Financial Performance - The company's revenue for 2020 was approximately RMB 1,142,058 thousand, representing a year-on-year increase of about 0.5%[12] - Net profit attributable to the company's equity shareholders for 2020 was approximately RMB 252,233 thousand, an increase of about 30.1% compared to the previous year[12] - The company's earnings per share for 2020 was approximately RMB 0.28[12] - The total revenue for the year 2020 was approximately RMB 1,142.1 million, representing an increase of about 0.5% compared to the previous year[21] - The company's revenue increased from approximately RMB 1,136.9 million in 2019 to approximately RMB 1,142.1 million in 2020, primarily due to the growth in revenue from railway sleeper products and flux-cored wire products[31] - The company's gross profit increased by approximately 11.7% from RMB 363.1 million in 2019 to RMB 405.5 million in 2020, mainly due to improved gross margins in railway fastening system products and increased sales of flux-cored wire products[35] - Operating profit rose by approximately 31.4% from RMB 227.7 million in 2019 to RMB 299.2 million in 2020, attributed to increased gross profit and fair value changes[43] - Net profit increased by approximately 30.7% from RMB 196.7 million in 2019 to RMB 257 million in 2020, driven by higher gross profit and fair value changes[48] Revenue Breakdown - Revenue from railway fastening system products was approximately RMB 830.6 million, accounting for 72.7% of total revenue, a decrease of about 5.5% from RMB 879 million in 2019[22] - Revenue from flux-cored wire products was approximately RMB 221.9 million, representing an increase of about RMB 22.8 million from RMB 199.1 million in 2019[25] - Revenue from railway sleeper products was approximately RMB 68.1 million, an increase of about RMB 21.7 million from RMB 46.4 million in 2019, driven by better market development[27] - Revenue from railway fastening system products decreased by approximately 5.5% from RMB 879 million in 2019 to RMB 830.6 million in 2020, attributed to uncertain construction progress from new major clients[31] - Revenue from flux-cored wire products rose by approximately 11.5% from RMB 199.1 million in 2019 to RMB 221.9 million in 2020, driven by increased demand in the welding materials industry[31] - Revenue from railway sleeper products surged by approximately 46.8% from RMB 46.4 million in 2019 to RMB 68.1 million in 2020, due to favorable market expansion and increased demand[32] Assets and Liabilities - Non-current assets increased to RMB 1,103,620 thousand in 2020 from RMB 991,880 thousand in 2019, reflecting a growth of approximately 11.3%[9] - Current assets decreased to RMB 1,794,407 thousand in 2020 from RMB 1,855,981 thousand in 2019, a decline of about 3.3%[9] - Total assets as of December 31, 2020, were approximately RMB 2,898 million, an increase of approximately RMB 50.1 million or about 1.8% compared to December 31, 2019, mainly due to an increase in fixed assets and construction in progress[53] - Total liabilities as of December 31, 2020, were approximately RMB 785.6 million, a decrease of approximately RMB 65.3 million or about 7.7% compared to December 31, 2019, primarily due to a reduction in accounts payable[54] - Total equity as of December 31, 2020, was approximately RMB 2,112.4 million, an increase of approximately RMB 115.4 million compared to December 31, 2019, mainly due to an increase in net profit for the year[55] Corporate Governance - The company has a diverse board with members having extensive experience in finance, engineering, and management, enhancing its governance structure[75] - The company emphasizes the importance of corporate governance with independent directors and committees overseeing audit and remuneration[68] - The board's composition reflects a balance of technical expertise and financial oversight, which is crucial for strategic decision-making[75] - The company is focused on enhancing its operational efficiency through experienced management and governance practices[77] - The company has adopted the corporate governance code as per the listing rules and is committed to enhancing its corporate governance practices[153] - The board consists of a mix of executive and non-executive directors, with a focus on maintaining effective oversight and decision-making[181] Strategic Plans - The company plans to invest approximately RMB 2.4 trillion in fixed assets for transportation in 2021, focusing on infrastructure development[13] - The target for new railway lines to be put into operation in 2021 is approximately 3,700 kilometers[13] - The group aims to enhance its core competitiveness and profitability by diversifying its product offerings and actively exploring vertical extension opportunities in the industry[102] - The group will focus on scientific and orderly railway construction as a key task for 2021, aligning with national transportation goals[102] Human Resources and Employee Management - Employee costs for 1,315 employees amounted to approximately RMB 99.1 million as of December 31, 2020, a decrease of approximately RMB 2.2 million or about 2.2% compared to the same period in 2019[57] - The company has a human resources management principle of "people-oriented," providing equal employment opportunities and regular reviews of employee compensation policies[96] Risk Management - The company faces market competition risks due to increased demand for railway fastening systems, which may lead to new competitors expanding their production capacity[92] - Revenue recognition for railway fastening system products is closely tied to the progress and final acceptance of related railway construction projects, which can impact the company's financial performance[93] - The company will continuously assess foreign exchange exposure risks due to a small portion of revenue generated from outside China, and may use derivative financial instruments to mitigate currency risks[94] Shareholding Structure - As of December 31, 2020, the total share capital of the company was RMB 448,920,000, divided into 897,840,000 shares, including 673,380,000 domestic shares and 224,460,000 H shares[86] - The shareholding structure indicates that significant ownership is concentrated among a few individuals, with multiple shareholders holding substantial stakes[135] - The controlling shareholders collectively control approximately 63.80% of the company's total share capital as of December 17, 2020[1] - The total number of shares held by the top shareholders indicates a strong control over the company, with the top three shareholders collectively owning over 85% of the domestic shares[137] Compliance and Regulatory Matters - The group strictly adhered to relevant laws and regulations during the fiscal year and was not penalized by regulatory authorities[99] - The company has maintained strict compliance with information disclosure regulations, ensuring all disclosures are accurate and complete[173] - The company is subject to regulatory oversight as indicated by the references to the Securities and Futures Ordinance[137] COVID-19 Impact - The company successfully resumed production in the first quarter of 2020, minimizing the adverse effects of the pandemic[12] - The group has implemented various measures to mitigate the impact of the COVID-19 pandemic, including production suspension and health monitoring[103]

Company Information [Directors, Supervisors, and Senior Management](index=3&type=section&id=Directors%2C%20Supervisors%2C%20and%20Senior%20Management) This section lists the members of the Board of Directors, Supervisory Committee, and various committees, noting appointment changes - Executive Directors include Zhang Haijun (Chairman), Wu Jinyu, Zhang Lihuan, Zhang Chao, and Fan Xiulan; Zhang Ligang resigned on December 23, 2019[3](index=3&type=chunk)[4](index=4&type=chunk) - Ms. Gu Xiaohui was appointed Executive Director on March 18, 2020, and re-designated as Non-Executive Director on March 25, 2020[4](index=4&type=chunk) - Mr. Guan En was appointed Chairman of the Supervisory Committee on July 29, 2019; Mr. Zhang Xiaosuo and Ms. Liu Jiao resigned as Supervisors on the same date[3](index=3&type=chunk)[4](index=4&type=chunk) [Company Contact Information](index=4&type=section&id=Company%20Contact%20Information) This section provides detailed contact information for the company's auditor, legal counsel, registered office, H-share registrar, stock code, website, and investor relations consultant - The company's auditor is Tianjian Certified Public Accountants (Special General Partnership)[6](index=6&type=chunk) - The company's stock code is **1596**, and its website is http://www.hbyc.com.cn[6](index=6&type=chunk) Financial Highlights [Performance Overview](index=5&type=section&id=Performance%20Overview) In 2019, the company reported increased revenue and net profit attributable to owners of the parent company compared to 2018 2019 vs. 2018 Performance Comparison (RMB thousand) | Indicator | 2019 | 2018 (Restated) | | :--- | :--- | :--- | | Revenue | 1,138,676 | 1,111,460 | | Cost of Sales | (748,436) | (733,936) | | Gross Profit | 390,240 | 377,524 | | Selling Expenses | (47,569) | (43,306) | | Administrative Expenses | (65,197) | (65,618) | | Profit Before Income Tax | 227,656 | 189,791 | | Net Profit Attributable to Owners of Parent Company | 193,822 | 162,969 | [Assets and Liabilities Overview](index=5&type=section&id=Assets%20and%20Liabilities%20Overview) As of year-end 2019, the company's total assets and liabilities increased, with a rise in equity attributable to owners of the parent company 2019 vs. 2018 Assets and Liabilities Comparison (RMB thousand) | Indicator | 2019 | 2018 (Restated) | | :--- | :--- | :--- | | Non-current