Core Viewpoint - Dongyue Group (00189) expects a significant decrease of approximately 82% in net profit attributable to shareholders for the fiscal year ending December 31, 2023, compared to the previous year [1] Financial Performance - The anticipated decline in net profit is consistent with the downward trend observed in the first half of the year [1] - The average market prices of some major products have significantly decreased for the fiscal year ending December 31, 2023, compared to the fiscal year ending December 31, 2022, leading to a reduction in revenue [1] - Changes in raw material prices during the fiscal year ending December 31, 2023, were insufficient to offset the negative impact of declining product prices on the company's net profit [1]

Investment Rating - The report assigns an "Accumulate" rating to Dongyue Group, suggesting investors pay attention to the stock [1][2]. Core Views - Dongyue Group is a leader in China's fluorosilicon industry, with optimized shareholding structure, improving refrigerant business margins, and promising long-term potential in polymer materials [1]. - The company is expected to achieve net profits attributable to shareholders of RMB 570 million, RMB 1.3 billion, and RMB 1.54 billion for the years 2023, 2024, and 2025, respectively, reflecting year-on-year changes of -85.2%, +127.4%, and +18.6% [1][4]. - The report highlights the integrated advantages of the fluorochemical and silicon chemical industries, with significant contributions from polymer materials, refrigerants, and organosilicon products [1]. Summary by Sections Industry Overview - Dongyue Group is positioned as a leader in the fluorosilicon industry, with a revenue structure comprising 31.6% from polymer materials, 20.2% from refrigerants, and 34.8% from organosilicon products as of H1 2023 [1]. Refrigerant Business - The issuance of production quotas for third-generation refrigerants in January 2024 is expected to improve supply-demand dynamics and drive price increases, benefiting Dongyue Group's profitability [1]. - The production quotas for second-generation refrigerants R22 and R142b are set at 53,574 tons and 1,882 tons, respectively, while third-generation refrigerants have a total quota of 74,556 tons [1]. Polymer Materials - Dongyue's polymer materials include various products such as PTFE and PVDF, with significant production capacities and self-sufficiency in raw materials [1]. - The report notes that while PVDF prices have seen a decline due to oversupply, the long-term outlook for polymer materials remains positive [1]. Shareholding Structure - The report mentions a planned buyback of 23.12% of shares held by Xinhua Group, which will result in the founder becoming the largest shareholder with a 25.22% stake [1].

Investment Rating - The report does not explicitly state an investment rating for Dongyue Group Core Insights - Dongyue Group is a leading player in China's fluorochemical industry, established in 1987 and listed on the Hong Kong main board in 2007. The company has grown into a significant production base for fluorosilicon materials and serves as a key supplier for renowned domestic and international companies [3][41] - The company benefits from the rising prices of refrigerants, with the global refrigerant market expected to grow from 202 tons in 2024 to 229 tons in 2029, reflecting a compound annual growth rate (CAGR) of 2.5% [13][25] - The fluorinated polymer materials segment has vast potential, with applications across various industries including construction, electronics, and aerospace [34][39] Summary by Sections 1. Company as China's Fluorochemical Leader - Dongyue Group is recognized as a leading enterprise in the fluorochemical sector in China, focusing on the manufacturing and distribution of refrigerants, polymers, and other chemical products [3][41] 2. Benefiting from Rising Refrigerant Prices - The company is positioned to benefit from the increasing prices of refrigerants, with specific price increases noted for various refrigerants such as R22 and R32 [25][26] 3. Vast Space for Fluorinated Polymer Materials - The fluorinated polymer materials segment includes products like PTFE, PVDF, and FKM, which have extensive applications in multiple industries [34][39] 4. Subsidiary Dongyue Silicon Materials as a Leader in Organic Silicon - Dongyue Silicon Materials, a subsidiary, is a major player in the organic silicon market, producing a range of products including silicone rubber and intermediates [41] 5. Synergy Between Dichloromethane, PVC, and Caustic Soda Segments with Refrigerants - The report highlights the interdependence of the dichloromethane, PVC, and caustic soda segments with the refrigerant division, indicating a collaborative operational strategy [6] 6. Future Hydrogen Energy IPO Aspirations - Dongyue Group is planning to pursue an IPO for its hydrogen energy segment, indicating future growth and diversification strategies [6] 7. Profit Forecast - The company has shown a compound annual growth rate (CAGR) of 38% in net profit from 2019 to 2022, with a revenue CAGR of 16% during the same period [6][8]

