Investment Rating - The report maintains a "Buy" rating for the company with a target price of HKD 29.73, which is equivalent to 10.5 times the forecasted earnings per share for 2024 [4][5]. Core Insights - Despite intense industry competition, the company is expected to outperform the industry due to its stable pricing strategy, continuous product upgrades, and increased penetration of high-end products [4][5]. - The company reported a revenue growth of 5.1% to HKD 23.77 billion in 2023, driven by a 12.2% increase in tissue paper sales and a 17.7% growth in e-commerce channels [3][4]. - The gross profit margin decreased by 0.3 percentage points to 33.7% due to rising raw material costs and increased promotional expenses [3][4]. Summary by Sections Financial Performance - In 2023, the company achieved a net profit of HKD 2.80 billion, representing a 45.5% increase compared to the previous year [5][6]. - The operating profit rose by 38.6% to HKD 3.98 billion, with a decrease in operating expense ratio by 0.3 percentage points to 21.3% [3][5]. - The company maintained a robust balance sheet with net cash of approximately HKD 5.39 billion, an increase of HKD 0.86 billion from the previous year [3][4]. Business Segments - Tissue paper business grew by 12.2% to HKD 13.75 billion, benefiting from a nationwide sales network and strong growth in high-end products [4][5]. - Sanitary napkin sales increased by 0.4% to HKD 6.18 billion, with gross margin improving from 61.8% in the first half to 66% in the second half [4][5]. - The adult diaper segment saw a 4.3% growth to HKD 1.25 billion, with gross margin rising from 36% to 40% due to lower raw material prices [4][5]. Future Outlook - For 2024, the company anticipates low single-digit revenue growth in tissue paper, sanitary napkins, and adult diapers, despite ongoing competitive pressures in the personal care industry [4][5]. - The report highlights that the company’s stable pricing strategy and product upgrades are expected to help it outperform the industry amid challenging market conditions [4][5].

Investment Rating - The report maintains an "Outperform" rating for the company [4][5] Core Views - The company's core business shows stable growth, driven by high-end product development and optimization of product mix, with a projected revenue increase of approximately 8.0% year-on-year for 2023 [4][5] - The company achieved a total revenue of 23.77 billion RMB in 2023, representing a year-on-year growth of 5.09%, and a net profit of 2.80 billion RMB, which is an increase of 45.51% year-on-year [4][5][6] - The expansion of e-commerce and new retail channels has been significant, with sales from these channels exceeding 7.16 billion RMB, accounting for about 30.1% of total revenue, and growing approximately 17.7% year-on-year [4][5] Financial Performance - The company’s three core business segments (tissue paper, sanitary napkins, and diapers) achieved stable revenue growth in 2023, with tissue paper sales increasing by 12.25% year-on-year to 13.75 billion RMB, and diaper sales growing by 4.33% year-on-year to 1.25 billion RMB [4][6][7] - The sanitary napkin segment faced intense market competition but still managed to maintain a slight revenue increase of 0.36% year-on-year, totaling 6.18 billion RMB [4][6][7] - The company’s gross profit margin for 2023 was 33.70%, a slight decrease of 0.30 percentage points year-on-year, while the net profit margin improved to 11.26%, an increase of 2.65 percentage points year-on-year [7][10] Earnings Forecast - The company is expected to achieve net profits of 2.94 billion RMB, 3.10 billion RMB, and 3.20 billion RMB for the years 2024, 2025, and 2026, respectively, with growth rates of 5.2%, 5.4%, and 3.2% [5][6][10] - The projected price-to-earnings (PE) ratio for 2024 is estimated to be between 13 to 14 times, suggesting a reasonable value range of 32.94 to 35.48 RMB per share [5][9]

[Corporate Information](index=4&type=section&id=Corporate%20Information) The report lists key corporate information including executive directors, independent non-executive directors, company secretary, legal advisors, auditors (PwC), and principal bankers - The report lists key corporate information such as the company's executive directors, independent non-executive directors, company secretary, legal advisors, auditors (PricewaterhouseCoopers), and principal bankers[3](index=3&type=chunk)[4](index=4&type=chunk) [Financial Highlights](index=6&type=section&id=Financial%20Highlights) This section presents key financial performance indicators and revenue breakdown by product category for the year 2023 2023 Key Financial Indicators | Indicator | 2023 | 2022 | Trend | | :--- | :--- | :--- | :--- | | Basic Earnings Per Share (RMB) | 2.415 | 1.657 | ▲ 45.7% Growth | | Net Profit Margin (%) | 11.8 | 8.5 | ▲ Improvement | | Debt Ratio (%) | 69.8 | 87.2 | ▼ Improvement | | Accounts Receivable Turnover Period (Days) | 42 | 48 | ▼ Improvement | 2023 Revenue Analysis by Product Category | Product Category | 2023 Revenue Share | 2022 Revenue Share | | :--- | :--- | :--- | | Tissue Products | 57.8% | 54.2% | | Sanitary Napkin Products | 26.0% | 27.2% | | Disposable Diaper Products | 5.3% | 5.3% | | Other | 10.9% | 13.3% | [Five-Year Financial Summary](index=8&type=section&id=Five-Year%20Financial%20Summary) This section provides a consolidated five-year overview of the company's performance, assets, and liabilities Five-Year Consolidated Performance Summary (RMB Thousand) | Indicator | 2023 | 2022 | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 23,767,936 | 22,615,878 | 20,790,144 | 22,374,001 | 22,492,845 | | Profit Attributable to Equity Holders of the Company | 2,800,533 | 1,925,249 | 3,273,601 | 4,594,815 | 3,907,723 | | Basic Earnings Per Share (RMB) | 2.415 | 1.657 | 2.786 | 3.864 | 3.285 | Five-Year Consolidated Assets and Liabilities Summary (RMB Thousand) | Indicator | 2023 | 2022 | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | :--- | :--- | | Total Assets | 40,215,901 | 42,337,242 | 42,292,748 | 44,440,925 | 43,238,775 | | Total Liabilities | 19,586,050 | 22,561,505 | 23,012,298 | 24,779,451 | 25,086,897 | | Net Assets Attributable to Equity Holders of the Company | 20,395,840 | 19,523,607 | 19,037,040 | 19,411,390 | 17,872,941 | [Company Product Series](index=10&type=section&id=Company%20Product%20Series) The company owns multiple well-known brands covering personal and household hygiene products, categorized by product type - The company owns several well-known brands covering personal and household hygiene product markets, with main brands including: - **Sanitary Napkins**: “Space 7”, “An Er Le” - **Diapers**: “An Er Le”, “Q • MO” (baby), “An Er Kang” (adult) - **Tissue Paper**: “Hearttex”, “Pinno”, “Bamboo π”, “Yueshi”, “Jialaina” - **Other**: “Convenient Care” (first aid products), “Convenient Pass” (enema solution)[11](index=11&type=chunk)[12](index=12&type=chunk)[13](index=13&type=chunk) [Chairman's Statement](index=12&type=section&id=Chairman's%20Statement) The Chairman's Statement reviews the 2023 operating environment, highlighting significant gross profit margin improvement through strategic focus on profitability, rational promotion, and product premiumization despite global economic challenges 2023 Performance Overview | Indicator | 2023 Amount | 2022 Amount | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Revenue | Approx. RMB 23.768 Billion | Approx. RMB 22.616 Billion | ▲ 5.1% | | Profit Attributable to Equity Holders of the Company | Approx. RMB 2.801 Billion | Approx. RMB 1.925 Billion | ▲ 45.5% | | Basic Earnings Per Share | Approx. RMB 2.415 | Approx. RMB 1.657 | ▲ 45.7% | | Full-Year Dividend | RMB 1.40 per share | RMB 1.40 per share | - Flat | - The group's three core businesses (tissue, sanitary napkins, diapers) saw revenue grow by approximately **8.0%** year-on-year, demonstrating strong growth momentum[16](index=16&type=chunk)[18](index=18&type=chunk) - Sales proportion from e-commerce and new retail channels increased to **30.1%**, becoming a significant growth engine[17](index=17&type=chunk)[19](index=19&type=chunk) - Looking ahead, the group will deepen its three core strategies: "focus on core business", "brand leadership", and "long-termism", actively promoting product premiumization and strengthening new retail channel penetration to consolidate market leadership[25](index=25&type=chunk)[29](index=29&type=chunk) [Chief Executive Officer's Report](index=16&type=section&id=Chief%20Executive%20Officer's%20Report) The CEO's report details the group's operational performance, business segment reviews, channel strategies, financial health, human resources, and future outlook [Business Review](index=16&type=section&id=Business%20Review) In 2023, the group's overall revenue increased by 5.1% year-on-year, with core businesses growing by 8.0%, and gross profit margin significantly improved in H2 due to lower pulp costs and product upgrades, leading to a 45.5% surge in profit attributable to equity holders 2023 Financial Performance Core Data | Indicator | 2023 | 2022 | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Overall Revenue | Approx. RMB 23.768 Billion | Approx. RMB 22.616 Billion | ▲ 5.1% | | Gross Profit | Approx. RMB 8.011 Billion | Approx. RMB 7.689 Billion | ▲ 4.2% | | Overall Gross Profit Margin | Approx. 33.7% | Approx. 