Ruoyu Chen: Investors inquire about financial status; the Secretary of the Board responds on funding, inventories, and debt issues.

Investor Q&A:

Hello, Secretary of the Board. I saw discussions about the company’s annual report in the stock forum:

① The company’s operating revenue and net profit both increased year over year at a relatively fast pace, but net operating cash flow decreased significantly year over year. Could you please explain the reasons for the differences between the two, and how any funds are being used or occupied?

② The inventory scale has grown quickly, and meanwhile the increase in selling expenses is significantly higher than the growth in revenue. Could you please tell us the current inventory structure and turnover situation, as well as the plans for destocking going forward?

③ The company’s short-term borrowings have increased, and new borrowings were added for the current term as well. Financial expenses have risen in parallel. Could you please explain the current debt structure and the repayment arrangements?

Thank you in advance for your reply.

Secretary of the Board’s Reply (If Yu Chen SZ003010):

Dear investors, hello! During the reporting period, the company achieved relatively fast growth in revenue and net profit. However, net operating cash flow decreased year over year. This is mainly because the company strategically increased inventory stocking to meet business expansion and peak-season replenishment needs, and the increase in prepaid accounts due to promotional prepayment recharge, which led to the decrease. The related funds were all used for normal operations, and there is no situation of any unlawful fund occupation. The growth in inventory scale and selling expenses is mainly due to revenue growth driving an increase in inventory stocking and business growth, which in turn increased marketing and promotion expenses. The company has established a dynamic inventory management mechanism and, relying on a digital supply chain system and precise marketing, has continued to improve inventory turnover efficiency. At the same time, the company’s newly added borrowings were mainly used to support business development and the current-term newly added repurchase-dedicated loans. The company’s cash flow remains stable, and overall repayment risk is controllable. Thank you for your attention.

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Disclaimer: This information is excerpted by Sina Finance from publicly available information and does not constitute any investment advice. Sina Finance does not guarantee the accuracy of the data; the content is for reference only.

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