MING YANG SMART ENERGY GROUP LIMITED
(GDR under the symbol: "MYSE")
(a joint stock company established under the laws of the People's Republic of China with limited liability)
Announcement on Shanghai Stock Exchange's Reply to the Work Letter on Information Disclosure Supervision under the Company's 2023 Annual Report
Ming Yang Smart Energy Group Limited (the "MYSE" or "Company") recently received the Regulatory Enquiry Letter on the Information Disclosure of 2023 Annual Report of Ming Yang Smart Energy Group Limited (Shang Zheng Gong Han [2024] No. 0785) (the "Regulatory Enquiry Letter") issued by the Shanghai Stock Exchange. The Company attached great importance to the Regulatory Enquiry Letter and immediately organised relevant personnel together with the annual auditor and the sponsor to conduct a serious analysis and verification on the issues in the letter. The reply to the relevant issues in the Regulatory Enquiry Letter are hereby disclosed as follows:
Comment 1 of the Regulatory Enquiry Letter: The annual report shows that in 2023, the Company achieved a total operating income of RMB27.859 billion, representing a year-on-yeardecrease of 9.39%, and a net profit attributable to the parent of RMB372 million, representing a year-on-yeardecrease of 89.19%. The decline in the gross profit margin of the Company's major products was one of the main reasons for the decline in net profit. In terms of business segments, the revenue from wind turbines and related accessories amounted to RMB23.517 billion, representing a year-on-yearincrease of 3.11%, and the gross profit margin was 6.35%, representing a year-on-yeardecrease of 11.42 percentage points; revenue from other business amounted to RMB298 million, representing a year-on-yeardecrease of 39.04%, and the gross profit margin was -24.05%,representing a year-on-yeardecrease of 25.22 percentage points. In addition, the Company's R&D expenses in the Reporting Period amounted to RMB585 million, representing a year-on-yeardecrease of 30.67%. Please disclose the following additional information: (1) The names, term of cooperation, subject matter, transaction amount and current balance of the top five customers and suppliers of wind turbines and related accessories. Combined with the sales prices of major products and the changes in unit costs, please explain the reasons for and rationality of the sharp decline in gross profit margin, and whether the relevant gross profit margin is at a reasonable level compared with that of peers; (2) The specific contents of other businesses, including the revenue, gross profit margin and names, term of cooperation, subject matter, transaction amount and current balance of the top five customers and suppliers. Combined with the specific business model, procurement and sales unit prices, please explain the reasons for and rationality of the sharp decline in revenue and the negative gross profit margin, and whether the relevant gross profit margin is at a reasonable level compared with that of peers;
- Combined with the investment and progress of specific R&D projects, please explain the specific reasons for the decline in R&D expenses during the Reporting Period, and whether the
decline in relevant investment will affect the Company's competitiveness and future profitability. The annual auditor please advise on comments (1) and (2).
I. The Company's response
- Analysis on the names, term of cooperation, subject matter, transaction amount and current balance of the top five customers and suppliers of wind turbines and related accessories, as well as explanation on the reasons and rationality for the substantial decline in gross profit margin, and whether the relevant gross profit margin is at a reasonable level compared with that of peers.