34.0% | ▼ 0.3 percentage points | | H2 Gross Profit Margin | 36.5% | 32.8% | ▲ 3.7 percentage points | | Operating Profit | Approx. RMB 3.978 Billion | Approx. RMB 2.869 Billion | ▲ 38.6% | | Profit Attributable to Equity Holders of the Company | Approx. RMB 2.801 Billion | Approx. RMB 1.925 Billion | ▲ 45.5% | - E-commerce and new retail channel sales increased by approximately **17.7%** year-on-year, raising their proportion of overall sales from **26.9%** to **30.1%**[35](index=35&type=chunk)[36](index=36&type=chunk) - After deducting an operating exchange loss of approximately **RMB 150 million** after tax, profit attributable to equity holders of the company increased by approximately **4.3%** year-on-year[38](index=38&type=chunk)[41](index=41&type=chunk) [Business Segments Review](index=19&type=section&id=Business%20Segments%20Review) In 2023, the group's core business segments showed mixed but overall positive performance, with strong growth in tissue, steady growth in diapers, and stable performance in sanitary napkins despite intense competition [Sanitary Napkin Business](index=19&type=section&id=Sanitary%20Napkin) The sanitary napkin business achieved stable growth with a 0.4% year-on-year revenue increase, consolidating market leadership through premium product promotion and new retail channel expansion, with H2 gross profit margin recovering to 66.0% Sanitary Napkin Business Financial Data | Indicator | 2023 | 2022 | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Sales Revenue | Approx. RMB 6.178 Billion | Approx. RMB 6.156 Billion | ▲ 0.4% | | Revenue Share | Approx. 26.0% | Approx. 27.2% | ▼ | | Full-Year Gross Profit Margin | Approx. 63.8% | Approx. 66.8% | ▼ | | H2 Gross Profit Margin | Approx. 66.0% | - | - | - Sales of "Pants-style" products increased by over **73.4%** year-on-year, indicating significant growth potential[51](index=51&type=chunk)[55](index=55&type=chunk) [Tissue Paper Business](index=21&type=section&id=Tissue%20Paper) The tissue paper business demonstrated strong performance with a 12.2% revenue increase and leading market share, benefiting from lower pulp costs and product upgrades, resulting in improved gross profit margins Tissue Paper Business Financial Data | Indicator | 2023 | 2022 | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Sales Revenue | Approx. RMB 13.748 Billion | Approx. RMB 12.248 Billion | ▲ 12.2% | | Revenue Share | Approx. 57.8% | Approx. 54.2% | ▲ | | Full-Year Gross Profit Margin | Approx. 21.7% | Approx. 20.7% | ▲ | | H2 Gross Profit Margin | 26.1% | 18.5% | ▲ | - Sales revenue of the premium "Cloud Soft" series exceeded **RMB 1.3 billion**, growing by approximately **26.6%** year-on-year, while wet wipes business sales revenue was approximately **RMB 931 million**, growing by nearly **10.5%**[58](index=58&type=chunk)[59](index=59&type=chunk) - E-commerce and new retail channel sales grew by approximately **26.1%**, accounting for **35.3%** of the overall tissue business sales[58](index=58&type=chunk)[59](index=59&type=chunk) [Disposable Diapers Business](index=23&type=section&id=Disposable%20Diapers) The disposable diapers business saw a 4.3% revenue increase, driven by premium baby diapers "Q • MO" and adult diapers, with gross profit margin rising to 38.1% due to lower raw material prices and a higher proportion of high-margin products Disposable Diapers Business Financial Data | Indicator | 2023 | 2022 | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Sales Revenue | Approx. RMB 1.254 Billion | Approx. RMB 1.202 Billion | ▲ 4.3% | | Revenue Share | Approx. 5.3% | Approx. 5.3% | - | | Full-Year Gross Profit Margin | Approx. 38.1% | Approx. 36.9% | ▲ | - Sales of premium product "Q • MO" increased by nearly **21.8%** year-on-year, raising its proportion in the diaper business to approximately **36.4%**[63](index=63&type=chunk)[65](index=65&type=chunk) - Adult diaper business grew by approximately **11.5%** year-on-year, accounting for **25.4%** of the overall diaper business sales[63](index=63&type=chunk)[65](index=65&type=chunk) [Other Income and Household Products Business](index=25&type=section&id=Other%20Income%20and%20Household%20Products) Other business revenue decreased by 14.0% year-on-year, primarily due to a reduction in raw material trading to secure production, and household product revenue also declined due to reduced export business Other Business Financial Data | Indicator | 2023 | 2022 | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Other Business Revenue | Approx. RMB 2.587 Billion | Approx. RMB 3.009 Billion | ▼ 14.0% | | Raw Material Trading Revenue | Approx. RMB 1.4 Billion | Approx. RMB 1.6 Billion | ▼ 13.6% | | Household Products Business Revenue | Approx. RMB 250 Million | Approx. RMB 326 Million | ▼ 23.4% | [International Business Development](index=25&type=section&id=International%20Business%20Development) The group's overseas channels, including Malaysia's Royal Group, generated approximately RMB 1.951 billion in revenue, accounting for 8.2% of total sales, with Malaysia's Royal Group business steadily recovering - Overseas channels generated approximately **RMB 1.951 billion** in full-year revenue, accounting for **8.2%** of the group's overall sales[74](index=74&type=chunk)[75](index=75&type=chunk) - Malaysia's Royal Group business revenue increased by approximately **6.3%** to **RMB 438 million**[76](index=76&type=chunk)[77](index=77&type=chunk) [Channel Strategies and Financials](index=26&type=section&id=Channel%20Strategies%20and%20Financials) The group achieved significant channel expansion, with e-commerce and new retail sales surging over 17.7% to exceed 30% of total sales, while maintaining robust financial health with improved debt ratio and net cash position - E-commerce and new retail channel sales revenue grew over **17.7%** to approximately **RMB 7.16 billion**, increasing their proportion of the group's overall sales to **30.1%**[79](index=79&type=chunk)[81](index=81&type=chunk) - Selling and administrative expenses as a percentage of total revenue slightly decreased from **21.6%** to **21.3%**[84](index=84&type=chunk)[88](index=88&type=chunk) - Operating exchange losses significantly narrowed from approximately **RMB 913 million** to approximately **RMB 180 million** due to a substantial decrease in RMB dividend amounts receivable from domestic subsidiaries[85](index=85&type=chunk)[89](index=89&type=chunk) Financial Position Indicators | Indicator | December 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and Bank Balances, etc. | Approx. RMB 19.628 Billion | Approx. RMB 21.563 Billion | | Bank and Other Borrowings | Approx. RMB 14.238 Billion | Approx. RMB 17.030 Billion | | Debt Ratio | Approx. 69.8% | Approx. 87.2% | | Net Debt Ratio | Approx. -26.4% (Net Cash) | Approx. -23.2% (Net Cash) | [Human Resources and Corporate Social Responsibility](index=29&type=section&id=Human%20Resources%20and%20Corporate%20Social%20Responsibility) As of year-end 2023, the group employed approximately 23,000 staff, continuously improving HR systems, and demonstrated strong commitment to ESG, achieving a BBB MSCI ESG rating and multiple awards for quality, low-carbon practices, and talent development - As of December 31, 2023, the group employed approximately **23,000** staff[99](index=99&type=chunk)[100](index=100&type=chunk) - The group established an ESG Committee at the board level in June 2023, and its MSCI ESG rating improved from BB to **BBB**[102](index=102&type=chunk)[103](index=103&type=chunk)[106](index=106&type=chunk) - In environmental protection, the group promoted distributed photovoltaic power generation projects, with greenhouse gas emission intensity at **0.66 tons of CO2 equivalent per RMB 10,000 sales**, and the papermaking segment's unit product energy consumption and water consumption per ton of paper are significantly better than national standards[111](index=111&type=chunk)[113](index=113&type=chunk) [Outlook](index=34&type=section&id=Outlook) For 2024, despite external uncertainties, the group anticipates stable pulp prices and will adhere to a "stable price" strategy, deepening its core strategies of "focus on core business," "brand leadership," and "long-termism" through product premiumization, channel expansion, and organizational optimization, while planning capacity expansion in several provinces - Pulp prices are expected to remain stable in **2024**, which will benefit the group's operations[130](index=130&type=chunk)[132](index=132&type=chunk) - The group will continue to implement three core strategies: "focus on core business" (tissue, sanitary napkins, diapers), "brand leadership" (product premiumization), and "long-termism" (channel expansion and organizational optimization)[134](index=134&type=chunk)[137](index=137&type=chunk) - Plans include capacity expansion and technological upgrades in Neikeng (Fujian), Xiaogan (Hubei), Hunan, and Yunfu (Guangdong), with some new capacity expected to commence production in **2024**[139](index=139&type=chunk)[141](index=141&type=chunk) [Directors and Senior Management Profiles](index=37&type=section&id=Directors%20and%20Senior%20Management%20Profiles) This section provides detailed background information on the company's executive directors, independent non-executive directors, and senior management, including age, position, responsibilities, industry experience, education, and other public company or social organization affiliations - The board comprises experienced founding shareholders and a new generation of management with professional backgrounds, while the core management team possesses decades of experience in consumer product manufacturing, distribution, finance, and corporate management[142](index=142&type=chunk)[144](index=144&type=chunk)[150](index=150&type=chunk) [Corporate Governance Report](index=47&type=section&id=Corporate%20Governance%20Report) This report outlines the company's corporate governance structure, board composition, and the functions of its various committees, emphasizing adherence to governance codes and internal control effectiveness [Board of Directors and Committees](index=48&type=section&id=Board%20of%20Directors%20and%20Committees) The report details the company's corporate governance structure, with a board of 8 executive and 4 independent non-executive directors, separate Chairman and CEO roles, and various committees predominantly