Securities code: 300185 securities abbreviation: Tongyu Heavy Industy Co.Ltd(300185) Tongyu Heavy Industy Co.Ltd(300185)
With Citic Securities Company Limited(600030)
Letter on the implementation of the opinions of the audit center on Tongyu Heavy Industy Co.Ltd(300185) applying for issuing convertible corporate bonds to unspecified objects
of
Reply Report
Sponsor (lead underwriter)
North block of excellence Times Square (phase II), No. 8, Zhongxin Third Road, Futian District, Shenzhen, Guangdong Province
Shenzhen Stock Exchange:
The letter of implementation of the opinions of the audit center on Tongyu Heavy Industy Co.Ltd(300185) application for issuing convertible corporate bonds to unspecified objects (audit letter [2022] No. 020032) (hereinafter referred to as the “implementation letter”) issued by your exchange on February 18, 2022 has been received, Citic Securities Company Limited(600030) (hereinafter referred to as “sponsor”) as a sponsor of Tongyu Heavy Industy Co.Ltd(300185) (hereinafter referred to as ” Tongyu Heavy Industy Co.Ltd(300185) “, “company” or “issuer”) issuing convertible corporate bonds to unspecified objects and listing on the gem, and Tongyu Heavy Industy Co.Ltd(300185) Beijing Jindu law firm (hereinafter referred to as “Jindu”, “issuer’s lawyer”) and Zhitong accounting firm (special general partnership) (hereinafter referred to as “Zhitong” and “accountant”) have implemented the relevant issues of the implementation letter one by one. Now, the reply to the implementation letter is as follows, please review.
explain:
1、 Unless otherwise specified, the abbreviations or terms in this reply report have the same meanings as those in the prospectus (draft of the meeting).
2、 The font in this reply report represents the following meanings:
Issues listed in the implementation letter are in bold (not bold)
Answers to questions in arial (not bold)
Supplementary disclosure of the prospectus in italics (BOLD)
3、 In this reply report, if the total is inconsistent with the listed value and, it is caused by rounding.
catalogue
Question 1 3 question 2 four
The issuer is requested to predict and disclose whether it can achieve profit in 2021 in combination with the performance in the third quarter of 2021 and the actual operation in the fourth quarter, and explain whether this issuance meets the issuance conditions of profit in the last two years. The sponsor and accountant are requested to check and give clear opinions.
[reply]
1、 In combination with the performance in the third quarter of 2021 and the actual operation in the fourth quarter of 2021, predict and disclose whether the profit can be realized in 2021, and explain whether the issuance meets the issuance conditions of profit in the last two years
According to the performance forecast of the company in 2021, according to the preliminary calculation of the company, the performance forecast of 2021 is as follows: unit: 10000 yuan
Estimated number of projects in 2021 changes in 2020
(Unaudited) (audited)
After deducting non recurring profits and losses, the net profit attributable to shareholders of the listed company ranges from 26692.55 to 32412.38, 38132.21 – 30.00% to – 15.00%
Net profit attributable to shareholders of listed companies ranging from 23992.55 to 29712.38 to 37326.64 – 35.72% – 20.40%
Note: the above performance in 2021 is the preliminary expected data of the company, which has not been audited or reviewed by accountants and does not constitute the issuer’s profit forecast or performance commitment.
From January to September 2021, the issuer realized a net profit attributable to the shareholders of the listed company of 262391300 yuan, a year-on-year decrease of 19.76%, mainly due to the impact of macro economy, the sharp rise in the prices of raw materials such as pig iron and scrap steel, and the year-on-year increase in the company’s operating costs. At the same time, affected by the decline of the rush to install wind power and the further intensification of market competition caused by the “de subsidy” policy of the wind power industry, the revenue of the company’s wind power spindle products with high gross profit margin decreased year-on-year, resulting in the year-on-year decline of the company’s net profit attributable to the shareholders of listed companies from January to September 2021. In the fourth quarter of 2021, the issuer normally realized profit. According to the voluntary disclosure announcement of Tongyu Heavy Industy Co.Ltd(300185) on the performance forecast of 2021, the issuer expects to realize the net profit attributable to the shareholders of the listed company in 2021 from 266925500 yuan to 32412380 yuan, and the net profit attributable to the shareholders of the listed company after deducting non recurring profits and losses from 239925500 yuan to 29712380 yuan. The issuer’s profit in 2021 is good.
