Investment Rating - The report maintains an "Accumulate" rating for the company [5][7]. Core Insights - Overall revenue growth has slowed, while high-end amino acid revenue growth has significantly increased. In 2023, the company's revenue was 28.01 billion yuan, a year-on-year increase of 1.9%, with a decline in growth rate of 25.6 percentage points. The food additives segment saw a revenue increase of 1.5% to 13.50 billion yuan, while the animal nutrition segment's revenue decreased by 7.1% to 8.90 billion yuan. The high-end amino acids segment experienced a remarkable growth of 64.2% to 1.97 billion yuan, with a growth rate increase of 79.4 percentage points [6][7]. Financial Performance Summary - Revenue and Profit Forecasts: - The company is expected to generate revenues of 28.44 billion yuan, 29.89 billion yuan, and 31.12 billion yuan for 2024, 2025, and 2026, respectively, representing year-on-year growth rates of 1.6%, 5.1%, and 4.1% [6][9]. - The forecasted net profit attributable to shareholders is 3.00 billion yuan, 3.33 billion yuan, and 3.70 billion yuan for the same years, with year-on-year changes of -4.7%, +11.2%, and +11.1% [6][9]. - Gross Margin Analysis: - The overall gross profit decreased by 13.4% to 6.25 billion yuan in 2023, with a gross margin of 22.3%, down 3.9 percentage points year-on-year. The gross margins for the food additives, animal nutrition, and other segments decreased to 16.0%, 17.1%, and 13.0%, respectively [7][9]. - Segment Performance: - The high-end amino acids and colloids segments saw gross margin improvements, reaching 39.6% and 59.1%, respectively, due to reduced contributions from lower-margin products in other segments [7][9].

Financial Performance - The Group's revenue increased by 1.9% to approximately RMB 28.0 billion in 2023 compared to 2022, driven by higher contributions from food additives, high-end amino acids, and colloid segments [2]. - Overall gross profit decreased by 13.4% to approximately RMB 6.2 billion in 2023, primarily due to reduced gross profit from food additives, animal nutrition, and other segments [2]. - Profit attributable to shareholders amounted to approximately RMB 3.1 billion, representing a decrease of 18.6% compared to 2022 [2]. - Earnings per share (Basic) was RMB 124.02 cents in 2023, down from RMB 152.34 cents in 2022 [2]. - Return on equity was 18.1% in 2023, compared to 24.9% in 2022 [2]. - The Group's profit before income tax expense for 2023 was RMB 3,850,245, a decrease from RMB 4,860,309 in 2022 [55]. - The total current income tax expense for 2023 was RMB 672,690,000, a decrease of 21.6% from RMB 858,579,000 in 2022 [49]. - Basic earnings per share profit attributable to shareholders was RMB 3,144,124,000 in 2023, down from RMB 3,861,078,000 in 2022, indicating a decrease of about 18.6% [63]. - Diluted earnings per share attributable to shareholders decreased to RMB 123.99 cents in 2023 from RMB 152.30 cents in 2022, representing a decline of approximately 18.5% [61]. Dividends - The Board proposed final dividends of HK 35.0 cents per share, resulting in a full-year dividend of HK 58.0 cents per share, with a payout ratio of 42.5% [2]. - The interim dividend paid in 2023 was RMB 534,954,000, a decrease from RMB 810,067,000 in 2022, reflecting a reduction of approximately 33.9% [69]. - The final dividends paid in 2023 amounted to RMB 748,943,000, compared to RMB 253,301,000 in 2022, representing an increase of approximately 195.5% [69]. - The proposed final dividend for 2024 is RMB 504,494,000, down from RMB 643,789,000 in 2022, which is a decrease of about 21.6% [70]. - The special final dividend proposed for 2024 is RMB 160,521,000, compared