United Optical Electronics responds to inquiry regarding the issuance of shares to purchase 92.62% of Changyi Optoelectronics' equity; performance commitments and integration plans clarified

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Joint Optoelectronics (Zhongshan United Optoelectronics Technology Co., Ltd.) responded in detail to the inquiry letter from the Shenzhen Stock Exchange regarding its application for issuing shares to purchase assets and raise supporting funds in March 2026. The company plans to acquire 92.62% of Dongguan Changyi Optoelectronics Co., Ltd. (hereinafter referred to as “Changyi Optoelectronics”) through share issuance, with a transaction price of 240.8227 million yuan. The reply addresses various issues including the transaction plan, target asset operations, financial data, valuation, and historical development, aiming to protect the interests of the listed company and minority shareholders.

Clear Core Elements of the Transaction Plan, Transparent Performance Commitments and Compensation Mechanisms

According to the reply, the performance commitments are made by the controlling shareholder, actual controller, core management, and employee shareholding platform of Changyi Optoelectronics, including Wang Jinping, Yin Haiming, Shenzhen Chuangyi, Shenzhen Qinyi, Zhu Zhiyong, Yi Xuefeng, and Zhao Zhikun. The commitment periods are 2025, 2026, and 2027, with net profit targets of no less than 31 million yuan, 29 million yuan, and 32 million yuan respectively, totaling at least 92 million yuan over three years. The performance compensation will be triggered if the cumulative net profit during the commitment period falls below 80% of the committed amount. Compensation will be made via share transfer, with a one-time compensation to the listed company after the commitment period.

In the valuation based on the income approach, the forecasted net profits for 2025-2027 are 37.0627 million yuan, 29.844 million yuan, and 33.4087 million yuan, respectively, exceeding the performance commitments. The reply explains that the lower performance commitments compared to forecasted profits are mainly due to the transaction price being below the valuation and market-based negotiations, which is reasonable. The coverage ratio of the performance commitments is 79.49%, and the transaction price is below 92.62% of the valuation based on the income approach, which helps safeguard the interests of the listed company.

Additionally, an excess performance reward mechanism is set: if the net profit attributable to the parent company each year is at least 70% of the committed performance, and the cumulative net profit over three years exceeds the cumulative commitment, then 50% of the excess will be used to reward the performance commitment parties, with total rewards not exceeding 20% of the total transaction price. This arrangement has been adjusted according to the “Guidelines for Regulatory Rules—Listing No. 1,” based on the actual profits of the target assets exceeding forecasts, in compliance with relevant regulations.

Details on Target Asset Operations and Financial Data

Changyi Optoelectronics mainly produces mobile phone lenses and general security lenses. During the reporting period, its operating income was 198 million yuan, 465 million yuan, and 364 million yuan, respectively. Its net profit attributable to the parent after deducting non-recurring gains and losses was -59.796 million yuan, 1.0719 million yuan, and 24.6959 million yuan, respectively. Gross profit margins were -9.29%, 14.20%, and 20.77%, showing a trend of turning losses into profits and increasing margins. The reply attributes this mainly to the recovery of the smartphone market, product structure optimization (such as increased share of 5P specifications lenses), scale effects reducing unit costs, and rapid growth in the general security business.

Regarding customer concentration, Changyi Optoelectronics’ sales to the top five customers account for over 70% of revenue, with the largest customer being Sunny Optical, which is both a major customer and supplier. The reply states that customer concentration is mainly due to the OEM nature of the mobile phone lens business, with industry-leading clients and stable cooperation. The target asset has signed a “Strategic Cooperation Agreement” with Sunny Optical to ensure future order stability.

Financial data as of August 31, 2025, shows accounts receivable of 205 million yuan, inventory of 107 million yuan, and a debt ratio of 62.85%. The reply provides detailed explanations of the aging structure of accounts receivable, collection status post-reporting period, inventory aging, and provision for inventory devaluation, believing that provisions for bad debts and inventory devaluation are sufficient and reasonable. Regarding the high debt ratio, the reply states that Changyi Optoelectronics’ operating cash flow continues to improve, and it has available bank credit lines, with sufficient debt repayment capacity, which will not significantly affect its ongoing operations.

Reasonableness of Valuation Appreciation and Plan for Synergy

The transaction valuation used both asset-based and income approaches, ultimately selecting the income approach. The total valuation of the entire equity of the target is 292 million yuan, with an appreciation rate of 19.64%. The reply explains that the valuation increase mainly comes from long-term equity investments (subsidiary Jiangxi Changyi performing well), inventory (finished goods and goods in transit including market sales profit), and intangible assets (patents, trademarks, and other uncapitalized assets).

Regarding the security business revenue forecast, the reply discloses that the security lens business revenue is expected to grow to 390 million yuan by 2030. This forecast is based on industry trends, historical growth data, existing orders, and new customer development, and is deemed reasonable. Post-reporting period performance shows that from September to December 2025, the security business exceeded the forecasted revenue.

For post-transaction integration, United Optoelectronics plans to implement measures across business, assets, finance, personnel, and organizational levels, including sharing R&D technology and sales channels, maintaining core management team stability, and appointing a financial officer to realize synergy effects. The company also highlights risks in integration but states that effective measures have been put in place to ensure successful integration.

Full Disclosure of Compliance and Risk Factors

The reply also explains issues related to the historical development of the target, including equity holding arrangements, differences in capital increase prices, and employee shareholding platforms, considering these arrangements legal and compliant, with no major legal risks. It addresses environmental protection, social security, and housing fund compliance, noting that Changyi Optoelectronics has taken rectification measures, and the actual controller has issued a bottom-line commitment.

United Optoelectronics states that this transaction will enhance the company’s sustainable operating capacity and complies with the “Reorganization Measures.” The company has prepared a “Major Risk Warning” highlighting key risks such as failure to meet performance commitments, integration not meeting expectations, and high customer concentration.

Independent financial advisors, lawyers, accountants, and appraisers have reviewed the transaction and believe the plan is reasonable, the information disclosure is true and accurate, and there are no major illegal or regulatory violations. The transaction is subject to registration with the China Securities Regulatory Commission and other procedures.

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