[Chairman's Report](index=5&type=section&id=Chairman%27s%20Report) The Group achieved a transformative breakthrough in 2020, resuming operations in March and strategically entering the cold chain logistics industry, while pursuing diversification in energy, environmental, and innovative technologies - In 2020, facing the COVID-19 pandemic, the Group designated the year as a 'transformative breakthrough year' and resumed production and operations in March[8](index=8&type=chunk) - The Group made a strategic decision to develop supply chain management business primarily focused on cold storage and cold chain supply, capitalizing on the rapid growth opportunities in China's cold chain logistics industry[8](index=8&type=chunk) - The Group will continue to seek acquisition, investment, or joint venture opportunities in energy saving, environmental protection, innovative technologies, and supply chain services to achieve business diversification and profit growth[10](index=10&type=chunk) [Management Discussion and Analysis](index=6&type=section&id=Management%20Discussion%20and%20Analysis) [Business Review](index=6&type=section&id=Business%20Review) The Group focused on automotive HVAC components and supply chain management, achieving significant revenue growth to **RMB 63.8 million** in automotive parts and narrowing losses, while formally entering the cold chain business with its first operational cold storage area - The Group's business is divided into two segments: trading, manufacturing, and R&D of automotive HVAC components; and the newly added supply chain management business for cold storage and cold chain supply[12](index=12&type=chunk) - The Group introduced Fuzhou Anda by selling a **40% equity stake** in Shuanghua Supply Chain to jointly develop cold storage services, and established a joint venture with Shanghai Lidaxing to expand into the supply chain services industry[15](index=15&type=chunk)[16](index=16&type=chunk) - The first cold storage area has been completed and put into operation, laying the foundation for the Group's supply chain management business development[16](index=16&type=chunk) [Outlook and Strategies](index=8&type=section&id=Outlook%20and%20Strategies) The Group will focus on four core strategies: deepening its presence in the domestic automotive aftermarket, expanding cold storage and cold chain supply, developing refrigerated vehicle business leveraging its refrigeration system expertise, and building an IoT cold chain ecosystem to enhance competitiveness and achieve long-term sustainable growth - Continuously deepen presence in the domestic automotive aftermarket, strengthening cooperation with major distributors and developing secondary and tertiary sales networks[19](index=19&type=chunk)[21](index=21&type=chunk) - Focus on developing cold storage and cold chain supply businesses to meet the rapidly growing market demand from fresh food e-commerce and other sectors[20](index=20&type=chunk)[22](index=22&type=chunk) - Leverage existing technology and experience to develop HVAC and refrigeration systems for refrigerated vehicles, and seek cooperation with major OES partners[23](index=23&type=chunk) - Plan to build an IoT-enabled supply chain ecosystem from farm to table, extending services to cold chain processing, transportation, and e-commerce to achieve business upgrades[24](index=24&type=chunk) [Financial Review](index=10&type=section&id=Financial%20Review) In fiscal year 2020, the Group's financial performance significantly improved, with total revenue growing **123.1%** year-on-year to **RMB 63.8 million**, driven by high-margin products like compressors in the domestic market, turning gross profit from a **RMB 5.7 million** loss to a **RMB 9.6 million** gain, and narrowing net loss attributable to owners from **RMB 31.4 million** to **RMB 5.2 million** Revenue by Product and Region for Fiscal Year 2020 | Category | Product | 2020 Revenue (RMB Thousand) | Share | 2019 Revenue (RMB Thousand) | Share | | :--- | :--- | :--- | :--- | :--- | :--- | | **Domestic** | **Subtotal** | **58,522** | **91.7%** | **25,156** | **87.9%** | | | Compressors | 21,680 | 34.0% | – | – | | | Evaporators | 15,278 | 23.9% | 16,657 | 58.2% | | | Condensers | 10,901 | 17.1% | 6,978 | 24.4% | | | Others | 10,663 | 16.7% | 1,521 | 5.3% | | **International** | **Subtotal** | **5,271** | **8.3%** | **3,460** | **12.1%** | | | Compressors | 4,391 | 6.9% | – | – | | | Others | 880 | 1.4% | 3,460 | 12.1% | | **Total** | | **63,793** | **100.0%** | **28,616** | **100.0%** | - Gross profit turned from a **RMB 5.7 million** gross loss in 2019 to a **RMB 9.6 million** gross profit in 2020, with gross margin improving from **-19.9%** to **15.0%**, primarily due to increased sales of high-margin products such as compressors[28](index=28&type=chunk) - Administrative expenses decreased by **12.2%** year-on-year to **RMB 25.9 million**, mainly due to reduced consulting fees and employee termination benefits[32](index=32&type=chunk) - Loss attributable to owners of the Company significantly decreased from **RMB 31.4 million** in 2019 to **RMB 5.2 million** in 2020[37](index=37&type=chunk) [Liquidity and Financial Resources](index=13&type=section&id=Liquidity%20and%20Financial%20Resources) As of the end of 2020, the Group maintained a sound financial position with no bank borrowings, and cash and equivalents, restricted deposits, and financial assets totaling approximately **RMB 121.9 million**, while net current assets decreased from **RMB 170.8 million** to **RMB 134.4 million**, and operating efficiency significantly improved with reduced inventory and accounts receivable turnover days - As of December 31, 2020, the Group had no bank borrowings, with cash, restricted time deposits, and financial assets totaling approximately **RMB 121.9 