to RMB 91,018,000 in 2022, representing an increase of approximately 76.5% [70]. - The total dividends for 2023 were RMB 1,337,558,000, down from RMB 1,544,874,000 in 2022, indicating a decrease of approximately 13.4% [69]. Assets and Liabilities - Total assets increased to RMB 32.6 billion in 2023, up from RMB 26.4 billion in 2022 [9]. - Non-current assets rose to RMB 12.8 billion in 2023, compared to RMB 10.5 billion in 2022 [9]. - Current assets totaled RMB 19.7 billion in 2023, an increase from RMB 15.9 billion in 2022 [9]. - Total liabilities increased to RMB 15,236,673, up 39.5% from RMB 10,895,000 in 2022 [10]. - Current liabilities rose to RMB 14,044,560, a 49.5% increase compared to RMB 9,387,995 in 2022 [10]. - Non-current liabilities decreased to RMB 1,192,113, down 20.9% from RMB 1,507,005 in 2022 [10]. - Total equity and liabilities reached RMB 32,560,887, up 23.4% from RMB 26,388,624 in 2022 [10]. Revenue Breakdown - Total revenue for 2023 reached RMB 28,006,875,000, an increase from RMB 27,474,639,000 in 2022, representing a growth of approximately 1.9% [29]. - Revenue from external customers in the PRC amounted to RMB 20,482,261,000 in 2023, up from RMB 19,517,420,000 in 2022, indicating a growth of about 4.9% [28]. - Revenue from external customers overseas decreased to RMB 7,524,614,000 in 2023 from RMB 7,957,219,000 in 2022, reflecting a decline of approximately 5.4% [28]. - The food additives segment generated revenue of RMB 13,495,002,000 in 2023, compared to RMB 13,300,548,000 in 2022, marking an increase of about 1.5% [26]. - The animal nutrition segment reported revenue of RMB 8,901,002,000 in 2023, down from RMB 9,581,198,000 in 2022, a decrease of approximately 7.1% [26]. - High-end amino acid products revenue increased significantly to RMB 1,972,812,000 in 2023 from RMB 1,201,208,000 in 2022, representing a growth of about 64% [26]. Cost and Expenses - Gross profit for the group in 2023 was RMB 6,247,385,000, compared to RMB 7,212,467,000 in 2022, indicating a decline of approximately 13.4% [27]. - Selling and marketing expenses increased by approximately RMB 47.6 million, or 2.7%, in the Year [145]. - Administrative expenses rose by approximately RMB 148.5 million, or 14.1%, due to increased employee benefits and impairment charges [146]. Cash Flow and Financing - The net cash inflow from operating activities for the year was approximately RMB 1,704.9 million, a decrease of 52.6% compared to RMB 3,600.1 million in 2022 [157]. - The Group's cash and bank balances reached approximately RMB 10,880.2 million as of December 31, 2023, up from RMB 7,639.5 million in 2022, representing an increase of 42.9% [157]. - The Group's total bank borrowings amounted to approximately RMB 9,724.5 million, an increase of 63.1% from RMB 5,953.1 million in 2022 [157]. - The weighted average effective interest rate on borrowings decreased to 2.10% in 2023 from 2.81% in 2022 [88]. Market and Economic Conditions - The price of 98% lysine was RMB9,410 per tonne in 2023, representing a drop of 13.3% compared to 2022 [114]. - The price of 70% lysine was RMB5,810 per tonne in 2023, reflecting a decrease of 11.2% compared to 2022 [114]. - China's corn production in 2023 was approximately 288.8 million tonnes, an increase of 4.2% from 2022 [105]. - The forecast for global economic growth in 2024 is projected at 3.1%, with China targeting around 5% growth [163]. Strategic Initiatives - The Group aims to confirm site locations in the U.S. and Eastern Europe in 2024 as part of its internationalization plan [165]. - The Group plans to further enhance its production technology and improve sales and marketing strategies [165].

