CHINA ZHENGTONG AUTO SERVICES HOLDINGS LIMITED 中國正通汽車服務控股有限公司 (Incorporated under the laws of the Cayman Islands with limited liability) INTERIM REPORT 中期報告 (根據開曼群島法律註冊成立的有限公司) Stock Code 股份代號 : 1728 鳥 類先的 綜合 股榜 陪 目錄 2 管理層討論及分析 12 其他資料 18 獨立審閱報告 19 綜合損益表 20 綜合損益及其他全面收入表 21 綜合財務狀況表 22 綜合權益變動表 24 簡明綜合現金流量表 25 未經審計中期財務報告附註 54 公司資料 管理層討論及分析 業務回顧 2024年中報 2 2024年上半年，國內汽車市場競爭進一步加劇，新能源新模式帶來的價格衝擊和市場情緒波動等因素，對傳統燃油汽車 經銷商帶來了巨大挑戰。雖然受益於國家及各級地方政府以舊換新等鼓勵政策的陸續落地，銷量有所穩定，但新車銷售 利潤率仍處於歷史低位。面臨行業轉型期的震盪與困境，在國資大股東的堅定支持和全力保障下，本集團專注於發 ...

Financial Performance - Revenue decreased by approximately 19.8% to about RMB 9,876 million, primarily due to declines in new car sales volume and selling prices [3]. - Overall gross profit decreased by approximately 71.9% to about RMB 177 million, with a gross profit margin decline of 3.3 percentage points to 1.8% [3]. - The net loss for the period was approximately RMB 635 million, compared to a net loss of approximately RMB 386 million in the same period of 2023 [3]. - Basic loss per share was approximately RMB 25, compared to RMB 14 in the same period of 2023 [3]. - Total comprehensive loss for the period was RMB 641.85 million, compared to RMB 393.89 million in the same period of 2023 [5]. - Total revenue for the six months ended June 30, 2024, was RMB 9,875,622,000, a decrease of 19.7% compared to RMB 12,309,565,000 in the same period of 2023 [12]. - Revenue from passenger vehicle sales decreased to RMB 7,657,625,000, down 27.3% from RMB 10,580,807,000 in the same period of 2023 [12]. - The group reported a net loss of approximately RMB 635 million for the six months ended June 30, 2024, compared to a loss of RMB 386 million in the same period of 2023 [75]. Cash Flow and Liquidity - Net cash inflow from operating activities was approximately RMB 147 million, compared to a net outflow of approximately RMB 446 million in the same period last year [3]. - Cash and cash equivalents as of June 30, 2024, were approximately RMB 470 million, a decrease of about RMB 275 million from RMB 745 million as of December 31, 2023 [77]. - As of June 30, 2024, the company's cash and cash equivalents amounted to approximately RMB 5,451 million, a decrease of about RMB 169 million from RMB 5,620 million as of December 31, 2023 [81]. Operational Adjustments - The company plans to maintain its focus on luxury and ultra-luxury brand car sales while implementing operational adjustments and cost reduction measures [2]. - The company plans to enhance operational efficiency and reduce leverage through various methods [82]. - The company is focusing on the development of luxury and ultra-luxury brand automotive sales while optimizing operational quality and innovating marketing strategies [51]. Employee and Costs - Employee costs totaled RMB 367,388 thousand for the six months ended June 30, 2024, compared to RMB 414,472 thousand in the same period of 2023, reflecting a decrease of about 11.4% [15]. - Employee costs for the first half of 2024 were approximately RMB 396 million, compared to RMB 441 million for the same period in 2023 [85]. - The company employed 6,555 employees in China as of June 30, 2024, a decrease from 6,669 employees as of December 31, 2023 [85]. Inventory and Sales - Inventory costs were RMB 9,472,953 thousand for the six months ended June 30, 2024, down from RMB 11,419,654 thousand in the same period of 2023, indicating a decline of approximately 17.0% [17]. - The total inventory as of June 30, 2024, was RMB 3,833,371,000, compared to RMB 3,771,902,000 as of December 31, 2023 [32]. - The average inventory turnover days for the first half of 2024 was 50.4 days, an increase of 1.0 day compared to 49.4 days in the first half of 2023 [79]. - The company's new car sales totaled 26,615 units, representing a year-on-year decline of 12.9%, including 22,679 units of luxury and ultra-luxury brands, which decreased by 13.4% [54]. - The used car market in China saw a total transaction of 9.383 million vehicles in the first half of 2024, an increase of 610,000 vehicles year-on-year, representing a growth of 7% with a total transaction value of RMB 625.212 billion [56]. - The company’s used car sales volume increased by approximately 11% year-on-year as of June 30, 2024 [57]. Revenue Streams - Revenue from after-sales services increased to RMB 1,698,980,000, up 19.1% from RMB 1,425,687,000 in the same period of 2023 [12]. - The group recognized RMB 325,635,000 in revenue from providing