Financial Performance - In the first half of 2023, the fluorosilicon chemical industry faced significant challenges, with a decline in product prices and weakening demand from downstream sectors, leading to a decrease in revenue and profit for the Group [10]. - For the six months ended June 30, 2023, the Group recorded revenue of approximately RMB7,198,111,000, representing a decrease of 28.83% compared to RMB10,113,288,000 in the same period last year [20]. - The gross profit margin declined to 15.73%, down from 36.86% in the corresponding period of 2022 [20]. - The Group's profit before taxation was approximately RMB287,755,000, a significant decrease from RMB2,381,058,000 in the same period last year [20]. - The net profit for the period was approximately RMB208,069,000, compared to RMB1,967,640,000 in the corresponding period of 2022 [20]. - The total comprehensive income for the period was approximately RMB 207,032,000, compared to RMB 1,950,435,000 in the same period of 2022 [21]. - The profit for the period attributable to owners of the Company was RMB 283,871,000, compared to RMB 1,692,775,000 in the prior year, reflecting a significant decline [104]. - The company reported a total comprehensive income for the period of RMB 282,834,000, down from RMB 1,675,570,000 in the previous year [104]. Operational Efficiency - Despite the adverse market conditions, the Group maintained stable production, achieving growth in both production and sales volume, which contributed to an increase in market share [9]. - The energy consumption level per unit product was reduced during the review period, indicating improved operational efficiency [9]. - The Group's management is focused on preparing for a potential industry recovery in the future, leveraging its operational strengths [9]. - The Group's strategies during the challenging market conditions included exploring potential developments and enhancing operational efficiencies [9]. - The management emphasized the importance of reinforcing internal strengths and cost reduction strategies in response to market changes [9]. Market Conditions - The overall market sentiment remained gloomy, impacting the fluorosilicon chemical industry significantly during the review period [10]. - The decline in sales and profits was attributed to significant price drops in key products due to weak downstream demand and increased industry capacity [24]. - The Group's performance in the first half of 2023 showed a significant decline compared to the historical best results from the previous year, but the management believes that the foundation for future growth remains solid [9]. Research and Development - R&D costs amounted to approximately RMB475,928,000, accounting for approximately 6.61% of total revenue [13]. - The Group added 53 new product grades during the period, contributing to profits and new vitality [13]. - The Group was granted 47 patents during the period, bringing the total to 587 licensed patents [13]. Segment Performance - The Fluoropolymer segment's external sales were approximately RMB 2,275,072,000, representing a year-on-year decrease of 31.45% [28]. - The profit for the Fluoropolymer segment was RMB 224,466,000, a decrease of 80.46% compared to RMB 1,148,539,000 in the previous year [28]. - The refrigerants segment generated revenue of RMB 1,452,853,000 with a segment profit margin of 11.58% [23]. - The organic silicone segment reported revenue of RMB 2,502,180,000 but incurred a loss of RMB 222,336,000, resulting in a negative margin of -8.89% [23]. - The overall operating profit margin for the Group was 3.78%, down from 23.56% in the same period last year [21]. Financial Position - As of June 30, 2023, the Group's total equity was RMB16,742,561,000, a decrease of 9.47% from December 31, 2022 [45]. - The Group's bank balances and cash as of June 30, 2023, were RMB4,260,716,000, compared to RMB5,315,994,000 on December 31, 2022 [45]. - The current ratio as of June 30, 2023, was 1.58, down from 2.00 on December 31, 2022 [45]. - The Group had no borrowings as of June 30, 2023, maintaining a negative gearing ratio of -25.45% [46]. - The total assets less current liabilities amounted to RMB 17,370,942, a decrease from RMB 19,071,987 as of December 31, 2022, representing a decline of approximately 8.9% [107]. - The company's equity attributable to the owners decreased to RMB 14,572,844 from RMB 16,082,018, reflecting a reduction of about 9.4% [109]. Employee and Governance - The Group aims to enhance human resources reform to create a vibrant platform for talent and innovation [18]. - The Board of Directors did not declare an interim dividend for the six months ended June 30, 2023, compared to no dividend declared for the same period in 2022 [50]. - The Company has established a Remuneration Committee to consider remuneration for Directors and senior management [54]. - The Risk Management Committee is responsible for overseeing the Group's risk management and internal control systems [55]. - The Company has established a whistleblowing policy for employees and stakeholders to confidentially report any improprieties [56]. Capital Expenditure and Investments - The Group's capital expenditure for the six months ended June 30, 2023, was approximately RMB744,415,000, down from RMB1,616,112,000 for the same period in 2022 [43]. - The company plans to enhance its production capacity of PVDF, a weather-resistant fluoropolymer, with a target completion date of December 31, 2025, involving a total investment of HK$2,000,000,000 [75]. - The company aims to increase its production capacity of PTFE, a synthetic fluoropolymer, also with a target completion date of December 31, 2025, involving an investment of HK$800,000,000 [75]. Shareholder Information - As of June 30, 2023, Mr. Zhang Jianhong holds a corporate interest of 258,948,451 Shares, representing 11.49% of the issued share capital [80]. - Mr. Fu Kwan has a corporate interest of 520,977,818 Shares, accounting for 23.12% of the issued share capital [80]. - The Company has disclosed all required interests and short positions as per the Securities and Futures Ordinance [84].