Assets | 867,572 | 603,923 | | Current Assets | 1,980,290 | 1,912,781 | | Non-current Liabilities | 124,051 | 35,641 | | Current Liabilities | 726,826 | 612,702 | | Equity Attributable to Owners of Parent Company | 1,921,800 | 1,798,010 | - Starting from 2019, the Group prepared its overseas financial statements in accordance with China's Enterprise Accounting Standards, restating the 2018 consolidated financial statements[8](index=8&type=chunk) Chairman's Statement [2019 Review](index=6&type=section&id=2019%20Review) Despite global economic slowdowns, the company capitalized on China's robust railway sector growth, expanding its product portfolio and acquiring Xingtai Juneng, leading to steady revenue and net profit increases - In 2019, China's railway industry developed ideally, with the "Eight Vertical and Eight Horizontal" high-speed railway network further improved, and **51** new lines completed and put into operation[9](index=9&type=chunk) - The company acquired **87.5%** equity in Xingtai Juneng Railway Electrical Equipment Co., Ltd. on March 9, 2019, expanding its railway sleeper product business to achieve synergistic effects[9](index=9&type=chunk) 2019 Key Financial Performance | Indicator | Amount (RMB thousand) | Year-on-year Growth | | :--- | :--- | :--- | | Revenue | 1,138,676 | 2.45% | | Net Profit Attributable to Equity Holders of the Company | 196,723 | 19.39% | | Earnings Per Share | RMB 0.22 | - | [2020 Outlook](index=6&type=section&id=2020%20Outlook) For 2020, the company aims to solidify its market leadership in railway fastener systems, optimize the Xingtai Juneng sleeper business, and diversify its flux-cored wire client base amid steady Chinese railway construction - 2020 is the final year of the "13th Five-Year Plan" and the "Medium and Long-Term Railway Network Plan," with China's railway construction continuing to advance the Sichuan-Tibet Railway, "Eight Vertical and Eight Horizontal" high-speed rail backbone, and intercity railway construction in urban clusters[10](index=10&type=chunk) - The company will continue to innovate and optimize products and services, providing high-quality railway fastener system products for various railway constructions[11](index=11&type=chunk) - The company plans to integrate and optimize the Xingtai Juneng sleeper business to leverage synergies, and actively expand its flux-cored wire customer base to promote diversified business development[11](index=11&type=chunk) Management Discussion and Analysis [Industry Review and Analysis](index=8&type=section&id=Industry%20Review%20and%20Analysis) In 2019, China's railway construction saw significant fixed asset investment and new line operations, including high-speed rail, exceeding long-term targets and presenting vast business opportunities - In 2019, national railway fixed asset investment exceeded **RMB 800 billion**, with **8,489 km** of new lines put into operation, including **5,474 km** of high-speed rail[12](index=12&type=chunk) - As of the end of 2019, the national railway operating mileage reached over **139,000 km**, with high-speed rail accounting for **35,000 km**, achieving the "Medium and Long-Term Railway Network Plan" target ahead of schedule[12](index=12&type=chunk) - In 2019, the length of newly opened urban rail transit lines in mainland China totaled **968.77 km**, with cumulative operating urban rail transit lines reaching **6,730.27 km**, indicating a stable and high-growth phase for urban rail transit[13](index=13&type=chunk) [Business Review](index=9&type=section&id=Business%20Review) The Group, a leading railway fastener system supplier, achieved overall revenue growth in 2019, primarily from flux-cored wire and new railway sleeper products, offsetting a decline in fastener system revenue - The Group's main business segments include: railway fastener system products, flux-cored wire products, and railway sleeper products[14](index=14&type=chunk) 2019 Revenue Overview by Business Segment | Business Segment | 2019 Revenue (RMB million) | % of Total Revenue | Year-on-year Change | | :--- | :--- | :--- | :--- | | Railway Fastener System Products | 878.1 | 77.1% | Decreased by 5.4% | | Flux-cored Wire Products | 200.8 | 17.6% | Increased by RMB 31.3 million | | Railway Sleeper Products | 46.4 | 4.1% | New Business | | **Total Revenue** | **1,138.7** | **100%** | **Increased by 2.4%** | - The decrease in railway fastener system product revenue was mainly due to uncertainty in the construction progress of new clients, leading to reduced sales, but the gross profit margin slightly increased to **38.5%**[15](index=15&type=chunk)[16](index=16&type=chunk) - The increase in flux-cored wire product revenue was mainly due to rising demand in the welding materials industry, with the gross profit margin increasing from **10.3%** to **12.6%**[16](index=16&type=chunk)[20](index=20&type=chunk) [Performance Analysis and Discussion](index=11&type=section&id=Performance%20Analysis%20and%20Discussion) The Group's total revenue and net profit increased in 2019, driven by growth in specific product segments and new business, leading to higher earnings per share 2019 Key Financial Indicator Changes | Indicator | 2019 (RMB million) | 2018 (RMB million, Restated) | Year-on-year Change | | :--- | :--- | :--- | :--- | | Revenue | 1,138.7 | 1,111.5 | Increased by 2.4% | | Operating Costs | 748.4 | 733.9 | Increased by 2% | | Gross Profit | 390.3 | 377.6 | Increased by 3.4% | | Selling Expenses | 47.6 | 43.3 | Increased | | Administrative Expenses | 65.2 | 65.6 | Decreased | | Research and Development Expenses | 44.3 | 36.1 | Increased | | Credit Impairment Losses | 8.0 | 30.8 | Decreased | | Asset Impairment Losses | 12.5 | 6.1 | Increased | | Operating Profit | 227.7 | 189.8 | Increased by 20.0% | | Net Profit | 196.7 | 164.8 | Increased by 19.4% | | Net Profit Attributable to Owners of Parent Company | 193.8 | 163.0 | Increased by 18.9% | | Basic Earnings Per Share | RMB 0.22 | RMB 0.18 | Slightly Increased | - The decrease in administrative expenses was mainly due to lower intermediary agency fees, partially offset by increases in staff remuneration and travel expenses[20](index=20&type=chunk) - The increase in asset impairment losses was primarily due to the impairment provision for goodwill recognized during the period[20](index=20&type=chunk) [Financial Resources and Capital Structure](index=13&type=section&id=Financial%20Resources%20and%20Capital%20Structure) As of December 31, 2019, the Group experienced growth in cash, total assets, and liabilities, with an increased capital-to-debt ratio primarily due to higher borrowings 2019 Financial Resources Overview (RMB million) | Indicator | December 31, 2019 | December 31, 2018 (Restated) | | :--- | :--- | :--- | | Cash and Cash Equivalents | 280.3 | 147.8 | | Accounts Receivable | 895.6 | 1,062.0 | | Accounts Payable | 405.1 | 383.5 | | Outstanding Borrowings | 320.6 | 124.8 | | Total Assets | 2,847.9 | 2,516.7 | | Total Liabilities | 850.9 | 648.3 | | Total Equity | 1,997.0 | 1,868.4 | | Gearing Ratio | 2% | -1.2% | - The increase in total assets was mainly due to the construction of new factory premises and the acquisition of a subsidiary, leading to the formation of goodwill[27](index=27&type=chunk) - The gearing ratio increased by **3.2** percentage points to **2%**, primarily due to increased borrowings at period-end[26](index=26&type=chunk) [Employees and Remuneration Policy](index=14&type=section&id=Employees%20and%20Remuneration%20Policy) As of December 31, 2019, the Group's employee count and associated costs increased, driven by higher headcount, wages, and social insurance contributions 2019 Employee and Remuneration Overview | Indicator | 2019 | 2018 | | :--- | :--- | :--- | | Number of Employees | 1,340 | - | | Employee Costs | RMB 101.3 million | RMB 89.9 million | | Year-on-year Growth | 12.7% | - | - The company sets remuneration standards based on employee qualifications, job responsibilities, and industry average levels, and provides bonuses based on operating performance and work contributions[27](index=27&type=chunk) Biographies of Directors, Supervisors, and Senior Management [Executive Directors' Biographies](index=15&type=section&id=Executive%20Directors'%20Biographies) This section details the personal backgrounds, educational qualifications, professional experience, and current and past appointments of the company's Executive Directors - Mr. Zhang Haijun is the founder, Executive Director, and Chairman of the company, responsible for overall business development strategy, holding qualifications as a Senior Economist and Engineer[29](index=29&type=chunk) - Mr. Wu Jinyu is an Executive Director and Chief Financial Officer, responsible for overall daily financial management, holding a qualification as a Senior Accountant[29](index=29&type=chunk)[30](index=30&type=chunk) - Mr. Zhang Chao is an Executive Director, Board Secretary, and Joint Company Secretary, responsible for overseeing overall business operations and company secretarial work[31](index=31&type=chunk) [Non-Executive Directors' Biographies](index=16&type=section&id=Non-Executive%20Directors'%20Biographies) This section outlines the biography of Ms. Gu Xiaohui, a Non-Executive Director with a Master's in Economic Law and extensive experience in infrastructure investment and the steel industry - Ms. Gu Xiaohui was appointed Executive Director in March 2020 and re-designated as Non-Executive Director, holding a Master's degree in Economic Law and previously serving as Assistant General Manager of a department at Beijing Infrastructure Investment Co., Ltd[31](index=31&type=chunk) [Independent Non-Executive