Huatai United Securities Co., Ltd
About Kangping Technology (Suzhou) Co.Ltd(300907) (Suzhou) Co., Ltd
Verification opinions on self-evaluation report of internal control in 2021
Huatai United Securities Co., Ltd. (hereinafter referred to as “Huatai united”), as a sponsor of initial public offering and listing on the gem of Kangping Technology (Suzhou) Co.Ltd(300907) (Suzhou) Co., Ltd. (hereinafter referred to as ” Kangping Technology (Suzhou) Co.Ltd(300907) ,” company “or” listed company “), in accordance with the administrative measures for securities issuance and listing recommendation business According to the requirements of the self regulatory guidelines for listed companies of Shenzhen Stock Exchange No. 2 – standardized operation of companies listed on GEM and other documents, Huatai jointly checked the internal control system of Kangping Technology (Suzhou) Co.Ltd(300907) 2021 and issued independent opinions as follows: I. The implementation of Kangping Technology (Suzhou) Co.Ltd(300907) internal control system
(I) internal control environment
1. Corporate governance structure
In strict accordance with the company law, the securities law and other laws and regulations, the company has established and improved the governance structure suitable for the development of the company. The rights and responsibilities of the general meeting of shareholders, the board of directors, the board of supervisors and the management are clear, restrict each other and operate well, forming a set of effective operation and management framework; The board of directors of the company has four professional committees: Strategy Committee, nomination committee, salary and assessment committee and Audit Committee; It has formulated the rules of procedure of the general meeting of shareholders, the rules of procedure of the board of directors, the rules of procedure of the board of supervisors, the working rules of independent directors, the working rules of the general manager, the working rules of the Secretary of the board of directors, the implementation rules of the strategy committee of the board of directors, the implementation rules of the nomination committee of the board of directors, the implementation rules of the remuneration and assessment committee of the board of directors, and the implementation rules of the audit committee of the board of directors Foreign guarantee management system, foreign investment decision-making system, related party transaction management system and other systems; Employing relevant industry experts and professionals as independent directors has played a good role in improving the standard operation level.
2. Organizational structure of the company
The company has set up 10 functional departments, including operation Department, procurement department, sales department, human resources department, technology department, logistics department, administration department, finance department, investment legal department and audit department. Each department has clear responsibilities, reasonable division of labor and mutual restriction.
As of December 31, 2021, the company has wholly-owned subsidiaries Nantong kangpingdong Electromechanical Technology Co., Ltd., Yizhu motor (Suzhou) Co., Ltd., Suzhou Maituo Electric Tool Co., Ltd., Shenzhen aishibit Motor Co., Ltd., Suzhou Yingdong Electric Tool Co., Ltd., Hong Kong CommScope Investment Co., Ltd., Hong Kong kangpinghe Technology Co., Ltd., Kangping Technology (Suzhou) Co.Ltd(300907) (Vietnam) Co., Ltd, Has a holding subsidiary, Korea es Industry Co., Ltd. All functional departments and branches of the company can operate normally under the leadership of the company’s management in accordance with the management system formulated by the company.
3. Internal audit
The audit department is subordinate to the audit committee under the board of directors and works independently under the supervision and guidance of the board of directors. The audit department is responsible for the internal audit and supervision of the company. The company has established an internal audit management system, made clear provisions on internal audit work, and improved the norms of internal audit work. Through internal audit activities, the company has effectively ensured the implementation of the company’s rules and regulations, reduced the company’s business risks and strengthened internal control.
4. Human resources
The company sets up a human resources department to be responsible for the management of the company’s human resources. In accordance with the labor contract law and relevant laws and regulations, the company has formulated human resources management system, attendance management measures, talent performance management measures, employee reward and punishment management measures, employee training management measures, etc., and effectively stipulated and implemented the company’s recruitment, training, salary, assessment, incentive and other personnel work, It ensures the stability of the staff and the sustainability of talent training.
(II) risk assessment
In order to effectively identify the main risks affecting the realization of the company’s objectives, the company has established a unified and standardized risk assessment procedure and decision-making risk assessment mechanism, set reasonable business objectives and internal control objectives on the basis of full consideration of internal and external business risks, comprehensively analyze and manage all kinds of risks, and actively take effective countermeasures to ensure the stable and healthy development of the company. The management at all levels of the company can timely identify and control risks, and transfer the identified risks to relevant decision-making levels, so as to ensure the timely investigation and removal of potential risks and the timely and proper handling of emergencies.
The main risk factors faced by the company include: market risk, operation risk, policy risk, financial risk and management risk.