million**[40](index=40&type=chunk) Changes in Working Capital Turnover Days | Indicator | 2020 (Days) | 2019 (Days) | Reason for Change | | :--- | :--- | :--- | :--- | | Average inventory turnover days | 140 | 308 | Increased inventory sales | | Average accounts receivable and bills receivable turnover days | 116 | 359 | Increased sales revenue, overall turnover rate improved | | Average accounts payable and bills payable turnover days | 110 | 156 | Management accelerated repayment speed | [Capital Expenditure, Commitments, and Human Resources](index=14&type=section&id=Capital%20Expenditure%2C%20Commitments%2C%20and%20Human%20Resources) Capital expenditure significantly increased to **RMB 49.1 million** this year, primarily for new machinery and construction in progress, while the number of employees grew from **64** to **140** to support business expansion, with total remuneration (excluding directors) of approximately **RMB 9.4 million**, and the Group strictly adheres to labor laws, providing comprehensive social insurance and benefits - Capital expenditure was approximately **RMB 49.1 million**, a significant year-on-year increase, primarily for new machinery and construction in progress[44](index=44&type=chunk) - By year-end, the Group's total number of employees increased from **64** to **140**[44](index=44&type=chunk) [Significant Investments, Acquisitions, and Disposals](index=14&type=section&id=Significant%20Investments%2C%20Acquisitions%2C%20and%20Disposals) This year, the Group executed two key strategic transactions to establish its supply chain business: selling a **40% equity stake** in Shuanghua Supply Chain to independent third-party Fuzhou Anda to introduce industry expertise, and forming a joint venture, Lidaxing Supply Chain, with Shanghai Lidaxing, holding a **70% stake**, to expand Shanghai-centric supply chain services - Disposed of a **40% equity stake** in Shuanghua Supply Chain to Fuzhou Anda for **RMB 1** and payment of unpaid capital contribution of **RMB 8.0 million**, aiming to jointly develop cold storage business[46](index=46&type=chunk) - Established a joint venture, Lidaxing Supply Chain, with Shanghai Lidaxing, with the Group contributing **RMB 10.5 million** and holding a **70% equity stake**, making it an indirect non-wholly owned subsidiary[46](index=46&type=chunk) [Other Financial Information](index=15&type=section&id=Other%20Financial%20Information) The Group, primarily operating in China, faces RMB exchange rate fluctuations against HKD and USD without hedging, had no significant contingent liabilities or asset pledges at year-end, fully utilized the remaining **RMB 10.0 million** IPO proceeds, and the Board recommended no final dividend, while post-reporting period, the Group increased its equity stake in Anhui Shuanghua - The remaining IPO proceeds of approximately **RMB 10.0 million** were fully utilized this year for plant facilities, equipment upgrades, and general working capital[55](index=55&type=chunk) - The Board recommended no final dividend for the year ended December 31, 2020[56](index=56&type=chunk) - Subsequent to the reporting period, on February 10, 2021, the Group acquired approximately **13.51%** equity interest in Anhui Shuanghua for **RMB 4.6 million** in cash[57](index=57&type=chunk) [Directors' Report](index=17&type=section&id=Directors%27%20Report) [Principal Risks and Uncertainties](index=17&type=section&id=Principal%20Risks%20and%20Uncertainties) The Group faces principal risks including macroeconomic changes impacting product demand, policy impacts on automotive sales, intense industry competition, operational risks from internal processes or external events, and financial risks such as credit, foreign exchange, and liquidity, which management continuously monitors and addresses - The Group faces multi-faceted risks including macroeconomic, policy and regulatory, intense competition, operational, and financial risks[63](index=63&type=chunk) [Directors' and Equity Interests](index=19&type=section&id=Directors%27%20and%20Equity%20Interests) The Board of Directors remained stable during the reporting period, with Chairman and CEO Mr. Zheng Ping holding a **43.5%** stake through Youshen Group as the controlling shareholder, his spouse Ms. Kong Xiaoling (Non-executive Director) deemed to have the same interest, and Ms. Zhou Shuxian and Mr. Xu Zonglin holding **18.5%** and **9.1%** respectively as major shareholders Shareholding of Directors and Major Shareholders (as at December 31, 2020) | Shareholder Name/Entity | Capacity/Relationship | Number of Shares | Percentage of Issued Share Capital | | :--- | :--- | :--- | :--- | | Mr. Zheng Ping | Executive Director, held through Youshen Group | 282,750,000 | 43.5% | | Ms. Kong Xiaoling | Non-executive Director, spouse of Mr. Zheng Ping | 282,750,000 | 43.5% | | Youshen Group | Controlling Shareholder (wholly owned by Mr. Zheng Ping) | 282,750,000 | 43.5% | | Ms. Zhou Shuxian | Major Shareholder | 120,160,000 | 18.5% | | Mr. Xu Zonglin | Major Shareholder | 59,144,000 | 9.1% | [Major Customers and Suppliers](index=23&type=section&id=Major%20Customers%20and%20Suppliers) This year, the Group experienced high customer and supplier concentration, with the largest customer accounting for **39.1%** of total sales and the top five customers collectively **68.5%**, while the largest supplier accounted for **23.0%** of total purchases and the top five suppliers collectively **87.5%**, maintaining good relationships with most major partners for over five years Customer and Supplier Concentration | Category | Share | | :--- | :--- | | **Sales** | | | Largest Customer | 39.1% | | Top Five Customers Total | 68.5% | | **Purchases** | | | Largest Supplier | 23.0% | | Top Five Suppliers Total | 87.5% | [Biographies of Directors and Senior