Directors' Biographies](index=17&type=section&id=Independent%20Non-Executive%20Directors'%20Biographies) This section introduces the three Independent Non-Executive Directors, bringing diverse professional expertise in accounting, urban rail transit design, and railway design to the company - Mr. Ye Qizhi is an Independent Non-Executive Director and Chairman of the Audit Committee, holding qualifications as a Certified Practising Accountant of CPA Australia and a Fellow of the Hong Kong Institute of Certified Public Accountants[32](index=32&type=chunk) - Mr. Wang Qi is an Independent Non-Executive Director and Chairman of the Nomination Committee, holding an Engineer qualification with extensive experience in railway transport research and urban rail transit design[34](index=34&type=chunk) - Mr. Zhang Liguo is an Independent Non-Executive Director and Chairman of the Remuneration Committee, holding a Senior Engineer qualification with extensive experience in railway design consulting[34](index=34&type=chunk) [Supervisors' Biographies](index=20&type=section&id=Supervisors'%20Biographies) This section presents the biographies of the Supervisory Committee members, including the Chairman, Mr. Guan En, and Mr. Hu Hebin, Chief Engineer of the welding materials division - Mr. Guan En is the Chairman of the Supervisory Committee, with practical experience in electronic engineering[38](index=38&type=chunk) - Mr. Hu Hebin is a Supervisor, serving as Chief Engineer of the welding materials division since 2018, responsible for R&D, production process improvement, and quality control of flux-cored wire products[38](index=38&type=chunk) [Senior Management Biographies](index=20&type=section&id=Senior%20Management%20Biographies) This section provides biographies of the company's Senior Management, detailing their responsibilities in production, sales, operations, safety, human resources, marketing, procurement, and Beijing office management - Mr. Zhang Ligang is the General Manager of the company, responsible for the Group's overall daily production, sales, and operational management, holding qualifications as an Engineer and Assistant Accountant[38](index=38&type=chunk)[39](index=39&type=chunk) - Mr. Zhang Lifeng is the Deputy General Manager, responsible for the overall daily management of marketing and sales, and was appointed Chairman of Xingtai Juneng Railway Electrical Equipment Co., Ltd. in August 2019[39](index=39&type=chunk) Board Report [Principal Business and Share Capital](index=22&type=section&id=Principal%20Business%20and%20Share%20Capital) As of December 31, 2019, the company's principal business includes R&D, production, and sales of railway fastener systems, flux-cored wire, and railway sleepers, with a defined share capital structure - The company's principal business is the research, development, production, and sale of railway fastener system products, flux-cored wire products, and railway sleeper products[41](index=41&type=chunk) 2019 Share Capital Structure | Share Type | Number of Shares | | :--- | :--- | | Domestic Shares | 673,380,000 | | H Shares | 224,460,000 | | **Total Shares** | **897,840,000** | [Risk Factors](index=23&type=section&id=Risk%20Factors) The company faces risks from intensified market competition, uncertainties in railway project progress and final acceptance, and potential foreign exchange losses due to RMB exchange rate fluctuations on H-share proceeds - Intensified market competition, with joint ventures and new domestic suppliers expanding production capacity, may affect the company's competitiveness[43](index=43&type=chunk) - Uncertainties in railway construction project progress and final acceptance times may impact the company's operating performance, trade receivables, and other receivables[43](index=43&type=chunk) - Fluctuations in the RMB exchange rate against foreign currencies may result in exchange losses or gains on H-share proceeds, and the company will assess foreign exchange exposure and use derivative financial instruments to mitigate risks[43](index=43&type=chunk) [Relationship with Key Stakeholders](index=24&type=section&id=Relationship%20with%20Key%20Stakeholders) The company maintains strong relationships with employees, customers, and suppliers, adhering to an 'people-oriented' principle, conducting satisfaction surveys, and ensuring compliance with relevant laws and regulations - The company adheres to an "people-oriented" principle, creating equal employment opportunities, regularly reviewing employee remuneration policies, and assisting employees with housing, transportation, and safety and health matters[45](index=45&type=chunk) - The company understands and meets customer needs through customer satisfaction surveys, maintains mutually beneficial relationships with suppliers, and regularly assesses their performance[46](index=46&type=chunk) - For the fiscal year ended December 31, 2019, the Group strictly complied with relevant laws and regulations materially affecting the company and received no penalties from relevant regulatory authorities[46](index=46&type=chunk) [Future Outlook and COVID-19 Response](index=25&type=section&id=Future%20Outlook%20and%20COVID-19%20Response) The company plans to pursue M&A opportunities, upgrade production equipment, and implemented comprehensive measures to protect employees and minimize operational impact in response to the COVID-19 pandemic in early 2020 - The company will closely follow market development trends, actively seek acquisition opportunities for quality assets upstream and downstream in the industry chain to enhance core competitiveness and profitability[50](index=50&type=chunk) - The company will continue to promote the upgrade and transformation of production equipment, improving automation levels to reduce costs and increase efficiency[50](index=50&type=chunk) - In response to the novel coronavirus epidemic in early 2020, the company prioritized protecting employees' lives and health, implementing comprehensive prevention and control measures such as thorough disinfection, distributing supplies, and health screening, and orderly organizing work resumption to minimize adverse impacts[50](index=50&type=chunk) [Dividend Policy and Taxation](index=25&type=section&id=Dividend%20Policy%20and%20Taxation) The Board proposes a final dividend for 2019, with the dividend policy considering operating performance and cash flow, and applicable income taxes withheld for overseas shareholders 2019 Final Dividend Proposal | Indicator | Content | | :--- | :--- | | Final Dividend | RMB 0.042 per share (tax inclusive) | | Total Net Amount | RMB 37,709,280 | | Estimated Payment Date | July 16, 2020 | | Record Date | June 8, 2020 | - The company has adopted a dividend policy, and the decision to distribute dividends requires Board approval and is at the Board's discretion, with final dividends subject to shareholder approval[52](index=52&type=chunk) - The company will withhold **10%** corporate income tax for H-share non-resident enterprise shareholders; for mainland individual investors investing in H-shares through Stock Connect, individual income tax will be withheld at a **20%** rate[52](index=52&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk)[57](index=57&type=chunk) [Major Customers and Suppliers](index=29&type=section&id=Major%20Customers%20and%20Suppliers) For the fiscal year ended December 31, 2019, the Group exhibited high customer and supplier concentration, with no beneficial interests held by directors or major shareholders in the top five 2019 Major Customer and Supplier Concentration | Category | % of Operating Revenue | | :--- | :--- | | Top Five Customers | 76.79% | | Largest Customer | 39.41% | | Category | % of Total Procurement Costs | | :--- | :--- | | Top Five Suppliers | 37.58% | | Largest Supplier | 15.39% | - No director, their close associates, or shareholders holding **5%** or more of the company's shares had any beneficial interest in the Group's top five customers or top five suppliers[59](index=59&type=chunk) [Use of IPO Proceeds and Project Progress](index=29&type=section&id=Use%20of%20IPO%20Proceeds%20and%20Project%20Progress) A significant portion of the IPO proceeds was utilized by year-end 2019, with remaining funds earmarked for acquisitions, and a new production base is expected to be operational by September 2020 Use of IPO Proceeds and Utilization (as of December 31, 2019) | Designated Use | Allocated Amount (RMB thousand) | Utilized Amount (RMB thousand) | Unutilized Amount (RMB thousand) | Expected Utilization Date | | :--- | :--- | :--- | :--- | :--- | | Capacity Expansion and Fixed Asset Investment | 179,732 | 179,732 | 0 | Not Applicable | | Domestic and International Acquisitions | 86,967 | 10,849 | 76,118 | June 2021 | | Purchase of Raw Materials | 86,967 | 86,967 | 0 | Not Applicable | | R&D and Testing of New Products | 86,967 | 86,967 | 0 | Not Applicable | | Project Bid Deposits | 57,978 | 57,978 | 0 | Not Applicable | | Working Capital | 57,978 | 57,978 | 0 | Not Applicable | | Upgrade Information Systems and Automated Production Facilities | 23,191 | 23,191 | 0 | Not Applicable | | **Total** | **579,780** | **503,662** | **76,118** | - | - The main production workshops and warehouses of the new production base have been completed, and relevant production equipment is being installed and debugged, with production expected to commence in September 2020[62](index=62&type=chunk) [Financial Position and Remuneration](index=30&type=section&id=Financial%20Position%20and%20Remuneration) As of December 31, 2019, the company held substantial distributable reserves, with remuneration for directors, supervisors, and senior management determined by the Remuneration Committee based on performance and industry standards - As of