To sum up, as of the signing date of this reply report, the company has complied with the provisions of item 5 of Article 9 of the measures for the administration of registration that “the net profit in the last two years shall be calculated based on the lower of before and after deducting non recurring profits and losses”. This offering meets the conditions for profitable issuance in the last two years.
The issuer has made a performance forecast on the operating performance in 2021.
(I) verification procedure
In response to the above matters, the recommendation institution and the accountant have implemented the following verification procedures:
1. Refer to the voluntary disclosure announcement of Tongyu Heavy Industy Co.Ltd(300185) on 2021 annual performance forecast announced by the company and the unaudited financial statements related to the performance forecast.
2. Check the company’s regular announcements to understand the operation of the company in the first three quarters and the fourth quarter of 2021. (II) verification opinions
After verification, the recommendation institution and the accountant believe that:
The issuer expects to be profitable in 2021 and has disclosed that this issuance meets the conditions for profitable issuance in the last two years in Item 5 of Article 9 of the measures for the administration of registration.
Question 2
In 2019, the national development and Reform Commission issued the notice on improving the on grid tariff policy for wind power. The subsidy for onshore wind power began to decline in 2021 and the national subsidy for offshore wind power was cancelled in 2022. The issuer’s large-scale offshore wind power product supporting capacity improvement project (hereinafter referred to as offshore wind power project) of this raised investment project mainly produces offshore wind power structure products. The gross profit margin in the second to 15th years is expected to be about 28% – 30%, which is higher than that of the issuer’s existing products.
Meanwhile, the rise in the price of raw materials led to the decline of the issuer’s gross profit margin in the latest period.
The issuer is requested to supplement the specific impact of the change of offshore wind power subsidy policy on the implementation and operating performance of the issuer’s raised investment projects, whether the parameters used in the benefit prediction of offshore wind power raised investment projects have taken into account the price fluctuation of raw materials and the corresponding impact of offshore wind power subsidy policy, and whether the benefit prediction is prudent.
The issuer is requested to make supplementary disclosure of the above risks and give major risk tips.
The sponsor is requested to check and express clear opinions.
[reply]
1、 The issuer is requested to supplement the specific impact of the change of offshore wind power subsidy policy on the implementation and operating performance of the issuer’s raised investment projects, whether the parameters used in the benefit prediction of offshore wind power raised investment projects have taken into account the corresponding impact of raw material price fluctuation and offshore wind power subsidy policy, and whether the benefit prediction is prudent
The main products of the issuer’s fund-raising project “supporting capacity improvement project of large offshore wind power products” are offshore wind power structure products. In May 2019, the national development and Reform Commission issued the notice on improving the on grid tariff policy for wind power (fgjg [2019] No. 882). Since January 1, 2021, the newly approved onshore wind power projects have fully realized parity on the grid, and the state will no longer subsidize. As for the on grid price of offshore wind power, if all units are connected to the grid in 2022 and beyond, the guidance price in the year of grid connection shall be implemented.
The decline of offshore wind power subsidy will not have a significant adverse impact on the implementation and operation of the issuer’s offshore wind power raised investment project. The parameters used in the benefit prediction of raised investment project have taken into account the corresponding impact of raw material price fluctuation and offshore wind power subsidy policy, as follows:
1. The decline of offshore wind power subsidies will not have an adverse impact on the long-term development of China’s wind power industry
According to the data of the national energy administration, by the end of 2021, the cumulative installed capacity of wind power in China was 328 million KW, a year-on-year increase of 16.6%. In 2021, the newly installed capacity of wind power in China was 47.57 million KW, and offshore wind power rose suddenly. The newly installed capacity in the whole year was 16.9 million KW, 1.8 times the total scale previously completed. At present, the cumulative installed capacity has reached 26.38 million KW, ranking first in the world.
In May 2019, the national development and Reform Commission issued the notice on improving the on grid tariff policy for wind power (fgjg [2019] No. 882). Since January 1, 2021, the newly approved onshore wind power projects have fully realized parity on the grid, and the state will no longer subsidize. As for the on grid price of offshore wind power, if all units are connected to the grid in 2022 and beyond, the guidance price in the year of grid connection shall be implemented. Due to the withdrawal of the national subsidy policy for offshore wind power at the end of 2021, there was a rush to install offshore wind power projects in China in 2021.