Management](index=26&type=section&id=Biographies%20of%20Directors%20and%20Senior%20Management) [Biographies of Directors and Senior Management](index=26&type=section&id=Biographies%20of%20Directors%20and%20Senior%20Management) This section details the personal biographies of the Company's executive directors, non-executive directors, independent non-executive directors, and senior management, covering their age, positions, professional backgrounds, industry experience, and key responsibilities within the Group, notably with Mr. Zheng Ping, the Group's founder, serving as an executive director, alongside his daughter Ms. Zheng Fei and spouse Ms. Kong Xiaoling on the Board - Mr. Zheng Ping, the Group's founder, serves as Executive Director, Chairman, and Chief Executive Officer, responsible for the Group's overall development strategy[111](index=111&type=chunk) - Ms. Zheng Fei (daughter of Mr. Zheng Ping) is an Executive Director and Vice President, responsible for overseeing business operations and strategy execution[112](index=112&type=chunk) - Ms. Kong Xiaoling (spouse of Mr. Zheng Ping) is a Non-executive Director, responsible for monitoring the Board and providing advice[115](index=115&type=chunk) [Corporate Governance Report](index=29&type=section&id=Corporate%20Governance%20Report) [Board and Committee Operations](index=29&type=section&id=Board%20and%20Committee%20Operations) This year, the Company complied with most Corporate Governance Code provisions, with a deviation where the Chairman and CEO roles were combined by Mr. Zheng Ping, while the Board, comprising **7** members including **3** independent non-executive directors, held **7** meetings, and its Nomination, Remuneration, and Audit Committees, all chaired by independent non-executive directors, convened regularly to fulfill their duties - The Company deviated from Corporate Governance Code provision A.2.1, with the roles of Chairman and Chief Executive Officer combined by Mr. Zheng Ping, a structure the Board believes facilitates swift decision-making[124](index=124&type=chunk)[131](index=131&type=chunk) - The Board has a Nomination Committee, Remuneration Committee, and Audit Committee, all chaired by independent non-executive directors, which held **2**, **2**, and **5** meetings respectively during the year[144](index=144&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk) [Risk Management and Internal Control](index=37&type=section&id=Risk%20Management%20and%20Internal%20Control) The Board holds ultimate responsibility for the Group's risk management and internal control systems, reviewing their effectiveness, and has established control procedures, including organizational structure and authorization, to safeguard assets, ensure compliance, and maintain financial information reliability, with the Audit Committee assisting in two annual reviews, concluding the systems operated effectively without significant risks or non-compliance this year - The Board is responsible for the Group's risk management and internal control systems and reviews their effectiveness annually[156](index=156&type=chunk) - As of the end of 2020, the Group's risk management and internal control systems operated effectively, with no material breaches or significant risks identified[156](index=156&type=chunk) [Environmental, Social and Governance (ESG)](index=37&type=section&id=Environmental%2C%20Social%20and%20Governance%20%28ESG%29) The Group is committed to sustainable development, demonstrating environmental efforts through improved production processes and waste treatment facilities, resulting in reduced unit product consumption of electricity, water, and packaging in 2020, while socially, it strictly adheres to labor regulations, ensures employee health, safety, and development training, established supply chain management procedures, and actively participates in community investment through various donations to charities, disaster areas, and research institutes over the years Changes in Energy and Resource Consumption | Year | Unit Electricity Consumption (kWh/unit) | Unit Water Consumption (tons/unit) | Unit Packaging Consumption (kg/unit) | | :--- | :--- | :--- | :--- | | 2019 | 6.74 | 0.09 | 0.63 | | 2020 | 5.06 | 0.03 | 0.32 | - As of the end of 2020, the Group had a total of **140** employees, comprising **56** females and **84** males, with no work-related injuries or fatalities reported during the year[173](index=173&type=chunk)[176](index=176&type=chunk) - The Group strictly adheres to labor standards, prohibiting child and forced labor, and provides comprehensive social insurance and benefits to employees[178](index=178&type=chunk) - The Group actively fulfills its social responsibilities, donating **RMB 2,000,000** to the 'Huangshan United Institute of Applied Technology' in 2019[186](index=186&type=chunk) [Independent Auditor's Report](index=48&type=section&id=Independent%20Auditor%27s%20Report) [Independent Auditor's Report](index=48&type=section&id=Independent%20Auditor%27s%20Report) Auditor BDO Limited issued an unmodified opinion on the Group's consolidated financial statements for the year ended December 31, 2020, affirming they present a true and fair view of the Group's financial position and performance, highlighting key audit matters including impairment assessment of property, plant and equipment and right-of-use assets, and impairment provision for inventories, both involving significant management judgment and estimation - The auditor issued an unmodified opinion on the 2020 consolidated financial statements[195](index=195&type=chunk) - Key audit matters include: - **Impairment of property, plant and equipment and right-of-use assets**: Management is required to assess impairment when indicators arise, involving significant judgments on future cash flows and discount rates - **Impairment