mortgage loan services, which was previously not included in revenue reporting [12]. - The automotive finance revenue of the company grew by 108.4% year-on-year as of June 30, 2024 [58]. Financial Instruments and Investments - The company issued perpetual bonds totaling RMB 200 million with an initial annual interest rate of 8.5% on February 28, 2023 [41]. - The company issued two additional perpetual bonds of RMB 100 million each on April 14 and June 12, 2023, with initial interest rates of 8.5% and 8.0% respectively, totaling RMB 200 million [42]. - The company issued perpetual bonds of RMB 350 million and RMB 150 million on November 11 and December 26, 2023, with initial interest rates of 7.2% and 7.0% respectively, totaling RMB 500 million [44]. Legal and Compliance - The company has initiated appeals regarding the first-instance judgment related to equity investment obligations, with ongoing legal proceedings [38]. - The company has not made any provisions for potential liabilities as of June 30, 2024, based on legal opinions and assessments of the situation [48]. Future Outlook - The group expects to continue its operations for at least the next 12 months based on cash flow forecasts and financial support from Xiamen International Trade Holdings Group [10]. - The company is actively exploring opportunities in emerging businesses such as new energy vehicle distribution and after-sales services [87].

Financial Performance - The total comprehensive income for the year ended December 31, 2023, was RMB (824,118) thousand, compared to RMB (318,044) thousand for the year ended December 31, 2022, indicating a significant increase in losses[33]. - The net loss attributable to ordinary shareholders for the year was RMB (894,628) thousand, compared to RMB (316,908) thousand in the previous year, highlighting the challenges faced[33]. - The company reported a significant increase in reserves, moving from RMB (41,814) thousand in 2022 to RMB (895,485) thousand in 2023, indicating a turnaround in reserve management[66]. - The company reported a loss of RMB 1,883 million for the year ending December 31, 2023, compared to a loss of RMB 1,421 million for the previous year[144]. - The company does not recommend a final dividend for the year 2023, consistent with the previous year[144]. - The company will not declare an interim dividend for the six months ending June 30, 2023, similar to the previous year[145]. Revenue and Growth - The company reported a total revenue growth rate of X% for the fiscal year, with specific segments contributing to this growth[16]. - For the fiscal year ending December 31, 2023, total revenue reached RMB 246,394 thousand, an increase from RMB 235,203 thousand in the previous year[37]. - Future guidance indicates a projected revenue growth of approximately 10% for the upcoming fiscal year[37]. - The company plans to expand its market presence through new product development and strategic acquisitions in the automotive service sector[16]. - The company plans to expand its market presence and invest in new product development to drive future growth[37]. Assets and Liabilities - The total assets as of December 31, 2023, were RMB 8,392,179 thousand, reflecting an increase from RMB 8,250,000 thousand in the previous year[37]. - The company’s equity attributable to shareholders was RMB 1,287,060 thousand, up from RMB 1,224,444 thousand in the previous year[37]. - Non-current liabilities decreased from RMB 8,596,839 thousand in 2022 to RMB 5,583,349 thousand in 2023, a reduction of approximately 35.5%[66]. - The company’s borrowings decreased from RMB 6,439,857 thousand in 2022 to RMB 3,488,141 thousand in 2023, a decline of approximately 45.8%[66]. - The company’s total liabilities have shown a consistent downward trend, reflecting improved financial health and management efficiency[66]. Audit and Compliance - The financial statements were prepared in accordance with the Hong Kong Financial Reporting Standards, ensuring compliance with local regulations[13]. - The independent auditor's report confirmed that the financial statements present a true and fair view of the company's financial position as of December 31, 2023[24]. - The independent non-executive directors reviewed the related party transactions and confirmed they are part of the group's ordinary business and conducted on normal commercial terms[100]. - The company has appointed KPMG as an independent auditor