Zhenjiang Co., Ltd. sells its overseas subsidiary and receives recognition from the sponsoring institution; both the prior fund-raising project changes and the sale are reasonable.

Caitong Haitong Securities Co., Ltd. (formerly known as: Caitong Junan Securities Co., Ltd.), as the then-current continuous supervision institution for Jiangsu Zhenjiang New Energy Equipment Co., Ltd. (hereinafter referred to as “Zhenjiang Shares”), responded to inquiries related to the matter of Zhenjiang Shares selling its overseas subsidiary, and issued a verification opinion, holding that both the Company’s prior change to its fund-raising projects and the current sale of its overseas subsidiary are reasonable.

The announcement shows that the target company sold by Zhenjiang Shares this time is the implementing entity of the fund-raising project “U.S. photovoltaic bracket component production line construction project” from its 2022 non-public issuance of shares. The project was changed from the original “photovoltaic bracket large-piece component production line construction project” in April 2023. It was completed and closed in June 2024, with cumulative investment of 133 million yuan of raised funds. However, in 2024 and 2025, the target company achieved operating revenue of 15.3845 million U.S. dollars and 33.6313 million U.S. dollars respectively, while net profit was -3.1844 million U.S. dollars and -1.5065 million U.S. dollars respectively, failing to meet expected benefits.

In response to the inquiry letter’s questions regarding the reasonableness of the prior change to the fund-raising project and the current sale, Zhenjiang Shares and the sponsor institution provided explanations from multiple aspects. In terms of project feasibility analysis, at that time, the Company mainly considered factors such as the tax incentives brought by the U.S. “Inflation Reduction Act,” market reserve to expand for major U.S. domestic customers (such as GameChange Solar, Array Technologies, Nextracker LLC, etc.), and its own technology reserves. The project’s originally expected benefits were substantial. With a total investment of 159.8792 million yuan, after full capacity by 2026, it was planned to add annual operating revenue of 496.0000 million yuan, add average annual net profit of 67.2237 million yuan, and an after-tax internal rate of return of 18.85%.

Regarding the reasonableness of the prior change to the fund-raising project, the Company stated that the change was mainly to better serve customers and expand market share by locating a production base in the U.S. close to customers, and to fully take advantage of local tax incentive policies. The termination of the original fund-raising project was because the domestic photovoltaic bracket industry’s production capacity expanded rapidly, and market competition was fierce, compressing product profit margins. To avoid wasting resources and improve the efficiency of using raised funds, the decision was made.

As for the reasonableness of this sale, Zhenjiang Shares pointed out that after the project went into production, it was affected by economic policies of the newly appointed U.S. president, leading to increased wait-and-see sentiment among downstream customers and orders falling short of expectations. In particular, the relevant bill introduced in July 2025 excluded Chinese companies and their overseas related entities from clean energy tax incentive policies, resulting in the target company no longer meeting the 45X advanced manufacturing tax credit conditions starting from early 2026. The original tax advantages no longer existed, and downstream customers had also paused cooperation. It is expected that the project will be unable to achieve expected benefits. Continuing to implement it would further weigh down the Company’s performance. Therefore, the Company decided to sell 100% of the equity of the target company, to optimize the asset structure and focus on its core business.

After conducting verification procedures such as reviewing relevant documents, understanding U.S. policies, and communicating with the Company’s management, the sponsor institution believed that the Company’s prior change to the fund-raising projects was based on the needs of a cross-border strategic layout, and that the current sale is a business adjustment to respond to changes in the U.S. regulatory environment. Both are reasonable.

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