composed of independent non-executive directors with defined mandates - The Board of Directors consists of **12** directors, including **8** executive directors and **4** independent non-executive directors, complying with listing rules[203](index=203&type=chunk)[205](index=205&type=chunk) - The company has established a Remuneration Committee, Audit Committee, Nomination Committee, Share Incentive Committee, and Environmental, Social and Governance (ESG) Committee to fulfill specialized oversight functions[244](index=244&type=chunk)[251](index=251&type=chunk)[262](index=262&type=chunk)[269](index=269&type=chunk)[273](index=273&type=chunk) - The company largely complied with the Corporate Governance Code in **2023**, except for one executive director's inadvertent trading during a blackout period[196](index=196&type=chunk)[241](index=241&type=chunk) [Accountability and Risk Management](index=61&type=section&id=Accountability%20and%20Risk%20Management) This section emphasizes the board's responsibility for the truth and fairness of financial reporting and outlines the company's risk management and internal control systems, which are reviewed annually by the Audit Committee and deemed sound and effective - The Board of Directors confirms its oversight responsibility for preparing true and fair financial statements[282](index=282&type=chunk)[283](index=283&type=chunk) - The group has established a risk management framework with tiered responsibilities across business units, management, and the Board, ensuring effective risk control[294](index=294&type=chunk)[296](index=296&type=chunk) - The Board has reviewed the internal control system for **2023** and considers it effective and sufficient[290](index=290&type=chunk)[293](index=293&type=chunk) [Shareholder Communication and Rights](index=64&type=section&id=Shareholder%20Communication%20and%20Rights) The company has adopted a shareholder communication policy, ensuring equal and timely access to information through various channels, and outlines procedures for shareholders to convene meetings and propose resolutions, alongside whistleblowing and anti-corruption policies - The company has established a shareholder communication policy to ensure equal and timely access to company information for shareholders[316](index=316&type=chunk) - Shareholders holding not less than **10%** of the voting shares may request to convene an extraordinary general meeting[304](index=304&type=chunk)[308](index=308&type=chunk) - The company has adopted whistleblowing and anti-corruption policies, establishing dedicated channels for related matters[321](index=321&type=chunk)[325](index=325&type=chunk) [Report of the Directors](index=69&type=section&id=Report%20of%20the%20Directors) This report details the group's principal activities, business review by segment and region, financial performance, dividend distribution, share schemes, and major customer and supplier relationships [Principal Activities and Business Review](index=69&type=section&id=Principal%20Activities%20and%20Business%20Review) This section outlines the group's primary business of manufacturing, distributing, and selling personal hygiene products in China, with the Chinese market contributing over 90% of revenue, and provides a breakdown of business by product segment and region 2023 Revenue and Operating Profit Contribution by Business Segment (RMB Thousand) | Business Segment | Revenue | Operating Profit Contribution | | :--- | :--- | :--- | | Sanitary Napkin Products | 6,178,438 | 2,317,022 | | Disposable Diaper Products | 1,254,070 | 194,302 | | Tissue Products | 13,748,172 | 243,739 | | Other | 2,587,256 | 129,601 | | **Total** | **23,767,936** | **2,884,664** | [Results and Dividend](index=71&type=section&id=Results%20and%20Dividend) During the reporting period, the Board declared an interim dividend of RMB 0.70 per share and proposed a final dividend of RMB 0.70 per share, totaling RMB 1.40 per share for the full year, consistent with the previous year 2023 Dividend Distribution | Dividend Type | Amount Per Share (RMB) | Total Amount (RMB Thousand) | | :--- | :--- | :--- | | Interim Dividend (Paid) | 0.70 | 813,485 | | Final Dividend (Proposed) | 0.70 | 813,485 | | **Full-Year Total** | **1.40** | **1,626,970** | [Share Schemes](index=79&type=section&id=Share%20Schemes) This section details the company's share option scheme and share award scheme, noting 51,606,000 unexercised share options as of year-end 2023 and the adoption of a new share award scheme in September 2023, with shares subsequently purchased by the trustee in the secondary market - As of December 31, 2023, a total of **51,606,000** share options remained unexercised under the share option scheme[378](index=378&type=chunk) - The company adopted a new share award scheme on September 11, 2023, with a limit of **5%** of the company's issued share capital, and as of January 19, 2024, the trustee had cumulatively purchased **17,800,000** company shares[385](index=385&type=chunk)[391](index=391&type=chunk)[398](index=398&type=chunk) [Major Customers and Suppliers](index=92&type=section&id=Major%20Customers%20and%20Suppliers) The group maintains a diversified customer and supplier base, with sales to the top five customers accounting for less than 30% of total revenue in 2023, and the largest supplier representing 12.9% of total purchases - Sales to the top five customers accounted for less than **30%** of total revenue[430](index=430&type=chunk) - The largest supplier accounted for **12.9%** of total purchases, and the top five suppliers collectively accounted for **33.1%**[430](index=430&type=chunk) [Independent Auditor's Report](index=95&type=section&id=Independent%20Auditor's%20Report) PricewaterhouseCoopers issued an unmodified opinion on the group's 2023 consolidated financial statements, affirming their true and fair representation of the group's financial position and performance, with "revenue recognition - goods sales" identified as a key audit matter - The auditor issued an unmodified opinion on the financial statements, deeming them to truly and fairly reflect the group's financial position[451](index=451&type=chunk) - "Revenue recognition - goods sales" was identified as a key audit matter due to the high volume of transactions, diverse product range, and broad customer base, which the auditor addressed through assessing internal controls, examining major customer agreements, and sample testing[452](index=452&type=chunk)[453](index=453&type=chunk)[454](index=454&type=chunk) [Consolidated Financial Statements](index=103&type=section&id=Consolidated%20Financial%20Statements) This section presents the group's consolidated financial statements, including the profit or loss, balance sheet, and cash flow statements, providing a comprehensive overview of its financial performance and position [Consolidated Statement of Profit or Loss](index=103&type=section&id=Consolidated%20Statement%20of%20Profit%20or%20Loss) For 2023, the group achieved revenue of RMB 23.768 billion, a 5.1% increase; gross profit of RMB 8.011 billion, up 4.2%; operating profit surged 38.6% to RMB 3.978 billion; and annual profit reached RMB 2.807 billion, a 44.0% increase 2023 Consolidated Statement of Profit or Loss Summary (RMB Thousand) | Item | 2023 | 2022 | | :--- | :--- | :--- | | Revenue | 23,767,936 | 22,615,878 | | Gross Profit | 8,010,688 | 7,689,499 | | Operating Profit | 3,977,931 | 2,869,154 | | Profit Before Income Tax | 3,605,404 | 2,833,286 | | Profit for the Year | 2,807,404 | 1,949,300 | [Consolidated Balance Sheet](index=105&type=section&id=Consolidated%20Balance%20Sheet) As of year-end 2023, the group's total assets were RMB 40.216 billion, total liabilities significantly decreased to RMB 19.586 billion, and total equity increased to RMB 20.630 billion, indicating an optimized balance sheet structure and more robust financial health Consolidated Balance Sheet Summary (RMB Thousand) | Item | December 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Non-current Assets | 13,405,939 | 14,228,720 | | Current Assets | 26,809,962 | 28,108,522 | | **Total Assets** | **40,215,901** | **42,337,242** | | **Equity and Liabilities** | | | | **Total Equity** | **20,629,851** | **19,775,737** | | Non-current Liabilities | 525,764 | 2,167,403 | | Current Liabilities | 19,060,286 | 20,394,102 | | **Total Liabilities** | **19,586,050** | **22,561,505** | [Consolidated Cash Flow Statement](index=109&type=section&id=Consolidated%20Cash%20Flow%20Statement) In 2023, the group generated strong net cash flow of RMB 3.875 billion from operating activities, with investing activities shifting to a net inflow of RMB 3.584 billion primarily due to changes in time deposits, while financing activities resulted in a net outflow of RMB 5.549 billion mainly for debt repayment and dividend payments, leading to a net increase of RMB 1.910 billion in cash and cash equivalents at year-end Consolidated Cash Flow Statement Summary (RMB Thousand) | Item | 2023 | 2022 | | :--- | :--- | :--- | | Net Cash Generated from Operating Activities | 3,875,375 | 3,809,862 | | Net Cash Generated From/(Used In) Investing Activities | 3,583,922 | (6,065,909) | | Net Cash Used In Financing Activities | (5,549,268) | (4,137,416) | | Net Increase/(Decrease) in Cash and Cash Equivalents | 1,910,029 | (6,393,463) | | Cash and Cash Equivalents at Year-End | 8,021,756 | 6,088,603 |

