Core Viewpoint - Mingzhi Electric's operational difficulties over the past two years are laid bare in a detailed 68-page response to the Shanghai Stock Exchange inquiry, revealing significant declines in revenue and profit [1] Financial Performance - From 2023 to 2024, the company's operating revenue decreased from 2.543 billion to 2.416 billion yuan, while net profit attributable to shareholders plummeted from 140 million to 78 million yuan, marking a decline of over 40% for two consecutive years [2] - The relocation of the Shanghai production base and delays in four new projects are cited as the main reasons for this downturn, with the relocation process causing a direct revenue loss of 150 million yuan [2] - The underperformance of new projects in Vietnam and Taicang, including the stepper motor project, has resulted in low capacity utilization rates, with only 64,000 units sold out of a projected 4 million for 2024 [2] Business Structure Changes - The core business of control motors and their drive systems is projected to generate 1.959 billion yuan in revenue for 2024, a year-on-year decline of 5.45%, with the photovoltaic application sector experiencing a 60% drop [4] - The medical equipment business also saw a 10% decline, while the smart automotive and robotics sectors showed growth, with smart automotive revenue increasing by 35% and robotics business nearly doubling [4] Strategic and Regulatory Challenges - Regulatory scrutiny highlights a lack of strategic execution, particularly regarding the mismatch between production capacity and market demand [5] - The company faces challenges in justifying its revenue forecasts and addressing the contradictions in its business performance, such as the decline in trade agency business despite rising profit margins [5] - The upcoming increase in tariffs on exports from Vietnam to the U.S. in August 2025 may undermine the company's overseas cost advantages, further complicating its operational landscape [5]

Financial Performance - The company reported a net profit of 13.65 million yuan for 2024, achieving a turnaround from losses, but the adjusted net profit was only 2.29 million yuan, indicating reliance on non-recurring gains of 11.37 million yuan, which accounted for 81.5% of the net profit [1] - Total revenue declined by 24.15% year-on-year to 295 million yuan, with handling business revenue decreasing by 9.50% and gross margin dropping by 2.08 percentage points [1] Liquidity and Debt Concerns - As of the end of 2024, the company had cash and cash equivalents of only 18.70 million yuan, while short-term borrowings and other payables exceeded 200 million yuan, resulting in a current ratio of 0.47 and a quick ratio of 0.47, indicating severe liquidity issues [1] Accounts Receivable Risks - Accounts receivable surged by 103.83% year-on-year to 30.49 million yuan, with 58.59% of other receivables aged over three years, raising concerns about the collectability of 39.88 million yuan owed by China State Construction [2] - The company attempted to mitigate bad debt provisions but faced scrutiny over the reasonableness of this approach, as the repayment cycle for China State Construction was extended [2] Asset Quality and Operational Challenges - The company’s asset quality and ongoing viability were questioned by regulators, with fixed assets making up 56.68% of total assets, amounting to 785 million yuan, and significant impairment losses recorded due to declining rental rates [3] - An attempt to sell assets in Lianyungang for 70 million yuan failed due to buyer default, highlighting difficulties in asset liquidation [3] Shareholder and Business Risks - The first major shareholder had pledged 64.3% of their shares, while the third major shareholder had pledged 100%, with a total of 12.12% of shares frozen, creating a negative feedback loop with business contraction [3] - The company’s trade agency business was scaled back due to increased financial risks, with basic logistics revenue plummeting to 27.73 million yuan, a significant year-on-year decrease [3]

Summary of Key Points Core Viewpoint The company, Jiangsu Wanlin Modern Logistics Co., Ltd., has received an inquiry letter from the Shanghai Stock Exchange regarding its 2024 annual report, prompting a detailed response concerning fixed asset impairment, accounts receivable, debt risks, and management expenses. Group 1: Fixed Assets - As of the end of 2024, the company's fixed assets amounted to 785 million yuan, representing 56.68% of total assets, with an impairment loss of 13 million yuan recorded in 2023 due to the underperformance of its subsidiary, Lianyungang Wanlin Logistics Co., Ltd. [1][2] - The revenue from the loading and unloading business of Lianyungang Wanlin decreased by 9.50% year-on-year, with a gross margin decline of 2.08 percentage points [1][2]. - The company conducted a detailed impairment test on fixed assets, concluding that the market value of certain properties indicated impairment, leading to a provision of 12.94 million yuan [1][2][3]. Group 2: Accounts Receivable - By the end of 2024, other receivables totaled 69.91 million yuan, primarily from trade agency business, with 58.59% of receivables from China State Construction Engineering Corporation being over three years old [4][5]. - The company reported a 103.83% year-on-year increase in accounts receivable, reaching 30.49 million yuan, while revenue decreased by 24.15% [4][5]. - The company has adopted a collective expected credit loss rate for accounts receivable, transitioning from individual impairment provisions for certain clients [4][5][6]. Group 3: Debt Risks - As of the end of 2024, the company reported short-term borrowings of 40.14 million yuan and other payables of 149.04 million yuan, with cash reserves of only 18.70 million yuan, resulting in a current ratio of 0.47 [13][15]. - The company has faced challenges in obtaining bank credit, with a total borrowing balance of 20 million yuan from two banks, both maturing in June 2026 [15][16]. - The company anticipates generating approximately 80 million yuan in operating cash flow in 2025, which may alleviate some liquidity pressures [15][16]. Group 4: Management Expenses and Non-Recurring Gains - The total employee compensation expense was 25.54 million yuan, reflecting a year-on-year decrease of 15.06% [16]. - The company is required to provide further details on the components of management expenses and the rationale behind the decline in employee compensation [16].

Core Viewpoint - Jiangsu Wanlin Modern Logistics Co., Ltd. is facing financial challenges, including a decline in revenue and net profit, alongside issues related to fixed asset impairment and accounts receivable management [1][2][3]. Fixed Assets - As of the end of 2024, the company's fixed assets amounted to 785 million yuan, representing 56.68% of total assets. In 2023, the company recognized a fixed asset impairment loss of 13 million yuan, primarily due to the underperformance of its subsidiary, Lianyungang Wanlin Logistics Co., Ltd., which reported a loss of 2.55 million yuan [2][3]. - The company did not recognize further impairment losses for fixed assets despite a decrease in business volume, with handling business revenue dropping by 9.50% year-on-year [2][3]. - A detailed impairment test was conducted on fixed assets at the end of 2023, revealing a net value of 24.76 million yuan for buildings, with an impairment provision of 12.94 million yuan [3][5]. Accounts Receivable - By the end of 2024, other receivables totaled 69.91 million yuan, with a significant portion (58.59%) aged over three years, primarily from China State Construction Engineering Corporation [8][12]. - The company has implemented a credit loss provision based on expected credit loss rates, with a year-on-year decrease of 24.15% in accounts receivable [8][12]. - The company has faced challenges in collecting receivables from China State Construction, leading to a longer aging of accounts, but has not identified significant credit risk [12][13]. Debt Risk - As of the end of 2024, the company reported short-term borrowings of 40.14 million yuan and other payables of 149.04 million yuan, with cash and cash equivalents at only 18.70 million yuan, resulting in a current ratio of 0.47 [17][18]. - The company received and repaid significant borrowing amounts during the reporting period, indicating liquidity challenges [17][18]. - The company is actively seeking bank credit to alleviate its liquidity issues and has projected an operating cash flow of approximately 80 million yuan for 2025 [17][18].