Raw material cost share and volatility

In 2023, 2024 and 2025, our material costs were RMB27.1 million, RMB578.0 million and RMB3,721.0 million, respectively, accounting for 67.8%, 81.8% and 82.8% of our total cost of sales, respectively.

Financial Information · p. 218

Materials and components accounted for the majority of our cost of sales, amounting to 99.1%, 99.6% and 99.7% of our cost of sales in 2023, 2024 and 2025, respectively.

Financial Information · p. 178

Compared to our peers, our flexible pricing mechanism allows us to respond swiftly to customer needs and market dynamics, enhancing our ability to secure and retain customer orders and to pass on raw material price fluctuations to customers.

Business · p. 130

For 2023, 2024 and 2025, our material costs included in cost of sales were RMB1,945.0 million, RMB3,158.5 million and RMB2,777.8 million, respectively, accounting for 97.1%, 96.6% and 95.3% of our total cost of revenue during the respective periods.

Business · p. 131

Given the close correlation between the prices of casing materials, batteries, and memory we procure from our suppliers and the often volatile bulk commodity cobalt ore and oil prices, we implement a comprehensive risk management strategy to mitigate the impact of such fluctuations, which primarily incorporates a raw material price linkage mechanism in our contracts with both customers and suppliers.

Business · p. 131

In response to the potential raw material price increases, we primarily mitigate the impact by building long-term relationships with our suppliers, signing linkage pricing agreements with the suppliers and maintaining close communication.

Business · p. 131

During the Track Record Period, cost of raw materials amounted to RMB6,335.8 million, RMB3,865.5 million and RMB4,811.1 million, respectively, representing 80.5%, 73.7% and 74.1% of our cost of sales for the respecive years.

Business · p. 122

We generally adopt market-linked pricing mechanisms in our raw material contracts, with pricing determined by reference to prevailing market indices rather than fixed-price arrangements.

Business · p. 122

Accordingly, to manage raw material cost volatility and support more stable margins, we closely monitor high-quality lithium mineral resources and are advancing a global lithium mineral resource configuration to continuously increase our lithium mineral self-sufficiency rate.

Financial Information · p. 168

Raw milk is the principal raw material for our dairy business and represents a significant component of our operating costs.

Financial Information · p. 185

A decline in raw milk prices generally reduces our procurement costs for externally sourced raw milk, while an increase in raw milk prices may raise our operating costs and affect profitability if such increases cannot be passed on through product pricing.

Financial Information · p. 185

We maintain a diversified raw milk sourcing structure comprising our self-owned dairy farms, strategic partner dairy farms, and third-party dairy farms.

Financial Information · p. 185

Various factors may affect the gross profit margin and profitability of our products, such as commodity prices related to raw materials.

Financial Information · p. 182

We are committed to enhancing centralized procurement of raw materials to amplify economies of scale, while promoting in-house production of key components to strategically balance the scale of external centralized procurement for optimal cost efficiency.

Financial Information · p. 182

The costs of raw materials and supply chain management efficiency are critical to our cost of sales and have historically fluctuated significantly.

Financial Information · p. 217

In 2023, 2024 and 2025, raw materials costs accounted for 92.6%, 92.8% and 90.7% of our cost of sales, respectively.

Financial Information · p. 217

Therefore, changes in the availability and prices of raw materials from upstream suppliers, particularly memory wafers and memory dies, could significantly impact our results of operations.

Financial Information · p. 217

Direct materials costs represent the largest portion of our cost of sales, accounting for approximately 92.5%, 90.3%, and 93.4% during FY2023, FY2024, and FY2025 of the Track Record Period, respectively.

Financial Information · p. 208

For FY2023, FY2024 and FY2025, the average purchase cost per tonne of nonwoven fabrics increased slightly by approximately 1.6% from FY2023 to FY2024 and further increased by 13.8% from FY2024 to FY2025.

