Jiwu High-Tech Responds to Convertible Bond Review Inquiry: 2024 Revenue Down 29.55% but Net Profit Surges 16.94% Against the Trend

Jiangsu Jiuwu Hi-Tech Co., Ltd. (hereinafter referred to as “Jiuwu Hi-Tech”) has recently replied to the Shenzhen Stock Exchange’s inquiry letter regarding its application to issue convertible corporate bonds to unspecified parties. In its reply letter, the company provides detailed disclosures on various aspects including performance fluctuations during the reporting period, accounts receivable, inventories, fixed assets, short-term borrowings, and financial investments, and explains the necessity, reasonableness, and risks of the raised-investment projects.

Performance fluctuations: revenue declines while net profit grows side by side

During the reporting period, Jiuwu Hi-Tech’s operating revenue was RMB 74,130.94 million, RMB 75,699.95 million, RMB 53,328.69 million, and RMB 37,385.88 million, respectively. Among them, in 2024 operating revenue decreased by 29.55% compared with 2023, mainly due to macroeconomic fluctuations and the company’s active optimization of its project structure, leading to the abandonment of certain projects with low gross profit margins.

In contrast, the company’s net profit attributable to shareholders after deducting non-recurring items was RMB 25.33 million, RMB 39.29 million, RMB 47.19 million, and RMB 34.08 million, respectively, with net profit in 2024 increasing by 16.94% year over year. This逆向 change was mainly attributable to an increase in the revenue contribution ratio of adsorption–separation products with high gross profit margins from 12.89% in 2023 to 23.75% and an increase in long-term equity investment gains accounted for using the equity method.

Product structure adjustment: the share of membrane integration business declines; material and accessory business grows

The company’s principal products are membrane integration technology turnkey solutions and their complete sets of equipment, materials, and accessories. During the reporting period, the revenue contribution ratio of membrane integration technology turnkey solutions and their complete sets of equipment decreased from 85.39% in 2022 to 45.33% from January to September 2025, while the revenue contribution ratio of materials and accessories increased from 14.45% to 52.64%.

The growth in the materials and accessories business is mainly driven by the lithium adsorbent product line. Benefiting from growth in downstream salt-lake lithium extraction market demand and the release of capacity from the company’s 6,000-ton lithium adsorption and separation materials annual production project, lithium adsorbent revenue increased from RMB 38.07 million in 2022 to RMB 126.66 million in 2024. The compound growth rate during the reporting period was 37.36%.

Gross margin and period expenses: overall gross margin improves; expense ratio rises somewhat

During the reporting period, the company’s gross margin for its main business showed an upward trend year by year, rising from 22.43% in 2022 to 44.36% from January to September 2025. Among them, the gross margin of membrane integration technology turnkey solutions and their complete sets of equipment increased from 15.42% to 27.67%, while the gross margin of materials and accessories remained above 58%.

Regarding period expenses, in 2024, the company’s period expense ratio was 32.03%, a significant increase from 18.89% in 2023. This was mainly due to the comprehensive impact of implementing equity incentive plans leading to increases in selling expenses, administrative expenses, and R&D expenses, as well as the decline in operating revenue.

Accounts receivable and inventories: scale changes and impairment provisions

For each period end during the reporting period, the book value of accounts receivable was RMB 45,325.75 million, RMB 58,376.69 million, RMB 52,493.43 million, and RMB 49,740.11 million, respectively. The proportion of bad debt allowance to the accounts receivable balance was 14.99%, 18.43%, 20.20%, and 24.32%, respectively, and the provision ratio increased year by year. The accounts receivable turnover rate is not materially different from that of comparable companies in the same industry.

The book value of inventories was RMB 24,227.07 million, RMB 18,709.68 million, RMB 23,792.28 million, and RMB 25,643.09 million, respectively. The proportion of inventory write-down provisions to the book balance of inventories for the current period was 0.65%, 2.02%, 4.34%, and 3.87%, respectively. The company stated that inventory turnover is good, with no large backlog or slow-moving items, and that inventory write-down provisions have been made sufficiently.

Short-term borrowings and debt-paying ability: the increase in borrowings is reasonable; repayment ability is strong

As of the end of September 2025, the company’s short-term borrowings balance was RMB 92.15 million, which increased from RMB 40.06 million at the end of 2024. The company said that the increase in short-term borrowings is mainly to meet working capital needs and capital expenditure needs arising from the expansion of business scale. At the same time, it uses temporarily idle funds to purchase low-risk wealth management products to improve capital utilization efficiency, and there is no unreasonable situation where idle funds and additional leverage coexist.

The company’s cash and cash equivalents balance and net cash flow from operating activities can cover its short-term borrowings. Major repayment-related indicators are generally at reasonable levels, and its short-term repayment capability is strong. As of the end of February 2026, the company has obtained bank credit lines of RMB 189,000.00 million, of which RMB 16,809.79 million has been used, leaving RMB 172,190.21 million not yet used; the credit lines are sufficient.

Raised-investment projects: focusing on special inorganic membranes; optimizing the product mix

For this public issuance of convertible corporate bonds, the total amount of proceeds to be raised is planned to be no more than RMB 30,400.00 million, to be used for the project of producing special inorganic membrane modules and equipment/production lines, as well as for replenishing working capital. Among them, after the special inorganic membrane module and equipment production line project is completed and put into production, it is expected to produce 5,000 special inorganic membrane modules and 100 special inorganic membrane separation units per year. During the project’s operating period, it is expected that average annual sales revenue will be RMB 16,601.77 million and average annual net profit will be RMB 3,223.09 million. The project’s internal rate of return (IRR) is 14.41%.

The company said that although the revenue and gross profit contribution ratio of the membrane integration business continue to decline, membrane materials-related business is still an important source of the company’s revenues and profits. The raised-investment project will help the company solidify its membrane materials business, optimize the product structure, enhance overall competitiveness, and is consistent with the company’s development strategy.

Risk warnings

The company has provided additional disclosures of various risks, including risks of fluctuations in operating performance, risks of fluctuations in cash flow from operating activities, risks related to the recovery of accounts receivable and bad debts, risks of inventory write-downs, risks of fixed-asset impairment, risks related to debt repayment, risks of project implementation for raised-investment projects, risks related to the digestion of newly added capacity, risks that benefits may not meet expectations, risks relating to depreciation’s impact on performance, risks of asset impairment related to Xuzhou TiO2, risks related to the impact of the prior raised-investment project, and risks related to the redemption of principal and interest of unconverted convertible bonds, etc.

Jiuwu Hi-Tech emphasized that the proceeds from this issuance will be mainly directed to its core business, which will help alleviate the company’s funding pressure and provide assurance for business development. The company will actively respond to various risks, strive to improve operating performance, and safeguard investors’ rights and interests.

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