Recently, China West Construction Group Co., Ltd. (hereinafter referred to as “China West Construction”) released its 2021 Stock Issuance Prospectus for Specific Objects (Registration Version). A total of 203,778,915 shares will be issued to specific investors, of which China Southwest Architecture intends to subscribe for 20,792,577 shares, and Anhui Conch Cement Co., Ltd. (hereinafter referred to as “Couch Cement”) intends to subscribe for 182,986,338 shares. Upon completion of this issuance, Conch Cement will hold 12.48% of the shares in China West Construction, becoming the second-largest shareholder of the company.

China West Construction and Conch Cement have signed a “Strategic Cooperation Agreement” and its supplementary agreement, under which the two parties will engage in comprehensive and in-depth cooperation across seven areas. After the implementation of the strategic cooperation, China West Construction is expected to see an average annual increase in operating revenue of 8.85 billion yuan and an increase in total profit of 708 million yuan. This represents an improvement of 38.71% and 78.23%, respectively, compared to the operating revenue and total profit in 2023, showing a significant enhancement in performance.

Strengthening Cooperation in the Supply and Marketing of Raw Materials

Driving sales growth to China West Construction through raw material supply and marketing partnerships. Through this strategic cooperation, Conch Cement will give preferential treatment to China West Construction in terms of cement procurement mode, sales price, settlement and payment method, loan and credit, so as to alleviate the capital pressure of China West Construction and enhance its profitability. On the one hand, by changing the procurement mode, China West Construction will directly purchase from Conch Cement, enjoying the cost savings from direct procurement and price concessions; on the other hand, Conch Cement will give preferential treatment in terms of payment credit, which will be conducive to China West Construction's flexible arrangement of procurement and further alleviate the cash pressure. The above measures can realize the direct connection between the production side and the demand side, improve the competitiveness of China West Construction's products in the market, and promote the improvement of sales performance.

Increase Cooperation in The Incremental Market for Concrete Mixing Plants

Through cooperation in the incremental market of concrete mixing plant, the regional coverage and market scale of China West Construction's business will be expanded. Pursuant to the “Strategic Cooperation Agreement”, the two parties will increase the construction and investment of concrete mixing plants by setting up a joint venture company and other forms of co-investment in regions where both parties have industrial advantages. At the same time, the two parties will provide financial guarantee for the joint venture company in light of the development situation and capital demand. On the basis of strategic cooperation, the two parties will invest in concrete mixing plants in East China, South China, Central China and West China in the next three years.

In terms of the cooperation model, the two parties will adopt a “One Station, One Discussion” approach. Given the characteristics of concrete mixing plants, which have a certain transportation radius, for each new mixing plant, China West Construction and Conch Cement will jointly discuss and determine the plant's location, investment scale, construction period, personnel allocation, and project operation based on various factors such as surrounding customer resources, upstream raw material supply, downstream market scale, and land environmental requirements. This approach aims to leverage China West Construction's expertise in the specialized operation of concrete mixing plants and Conch Cement's resource advantages in the local area.

Since China West Construction is a large-scale, specialized ready-mixed concrete production enterprise with rich operational experience in concrete mixing plants, the concrete mixing plants resulting from the cooperation will be controlled by China West Construction. To strengthen the cooperation guarantee, on November 1, 2022, China West Construction and Conch Cement signed a supplementary agreement, which clarified that China West Construction will hold controlling interests in the cooperating concrete mixing plants.

According to calculations, with the implementation of the strategic cooperation and the gradual commissioning of additional concrete mixing plants, China West Construction is expected to see an average annual increase in operating revenue of 8.85 billion yuan and total profit of 558 million yuan, representing an increase of 38.71% and 61.66%, respectively, compared to the operating revenue and total profit of 2023, thereby continuously driving the growth of China West Construction's performance.