to report on the related party transactions for the year ending December 31, 2023[99]. - All independent non-executive directors have confirmed their independence according to the listing rules[126]. Sustainability and Efficiency - The company aims to continue its sustainability development strategy, promoting environmental protection and resource recycling in its operations[8]. - The company is committed to enhancing its operational efficiency and reducing energy consumption through green office initiatives[8]. - The company is focusing on enhancing its technology capabilities to improve operational efficiency and customer experience[37]. Related Party Transactions - The group has ongoing related party transactions that require compliance with the listing rules, specifically under Chapter 14A[127]. - Wuhan Zhengtong signed a service subcontracting agreement with Xiamen Gaoxin Yundao Technology, with a total annual cap of RMB 55 million for the years ending December 31, 2023, 2024, and 2025, and an actual amount incurred of RMB 35.7 million for the year ending December 31, 2023[128]. Governance and Management - The board of directors has undergone changes, with Mr. Wang Mingcheng resigning as chairman on April 10, 2024, and Mr. Huang Junfeng appointed as the new chairman[118]. - The company has no significant contracts or agreements with current directors that could be terminated without compensation within one year[120]. - The company’s board of directors underwent changes, with new independent non-executive directors appointed effective February 7, 2024[149]. Financial Policies and Provisions - The company measures expected credit losses based on the entire expected life of financial instruments, with specific assessments for significant increases in credit risk since initial recognition[177]. - The company has established provisions for expected credit losses that are higher than the carrying value of guarantees in specific debtor default scenarios[166]. - The company will write off financial assets or receivables when it determines that the debtor has no assets or sufficient cash flow to repay the amount to be written off[163]. - The company has a policy to recognize any changes in expected credit loss amounts in profit or loss, reflecting changes in credit risk since initial recognition[180].

Financial Performance - The group's revenue for the year ended December 31, 2023, was approximately RMB 24,132 million, an increase of 7% compared to RMB 22,607 million in 2022[9]. - The overall gross profit was approximately RMB 1,009 million, a decrease of about 36% from RMB 1,587 million in 2022, resulting in a gross profit margin of approximately 4%, down 3 percentage points from 7% in 2022[9]. - Operating profit for the year was approximately RMB 168 million, a decline of about RMB 666 million compared to RMB 834 million in 2022[10]. - The net loss for the year was approximately RMB 820 million, an increase of about 176% from RMB 297 million in 2022[10]. - Revenue from passenger car sales increased to RMB 20,224,295 thousand in 2023, up from RMB 18,844,892 thousand in 2022, representing a growth of approximately 7.3%[24]. - The group reported a net loss of RMB 820 million for the year ended December 31, 2023, with current liabilities totaling RMB 8,218 million[21]. - The group recorded a basic loss per share of RMB (31.9) cents for the year ended December 31, 2023, compared to RMB (10.9) cents in 2022, indicating a worsening in performance[50]. - The company reported a pre-tax loss of RMB 886,600,000 for the year ended December 31, 2023, compared to a loss of RMB 130,342,000 in 2022, indicating a significant increase in losses[68]. - The basic loss per share for the year ended December 31, 2023, was RMB 890,990,000, compared to RMB 296,285,000 for the year ended December 31, 2022, reflecting a worsening financial performance[71]. Assets and Liabilities - Total assets as of December 31, 2023, were RMB 15,088 million, compared to RMB 13,902 million as of December 31, 2022[5]. - Current liabilities increased to RMB 22,644 million from RMB 18,911 million in the previous year[6]. - The company's equity attributable to shareholders increased to RMB 361 million from RMB 193 million in 2022[6]. - The group's current liabilities as of December 31, 2023, were approximately RMB 22,644 million, an increase of about RMB 3,733 million from RMB 18,911 million as of December 31, 2022, primarily