December 31, 2019, the company's distributable reserves calculated in RMB were approximately **RMB 551.2 million**[62](index=62&type=chunk) - The Remuneration Committee reviews and determines the remuneration and compensation packages for directors and supervisors, referencing salaries of comparable companies, time commitment, responsibilities, and the Group's performance[64](index=64&type=chunk) 2019 Senior Management (Non-Director, Non-Supervisor) Remuneration Distribution | Remuneration Level | Number of Personnel | | :--- | :--- | | RMB 50,001 to RMB 100,000 | 1 | | RMB 100,001 to RMB 200,000 | 2 | | RMB 200,001 to RMB 300,000 | 3* (one of whom has retired) | [Interests of Directors, Supervisors, and Chief Executives in Shares](index=32&type=section&id=Interests%20of%20Directors%2C%20Supervisors%2C%20and%20Chief%20Executives%20in%20Shares) As of December 31, 2019, several directors, supervisors, and chief executives held interests in the company's domestic shares, with a concerted action group collectively controlling a significant portion of the total share capital Interests of Directors, Supervisors, and Chief Executives in Domestic Shares as of December 31, 2019 | Name | Capacity | Number of Shares (Total) | Approximate Total Shareholding Percentage in Company's Share Capital (%) | | :--- | :--- | :--- | :--- | | Mr. Zhang Haijun | Director | 587,552,774 | 65.44 | | Mr. Zhang Ligang | Director | 587,552,774 | 65.44 | | Mr. Wu Jinyu | Director | 587,552,774 | 65.44 | | Mr. Zhang Chao | Director | 587,552,774 | 65.44 | | Mr. Zhang Lihuan | Director | 587,552,774 | 65.44 | | Ms. Fan Xiulan | Director | 923,132 | 0.10 | | Mr. Zhang Xiaosuo | Supervisor | 587,552,774 | 65.44 | | Ms. Liu Jiao | Supervisor | 587,552,774 | 65.44 | - Members of the controlling shareholder group (totaling **15** individuals) entered into a concerted action agreement on January 12, 2018, to jointly control approximately **65.44%** of the company's total share capital[71](index=71&type=chunk) [Interests of Substantial Shareholders in Shares](index=33&type=section&id=Interests%20of%20Substantial%20Shareholders%20in%20Shares) As of December 31, 2019, substantial shareholders, including the controlling shareholder group, collectively controlled a significant portion of the company's total share capital, alongside notable institutional H-share investors - Members of the controlling shareholder group and their spouses (such as Ms. Zhou Qiuju, Ms. Zhang Junxia, Ms. Zhang Xiaoxia, etc.) jointly controlled approximately **65.44%** of the company's total share capital[73](index=73&type=chunk)[75](index=75&type=chunk)[77](index=77&type=chunk)[79](index=79&type=chunk) Interests of Substantial Shareholders in H Shares as of December 31, 2019 | Name/Entity | Share Class | Number of Shares | Approximate Percentage of Shareholding in Relevant Class (%) | Approximate Total Shareholding Percentage in Company's Total Share Capital (%) | | :--- | :--- | :--- | :--- | :--- | | Mr. Guo Zhongyan | H Shares | 25,031,000 | 11.15 | 2.79 | | BOCOM International Securities Limited | H Shares | 33,669,000 | 15.00 | 3.75 | | Jingtou (Hong Kong) Co., Limited | H Shares | 38,102,000 | 16.97 | 4.24 | | GUOKONG (HONG KONG) INVESTMENT CO., LIMITED | H Shares | 20,300,000 | 9.04 | 2.26 | [Continuing Connected Transactions](index=37&type=section&id=Continuing%20Connected%20Transactions) In 2019, the company engaged in continuing connected transactions, including leases and procurement, conducted on normal commercial terms, with certain agreements terminated to optimize operational efficiency 2019 Continuing Connected Transactions Overview (RMB thousand) | Transaction Content | Actual Amount | Annual Cap | | :--- | :--- | :--- | | Lease of property from Mr. Zhang Haijun | 360 | 360 | | Lease of certain office premises in Shijiazhuang, Hebei Province, China from Longji | 700 | 700 | | Procurement of comprehensive services from Longji | 2,110 | 2,110 | | Procurement of section steel from Longji | – | 1,430 | | Procurement of baffle section steel processing services from Longji | 2,807 | 6,200 | | **Total** | **5,977** | **10,800** | - Longji is controlled by Ms. Zhou Qiuju, spouse of the de facto controller Mr. Zhang Haijun, and other members of the controlling shareholder group and their spouses[85](index=85&type=chunk) - The company terminated the master procurement agreement and master processing agreement with Longji on December 27, 2019, effective from December 31, 2019, to save administrative costs and optimize overall operational efficiency[88](index=88&type=chunk) [Corporate Governance and Compliance](index=40&type=section&id=Corporate%20Governance%20and%20Compliance) The Group maintains high corporate governance standards, complying with listing rules, had no significant legal disputes in the reporting period, and established an International Trade Review Committee to monitor business risks in sanctioned countries - The company has complied with the applicable code provisions contained in the Corporate Governance Code[90](index=90&type=chunk) - As of December 31, 2019, the company had no significant legal proceedings[90](index=90&type=chunk) - The company established an International Trade Review Committee to monitor business risks in sanctioned countries and ensure that relevant business activities comply with international sanctions laws and regulations[90](index=90&type=chunk) Supervisory Committee Report [Supervisory Committee Meeting Status](index=42&type=section&id=Supervisory%20Committee%20Meeting%20Status) In 2019, the Supervisory Committee held four meetings, reviewing key proposals including annual and interim reports, supervisor appointments, and profit distribution, with all supervisors attending - In 2019, the Supervisory Committee held **four** meetings, reviewing multiple important proposals, including annual and interim reports, supervisor appointments and removals, and profit distribution[96](index=96&type=chunk) - All supervisors attended the Supervisory Committee meetings, ensuring the fulfillment of their oversight duties[96](index=96&type=chunk) [Independent Opinions of the Supervisory Committee](index=42&type=section&id=Independent%20Opinions%20of%20the%20Supervisory%20Committee) The Supervisory Committee affirmed the company's standardized operations, sound corporate governance, effective internal controls, and the diligence of directors and senior management, with no violations or harm to shareholder interests observed - The Supervisory Committee believes that the company operates in a standardized manner, with scientific and legal decision-making, a sound corporate governance structure, and effective internal control mechanisms[97](index=97&type=chunk) - Directors and senior management are honest, diligent, and conscientious in their duties, with no violations of laws, regulations, or the company's articles of association, nor any actions harming the interests of the company or its shareholders[98](index=98&type=chunk) - The company's financial position in 2019 was good, financial management was standardized, and the consolidated financial statements comprehensively, objectively, and truly reflected the company's financial position and operating results, with an unqualified audit opinion[99](index=99&type=chunk) - The pricing principles for connected transactions complied with commercial practices and relevant policies, and no instances of insider trading harming the interests of the company or its shareholders occurred[101](index=101&type=chunk) Corporate Governance Report [Corporate Governance Practices and the Board](index=44&type=section&id=Corporate%20Governance%20Practices%20and%20the%20Board) The company adheres to high corporate governance standards, with the Board overseeing business, decision-making, and internal controls, ensuring independent director representation and continuous professional development - The company has complied with all applicable code provisions contained in the Corporate Governance Code and has formulated written guidelines for employee securities transactions that are no less stringent than the Model Code[103](index=103&type=chunk) - The Board is chaired by Mr. Zhang Haijun, with Mr. Zhang Ligang serving as Chief Executive Officer, ensuring a separation of duties and a balance of power and responsibility[107](index=107&type=chunk) 2019 Board Meeting Attendance Record | Director Name | Attendance Rate | | :--- | :--- | | Mr. Zhang Haijun (Chairman) | 10/12 | | Mr. Zhang Ligang | 11/11 | | Mr. Wu Jinyu | 12/12 | | Mr. Zhang Chao | 12/12 | | Mr. Zhang Lihuan | 10/12 | | Ms. Fan Xiulan | 12/12 | | Mr. Ye Qizhi | 12/12 | | Mr. Wang Qi | 12/12 | | Mr. Zhang Liguo | 12/12 | - The company appoints at least **three** Independent Non-Executive Directors, comprising one-third of the Board, who possess appropriate professional qualifications or expertise in accounting or related financial management[108](index=108&type=chunk) [Functions of the Supervisory Committee](index=47&type=section&id=Functions%20of%20the%20Supervisory%20Committee) The Supervisory Committee, comprising shareholder and employee representatives, reviews financial conditions, supervises directors and senior management, and ensures company compliance and shareholder interests - The Supervisory Committee consists of **two** shareholder representative supervisors and **one** employee representative supervisor; directors and senior management members may not concurrently serve as supervisors[117](index=117&type=chunk) - The main functions of the Supervisory Committee include examining the company's financial status, supervising the performance of duties by directors and senior management, proposing to convene extraordinary general meetings, and inspecting