1. Market risk
(1) Macroeconomic fluctuation risk
The company’s main products are motors for electric tools, which are professional supporting parts for electric tool manufacturing industry. They have the characteristics of wide application fields, numerous product varieties and complex specifications. The downstream industry is highly related to the macroeconomic environment, residents’ income level, consumer demand and other factors, and has strong economic periodicity, which makes the company’s electric tool accessories industry also show certain cyclical fluctuations. When the macro-economy develops well, the electric tool industry maintains steady growth, and the market demand for motors continues to expand. However, in recent years, under the continuous influence of factors such as the global financial crisis, China’s macro economy is facing multiple pressures of slowing growth, structural adjustment and digesting the side effects of previous policies.
If the economic boom continues to decline in the future, it will have an adverse impact on the market demand for electric tools, or the decline in orders caused by major difficulties in the operation of the company’s main customers will have an adverse impact on the company’s production and operation, and then the company will face the risk of decline in operating revenue and operating profit.
(2) Increased competition risk
With the development of economy, the electric tool industry is developing rapidly. The existing enterprises expand the production scale or new enterprises enter, which intensifies the industry competition. At the same time, there are many production enterprises in the industry, with low market concentration and fierce competition. In recent years, some advantageous enterprises with certain competitiveness have gradually emerged in China’s motor industry. With years of development, the company has occupied a certain share in the market and gradually formed a brand effect. However, if it can not continue to maintain its existing advantages in technology development, product quality and marketing channels, in the face of increasingly fierce market competition, there will be a risk of decline in market share and gross profit margin.
(3) Overseas regional risk
The company’s direct export to the United States accounts for a relatively small proportion of sales revenue. In order to cooperate with the strategic layout of major customers and reduce the possible impact of Sino US trade disputes, and with the development trend of the global industrial chain layout of the power tool manufacturing industry, in order to improve market share, give play to scale effect and reduce production costs, the company has invested and built factories in Vietnam. As an emerging economy in Southeast Asia, Vietnam has relatively low labor cost and good business environment. At the same time, it has obvious location advantages, adjacent to China and fast sea and land transportation. The company’s production base in Vietnam will make full use of the above advantages to further improve the competitiveness of the company’s products. In the current global trading environment, Vietnam business will bring new opportunities for business growth to the company.
However, if Vietnam’s political, economic, social situation and trade policy change significantly, the local demand changes significantly, and the political, economic and diplomatic cooperation relationship with China changes, it will have a certain impact on the operation of the company.
2. Operational risk
(1) Risk that products and technologies cannot be continuously updated
In order to seize the good opportunity of the transfer of the world manufacturing industry to China, gradually complete the industrial upgrading in the trend of globalization and realize the development and growth of enterprises, in recent years, Chinese motor manufacturing enterprises have increased the innovation of products and technologies, and expect to quickly meet the personalized needs of customers with differentiated products and rapid R & D. Through the core technology and design ability accumulated in the process of long-term production and operation, the company has strengthened the adjustment of product structure and the development of new products. At present, the company sells a large number of product series, models and specifications, and has obtained a number of Chinese patents, overseas patents and design rights and a number of core production technologies. Nevertheless, the company may still face the risk of declining market share and product profit margin due to the slow update speed of products and technologies and failure to meet customer needs in time.
If the company fails to solve the risks in the research and development of new products in the future, it will have an adverse impact on the research and development process of the company’s new products, and even lead to the failure of new product research and development, so the company is at risk of losing its existing technical advantages.
(2) Risk of rising labor costs
In 2021, the direct labor cost of the company accounted for about 6.14% of the main business cost. As a technology intensive and labor-intensive production enterprise, the company needs not only senior talents in R & D, marketing and management, but also high-quality front-line technical workers to provide customers with high-quality products. Affected by the changes in the structure of labor supply and demand, the overall socio-economic development and the implementation of the new labor contract law caused by the further aging of China’s population in the future, China’s labor costs will show a long-term upward trend. If the company cannot timely optimize the product structure and improve labor production efficiency to absorb the increased labor cost, there will be a risk of rising labor cost.