Financial Performance - Fufeng Group reported a turnover of RMB 28,000 million for the first half of 2023, a significant increase compared to RMB 24,000 million in the same period of 2022, representing a growth of approximately 16.67%[4] - The profit attributable to shareholders for the first half of 2023 was RMB 4,000 million, up from RMB 3,500 million in the first half of 2022, indicating a growth of about 14.29%[4] - The Group's revenue increased by 5.0% to approximately RMB13,580.1 million in the Period, driven by higher contributions from food additives, colloid, and high-end amino acid segments[8] - Overall gross profit decreased by 17.4% to approximately RMB2,956.8 million, primarily due to declines in the gross profit of food additives and animal nutrition segments[8] - Profit attributable to shareholders decreased by 24.1% to approximately RMB1,537.9 million in the Period[8] - The company's revenue for the six months ended June 30, 2023, was RMB 13,580,093, an increase from RMB 12,930,797 in the same period of 2022, reflecting a growth of approximately 5.02%[72] - Gross profit for the same period was RMB 2,956,760, down from RMB 3,580,620 in 2022, indicating a decrease of approximately 17.38%[72] - Operating profit decreased to RMB 1,731,961 from RMB 2,721,900 year-on-year, representing a decline of approximately 36.5%[72] - Profit for the half-year decreased to RMB 1,537,904, down 24.1% from RMB 2,026,006 in 2022[74] - Total comprehensive income attributable to shareholders for the half-year was RMB 1,535,044, a decline of 24.2% compared to RMB 2,026,006 in 2022[74] Segment Performance - Revenue from the food additives segment increased by 8.1% to approximately RMB6,558.5 million, mainly due to stable contributions from MSG and increased revenue from starch sweeteners[15] - Gross profit from the food additives segment decreased by 23.5% to approximately RMB971.8 million, with a gross profit margin of 14.8%, down 6.1 percentage points from the Corresponding Period[15] - Revenue from the animal nutrition segment dropped by 14.0% to approximately RMB4,090.7 million, attributed to increased competition and oversupply in the market[18] - Gross profit from the animal nutrition segment decreased by 57.5% to approximately RMB594.5 million, with a gross profit margin of 14.5%, down 14.9 percentage points from the Corresponding Period[19] - Revenue of the high-end amino acid segment increased by 54.7% to approximately RMB827.4 million, driven by increased sales volume[22] - Gross profit of the high-end amino acid segment rose by 40.2% to approximately RMB298.8 million, with a gross profit margin of 36.1%, down 3.8 percentage points[22] - Colloid segment revenue increased by 73.6% to approximately RMB1,632.3 million, primarily due to higher sales volume and ASP of xanthan gum, which was RMB40,864 per tonne, up 44.2%[24] - Gross profit of the colloid segment surged by 109.8% to approximately RMB997.4 million, with a gross profit margin of 61.1%, up 10.5 percentage points[24] Market Conditions - The average selling price (ASP) of MSG in the first quarter of 2023 was approximately RMB 9,435 per tonne, while it dropped to RMB 8,667 per tonne by the end of the second quarter due to increased supply and weak demand[5] - The ASP of threonine and lysine increased in the second quarter of 2023 due to production inspections and maintenance by some suppliers, which limited market supply[6] - China's GDP growth was recorded at 4.5% in Q1 2023 and 6.3% in Q2 2023, averaging 5.5% for the first half of the year, although it was lower than expected[5] - The International Monetary Fund forecasts China's GDP growth at 5.2% for 2023, reflecting ongoing economic recovery challenges[5] - Corn prices fluctuated between RMB 2,636 to RMB 2,816 per tonne during the period, with supply at approximately 188 million tonnes and demand at 116 million tonnes[5] - Coal supply in China increased by 4.4% to approximately 2.3 billion tonnes, while coal imports surged by 93% to around 222 million tonnes during the same period[5] Financial Position and Liquidity - As of June 30, 2023, the Group's total assets amounted to approximately RMB26,888.1 million, an increase from RMB26,388.6 million as of December 31, 2022[38] - The total debts of the Group were approximately RMB5,971.8 million as of June 30, 2023, down from RMB6,026.7 million as of December 31, 2022, resulting in a gearing ratio of