due to an increase in short-term borrowings[136]. - The total liabilities as of December 31, 2023, were RMB 91,209,000, reflecting the financial position prior to losing control of Shanghai Yige[84]. - The carrying amount of inventory pledged as collateral for loans was RMB 1,212,183,000 as of December 31, 2023, up from RMB 1,121,577,000 in 2022[89]. - As of December 31, 2023, pledged assets amounted to approximately RMB 9,468 million, an increase from RMB 8,003 million in 2022, primarily due to increased pledged bank deposits[144]. Cash Flow and Financing - The group expects to receive financial support from Xiamen International Trade Group for at least the next 12 months, ensuring sufficient funds for ongoing operations[21]. - The total financing costs for loans and borrowings amounted to RMB 1,031,600 thousand, compared to RMB 957,414 thousand in the previous year, indicating an increase of approximately 7.7%[26]. - The net cash inflow from operating activities for the year ended December 31, 2023, was approximately RMB 37 million, compared to RMB 159 million in 2022[137]. - Cash and cash equivalents, along with bank deposits, were approximately RMB 5,620 million as of December 31, 2023, an increase of about RMB 929 million from RMB 4,691 million in 2022, primarily due to increased financing[142]. - The net debt ratio as of December 31, 2023, was approximately 1,198.1%, a significant decrease from 6,828.9% in 2022, indicating improved financial health[142]. Operational Highlights - The company continues to focus on mid-to-high-end brand sales and is actively seeking growth opportunities in the used car and automotive export sectors[9]. - The luxury car brand market share has steadily increased, with sales volume rising during the reporting period[9]. - The group plans to focus on mainstream luxury brands and optimize brand structure, aiming to improve operational quality and control vehicle sales prices[149]. - The group aims to expand into emerging businesses, including new energy brands and after-sales services, through acquisitions and partnerships[151]. - The group will accelerate its layout in the used car export business, leveraging national policies to promote overseas sales and cross-border e-commerce platforms[151]. Tax and Regulatory Compliance - The group’s income tax expense for the year was RMB 37,303 thousand, down from RMB 73,849 thousand in the previous year, representing a decrease of approximately 49.5%[45]. - The company has adopted the corporate governance code as per the listing rules and has complied with its provisions during the year[160]. - The company did not purchase, sell, or redeem any of its listed securities during the year ended December 31, 2023[159]. Employee and Cost Management - Employee costs for continuing operations decreased to RMB 955,750 thousand in 2023 from RMB 985,319 thousand in 2022, a reduction of about 3.0%[26]. - The group employed 6,669 employees as of December 31, 2023, down from 7,181 employees in 2022, with employee costs for the year amounting to approximately RMB 956 million[146]. - Administrative expenses decreased by approximately 15.3% to RMB 1,085 million from RMB 1,281 million in 2022, attributed to cost control measures[172]. Inventory and Cost of Sales - The group reported a cost of inventory amounting to RMB 22,558,926 thousand for the year ended December 31, 2023, compared to RMB 20,454,963 thousand in 2022, reflecting an increase of approximately 10.2%[45]. - The group's cost of sales for the year ended December 31, 2023, was approximately RMB 23,123 million, an increase of about 10.0% compared to RMB 21,020 million in 2022[169]. - The group's inventory write-down for the year ended December 31, 2023, was RMB 48,764,000, compared to RMB 54,386,000 in 2022[120]. - As of December 31, 2023, total inventory was RMB 3,092,763,000, a decrease from RMB 3,403,685,000 in 2022, representing a decline of approximately 9.1%[89]. Future Projections - The group’s revenue growth rate projections for 2024 are estimated between 1.5% and 24.3%, indicating potential for significant revenue increase[55]. - The company’s revenue growth rate for the forecast period from 2024 to 2028 is based on historical performance and reflects the latest developments in customer demand in the automotive industry[76]. - The estimated growth rate for cash flows beyond the five-year forecast period is set at 3%, consistent with industry reports[74].