3. Policy risk
(1) Risks of changes in export tax rebate policies
The export tax rebate policy is an important part of the national tax policy. The Chinese government has always regarded export as a long-term measure to stimulate China’s economic growth. Especially for emerging industries, it has given higher export tax rebate rates to encourage and support; The implementation of export tax rebate policy is an important strategic means for the country to realize the adjustment of industrial structure and develop emerging industries. Export tax rebate has a great impact on the business performance of enterprises, which is the basic feature of China’s export-oriented enterprises and the basic feature of China’s electric tool industry. For the export sales of some products of the company, the national export tax rebate policy of “exemption, credit and refund” shall be implemented. The change of export tax rebate rate will affect the profit margin of the company’s product sales to a certain extent. If the state reduces the export tax rebate rate of relevant products, it will increase the product cost of the company, reduce the sales gross profit when the price of export products remains unchanged, and then affect the business performance of the company. With the global economic recovery and the continuous improvement of China’s exports, the possibility of reducing the export tax rebate rate of relevant products cannot be ruled out. If the export tax rebate rate is lowered, it will have an adverse impact on the export business profits of the company’s related products. (2) Risk of changes in income tax preferential policies
The company obtained the qualification of high-tech enterprise in August 2014 and passed the reexamination of high-tech enterprise in November 2021. According to the relevant provisions of the enterprise income tax law of the people’s Republic of China, the applicable enterprise income tax rate of the company in 2021 is 15%. The subsidiary Yizhu motor obtained the qualification of high-tech enterprise in October 2015 and passed the reexamination of Yizhu motor’s high-tech enterprise in November 2021. The applicable corporate income tax rate of Yizhu motor in 2021 is 15%. Ashbit, a subsidiary, obtained the qualification of high-tech enterprise in November 2015 and passed the reexamination of ashbit high-tech enterprise in December 2021. The applicable corporate income tax rate of ashbit in 2021 is 15%.
If the company and its subsidiaries cannot continue to pass the re recognition of the qualification of high-tech enterprises in the future, or the tax preferential policies of the state for high-tech enterprises change, it will have a certain impact on the operating performance of the company.
(3) Exchange rate fluctuation risk
In 2021, the export amount of the company’s main business was 1035611700 yuan, accounting for 90.26% of the main business income. The import and export business of the company is settled in US dollars, and the exchange loss (minus: income) in 2021 is 1.3883 million yuan. If the business scale of the company continues to expand, the export volume further increases, and the exchange rate fluctuates greatly in the future, there may be large exchange losses, which will have an adverse impact on the operating performance of the company. 4. Financial risk
(1) Risk of large balance of accounts receivable
At the end of 2021, the financing balance of accounts receivable and accounts receivable of the company was 217715500 yuan and 31343900 yuan respectively, and the financing scale of accounts receivable and accounts receivable showed an increasing trend. The company’s main customers are international well-known power tool manufacturers and sellers, with strong credit strength, and there is no major risk in the recovery of accounts receivable. However, with the growth of the company’s scale and the sudden deterioration of customer credit, the company may face the risk of bad debt loss due to the increase of accounts receivable.
(2) Risk of decline in gross profit margin of products
In 2021, the company’s comprehensive gross profit margin was 9.51%, which was affected by the fluctuation of main raw material prices and labor costs. Direct raw materials, direct labor and manufacturing costs are the main costs of the company’s production of motors. If the price of direct raw materials and labor costs continue to rise in the future, the company’s gross profit margin is at risk of decline.
At the same time, in the future, with the development of China’s electric tool motor manufacturing industry, if the company cannot continuously improve its technological innovation ability and maintain a certain leading edge, or competitors weaken the advantage of the company’s products in terms of sex price ratio by improving the technical content of products and reducing the sales price, the company has the risk of reducing the gross profit margin of products.
5. Manage risk
With the growth of the company’s business and the implementation of raised investment projects, the company’s scale will be further improved, the personnel will be continuously increased, the company’s organizational structure will be complex, higher requirements will be put forward for the company’s management, and the company will face greater challenges in the implementation of strategic planning, human resource management, sales management, financial management and so on. If the company cannot continuously and effectively improve its management ability and level, resulting in the company’s management system can not fully adapt to the expansion of business scale, it will have an adverse impact on the company’s operation and profitability.
(III) internal control activities
The company has formulated sound rules and regulations and business operation processes for daily business activities, including sales, procurement, assets, funds, R & D, production and other businesses. The business processing has clear authorization and approval, which can be summarized to the financial and relevant departments for recording and checking in time, and the original vouchers shall be kept properly.
1. Authorization approval control
Before post setting, the company will analyze and sort out the incompatible jobs involved in each business process, fully consider the control principle of incompatible job separation, take corresponding separation measures, and form a working mechanism of performing their own duties, assuming their own responsibilities and mutual restriction.
2. Responsibility division control
According to the provisions of conventional authorization and special authorization, the company defines the scope of authority, approval procedures and corresponding responsibilities for each post to handle business and matters, and strictly controls the special authorization to avoid major losses to the production and operation of the enterprise due to unreasonable authorization, unclear authority and unclear responsibility. Among them, focus on the concentration and use of funds, reimbursement of expenses, handling of major matters, etc.
3. Accounting system control
The company strictly complies with the accounting law of the people’s Republic of China, accounting standards for business enterprises, internal control norms – basic norms and other laws and regulations