1. Table of the top five customers and suppliers of wind turbines and related accessories
(1) Top five customers
Unit: RMB'0,000 | ||||||||||||||
Subject | Transaction | Receivables | Contract | |||||||||||
Names | Term of cooperation | amount | liabilities | |||||||||||
matter | balance | |||||||||||||
(2023) | balance | |||||||||||||
China | Energy | Engineering | ||||||||||||
Group | Guangdong | Electric | 6 years | WTGs | 387,025.98 | 117,675.17 | - | |||||||
Power Design Institute Co., Ltd. | ||||||||||||||
China | Datang | International | 5 years | WTGs | 254,460.75 | 21,063.23 | - | |||||||
Trading Corporation | ||||||||||||||
CGN New Energy | (Huizhou) | 3 years | WTGs | 186,756.83 | 100,944.67 | - | ||||||||
Co., Ltd. | ||||||||||||||
Shandong Ludian | International | 5 years | WTGs | 134,777.33 | 75,364.12 | - | ||||||||
Trade Co., Ltd. | ||||||||||||||
Huaneng | (Longkou) | New | ||||||||||||
Energy | Technology | 1 year | WTGs | 98,678.15 | - | 4,122.63 | ||||||||
Development Co., Ltd. | ||||||||||||||
Total | 1,061,699.04 | 315,047.19 | 4,122.63 | |||||||||||
(2) Top five suppliers | ||||||||||||||
Unit: RMB'0,000 | ||||||||||||||
Term of | Transaction | Payables | ||||||||||||
Names | Subject matter | amount | ||||||||||||
cooperation | balance | |||||||||||||
(2023) | ||||||||||||||
Nanjing | High Speed | Gear | 12 years | Gearboxes | 145,772.68 | 40,088.25 | ||||||||
Manufacturing Co., Ltd. | ||||||||||||||
NFAIC | High | Precision | 12 years | Gearboxes | 103,432.62 | 12,815.94 | ||||||||
Transmission Co., Ltd. | ||||||||||||||
NGC (Huai'an) High Speed Gear | 2 years | Gearboxes | 85,728.84 | 3,295.23 | ||||||||||
Manufacturing Co., Ltd. | ||||||||||||||
Zhangjiagang Guangda | Special | 9 years | Castings | 80,685.83 | 12,511.98 | |||||||||
Material Co., Ltd. | ||||||||||||||
Luoyang Xinqianglian Slewing | 12 years | Main shaft bearings, yaw | 73,739.97 | 19,773.83 |
Bearing Co., Ltd. | bearings and pitch bearings | |||
Total | 489,359.94 | 88,485.23 | ||
2. Reasons for the decline in gross profit margin of wind turbines and related accessories
With the launch of the 14th Five-Year Plan and Carbon Peak and Carbon Neutrality Policy, renewable clean energy power generation has become a key area and major layout point for China's future development. The vigorous development of wind power generation, clean energy and other industries has entered the fast lane, ensuring that the development environment of the industry will continue to improve in the future. The wind power industry has broad development prospects and coexists with fierce competition.
The continuous advancement of technology and cost optimization of WTGs are the important reasons for the reduction in bidding prices. With the continuous development of technology, the efficiency of WTGs has been continuously improved, and the cost of wind farm construction has also been gradually reduced. In addition, as the domestic wind power market gradually matures and competition intensifies, wind power companies have to adopt more favorable pricing strategies in order to gain more market share. Therefore, the bidding prices of wind turbines in the wind power industry continue to decline.
- Sales price: After wind power plants were connected to the grid at parity, wind power projects needed to reduce construction costs by lowering equipment purchase prices in order to ensure a reasonable rate of return. As a result, the bidding prices for wind power equipment fell sharply.
The Company's average revenue per kilowatt in 2023 amounted to RMB2,426.20/KW, compared with RMB3,121.46/KW in 2022, representing a decrease of 22.27%.
- Cost: The cost reduction of wind turbine equipment needs to be achieved gradually through various means including business and technology.
The Company's average cost per kilowatt in 2023 amounted to RMB2,272.12/KW, compared with RMB2,566.75/KW in 2022, representing a decrease of 11.48%.
Unit: RMB | |||
Category | 2023 | 2022 | Change (%) |
Average revenue per kilowatt | 2,426.20 | 3,121.46 | -22.27% |
Average cost per kilowatt | 2,272.12 | 2,566.75 | -11.48% |
- According to the Company's market research statistics, mainstream manufacturers in the market have lowered prices of all levels of models to varying degrees during the Reporting Period, continuously bringing down sales prices.
The Company has taken a number of measures to reduce costs, including centralised procurement bidding, business negotiations and R&D optimization, but costs still cannot drop at the same rate as the above-mentioned sales prices. On the other hand, the Company's cost-cutting measures will take some time to show results, resulting in a decline in the gross profit margin of
the Company's product sales order.
3. Comparison of gross profit margin of wind turbines and related accessories with that of peers
The gross profit data of wind turbines and related accessories in the same industry in 2023 are as follows:
Unit: RMB
Category | MYSE | Goldwind Science & | Windey Group | Sany Renewable | Electric Wind |
Technology | Energy | Power | |||
Average revenue per | 2,426.20 | 1,923.74 | 1,890.99 | 1,648.79 | 2,279.70 |
kilowatt | |||||
Average cost per | 2,272.12 | 1,800.44 | 1,654.45 | 1,394.01 | 2,148.93 |
kilowatt | |||||
Gross profit margin | 6.35% | 6.41% | 12.51% | 15.45% | 5.74% |
The comparable listed companies in the same industry were selected by the Company based on its main business, and the figures were extracted from the annual reports of relevant listed companies. According to the above table, the Company's gross profit margin for wind turbines and related accessories was basically at the same level as that of Goldwind Science & Technology and Electric Wind Power.