financial information[120](index=120&type=chunk) [Board Committees](index=48&type=section&id=Board%20Committees) The Board has established Audit, Remuneration, Nomination, Corporate Governance, and Strategy Committees, each with defined mandates to oversee financial reporting, compensation, board structure, compliance, and strategic development - The Audit Committee comprises **three** Independent Non-Executive Directors, chaired by Mr. Ye Qizhi, with primary responsibilities including reviewing financial information, monitoring internal audit functions, and discussing audit scope with auditors[122](index=122&type=chunk)[123](index=123&type=chunk) - The Remuneration Committee comprises **three** members, chaired by Mr. Zhang Liguo, with primary functions including reviewing the remuneration policies and packages for directors and senior management[123](index=123&type=chunk) - The Nomination Committee comprises **three** members, chaired by Mr. Wang Qi, with primary duties including reviewing the structure, size, and composition of the Board, and assessing the independence of Independent Non-Executive Directors[127](index=127&type=chunk) - The Corporate Governance Committee comprises **three** members, chaired by Mr. Ye Qizhi, with primary duties including establishing and reviewing corporate governance policies and practices, and monitoring compliance[134](index=134&type=chunk) - The Strategy Committee comprises **three** members, chaired by Mr. Zhang Haijun, with primary duties including researching the Group's medium-to-long-term development strategies, investment plans, and major business decisions[134](index=134&type=chunk)[136](index=136&type=chunk) [Board Diversity Policy and Nomination Policy](index=51&type=section&id=Board%20Diversity%20Policy%20and%20Nomination%20Policy) The company's Board Diversity Policy aims for a diverse board considering various factors to enhance competitiveness, while the Nomination Policy ensures suitable skills, experience, and diverse perspectives among board members - The company has adopted a Board Diversity Policy, aiming to maintain a diverse Board to enhance competitive advantage, considering factors such as gender, age, cultural and educational background, professional qualifications, skills, knowledge, and industry and regional experience[129](index=129&type=chunk)[130](index=130&type=chunk) - The Board Nomination Policy sets out selection criteria and processes, aiming to ensure that Board members possess a balanced set of skills, experience, and diverse perspectives appropriate for the company and the continuity of the Board[129](index=129&type=chunk)[130](index=130&type=chunk) [Risk Management and Internal Control](index=53&type=section&id=Risk%20Management%20and%20Internal%20Control) The Board oversees risk management and internal control systems, with an independent internal audit function reporting to committees, and established procedures for whistleblowing and monitoring business risks in sanctioned countries - The Board is responsible for the risk management and internal control systems, aiming to manage rather than eliminate the risk of failure to achieve business objectives[136](index=136&type=chunk) - The company has adopted various internal control rules and procedures, including internal control management measures, employee training, and the engagement of external professional consultants and Chinese legal counsel[139](index=139&type=chunk) - The internal audit department is responsible for independently reviewing the adequacy and effectiveness of the risk management and internal control systems, and reports to the Audit Committee and the International Trade Review Committee[141](index=141&type=chunk) - The company has established whistleblowing procedures and disclosure policies, and monitors business risks in sanctioned countries to ensure compliance with international sanctions laws and regulations[141](index=141&type=chunk) [Joint Company Secretaries and Shareholders' Rights](index=56&type=section&id=Joint%20Company%20Secretaries%20and%20Shareholders'%20Rights) Joint Company Secretaries ensure directors receive governance advice, while the company safeguards shareholder rights through various communication channels, including general meetings and inquiry procedures - Mr. Zhang Chao and Ms. Wu Weiqin have been appointed as Joint Company Secretaries, ensuring that directors can obtain advice and services regarding corporate governance and Board practices and matters[143](index=143&type=chunk) - The company communicates with shareholders through channels such as general meetings, convening extraordinary general meetings, proposing resolutions, and written inquiries, safeguarding shareholder rights[145](index=145&type=chunk)[146](index=146&type=chunk) [Communication with Shareholders and Investors](index=58&type=section&id=Communication%20with%20Shareholders%20and%20Investors) The company prioritizes effective communication with shareholders through annual general meetings and other forums, with independent resolutions presented and independent non-executive directors attending, and the Articles of Association revised during the year - The company engages in continuous dialogue with shareholders through annual general meetings and other shareholder meetings to strengthen investor relations[148](index=148&type=chunk) - At the 2019 Annual General Meeting, independent resolutions were proposed on various significant matters, and all Independent Non-Executive Directors attended[148](index=148&type=chunk) - The company's Articles of Association were revised at the general meetings held on July 29, 2019, and March 18, 2020[149](index=149&type=chunk) Environmental, Social and Governance Report [Reporting Standards, Period, and Scope](index=59&type=section&id=Reporting%20Standards%2C%20Period%2C%20and%20Scope) This ESG report, prepared according to HKEX Listing Rules, covers the period from January 1 to December 31, 2019, encompassing the company headquarters and the newly acquired Xingtai Juneng railway sleeper business - This ESG report is prepared in accordance with the "Environmental, Social and Governance Reporting Guide" in Appendix 27 of the HKEX Listing Rules[152](index=152&type=chunk) - The reporting period is from January 1, 2019, to December 31, 2019, covering the company's headquarters and the newly acquired Xingtai Juneng railway sleeper business for the year[152](index=152&type=chunk) [Company Background and ESG Commitment](index=59&type=section&id=Company%20Background%20and%20ESG%20Commitment) As a leading Chinese railway fastener system supplier, the company emphasizes innovation and quality, was recognized as a manufacturing champion in 2019, and its Board oversees ESG initiatives and risk assessment - The company is a leading supplier of railway fastener systems in China's railway industry, with over **ten years** of experience, and its products cover all "Four Vertical and Four Horizontal" high-speed railway corridors nationwide[152](index=152&type=chunk) - The company was recognized as one of Hebei Province's manufacturing single-champion enterprises in 2019[153](index=153&type=chunk) - The Board oversees the direction of ESG work and is responsible for assessing and identifying risks related to environmental, social, and governance matters[153](index=153&type=chunk) [Stakeholders and Materiality Assessment](index=61&type=section&id=Stakeholders%20and%20Materiality%20Assessment) The company engages with diverse stakeholders to understand their expectations, identifying key ESG issues across environmental, employee, business, and community themes through a materiality assessment to continuously improve performance - The company continuously communicates with stakeholders (including shareholders, customers, employees, suppliers, regulatory bodies, and the public) through various channels to protect their interests[155](index=155&type=chunk) - The materiality assessment results categorize ESG issues into four major thematic areas: environment, employees, business, and community, and the company will continuously improve its ESG performance to meet stakeholder expectations[162](index=162&type=chunk) [Our Environment](index=65&type=section&id=Our%20Environment) The company adheres to environmental laws, implements energy management, and despite increased emissions from new business, reduced per capita emissions through solar power, afforestation, and electric vehicles, while recycling waste and conserving resources - The company strictly adheres to national environmental laws and regulations and has formulated the "Energy Management Work System" to conserve energy and reduce consumption[164](index=164&type=chunk) 2019 Air Pollutant and Greenhouse Gas Emissions Overview | Emission Type | 2019 Emissions (kg/tons) | 2018 Emissions (kg/tons, Restated) | | :--- | :--- | :--- | | Nitrogen Oxides (NOx) | 1,863.07 kg | 1,208.92 kg | | Sulfur Oxides (SOx) | 462.51 kg | 298.97 kg | | Particulate Matter (PM) | 185.71 kg | 120.31 kg | | Scope 1 Direct Emissions (tons CO2e) | 2,430.07 tons | 1,803.70 tons | | Scope 2 Indirect Emissions (tons CO2e) | 108,266.19 tons | 101,740.09 tons | | Scope 3 Other Indirect Emissions (tons CO2e) | 80.77 tons | 75.71 tons | | **Total (tons CO2e)** | **110,777.03 tons** | **103,619.50 tons** | - The company reduced indirect carbon emissions by approximately **807 tons** through photovoltaic power generation and significantly increased tree planting in the new factory area to **1,488** trees, reducing indirect carbon emissions by approximately **34 tons**[169](index=169&type=chunk) 2019 Hazardous and Non-hazardous Waste Generation | Waste Type | Hazardous/Non-hazardous | 2019 Generation (tons) | 2018 Generation (tons) | | :--- | :--- | :--- | | Waste Oil | Hazardous | 2.4 | 2.2 | | Waste Sand | Non-hazardous | 10,332.1 | 6,327.2 | | Scrap Iron | Non-hazardous | 2.0 | – | - The company implements various environmental protection measures, including promoting water conservation, waste sorting and recycling, energy-saving appliances, green travel, paperless office, selling waste sand, recycling raw material residues, energy-saving technological upgrades, and recycling product packaging materials[181](index=181&type=chunk)[182](index=182&type=chunk)[184](index=184&type=chunk) [Our Employees](index=72&type=section&id=Our%20Employees) The company adheres to labor laws, ensures fair employment, and manages compensation through a dedicated committee, prioritizing occupational health and safety with regular check-ups and training, while strictly prohibiting forced or illegal labor - The company strictly complies with laws and regulations such as the "Labor Law of the People's Republic of China," safeguarding employees' legitimate rights and interests, treating employees of different races, genders, and ages fairly, and strictly prohibiting discrimination[184](index=184&type=chunk) - The company has formulated the "Remuneration Management Measures," determining salary levels based on job value and individual contributions, and provides bonuses and special talent allowances[186](index=186&type=chunk) 2019 Workforce Overview | Indicator | 2019 | 2018 | | :--- | :--- | :--- | | Total Number of Employees | 1,340 | 1,131 | | By Gender: | | | | - Male | 1,090 | 920 | | - Female | 250 | 211 | | By Age: | | | | - Under 30 | 290 | 240 | | - 30-50 years old | 800 | 680 | | - Over 50 years old | 250 | 211 | - The company highly values occupational health and safety, having formulated the "Safety Regulations Compilation" and "Standards and Management Regulations for the Distribution of Employee Labor Protection Supplies," and organizes annual health check-ups and safety training[195](index=195&type=chunk)[196](index=196&type=chunk)[198](index=198&type=chunk) 2019 Employee Training Status | Indicator | 2019 | 2018 | | :--- | :--- | :--- | | Total Number of Employees Trained (persons) | 1,411 | 1,093 | | Total Training Hours (hours) | 5,264 | 7,767 | | Average Training Hours per Person (hours/person) | 3.73 | 7.10 | - The company strictly verifies job applicants' information, strictly prohibits the recruitment and employment of illegal laborers and child labor, and strictly prohibits all forms of forced or compulsory labor[202](index=202&type=chunk)[205](index=205&type=chunk) [Our Business](index=78&type=section&id=Our%20Business) The company prioritizes supply chain management, product safety, and intellectual property protection, holding numerous patents, and enforces strict anti-corruption and anti-money laundering policies with a whistleblowing mechanism - The company has formulated the "Procurement Control Procedures" to select qualified suppliers through on-site inspections, qualification certificate reviews, and product testing, and conducts periodic evaluations of long-term cooperative suppliers[203](index=203&type=chunk)[206](index=206&type=chunk) - The company highly values product safety and reliability, strictly complying with relevant national, international, and industry standards, and has formulated the "Return and Exchange Management Measures" to handle return and exchange matters[207](index=207&type=chunk) - As of the end of 2019, the company had a cumulative total of **39** effective patents and **6** pending applications, totaling **45** patents[208](index=208&type=chunk) - The company has formulated the "Anti-Commercial Bribery Management Regulations" and "Anti-Fraud Management Regulations," and has an internal audit department and a whistleblowing hotline responsible for receiving and investigating improper conduct and illegal activities[209](index=209&type=chunk) [Our Community](index=80&type=section&id=Our%20Community) The company actively engages in community welfare, organizing blood donation drives, supporting impoverished households, and making significant charitable donations, with plans to increase environmental and social contributions - In 2019, the company organized a voluntary blood donation event, with **22** employees cumulatively donating **8,800 ml** of blood[210](index=210&type=chunk) - The company conducted visits and慰問 activities for impoverished households, delivering comfort items and New Year greetings to **11** households[210](index=210&type=chunk) - On July 30, 2019, the company donated **RMB 248,000** to the "Shijiazhuang Gaocheng District Charity Federation"[210](index=210&type=chunk) Audit Report [Audit Opinion and Basis](index=81&type=section&id=Audit%20Opinion%20and%20Basis) Tianjian Certified Public Accountants issued an unqualified audit opinion on the company's 2019 consolidated and parent company financial statements, affirming their fair presentation in accordance with Enterprise Accounting Standards - The auditor issued an **unqualified audit opinion** on the company's 2019 financial statements[213](index=213&type=chunk) - The financial statements were prepared in all material respects in accordance with the provisions of Enterprise Accounting Standards, fairly reflecting the company's financial position, operating results, and cash flows[213](index=213&type=chunk) - The audit work was conducted in accordance with Chinese Certified Public Accountants' Auditing Standards, and the auditors were independent of the company and fulfilled their professional ethical responsibilities[214](index=214&type=chunk) [Key Audit Matters](index=82&type=section&id=Key%20Audit%20Matters) Key audit matters included revenue recognition, impairment of accounts receivable, and goodwill impairment, all addressed through specific audit procedures due to their materiality and inherent management judgment - Revenue recognition is a key audit matter because operating revenue is one of the company's key performance indicators, and there is an inherent risk of management inappropriately recognizing revenue[216](index=216&type=chunk) - Impairment of accounts receivable is a key audit matter because accounts receivable are material in amount and involve significant management judgment[218](index=218&type=chunk) - Goodwill impairment is a key audit matter because goodwill is material in amount and impairment testing involves significant management judgment[220](index=220&type=chunk) - The auditors evaluated and reviewed the key assumptions used in the goodwill impairment test, such as revenue growth rate during the detailed forecast period, perpetual growth rate, gross profit margin, and discount rate[221](index=221&type=chunk) - According to the valuation report, the recoverable amount of the asset group containing goodwill was **RMB 146,600,000.00**, which was lower than its carrying value, and a goodwill impairment loss of **RMB 13,189,669.44** should be recognized for the current period[221](index=221&type=chunk) [Responsibilities of Management and Governance for Financial Statements](index=88&type=section&id=Responsibilities%20of%20Management%20and%20Governance%20for%20Financial%20Statements) Management is responsible for preparing fair financial statements, maintaining internal controls, and assessing going concern, while the governance body oversees the financial reporting process - Management is responsible for preparing financial statements in accordance with Enterprise Accounting Standards to achieve fair presentation, and for designing, implementing, and maintaining necessary internal controls[223](index=223&type=chunk) - Management is responsible for assessing the company's ability to continue as a going concern and for applying the going concern assumption[223](index=223&type=chunk) - The governance body is responsible for overseeing the company's financial reporting process[223](index=223&type=chunk) [Responsibilities of Certified Public Accountants for Financial Statement Audit](index=89&type=section&id=Responsibilities%20of%20Certified%20Public%20Accountants%20for%20Financial%20Statement%20Audit) Certified Public Accountants aim for reasonable assurance that financial statements are free from material misstatement, exercising professional judgment, evaluating internal controls, and communicating significant findings to governance - The objective of Certified Public Accountants is to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error[224](index=224&type=chunk) - Auditors exercise professional judgment and maintain professional skepticism, identify and assess risks of material misstatement, design and implement audit procedures, and obtain sufficient and appropriate audit evidence[224](index=224&type=chunk) - Auditors are responsible for directing, supervising, and performing the group audit, and assume full responsibility for the audit opinion[224](index=224&type=chunk) - Auditors communicate with the governance body regarding the planned scope and timing of the audit and significant audit findings, and provide a statement regarding independence-related ethical requirements[225](index=225&type=chunk) Financial Statements [Consolidated Balance Sheet](index=91&type=section&id=Consolidated%20Balance%20Sheet) As of December 31, 2019, the company's consolidated total assets, liabilities, and owners' equity all increased compared to the previous year-end Consolidated Balance Sheet Key Data as of December 31, 2019 (RMB) | Indicator | Period-end Amount | Prior Year-end Amount | | :--- | :--- | :--- | | Cash and Bank Balances | 404,071,733.23 | 182,041,928.10 | | Accounts Receivable | 895,645,526.81 | 1,062,043,356.05 | | Inventories | 355,229,722.60 | 276,649,303.97 | | Fixed Assets | 125,378,423.78 | 92,092,316.71 | | Construction in Progress | 338,145,666.75 | 257,043,510.17 | | Goodwill | 102,739,493.25 | - | | Short-term Borrowings | 170,000,000.00 | 94,810,000.00 | | Accounts Payable | 405,067,840.65 | 383,451,729.11 | | Equity Attributable to Owners of Parent Company | 1,921,799,626.44 | 1,798,009,569.53 | | **Total Assets** | **2,847,861,466.08** | **2,516,704,312.79** | | **Total Liabilities and Owners' Equity** | **2,847,861,466.08** | **2,516,704,312.79** | [Balance Sheet](index=94&type=section&id=Balance%20Sheet) As of December 31, 2019, the parent company's total assets, liabilities, and owners' equity all increased compared to the previous year-end Parent Company Balance Sheet Key Data as of December 31, 2019 (RMB) | Indicator | Period-end Amount | Prior Year-end Amount | | :--- | :--- | :--- | | Cash and Bank Balances | 380,384,979.61 | 168,952,728.32 | | Accounts Receivable | 866,531,296.46 | 1,057,469,677.18 | | Inventories | 356,278,597.01 | 275,516,520.06 | | Long-term Equity Investments | 358,509,885.02 | 202,926,667.44 | | Short-term Borrowings | 140,000,000.00 | 94,810,000.00 | | Accounts Payable | 423,944,486.14 | 415,692,376.09 | | **Total Assets** | **2,864,614,474.06** | **2,558,718,866.04** | | **Total Liabilities and Owners' Equity** | **2,864,614,474.06** | **2,558,718,866.04** | [Consolidated Income Statement](index=97&type=section&id=Consolidated%20Income%20Statement) For 2019, the company reported increased consolidated total operating revenue, net profit, and basic earnings per share compared to the previous year Consolidated Income Statement Key Data for 2019 (RMB) | Item | Current Period Amount | Prior Period Amount | | :--- | :--- | :--- | | Total Operating Revenue | 1,138,675,870.66 | 1,111,459,983.25 | | Total Operating Costs | 921,112,761.72 | 900,274,539.77 | | Operating Profit | 227,708,489.55 | 188,859,705.07 | | Net Profit | 196,723,095.68 | 164,771,911.39 | | Net Profit Attributable to Owners of Parent Company | 193,821,576.91 | 162,969,102.34 | | Basic Earnings Per Share | 0.22 | 0.18 | [Income Statement](index=99&type=section&id=Income%20Statement) For 2019, the parent company's net profit increased despite a slight decrease in operating revenue compared to the prior year Parent Company Income Statement Key Data for 2019 (RMB) | Item | Current Period Amount | Prior Period Amount | | :--- | :--- | :--- | | Operating Revenue | 1,095,015,387.03 | 1,104,261,232.91 | | Operating Costs | 729,636,847.55 | 739,031,188.05 | | Operating Profit | 213,644,767.21 | 181,156,256.76 | | Net Profit | 185,141,478.55 | 158,993,351.13 | [Consolidated Cash Flow Statement](index=101&type=section&id=Consolidated%20Cash%20Flow%20Statement) For 2019, the company generated positive net cash flow from operating activities, while investment activities resulted in negative net cash flow, and financing activities generated positive net cash flow, leading to an increased year-end cash and cash equivalents balance Consolidated Cash Flow Statement Key Data for 2019 (RMB) | Item | Current Period Amount | Prior Period Amount | | :--- | :--- | :--- | | Net Cash Flow from Operating Activities | 227,052,084.13 | 225,555,781.10 | | Net Cash Flow from Investing Activities | -188,545,621.10 | -69,303,346.01 | | Net Cash Flow from Financing Activities | 94,139,622.35 | -299,050,349.81 | | Cash and Cash Equivalents at Period-end | 280,262,664.35 | 147,756,286.25 | [Cash Flow Statement](index=103&type=section&id=Cash%20Flow%20Statement) For 2019, the parent company generated positive net cash flow from operating activities, while investment activities resulted in negative net cash flow, and financing activities generated positive net cash flow, leading to an increased year-end cash and cash equivalents balance Parent Company Cash Flow Statement Key Data for 2019 (RMB) | Item | Current Period Amount | Prior Period Amount | | :--- | :--- | :--- | | Net Cash Flow from Operating Activities | 239,715,359.58 | 219,713,966.15 | | Net Cash Flow from Investing Activities | -184,408,728.15 | -66,258,646.01 | | Net Cash Flow from Financing Activities | 66,763,305.83 | -296,125,049.81 | | Cash and Cash Equivalents at Period-end | 256,575,910.73 | 134,667,086.47 | [Consolidated Statement of Changes in Owners' Equity](index=105&type=section&id=Consolidated%20Statement%20of%20Changes%20in%20Owners'%20Equity) For 2019, the company's consolidated total owners' equity increased, primarily driven by higher net profit, appropriation of surplus reserves, and distributions to owners Consolidated Statement of Changes in Owners' Equity Key Data for 2019 (RMB) | Item | Period-end Amount | Prior Year-end Amount | | :--- | :--- | :--- | | Paid-in Capital (or Share Capital) | 448,920,000.00 | 448,920,000.00 | | Capital Reserve | 830,651,223.40 | 830,651,223.40 | | Surplus Reserve | 90,991,413.12 | 72,477,265.27 | | Retained Earnings | 551,236,989.92 | 445,961,080.86 | | Total Equity Attributable to Owners of Parent Company | 1,921,799,626.44 | 1,798,009,569.53 | | Non-controlling Interests | 75,185,152.62 | 70,351,013.14 | | **Total Owners' Equity** | **1,996,984,779.06** | **1,868,360,582.67** | [Statement of Changes in Owners' Equity](index=107&type=section&id=Statement%20of%20Changes%20in%20Owners'%20Equity) For 2019, the parent company's total owners' equity increased, primarily driven by higher net profit, appropriation of surplus reserves, and distributions to owners Parent Company Statement of Changes in Owners' Equity Key Data for 2019 (RMB) | Item | Period-end Amount | Prior Year-end Amount | | :--- | :--- | :--- | | Paid-in Capital (or Share Capital) | 448,920,000.00 | 448,920,000.00 | | Capital Reserve | 831,739,615.96 | 831,739,615.96 | | Surplus Reserve | 90,991,413.12 | 72,477,265.27 | | Retained Earnings | 518,109,489.69 | 421,513,678.99 | | **Total Owners' Equity** | **1,889,760,518.77** | **1,774,650,560.22** | Notes to Financial Statements [Company Profile and Basis of Preparation](index=109&type=section&id=Company%20Profile%20and%20Basis%20of%20Preparation) Hebei Yichen Industrial Group Co., Ltd., established in 2001 and listed on HKEX in 2016, specializes in railway fastener systems, flux-cored wire, and sleepers, with financial statements prepared on a going concern basis under China's Enterprise Accounting Standards - The company was established on April 9, 2001, and its H-shares were listed on the Main Board of the Hong Kong Stock Exchange on December 21, 2016[251](index=251&type=chunk) - The company's principal business is the research, development, production, and sale of railway fastener systems, flux-cored wire, and railway sleepers[251](index=251&type=chunk) - These financial statements are prepared on a going concern basis and comply with the requirements of Enterprise Accounting Standards, truly and completely reflecting the company's financial position, operating results, and cash flows[252](index=252&type=chunk)[254](index=254&type=chunk) [Significant Accounting Policies and Estimates](index=111&type=section&id=Significant%20Accounting%20Policies%20and%20Estimates) This section details the company's accounting policies and estimates for financial instruments, inventory, fixed assets, and revenue recognition, including the adoption of new lease standards and disclosure of significant accounting judgments - The company's financial assets are classified into three categories: measured at amortized cost, measured at fair value with changes recognized in other comprehensive income, and measured at fair value with changes recognized in profit or loss for the current period[262](index=262&type=chunk) - The company performs impairment testing on financial assets measured at amortized cost, debt instrument investments, and contract assets based on expected credit losses[272](index=272&type=chunk) - The company recognizes revenue from the sale of railway fasteners, flux-cored wire, and sleepers as fulfilling performance obligations at a point in time, when the customer obtains control of the related goods or services[314](index=314&type=chunk) - The company adopted the revised "Enterprise Accounting Standard No. 21 - Leases" from January 1, 2019, without adjusting comparative period information, and retrospectively adjusted the opening retained earnings and other relevant financial statement items for the current reporting period's initial adoption differences[337](index=337&type=chunk) Major Impact of Adopting New Lease Standards on Financial Statements as of January 1, 2019 (RMB) | Item | December 31, 2018 | Adjustment Impact of New Lease Standards | January 1, 2019 | | :--- | :--- | :--- | :--- | | Right-of-use Assets | - | 1,869,532.99 | 1,869,532.99 | | Non-current Liabilities Due Within One Year | - | 959,988.46 | 959,988.46 | | Lease Liabilities | - | 909,544.53 | 909,544.53 | [Taxation](index=146&type=section&id=Taxation) The company's main taxes include VAT, property tax, and corporate income tax, with the company benefiting from a high-tech enterprise tax rate and certain subsidiaries enjoying small and micro-enterprise tax relief Major Tax Types and Rates | Tax Type | Tax Rate | | :--- | :--- | | Value-Added Tax | 16%, 13%, 10%, 9% | | Property Tax | 1.2% | | Urban Maintenance and Construction Tax | 5%, 7% | | Education Surcharge | 3% | | Local Education Surcharge | 2% | | Corporate Income Tax | 15%, 20%, 25% | - As a high-tech enterprise, the company pays corporate income tax at a **15%** rate from 2018 to 2020[343](index=343&type=chunk) - Yichen Enterprise Management and Yichen Trading qualify as small and micro-enterprises, enjoying preferential corporate income tax policies in 2019[343](index=343&type=chunk) [Notes to Consolidated Financial Statement Items](index=147&type=section&id=Notes%20to%20Consolidated%20Financial%20Statement%20Items) This