Financial Performance - Revenue for the six months ended June 30, 2023, was RMB 7,198 million, a decrease of 29.4% compared to RMB 10,113 million in the same period of 2022[3] - Gross profit for the same period was RMB 1,132 million, resulting in a gross margin of 15.73%, down from 36.86% in 2022[3] - Profit before tax decreased to RMB 288 million from RMB 2,381 million, reflecting a decline of 87.9% year-over-year[3] - Net profit attributable to owners of the company was RMB 284 million, compared to RMB 1,693 million in the previous year, a decrease of 83.2%[3] - Basic and diluted earnings per share were RMB 0.13, down from RMB 0.76 in the same period last year[3] - The total profit for the group for the six months ended June 30, 2023, was RMB 276,845,000, a decrease of 88.63% from RMB 2,435,791,000 in the same period of 2022[44] Assets and Equity - Total equity as of June 30, 2023, was RMB 16,743 million, a decrease from RMB 18,493 million at the end of 2022[3] - Total assets less current liabilities amounted to RMB 17,370 million, down from RMB 19,072 million in the previous year[7] - Cash and cash equivalents decreased to RMB 4,261 million from RMB 5,316 million, indicating a reduction in liquidity[6] - As of June 30, 2023, the company's total equity reached RMB 16,742,561,000, a decrease of 9.47% from December 31, 2022[57] Revenue Breakdown - The revenue breakdown includes RMB 2,275,072 thousand from high polymer materials, RMB 2,502,180 thousand from organic silicon, and RMB 1,452,853 thousand from refrigerants[14] - The fluoropolymer materials segment reported external sales of RMB 2,275,072,000, down 31.45% from RMB 3,318,963,000 in the previous year, contributing 31.61% to total external sales[46] - The organic silicon segment's external sales decreased by 27.51% to RMB 2,502,180,000, resulting in a loss of RMB 222,336,000 compared to a profit of 636,691,000 in the previous year[48] - The refrigerants segment generated revenue of RMB 1,452,853,000 with a profit margin of 11.58%, compared to RMB 2,087,848,000 and a profit margin of 16.95% in the previous year[44] Operational Efficiency - The overall segment performance showed a profit before tax of RMB 287,755 thousand, indicating a strong operational efficiency[14] - The company reported a net loss of RMB 222,336 thousand in the organic silicon segment, highlighting challenges in that area[14] - The company experienced a decline in revenue and profit due to weak downstream demand and price drops in several key products during the first half of 2023[32] Research and Development - Research and development costs were approximately RMB 475,928,000, accounting for 6.61% of total revenue[34] - The group launched 53 new product brands during the review period, contributing to profit and vitality[34] - The group received 47 new patents during the review period, bringing the total to 587 authorized patents[34] - The group aims to focus R&D resources on high-end products with good market prospects and high returns[39] Government Support and Income - Government subsidies recognized by the company amounted to RMB 34,350,000 for the six months ended June 30, 2023, compared to RMB 16,557,000 for the same period in 2022, representing a 107.0% increase[18] - Interest income from bank deposits increased to RMB 44,738,000 for the six months ended June 30, 2023, up from RMB 34,188,000 in the previous year, reflecting a growth of 30.8%[18] - The company reported a decrease in the income tax expense significantly to RMB 79,686,000 for the six months ended June 30, 2023, down from RMB 413,418,000 in the same period of 2022, indicating a reduction of 80.7%[20] Employee and Governance - The group employed 8,734 employees as of June 30, 2023, an increase from 7,549 employees as of December 31, 2022[60] - The company has maintained compliance with corporate governance codes, except for a deviation regarding the separation of roles between the chairman and CEO[69] - The company is currently assessing suitable female candidates to achieve gender diversity on the board by December 31, 2024[70] Future Plans and Strategies - The company is focusing on expanding its product lines and enhancing its market presence through strategic initiatives[12] - The group has established a comprehensive development plan for the second half of the year, involving all departments in production, sales, safety, and procurement[41] - The company continues to evaluate potential mergers and acquisitions to bolster its market position and drive growth[12]

Financial Performance - In 2022, the Group achieved a revenue of RMB20,027,988,000, representing a year-on-year growth of 26.41%[10] - Profit attributable to owners of the Company reached RMB3,855,539,000, reflecting a year-on-year increase of 85.82%[10] - For the year ended December 31, 2022, the Group recorded revenue of approximately RMB20,027,988,000, representing an increase of 26.41% over RMB15,843,947,000 in the previous year[33] - Gross profit margin slightly decreased to 32.53% (2021: 32.93%), and operating margin was 19.81% (2021: 23.01%) with a profit before tax of approximately RMB5,125,055,000[33] - The fluoropolymers segment generated revenue of RMB6,487,010,000 with an operating margin of 30.67%, while the organic silicon segment generated revenue of RMB6,648,326,000 with a lower operating margin of 6.97%[35] - The refrigerants segment recorded revenue of RMB4,361,050,000 with an operating margin of 23.42%, showing significant growth compared to the previous year[35] - The organic silicon segment's external sales increased