Core Viewpoint - The traditional component supplier Huafeng Co., Ltd. has decided to terminate its "New Lightweight Engine Core Component Intelligent Manufacturing Project" due to disappointing market conditions and internal capacity utilization issues, reflecting a strategic shift in response to the rapid penetration of new energy heavy trucks in the market [2][6][9] Group 1: Project Termination - Huafeng Co., Ltd. announced the termination of the second phase of its "New Lightweight Engine Core Component Intelligent Manufacturing Project," which was initially planned as a key expansion initiative with a total investment of 750 million yuan, of which 349 million yuan was to be raised [4][5] - The decision to halt the project was made during the fifth board meeting held on December 16, 2025, indicating a shift in the company's investment strategy [4] - The remaining balance of approximately 139 million yuan from the raised funds will be kept in a dedicated account for future investment opportunities [5] Group 2: Market and Internal Challenges - The heavy truck market has been experiencing a downturn, with a 51.84% year-on-year decline in sales in 2022, and while there is some recovery expected from 2023 to 2025, growth rates remain below initial project expectations [6][8] - Internal improvements in technology and processes have led to an increase in production capacity from the planned 50,000 sets to 80,000 sets for the first phase of the project, making further investment in the second phase unnecessary [7] - The rapid growth of new energy heavy trucks, which accounted for 25.95% of the market share by late 2025, has further pressured traditional heavy truck components, indicating a significant shift in market demand [7][8] Group 3: Financial Performance - For the first three quarters of 2025, Huafeng Co., Ltd. reported a revenue of 558 million yuan, a decrease of 23.36% year-on-year, and a net profit of 12.7682 million yuan, down 75.67% year-on-year [8] - The decline in performance is attributed to fluctuations in market demand and changes in customer product structures, leading to reduced orders for components and lower capacity utilization [8][9] - The board concluded that continuing investment in a project with uncertain returns and potential technological risks would not align with shareholder interests, thus supporting the decision to terminate the project [9]

Core Viewpoint - The company has decided to terminate the second phase of the fundraising investment project for the "Intelligent Manufacturing Project of Core Components for New Lightweight Engines" and will manage the remaining funds in a dedicated account while seeking new investment opportunities in line with future business strategies [1] Group 1 - The board of directors approved the proposal to terminate the second phase of the fundraising investment project [1] - The total planned investment for the project was 750 million yuan, with 139 million yuan remaining as of December 15, 2025, including interest income, financial returns, and outstanding payments [1] - The company will continue to manage the remaining funds in a dedicated account [1]

Overview - The company plans to use temporarily idle raised funds for cash management to improve fund utilization efficiency without affecting the construction of investment projects and normal operations [1][6]. Cash Management Details - The amount for cash management is set at a maximum of RMB 100 million, with a resolution validity period of 12 months from the board's approval date [1][4]. - The source of funds for this cash management comes from the proceeds of the company's initial public offering (IPO), which raised a total of RMB 855.63 million, with a net amount of RMB 796.77 million after deducting issuance costs [2][3]. Investment Strategy - The company will invest in low-risk, short-term financial products, including government bonds, bank wealth management products, structured deposits, and securities company income certificates, with a maximum investment period of one year [4][5]. - The investment decision-making authority is delegated to the company's chairman, who will select qualified financial institutions as trustees and manage the investment process [4][5]. Approval Process - The board of directors has approved the cash management proposal, which does not require submission to the shareholders' meeting as it falls within the board's approval authority [4][6]. Impact on the Company - The use of idle funds for cash management will not affect the construction of investment projects or change the purpose of the raised funds, and it is expected to enhance fund utilization efficiency and generate investment returns [5][6]. - The company does not have significant debts that would complicate the purchase of large financial products, ensuring that cash management activities will not adversely impact its financial status or operational results [5][6]. Opinions from Supervisory Bodies - The supervisory board agrees that the cash management of temporarily idle funds aligns with regulatory requirements and can enhance fund efficiency and company revenue [6][7]. - The sponsoring institution has confirmed that the cash management plan complies with relevant laws and regulations, and there are no objections to the proposal [7].

Core Viewpoint - The company is facing delays in the "New Lightweight Engine Core Components Intelligent Manufacturing Project" due to market demand fluctuations and has decided to extend the project's completion date to December 2025 [4][8][15] Summary by Sections Project Overview - The "New Lightweight Engine Core Components Intelligent Manufacturing Project" was approved in September 2020, with a total investment of 750 million yuan, of which 348.92 million yuan was raised through the IPO [2][4] - The project aims to establish a production capacity of 100,000 sets of engine blocks and cylinder heads annually, with the first phase expected to be operational by December 2022 and the second phase by January 2024 [2] Project Progress and Financials - As of April 2024, the project has utilized 187.99 million yuan, accounting for 53.88% of the planned investment [4] - The first phase of the project has been completed and generated revenue of 369.21 million yuan in 2023, benefiting from increased sales of natural gas heavy trucks [2][4] Reasons for Delays - The project has experienced slow progress and low utilization of raised funds due to significant fluctuations in the heavy truck market, with a 51.84% year-on-year decline in sales in 2022 [4][6] - The company has opted to delay the second phase of the project, citing the need for prudent financial management in light of market conditions [4][6] Market Trends and Adjustments - The penetration rate of natural gas heavy trucks is increasing, but the products from the completed project do not align with the demand for high-power natural gas engines, leading to low capacity utilization [5][6] - The company is closely monitoring market changes and may adjust its investment strategy accordingly, especially in response to the growing trend of new energy heavy trucks [5][6] Risk Assessment and Management - The company has conducted a thorough risk assessment and has disclosed potential risks related to project delays and changes in investment plans [12][15] - There are no indications of non-operational occupation of funds by major shareholders or related parties, ensuring compliance with regulatory requirements [12][15]