provision for inventories**: Determining the net realizable value of inventories and provisions for obsolescence involves significant management judgment and estimation[199](index=199&type=chunk)[201](index=201&type=chunk) [Consolidated Financial Statements](index=53&type=section&id=Consolidated%20Financial%20Statements) [Consolidated Statement of Profit or Loss](index=53&type=section&id=Consolidated%20Statement%20of%20Profit%20or%20Loss) In fiscal year 2020, the Group's revenue grew **123.1%** year-on-year to **RMB 63.8 million**, with gross profit turning from a **RMB 5.7 million** loss to a **RMB 9.6 million** gain, and annual loss significantly narrowed from **RMB 31.5 million** to **RMB 7.1 million**, while loss attributable to owners of the parent company narrowed from **RMB 31.4 million** to **RMB 5.2 million** Consolidated Statement of Profit or Loss Summary (For the year ended December 31) | Indicator (RMB Thousand) | 2020 | 2019 | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Revenue | 63,793 | 28,616 | +123.1% | | Gross Profit/(Loss) | 9,597 | (5,738) | Turned to Profit | | Loss before tax | (8,008) | (33,099) | Loss narrowed 75.8% | | Loss for the year | (7,127) | (31,548) | Loss narrowed 77.4% | | Loss attributable to owners of the parent | (5,153) | (31,377) | Loss narrowed 83.6% | | Basic loss per share | RMB (0.8) cents | RMB (4.8) cents | - | [Consolidated Statement of Financial Position](index=55&type=section&id=Consolidated%20Statement%20of%20Financial%20Position) As of the end of 2020, the Group's total assets slightly increased to **RMB 383 million**, with non-current assets rising to **RMB 207 million** due to increased property, plant, and equipment, while current assets decreased to **RMB 176 million** mainly due to reduced restricted time deposits, total liabilities increased to **RMB 43.4 million**, and net assets remained stable at approximately **RMB 339 million** Consolidated Statement of Financial Position Summary (As at December 31) | Indicator (RMB Thousand) | 2020 | 2019 | | :--- | :--- | :--- | | **Assets** | | | | Total non-current assets | 207,149 | 169,708 | | Total current assets | 175,672 | 195,548 | | **Total Assets** | **382,821** | **365,256** | | **Liabilities and Equity** | | | | Total current liabilities | 41,231 | 24,787 | | Total non-current liabilities | 2,205 | 2,208 | | **Total Liabilities** | **43,436** | **26,995** | | **Net Assets** | **339,385** | **338,261** | | Equity attributable to owners of the parent | 333,327 | 333,429 | | Non-controlling interests | 6,058 | 4,832 | | **Total Equity** | **339,385** | **338,261** | [Consolidated Statement of Cash Flows](index=58&type=section&id=Consolidated%20Statement%20of%20Cash%20Flows) In fiscal year 2020, the Group's net increase in cash and cash equivalents was **RMB 1.7 million**, with cash outflow from operating activities significantly improving from a net outflow of **RMB 18.0 million** to **RMB 0.7 million**, and investing activities shifting from a net outflow of **RMB 73.8 million** to a net inflow of **RMB 3.4 million**, primarily due to a substantial decrease in restricted time deposits, while cash outflow from financing activities remained low Consolidated Statement of Cash Flows Summary (For the year ended December 31) | Indicator (RMB Thousand) | 2020 | 2019 | | :--- | :--- | :--- | | Net cash flows used in operating activities | (658) | (17,995) | | Net cash flows from/(used in) investing activities | 3,383 | (73,779) | | Net cash flows used in financing activities | (1,062) | (1,337) | | **Net increase/(decrease) in cash and cash equivalents** | **1,663** | **(93,111)** | | Cash and cash equivalents at beginning of year | 17,995 | 109,825 | | **Cash and cash equivalents at end of year** | **19,587** | **17,995** | [Five-Year Financial Summary](index=121&type=section&id=Five-Year%20Financial%20Summary) [Five-Year Financial Summary](index=121&type=section&id=Five-Year%20Financial%20Summary) This section provides a summary of the Group's key financial data for five consecutive fiscal years from 2016 to 2020, showing a continuous decline in revenue from 2016 to 2019 followed by a strong rebound in 2020, with the lowest annual loss in 2020 despite losses in all five years, while total assets remained relatively stable and total liabilities rebounded in 2020 Five-Year Financial Data Summary (RMB Thousand) | Indicator | 2016 | 2017 | 2018 | 2019 | 2020 | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 120,749 | 83,751 | 55,166 | 28,616 | 63,793 | | Gross Profit/(Loss) | 12,307 | 11,428 | 10,853 | (5,738) | 9,597 | | Loss for the year | (16,346) | (17,187) | (13,245) | (31,548) | (7,127) | | Total Assets | 448,111 | 430,317 | 409,175 | 365,256 | 382,821 | | Total Liabilities | (50,737) | (51,990) | (44,368) | (26,995) | (43,436) |

Financial Performance - For the six months ended June 30, 2020, the company achieved sales revenue of approximately RMB 338 million, representing a year-on-year increase of about 107.4% or RMB 175 million [8]. - The company recorded a loss attributable to owners of the company of approximately RMB 42 million, an improvement of about RMB 38 million compared to a loss of RMB 80 million in the same period last year [10]. - International sales revenue for the six months ended June 30, 2020, was approximately RMB 12 million, significantly impacted by global pandemic and trade disruptions [10]. - The company's revenue for the six months ended June 30, 2020, was approximately RMB 33.8 million, an increase of about RMB 17.5 million or 107.4% compared to RMB 16.3 million in the same period of 2019 [22]. - The gross profit for the six months ended June 30, 2020, was approximately RMB 7.6 million, a significant improvement from a loss of RMB 2.2 million in the same period of 2019 [26]. - The company