approximately 22.2%[38] - The Group had a net cash inflow of approximately RMB1,332.0 million from operating activities during the Period, compared to RMB1,149.7 million in the corresponding period[37] - The Group's net unrestricted cash after short-term bank borrowings was approximately RMB1,934.3 million as of June 30, 2023, up from RMB1,639.5 million as of December 31, 2022[37] - The Group's total cash and bank balances were approximately RMB7,433.2 million as of June 30, 2023, down from RMB7,639.5 million as of December 31, 2022[37] - The Group maintained a healthy liquidity position throughout the Period, supported by cash generated from operations and bank borrowings[37] - The Group's current ratio was 1.79 times, an increase from 1.69 times as of December 31, 2022[37] Investments and Expansion Plans - The Group plans to expand MSG capacity in China by adding 400,000 tonnes at the Hulunbeier Base, expected to launch in Q4 2023[45] - The Group is conducting feasibility studies for establishing production bases in the U.S. and Europe despite delays in the U.S. project[45] - The Group has established three regional marketing centers in the U.S., Netherlands, and Vietnam to serve overseas customers directly[45] Employee and Governance - As of June 30, 2023, the Group employed approximately 16,500 employees[48] - The annual remuneration for Executive Directors was increased effective April 1, 2023, with Mr. Li Xuechun receiving RMB1,428,000[51] - The company has complied with the Corporate Governance Code during the reporting period, with all directors attending the annual general meeting except one[54] Financial Risks and Management - Financial risks faced by the Group include market risk, credit risk, and liquidity risk, with no material changes in risk management policies since the end of 2022[103] - Credit risk is managed on a Group basis, with bank deposits held in reputable financial institutions considered to have low credit risk[105] - The Group's activities expose it to various financial risks, including foreign exchange risk and interest rate risk[107] Trade Receivables and Impairment - The gross carrying amount of trade receivables as of June 30, 2023, was RMB 1,067,800,000, compared to RMB 1,094,634,000 as of December 31, 2022[116] - The provision for impairment loss allowances for trade receivables was RMB 33,637,000 for the six months ended June 30, 2023[119] - The expected loss rates for trade receivables were 4.09% for 3 months, 29.14% for 3 to 12 months, and 99.12% for over 12 months as of June 30, 2023[116] - The opening loss allowance for trade receivables was RMB 50,000,000 as of January 1, 2022, and remained unchanged at RMB 50,000,000 as of December 31, 2022, and June 30, 2023[125] Accounting Policies and Standards - The Group has adopted new accounting standards effective from January 1, 2023, including HKFRS 17 and amendments to HKAS 12, impacting deferred tax recognition[90] - The Group's interim financial statements for the six months ended June 30, 2023, reflect significant accounting policies and amendments adopted, including deferred tax assets and liabilities recognition[94] - The cumulative effect of recognizing adjustments as of December 31, 2022, was not material, with no adjustments made to beginning retained earnings[95]

Financial Performance - The Group's revenue increased by 5.0% to approximately RMB 13,580.1 million for the six months ended June 30, 2023, compared to the corresponding period, driven by higher contributions from food additives, colloid, and high-end amino acid segments[3]. - Overall gross profit decreased by 17.4% to approximately RMB 2,956.8 million during the same period, primarily due to declines in the gross profit of food additives and animal nutrition segments[3]. - Profit attributable to shareholders decreased by 24.1% to approximately RMB 1,537.9 million for the period[3]. - Basic and diluted earnings per share were RMB 60.70 cents and RMB 60.68 cents, respectively, compared to RMB 79.96 cents for the corresponding period[3]. - Return on equity for the period was 18.9%, down from 28.0% in the corresponding period[3]. - Operating profit for the period was RMB 1,731.9 million, a decrease from RMB 2,721.9 million in the previous period[7]. - Finance income increased to RMB 135.3 million, while finance costs decreased to RMB 109.7 million, resulting in net finance income of RMB 25.6 million[7]. Dividends - An