-
Analysis on specific contents of other businesses, including the corresponding business segment's revenue and gross profit margin, names, term of cooperation, subject matter, transaction amount and current balance of the top five customers and suppliers, as well as explanation on reasons and rationality for the substantial decrease in revenue and negative gross profit margin, and whether the relevant gross profit margin is at a reasonable level compared with that of peers.
1. The corresponding segment income, gross profit margin and information on the top five customers and suppliers for other income in revenue from principal businesses
The Company's other income amounted to RMB298 million, including photovoltaic product income of RMB189 million, wind farm construction income of RMB108 million, and electricity sales income of RMB0.45 million.
The income and gross profit margin of other business segments are as follows:
Unit: RMB'0,000 | ||||
Business segment | Main business income | Main business cost | Gross profit margin | |
Photovoltaic components | 18,920.12 | 26,169.33 | -38.31% | |
Wind farm construction | 10,829.64 | 10,762.30 | 0.62% | |
Electricity Sales | 45.35 | 28.51 | 37.13% | |
Total | 29,795.11 | 36,960.14 | -24.05% | |
- The names, term of cooperation, subject matter, transaction amount and current balance of the top five customers and suppliers of photovoltaic products business are as follows:
1) Top five customers
Unit: RMB'0,000 | |||||||||||||||||||||
No. | Name of customer | Transaction | Receivables | Term of | Subject matter | ||||||||||||||||
amount | balance | cooperation | |||||||||||||||||||
Electric | Energy | E-Commerce | (Beijing) | Photovoltaic | |||||||||||||||||
1 | Technology Co., Ltd. (電能易購（北京） | 3,708.14 | 209.51 | 1 year | |||||||||||||||||
components | |||||||||||||||||||||
科技有限公司) | |||||||||||||||||||||
Hunan Red Solar New Energy | Photovoltaic | ||||||||||||||||||||
2 | Science and Technology | 2,749.54 | 9.61 | 1 year | |||||||||||||||||
components | |||||||||||||||||||||
Limited Company | |||||||||||||||||||||
Inner Mongolia | Halun | New | Energy | Photovoltaic | |||||||||||||||||
3 | Technology Co., Ltd. (內蒙古哈倫新能源 | 1,987.95 | 523.19 | 1 year | |||||||||||||||||
components | |||||||||||||||||||||
科技有限公司) | |||||||||||||||||||||
Shaanxi | Skyworth | New | Energy | Photovoltaic | |||||||||||||||||
4 | Technology Co., Ltd. (陝西創維新能源科 | 929.25 | - | 1 year | |||||||||||||||||
components | |||||||||||||||||||||
技有限公司) | |||||||||||||||||||||
China | Electric | Power | Engineering | Photovoltaic | |||||||||||||||||
5 | Consulting | Group | Southwest | Electric | 665.63 | 112.82 | 1 year | ||||||||||||||
components | |||||||||||||||||||||
Power Design Institute Co., Ltd. | |||||||||||||||||||||
Total | 10,040.51 | 855.13 | |||||||||||||||||||
2) Top five suppliers | |||||||||||||||||||||
Unit: RMB'0,000 | |||||||||||||||||||||
Transaction | Payables | Prepayments | Term of | Subject | |||||||||||||||||
No. | Name of supplier | balance | cooperat | ||||||||||||||||||
amount | balance | matter | |||||||||||||||||||
ion | |||||||||||||||||||||
1 | Tianjin | Huanou | International | 7,501.03 | - | 440.64 | 1 year | Silicon | |||||||||||||
Silicon Materials Co., Ltd. | Wafer | ||||||||||||||||||||
2 | Dongguan | CSG | Solar | Glass Co., | 6,770.44 | 2,710.90 | - | 1 year | Glass | ||||||||||||
Ltd | |||||||||||||||||||||
3 | Suzhou iSilver Materials Co., Ltd | 4,734.46 | 634.33 | - | 1 year | Silver paste | |||||||||||||||
Zhonghuan | Aineng | (Gaoyou) | |||||||||||||||||||