by 55.78% to RMB6,648,326,000 from RMB4,267,829,000, accounting for 33.20% of the Group's total external sales (2021: 26.94%) [43] - The profit for the organic silicon segment decreased by 63.45% to RMB463,465,000 from RMB1,267,885,000 in the previous year [43] - The dichloromethane, PVC, and liquid alkali segment's external sales increased by 5.66% to RMB1,624,811,000 from RMB1,537,795,000, accounting for 8.11% of the Group's total external sales (2021: 9.71%) [46] - The profit for the dichloromethane, PVC, and liquid alkali segment increased by 236.94% to RMB460,302,000 from RMB136,612,000 in the previous year [46] Research and Development - The Group's R&D expenditure was approximately RMB1,310,535,000, marking a year-on-year growth of 56.22%[12] - The number of R&D personnel increased to over 800, with more than 40% holding doctoral and master's degrees[12] - The Group established 22 joint laboratories and carried out 88 cooperative projects with over 60 universities and research institutes[12] - The Group launched 142 new product grades during the year, with revenue from new and high-end products reaching a record high[12] - The Group will increase scientific research efforts to promote the development of new products and applications[22] Production and Operations - A new 10,000-ton/year PVDF project was completed in the second half of the year, contributing to economic benefits[16] - The average capacity utilization rate of the Group's facilities reached over 90%, ensuring stable production efficiency[17] - The Group completed a total of 10 new construction, reconstruction, and expansion projects during the year[16] - The Group's proactive response to pandemic challenges ensured high-efficiency production throughout the year[17] - The Group plans to enhance production efficiency and scale through the implementation of significant project development plans[25] - The Group aims to strengthen technology breakthroughs and promote operating efficiency to enhance market competitiveness amid a challenging market environment[30] Financial Management - Financial cost decreased to RMB15,032,000, representing a year-on-year decrease of 81.25%[19] - Debt ratio was 24.96%, a decrease of 2.64 percentage points compared to 2021[19] - The Group aims to strengthen cost control and improve capital utilization efficiency to maximize profits[28] - The Group plans to maintain stringent budget control to improve efficiency on expenditures and maximize profit[30] - The Group's total equity amounted to RMB18,493,477,000, representing an increase of 18.26% compared to RMB15,634,000,000 as at December 31, 2021[49] - The Group generated a total of RMB5,082,541,000 net cash inflow from operating activities, up from RMB3,914,053,000 in 2021[49] - As at December 31, 2022, the Group had no balance of borrowings, compared to RMB624,100,000 in 2021[49] Strategic Focus - The Group has decided to gradually exit the real estate business, focusing on core areas of "fluorine, silicon, membrane, and hydrogen" for sustainable development[28] - The Group anticipates a challenging 2023, emphasizing the need for resilience and strategic focus[28] - The Company aims to replenish its general working capital, with an allocation of HK$510,000,000[89] - The Company aims to enhance the production capacity of PVDF by utilizing HK$2,000,000, with an expected completion date of December 31, 2025[89] Corporate Governance - The Board of Dongyue Group Limited comprises eight directors, with three independent non-executive directors representing one-third of the Board[132] - The Company has complied with the Corporate Governance Code provisions during the year, except for a deviation regarding the roles of chairman and chief executive officer[131] - The Board has delegated daily operations to senior management while overseeing the Group's business and strategic direction[134] - The Company has established several committees, including a Remuneration Committee, Audit Committee, Nomination Committee, Corporate Governance Committee, and Risk Management Committee, with a majority of independent non-executive directors in most committees[148] - The Company aims to establish and maintain a diverse Board in terms of skills, experiences, knowledge, expertise, culture, independence, age, and gender[166] Environmental, Social, and Governance (ESG) - The report is prepared in accordance with the Environmental, Social and Governance Reporting Guide set out in Appendix 27 to the Rules Governing the Listing of Securities on the Main Board of the Stock Exchange of Hong Kong Limited[194] - The Board of Directors focuses on the sustainable development performance of Dongyue Group Limited and formulates the overall ESG strategy[198] - The ESG working group is responsible for the day-to-day implementation of ESG work and managing related risks[198] - Key focus areas for 2022 included sustainable supply chains and integrity in operations[199] - The Company emphasizes the importance of product and service quality in its ESG strategy[199]