reported a net loss of RMB 4,233,000, compared to a net loss of RMB 7,988,000 for the same period in 2019, indicating a 47% improvement in loss [85]. - The company incurred a loss before tax of RMB 6,344,000, an improvement from a loss of RMB 8,209,000 in the previous year, reflecting a reduction in losses by 22.7% [80]. - The total comprehensive loss for the period was RMB 5,137,000, compared to a total comprehensive loss of RMB 7,988,000 in the previous year, showing a 36% reduction in comprehensive loss [85]. Sales and Market Strategy - Domestic sales revenue amounted to approximately RMB 326 million, with sales of evaporators, condensers, and compressors contributing approximately RMB 79 million, RMB 72 million, and RMB 162 million respectively [8]. - The company has strengthened cooperation with major distributors in the domestic aftermarket, enhancing promotional efforts to reliable customers with established sales networks [8]. - The company plans to enhance sales efforts in the domestic aftermarket, focusing on collaboration with major dealers and expanding the sales network [16]. - The company has diversified its product line by adding automotive air conditioning compressors since the establishment of Huangshan Shuanghua Donglin Compressor Co., Ltd. in November 2019 [8]. Operational Developments - The company plans to utilize its vacant properties in Shanghai to develop cold storage and cold chain supply businesses, transitioning from traditional manufacturing to cold chain logistics services [11]. - The company has established a partnership with Fuzhou Anda Shengdong Logistics Co., Ltd. to transform part of its vacant properties into a large cold storage area [11]. - The first cold storage area began construction in June 2020 and is expected to be completed around October 2020, with a second cold storage area planned to start construction in December 2020 [17]. - The company recognizes the growing demand for cold chain logistics in China, driven by the rapid development of the e-commerce sector for fresh food [17]. Financial Position and Assets - As of June 30, 2020, the group's net current assets decreased to approximately RMB 167.8 million from RMB 170.8 million as of December 31, 2019 [38]. - The group's cash and cash equivalents as of June 30, 2020, were approximately RMB 141.9 million, down from RMB 154.8 million as of December 31, 2019 [39]. - The company has approximately RMB 10 million of unutilized funds from its IPO, with planned allocations of RMB 2 million for facility upgrades, RMB 3 million for equipment upgrades, and RMB 5 million for general working capital [49]. - The company’s total assets less current liabilities stood at RMB 334,376,000, slightly down from RMB 340,469,000 in the previous year [84]. - The company’s equity attributable to owners of the parent decreased to RMB 329,447,000 from RMB 333,429,000, a decline of 1.2% [84]. Expenses and Cost Management - Sales and distribution costs for the six months ended June 30, 2020, amounted to approximately RMB 2.5 million, an increase of about 92.3% year-on-year, primarily due to increased sales revenue and related transportation costs [31]. - Administrative expenses for the six months ended June 30, 2020, were approximately RMB 13.3 million, a 43.0% increase compared to the same period last year, mainly due to office expenses related to business recovery post-COVID-19 [32]. - The total remuneration for key management personnel decreased to RMB 1,079,000 in the first half of 2020 from RMB 1,189,000 in the same period of 2019, reflecting cost control measures [140]. Governance and Compliance - The company has established a nomination committee to recommend suitable directors and management personnel to enhance corporate strategy [72]. - The board diversity policy was adopted on March 5, 2019, aiming to improve company performance and promote long-term development through diverse board composition [74]. - The company has complied with the corporate governance code, with no significant deviations reported, except for specific provisions regarding the roles of the chairman and CEO [67][68]. - Independent non-executive directors have served for over nine years, and their reappointment will be addressed at the next annual general meeting [69]. Risk Management - The company is currently monitoring foreign exchange risks, particularly from fluctuations in HKD and USD against RMB, but has no intention to hedge these risks at present [46]. - The company has no assets pledged as collateral as of June 30, 2020 [48]. - The company has no collateral for trade receivables or payables as of June 30, 2020, maintaining a risk management strategy focused on credit monitoring [126]. Cash Flow and Investments - The net cash generated from investing activities increased significantly to RMB 18,194,000 in 2020, compared to RMB 10,763,000 in 2019, representing an increase of approximately 69% [87]. - The company reported a net cash inflow of RMB 8,945,000 for the six months ended June 30, 2020, compared to a net inflow of RMB 1,420,000 in the same period of 2019, indicating a significant improvement in cash flow [87]. - The company sold 40% equity in its wholly-owned subsidiary Shanghai Shuanghua Supply Chain Management Co., Ltd. for RMB 1 and unpaid capital of RMB 8 million, to Fuzhou Anda, with payments scheduled for August 31 and September 30, 2020 [44]. Audit and Financial Reporting - The company appointed a new auditor, RSM Hong Kong, after the resignation of Ernst & Young due to a disagreement over audit fees [53]. - The interim financial statements were approved by the board of directors on August 31, 2020 [153]. - The financial department, led by the finance manager, is responsible for determining the fair value measurement policies and procedures for financial instruments [145].