section provides detailed disclosures for consolidated financial statement items, including cash, receivables, inventory, fixed assets, goodwill, and borrowings, noting a goodwill impairment loss recognized in the period Consolidated Balance Sheet Key Items Data as of December 31, 2019 (RMB) | Item | Period-end Amount | Prior Year-end Amount | | :--- | :--- | :--- | | Cash and Bank Balances | 404,071,733.23 | 182,041,928.10 | | Trading Financial Assets | 1,938,703.64 | 128,770,000.00 | | Notes Receivable | 84,632,428.05 | 47,053,523.95 | | Accounts Receivable | 895,645,526.81 | 1,062,043,356.05 | | Inventories | 355,229,722.60 | 276,649,303.97 | | Long-term Equity Investments | 158,998,481.82 | 131,874,303.48 | | Fixed Assets | 125,378,423.78 | 92,092,316.71 | | Construction in Progress | 338,145,666.75 | 257,043,510.17 | | Goodwill | 102,739,493.25 | - | | Short-term Borrowings | 170,000,000.00 | 94,810,000.00 | | Accounts Payable | 405,067,840.65 | 383,451,729.11 | | Employee Remuneration Payable | 7,119,414.13 | 5,529,884.05 | | Long-term Borrowings | 70,000,000.00 | 30,000,000.00 | | Deferred Income | 5,408,866.67 | 5,641,466.67 | - In 2019, the company's acquired subsidiary, Xingtai Juneng, did not meet its performance commitment, and a performance compensation receivable of **RMB 1,938,703.64** was recognized and presented as a trading financial asset[349](index=349&type=chunk) - The goodwill impairment test results showed that the recoverable amount of the asset group containing goodwill was lower than its carrying value, and a goodwill impairment loss of **RMB 11,540,960.76** should be recognized for the current period[428](index=428&type=chunk) Consolidated Income Statement Key Items Data for 2019 (RMB) | Item | Current Period Amount | Prior Period Amount | | :--- | :--- | :--- | | Operating Revenue | 1,138,675,870.66 | 1,111,459,983.25 | | Operating Costs | 748,435,944.50 | 733,935,828.30 | | Selling Expenses | 47,568,603.53 | 43,305,936.71 | | Administrative Expenses | 65,196,906.21 | 65,618,498.73 | | Research and Development Expenses | 44,343,738.98 | 36,063,094.87 | | Finance Costs | 9,704,992.92 | 12,983,596.19 | | Investment Income | 27,124,178.34 | 24,483,484.05 | | Credit Impairment Losses | -8,035,220.94 | -30,847,888.02 | | Asset Impairment Losses | -12,510,906.06 | -6,089,783.89 | | Income Tax Expense | 30,933,120.71 | 25,019,483.24 | Consolidated Cash Flow Statement Supplementary Information for 2019 (RMB) | Item | 2019 | 2018 | | :--- | :--- | :--- | | Cash Received Relating to Other Operating Activities | 65,834,350.86 | 117,264,037.28 | | Cash Paid Relating to Other Operating Activities | 146,973,234.52 | 109,358,516.78 | | Cash Received Relating to Other Investing Activities | 286,000.00 | 30,628,058.50 | | Cash Paid Relating to Other Investing Activities | 50,000,000.00 | - | | Cash Received Relating to Other Financing Activities | 70,000,000.00 | - | | Cash Paid Relating to Other Financing Activities | 908,144.42 | - | - The difference of **RMB 123,809,068.88** between the cash and cash equivalents balance in the 2019 consolidated cash flow statement and the cash and bank balances in the consolidated balance sheet is mainly due to the exclusion of time deposits and other cash and bank balances that do not meet the definition of cash and cash equivalents[515](index=515&type=chunk) [Changes in Consolidation Scope](index=201&type=section&id=Changes%20in%20Consolidation%20Scope) On May 31, 2019, the company acquired a majority stake in Xingtai Juneng Railway Elect

Financial Performance - The company's revenue for 2018 was approximately RMB 1,111,460 thousand, representing an increase of about 15.1% compared to the previous year[11]. - The net profit attributable to equity shareholders for 2018 was approximately RMB 180,169 thousand, reflecting a growth of about 2.3% year-on-year[11]. - The company achieved earnings per share of approximately RMB 0.20 for 2018[11]. - In 2018, the total revenue of Hebei Yichen Industrial Group Co., Ltd. was approximately RMB 1,111.5 million, an increase of about 15.1% compared to 2017[19]. - Revenue from railway fastening system products was approximately RMB 927.9 million, accounting for about 83.5% of total revenue, representing a 16.7% increase from RMB 795.2 million in 2017[20]. - The company achieved a gross profit of approximately RMB 333.5 million, a decrease of about 2.0% from RMB 340.2 million in 2017, primarily due to a reduction in gross profit from railway fastening system products[30]. - Operating profit for 2018 was approximately RMB 211.3 million, a decrease of about 2.3% from RMB 216.3 million in 2017[35]. - Net profit increased by approximately RMB 5.7 million or 3.2% to RMB 182.2 million in 2018, while the net profit margin decreased from 18.3% in 2017 to 16.4% in 2018[40]. Asset and Liability Management - Non-current assets increased to RMB 587,276 thousand in 2018 from RMB 462,171 thousand in 2017, indicating a growth of approximately 27.0%[8]. - Current assets decreased to RMB 1,930,171 thousand in 2018 from RMB 2,095,715 thousand in 2017, a decline of about 7.9%[8]. - The total liabilities decreased from RMB 1,389,576 thousand in 2017 to RMB 619,801 thousand in 2018, a reduction of approximately 55.4%[8]. - Total assets as of December 31, 2018, were approximately RMB 2,517.4 million, a decrease of about RMB 40.4 million or 1.6% from the previous year[45]. - Total liabilities decreased by approximately RMB 202.0 million or 24.6% to RMB 619.8 million as of December 31, 2018, primarily due to a reduction in bank borrowings[46]. Market Strategy and Growth - The company plans to expand its market share in the drug core welding wire segment while maintaining its leading position in the railway fastening business[12]. - The company aims to promote advanced experiences, technologies, and products of China's high-speed railway fastening systems globally[12]. - The railway industry is expected to continue its rapid development, with significant investments in fixed assets planned for 2019[12]. - The company anticipates revenue growth from railway fastening systems due to support from national railway network development plans[24]. - The company aims to expand its market share in heavy-duty railway fastening systems, urban rail transit fastening systems, and ordinary railway fastening systems while enhancing its industry experience and customer base[52]. Cost Management and Profitability - The sales cost related to railway fastening system products increased by approximately 31.4% to RMB 613.9 million, up from RMB 467.0 million in 2017, primarily due to rising raw material prices[23]. - The gross profit for railway fastening system products decreased from RMB 328.2 million in 2017 to RMB 314.0 million in 2018, with the gross margin dropping from 41.3% to 33.8%[23]. - The gross profit from drug core welding wire products increased by approximately 44.2% from RMB 10.7 million in 2017 to RMB 15.4 million in 2018, with a gross margin improvement from 6.5% to 9.1% due to increased sales volume and unit price[30]. - The gross profit margin improved to 35%, up from 30% in the previous year, indicating better cost management[66]. - The company aims to reduce operational costs by 5% through efficiency improvements in the supply chain[66]. Investment and Development - The company plans to invest 50 million RMB in research and development for innovative welding technologies over the next fiscal year[76]. - The company plans to upgrade automation production equipment and optimize production processes to further reduce costs and increase efficiency[52]. - The company has allocated 15% of the IPO proceeds for research and development of new products, with RMB 86.8 million designated for this purpose[118]. Corporate Governance and Compliance - The company has strictly complied with relevant laws and regulations and has not faced penalties from regulatory authorities during the fiscal year ended December 31, 2018[99]. - The company maintained high standards of corporate governance and complied with applicable codes during the reporting period[162]. - The board of directors held a total of 6 meetings during the year ended December 31, 2018, with a 100% attendance rate from all directors[186]. - The company has established written guidelines for employees regarding securities trading to prevent violations of insider trading rules[184]. - All independent non-executive directors have confirmed their independence in accordance with the relevant guidelines[189]. Shareholder Information - As of December 31, 2018, the total share capital of the company was RMB 448,920,000, divided into 897,840,000 shares, including 673,380,000 domestic shares and 224,460,000 H shares, with a par value of RMB 0.50 per share[85]. - The company’s sales revenue from the top five customers accounted for 39% of total revenue, with the largest customer contributing 11%[119]. - The company has a significant concentration of ownership, with major shareholders holding over 65% of total share capital[138]. - The report indicates that the majority of shares are held by individuals with spouse rights, reflecting a familial ownership structure[138]. Future Outlook - The company provided a positive outlook for the next quarter, projecting a revenue growth of 10% to 12%[66]. - The company plans to focus on railway fastening systems and expects railway fixed asset investment in 2019 to be around RMB 800 billion, with the commissioning of new lines totaling 6,800 kilometers, including 3,200 kilometers of high-speed rail[50]. - The company will review its dividend policy based on operating performance, cash flow, financial condition, and other relevant factors[104].