4. Related party transactions
According to the application materials, 1) during the reporting period, the sales amount of the company to Jingke energy was 382056700 yuan, 581508300 yuan, 874438900 yuan and 1136947700 yuan respectively; 2) In 2018, 2019 and January September 2021, the company purchased electrical equipment from Chongqing Daquan Tailai Electric Co., Ltd. with the amount of 544165 million yuan, 1050312 million yuan and 1141963 million yuan respectively; In addition, during the reporting period, the company purchased electrical equipment from Nanjing Daquan Transformer Co., Ltd. and Nanjing Daquan Electric Co., Ltd. The issuer is requested to explain: (1) whether the sales price of the company to Jingke energy during the reporting period is fair; (2) Specific contents of electrical equipment purchased from related parties during the reporting period, necessity, pricing basis and fairness of relevant transactions. The lawyer of the issuer and the reporting accountant are invited to check and express their opinions.
reply:
1、 Issuer description
(I) whether the sales price of the company to Jingke energy is fair during the reporting period
Jingke energy is a vertically integrated manufacturer of downstream “silicon material processing – silicon wafer – battery wafer – module”. It is a leading enterprise in the photovoltaic industry. It has a large demand for polysilicon material procurement. Longgen Zhang, a director of the company, once served as a director of jinkosolar Holding Co., Ltd. (an American listed company, stock code: JKS. N), and resigned as a director of the company on December 7, 2020. According to the Listing Rules of Shanghai Stock Exchange’s Kechuang board, the issuer still discloses the transaction volume with Jingke energy holdings and its subsidiaries from December 7, 2020 to December 6, 2021 as related party transactions. After December 6, 2021, the issuer will no longer disclose the above companies as related parties. During the reporting period, the issuer sold polysilicon materials to Jingke energy.
During the reporting period, the issuer sold polysilicon to Jingke energy as follows:
Project 20212020 2019
Total sales amount (yuan): 1457506991158744389139558150828928
Total sales quantity (kg) 100242 Shahe Industrial Co.Ltd(000014) 02560 Cofco Biotechnology Co.Ltd(000930) 616000
The average selling price of Jingke energy (yuan / kg) is 145.40 62.35 62.49
Average selling unit price of the issuer (yuan / kg) 143.18 61.93 62.74
Variance amount (yuan / kg) 2.22 0.42 -0.25
Difference rate: 1.55%, 0.67% – 0.40%
The average sales price of the company to Jingke energy in 2019, 2020 and 2021 has little deviation from the average sales price of the issuer in that period. During the reporting period, the issuer’s sales price of Jingke energy was not significantly unfair.
(II) specific contents of electrical equipment purchased from related parties during the reporting period, necessity, pricing basis and fairness of relevant transactions
1. Specific contents and necessity of purchasing electrical equipment from related parties during the reporting period
During the reporting period, the issuer purchased electrical equipment from Chongqing Daquan Tailai Electric Co., Ltd., Nanjing Daquan Transformer Co., Ltd. and Nanjing Daquan Electric Co., Ltd. as follows:
Unit: 10000 yuan
Name of related party purchase category 20212020 2019
Chongqing Daquan Tailai electric equipment (reduction furnace transformer
Reduction furnace power supply system, switch cabinet, 1149265 76.881050312 distribution cabinet, etc.)
Nanjing Daquan transformer has electrical equipment (reduction furnace transformer, 833130 27.88851769 Co., Ltd. dry-type transformer)
Nanjing Daqiao Electrical Equipment Co., Ltd
Distribution box, electrical control cabinet, monitoring panel (551858, 30.80, 430028, etc.)
Chongqing Daquan Tailai Electric Co., Ltd., Nanjing Daquan Transformer Co., Ltd. and Nanjing Daquan Electric Co., Ltd. are subordinate enterprises of Daquan Group Co., Ltd. (hereinafter referred to as “Daquan Group”). Daquan Group is a leading manufacturer in the fields of electricity, new energy and rail transit. It mainly develops and produces complete sets of medium and low voltage electrical equipment, intelligent components, rail transit equipment, etc. Daquan Group has many production bases, research institutes and 23 manufacturing enterprises in Yangzhong, Jiangsu, Jiangning, Nanjing, Wanzhou, Chongqing and Wuhan, Hubei. It has many joint ventures with international well-known enterprises such as Siemens of Germany and snow dragon of Switzerland. It has established more than 20 branches in America, Europe, Southeast Asia, the Middle East and Africa. The group has nearly 10000 employees. Daquan Group is one of the top 100 enterprises in China’s machinery industry, a national innovative enterprise, a national key high-tech enterprise, the first batch of national green factories, a national civilized unit and a commendation unit of the National May Day Labor award.