interim dividend of HK 23.0 cents per share was declared, with a dividend payout ratio of 35%[3]. - The interim dividend proposed on August 30, 2023, is HKD583,392,000 (equivalent to RMB534,953,000), representing HKD23.0 cents per share, a decrease from HKD32.0 cents per share in the corresponding period[62]. Assets and Liabilities - Total assets as of June 30, 2023, amounted to RMB 26,888.1 million, compared to RMB 26,388.6 million at the end of 2022[11]. - Total liabilities decreased from RMB 10,895,000,000 as of December 31, 2022, to RMB 10,593,691,000 as of June 30, 2023, representing a reduction of approximately 2.8%[12]. - Total equity increased from RMB 15,493,624,000 as of December 31, 2022, to RMB 16,294,399,000 as of June 30, 2023, reflecting a growth of about 5.2%[12]. - Current liabilities decreased from RMB 9,387,995,000 to RMB 8,800,393,000, a decline of approximately 6.2%[12]. - Non-current liabilities increased from RMB 1,507,005,000 to RMB 1,793,298,000, an increase of about 18.9%[12]. Revenue Segmentation - Revenue from the food additives segment increased by 8.1% to approximately RMB 6,558.5 million, mainly due to stable contributions from MSG and increased revenue from starch sweeteners[73]. - Revenue from the animal nutrition segment dropped by 14.0% to approximately RMB 4,090.7 million, influenced by previous high demand during supply chain disruptions[75]. - Revenue from threonine dropped by 36.0% to approximately RMB 884.6 million, with a decrease in average selling price (ASP) by 20.2%[80]. - Revenue from lysine decreased by 11.2% to approximately RMB 907.6 million, despite a sales volume increase of approximately 16.5%[80]. - Revenue of the high-end amino acid segment increased by 54.7% to approximately RMB 827.4 million, driven by increased sales volume[81]. - Revenue of the colloid segment increased by 73.6% to approximately RMB 1,632.3 million, primarily due to increased revenue from xanthan gum[84]. Cost and Profit Margins - Gross profit from the food additives segment decreased by 23.5% to approximately RMB 971.8 million, with a gross profit margin of 14.8%, down 6.1 percentage points[73]. - Gross profit from the animal nutrition segment decreased by 57.5% to approximately RMB 594.5 million, with a gross profit margin of 14.5%, down 14.9 percentage points[76]. - Gross profit of the high-end amino acid segment rose by 40.2% to approximately RMB 298.8 million, with a gross profit margin of 36.1%, a decrease of 3.8 percentage points[81]. - Gross profit of the colloid segment surged by 109.8% to approximately RMB 997.4 million, with a gross profit margin of 61.1%, an increase of 10.5 percentage points[85]. - Gross profit from other products fell by 58.0% to approximately RMB 94.2 million, with a gross profit margin of 20.0%, a decrease of 15.2 percentage points[86]. Cash Flow and Financing - The Group reported a net cash inflow from operating activities of approximately RMB 1,332.0 million, compared to RMB 1,149.7 million in the corresponding period[107]. - As of June 30, 2023, the Group's net unrestricted cash after short-term bank borrowings was approximately RMB 1,934.3 million, an increase from RMB 1,639.5 million at the end of 2022[107]. - The Group's bank borrowings included RMB 948,000 in unsecured loans and RMB 880,000 in secured loans as of June 30, 2023[54]. - The Group's total current income tax in the PRC decreased to RMB 205,691,000 from RMB 332,980,000 in the previous year, reflecting a reduction in taxable profits[42]. Market Conditions - China's GDP growth was recorded at 4.5% in Q1 2023 and 6.3% in Q2 2023, averaging 5.5% for the first half of the year, lower than the expected 5.2% for 2023[63]. - Corn prices fluctuated between RMB2,636 to RMB2,816 per tonne, with supply and demand in China at approximately 188 million tonnes and 116 million tonnes respectively[63]. - Coal supply in China increased by 4.4% to approximately 2.3 billion tonnes, while coal imports surged by 93% to approximately 222 million tonnes[63]. Corporate Governance - The Company has complied with the Corporate Governance Code except for certain exceptions noted during the reporting period[118]. - The Company has adopted the Model Code for securities transactions by Directors and confirmed compliance during the reporting period[120]. - The Group's unaudited interim condensed consolidated financial statements were reviewed by the Audit Committee[118].