Financial Information · p. 208

The table below presents a sensitivity analysis illustrating the impact of changes in the average direct material costs of two key raw materials, nonwoven fabrics and SAP on our profit before tax during the Track Record Period.

Financial Information · p. 208

In 2023, 2024 and 2025, our materials cost was RMB188.0 million, RMB184.5 million and RMB168.2 million, representing 63.0%, 52.1% and 45.4% of our total cost of sales, respectively.

Financial Information · p. 208

In response to the potential price increases, we primarily mitigate the impact on our raw material costs by building long-term relationships with our suppliers and conducting secondary source evaluations.

Business · p. 148

Our materials cost is primarily influenced by copper prices, purchase volume, and quality requirements, with scale-based procurement generally offering price advantages.

Business · p. 149

The fluctuations in the prices of raw materials, particularly copper-clad laminates, copper balls, and other key PCB manufacturing inputs also affect our results of operations.

Financial Information · p. 186

In periods of rising raw material prices, our cost of sales increased, which exerted pressure on gross profit margins if such cost increases could not be fully passed on to customers in a timely manner.

Financial Information · p. 186

We maintain long-term cooperative relationships with major suppliers of copper-clad laminates and other key materials, which help support stable supply and provide a degree of cost visibility.

Financial Information · p. 187

The cost of sales primarily consisted of material and manufacturing costs, which amounted to RMB951.8 million, RMB915.6 million and RMB834.9 million in 2023, 2024 and 2025, respectively, representing 94.1%, 92.9% and 92.0% of our total cost of sales during the same periods, respectively.

Financial Information · p. 217

The price and supply of our raw materials are affected by various factors, including changes in macroeconomic conditions, international trade policies and tariffs, upstream supply capacity, adjustments to suppliers’ business strategies and fluctuations in currency exchange rates.

Financial Information · p. 217

Given the competitive nature of the market, we generally cannot pass on price increases for raw materials, parts and components to our customers in full.

Business · p. 169

raw materials accounted for 71.1%, 74.1% and 73.0% of our total cost of sales in 2023, 2024 and 2025, respectively.

Financial Information · p. 181

The procurement costs for such raw materials may fluctuate due to a number of factors beyond our control, such as supply chain disruptions and inflation, and we are susceptible to significant changes in the availability, price and standard of key raw materials.

Financial Information · p. 181

We have implemented cost management measures against potential disruptions to our supply chain.

Financial Information · p. 182

Our raw material procurement costs, such as automotive-grade chips, constituted a considerable portion of our cost of sales for the years ended December 31, 2023, 2024 and 2025, which amounted to RMB256.3 million, RMB182.3 million and RMB199.5 million, representing 76.1%, 53.7% and 37.4% of our total cost of sales in the corresponding years, respectively.

Business · p. 155

The prices of raw materials are susceptible to price fluctuations due to supply and demand trends, foreign exchange rates, transportation costs, government regulations and tariffs, price controls, economic climate and other unforeseen circumstances.

Financial Information · p. 214

Concurrently, we established long-term strategic partnerships with key suppliers to secure raw material prices, thereby ensuring supply stability.

Business · p. 159

During the Track Record Period, direct materials, which primarily comprising copper used in our copper-based cultural and creative products, accounted for approximately 51.9%, 47.1%, 47.1%, 46.9% and 47.6% of our total cost of sales for the years ended December 31, 2022, 2023, 2024 and the nine months ended September 30, 2024 and 2025, respectively.

Business · p. 122

During the Track Record Period and up to the Latest Practicable Date, we had not adopted any hedging policy or entered into futures contracts or other hedging instruments in relation to copper or other raw materials.

Business · p. 123

Copper is the primary raw material used in our production process, and fluctuations in copper prices have a direct impact on our cost of sales and gross margin.