Investment Rating - The report maintains an "Overweight" rating for the company [5][8] Core Views - The company's 2023 performance met expectations, with significant growth in high-end products and improved profitability due to reduced raw material costs and narrowed exchange losses [3] - The company's revenue in 2023 was RMB 23.768 billion, up 5.1% YoY, with net profit attributable to shareholders reaching RMB 2.801 billion, up 45.5% YoY [3] - The report is optimistic about the company's future profitability improvement through cost control and product upgrades [3] Financial Performance - In H2 2023, the company's revenue was RMB 11.563 billion, up 1.3% YoY, with net profit attributable to shareholders reaching RMB 1.575 billion, up 142.6% YoY [3] - The company's gross profit margin for tissue products in H2 2023 was 26.1%, up 7.6 percentage points YoY and 8.4 percentage points QoQ [3] - The gross profit margin for sanitary napkins in H2 2023 was 66%, down 2.4 percentage points YoY but up 4.2 percentage points QoQ [3] - The gross profit margin for diapers in H2 2023 was 40%, up 1.2 percentage points YoY and 4 percentage points QoQ [3] Business Segments - Tissue products: H2 2023 revenue was RMB 6.578 billion, up 2.7% YoY, with high-end products like the Cloud Touch series growing 26.6% YoY [3] - Sanitary napkins: H2 2023 revenue was RMB 2.959 billion, down 2.3% YoY, but high-end products like panty-style sanitary napkins grew 73.4% YoY [3] - Diapers: H2 2023 revenue was RMB 589 million, up 3.5% YoY, with high-end diaper Q·MO growing approximately 21.8% YoY [3] Future Outlook - The report forecasts net profit attributable to shareholders for 2024-2026 to be RMB 2.923 billion, RMB 3.012 billion, and RMB 3.203 billion, respectively [3] - The company's e-commerce and new retail channels generated RMB 3.66 billion in revenue in H2 2023, up 7.6% YoY [3] - The company is expected to maintain stable pricing strategies and more precise cost control in 2024, with continued product upgrades driving profitability [3] Valuation - The target price is adjusted to HKD 31.08, based on a 12x PE ratio for 2025, in line with industry peers [8] - The company's current PE ratio is 11.07x for 2023, expected to decrease to 8.68x by 2026 [4]

Core Viewpoint - Macquarie has downgraded the net profit forecasts for Hengan International (01044) for the fiscal years 2024 and 2025 by 12% and 9% respectively, reflecting the anticipated need for higher advertising and promotional expenses in a competitive market [1] Business Performance - Hengan's sales in the second half of last year increased by 1.3% year-on-year, which was below Macquarie's expectations [1] - Sales of tissue and diapers grew by 2.7% and 3.5% respectively, a slowdown compared to the first half of the year where growth was 22.7% and 5% [1] - Sanitary napkin sales declined by 2.3% year-on-year, contrasting with a 3% increase in the first half, attributed to intensified price competition due to falling wood pulp prices [1] Retail Channel Insights - Sales from new retail channels increased by 7%, contributing 31% to total sales, compared to 29.5% in the same period of 2022 [1] - The tissue business gained further market share last year, while the sanitary napkin segment has shown good growth momentum since the beginning of 2024 [1] - The tissue segment is facing intense competition, leading the company to potentially enhance promotions to stimulate growth [1]

Investment Rating - The report maintains a "Buy" rating for the company with a target price adjusted to HKD 33.85, indicating a potential upside of 30.2% from the current price of HKD 26.00 [1][2][8]. Core Insights - The company's performance in 2023 met expectations, with a notable recovery in profit margins driven by a high-end product mix and easing cost pressures. Sales increased by 5.1% year-on-year to RMB 23.768 billion, while net profit rose by 45.5% to RMB 2.801 billion [1][2]. - The report highlights that the sales growth rate slowed in the second half of 2023 due to intensified competition and promotional expense management, dropping from 9% in the first half to 1.3% in the second half. However, the gross margin improved significantly to 36.5% in the second half, up from 32.8% in the same period of 2022 [1][2][6]. - The high-end product lines, particularly in tissue and sanitary products, received positive feedback, contributing to the overall sales growth. The wet wipes segment saw a 10.5% increase, while the "Cloud Soft" series achieved a remarkable 26.6% growth [1][2][7]. Financial Performance Summary - For 2023, the company reported a revenue of RMB 23.768 billion, a 5.1% increase from 2022, with core business sales (tissues, sanitary napkins, diapers) growing by 8.0% to RMB 21.18 billion. The net profit for the year was RMB 2.801 billion, reflecting a 45.5% year-on-year increase [3][6]. - The gross margin for the year was stable, with a significant improvement in the second half, where the gross margin reached 36.5%, up 5.5 percentage points from the previous year [1][6]. - The company plans to increase marketing expenditures in the first half of 2024 to support sales growth, particularly in the tissue segment, which is expected to achieve low single-digit growth [2][3]. Future Outlook - The report anticipates low single-digit growth for core business in 2024, driven by the high-end product mix. Despite favorable raw material cost trends, increased market competition may pressure average selling prices [2][3]. - The company is expected to maintain a stable dividend payout, with a total dividend of RMB 1.4 per share for 2023, maintaining a payout ratio of 58% [1][3].

Financial Performance - Revenue for the year ended December 31, 2023, was RMB 23,767,936 thousand, representing a 5.1% increase from RMB 22,615,878 thousand in 2022[3] - Operating profit increased by 38.6% to RMB 3,977,931 thousand compared to RMB 2,869,154 thousand in the previous year[3] - Profit attributable to equity holders of the company rose by 45.5% to RMB 2,800,533 thousand from RMB 1,925,249 thousand in 2022[3] - Basic and diluted earnings per share increased by 45.8% to RMB 2.415 from RMB 1.657 in the previous year[3] - Group operating profit for 2023 was RMB 3,977,931 thousand, compared to RMB 2,869,154 thousand in 2022, reflecting a significant increase of approximately 38.7%[21] - Net profit attributable to equity holders of the company for 2023 was RMB 2,800,533 thousand, up from RMB 1,925,249 thousand in 2022, indicating a growth of around 45.5%[21] - The group reported a profit before tax of RMB 3,605,404 thousand for 2023, compared to RMB 2,833,286 thousand in 2022, marking an increase of approximately 27.2%[21] - The overall gross profit for 2023 rose by approximately 4.2% to about RMB 8,010,688,000, compared to RMB 7,689,499,000 in 2022[47] - The overall gross margin for 2023 was approximately 33.7%, with a significant improvement to 36.5% in the second half of the year[47] Assets and Liabilities - Total assets decreased to RMB 40,215,901 thousand from RMB 42,337,242 thousand in 2022[9] - Total liabilities decreased to RMB 19,586,050 thousand from RMB 22,561,505 thousand in the previous year[11] - The total assets of the group as of December 31, 2023, amounted to RMB 40,215,901 thousand, with total liabilities of RMB 19,586,050 thousand[23] - The company maintained a current ratio of 1.4, consistent with the previous year[3] - The company has a deferred tax asset of RMB 532,204,000 as of December 31, 2022[27] Dividends and Shareholder Returns - The company proposed a final dividend of RMB 0.70 per share, consistent with the previous year[3] - The company has committed to a final dividend of RMB 0.70 per share for the fiscal year ending December 31, 2023, pending approval at the 2024 Annual General Meeting[101] - The company maintained a stable dividend payout of RMB 1.40 per share for the year, consistent with the previous year[48] Revenue Breakdown - The revenue breakdown includes RMB 6,178,438 thousand from sanitary napkin products, RMB 1,254,070 thousand from diaper products, and RMB 13,748,172 thousand from tissue products[21] - Sales revenue from the sanitary napkin business increased by approximately 0.4% to about RMB 6,178,438,000 (2022: RMB 6,156,060,000), accounting for about 26.0% of the group's total revenue (2022: 27.2%) [51] - Sales revenue from the tissue paper business surged by approximately 12.2% to about RMB 13,748,172,000 (2022: RMB 12,248,011,000), representing about 57.8% of the group's total revenue (2022: 54.2%) [58] - The three core business segments (tissue, sanitary napkins, and diapers) achieved a revenue growth of approximately 8.0% year-on-year[45] Operational Efficiency - The inventory turnover period improved to 42 days from 43 days in the previous year[3] - Accounts receivable and notes receivable decreased from RMB 2,993,134,000 in 2022 to RMB 2,718,998,000 in 2023, with a net amount of RMB 2,553,357,000 after impairment provisions[40] - Accounts payable and notes payable decreased from RMB 2,920,685,000 in 2022 to RMB 2,750,069,000 in 2023[42] - Sales and administrative expenses increased by approximately 3.7% to about RMB 5,068,887,000, while the expense ratio slightly decreased to about 21.3% of total revenue[74] Market and Sales Strategy - E-commerce and new retail sales accounted for approximately 30.1% of total sales, up from 26.9% in 2022, representing a year-on-year growth of about 17.7%[46] - The company plans to continue focusing on high-end product development and optimizing its product mix to meet consumer demand for high-quality diversified products[46] - The company plans to continue expanding the proportion of new retail channels in total sales and develop higher quality products [57] - The company aims to enhance its sales channels, focusing on e-commerce and new retail strategies, while also strengthening partnerships with maternal and infant stores, nursing homes, and hospitals[68] Sustainability and Corporate Responsibility - The company is committed to sustainable development and aims to enhance its competitive edge while expanding its market presence both domestically and internationally[100] - The company has been recognized as a "Green Factory" by the Ministry of Industry and Information Technology, marking its third national-level green factory[87] - The greenhouse gas