Financial Performance - For the year ended December 31, 2019, the company reported sales revenue of approximately RMB 286 million, a decrease of about RMB 266 million compared to the previous year[12]. - The company's revenue for the year ended December 31, 2019, was approximately RMB 286 million, a decrease of about RMB 266 million compared to RMB 552 million in the same period of 2018, representing a decline of approximately 48.2%[34]. - The group reported a loss attributable to owners of the company of approximately RMB 31.4 million for the year ended December 31, 2019, compared to a loss of RMB 13.2 million in the previous year[46]. - The gross profit for the year ended December 31, 2019, was approximately RMB 0.3 million, down from RMB 6.6 million in 2018, resulting in a gross margin decrease from 12.0% to 1.2%[37]. - Other income and gains increased to approximately RMB 15.1 million for the year ended December 31, 2019, compared to RMB 9.7 million in 2018, marking a growth of approximately 55.7%[39]. - The group's administrative expenses rose by approximately 34.6% to RMB 8.8 million for the year ended December 31, 2019, primarily due to increased consulting fees and employee costs[41]. - The group's total revenue for the year ended December 31, 2019, was approximately RMB 28.6 million, a decrease from RMB 55.2 million in 2018, representing a decline of 48.0%[35]. Market and Sales Strategy - Domestic market sales revenue was approximately RMB 252 million, with evaporator and condenser sales contributing approximately RMB 167 million and RMB 70 million, respectively[12]. - International market sales revenue was approximately RMB 35 million, with evaporator and condenser sales contributing approximately RMB 32 million and RMB 2 million, respectively[13]. - The company is focusing on the automotive aftermarket, large OEMs, and HVAC components in commercial refrigeration and ventilation to achieve sustainable growth[7]. - The company is actively adjusting its sales strategies to mitigate potential risks under unfavorable market conditions[8]. - The company plans to strengthen cooperation with major distributors across different regions in China to steadily increase its market share in the aftermarket[23]. - The company aims to maximize shareholder value by leveraging existing resources and diversifying its business areas[8]. - The company is aware of intense competition in the market and will continuously review and adjust its sales and marketing strategies to ensure sustainable development[77]. Production and Operations - The company has completed the relocation and installation of its main production line to the new Anhui factory, which has resumed operations[8]. - The relocation of production lines from Shanghai to Anhui is expected to reduce labor costs by approximately RMB 15,000 to RMB 20,000 per employee annually compared to Shanghai, as well as lower production costs due to reduced utility expenses[27]. - The company is focusing on optimizing its business model and structure to solidify its position in the aftermarket segment[20]. - The company has implemented a turnaround plan to improve its business model and structure, expand its sales network, and enhance its R&D capabilities[8]. - The company has been engaged in the automotive parts trade, manufacturing, and R&D for over 20 years, accumulating significant industry experience and resources[171]. Research and Development - The company is actively collaborating with international automotive parts suppliers and experts to develop new energy-saving automotive heat exchanger products for large OEMs, with three projects currently undergoing feasibility studies[26]. - The company is developing two new products aimed at electric and hybrid vehicles, including a component for automotive safety systems and a component for automotive heat exchanger systems[31]. - The research and development of the new products is expected to be completed by the end of 2020, enhancing the company's core competitiveness in technology and product design[33]. Environmental and Social Responsibility - The company has been actively promoting green measures and awareness in its daily operations to support environmental sustainability[80]. - The company has committed to implementing more environmental measures to enhance sustainability in its operations[81]. - The company emphasizes employee health and safety as a critical component of sustainable development, providing a fair and safe working environment[168]. - The company actively participates in social welfare activities, contributing to balanced social development[169]. - The company has implemented a waste gas treatment system with a capacity of 15,000 m³/h, ensuring emissions meet the Shanghai air pollution standards[178]. - The company has engaged a qualified environmental firm for waste gas treatment, ensuring compliance with national environmental standards since 2016[180]. Corporate Governance - The company has adopted high standards of corporate governance, complying with all provisions of the Corporate Governance Code[135]. - The board consists of three executive directors, one non-executive director, and three independent non-executive directors, with all independent directors confirmed as independent[136]. - The company has implemented a board diversity policy aimed at enhancing performance and optimizing leadership structure[154]. - The board is responsible for setting the company's goals, strategies, and policies, as well as monitoring operational and financial performance[141]. Financial Risks and Management - The company faced various financial risks, including credit risk, foreign exchange risk, and liquidity risk, and regularly reviews its capital structure to maintain a healthy financial position[79]. - The company acknowledges the impact of the US-China trade war on its operations and is cautiously selecting sales orders to minimize credit default risks and margin losses[13]. - The average accounts receivable turnover days increased to 359 days for the year ended December 31, 2019, compared to 315 days in 2018, reflecting longer credit terms[51]. Employee and Workforce Management - The company reported a total of 64 employees as of December 31, 2019, with a turnover rate of 42.0% for the year[184]. - The company has a health and safety management system in place, conducting monthly safety training to enhance employee awareness[186]. - The company provides full training support for employees, covering various professional and safety training programs[187]. - The company has a 100% return rate for female employees returning from maternity leave this year[192].