Financial Information · p. 200

In 2022, 2023, 2024 and the nine months ended September 30, 2024 and 2025, our raw material costs were RMB1,129.3 million, RMB1,110.9 million, RMB1,627.5 million, RMB1,169.8 million and RMB1,681.9 million, representing 63.3%, 62.2%, 65.4%, 65.4% and 67.3% of our total cost of sales, respectively.

Financial Information · p. 183

The prices of such raw materials are susceptible to price fluctuations due to various factors beyond our control.

Financial Information · p. 183

We have implemented various cost-control measures, including improving the raw material utilization, reducing scrap rate and optimizing processes through dedicated engineering initiatives.

Financial Information · p. 183

For the years ended December 31, 2023 and 2024 and 2025, our costs of raw materials and components were RMB638.9 million, RMB834.3 million and RMB811.3 million, respectively, accounting for 67.6%, 69.9% and 73.0% of our total cost of sales during the respective periods.

Business · p. 164

We have adopted comprehensive policies and measures to manage supply chain risks and fluctuations in raw material prices.

Business · p. 164

During the Track Record Period, we have not experienced any significant material fluctuation in prices set by our suppliers, material breach of contract on the part of our suppliers or material delay in delivery of our orders from our suppliers.

Business · p. 164

The prices of some of our raw materials, particularly copper wires and silicon steel, are closely linked to the prices of the bulk commodities copper and steel, and thus are subject to fluctuations due to market changes.

Business · p. 142

To mitigate the impact of such fluctuations, we have adopted the following measures: (i) incorporating a raw material price-linking mechanism into contracts with some of our customers and suppliers, enabling us to adjust prices in response to market fluctuations; (ii) implementing centralized procurement for bulk materials and entering into long-term framework agreements with major raw material suppliers to secure more favorable pricing and more stable supply; (iii) establishing a scientific inventory model: based on market trend forecasts, we strategically increase raw material reserves when prices are low and reduce inventory levels when prices are high; and (iv) continuously improving our production processes to enhance material utilization while reducing scrap rates and material waste.

Business · p. 142

In 2022, 2023, 2024 and the nine months ended September 30, 2024 and 2025, raw materials costs accounted for 91.3%, 92.3%, 92.8%, 93.1% and 92.6% of our cost of sales, respectively.

Financial Information · p. 293

As a result, our inventory of memory chips increased by approximately two times from December 31, 2024 to September 30, 2025.

Business · p. 248

During the Track Record Period and up to the Latest Practicable Date, we had not adopted any hedging policies to mitigate the effect of fluctuations in the prices of raw materials.

Business · p. 247

Market price of raw material like copper set significant impact on our business results and we have implemented several measures to mitigate the effects of procurement cost volatility and ensure stable raw material supplies

Business · p. 174

For example, with respect to our communication cable products and NEV power transmission products, the relevant customer contracts provide that the selling prices shall be with reference to fluctuations in copper prices.

Business · p. 174

our Directors are of the view that, during the Track Record Period, our pricing flexibility and procurement management measures were effective in mitigating the impact of raw material price fluctuations on our financial performance as evidenced by our stable gross profit margin of 30.2%, 31.3%, 30.5% and 31.3% for the three years ended December 31, 2022, 2023 and 2024, and the nine months ended September 30, 2025 respectively.

Business · p. 174

In addition, we had raw material costs of RMB379.4 million, RMB202.8 million, RMB252.3 million, RMB174.2 million and RMB193.1 million in 2022, 2023, 2024 and the eight months ended August 31, 2024 and 2025, respectively, representing 46.4%, 43.8%, 44.0%, 44.6% and 42.0% of our total revenue in same respective periods.

Financial Information · p. 264

To mitigate raw material price fluctuations, we regularly analyze market conditions, utilize digital tools for real-time price tracking, establish long-term supplier relationships and sign long-term contracts.

Financial Information · p. 264

Benefiting from our effective procurement management system and flexible production capabilities, our cost of sales decreased and our gross profit margin increased during the Track Record.

Financial Information · p. 264