4 | Energy Technology Co., Ltd. (中環 | 4,710.36 | 2.48 | - | 1 year | Cell | |||||||||||||||
艾能(高郵)能源科技有限公司) | |||||||||||||||||||||
5 | Shangrao | Jietai | New | Energy | 4,380.57 | - | 9.30 | 1 year | Cell | ||||||||||||
Technology Co., Ltd. | |||||||||||||||||||||
Total | 28,096.86 | 3,347.71 | 449.94 | ||||||||||||||||||
- The names, term of cooperation, subject matter, transaction amount and current balance of the top five customers and suppliers of wind farm construction business
1) Top five customers
Unit: RMB'0,000
Transaction | Contract | Term of | ||||||
No. | Name of customer | Contract assets | cooperati | Subject matter | ||||
amount | liabilities | |||||||
on | ||||||||
Turpan | Xinyang Guosheng | |||||||
New | Energy | Power | Power station | |||||
1 | Generation Co., Ltd. (吐魯 | 7,307.50 | - | - | 1 year | project | ||
番新陽國盛新能源發電有 | engineering | |||||||
限公司) | ||||||||
Xinyang | Mingjun | New | Power station | |||||
2 | Energy Co., Ltd. (信陽明駿 | 3,508.46 | - | 1,268.61 | 1 year | project | ||
新能源有限公司) | engineering | |||||||
Huaian Guohe New Energy | Power station | |||||||
3 | Co., Ltd. (淮安國和新能源 | 13.68 | 14.50 | - | 0.5 years | project operation | ||
有限公司) | and maintenance | |||||||
Total | 10,829.64 | 14.50 | 1,268.61 | |||||
Note 1: Turpan Xinyang Guosheng New Energy Power Generation Co., Ltd. (吐魯番新
陽國盛新能源發電有限公司) (the "Xinyang Guosheng") was originally a wholly-owned
subsidiary of the Company and was sold in September 2023. The transaction amount of RMB73.075 million in 2023 was the revenue recognised by the Company for providing power station project engineering services to Xinyang Guosheng after it was deconsolidated.
Note 2: Xinyang Mingjun New Energy Co., Ltd. (信陽明駿新能源有限公司) (the
"Xinyang Mingjun") was originally a wholly-owned subsidiary of the Company and was sold in June 2023. The transaction amount of RMB35.0846 million in 2023 was the revenue recognised by the Company for providing power station project engineering services to Xinyang Mingjun after it was deconsolidated.
2) Top five suppliers
Unit: RMB'0,000 | ||||||
No. | Name of supplier | Transaction | Balance of | Term of | Subject matter | |
amount | payables | cooperation | ||||
1 | PowerChina Henan Engineering | 2,027.51 | 612.05 | 2 years | Main construction | |
Co., Ltd. | ||||||
2 | Wolin Energy Group Co., Ltd. (沃霖 | 1,484.79 | 1,379.80 | 1 year | Booster station and collector | |
能源集團有限公司) | line engineering | |||||
Beijing Boneng Antai | Electric | |||||
3 | Power Engineering Co., Ltd. (北京 | 806.61 | 677.55 | 2 years | Hoisting engineering | |
博能安泰電力工程有限公司) | ||||||
Xinjiang CSSC Haiwei | Electric | Wind turbine and box-type | ||||
transformer foundation | ||||||
4 | Power Technology Co., Ltd. (新疆 | 799.66 | 998.00 | 1 year | ||
engineering, booster station | ||||||
中船海爲電力科技有限公司) | ||||||
and collector line engineering | ||||||
5 | Sichuan Xinhuo Energy | Co., Ltd. | 629.84 | 119.96 | 2 years | Engineering construction |
(四川薪火能源有限公司) | ||||||
Total | 5,748.41 | 3,787.36 | ||||
2. The reasons for the significant decrease in other income under main business income as follows
Other income in 2023 amounted to RMB298 million, representing a decrease of RMB191 million from the same period last year, mainly due to a decrease of RMB362 million in revenue from wind farm construction from the same period last year.
The main reason for the decrease in revenue from wind farm construction business was the impact of industry competition. There were relatively more orders for wind farm construction business executed in 2022, and fewer new orders for this business in 2023.