Financial Performance - For the six months ended June 30, 2019, Shuanghua Holdings Limited reported revenue of approximately RMB 16.3 million, a decrease of about 48.9% or RMB 15.6 million compared to the same period last year[8]. - The company recorded a net loss of approximately RMB 8.0 million for the first half of 2019, compared to a net profit of approximately RMB 2.2 million in the same period last year[8]. - The group's revenue for the six months ended June 30, 2019, was approximately RMB 16.3 million, a decrease of about RMB 15.6 million or 48.9% compared to RMB 31.9 million in the same period of 2018[21]. - The total comprehensive loss for the period was RMB 7,988,000, compared to a total comprehensive income of RMB 2,198,000 in 2018[75]. - The company reported a loss before tax of RMB 8,209,000, compared to a profit of RMB 2,702,000 in the previous year[75]. - The group incurred a loss attributable to equity holders of approximately RMB 8.0 million for the six months ended June 30, 2019, compared to a profit of approximately RMB 2.2 million in the same period of 2018[35]. - The group reported a pre-tax loss of RMB 18,517 thousand for the six months ended June 30, 2019, compared to a pre-tax profit of RMB 20,966 thousand in 2018[120]. Sales and Revenue Breakdown - Domestic sales of evaporators amounted to approximately RMB 8.0 million, while condenser sales were about RMB 3.8 million, both affected by the slowdown in China's economic growth[11]. - International sales of evaporators were approximately RMB 2.4 million, with condenser sales at around RMB 0.2 million, impacted by global political uncertainties and market weakness[13]. - Revenue from customers in China was RMB 13,661 thousand, down 48.0% from RMB 26,242 thousand in 2018[108]. - Total customer contract revenue for the six months ended June 30, 2019, was RMB 16,307 thousand, a decrease of 48.9% compared to RMB 31,861 thousand for the same period in 2018[113]. - Revenue from the top three customers accounted for over 10% of total revenue, totaling RMB 9,813 thousand for the six months ended June 30, 2019, compared to RMB 13,617 thousand in 2018[110]. Cost Management and Expenses - The group plans to optimize its cost structure, with labor costs accounting for approximately 9-10% of production costs, and aims to reduce production costs by hiring local employees in Anhui[20]. - Sales and distribution costs decreased by approximately 26.2% due to a decline in sales revenue, leading to reduced personnel and transportation expenses[29]. - Administrative expenses decreased by approximately 7.2% as a result of improved internal management and streamlined personnel costs[30]. - Employee compensation for the six months ended June 30, 2019, was approximately RMB 4.2 million, down from RMB 6.0 million for the same period in 2018[41]. - The group’s employee benefit expenses, excluding directors' remuneration, were RMB 5,199 thousand, down from RMB 6,912 thousand in 2018[120]. Asset and Liability Management - The group's net current assets decreased from approximately RMB 216.5 million as of December 31, 2018, to approximately RMB 208.9 million as of June 30, 2019[36]. - Current assets decreased to RMB 241,114,000 from RMB 257,480,000 at the end of 2018, reflecting a reduction in liquidity[76]. - Current liabilities were reduced to RMB 32,224,000 from RMB 41,026,000, indicating improved short-term financial health[78]. - The company's net assets decreased to RMB 356,819,000 from RMB 364,807,000, showing a decline in overall equity[78]. - The total liabilities measured at amortized cost decreased to RMB 17,910,000 as of June 30, 2019, down from RMB 28,170,000 at the end of 2018, indicating a reduction of 36.6%[150]. Cash Flow and Investments - The net cash used in operating activities for the first half of 2019 was RMB (8,675,000), a decrease from RMB 1,334,000 generated in the same period of 2018, reflecting operational challenges[82]. - The company generated a net cash inflow from investing activities of RMB 10,763,000 in the first half of 2019, compared to a cash outflow of RMB (1,206,000) in the same period of 2018, indicating improved investment performance[82]. - As of June 30, 2019, the company's cash and cash equivalents increased to RMB 111,245,000 from RMB 106,653,000 at the end of June 2018, showing a positive cash flow trend[82]. - Cash and cash equivalents amounted to RMB 111,245,000 as of June 30, 2019, compared to RMB 109,825,000 at the end of 2018, showing a slight increase of 1.3%[135]. Corporate Governance and Management - The company has adopted all provisions of the corporate governance code as per the listing rules, with no known non-compliance during the reporting period[64]. - The board of directors has not established a clear division of roles between the chairman and the CEO, as both roles are held by Mr. Zheng Ping[64]. - The company has established a remuneration committee to oversee the compensation policies for directors and senior management, enhancing corporate governance[71]. - The company has established a nomination committee to recommend suitable directors and management personnel to enhance corporate strategy[68]. - The board diversity policy was approved on March 5, 2019, recognizing diversity as a key factor for improving company performance and long-term development[69]. Future Plans and Strategies - The company plans to implement a turnaround plan that includes optimizing business models, enhancing core technology, and broadening sales channels[14]. - Shuanghua Holdings Limited aims to diversify its business by leasing out vacant properties in Shanghai after relocating its production base to Anhui[15]. - The management believes that the revenue decline is temporary and is committed to expanding business and increasing revenue in the future[9]. - The group is considering expanding sales channels and strengthening sales efforts by potentially hiring more sales engineers during the later stages of new product development[19]. Accounting and Financial Reporting - The company adopted HKFRS 9 and HKFRS 16 effective January 1, 2019, which may have implications for financial reporting and lease accounting[89]. - The adoption of HKFRS 16 resulted in an increase of RMB 65,707 thousand in right-of-use assets[95]. - The group has chosen to separately present right-of-use assets in the statement of financial position[93]. - The new accounting policy for right-of-use assets includes initial direct costs and lease payments made before the commencement date[98]. - The group will reassess the lease term if significant events or circumstances affecting the exercise of renewal options occur[100].

