41% in 2024, which enhances profitability and market competitiveness [10][32]. - The company has established a strong customer base, including well-known domestic and international clients, which supports its revenue stability [10][52]. Summary by Sections 1. Business Overview - The company specializes in PCB production, offering single-sided, double-sided, and multilayer boards, with a focus on high-quality, flexible manufacturing to meet diverse customer needs [16]. - In 2023, the company generated revenues of 431.72 million yuan from consumer electronics and 283.77 million yuan from automotive electronics [31]. 2. Basic Business Foundation - The company has accumulated a strong client portfolio, including Delta Group, LG Group, and others, which enhances its market position [52]. - The global PCB market is expected to exceed 100 billion USD by 2026, with significant contributions from sectors like mobile phones, servers, and automotive electronics [10][52]. 3. Growth Potential - The AI boom is expected to drive demand for server and optical module PCBs, with the Chinese server PCB market projected to grow from 19.40 billion yuan in 2023 to 28.72 billion yuan by 2029 [10][11]. - The company is actively expanding into emerging applications such as storage/servers and communication, which are anticipated to be significant growth areas [10][11]. 4. Financial Forecast and Valuation - The company is projected to achieve revenues of 1.043 billion yuan in 2024, with a year-on-year growth of 5.97%, and a net profit of 123.31 million yuan, reflecting a 4.45% increase [7][44]. - The expected net profits for 2025-2027 are 136 million, 150 million, and 171 million yuan, respectively, with corresponding P/E ratios of 34.7, 31.4, and 27.6 [8][10].