Financial Performance - For the six months ended June 30, 2023, the company recorded revenue of approximately RMB 12,310 million, representing a year-on-year increase of about 11.2%[5] - The company's gross profit for the same period was approximately RMB 630 million, reflecting a year-on-year decrease of about 33.6%[5] - The group recorded a net loss of approximately RMB 386 million for the first half of 2023, compared to a profit of RMB 6 million in the same period of 2022[43] - Operating profit for the first half of 2023 was approximately RMB 153 million, down from RMB 533 million in the same period of 2022, primarily due to a decline in new car sales gross margin[41] - The group's selling and distribution expenses for the first half of 2023 were approximately RMB 566 million, an increase of about 4.4% from RMB 542 million in the first half of 2022[45] - The company's net loss for the period was RMB 386,064 thousand, compared to a profit of RMB 5,675 thousand in the previous year[158] - Basic and diluted loss per share was RMB (14.4), compared to earnings of RMB 0.3 per share in 2022[164] Sales and Market Activity - New car sales totaled 30,560 units, a year-on-year increase of approximately 17.1%, including 26,187 units of luxury and ultra-luxury brands, which grew by about 22.1%[8] - New car sales revenue for the first half of 2023 was approximately RMB 10,581 million, up about 14.0% from RMB 9,281 million in the first half of 2022, accounting for 86.0% of total revenue[37] - The used car market in China saw a cumulative transaction volume of 8.7686 million units in the first half of 2023, a year-on-year increase of 15.6%[19] - The company plans to leverage existing store resources and favorable conditions to expand its used car export business significantly[78] Service and After-Sales - The company achieved 574,600 after-sales service transactions, generating after-sales service revenue of approximately RMB 1,426 million[17] - Service revenue for the first half of 2023 reached RMB 437.841 million, a significant increase of 97.5% compared to RMB 221.635 million in the same period of 2022[127] Operational Developments - The company completed upgrades for 9 core brand stores and showrooms to enhance customer purchasing experience[6] - The company continues to optimize its online platform, enhancing customer interaction and satisfaction through various digital initiatives[10] - The company has opened two new NIO maintenance centers in the first half of 2023, furthering its presence in the new energy sector[24] - The company has established a comprehensive logistics base that integrates parts logistics, vehicle logistics, and vehicle storage, expected to be operational soon[30] Corporate Governance and Risk Management - The company has optimized its governance structure by revising 31 internal regulations and abolishing 5, enhancing decision-making and supervision processes[32] - The company has focused on risk management by establishing a risk management system and emergency response mechanisms to address operational risks[34] - The company remains committed to high standards of corporate governance, ensuring compliance with the corporate governance code[97] Financial Position and Assets - As of June 30, 2023, the group's current assets were approximately RMB 14,610 million, an increase of about RMB 780 million from RMB 13,830 million as of December 31, 2022[49] - The group's cash and cash equivalents were approximately RMB 705 million as of June 30, 2023, a decrease of about RMB 29 million from RMB 734 million as of December 31, 2022[54] - The company's inventory was approximately RMB 3,581 million, a decrease of about RMB 483 million from RMB 4,064 million on December 31, 2022, primarily due to reduced new car inventory[58] - The total assets of the group as of June 30, 2023, amounted to RMB 3,580,553 thousand, down from RMB 4,064,270 thousand as of December 31, 2022, indicating a reduction of 11.9%[108] Shareholder and Equity Information - As of June 30, 2023, the total number of issued shares is 2,867,102,420, with major shareholders holding significant stakes: Xiamen Guomao Holding Group at 28.62% and Zhang Mei at 10.01%[83] - The company has granted a total of 47,100,000 shares under the share incentive plan, representing approximately 1.92% of the issued shares as of the adoption date[89] - The company did not declare any interim dividends for the six months ended June 30, 2023[151] Future Outlook and Strategy - The company plans to focus on market expansion and new product development to improve future performance[168] - The company is actively exploring investment and collaboration opportunities in the new energy market, particularly in the stable revenue-generating maintenance sector[24] - The company will continue to focus on luxury and ultra-luxury car brands, enhancing strategic partnerships with major manufacturers, including those in the new energy sector[78]