Stock Option Plan - The company granted 2,000,000 stock options under the new stock option plan, representing approximately 0.08% of the total issued shares as of December 31, 2022[2]. - The total number of stock options available for grant under the new stock option plan increased from 247,473,403 shares on January 1, 2022, to 250,473,403 shares by December 31, 2022[4]. - The plan's authorization limit allows the company to issue up to 254,673,403 shares, equivalent to 10% of the total issued shares at the time of the plan's adoption[3]. - No stock options were cancelled during the fiscal year ending December 31, 2022[5]. - The exercise price for the stock options granted on July 4, 2022, was set at HKD 4.96[6]. - The vesting schedule for the stock options allows for a maximum of 25% to be exercisable starting from July 4, 2024, with full vesting by July 4, 2027[3]. - The closing price of the shares on the day prior to the grant of the stock options was HKD 5.03[3]. - The total number of stock options granted and unexercised as of December 31, 2022, was 4,200,000[6]. - The stock option plan was initially adopted at the annual general meeting held on May 12, 2017[4]. - The company aims to align the interests of its key employees with its long-term performance through the stock option plan[3]. - The stock option plan post-IPO has a vesting schedule of up to 5 years, with a maximum of 25% vesting per tranche[7]. - The first tranche vests after the second anniversary of the grant date, with subsequent tranches vesting on the third, fourth, and fifth anniversaries[7].

Financial Performance - The Group achieved a revenue increase of 27.6% to approximately RMB 27.5 billion and a net profit increase of 201.5% to RMB 3.9 billion in 2022[4]. - Gross profit margin improved by 8.2 percentage points to 26.3%[4]. - Profit attributable to shareholders surged by 201.5% to approximately RMB 3.86 billion in 2022, up from RMB 1.28 billion in 2021[18]. - Revenue for the year ended December 31, 2022, was RMB 27,474,639, an increase of 27.5% from RMB 21,539,841 in 2021[178]. - Gross profit for 2022 was RMB 7,212,467, representing a gross margin of 26.2%, compared to RMB 3,905,276 in 2021[178]. - Operating profit for 2022 was RMB 5,250,746, a significant increase from RMB 1,580,357 in 2021[179]. - The company reported a profit for the year of RMB 3,861,078, compared to a loss of RMB 1,280,640 in the previous year[192]. Revenue Breakdown - The Group's key business segments, including food additives, animal nutrition, and colloid, saw significant revenue increases during the year[4]. - Revenue from the food additives segment was approximately RMB 13,300.5 million, an increase of 28.0% compared to 2021[28]. - Revenue from the animal nutrition segment was approximately RMB 9,581.2 million, a 25.7% increase from 2021[28]. - Revenue from the colloid segment was approximately RMB 2,238.7 million, an increase of 114.7% compared to 2021[30]. - Revenue from threonine was approximately RMB 2,469.6 million, a 3.1% increase from 2021[29]. - Revenue from the high-end amino acid segment was approximately RMB 1,201.2 million, a decrease of 15.1% compared to 2021[29]. Cost and Expenses - Selling and marketing expenses increased by 25.4%, while administrative expenses rose by 10.9% compared to 2021[21]. - Finance costs increased significantly by 183.7% to approximately RMB 489.9 million in 2022[21]. - Corn