Core Viewpoint - Zhonglun New Materials Co., Ltd. is responding to the Shenzhen Stock Exchange's inquiry regarding its application for issuing convertible bonds, citing performance decline primarily due to fluctuations in crude oil prices and intensified industry competition [2][3]. Financial Performance - The company reported a slight increase in revenue but a continuous decline in net profit from 2022 to 2025, with revenues of 2.297 billion, 2.352 billion, 2.473 billion, and 1.537 billion yuan, and net profits of 285 million, 206 million, 113 million, and 67 million yuan respectively [2]. - The decline in performance is attributed to the correlation between raw material costs, particularly caprolactam, and crude oil prices, which dropped from $117.5 per barrel to $64.01 per barrel, a decrease of 45.53% [2]. Cash Flow and Debt Servicing - The company's operating cash flow turned positive by the end of September 2025, reaching 29.29 million yuan after being negative at -142 million yuan in the first half of 2025 [3]. - The company has sufficient debt servicing capability, with a coverage ratio of 183.13% based on the average operating cash flow over the past three years [3]. Profitability and Revenue Verification - There is a significant difference in gross margins between domestic and overseas sales, with domestic gross margin at 9.87% and overseas at 18.56% for the first nine months of 2025 [4]. - The company’s overseas revenue accounted for 54.22% of total revenue, with verification confirming the authenticity of overseas sales through various audit procedures [4]. Accounts Receivable and Inventory Management - As of the end of 2024, the company had accounts receivable of 234 million yuan, with a turnover rate of 7.23 times per year, indicating effective credit policies [5]. - Inventory management is also robust, with 96.13% of inventory aged less than one year and a low provision for inventory impairment at 1.23% [5]. Fundraising Projects - The company plans to use 868 million yuan from the convertible bond issuance for the industrialization project of high-performance membrane materials in Indonesia, which is expected to add 90,000 tons per year of BOPA membrane capacity [6][7]. - The project is anticipated to generate an additional net profit of 170 million yuan annually, with a gross margin of 17.74% [7].

Core Insights - The article discusses the significance of Polyamide 6 (PA6) in various industries and highlights BASF's role as a key supplier in Germany [3][10] - It emphasizes the importance of first-level distributors in the supply chain for PA6 products, detailing their roles in product distribution, market promotion, and customer service [6][10] Group 1: Importance of PA6 - PA6 is a thermoplastic engineering plastic known for its excellent mechanical properties, heat resistance, and processing capabilities, making it widely used in automotive, electronics, packaging, and industrial machinery [3][4] - The demand for high-quality raw materials like PA6 is increasing with industrial development, necessitating reliable suppliers and distributors [3][4] Group 2: BASF's PA6 Products - BASF is recognized for its high-quality PA6 products, which are characterized by stable quality, good processing performance, and environmentally friendly production processes [4][10] - The company targets the European market while also distributing its products globally through partners and distributors, offering various grades and particle sizes to meet diverse customer needs [4][10] Group 3: Role of First-Level Distributors - First-level distributors play a crucial role in connecting manufacturers with end customers, managing product distribution, and ensuring adequate inventory to prevent production interruptions [6][10] - They provide technical support and after-sales service, helping customers address issues encountered during the use of PA6 products [6][10] - Distributors also relay customer feedback and market trends back to BASF, assisting in product and service optimization [7][10] Group 4: Selecting a Reliable Distributor - When procuring PA6, it is essential to choose a reputable distributor with good credentials, quality products, and strong service capabilities [8][10] - Factors to consider include the distributor's reputation, product quality certifications, service quality, and price stability [8][10] Group 5: Future Industry Trends - The production and application of PA6 are evolving with industrial upgrades and increasing environmental requirements, focusing on green production processes and the use of renewable resources [8][10] - BASF and its distributors must adapt strategies to enhance supply chain flexibility and service levels to meet diverse market demands [8][10]