3. The reasons for the negative gross profit margin in other income under main business income as follows
Other income includes revenue from photovoltaic products, wind farm construction, and electricity sales. Since the revenue from electricity sales accounts for an insignificant proportion, the impact on gross profit margin is negligible. The revenue proportion and gross profit margin of the main corresponding business segments in other income in 2023 and 2022 are as follows:
Unit: RMB'0,000 | |||||||||
2023 | 2022 | ||||||||
Business segment | |||||||||
Revenue | Gross profit | Revenue | Revenue | Gross profit | Revenue | ||||
margin | proportion | margin | proportion | ||||||
Revenue | from | 18,920.12 | -38.31% | 63.50% | 1,802.98 | -61.47% | 3.69% | ||
photovoltaic product | |||||||||
Revenue from | wind | 10,829.64 | 0.62% | 36.35% | 47,064.44 | 3.77% | 96.29% | ||
farm construction | |||||||||
Total | 29,749.76 | -24.14% | 99.85% | 48,867.42 | 1.36% | 99.98% | |||
According to the table above, the negative gross profit margin of other income was mainly affected by the proportion of internal segments, with a decrease in revenue from wind farm construction revenue with positive gross profit and an increase in photovoltaic product revenue with negative gross profit. In 2022, photovoltaic revenue accounted for 3.69%, with a gross profit margin of -61.47%. In 2023, photovoltaic revenue accounted for 63.5%, representing an increase of 59.81 percentage points from the same period last year, and the gross profit margin
in 2023 was -38.31%.
The Company has been engaged in the photovoltaic business since 2018. During this stage, the Company mainly produced and sold thin-film photovoltaic components in small batches. In 2022, the Company began to invest in the large-scale construction of a crystalline silicon photovoltaic component production base. The main reasons for the negative gross profit margin of photovoltaic products were as follows: (1) after the crystalline silicon photovoltaic base was officially put into production in the first half of 2023, the overall capacity utilization rate was low with a high fixed amortization cost for products, and the average annual cost per watt was nearly RMB0.10-0.20/W higher than the full production state as the crystalline silicon photovoltaic business was in the early stage of production and the capacity ramp-up period, and was affected by the number of orders on hand for photovoltaic components; (2) affected by the price war of photovoltaic products, the market price of photovoltaic components has dropped sharply, resulting in a negative gross profit margin of photovoltaic products; and (3) in the future, the global photovoltaic installed capacity will still be in a continuous upward cycle, thus the Company considers that heterojunction photovoltaics will be the mainstream of photovoltaic products in the next few years, and there is a lot of room for improvement in performance, efficiency and cost reduction. With the scale of the Company's photovoltaic products and the continuous iteration and innovation of technology, the gross profit margin will gradually improve. The Company's photovoltaic gross profit margin was lower than that of its peers mainly because the Company's photovoltaic product business was in the early stage of production and the capacity ramp-up period with a low overall capacity utilization rate and a high fixed amortization cost for products.
Company | Gross profit margin in 2023 | Gross profit margin in 2022 |
Risen | 13.63% | 5.02% |
Golden Solar | -20.14% | -1.78% |
EGING PV | 7.36% | 3.43% |
Average gross profit margin | 0.28% | 2.22% |
- Explanation on the specific reasons for the decrease in R&D expenses during the Reporting Period and whether the decrease in related investment will affect the Company's competitiveness and future profitability in combination with the investment and progress of specific R&D projects.
1. The specific reasons for the decrease in R&D expenses during the Reporting Period in combination with the investment and progress of specific R&D projects.
- In 2023, the total R&D investment (including expense and capitalization) amounted to RMB1.005 billion, the total operating income amounted to RMB27.859 billion, and the total R&D investment accounted for 3.61% of the operating income. In 2022, the total R&D investment amounted to RMB1.098 billion, the operating income in the same period amounted to RMB30.748 billion, and the total R&D investment accounted for 3.57% of the operating income, and the operating income of 2023 was basically the same as in 2022. For details, please refer to the table below:
Unit: RMB'00 million
Project | 2023 | 2022 | Year-on-year change | |||
Amount | R&D structure ratio | Amount | R&D structure ratio | Change | Rate of change | |
Amount of expense | 5.85 | 58.23% | 8.44 | 76.85% | -2.59 | -30.67% |
Capitalised amount | 4.20 | 41.77% | 2.54 | 23.15% | 1.66 | 65.04% |
Total R&D investment | 10.05 | 100% | 10.98 | 100% | -0.93 | -8.51% |
- The reason for the decline in R&D expenses was that many R&D projects entered the development stage in the second half of 2022 and 2023. Therefore, the capitalised investment in 2023 was relatively concentrated, and the R&D expense investment was relatively reduced with more investment. The capitalised amount in 2023 amounted to RMB420 million, including 10MW fixed offshore wind turbine R&D projects of RMB123 million (including MySE11 unit development project and MSE12 unit development project), 10MW floating offshore wind turbine design and R&D projects of RMB116 million, and 9MW wind turbine R&D and improvement R&D projects of RMB45 million.