emission intensity for 2023 was 0.66 tons of CO2 equivalent per 10,000 yuan in sales, significantly lower than the industry standard[86] - The company has implemented a comprehensive safety management strategy and conducted regular safety training, resulting in a workplace injury rate of 0[90] - The company has been actively involved in social responsibility initiatives, including donations of RMB 2 million worth of supplies to earthquake-affected areas in Syria and Turkey[93] Governance and Compliance - The audit committee is chaired by an independent non-executive director, with three other independent non-executive directors as members, ensuring compliance with the highest standards of corporate governance[105] - The company confirmed full compliance with the Listing Rules, except for a minor breach by a director who inadvertently purchased 100,000 shares during a trading blackout period[109] - The board of directors includes eight executive directors and four independent non-executive directors, reflecting a diverse governance structure[112] - The company has maintained high standards of corporate governance, which aids in managing business risks and enhancing transparency[108] Employee and Human Resources - The group employed approximately 23,000 employees as of December 31, 2023, with a focus on improving human resource efficiency and employee compensation[79] - The total training hours for employees exceeded 240,000 hours in 2023, with 173 individuals promoted to management positions[89] - The company employed approximately 23,000 people by the end of 2023, with a female employee ratio of 56%[89] Future Outlook - The company plans to expand production capacity and upgrade technology, including establishing a new base for upgraded sanitary napkins, diapers, and wet wipes in Fujian, with some new capacity expected to be operational in 2024[100] - The company is closely monitoring geopolitical tensions and global monetary policy tightening, which may impact economic growth and consumer confidence, but remains optimistic about China's economic fundamentals[95] - The company aims to enhance its brand image and attract younger consumers through various promotional activities and partnerships [54]

[Financial Highlights](index=5&type=section&id=Financial%20Highlights) Key financial indicators for H1 2023 show revenue growth, but declining profitability and improved asset turnover Key Financial Indicators for H1 2023 | Indicator | H1 2023 (RMB thousands) | H1 2022 (RMB thousands) | Change | | :--- | :--- | :--- | :--- | | **Revenue** | 12,204,605 | 11,200,021 | +9.0% | | **Core Business Revenue** | 11,054,709 | 9,604,649 | +15.1% | | **Gross Margin** | 31.0% | 35.2% | -4.2pp | | **Operating Profit** | 1,701,681 | 1,885,753 | -9.8% | | **Profit Attributable to Equity Holders** | 1,225,768 | 1,276,191 | -4.0% | | **Basic Earnings Per Share** | RMB 1.055 | RMB 1.098 | -3.9% | | **Finished Goods Turnover Days** | 33 days | 39 days | -6 days | | **Accounts Receivable Turnover Days** | 43 days | 51 days | -8 days | [Interim Condensed Consolidated Financial Statements](index=6&type=section&id=Interim%20Condensed%20Consolidated%20Financial%20Statements) [Interim Condensed Consolidated Statement of Profit or Loss](index=6&type=section&id=Interim%20Condensed%20Consolidated%20Statement%20of%20Profit%20or%20Loss) In H1 2023, total revenue grew 9.0% to RMB 12.205 billion, but rising costs and expenses led to a 4.1% decline in gross profit and a 9.8% drop in operating profit Key Profit or Loss Data (For the Six Months Ended June 30) | Item | 2023 (RMB thousands) | 2022 (RMB thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | 12,204,605 | 11,200,021 | +9.0% | | Cost of Sales | (8,416,055) | (7,257,830) | +16.0% | | **Gross Profit** | **3,788,550** | **3,942,191** | **-3.9%** | | Operating Profit | 1,701,681 | 1,885,753 | -9.8% | | Profit Before Income Tax | 1,541,482 | 1,795,900 | -14.2% | | **Profit for the Period** | **1,226,901** | **1,291,618** | **-5.0%** | | **Profit Attributable to Equity Holders of the Company** | **1,225,768** | **1,276,191** | **-4.0%** | | **Basic Earnings Per Share** | **RMB 1.055** | **RMB 1.098** | **-3.9%** | [Interim Condensed Consolidated Balance Sheet](index=9&type=section&id=Interim%20Condensed%20Consolidated%20Balance%20Sheet) As of June 30, 2023, total assets increased 14.3% to RMB 48.397 billion, while total liabilities rose 24.6% to RMB 28.117 billion, primarily due to a significant increase in current borrowings Balance Sheet Summary | Item | June 30, 2023 (RMB thousands) | December 31, 2022 (RMB thousands) | Change | | :--- | :--- | :--- | :--- | | **Total Assets** | **48,397,012** | **42,337,242** | **+14.3%** | | Non-current Assets | 13,598,908 | 14,228,720 | -4.4% | | Current Assets | 34,798,104 | 28,108,522 | +23.8% | | **Total Liabilities** | **28,116,975** | **22,561,505** | **+24.6%** | | Non-current Liabilities | 406,019 | 2,167,403 | -81.3% | | Current Liabilities | 27,710,956 | 20,394,102 | +35.9% | | **Total Equity** | **20,280,037** | **19,775,737** | **+2.6%** | - Significant increase in current assets was primarily driven by cash and bank balances, rising from **RMB 18.667 billion** at year-end to **RMB 26.750 billion**[12](index=12&type=chunk) - Increase in current liabilities mainly resulted from short-term borrowings growing from **RMB 15.029 billion** to **RMB 23.659 billion**[13](index=13&type=chunk) [Interim Condensed Consolidated Statement of Cash Flows](index=12&type=section&id=Interim%20Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) In H1 2023, net cash from operating activities was RMB 1.939 billion, while investing activities resulted in a net outflow of RMB 2.709 billion, and financing activities generated RMB 5.431 billion, leading to a net increase in cash and cash equivalents of RMB 4.661 billion Cash Flow Statement Summary (For the Six Months Ended June 30) | Item | 2023 (RMB thousands) | 2022 (RMB thousands) | | :--- | :--- | :--- | | **Net Cash Generated from Operating Activities** | **1,938,954** | **2,124,023** | | **Net Cash (Used in)/Generated from Investing Activities** | **(2,709,232)** | **3,182,282** | | **Net Cash Generated from Financing Activities** | **5,431,320** | **3,169,399** | | Net Increase in Cash and Cash Equivalents | 4,661,042 | 8,475,704 | | Cash and Cash Equivalents at Beginning of Period | 6,088,603 | 12,339,816 | | **Cash and Cash Equivalents at End of Period** | **10,793,612** | **20,888,836** | [Notes to the Interim Condensed Consolidated Financial Information](index=14&type=section&id=Notes%20to%20the%20Interim%20Condensed%20Consolidated%20Financial%20Information) [6. Segment Information](index=24&type=section&id=6.%20SEGMENT%20INFORMATION) In H1 2023, tissue paper revenue grew 22.7% to become the largest segment, but all major business segments experienced profit declines, with tissue paper profit significantly down 98.3% due to raw material costs Revenue by Business Segment (For the Six Months Ended June 30) | Business Segment | 2023 (RMB thousands) | 2022 (RMB thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Sanitary Napkin Products | 3,219,295 | 3,128,524 | +2.9% | | Disposable Diaper Products | 665,304 | 633,512 | +5.0% | | Tissue Paper Products | 7,170,110 | 5,842,613 | +22.7% | | Others | 1,149,896 | 1,595,372 | -27.9% | | **Group Total Revenue** | **12,204,605** | **11,200,021** | **+9.0%** | Profit by Business Segment (For the Six Months Ended June 30) | Business Segment | 2023 (RMB thousands) | 2022 (RMB thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Sanitary Napkin Products | 1,149,778 | 1,330,726 | -13.6% | | Disposable Diaper Products | 30,152 | 101,566 | -70.3% | | Tissue Paper Products | 5,180 | 305,995 | -98.3% | | Others | 40,350 | 42,106 | -4.2% | [10. Dividends](index=33&type=section&id=10.%20DIVIDENDS) The Board proposed an interim dividend of RMB 0.70 per share for 2023, consistent with the prior year, totaling approximately RMB 0.813 billion, which is not yet recognized as a liability - The Board proposed an interim dividend of **RMB 0.70** per share on August 24, 2023, consistent with the same period in 2022[78](index=78&type=chunk)[79](index=79&type=chunk) - The total interim dividend amounts to approximately **RMB 813,485,000**, payable in HKD[79](index=79&type=chunk) [16. Borrowings](index=42&type=section&id=16.%20BORROWINGS) As of June 30, 2023, total borrowings increased 40.1% to RMB 23.860 billion, driven by new ultra-short-term commercial papers and increased short-term bank loans, with the average effective annual interest rate rising to 3.31% Borrowings Composition | Item | June 30, 2023 (RMB thousands) | December 31, 2022 (RMB thousands) | | :--- | :--- | :--- | | Non-current Borrowings | 201,251 | 2,001,334 | | Current Borrowings | 23,658,741 | 15,028,618 | | **Total** | **23,859,992** | **17,029,952** | - During H1 2023, the company issued four tranches of ultra-short-term commercial papers totaling **RMB 5.0 billion**, with coupon rates ranging from **2.39%** to **2.40%**[100](index=100&type=chunk)[101](index=101&type=chunk) - As of June 30, 2023, the Group's average effective annual interest rate on borrowings was approximately **3.31%**, an increase from **2.10%** at the end of 2022[98](index=98&type=chunk)[99](index=99&type=chunk) [Management Discussion and Analysis](index=53&type=section&id=Management%20Discussion%20and%20Analysis) [Business Review](index=53&type=section&id=BUSINESS%20REVIEW) In H1 2023, despite raw material price pressure, overall revenue grew 9.0% to RMB 12.205 billion driven by effective omnichannel sales, though high-cost wood pulp inventory led to a decline in gross margin and operating profit - Overall revenue increased by **9.0%** to approximately **RMB 12.205 billion**, with the three core business segments' revenue growing by approximately **15.1%**[131](index=131&type=chunk)[133](index=133&type=chunk) - E-commerce sales (including Retail Link and New Channels) increased by approximately **30.0%**, raising their contribution to nearly **29.0%**[134](index=134&type=chunk)[136](index=136&type=chunk) - Affected by raw material prices, the overall gross margin decreased to **31.0%** (from 35.2% in the prior period), but is expected to improve in H2[135](index=135&type=chunk)[137](index=137&type=chunk) - Profit attributable to equity holders decreased by approximately **4.0%** to **RMB 1.226 billion**, primarily due to high-cost wood pulp inventory; the Board declared an interim dividend of **RMB 0.70** per share, consistent with the prior year[138](index=138&type=chunk)[139](index=139&type=chunk)[141](index=141&type=chunk) [Segment Performance](index=55&type=section&id=Segment%20Performance) In H1 2023, all core businesses achieved revenue growth, with tissue paper leading at 22.7%, though its gross margin was pressured by high wood pulp prices, while sanitary napkins and disposable diapers also saw steady growth [Sanitary Napkin Business](index=55&type=section&id=Sanitary%20Napkin) Sanitary napkin revenue grew 2.9% to RMB 3.219 billion, driven by product upgrades and new retail channels, despite a gross margin decline to 61.8% due to rising raw material costs Sanitary Napkin Business Performance | Indicator | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Revenue | RMB 3.219 billion | RMB 3.129 billion | | Revenue Growth Rate | +2.9% | - | | Revenue Contribution | 26.4% | 27.9% | | Gross Margin | 61.8% | 65.3% | - Sales of 'Pants-style' series products increased by over **76.0%** year-over-year, serving as a key growth driver for the business[149](index=149&type=chunk) [Tissue Paper Business](index=58&type=section&id=Tissue%20Paper) Tissue paper revenue surged 22.7% to RMB 7.170 billion, accounting for 58.7% of total revenue, though gross margin declined to 17.7% due to high wood pulp costs, with improvement expected in H2 Tissue Paper Business Performance | Indicator | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Revenue | RMB 7.170 billion | RMB 5.843 billion | | Revenue Growth Rate | +22.7% | - | | Revenue Contribution | 58.7% | 52.2% | | Gross Margin | 17.7% | 23.1% | - Sales of the high-end 'Cloud Soft' series grew by over **40.0%**, accounting for more than **12.0%** of total tissue sales[158](index=158&type=chunk) - E-commerce channel sales increased by over **40.0%**, representing nearly **33.3%** of tissue sales[158](index=158&type=chunk) [Disposable Diapers Business](index=59&type=section&id=Disposable%20Diapers) Disposable diaper sales rebounded with a 5.0% increase to RMB 0.665 billion, driven by adult and high-end infant diapers, leading to a slight gross margin improvement to 36.0% Disposable Diapers Business Performance | Indicator | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Revenue | RMB 0.665 billion | RMB 0.634 billion | | Revenue Growth Rate | +5.0% | - | | Revenue Contribution | 5.5% | 5.7% | | Gross Margin | 36.0% | 35.3% | - Adult disposable diaper business recorded approximately **45.1%** growth, accounting for **29.2%** of overall disposable diaper sales[164](index=164&type=chunk) - Sales of high-end product 'Q • MO' increased by nearly **19.1%** year-over-year, representing over **35.0%** of the disposable diaper business[164](index=164&type=chunk) [E-commerce and New Retail Channel Strategies](index=63&type=section&id=E-commerce%20and%20New%20Retail%20Channel%20Strategies) In H1 2023, e-commerce channel sales grew over 30% to RMB 3.5 billion, increasing their contribution to 29.0% of total revenue, with significant impact across all core product categories - E-commerce channel sales increased by over **30.0%**, reaching approximately **RMB 3.5 billion**[184](index=184&type=chunk) - E-commerce channel sales as a percentage of the Group's total revenue increased from **24.2%** in the prior period to approximately **29.0%**[184](index=184&type=chunk) [Financial Review](index=64&type=section&id=Financial%20Review) Sales and administrative expenses rose 19.8% to 21.0% of total revenue due to increased online marketing, while operating exchange losses significantly narrowed, and the Group maintained a strong net cash position with a -23.9% net gearing ratio - Sales and administrative expenses increased by **19.8%** to **RMB 2.565 billion**, representing **21.0%** of total revenue[189](index=189&type=chunk) - The Group recorded an operating exchange loss of approximately **RMB 0.182 billion**, a significant **50.4%** reduction from **RMB 0.368 billion** in the prior period[190](index=190&type=chunk) Liquidity and Gearing Position (As of June 30, 2023) | Indicator | Amount/Ratio | | :--- | :--- | | Cash and Bank Balances | RMB 28.646 billion | | Bank and Other Borrowings | RMB 18.860 billion | | Ultra-short-term Commercial Papers | RMB 5.0 billion | | Gearing Ratio | 119.1% | | Net Gearing Ratio | -23.9% (Net Cash) | [Outlook](index=71&type=section&id=Outlook) For H2 2023, the Group anticipates improved tissue paper gross margin as high-cost wood pulp inventory is consumed, while continuing to execute core strategies of focusing on main businesses, enhancing brands, and pursuing long-term growth, alongside planned capacity expansion and diversification into health industries - The positive impact of declining wood pulp prices is expected to materialize in H2, leading to an improvement in the tissue paper business's gross margin[232](index=232&type=chunk) - The Group will adhere to three core strategies: 'Focus on Core Businesses' (tissue paper, sanitary napkins, disposable diapers), 'Brand Enhancement', and 'Long-Termism'[234](index=234&type=chunk) - Plans are in place to expand production capacity in Fujian, Xiaogan, Hunan, and Guangdong, with new capacities expected to commence operation sequentially in H2 2023[239](index=239&type=chunk)[241](index=241&type=chunk) - Long-term development goals include expanding into women's health, infant and child health, and elderly health industries, while gradually promoting brand internationalization[240](index=240&type=chunk)[242](index=242&type=chunk) [Corporate Governance and Other Information](index=74&type=section&id=Corporate%20Governance%20and%20Other%20Information) [Directors' and Major Shareholders' Interests](index=74&type=section&id=DIRECTORS%27%20INTERESTS) As of June 30, 2023, Chairman Mr. Sze Man Bok and Vice Chairman Mr. Hui Lin Chit held approximately 20.60% and 23.16% equity interests respectively, with An Ping Holdings Limited and Tin Lee Investments Limited also being major shareholders Directors' Shareholdings (As of June 30, 2023) | Director Name | Total Shares | Equity Percentage | | :--- | :--- | :--- | | Mr. Sze Man Bok | 239,399,999 | 20.60% | | Mr. Hui Lin Chit | 269,192,733 | 23.16% | | Mr. Xu Qingliu | 10,500,000 | 0.90% | [Share Option Scheme](index=78&type=section&id=SHARE%20OPTION%20SCHEME) As of June 30, 2023, there were 51,606,000 unexercised share options under the 2021 scheme, with no grants, exercises, or cancellations during the period, and 71,480,742 shares remaining available for grant - As of June 30, 2023, the total number of unexercised share options was **51,606,000**[271](index=271&type=chunk)[272](index=272&type=chunk) - For H1 2023, expenses recognized from the share option scheme amounted to **RMB 22,006,000**, with **RMB 47,178,000** remaining to be amortized in the future[276](index=276&type=chunk)

[Financial Highlights](index=1&type=section&id=Financial%20Highlights) The company reported a 9.0% revenue increase to RMB 12.2 billion in H1 2023, alongside a decline in gross margin and profitability H1 2023 Financial Highlights (Unaudited) | Metric | H1 2023 (RMB thousands) | H1 2022 (RMB thousands) | Change (%) | | :--- | :--- | :--- | :--- | | **Revenue** | 12,204,605 | 11,200,021 | 9.0% | | Core Business Revenue (Tissue, Feminine Care, Diapers) | 11,054,709 | 9,604,649 | 15.1% | | **Gross Margin** | 31.0% | 35.2% | -4.2 p.p. | | **Operating Profit** | 1,701,681 | 1,885,753 | (9.8%) | | **Profit Attributable to Owners of the Company** | 1,225,768 | 1,276,191 | (4.0%) | | **Basic Earnings Per Share (RMB)** | 1.055 | 1.098 | (4.0%) | [Interim Financial Information](index=2&type=section&id=Interim%20Financial%20Information) This section provides detailed interim consolidated financial statements, including the income statement, balance sheet, cash flow statement, and explanatory notes [Interim Condensed Consolidated Income Statement](index=3&type=section&id=Interim%20Condensed%20Consolidated%20Income%20Statement) For the six months ended June 30, 2023, group revenue grew 9.0% to RMB 12.2 billion, but gross profit declined 3.9% to RMB 3.79 billion due to increased cost of sales, leading to a 9.8% decrease in operating profit and a 4.0% decrease in profit attributable to owners Summary of Interim Condensed Consolidated Income Statement | Item | H1 2023 (RMB thousands) | H1 2022 (RMB thousands) | Change | | :--- | :--- | :--- | :--- | | Revenue | 12,204,605 | 11,200,021 | +9.0% | | Gross Profit | 3,788,550 | 3,942,191 | -3.9% | | Operating Profit | 1,701,681 | 1,885,753 | -9.8% | | Profit Before Income Tax | 1,541,482 | 1,795,900 | -14.2% | | Profit Attributable to Owners of the Company | 1,225,768 | 1,276,191 | -4.0% | [Interim Condensed Consolidated Balance Sheet](index=5&type=section&id=Interim%20Condensed%20Consolidated%20Balance%20Sheet) As of June 30, 2023, total assets increased 14.3% to RMB 48.4 billion, total liabilities rose 24.6% to RMB 28.12 billion primarily due to a significant increase in short-term borrowings, and total equity slightly increased 2.6% to RMB 20.28 billion Summary of Balance Sheet | Item | June 30, 2023 (RMB thousands) | December 31, 2022 (RMB thousands) | Change | | :--- | :--- | :--- | :--- | | **Total Assets** | 48,397,012 | 42,337,242 | +14.3% | | Current