Financial Performance - Total revenue for the year ended December 31, 2022, was RMB 20,028 million, representing a 26.8% increase from RMB 15,844 million in 2021[4] - Gross profit for the same period was RMB 6,514 million, with a gross margin of 32.53%, slightly down from 32.93% in 2021[4] - Net profit attributable to shareholders for 2022 was RMB 3,856 million, up 86% from RMB 2,075 million in 2021[4] - Basic earnings per share increased to RMB 1.73 from RMB 0.98 in the previous year, reflecting a growth of 76.5%[4] - Total equity as of December 31, 2022, was RMB 18,493 million, compared to RMB 15,639 million in 2021, indicating a growth of 18%[4] - The company reported a total comprehensive income of RMB 4,170 million for the year, up from RMB 2,447 million in 2021, representing a growth of 70.4%[6] - The company achieved a net profit of approximately RMB 4,176,117,000, compared to RMB 2,681,545,000 in 2021, representing a significant increase[71] Revenue Breakdown - Revenue from high polymer materials amounted to RMB 6,487,010 thousand in 2022, up from RMB 4,825,266 thousand in 2021, indicating a growth of about 34.4%[14] - Revenue from refrigerants was RMB 4,361,050 thousand in 2022, compared to RMB 3,337,155 thousand in 2021, reflecting an increase of approximately 30.7%[14] - Revenue from organic silicon, dichloromethane, PVC, and caustic soda totaled RMB 19,121,197 thousand in 2022, a significant rise from RMB 13,968,045 thousand in 2021, marking an increase of around 36.5%[14] - The revenue from the high polymer materials segment was RMB 6,487,010 thousand, up from RMB 4,825,266 thousand in 2021, indicating a growth of about 34.4%[22] - The refrigerants segment generated revenue of RMB 4,361,050 thousand, an increase from RMB 3,337,155 thousand in the previous year, reflecting a growth of approximately 30.7%[23] - The organic silicon division's external sales grew by 55.78% to RMB 6,648,326,000, representing 33.20% of the group's total external sales[79] Dividends and Shareholder Returns - The company declared a final dividend of HKD 0.60 per share, up from HKD 0.34 in 2021[4] - The proposed final dividend is HKD 0.60 per share for the year ending December 31, 2022, up from HKD 0.34 per share in 2021, representing a 76.5% increase[91] - The company repurchased and canceled 1,051,000 shares during the year, down from 1,499,000 shares in 2021[42] Research and Development - Research and development costs amounted to RMB 1,310,535,000 in 2022, reflecting the company's commitment to innovation[33] - The group achieved a record high in revenue from new products and high-end products, with 142 new product brands launched during the year[59] - R&D expenditure for the year was approximately RMB 1,310,535,000, representing a year-on-year increase of 56.22%, marking seven consecutive years of growth in R&D spending[59] - The company established Shandong Dongyue Research Institute to optimize its technology management system and enhance R&D capabilities, with over 800 R&D personnel, of which more than 40% hold doctoral or master's degrees[58] Market and Operational Strategy - The company plans to continue expanding its market presence and investing in new technologies to drive future growth[5] - The company is focused on expanding its market presence and enhancing its product offerings in high polymer materials and refrigerants[14] - The company plans to continue investing in research and development for new products and technologies to drive future growth[14] - The company aims to enhance cost control and improve capital efficiency to maximize profits in response to a challenging market environment[69] - The group plans to enhance R&D efforts to drive innovation in new products and applications[65] Asset and Liability Management - Total equity reached RMB 18,493,477,000, an increase of 18.26% from the previous year[86] - The asset-liability ratio improved to 24.96%, a decrease of 2.64 percentage points from 2021, with financing costs reduced to RMB 15.032 million, down 81.25% year-on-year[62] - The group's cash and bank balances increased to RMB 5,315,994,000, up from RMB 5,102,552,000, due to improved operating cash flow[86] - The group maintained a current ratio of 2.00, slightly down from 2.11 in the previous year, indicating strong liquidity[86] Employee and Compensation - Employee costs for 2022 amounted to RMB 1,880,403,000, up from RMB 1,622,523,000 in 2021, reflecting a growth of 15.9%[40] - The group employed 7,065 employees as of December 31, 2022, compared to 6,824 employees in 2021, reflecting an increase of approximately 3.5%[90] - The group has implemented a competitive compensation policy, including social insurance and retirement benefits, to attract and retain talent[90] Compliance and Governance - The company is committed to maintaining transparency and compliance with international financial reporting standards in its financial disclosures[12] - The group established a new compliance management system to ensure sustainable and healthy development[63] - The audit committee reviewed the group's accounting policies and internal controls as of March 24, 2023[97] - The group has established various committees, including a remuneration committee and a corporate governance committee, to oversee governance and compensation matters[98][100] Future Outlook - The market outlook for 2023 is uncertain, with potential impacts from capacity expansion and downstream market adjustments[64] - The company anticipates 2023 to be a challenging year, testing its resilience and commitment to the strategic development plan[70]

