JISCO Hongxing and HSBC Industrial's related-party transactions exceed 4 billion yuan for two consecutive years, then plunge over 95% in 2026, triggering a Shanghai Stock Exchange inquiry

Regulation
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The Shanghai Stock Exchange recently issued a regulatory inquiry regarding JISCO Hongxing's 2025 annual report, focusing on the company's two-way transactions with related party Jiayuguan HSBC Industrial Products Co., Ltd. The inquiry letter pointed out that in 2024 and 2025, the company's purchases from HSBC Industrial reached 4.205 billion yuan and 4.473 billion yuan respectively, while sales reached 4.692 billion yuan and 4.549 billion yuan, with the amounts being highly similar. However, purchases are expected to plummet to 120 million yuan and sales to 195 million yuan in 2026, and the company was asked to explain the transaction background, commercial substance, accounting treatment, and the reasons for the dramatic change in amounts. JISCO Hongxing replied that the core of the transactions involves the company selling steel coil raw materials to HSBC Industrial, which then completes shearing and packaging processing. Most of the products are repurchased by the company's sales subsidiary for external sale, while a small portion is processed by HSBC Industrial and sold directly to external parties. The company itself lacks deep steel processing capabilities, while HSBC Industrial has geographical and cost advantages. The related transactions have genuine commercial substance, with pricing based on market prices or a cost-plus model, and there is no transfer of benefits. In terms of accounting treatment, the portion sold directly by HSBC Industrial is recognized as revenue on a gross basis, while repurchased products are offset at the consolidated statement level. This treatment complies with corporate accounting standards. The corresponding accounts receivable of 6.2618 million yuan at the end of 2025 had been fully collected before May 2026, with no signs of impairment. The significant decline in related-party transaction scale in 2026 is mainly due to the upgrade of the company's CSP production line, an increase in the proportion of direct supply to end customers, downstream customers building their own processing capacity, and a slowdown in demand for photovoltaic steel in the northwest region. The business model and accounting methods between the two parties have not changed.

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As the related party, HSBC Industrial is subject to the same inquiry and scrutiny, with transactions expected to drop dramatically.

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