Assets | 34,798,104 | 28,108,522 | +23.8% | | Non-current Assets | 13,598,908 | 14,228,720 | -4.4% | | **Total Liabilities** | 28,116,975 | 22,561,505 | +24.6% | | Current Liabilities | 27,710,956 | 20,394,102 | +35.9% | | Non-current Liabilities | 406,019 | 2,167,403 | -81.3% | | **Total Equity** | 20,280,037 | 19,775,737 | +2.6% | [Interim Condensed Consolidated Cash Flow Statement](index=8&type=section&id=Interim%20Condensed%20Consolidated%20Cash%20Flow%20Statement) In H1 2023, net cash from operating activities decreased 8.7% to RMB 1.94 billion, net cash used in investing activities was RMB 2.71 billion (compared to net inflow last year), and net cash from financing activities was RMB 5.43 billion, resulting in a net increase in cash and cash equivalents of RMB 4.66 billion to RMB 10.79 billion Summary of Cash Flow Statement | Item | H1 2023 (RMB thousands) | H1 2022 (RMB thousands) | | :--- | :--- | :--- | | Net Cash Generated from Operating Activities | 1,938,954 | 2,124,023 | | Net Cash (Used in) / Generated from Investing Activities | (2,709,232) | 3,182,282 | | Net Cash Generated from Financing Activities | 5,431,320 | 3,169,399 | | Net Increase in Cash and Cash Equivalents | 4,661,042 | 8,475,704 | [Notes to the Interim Condensed Consolidated Financial Information](index=9&type=section&id=Notes%20to%20the%20Interim%20Condensed%20Consolidated%20Financial%20Information) These notes detail the basis of preparation, accounting policies, segment information, revenue and expense breakdowns, and balance sheet items, highlighting that tissue products are the primary revenue source (58.7%), short-term borrowings significantly increased, and an interim dividend of RMB 0.70 per share is proposed [Segment Information](index=16&type=section&id=Segment%20Information) The group operates in four segments: feminine care, disposable diapers, tissue, and others; in H1 2023, tissue products were the largest revenue contributor at 58.7% (22.7% growth), feminine care accounted for 26.4% (2.9% growth), and disposable diapers 5.5% (5.0% growth), with feminine care generating the highest segment profit of RMB 1.15 billion H1 2023 Segment Revenue and Profit (RMB thousands) | Segment | Revenue | % of Total | Segment Profit | | :--- | :--- | :--- | :--- | | Feminine Care Products | 3,219,295 | 26.4% | 1,149,778 | | Disposable Diaper Products | 665,304 | 5.5% | 30,152 | | Tissue Products | 7,170,110 | 58.7% | 5,180 | | Others | 1,149,896 | 9.4% | 40,350 | [Dividends](index=21&type=section&id=Dividends) The Board recommends an interim dividend of RMB 0.70 per share for the six months ended June 30, 2023, consistent with the prior year, totaling approximately RMB 813.49 million - The Board recommends an interim dividend of **RMB 0.70 per share**, consistent with H1 2022, with a total dividend amount of approximately **RMB 813 million**[60](index=60&type=chunk) [Borrowings](index=26&type=section&id=Borrowings) As of June 30, 2023, total group borrowings significantly increased to RMB 23.86 billion from RMB 17.03 billion at year-end 2022, with short-term borrowings (including super short-term commercial papers) accounting for the majority at RMB 23.66 billion, and the average annual borrowing interest rate was approximately 3.31% Borrowing Structure (RMB thousands) | Item | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Long-term Borrowings | 201,251 | 2,001,334 | | Short-term Borrowings | 23,658,741 | 15,028,618 | | **Total** | **23,859,992** | **17,029,952** | - In H1 2023, the company issued four tranches of super short-term commercial papers totaling **RMB 5 billion**, with interest rates ranging from **2.39% to 2.40%**[75](index=75&type=chunk) [Business Overview and Management Discussion](index=33&type=section&id=Business%20Overview%20and%20Management%20Discussion) This section provides an overview of the group's business performance, segment-specific results, e-commerce developments, financial position, corporate social responsibility initiatives, and future strategic outlook [Overall Business Review](index=33&type=section&id=Overall%20Business%20Review) In H1 2023, overall group revenue grew 9.0%, with core business revenue (tissue, feminine care, diapers) up 15.1%; however, gross margin declined to 31.0% due to high-cost raw material inventory, while e-commerce sales increased by approximately 30% to nearly 29.0% of total sales, and profit attributable to owners decreased 4.0% to RMB 1.23 billion - The group's three core businesses (tissue, feminine care, and diapers) maintained strong revenue growth in H1, increasing by approximately **15.1% year-on-year**[97](index=97&type=chunk) - E-commerce sales (including Retail Link and New Channels) further increased to nearly **29.0% of total sales**, growing by approximately **30.0% year-on-year**[97](index=97&type=chunk) - Overall gross margin declined to approximately **31.0%** (35.2% in the prior year) due to high-cost wood pulp inventory, but is expected to improve in H2[98](index=98&type=chunk) [Segment Business Performance](index=35&type=section&id=Segment%20Business%20Performance) All core businesses recorded sales growth, with tissue products revenue significantly up 22.7% but under gross margin pressure, feminine care revenue up 2.9% with declining gross margin due to raw material costs, and diaper products revenue rebounding with 5.0% growth, driven by strong adult diaper sales and improved gross margin [Feminine Care Business](index=35&type=section&id=Feminine%20Care%20Business) Feminine care sales revenue increased 2.9% year-on-year to RMB 3.22 billion, driven by product upgrades and new channel expansion despite intense market competition, with "Pants-style" products growing over 76.0%, though gross margin decreased 3.5 percentage points to 61.8% due to rising raw material prices Feminine Care Business Performance | Metric | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Sales Revenue (RMB thousands) | 3,219,295 | 3,128,524 | | Growth Rate | +2.9% | - | | Gross Margin | 61.8% | 65.3% | - "Pants-style" series products showed significant growth potential, increasing by over **76.0% year-on-year** during the period[100](index=100&type=chunk) [Tissue Business](index=37&type=section&id=Tissue%20Business) Tissue business sales revenue significantly increased 22.7% to RMB 7.17 billion, driven by stable pricing and omni-channel sales, with high-end "Cloud Soft" series sales growing over 40%; however, gross margin declined to 17.7% due to high-cost wood pulp inventory but is expected to improve in H2, and e-commerce channel sales grew over 40% Tissue Business Performance | Metric | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Sales Revenue (RMB thousands) | 7,170,110 | 5,842,612 | | Growth Rate | +22.7% | - | | Gross Margin | 17.7% | 23.1% | - Sales of the high-end "Cloud Soft" series recorded over **40.0% growth**, accounting for over **12.0% of total tissue sales**[101](index=101&type=chunk) - Tissue business sales through e-commerce channels grew over **40.0%**, representing approximately **33.3% of tissue sales**[101](index=101&type=chunk) [Diaper Business](index=38&type=section&id=Diaper%20Business) Diaper business sales rebounded with a 5.0% year-on-year increase to RMB 665 million, driven by nearly 19.1% growth in high-end "Q • MO" products (over 35% of sales) and strong adult diaper sales (nearly 45.1% increase), leading to an improved gross margin of 36.0% due to a higher proportion of high-margin products Diaper Business Performance | Metric | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Sales Revenue (RMB thousands) | 665,304 | 633,513 | | Growth Rate | +5.0% | - | | Gross Margin | 36.0% | 35.3% | - Sales of high-end "Q • MO" products increased by approximately **19.1% year-on-year**, with their proportion rising to over **35.0%**[103](index=103&type=chunk) - Adult diaper business recorded an increase of approximately **45.1%**, accounting for about **29.2%** of the segment[103](index=103&type=chunk) [Other Revenue and Household Products Business](index=40&type=section&id=Other%20Revenue%20and%20Household%20Products%20Business) Other revenue decreased 27.9% year-on-year to RMB 1.15 billion, primarily due to a significant 34.7% decline in raw material trading business revenue, while household products revenue also fell 26.1%, and sales of medical-related products significantly decreased due to reduced demand post-pandemic - Other revenue decreased by approximately **27.9% year-on-year**, primarily due to a significant decline of approximately **34.7%** in raw material trading business revenue to approximately **RMB 580 million**[105](index=105&type=chunk) [E-commerce and New Retail Channels](index=41&type=section&id=E-commerce%20and%20New%20Retail%20Channels) The group's e-commerce and new retail channels maintained strong momentum in H1 2023, with sales revenue growing over 30.0% to more than RMB 3.5 billion, increasing their contribution to overall group sales to approximately 29.0%, and new retail channels now contribute over 30%, 20%, and 50% to tissue, feminine care, and diaper sales, respectively E-commerce Channel Performance | Metric | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Sales Revenue (RMB) | Over approximately 3.5 billion | Approximately 2.7 billion | | Growth Rate | Over 30.0% | - | | % of Total Group Sales | Approximately 29.0% | 24.2% | [Financial Position Analysis](index=42&type=section&id=Financial%20Position%20Analysis) The group's financial position remains robust, with sales and administrative expenses increasing 19.8% due to higher online marketing investment, and operating exchange losses from RMB depreciation narrowed significantly to approximately RMB 182 million, maintaining a net cash position with a net debt-to-equity ratio of negative 23.9% [Liquidity, Financial Resources and Bank Borrowings](index=42&type=section&id=Liquidity%2C%20Financial%20Resources%20and%20Bank%20Borrowings) As