Financial Performance - The company's revenue reached approximately RMB 10,113,288,000, representing a year-on-year increase of 56.29%[10] - Net profit amounted to approximately RMB 1,967,640,000, a year-on-year growth of 147.57%[10] - Profit attributable to owners of the company was approximately RMB 1,692,775,000, reflecting a year-on-year increase of 180.62%[10] - The company recorded revenue of approximately RMB 10,113,288,000 for the six months ended June 30, 2022, representing a 56.29% increase compared to RMB 6,470,878,000 for the same period last year[20] - The gross profit margin increased to 36.86%, up by 10.65 percentage points year-on-year[10] - The gross profit margin increased to 36.86% from 26.21% in the same period last year, while the operating profit margin rose to 23.56% from 16.13%[20] - The company recorded a net profit of approximately RMB 1,967,640,000, up from RMB 794,790,000 in the same period last year[20] - The company’s total comprehensive income for the six months ended June 30, 2022, was RMB 1,692,775,000, compared to RMB 1,675,570,000 for the same period in 2021, representing a growth of approximately 1.3%[85] - The company reported a profit attributable to equity holders of RMB 1,692,775,000 for the six months ended June 30, 2022[85] Research and Development - R&D expenses were approximately RMB 616,590,000, a 103.66% increase compared to RMB 302,758,000 in the same period of 2021[13] - A total of 267 R&D projects were conducted, with 116 new projects initiated and 85 new products launched[13] - The company plans to accelerate the selection and market introduction of R&D projects in the second half of the year[15] - The company has a current total of 501 valid patents, with 23 patent applications filed and 42 patents granted during the review period[13] Operational Highlights - The company completed 30 project constructions during the review period, with ongoing projects including the expansion of PVDF products[11] - The fluoropolymer materials segment achieved external sales of RMB 3,318,963,000, a 70.87% increase from RMB 1,942,387,000 in the previous year, accounting for 32.82% of total external sales[24] - The organic silicon segment's external sales increased by 114.34% to RMB 3,451,972,000, accounting for 34.13% of total external sales, with a profit of RMB 636,691,000, up 52.42% from last year[25] - The refrigerant segment's external sales rose by 70.67% to RMB 2,087,848,000, representing 20.64% of total external sales, with a profit of RMB 353,822,000, an increase of 198.65% year-on-year[26] - The dichloromethane, PVC, and caustic soda segment's external sales increased by 2.08% to RMB 764,785,000, with a profit of RMB 213,517,000, up 2,188.01% compared to last year[27] - The property development segment's external sales decreased by 66.33% to RMB 250,276,000, with a profit of RMB 4,750,000, down 84.89% year-on-year[30] Capital Expenditures and Investments - Capital expenditures for the first half of 2022 totaled approximately RMB 1,616,112,000, compared to RMB 1,128,374,000 in the same period last year[35] - The company plans to complete a new 10,000 tons/year PVDF project by October, with total PVDF production capacity expected to reach 25,000 tons/year by the end of the year[16] - The company has established plans to expand PVDF production capacity to 55,000 tons/year by 2025 due to increased demand from the lithium battery industry[24] - The company acquired property, machinery, and equipment amounting to approximately RMB 1,331,361,000 for business expansion in refrigerants, polymers, and organosilicon, compared to RMB 551,749,000 in the same period of 2021, indicating a significant increase of about 141%[112] Financial Position - As of June 30, 2022, total equity reached RMB 16,662,063,000, a 6.54% increase from December 31, 2021, with cash and bank balances totaling RMB 5,671,472,000[36] - The total borrowing amount of the group was RMB 670,600,000, an increase from RMB 624,100,000 as of December 31, 2021, resulting in a debt ratio of -42.88%[37] - The group has a net cash position, indicating that cash and cash equivalents exceed its debt[37] - The company reported a total asset less current liabilities of RMB 17,532,807 thousand, up from RMB 16,353,738 thousand in the previous year[83] - The company's total liabilities as of June 30, 2022, were RMB 10,222,936,000, compared to RMB 9,151,291,000 as of January 1, 2022, indicating an increase in leverage[85] Governance and Compliance - The company emphasizes enhancing internal control management to mitigate operational risks and improve compliance[18] - The board believes that having the same person serve as both chairman and CEO enhances strong leadership and operational efficiency[57] - The company has complied with the corporate governance code, except for the separation of roles between the chairman and CEO[56] - The group has established various committees, including an audit committee and a risk management committee, to oversee financial reporting and risk management practices[47][52] - The company has engaged an independent consulting firm to conduct internal reviews and provide recommendations for its internal control systems[53] Employee and Shareholder Information - The group employed a total of 6,843 employees as of June 30, 2022, compared to 6,824 employees as of December 31, 2021[42] - The company has implemented a compensation policy based on performance and employee contributions, including benefits such as medical insurance and stock options[42] - The company repurchased a total of 1,501,000 shares at a price range of HKD 10.58 to HKD 11.10, with a total cost of approximately HKD 16,403,120[44] - The board did not declare an interim dividend for the six months ended June 30, 2022, consistent with the previous year[43] Risk Management - The company has identified and assessed various risks, creating a risk list and prioritizing them based on potential financial losses and operational impacts[54] - The board has reviewed the effectiveness of the risk management and internal control systems and considers them sufficient[54] - The company has established internal audit functions to continuously improve and monitor the effectiveness of risk management systems[54]