In the field of electrical equipment, Daquan Group provides customers with GIS equipment below 220kV (English abbreviation of gas insulated fully enclosed combined apparatus, which is composed of circuit breaker, disconnector, grounding switch, transformer, lightning arrester, bus, connector and outgoing line terminal), medium and low voltage set of electrical equipment, intelligent components, bus, transformer, power system automation and system integration; Provide customers with solutions including new energy power generation system, intelligent substation system, distribution network automation system, factory automation and energy efficiency management system.
Daquan Group is in the forefront of the same industry in China in the fields of medium and low voltage complete sets of electrical appliances, enclosed bus, low-voltage bus duct, DC traction power supply equipment and so on.
Chongqing Daquan Tailai Electric Co., Ltd. is a wholly-owned subsidiary invested and established by Daquan Group in Chongqing Wanzhou District high tech Development Zone. The company specializes in the R & D, design, production and sales of power quality products, new energy power supply systems and complete sets of medium and low voltage electrical equipment.
Nanjing Daquan Transformer Co., Ltd. is a high-tech enterprise registered by Daquan Group in Nanjing Jiangning Economic Development Zone. The company specializes in the scientific research, development, production, manufacturing and product sales of products and equipment such as power transformer, dry-type transformer, special transformer, combined transformer and prefabricated substation, with power transformer, dry-type transformer and mining flameproof transformer (substation) as the backbone products.
Nanjing Daquan Electric Co., Ltd. is a wholly-owned subsidiary invested and established by Daquan Group in Nanjing Jiangning Economic Development Zone, specializing in the production and sales of low-voltage complete sets of electrical equipment such as okken, BLOKSET, sivacon 8pt and mzs.
In the process of purchasing fixed assets for capacity construction, the issuer needs to use the supporting equipment and relevant spare parts of polycrystalline silicon production line such as reduction furnace transformer. Therefore, it has purchased from Chongqing Daquan Tailai Electric Co., Ltd., Nanjing Daquan Transformer Co., Ltd. and Nanjing Daquan Electric Co., Ltd., and relevant transactions are necessary. 2. Pricing basis and fairness of related transactions
The related party transactions between Chongqing Daquan Tailai Electric Co., Ltd., Nanjing Daquan Transformer Co., Ltd., Nanjing Daquan Electric Co., Ltd. and the issuer follow the principle of independent transaction. The specific transaction price varies according to the requirements of product scope of application, performance parameters, configuration structure, material specification, component brand, physical size of each set of products, quantity of supporting spare parts and so on. The issuer adopts yicaitong bidding management, and all price comparisons, including related party transactions, follow the principle of winning the bid at a low price. If the price inquiry and comparison results are obviously abnormal or not winning the bid at a low price, the detailed reasons shall be indicated if it is necessary to negotiate again. During the reporting period, the price comparison results of related party transactions between Chongqing Daquan Tailai Electric Co., Ltd., Nanjing Daquan Transformer Co., Ltd., Nanjing Daquan Electric Co., Ltd. and the issuer were all bid winning at a low price, and there was no obvious abnormality in the price inquiry and comparison results.
