Research Express | Jiangsu Hongde Receives Southwest Securities Research Visit, Detailing Main Causes of Gross Margin Decline and Response Strategies

On March 17, 2026, Jiangsu Hongde Special Components Co., Ltd. (hereinafter referred to as “Jiangsu Hongde”) received a targeted survey and on-site visit from Southwest Securities. The company’s Secretary of the Board of Directors, Li Linli, and Securities Affairs Representative Yan Ruirui hosted the research team, providing detailed responses to investor concerns regarding the 2025 interim report gross profit margin fluctuations, fixed asset depreciation impacts, raw material price risks, and industry competitive advantages.

Basic Information of Investor Relations Activities

• Type of Investor Activity: Targeted survey, on-site visit
• Date: March 17, 2026
• Location: On-site research
• Participating Organization: Southwest Securities (Qiqi Xinlong)
• Company Representatives: Secretary of the Board Li Linli, Securities Affairs Representative Yan Ruirui

Key Questions and Responses from the Survey

Main reasons for the decline in gross profit margin in the 2025 interim report: decrease in export proportion, intensified domestic competition, and increased depreciation

Regarding the decline in gross profit margin in the first half of 2025, the company stated that gross margin levels are influenced by multiple factors such as raw material prices, labor costs, capacity utilization, and order prices. The main reasons for the decline include three aspects: First, the decrease in the proportion of export sales, which previously had higher margins, leading to an overall reduction in gross profit margin; second, fierce competition among domestic wind power equipment manufacturers has put downward pressure on product prices; third, after new projects are completed, capacity and efficiency have not yet been fully realized, and fixed costs like depreciation have increased.

Depreciation pressure on fixed assets: coping with a scale of 616.55 million yuan through revenue expansion to reduce costs

On the impact of fixed asset depreciation on profitability, the company indicated that as investment projects are completed and put into operation, the scale of fixed assets has increased significantly. As of September 30, 2025, the book value of fixed assets reached approximately 615.5577 million yuan (about 616 million yuan). To alleviate the pressure from increased depreciation, the company plans to intensify market development, improve capacity utilization, reduce operating costs, and dilute unit depreciation costs through revenue growth.

Rising prices of bulk raw materials: negotiating price adjustments with customers to offset cost pressures

Regarding the impact of rising raw material prices on profits, the company said that some customers’ product prices are linked to international raw material prices, while others are priced based on market conditions and order demand. During price negotiations, raw material increases are considered a key factor. When price hikes reach a certain level, the company will negotiate reasonable adjustments with customers to offset the adverse effects of rising raw material costs.

Impact of RMB appreciation: strengthening foreign exchange risk management and optimizing product and customer structure

On the issue of exchange gains and losses caused by RMB appreciation, the company stated that normal currency fluctuations have limited impact on export foreign exchange gains and losses, but large fluctuations may have some effect. The company will continue to strengthen foreign exchange risk management, optimize product and customer structures, and enhance market competitiveness and overall profitability to respond to external environment changes.

Industry competitive advantages: driven by technological R&D and manufacturing processes

The company’s core advantages in the industry lie in technological R&D and manufacturing processes. In terms of R&D, the company has established a dedicated research center focusing on high-performance cast iron, cast aluminum materials, and cutting-edge casting materials. Notably, the QT400-18LT ultra-low temperature (-40°C) impact-resistant material has been successfully developed and stably applied in large wind power castings, earning high recognition from customers. In manufacturing processes, progress has been made in processing wind power main shafts and bearing housings, effectively improving product quality, reducing production costs, and increasing efficiency.

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