Financial Performance - The Group's revenue increased by 57.74%, gross profit margin rose by 10 percentage points, and net profit surged by 197.01% in 2021[7]. - For the year ended 31 December 2021, the Group recorded revenue of approximately RMB15,843,947,000, representing an increase of 57.74% compared to RMB10,044,313,000 in the previous year[21]. - Gross profit margin increased to 32.93% (2020: 22.35%) and operating results margin was 23.01% (2020: 11.04%) during the review year[21]. - The Group recorded profit before taxation of approximately RMB3,244,209,000 (2020: RMB1,016,621,000) and net profit of approximately RMB2,681,545,000 (2020: RMB902,856,000)[21]. - Basic earnings per share was RMB0.98 (2020: RMB0.37) with a recommended final dividend of HK$0.34 per share[21]. Research and Development - R&D expenses amounted to approximately RMB 838,893,000, representing a year-on-year increase of 42.07%, accounting for 5.29% of revenue[10]. - The Group launched 92 new products during the year, including high-end environmentally friendly dispersion resins and high-performance polyvinylidene fluoride resins for lithium-ion batteries[12]. - The Group submitted 93 patent applications and was granted approval for 70 patents, with over 460 valid patents currently held[12]. - The Group had a total of 573 R&D staff dedicated to innovation and technological advancement[12]. Market Demand and Product Segments - The domestic new energy industry demand significantly boosted the market for battery-grade PVDF, establishing the Group as a key supplier[11]. - The demand for PVDF surged by 176.04%, significantly contributing to the Group's revenue growth[27]. - The Group's fluoropolymers segment generated revenue of RMB4,825,266,000 with an operating profit margin of 27.88%[24]. - The organic silicon segment achieved revenue of RMB4,184,131,000 with an operating profit margin of 30.30%[24]. - Revenue from the refrigerants segment was RMB3,337,155,000 with an operating profit margin of 17.41%[24]. Capital Expenditure and Production Capacity - Capital expenditure for the year reached approximately RMB 4,803,248,000, representing an increase of 152.74% from approximately RMB 1,900,497,000 in 2020[13]. - The new 10,000 tons/year PVDF project is expected to be completed and put into operation in October 2022, with total PVDF production capacity projected to reach 25,000 tons/year[15]. - By 2025, the total production capacity of PVDF is planned to reach 55,000 tons/year, and the total production capacity of raw material R142b will reach 100,000 tons/year[15]. - Dongyue Organosilicon's 300,000 tons/year organic silicon monomer and 200,000 tons/year organic silicon downstream deep-processing projects began trial production at the end of 2021, with production capacity expected to more than double[15]. Corporate Governance - The Company has adopted and complied with the Corporate Governance Code during the year ended December 31, 2021, except for a deviation regarding the roles of chairman and CEO[114]. - The Company has established various committees, including a Remuneration Committee, Audit Committee, Nomination Committee, Corporate Governance Committee, and Risk Management Committee, to enhance governance[137]. - The Board believes that the placing will broaden the shareholder base and finance the planned rapid development and expansion of the Group's business and production capacity, which is in the interests of the Company and its shareholders[69]. - The Company emphasizes the importance of maintaining high standards of corporate governance as a key responsibility of the Directors[127]. Shareholder Information - The company reported a final dividend of HKD 0.34 per share for the year ended December 31, 2021, compared to HKD 0.14 in 2020, subject to shareholder approval[56]. - The Group's distributable reserves as of December 31, 2021, amounted to RMB4,567,139,000, with HK$766,254,000 (approximately RMB628,747,000) proposed as the Final Dividend[61]. - The Company placed 145,000,000 new shares and repurchased 1,499,000 ordinary shares, resulting in a total of 2,255,190,455 issued shares as of December 31, 2021[36]. Risk Management - The Company acknowledges its obligations under the Securities and Futures Ordinance and the Listing Rules, ensuring immediate publication of inside information when aware[161]. - The Company will continue to improve and monitor the effectiveness of its risk management and internal control systems[161]. - The Risk Management Committee's discussions included internal control measures and policies, which were reviewed before recommending them to the Board for approval[158]. - The Company has developed risk management manuals to clarify responsibilities in risk management among management, the Board, and committees[160]. Environmental, Social, and Governance (ESG) - The ESG report covers the period from January 1, 2021, to December 31, 2021, with some content extending beyond this timeframe[179]. - The report is prepared in accordance with the Environmental, Social and Governance Reporting Guide of the Hong Kong Stock Exchange[182]. - The company emphasizes stakeholder engagement as a crucial channel for sustainable development, collecting and analyzing stakeholder feedback for continuous improvement[192]. - The focus on environmental compliance includes emission compliance and energy conservation efforts[199].