From 2022, the state subsidies for newly approved offshore wind power projects will be cancelled, which will bring challenges to wind turbine enterprises. The decline of subsidies will force the technological progress of the industry and the gradual promotion of affordable wind power. The wind power industry will enter a new stage of development driven by cost reduction and efficiency increase from being driven by policy subsidies.
Under the guidance of the national goal of “achieving 1.2 billion kilowatts of installed capacity in 2030”, all key coastal provinces have successively issued the new energy construction plan of the 14th five year plan. By 2025, Jiangsu will add 11gw of wind power, including 8GW of offshore wind power, and Zhejiang will add more than 4.5gw of wind power installed capacity, mainly offshore wind power. Guangdong’s offshore wind power will strive to reach 18gw by the end of 2025 and take the lead in realizing parity grid connection in China. Shandong’s installed capacity of wind power will reach 25gw by 2025, focusing on offshore wind power, and actively promote wind power development, The scale of offshore wind power grid connection in Fujian is expected to reach 5GW by 2025.
For offshore wind power projects, the State encourages local governments to introduce targeted support policies, and Guangdong, Zhejiang, Shanghai and other provinces and cities clearly introduce subsidy policies for offshore wind power. Taking Guangdong Province as an example, on June 1, 2021, the general office of Guangdong Provincial People’s government issued the implementation plan for promoting the orderly development of offshore wind power and the sustainable development of related industries (YFB [2021] No. 18), which defined the corresponding provincial subsidy policies: the subsidy standard is 1500 yuan, 1000 yuan and 500 yuan per kilowatt for full capacity grid connected projects in 2022, 2023 and 2024, The subsidy fund shall be solved by the special fund for offshore wind power subsidy established by the provincial finance.
According to the statistics of the International Renewable Energy Agency (Irena), from 2010 to 2020, the investment per kilowatt of offshore wind power decreased by 32% and the cost of kwh power decreased by 48%. After more than ten years of development, with the improvement of operation and technology, the unit cost of offshore wind power in China is also gradually decreasing, from about 23700 yuan / kW in 2010 to about 15700 yuan / kW in 2020, so as to reduce the cost of kwh. In the future, there is still room for further decline in the cost of offshore wind power around the world. It is expected that in 2025, the cost of offshore wind power in China will reach US $65.2/mwh (about RMB 0.42/kwh according to the exchange rate of 6.4), and the cost reduction space will reach 23.3%, which will support the gradual realization of parity Internet access of offshore wind power in China.
To sum up, although the central financial subsidies for offshore wind power were withdrawn in 2021, the relay of local financial subsidies and the introduction of the 14th five year plan for offshore wind power in many coastal provinces such as Guangdong, Fujian and Zhejiang are conducive to ensuring the stable development of offshore wind power in the transition period of affordable online access; In addition, during the “14th five year plan” period, the unit cost and kwh cost of offshore wind power are expected to be further reduced. The cancellation of the central government’s subsidy policy for offshore wind power is conducive to promoting the offshore wind power industry to reduce costs and increase efficiency through technological progress in the long run, and promoting the sustainable, stable and healthy development of the wind power industry.
2. The impact of offshore wind power subsidy policy has been considered when calculating the benefits of raised investment projects
The issuer has considered the future market demand of potential customers under the influence of offshore wind power subsidy policy when calculating the benefits of offshore wind power project. The issuer understands the distribution of downstream wind power operators and future production and construction intention of its wind power machine through communication with potential customers. Among the five main intended customers of the issuer’s offshore wind power project, the top three are overseas customers. According to the interview, the main offshore wind turbine products of its overseas customers a, B and C are installed overseas, and the decline of China’s wind power subsidy policy has not adversely affected its offshore wind power business; Domestic customer D expects that the number of 7mw wind turbines in Shanghai will be reduced by about 25% – 50% in 2022 compared with the year of rush installation of offshore wind power in 2021. It is expected that the installed capacity of Offshore Large MW wind power will increase steadily year by year from 2023 to 2025; Domestic customer e expects to control the production cost by adjusting the type of offshore wind power products. Compared with 2021, the demand for 7mw wind power in Shanghai will remain relatively stable in 2022, and will rise steadily from 2023 to 2025. The main products of offshore wind power raised investment projects include stator and transfer
