Core Viewpoint - Qingdao Huicheng Environmental Protection Technology Group Co., Ltd. has responded to the Shenzhen Stock Exchange's inquiry regarding its application for a specific stock issuance, providing detailed explanations about its business operations and financial status [1] Performance Fluctuations and Business Conditions - The main business of Huicheng Environmental Protection is solid waste treatment and resource utilization. The company's net profit attributable to shareholders, excluding non-recurring gains and losses, showed fluctuations: 4.67 million, -8.03 million, 139.54 million, and 34.42 million yuan in different periods. In 2023, the official operation of the petroleum coke hydrogen ash utilization project significantly boosted revenue from treatment services and steam sales, leading to a substantial year-on-year profit increase. However, from January to September 2024, operating revenue increased by 10.07% year-on-year, while net profit attributable to shareholders decreased by 74.01%, primarily due to rising operational costs of the ash utilization project, macroeconomic downturns, and declining profitability in the refining industry [2] - The company's revenue from China Petroleum accounted for a high proportion, at 69.12% in 2023 and 62.75% from January to September 2024, as Guangdong Petrochemical, a subsidiary of China Petroleum, is the sole customer for the ash utilization project. The gross profit margin of the main business fluctuated significantly, recorded at 27.82%, 21.41%, 32.37%, and 24.80% in the respective years [2] Asset and Liability Situation - By the end of 2023, the company's fixed assets increased by 1.32 billion yuan, a growth of 268.22%, mainly due to the commissioning of multiple projects. As of September 30, 2024, the book value of construction in progress was 748.13 million yuan, indicating a significant future funding requirement. The company had short-term loans of 246.76 million yuan, non-current liabilities due within one year of 337.08 million yuan, and long-term loans of 1.29 billion yuan, with a debt-to-asset ratio of 66.12%, higher than comparable companies in the industry [3] Business Situation Explanation - The ash utilization project addresses the challenge of high-sulfur petroleum coke hydrogen ash disposal for Guangdong Petrochemical, with the company being the sole supplier for ash disposal. Revenue recognition is based on the actual disposal and steam sales. In 2024, revenue and gross profit margin are expected to decline due to decreased ash reception and disposal volumes, along with rising costs. The company plans to advance the second phase of the project, expand steam sales channels, and optimize equipment maintenance to mitigate these issues. The gross profit margin of the main business is influenced by downstream demand and market competition, with fluctuations observed in different business segments. The gross profit margin increased in 2023 due to the petroleum coke hydrogen ash business but is expected to decline in 2024 due to reduced margins in catalyst and ash businesses. Inventory levels are projected to increase by the end of 2024 and mid-2025 due to the advancement of a 200,000 tons/year mixed waste plastic resource utilization project, with sufficient inventory turnover and adequate provisions for inventory depreciation [4]

Business Situation - The main business of the company is solid waste treatment and resource utilization, with significant revenue growth in 2023 due to the operation of the petroleum coke hydrogen ash comprehensive utilization project [2] - The company's net profit attributable to shareholders, excluding non-recurring gains and losses, was 4.67 million, -8.03 million, 139.54 million, and 34.42 million yuan for the respective reporting periods [2] - Revenue from sales to China Petroleum accounted for 69.12% and 62.75% of the main business revenue in 2023 and the first nine months of 2024, respectively [2] - The gross profit margin of the main business fluctuated significantly, recorded at 27.82%, 21.41%, 32.37%, and 24.80% [2] Financial Situation - As of the end of 2023, fixed assets increased by 1.32 billion yuan, a growth of 268.22%, mainly due to multiple projects being put into production [3] - As of September 30, 2024, the value of construction in progress was 748.13 million yuan, with short-term loans at 246.76 million yuan and long-term loans at 1.29 billion yuan, resulting in a debt-to-asset ratio of 66.12%, higher than comparable companies in the industry [3] - Inventory values over the last two years and the current period were 106.84 million, 193.57 million, and 279.93 million yuan, with an increase in inventory due to preparations for deep catalytic cracking of waste plastics [3] - Sales expenses in 2023 increased by 13.11 million yuan, a rise of 97.93%, primarily due to increases in agency fees, hospitality expenses, and employee salaries [3] - The value of trading financial assets at the end of the reporting period was 12.15 million yuan, representing the company's purchased financial products [3] Risks and Responses - The company faces risks including reliance on a single customer, declining performance and gross margins, impairment of fixed assets and construction in progress, inventory depreciation, and debt repayment issues [4] - The company plans to steadily advance related projects, expand steam sales channels, rationally plan equipment updates and maintenance, strengthen cost control, and explore domestic and international markets [4] - The actual controller of the company is taking measures to maintain control stability, and the company does not hold significant financial investments, complying with relevant regulations [4]