Financial Performance - In the first half of 2021, the company achieved significant growth in operating performance, driven by technological innovation and market recovery, with a notable increase in sales of fluorosilicone materials[7]. - The company recorded revenue of approximately RMB 6,470,878,000 for the six months ended June 30, 2021, representing a 39.57% increase from RMB 4,636,363,000 in the same period last year[20]. - The company’s net profit for the period was approximately RMB 794,790,000, up from RMB 446,747,000 in the same period of 2020[20]. - The company’s operating profit margin was 16.13%, an increase from 12.17% in the previous year[20]. - The company reported a total profit before tax of RMB 997,895 for the six months ended June 30, 2021, reflecting strong operational performance[96]. - The company reported a total comprehensive income of RMB 705,868 thousand for the period, significantly higher than RMB 248,184 thousand in the same period last year, representing an increase of approximately 184.5%[77]. Revenue Growth by Segment - The fluoropolymer materials division reported external sales of RMB 1,942,387,000, an increase of 28.92% compared to RMB 1,506,705,000 in the same period last year, accounting for 30.02% of total external sales[25]. - The refrigerants division's external sales reached RMB 1,223,303,000, a growth of 17.70% from RMB 1,039,330,000 last year, representing 18.90% of total external sales[27]. - The organic silicon division's external sales increased by 41.97% to RMB 1,610,491,000 from RMB 1,134,350,000 last year, accounting for 24.89% of total external sales[29]. - The division for dichloromethane, PVC, and caustic soda reported external sales of RMB 749,218,000, a 23.98% increase from RMB 604,323,000 last year, but profits decreased by 65.01% to RMB 9,332,000[30]. Research and Development - Research and development expenditure reached RMB 303 million, a year-on-year increase of 51.08%, accounting for 4.68% of total revenue, with 24 new product development projects completed[11]. - A total of 40 patents were granted to the company during the review period, reflecting its commitment to innovation in the fluorosilicone materials sector[11]. - The company has established six laboratories in major cities and countries, enhancing its ability to attract high-end talent and collaborate with academic institutions[11]. Production Capacity and Expansion Plans - The company plans to accelerate the construction of key product projects, including a 20,000-ton PTFE project and a 30,000-ton organic silicon monomer project, aiming for production by the end of the year[9]. - The company aims to double its organic silicon production capacity by the end of the year through ongoing project advancements[9]. - The company plans to expand PVDF production capacity to 55,000 tons and R142b production capacity to 100,000 tons by 2025, focusing on the unique advantages of the R152a-R142b-VDF-PVDF supply chain[14]. Environmental and Safety Initiatives - The company is also focusing on environmental safety projects, including acid recovery and wastewater recycling initiatives[9]. - The company’s safety reserve, required by regulations, amounted to RMB 4,823,000, reflecting compliance with safety regulations in China[84]. Shareholder and Governance Matters - The board did not declare an interim dividend for the six months ended June 30, 2021, consistent with the previous year[44]. - The company has established a Corporate Governance Committee effective from March 21, 2013, to oversee corporate governance matters[52]. - The company has complied with the corporate governance code except for the separation of the roles of Chairman and CEO, which are held by the same individual[58]. Financial Position and Liabilities - As of June 30, 2021, total equity reached RMB 10,886,581,000, a 3.38% increase from December 31, 2020, with cash and bank balances totaling RMB 4,310,707,000[39]. - The group’s total borrowings amounted to RMB 1,999,954,000 as of June 30, 2021, compared to RMB 1,904,550,000 on December 31, 2020, with a negative debt ratio of -26.94%[40]. - The company’s total liabilities as of June 30, 2021, were RMB 2,099,723,000, reflecting a manageable debt level in relation to its equity[82]. Employee and Management Information - The group employed 5,956 staff as of June 30, 2021, an increase from 5,576 employees on December 31, 2020[43]. - The total remuneration for directors and key management personnel for the six months ended June 30, 2021, was RMB 17,006,000, a decrease of 6.9% from RMB 18,274,000 in the same period of 2020[136]. Cash Flow and Investments - The net cash generated from operating activities for the six months ended June 30, 2021, was RMB 1,209,438, an increase of 16.8% compared to RMB 1,035,431 for the same period in 2020[87]. - The net cash used in investing activities was RMB (1,128,644), slightly higher than RMB (1,056,216) for the same period in 2020[87]. - The company’s cash and cash equivalents at the end of the period were RMB 4,310,707, down from RMB 4,746,135 at the end of the same period in 2020[87].