The Increase in Corrugated Paper Prices Has Led To The Recovery Of The Gross Profit Margin. Shangyigong International's Latest Response: The Capacity Utilization Rate Is 90% - 95%

On May 26th, Shanying International held an online question-and-answer session for investors. The following is the transcript of the answers.
Record of Responses to Questions
Q1: Recently, the prices of corrugated paper have risen. How has the average price of the company's products increased and how has the gross profit margin been restored? How efficient is the transmission of raw material (waste paper, wood pulp) costs at present?
Hello, recently due to changes in industry supply and demand and other factors, the price of corrugated paper has shown an upward trend. The prices of our corrugated paper products generally follow the market trend. The gross profit margin of related products has shown a certain recovery trend compared to the previous period. Usually, the transmission of costs to product prices is affected by various factors and there is a certain time lag. Our company has the advantage of an integrated industrial chain. The synergy between the upstream and downstream of the industrial chain enables our company to have strong cost control capabilities and raw material supply capabilities, and to provide customers with a one-stop packaging overall solution. Our company can more timely and accurately grasp the market price information of recycled fibers and raw paper, which is conducive to our company adjusting the pricing strategies of raw materials and products in a timely manner, thereby effectively controlling production costs. Thank you for your attention.
Q2 Company has a large scale of fixed assets, with an annual depreciation amount exceeding 3 billion yuan. What is the current utilization rate of production capacity? Does the company have a clear plan for capacity optimization or asset disposal to reduce the depreciation cost per unit product?
Hello, in 2025, the company will accrue depreciation for its fixed assets amounting to 1.736 billion yuan. The current capacity utilization rate is between 90% and 95%. The core of the future strategy will shift from "scale expansion" to cost control and lean operation. The company will continuously optimize the efficiency of fixed asset utilization, increase the capacity utilization rate, orderly dispose of and renovate inefficient assets, and promote lean production. Thank you for your attention.
Compared with peers Jilong and Liren, our company has a significant gap in terms of pulp and paper integration and self-sufficiency rate of raw materials. Will there be any plans to increase the self-sufficiency rate of raw materials in the future to mitigate the impact of cost fluctuations?
Hello, the paper-making section of the company will gradually improve the "high-end packaging pulp paper integrated construction" by building wood pulp production lines at the newly established bases in Hubei, Suzhou and Jilin in recent years. This measure can: first, significantly reduce the investment per unit capacity and lower the unit cost of existing production capacity; second, when raw material prices fluctuate, increasing the self-supply ratio of core raw materials can enhance the company's active adjustment ability in terms of costs; third, the high-end packaging paper produced through the integrated pulp-paper production will have significant cost advantages, which can effectively increase the company's market share in the high-end packaging paper sector. Through the "less investment, higher-end" approach, the overall asset return rate of the company will be continuously improved. Thank you for your attention.
The current outstanding debt of Q4 Company remains relatively high, and the erosion of profits by financial expenses is quite significant. Could you please tell us what specific measures the company will take in the future to reduce debt and optimize its debt structure?
Hello, at present, our company has made substantial progress in optimizing its debt structure: Firstly, the company has smoothly passed through the peak period of convertible bond redemption, and both "Shanying Convertible Bond" and "Eagle 19 Convertible Bond" have completed their conversion and maturity redemption, and the related systemic risks have been eliminated; Secondly, by the end of 2025, the scale of non-current liabilities due within one year has decreased significantly from 5.766 billion yuan at the end of 2024 to 1.133 billion yuan, a reduction of over 60%; Thirdly, the financing mainly from the four major state-owned banks and policy banks has steadily increased, which helps to achieve reasonable control of financial expenses. In the future, the company will systematically restore the corporate credit system, strictly control capital expenditures, and gradually optimize the debt structure and reduce the leverage level. Thank you for your attention.
What are the core business goals of Q5 Company for the next 1-2 years? Is it to prioritize debt reduction and cash flow preservation, or to prioritize profit improvement and profit statement restoration?