kernels accounted for approximately 56.3% of total production costs, a decrease of 2.8 percentage points from 2021[36]. - The total cost of coal increased by 35.4% during the year, accounting for 17.2% of total production costs[37]. Dividends and Shareholder Returns - The Board proposed a final dividend of HK29.0 cents and a special final dividend of HK4.1 cents per share, resulting in a full-year dividend of HK69.7 cents per share with a payout ratio of 40%[4]. - The total of paid interim dividend and proposed final and special dividends is HK69.7 cents per share, compared to HK21.5 cents in 2021[44]. - Dividends paid to shareholders increased significantly to RMB 1,079,216 in 2022 from RMB 292,653 in 2021, reflecting a substantial rise in shareholder returns[197]. Cash Flow and Liquidity - The Group achieved a net cash inflow of approximately RMB 3,600.1 million from operating activities in 2022, up from RMB 2,774.4 million in 2021[47]. - As of December 31, 2022, the Group's total cash and bank balances increased to approximately RMB 7,639.5 million, compared to RMB 4,054.8 million in 2021[47]. - The company reported a net increase in cash and cash equivalents of RMB 92,410 for the year, with total cash and cash equivalents at the end of the year amounting to RMB 7,008,116[197]. Strategic Initiatives - The Group plans to establish three strategic regional sales offices in America, Europe, and Southeast Asia to enhance internationalization efforts[4]. - The company aims to maintain high-quality internationalization and improve production capacity to consolidate its leading market position[54]. - The company is revamping a plant acquired in 2020 to produce chemicals for its products, aiming to reduce production costs[54]. ESG and Sustainability - The Group's ESG strategy was further strengthened under the leadership of the ESG Committee, emphasizing sustainable development[4]. - The emission concentration of greenhouse gases was 323.87 tCO2 e/million RMB revenue, representing a decrease of 8.16% compared to 2021[71]. - Total sewage discharge was 9,845,500 tonnes, representing a decrease of 1.28% compared to 2021[71]. - Fufeng Group received the "Green Deposit Scheme" award from Mitsubishi UFJ Financial Group, Inc. (MUFG) in 2022[71]. Governance and Compliance - The Board is responsible for promoting the Group's success through leadership and supervision[77]. - The roles of the Chairman and the Chief Executive Officer are clearly separated to ensure effective governance[78]. - The Company has arranged liability insurance for its Directors and officers, with no claims made during the year[96]. - The risk management and internal control system of the Group is considered to be effectively operated by the Board[97]. Employee Engagement and Training - As of December 31, 2022, the company employed approximately 15,100 employees[58]. - Total number of employees is 15,099, with 90.7% (13,700) having received training[72]. - Employees accumulated a total of 550,866 training hours[72]. Market Conditions and Economic Outlook - China's GDP growth rate was reported at 3.0% year-on-year in 2022, amidst global economic recovery challenges[9]. - Economic growth in Mainland China is projected to be approximately 5.0% for 2023, an increase from 3.0% in 2022[53]. - The International Monetary Fund (IMF) forecasts global economic growth to be 2.9% for 2023, down from 3.2% in 2022[53].

