I. Key Event: Youfa Group Announces Capital Increase; Hainan Supply Chain’s Registered Capital Doubles

On the evening of November 20, Tianjin Youfa Steel Pipe Group Co., Ltd. (hereinafter referred to as “Youfa Group”), a leading domestic steel pipe manufacturer, issued a board resolution announcement, declaring a major investment decision. According to the announcement, the company’s board of directors has approved a capital increase proposal for its subsidiary, planning for its wholly-owned subsidiary, Tianjin Youfa Supply Chain Management Co., Ltd., to increase its capital in its wholly-owned subsidiary, Youfa (Hainan) Supply Chain Management Co., Ltd., by 300 million yuan. This capital increase will be paid in cash. After completion, Hainan Supply Chain’s registered capital will increase dramatically from the original 200 million yuan to 500 million yuan, an increase of 150%, while its equity structure will remain unchanged, remaining a wholly-owned subsidiary of Youfa Supply Chain.

II. Decision-Making Procedure: Approved by the Board of Directors, No Shareholders’ Meeting Required

The Company held its 23rd meeting of the 5th Board of Directors on November 20, 2025, and formally approved the “Proposal on Capital Increase to Subsidiaries and Cumulative External Investment.” According to the relevant provisions of the Shanghai Stock Exchange’s “Stock Listing Rules” and the Company’s Articles of Association, the investment amount is within the Board of Directors’ approval authority and therefore does not require submission to the shareholders’ meeting for review. The announcement also clarifies that this transaction does not constitute a related-party transaction or a major asset restructuring, and the procedures are compliant and efficient.

III. Purpose of Capital Increase: Enhancing Strength, Optimizing Structure, and Supporting Long-Term Business Development

Youfa Group provided a clear explanation of the purpose of this capital increase in the announcement. It is mainly to improve the financial strength and overall competitiveness of its Hainan Supply Chain subsidiary, while optimizing its asset-liability structure to promote the smooth operation of the subsidiary’s business. This move is considered an important step in line with Youfa Group’s overall development strategy and long-term interests. The capital increase funds come from its own funds. After the capital increase, Hainan Supply Chain will remain a wholly-owned subsidiary within the Group’s consolidated financial statements and will not have an adverse impact on the Company’s financial condition.

IV. Target Company and Potential Risks: Opportunities and Challenges Coexist in the Hainan Free Trade Port

The core target of this capital increase—Youfa (Hainan) Supply Chain Management Co., Ltd.—is registered in Jiangdong New Area, Haikou City, Hainan Province. Its business scope is broad, covering supply chain management services, metal material sales, import and export of goods, and general cargo warehousing services, showing significant synergy with Youfa Group’s main business. The decision to focus its investment in Hainan is interpreted by the market as an important measure for Youfa Group to leverage the policy advantages of the Hainan Free Trade Port to expand into domestic and international markets.

Meanwhile, the announcement also highlighted relevant investment risks. After the capital increase, Hainan Supply Chain may face uncontrollable factors in its actual operations, such as the macroeconomic environment, industry cycles, raw material price fluctuations, and changes in market demand, leading to uncertainty in its future operating performance. Youfa Group stated that it will actively adopt strategies and management measures to prevent and address these risks and advised investors to make prudent decisions.

V. Industry Impact: Leading Steel Enterprises Strengthen Supply Chain Layout, Demonstrating Development Confidence

Youfa Group, a leading welded steel pipe enterprise with an annual output exceeding 20 million tons, has significantly increased its investment in its Hainan supply chain, fully demonstrating its strategic intention to continuously strengthen supply chain control and deepen its national and even global layout under the new circumstances. Against the backdrop of the steel industry’s current focus on improving quality and efficiency and transforming and upgrading, the substantial investment by leading enterprises in supply chain management and channel construction not only helps enhance their own risk resistance and market competitiveness but also provides new ideas and trends for the high-quality development of the industry.

Note: Reprinted from Steel.com