2. Explanation on the Company's competitiveness and future profitability
(1) 10MW offshore floating wind turbine design and R&D project
Performance: Offshore typhoon-resistant floating wind turbines. Main technical indicators: Equipped with two Ming Yang MySE8.3-180ultra-compactsemi-direct drive offshore wind turbines with the total capacity of 16.6MW. Advantages or core competitiveness: The world's largest and lightest dual-rotortyphoon-resistant floating wind turbine, which can be used in a wide range of seas around the world with a water depth of more than 35 meters.
(2) 8-10MW offshore wind turbine R&D project
Performance: Offshore typhoon-resistant fixed wind turbines, offshore non-typhoon-resistant wind turbines and onshore large-capacity wind turbines. The series of wind turbines can be customized for onshore desert, Gobi and wilderness areas, as well as near, medium and far sea areas. Main technical indicators: Advanced semi-direct drive technology route and customized offshore and onshore wind turbines with large single-unit capacity of 8-10MW. Advantages or core competitiveness: Ming Yang's unique super-compactsemi-direct drive technology route, medium-speed gearbox, permanent magnet generator and full-power converter hybrid transmission design and innovative low-speed ratio gearbox and main shaft integrated design. The wind turbines are designed according to ultra-different environmental boundaries, and a diesel generator backup power supply is configured for typhoon areas to achieve active anti-typhoon yaw action.
(3) 9MW wind turbine R&D and improvement project
Performance: Offshore typhoon-resistant fixed wind turbines. Main technical indicators: MySE9.0-230 offshore products and supporting blade projects with blade length of 111.5m and impeller diameter of 230m. Advantages or core competitiveness: New products using double-fed technology, with modular design, high reliability, high efficiency, convenient transportation and installation and low cost.
Through continuous technological innovation, the Company has developed large-scale onshore and offshore wind turbines with better performance and lower kilowatt costs, contributing
Ming Yang's wisdom to customers' continuous improvement of the investment return rate of power station assets throughout the life cycle. As of now, the wind turbines on hand for models over 10MW amount to 3.9GW, of which 3.6GW is from domestic markets and 0.3GW is from international markets.
In view of the above, the total R&D investment was basically the same as last year, and the Company's main R&D technologies were at the leading level in the industry with industry competitiveness and future profitability.
-
The Accountant's response
(I) Verification procedures
We have designed and implemented relevant procedures in accordance with the requirements of the Chinese Certified Public Accountant Auditing Standards. The main procedures we implemented for the above issues include:
- Understanding, evaluating and testing the design and implementation of internal controls related to MYSE's revenue and costs;
- Identifying revenue recognition as a key audit matter and conducting random checks on sales contracts, original production records and product shipping logistics information to assess the accuracy of MYSE's revenue recognition amount and timing;
- Reviewing purchase contracts, invoices and shipping logistics information on sampling basis, verifying the authenticity and accuracy of purchase amounts, and performing IT system testing for cost collection and allocation to evaluate whether the Company's product cost accounting is correct;
- Performing confirmation procedures with MYSE's customers and suppliers to verify their contract signing, subject matter, transaction amount and other information; and
- Performing analytical procedures on revenue, cost and gross profit margin to analyse the reasons and rationale for changes in gross profit margin.
- The Accountant's opinion
Based on the audit procedures we performed, we are of the opinion that the Company's above explanations on the reasons for the fluctuations in gross profit margin were consistent with the materials and information we obtained during the 2023 audit for MYSE, and the reasons for the changes in the Company's gross profit margin were in line with the actual situation.
Comment 2 of the Regulatory Enquiry Letter: According to the annual report, the Company's wind farm construction revenue amounted to RMB108 million, with a gross profit margin of 0.62%; in terms of related current accounts, the book balance of accounts receivable "engineering and construction business" portfolio amounted to RMB79.9198 million, and the book balance of contract assets "engineering construction business" portfolio amounted to RMB151 million, with a total impairment provision of RMB4.592 million. The Company is requested to make additional disclosure of: (1) the specific mode, settlement method, time point for revenue recognition of the wind farm construction business, the top five customers and
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