Financial Performance - In 2018, the company achieved a revenue of RMB 552 million, a decrease of RMB 286 million compared to the previous year[13]. - The company reported a net loss of RMB 132 million for 2018, an improvement from a net loss of RMB 172 million in the previous year[14]. - For the year ended December 31, 2018, the company's revenue was approximately RMB 55.2 million, a decrease of RMB 28.6 million or 34.1% compared to RMB 83.8 million in 2017[22]. - The overall gross profit for the year was approximately RMB 10.9 million, slightly down by RMB 0.5 million from RMB 11.4 million in the previous year, with a gross profit margin of 19.7%, up from 13.6% in 2017[24]. - The company reported a net loss attributable to equity holders of the parent of approximately RMB 13.2 million for the year, an improvement from a loss of RMB 17.2 million in the previous year[33]. Sales and Market Performance - Sales revenue from evaporators was RMB 426 million, while condensers generated RMB 97 million, and other products contributed RMB 29 million[14]. - Domestic market sales reached RMB 453 million, while international market sales amounted to RMB 99 million[14]. - Domestic evaporator sales decreased by 25.5% to RMB 348 million, and domestic condenser sales fell by 33.2% to RMB 81 million[16]. - International evaporator sales were RMB 78 million, down 1.3%, while international condenser sales plummeted by 78.2% to RMB 16 million[18]. - Domestic market revenue from evaporators was RMB 34.8 million, accounting for 63.1% of total revenue, while international market revenue from evaporators was RMB 7.8 million, accounting for 14.1% of total revenue[23]. Business Strategy and Development - The company is focusing on enhancing its core technology and competitiveness, particularly in the electric vehicle parts market[9]. - Future strategies include seeking new development opportunities in new energy, innovative technology, and financial services through acquisitions and strategic alliances[10]. - The company is actively optimizing its business model and structure to improve overall gross margins[9]. - The management is committed to maximizing shareholder value while diversifying business areas and enhancing product and technology upgrades[10]. - The company plans to continue optimizing its business model and structure to enhance core technology and competitiveness, aiming for a turnaround to profitability[20]. Financial Position and Cash Flow - As of December 31, 2018, the company's cash and cash equivalents were approximately RMB 109.8 million, compared to RMB 106.3 million as of December 31, 2017[36]. - The average inventory turnover days increased to 520.0 days for the year ended December 31, 2018, compared to 201.5 days for the year ended December 31, 2017, primarily due to a downturn in the market affecting sales and related costs[38]. - The average accounts receivable turnover days increased to 338.8 days for the year ended December 31, 2018, from 263.5 days for the year ended December 31, 2017, due to longer credit terms and an increase in local customers using receivables within six months[38]. - The average accounts payable turnover days increased to 195.9 days for the year ended December 31, 2018, compared to 134.4 days for the year ended December 31, 2017, as the group slowed down payments to suppliers to better manage cash flow[39]. - The company aims to strengthen its sales channels and improve collection efforts to enhance cash flow management and operational efficiency[20]. Investments and Acquisitions - The company has invested RMB 6.75 million for a 45% stake in Anhui Shuanghua Heat Exchange Systems Co., Ltd., which is currently in its construction phase[31]. - The group made a significant investment of RMB 6.75 million for a 45% stake in Anhui Shuanghua Heat Exchange System Co., Ltd., fully paid in 2018[44]. - The company acquired two inactive companies on October 10, 2018, and one inactive company in Hong Kong on November 8, 2018, for business expansion purposes[96]. Corporate Governance - The board of directors consists of three executive directors, one non-executive director, and three independent non-executive directors, with all independent directors confirmed as independent[121]. - The board held five meetings during the fiscal year ending December 31, 2018, with full attendance from all executive and non-executive directors[121]. - The company adheres to the corporate governance code and has implemented measures to maintain high standards of corporate governance throughout its operations[120]. - The board is responsible for setting the group's goals, strategies, and policies, as well as monitoring operational and financial performance[126]. - The company has maintained a stable auditor relationship over the past three years, indicating consistent financial oversight[104]. Environmental and Social Responsibility - The company has implemented various green measures to promote environmental sustainability in its operations[64]. - The group emphasizes resource usage and environmental management, achieving energy savings through equipment technology upgrades in the past two years[155]. - The company has established a green environmental policy, focusing on improving production efficiency and reducing resource consumption[169]. - The company has engaged a qualified environmental firm for waste management, ensuring compliance with national environmental standards since 2017[167]. - The group is committed to corporate social responsibility and actively participates in various social welfare activities[156]. Employee Relations and Safety - The total number of employees as of December 31, 2018, was 131, with a turnover rate of 21.2% for males and 21.8% for females[171]. - The company reported zero work-related injuries or fatalities in 2018, with total working hours for males at 161,260 hours and for females at 129,297 hours[174]. - The company has a comprehensive training program covering various areas, including safety management and equipment operation, fully subsidizing training costs for employees[175]. - The company has invested in workplace safety and health measures, including regular safety training and health checks for employees[173]. - The company has maintained a 100% return-to-work rate for female employees after maternity leave since its establishment[180].