Core Viewpoint - Kirin Xin'an, known as the "first domestic operating system stock," has adjusted its bad debt provision method for accounts receivable from its largest client, A1 unit, which has raised concerns from the stock exchange [1][2]. Financial Performance - As of the end of 2024, Kirin Xin'an reported accounts receivable of 4.06 billion yuan, with 2.23 billion yuan owed by A1 unit, accounting for 55% of total receivables [2][3]. - The company achieved operating revenue of 286 million yuan and a net profit of 7.94 million yuan in the previous year, indicating significant growth [1]. Accounts Receivable Details - The accounts receivable from A1 unit originated from sales made in 2021 and 2022, and as of now, these amounts have not been collected [1]. - The bad debt provision for A1 unit was changed from a combined provision method to an individual provision method, with a bad debt loss amounting to 60.78 million yuan, representing a provision rate of 27% [2][4]. Client Relationship and Sales History - A1 unit was the largest client from 2019 to 2022, with sales figures of 625.02 million yuan, 1.03 billion yuan, 1.44 billion yuan, and 1.65 billion yuan, each accounting for over 40% of Kirin Xin'an's revenue during those years [3]. - In 2023, revenue from A1 unit dropped to zero, but the company continues to provide technical support and maintenance services [3][5]. Change in Provision Methodology - The change in bad debt provision methodology was influenced by the aging of accounts receivable, with 1.81 billion yuan being 2 to 3 years old and 417.98 million yuan being 3 to 4 years old [4]. - The company opted for individual provision to reflect the credit risk more cautiously, as the aging structure of A1 unit's receivables significantly differs from other clients [5].

Core Viewpoint - The company has received an inquiry letter from the Shanghai Stock Exchange regarding its 2024 annual report, specifically focusing on accounts receivable from a major client, A1 unit, and the adequacy of bad debt provisions [1][2]. Group 1: Accounts Receivable and Bad Debt Provisions - As of the end of 2024, the company's accounts receivable balance from A1 unit is 422.31 million yuan, with 55.17% of this amount (224.00 million yuan) being overdue [1][2]. - The company has changed its bad debt provision method for A1 unit from a collective approach to an individual assessment, resulting in a bad debt loss of 60.78 million yuan, which corresponds to a provision rate of 27% [1][3]. - The accounts receivable from A1 unit primarily originated from sales made in 2021 and 2022, with a significant portion (181.42 million yuan) being aged 2-3 years and 41.80 million yuan aged 3-4 years [2][3]. Group 2: Reasons for Bad Debt Provision Changes - The long overdue accounts from A1 unit are attributed to internal management issues within A1, but the company has not observed any signs of A1 refusing or being unable to pay [3][7]. - The company has conducted a thorough analysis of the credit risk associated with A1 unit, leading to the decision to individually assess bad debt provisions, which is deemed more accurate under current accounting standards [5][7]. - The bad debt provision for A1 unit is higher than what would have been calculated under the collective assessment method, reflecting a more cautious approach to credit risk [6][7]. Group 3: Revenue Recognition and Business Continuity - Revenue from A1 unit is recognized upon delivery and acceptance of products, with total recognized revenue amounting to 255.45 million yuan against a contract amount of 288.66 million yuan [11][12]. - The company continues to engage with A1 unit for after-sales maintenance and product development, indicating ongoing business relations despite the lack of new contracts or payments [17][19]. - The company has issued products to A1 unit valued at 24.82 million yuan, which are currently under price review, and no new sales contracts have been signed as of the latest update [17][19].

Core Viewpoint - The company has faced significant challenges with its major client, A1 unit, leading to a substantial increase in bad debt provisions due to the inability to collect receivables, which has prompted a shift from collective to individual bad debt provisioning [1][2][10]. Group 1: Accounts Receivable and Bad Debt Provisions - As of the end of 2024, the company's accounts receivable from A1 unit amounted to 406 million yuan, with 224 million yuan (55.17%) attributed to A1 unit [1]. - The bad debt provision for A1 unit was adjusted from a collective basis to an individual basis, with a bad debt loss of 60.78 million yuan, representing a provision rate of 27% [1][10]. - The aging analysis shows that as of the end of 2024, 181.42 million yuan of accounts receivable from A1 unit were aged 2-3 years, and 41.80 million yuan were aged 3-4 years, with no repayments received to date [3][10]. Group 2: Revenue Recognition and Client Relationship - Revenue from A1 unit was recognized upon delivery and acceptance of products, with total recognized revenue of 285.66 million yuan against a contract amount of 288.66 million yuan [12][14]. - The company has maintained ongoing communication with A1 unit to facilitate the collection of receivables and has continued to provide after-sales support and product development [15][16]. - Despite the lack of new contracts or payments from A1 unit in 2024, the business relationship remains active, with ongoing product deliveries and technical support [16][18]. Group 3: Audit and Verification - The sponsor institution conducted thorough verification procedures, including interviews with management and reviews of accounts receivable details, confirming the accuracy of revenue recognition and the sufficiency of bad debt provisions [16][17]. - The audit confirmed that the company’s bad debt provisioning practices align with industry standards and that the provisions made for A1 unit were adequate given the circumstances [10][19].