Financial Performance - The Group's revenue increased by 27.6% to approximately RMB 27.5 billion in 2022 compared to 2021, driven by higher contributions from food additives, animal nutrition, and colloid segments [2]. - Overall gross profit rose by 84.7% to approximately RMB 7.2 billion in 2022, primarily due to increases in gross profit from food additives, animal nutrition, and colloid segments [2]. - Profit attributable to shareholders amounted to approximately RMB 3.9 billion, representing an increase of 201.5% compared to 2021 [2]. - Basic earnings per share was RMB 152.34 cents, up from RMB 50.55 cents in 2021 [4]. - Return on equity improved to 24.9% in 2022, compared to 10.1% in 2021 [2]. - Total revenue for 2022 reached RMB 27,474,639,000, a 27.5% increase from RMB 21,539,841,000 in 2021 [44]. - Gross profit for the same period was approximately RMB 7,212,467,000, representing an increase of 84.7% from RMB 3,905,300,000 in 2021 [129]. - Profit attributable to shareholders increased by 201.5% to approximately RMB 3,861,078,000 in 2022 compared to RMB 1,280,640,000 in 2021 [129]. Dividends - The Board proposed a final dividend of HK 29.0 cents and a special final dividend of HK 4.1 cents per share, resulting in a full-year dividend of HK 69.7 cents per share, with a payout ratio of 40% [2]. - Proposed final dividend for 2023 is HKD 735,422,000 (equivalent to RMB 643,789,000), representing HK29.0 cents (RMB 25.4 cents) per share, up from HK11.7 cents (RMB 9.5 cents) in 2021 [77]. - The total dividends paid in 2022 reached 1,554,874 RMB'000, a substantial increase from 447,477 RMB'000 in 2021 [76]. Assets and Liabilities - Total assets increased to RMB 26.39 billion in 2022 from RMB 21.51 billion in 2021 [11]. - Total liabilities increased to RMB 10,895,000, up 23.9% from RMB 8,833,052 in the previous year [12]. - Current liabilities rose to RMB 9,387,995, a 74.5% increase from RMB 5,373,665 in 2021 [12]. - Non-current liabilities decreased significantly to RMB 1,507,005, down 56.5% from RMB 3,459,387 in 2021 [12]. - Total equity and liabilities reached RMB 26,388,624, an increase of 22.5% from RMB 21,510,806 in the previous year [12]. - Cash and cash equivalents rose to RMB 7.01 billion in 2022, compared to RMB 3.54 billion in 2021 [11]. Segment Performance - The Group operates through five segments: food additives, animal nutrition, high-end amino acids, colloid, and other products, with performance assessed based on gross profit [39]. - Revenue from food additives segment was RMB 13,300,548,000, up 28.9% from RMB 10,388,668,000 in 2021 [44]. - Animal nutrition segment revenue increased to RMB 9,581,198,000, a 25.7% rise from RMB 7,619,865,000 in 2021 [44]. - The colloid segment's revenue was approximately RMB 2,238.7 million, a significant increase of 114.7% from 2021, driven by higher sales volume and ASP of xanthan gum, which reached RMB 31,421 per tonne, up 65.6% [145]. - The high-end amino acid segment reported revenue of approximately RMB 1,201.2 million, a decrease of 15.1% from 2021, with gross profit declining by 34.6% to approximately RMB 384.2 million [144]. Costs and Expenses - Selling and marketing expenses increased by 25.4% to support growth initiatives [131]. - Finance costs surged by 183.7% to approximately RMB 489.9 million in 2022 compared to RMB 172.0 million in 2021 [132]. - Staff costs increased by approximately RMB 315.5 million or 28.1%, reaching approximately RMB 1,436.5 million in the Year [170]. Cash Flow and Financing - As of December 31, 2022, the Group's net cash inflow from operating activities was approximately RMB 3,600.1 million, an increase from RMB 2,774.4 million in 2021 [178]. - The total bank borrowings of the Group amounted to approximately RMB 5,953.1 million as of December 31, 2022, up from RMB 4,227.0 million in 2021 [179]. - The Group obtained a syndicated loan of up to $400,000,000 with a term of 36 months and an interest rate of 1.80% plus LIBOR [177]. Economic Environment - The overall economic environment in China showed a GDP growth rate of 3.0% in 2022, with uncertainties due to the COVID pandemic and geopolitical conflicts [117]. - The International Monetary Fund (IMF) forecasts global economic growth at 2.9% for 2023, down from 3.2% in 2022, while China's economic growth is expected to be approximately 5.0% in 2023, up from 3.0% in 2022 [187][190]. Corporate Governance and Compliance - The company adheres to the corporate governance code as outlined in the Listing Rules, with compliance noted for the year 2022 [197]. - The company confirmed that there is no use of forced labor in its production processes [197]. Future Outlook - The Group plans to continue its "Dual High-quality Objectives" strategy, focusing on high-quality internationalization and maintaining operational excellence in existing production capacity [191]. - The Group aims to establish three regional marketing centers in America, Europe, and Southeast Asia to better serve overseas customers [191].