Hello, starting from 2026, our company will undergo a crucial transformation. Specifically, 1. Transition from asset scale expansion to achieving liquidity sufficiency and restoring profit levels; 2. Transform the business structure to become more high-quality, and increase asset returns. We will continue to implement measures to reduce debt, enhance our ability to withstand risks, and at the same time, as a core goal in operational management, we will continuously optimize "free cash flow", strictly control capital and expense expenditures, and implement cost reduction and efficiency improvement measures to drive the company to transform from the heavy investment model of "capital-driven growth" to the high-return model of "operation-driven growth". Thank you for your attention.
Q6 Regarding the issue of long-term overcapacity in the industry and the low utilization rate of the company's production capacity, how does the company view the industry landscape in the next 2-3 years? What plans does the company have for upgrading its product structure?
Hello, in 2025, the supply and demand pattern of corrugated board and paper will show differentiated development. Although the production capacity growth rate of the leading corrugated board paper enterprises has slowed down, the production capacity they have invested in over the past few years has been continuously released. Meanwhile, large paper mills adhere to the principle of cautious shutdown, maintaining a stable production schedule, which has driven the industry's capacity utilization rate to rise to 66%, and the market supply has increased. The company's capacity utilization rate is between 90% and 95%, much higher than the industry average. Currently, the paper industry has entered a deep adjustment stage. The narrowing of profit margins is expected to further accelerate the elimination of backward production capacity in the industry, promoting the continuous optimization of the industry's competitive landscape, and creating a more favorable market environment for the development of high-quality enterprises. At the same time, in 2026, the company will also actively promote the implementation of the high-end fiber wood pulp project to achieve self-supply of high-end fibers, thereby comprehensively enhancing its cost competitiveness. Thank you for your attention.
What achievements has Q7 Company made in the field of ESG?
Hello, as an international enterprise deeply involved in the entire chain of recycling of renewable resources, paper production and packaging, the company attaches great importance to the concept of sustainable development. The specific contents are as follows: 1. Relying on the integrated advantages of the entire chain, the company focuses on the circular economy, builds a carbon management system, optimizes the energy structure, strictly controls pollutant emissions, and promotes efficient resource utilization. The company successfully passed the EATNS carbon management system review and became a leading enterprise in the country with the corresponding certification. The company and its subsidiaries Zhejiang Sanying, Huashan Sanying, South China Sanying, and Guangdong Sanying respectively obtained the certification certificates for carbon management system standardization; 2. The company adheres to innovation-driven development, strictly adheres to the bottom line of product quality and safety, and empowers customers with high-quality services; 3. Always placing employees at the core position, it fully guarantees the legitimate rights and interests of employees, protects the occupational health of employees, and helps employees grow and develop; 4. Continuously improving the company's governance structure, strengthening risk control and internal control. The specific contents can be found in the company's "2025 Sustainable Development Report". Thank you for your attention.
What is the proportion of R&D expenditure in Company Q8?
Hello, the company's R&D expenses for the year 2025 were 841 million yuan, which was basically the same as the previous year. It accounted for 2.92% of the company's operating revenue. For more details, please refer to the company's "2025 Annual Report". Thank you for your attention.
Q9 How is the overseas business development of the company?
Hello, the company is steadily implementing its international strategy through the acquisition of fiber resources, the deepening of advantageous markets, and the layout of high-end paper varieties. It is continuously conducting trade business in major global fiber recycling regions such as the United States, the United Kingdom, and the Netherlands, and is establishing a recycled pulp production base in Southeast Asia to ensure the high-quality supply of raw materials. The company's holding subsidiary, Fenghuang Paper Industry, belongs to the wood pulp-based papermaking sub-sector and has a wide range of products. Currently, it has an annual comprehensive production capacity of 560,000 tons of pulp and paper, with a pulp production capacity of 340,000 tons and a paper production capacity of 220,000 tons. The packaging sector closely follows the expansion of major customers' overseas operations and has built secondary plants in Vietnam and Thailand, further enhancing the horizontal service capabilities of the packaging sector. The company will continue to implement the "Belt and Road Initiative", accelerate the overseas expansion of packaging business, and seek new growth opportunities.