2、 Verification procedure and conclusion
(I) verification procedure
The reporting accountant has performed the following verification procedures:
Check the price difference between the orders of the issuer and different customers, and understand the reasons for the price difference from the management;
2. Interviewed the relevant sales principals and financial personnel of the issuer to find out whether there is a difference in the price between the products sold by the issuer to other parties and Jingke energy;
3. Interview with Jingke energy to understand the cooperation content and pricing method between the issuer and Jingke energy; Implement the letter confirmation procedure to Jingke energy and verify the authenticity and accuracy of the sales amount during the reporting period;
4. Select samples, check the relevant procurement contracts, capital flow, invoices and other supporting documents signed by the issuer with Chongqing Daquan Tailai Electric Co., Ltd., Nanjing Daquan Transformer Co., Ltd. and Nanjing Daquan Electric Co., Ltd., and check the specific contents of relevant procurement transactions;
5. Send letters to related parties Chongqing Daquan Tailai Electric Co., Ltd., Nanjing Daquan Transformer Co., Ltd. and Nanjing Daquan Electric Co., Ltd. to confirm the transaction amount of electrical equipment purchased during the reporting period, and verify the authenticity and accuracy of the transaction amount of related parties;
6. Interview the issuer’s business personnel to understand the reasons and background of related party procurement of electrical equipment, the pricing basis of specific transaction prices, the price comparison process of the issuer’s selection of procurement suppliers, check the purchase quotations of related parties and other third-party suppliers, and check whether there are significant differences in the transaction prices of related parties. (II) verification conclusion
After verification, the reporting accountant believes that:
1. During the reporting period, there was no significant difference between the company’s sales price to Jingke energy and the prices of other customers, and the sales price was fair;
2. The specific contents of electrical equipment purchased by related parties during the reporting period are the supporting equipment of polysilicon production line and relevant spare parts, which are required by the issuer’s production activities. The relevant transactions are necessary, the pricing basis is reasonable, and there is no significant difference from the purchase quotation of the third-party supplier. 5. About operation
According to the application materials, during the reporting period, the issuer’s polysilicon sales revenue was 1977157700 yuan, 2390918200 yuan, 4632886000 yuan and 8264626600 yuan respectively, and the gross profit margin was 32.74%, 22.28%, 33.63% and 67.28% respectively. The issuer is requested to explain: (1) explain the reasons and sustainability of the substantial increase in revenue during the reporting period in combination with the development trend and cycle of the industry, the performance changes of Companies in the same industry and the policies of downstream industries; (2) Explain the reasons and sustainability of the increase in the gross profit margin of polysilicon products during the reporting period in combination with the price changes of unit materials, direct labor and power and the comparison of Companies in the same industry; And analyze whether the changes of purchase quantity and amount of main raw materials match the changes of sales quantity and amount of the issuer; (3) In combination with the impact of the international trade situation on the issuer’s downstream customers, explain whether it will have a significant adverse impact on the issuer’s operating performance and the capacity digestion of the raised investment project, and whether the relevant risks have been fully disclosed in the prospectus. Please report to the accountant for verification and comment.
reply:
1、 Issuer description
(I) explain the reasons and sustainability of the substantial increase in revenue during the reporting period in combination with the development trend and cycle of the industry, the performance changes of Companies in the same industry and the policies of downstream industries
1. Development trend and cycle of the industry and policies of downstream industries
(1) The supply of medium and short-term polysilicon determines the upper limit of photovoltaic installation
In the medium and short term, the demand for silicon is greater than the supply, and the new installed capacity of photovoltaic will be basically determined by the capacity of the supply bottleneck. Polysilicon is the basic raw material of photovoltaic industry, and polysilicon production is in the upstream of photovoltaic industry chain. As a link with high technical / financial barriers, relatively rigid production capacity and long production expansion / climbing cycle, superimposed with factors such as routine maintenance, silicon material is more likely to rise in price due to short supply than other links such as silicon wafers, cells and modules, which has become the supply bottleneck of the whole supply chain of photovoltaic industry. In 2021, the global output of photovoltaic polysilicon was about 590000 tons, of which China’s polysilicon output was 488000 tons, and most of the global polysilicon production capacity was in China. According to the information publicly disclosed by CPIA, PV InfoLink, enterprises and the estimated production time of the capacity under construction, the polysilicon output in 2022 is expected to be in a tight balance with the new installed capacity demand of downstream photovoltaic. The output of polysilicon is still likely to determine the upper limit of new installed capacity of photovoltaic in 2022 based on the role of supply chain bottleneck, so polysilicon is still expected to maintain a high market price in 2022.
Since 2019, the price of high-purity polysilicon is as follows:
Unit: yuan / kg
two hundred and fifty
two hundred
one hundred and fifty
one hundred
fifty
zero
Source: wind
In 2019, the price of polysilicon products generally showed a continuous downward trend, mainly due to: first, after the promulgation of the “531 policy” in 2018, the industry demand decreased rapidly, the polysilicon supply was relatively rigid, and the imbalance between supply and demand led to a sharp decline in the price of polysilicon. The price at the end of the year was lower than that at the beginning of the year