of June 30, 2023, the group held approximately RMB 28.65 billion in cash and bank deposits, with the debt-to-equity ratio increasing to 119.1% from 87.2% at year-end, and a net debt-to-equity ratio of negative 23.9% indicating a net cash position, while RMB 5 billion in super short-term commercial papers were issued during the period Financial Ratios | Metric | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Debt-to-Equity Ratio | 119.1% | 87.2% | | Net Debt-to-Equity Ratio | -23.9% | -23.2% | - From February to May 2023, the group completed the issuance of four tranches of super short-term commercial papers totaling **RMB 5 billion**, with coupon rates ranging from **2.39% to 2.4%**[113](index=113&type=chunk) [Corporate Social Responsibility](index=45&type=section&id=Corporate%20Social%20Responsibility) The group continues to advance sustainable development, improving its FTSE Russell ESG rating to 3.1 and being included in S&P Global's "Sustainability Yearbook 2023 (China Edition)," actively fulfilling social responsibilities across innovation, philanthropy, low-carbon environmental protection, employee development, and health and safety - The group's FTSE Russell ESG rating improved to **3.1 points**, leading to its inclusion in the FTSE4Good Index[117](index=117&type=chunk) - The group joined the Green Recycled Plastic Supply Chain Joint Working Group (GRPG) as Vice Chairman to promote plastic source reduction, and all six of its paper manufacturing companies obtained **FSC/CoC certification**[120](index=120&type=chunk) [Future Outlook](index=48&type=section&id=Future%20Outlook) Looking ahead to H2, the group anticipates improved gross margins for tissue products due to falling wood pulp prices, and will continue its core strategies of "focusing on main business," "enhancing brand," and "long-termism," concentrating on tissue, feminine care, and diaper businesses, while further elevating brand image, accelerating product premiumization, and planning capacity expansion in Fujian, Xiaogan, and Hunan to solidify market leadership - The positive impact of declining wood pulp prices is expected to be reflected in tissue business costs in H2, leading to an improvement in gross margin[125](index=125&type=chunk) - The group will continue to implement three core strategies: "Focusing on Main Business," "Enhancing Brand," and "Long-termism"[125](index=125&type=chunk) - Plans are underway to expand production capacity in regions including Fujian, Xiaogan, Hunan, and Yunfu, Guangdong, with some new capacity expected to commence operations in H2 2023[126](index=126&type=chunk) [Other Company Information](index=50&type=section&id=Other%20Company%20Information) This section provides details on the interim dividend declaration and updates regarding the company's corporate governance practices [Interim Dividend and Closure of Register of Members](index=50&type=section&id=Interim%20Dividend%20and%20Closure%20of%20Register%20of%20Members) The Board announced an interim dividend of RMB 0.70 per share, consistent with the prior year, payable on October 12, 2023, to shareholders on record as of September 22, 2023 - An interim dividend of **RMB 0.70 per share** has been declared, consistent with H1 2022[127](index=127&type=chunk) [Corporate Governance](index=51&type=section&id=Corporate%20Governance) The group is committed to high corporate governance standards, complying with all applicable Code on Corporate Governance provisions during the period, except for two independent non-executive directors' absence from the AGM and one executive director's inadvertent purchase of company shares during a blackout period, violating the Model Code - Executive Director Mr. Xu Qingliu inadvertently purchased **100,000 company shares** on March 22, 2023, during a director dealing blackout period, violating the Model Code[130](index=130&type=chunk)

Financial Performance - In 2022, the company's revenue reached RMB 22,615.9 million, an increase from RMB 20,790.1 million in 2021, representing a growth of approximately 8.8%[11] - The net profit attributable to equity holders of the company for 2022 was RMB 1,925.2 million, down from RMB 3,273.6 million in 2021, reflecting a decrease of about 41.2%[11] - The basic earnings per share for 2022 was RMB 1.657, compared to RMB 2.786 in 2021, indicating a decline of approximately 40.5%[11] - The gross profit margin decreased to 8.5% in 2022 from 15.7% in 2021, showing a significant drop of 7.2 percentage points[8] - The overall gross profit decreased by approximately 1.1% to about RMB 7,689,499,000, with the gross profit margin dropping to approximately 34.0% from 37.4% in 2021[36] - Operating profit fell by approximately 36.9% to about RMB 2,869,154,000, influenced by significant foreign exchange losses of approximately RMB 912,865,000[36] - Profit attributable to equity holders decreased by approximately 41.2% to RMB 1,925,249,000, with basic earnings per share at approximately RMB 1.657, down from RMB 2.786 in 2021[36] Revenue Breakdown - The group's revenue for the year ended December 31, 2022, was approximately RMB 22,615,878,000, an increase of 8.8% compared to RMB 20,790,144,000 in 2021[26] - E-commerce sales accounted for approximately 26.9% of total sales, while other new retail channels exceeded 13.0% of total sales[27] - The adult incontinence product sales continued to show strong growth, accounting for about 23.7% of total diaper sales[28] - Sales revenue from the sanitary napkin business increased by approximately 0.7% to about RMB 6,156,060,000, accounting for approximately 27.2% of total revenue[39] - In 2022, tissue sales revenue increased by approximately 24.4% to about RMB 12,248,011,000, accounting for 54.2% of total revenue[43] - The disposable diaper products segment reported revenue of RMB 1,202,347,000, down from RMB 1,219,445,000 in the previous year[1] - Revenue from the China region accounted for 91.8% of total revenue, with RMB 20,785,192,000 in 2022 compared to RMB 19,871,284,000 in 2021[2] Dividends and Reserves - The board proposed a final dividend of RMB 0.70 per share, maintaining the same level as the previous year, resulting in a total annual dividend of RMB 1.40 per share, down from RMB 1.70 in 2021[26] - The group's distributable reserves increased to RMB 8,847,043,000 in 2022 from RMB 7,581,252,000 in 2021[4] - The board declared an interim dividend of RMB 0.70 per share, down from RMB 1.00 per share in the previous year, totaling RMB 813,485,000[3] Debt and Financial Position - The company's debt ratio improved to 87.2% in 2022 from 95.7% in 2021, indicating a reduction in financial leverage[8] - The company's bank loans and other borrowings amounted to approximately RMB 17.03 billion, down from RMB 18.23 billion a year earlier[61] - The net debt ratio was approximately -23.2% as of December 31, 2022, compared to -21.3% a year prior, indicating a net cash position[63] Market Strategy and Product Development - The company plans to focus on expanding its product lines, including new personal care and hygiene products, to enhance market presence[18] - The company aims to strengthen its brand image and corporate culture to align with consumer and market demands[3] - The company is committed to developing high-end products and optimizing its product mix to improve market share and brand reputation[28] - The company plans to maintain stable pricing strategies while enhancing product upgrades and high-end offerings to capture market share[38] - The company aims to enhance its all-channel sales capabilities and strengthen its competitive advantages to capture growth opportunities from domestic consumption upgrades[29] Sustainability and Corporate Social Responsibility - The company is focused on sustainable development and has improved its ESG rating from B to BB, surpassing 78% of its peers in sustainability assessments[67] - The company is committed to innovation, developing eco-friendly products, and has established a comprehensive R&D system to meet consumer demands for green products[70] - In 2022, the company donated RMB 520,000 worth of hygiene products to earthquake-affected areas and invested RMB 1.73 million in women's health and education initiatives[71] - The company achieved a paper water reuse rate of over 99%, with a water consumption of 5.6 tons per ton of paper, well below the national standard limit[72] Management and Governance - The company has a strong focus on risk management and internal auditing, led by the Chief Risk Officer with over 34 years of experience in management and marketing[108] - The board consists of 15 directors, including 10 executive directors and 5 independent non-executive directors, ensuring a balance of expertise and governance[115] - The company has established an ISO 45001 occupational health and safety management system and has not reported any work-related fatalities in 2022, with an occupational disease incidence rate of 0[77] - The company has adopted a board diversity policy, with a current composition of 15 directors, including five independent non-executive directors[126] Employee and Community Engagement - As of the end of 2022, the company had approximately 23,000 employees, with a female employee ratio of 58%, and a total training hours exceeding 260,000[75] - The company is actively involved in charitable activities and community service, reflecting its corporate social responsibility initiatives[93] Future Outlook - The outlook for 2023 anticipates a gradual release of consumer demand and steady economic recovery in China, with a focus on high-end strategies for future development[28] - The company plans to expand production capacity and upgrade technology, including establishing a new base for sanitary napkins, diapers, and wet wipes in Fujian, with new capacity expected to be operational in 2024[81]