[Interim Results Announcement for the Six Months Ended June 30, 2023](index=1&type=section&id=Interim%20Results%20Announcement) [Summary](index=1&type=section&id=%E6%91%98%E8%A6%81) The Group's revenue increased by 11.2% year-on-year to RMB 12,310 million in H1 2023, driven by higher new car sales, but overall gross profit decreased by 33.6% due to lower average selling prices, resulting in a loss attributable to equity holders of approximately RMB 394 million and basic loss per share of RMB 14.4 cents Key Financial and Operating Highlights for H1 2023 | Indicator | H1 2023 (RMB Million) | H1 2022 (RMB Million) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 12,310 | 11,068 | +11.2% | | Overall Gross Profit | 630 | 949 | -33.6% | | Gross Profit Margin | 5.1% | 8.6% | -3.5 percentage points | | Loss/Profit Attributable to Equity Holders of the Company | (394) | 8 | N/A | | Basic Loss/Earnings Per Share (RMB Cents) | (14.4) | 0.3 | N/A | | New Car Sales Units | 30,560 | N/A | +17.1% | | Luxury and Ultra-Luxury Car Sales Units | 26,187 | N/A | +22.1% | [Consolidated Financial Statements](index=2&type=section&id=%E7%B6%9C%E5%90%88%E8%B2%A1%E5%8B%99%E5%A0%B1%E8%A1%A8) This section presents the unaudited consolidated statement of profit or loss, statement of profit or loss and other comprehensive income, and statement of financial position for the six months ended June 30, 2023, reflecting the Group's financial performance and position [Consolidated Statement of Profit or Loss](index=2&type=section&id=%E7%B6%9C%E5%90%88%E6%90%8D%E7%9B%8A%E8%A1%A8) For the six months ended June 30, 2023, Group revenue increased to RMB 12,309,565 thousand, but gross profit significantly decreased due to higher cost of sales and lower average selling prices for new cars, resulting in a loss of RMB 386,064 thousand Key Data from Consolidated Statement of Profit or Loss (RMB Thousand) | Indicator | For the Six Months Ended June 30, 2023 | For the Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Revenue | 12,309,565 | 11,068,764 | | Cost of Sales | (11,679,149) | (10,119,500) | | Gross Profit | 630,416 | 949,264 | | Other Income | 623,786 | 393,264 | | Selling and Distribution Expenses | (565,904) | (542,098) | | Administrative Expenses | (535,363) | (500,141) | | Operating Profit | 152,935 | 532,715 | | Finance Costs | (536,380) | (482,527) | | (Loss)/Profit Before Tax | (383,569) | 70,407 | | (Loss)/Profit for the Period | (386,064) | 5,675 | | (Loss)/Profit Attributable to Equity Holders of the Company | (393,537) | 8,150 | | (Loss)/Profit Attributable to Non-controlling Interests | 7,473 | (2,475) | | Basic and Diluted (Loss)/Earnings Per Share (RMB Cents) | (14.4) | 0.3 | [Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=3&type=section&id=%E7%B6%9C%E5%90%88%E6%90%8D%E7%9B%8A%E5%8F%8A%E5%85%B6%E4%BB%96%E5%85%A8%E9%9D%A2%E6%94%B6%E5%85%A5%E8%A1%A8) For the six months ended June 30, 2023, the Group reported a loss for the period of RMB 386,064 thousand, which, combined with exchange differences in other comprehensive income (net of tax), resulted in a total comprehensive loss of RMB 393,889 thousand Key Data from Consolidated Statement of Profit or Loss and Other Comprehensive Income (RMB Thousand) | Indicator | For the Six Months Ended June 30, 2023 | For the Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | (Loss)/Profit for the Period | (386,064) | 5,675 | | Other Comprehensive Income for the Period (Net of Tax) | (7,825) | (10,245) | | Total Comprehensive Income for the Period | (393,889) | (4,570) | | Total Comprehensive Income Attributable to Equity Holders of the Company | (401,362) | (2,095) | | Total Comprehensive Income Attributable to Non-controlling Interests | 7,473 | (2,475) | [Consolidated Statement of Financial Position](index=4&type=section&id=%E7%B6%9C%E5%90%88%E8%B2%A1%E5%8B%99%E7%8B%80%E6%B3%81%E8%A1%A8) As of June 30, 2023, the Group's non-current assets slightly decreased while current assets increased, with a significant rise in current liabilities leading to an expanded net current liabilities position, though net assets and total equity grew substantially due to the issuance of perpetual bonds Key Data from Consolidated Statement of Financial Position (RMB Thousand) | Indicator | As of June 30, 2023 | As of December 31, 2022 | | :--- | :--- | :--- | | Non-current Assets | 13,860,314 | 13,902,668 | | Current Assets | 14,609,696 | 13,830,091 | | Current Liabilities | 20,339,004 | 18,911,476 | | Net Current Liabilities | (5,729,308) | (5,081,385) | | Net Assets | 1,176,274 | 224,444 | | Total Equity | 1,176,274 | 224,444 | | Perpetual Bonds | 899,951 | — | [Notes to the Unaudited Interim Financial Statements](index=6&type=section&id=%E6%9C%AA%E7%B6%93%E5%AF%A9%E6%A0%B8%E4%B8%AD%E6%9C%9F%E8%B2%A1%E5%8B%99%E5%A0%B1%E8%A1%A8%E9%99%84%E8%A8%BB) This section details the basis of preparation, new accounting policies, composition of income and expenses, balance sheet items, and significant financial guarantees, perpetual bonds, and contingent liabilities, providing essential supplementary information for understanding the financial statements [1 General Information](index=6&type=section&id=1%20%E4%B8%80%E8%88%AC%E8%B3%87%E6%96%99) The Group primarily engages in 4S dealership, automotive supply chain, and integrated property businesses in China - The Group's principal businesses include 4S dealership, automotive supply chain, and integrated property businesses[36](index=36&type=chunk) [2 Basis of Preparation](index=6&type=section&id=2%20%E7%B7%A8%E8%A3%BD%E5%9F%BA%E6%BA%96) This interim financial report is prepared in accordance with the HKEX Listing Rules and HKAS 34, reviewed by KPMG, includes 2022 annual financial data for comparison, and the directors confirm the Group's ability to continue as a going concern - This interim financial report is prepared in accordance with the HKEX Listing Rules and HKAS 34, and has been reviewed by KPMG[25](index=25&type=chunk)[38](index=38&type=chunk) - Despite a net loss of **RMB 386 million** and net current liabilities of **RMB 5,729 million** for the period, the Board believes the Group can continue as a going concern for at least the next 12 months, based on cash flow forecasts and financial support from controlling shareholder Guomao Holdings[29](index=29&type=chunk) [3 New Accounting Policies Applied and Changes in Accounting Policies](index=7&type=section&id=3%20%E6%96%B0%E6%87%89%E7%94%A8%E7%9A%84%E6%9C%83%E8%A8%88%E6%94%BF%E7%AD%96%E5%8F%8A%E6%9C%83%E8%A8%88%E6%94%BF%E7%AD%96%E7%9A%84%E8%AE%8A%E5%8B%95) The Group applied HKFRS 17 and amendments to HKAS 8 and 12 this period, classifying perpetual bonds as equity, with HKFRS 17 having no material impact, HKAS 8 amendments aligning with existing methods, and HKAS 12 amendments primarily affecting deferred tax asset and liability disclosures without altering overall balances - Perpetual bonds are classified as equity due to no fixed maturity date and discretionary coupon payments by the Group[30](index=30&type=chunk) - The Group has applied HKFRS 17 (Insurance Contracts) and amendments to HKAS 8 (Definition of Accounting Estimates) and HKAS 12 (Income Taxes: Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction)[31](index=31&type=chunk) - Following HKAS 12 amendments, the Group will separately determine temporary differences related to right-of-use assets and lease liabilities, primarily impacting the disclosure of deferred tax asset and liability components in annual financial statements, but not the overall deferred tax balance[58](index=58&type=chunk)[68](index=68&type=chunk) [4 Revenue](index=9&type=section&id=4%20%E6%94%B6%E7%9B%8A) The Group's revenue primarily derives from passenger vehicle sales, after-sales services, logistics services, and lubricant sales, with passenger vehicle sales, after-sales services, and lubricant sales recognized at a point in time, and logistics services recognized over time Revenue Composition (RMB Thousand) | Revenue Category | For the Six Months Ended June 30, 2023 | For the Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Sales of Passenger Vehicles | 10,580,807 | 9,281,151 | | Provision of After-sales Services | 1,425,687 | 1,467,521 | | Provision of Logistics Services | 189,234 | 220,270 | | Sales of Lubricants | 113,812 | 99,156 | | Others | 25 | 666 | | **Total Revenue** | **12,309,565** | **11,068,764** | - Revenue from logistics services is recognized over time, while revenue from passenger vehicle sales, after-sales services, and lubricant sales is recognized at a point in time[79](index=79&type=chunk) [5 Other Income](index=9&type=section&id=5%20%E5%85%B6%E4%BB%96%E6%94%B6%E5%85%A5) The Group's other income primarily includes service income, bank interest, net gain on disposal of property, and net gain on financial instruments, with a significant increase to RMB 623,786 thousand for the six months ended June 30, 2023, mainly due to higher service income and net realized and unrealized gains on financial instruments Other Income Composition (RMB Thousand) | Income Category | For the Six Months Ended June 30, 2023 | For the Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Service Income | 437,841 | 221,635 | | Bank Deposit Interest Income | 33,338 | 15,516 | | Net Gain on Disposal of Property, Plant and Equipment | 21,792 | 93,161 | | Net Realized and Unrealized Gains on Financial Instruments | 76,753 | 8,491 | | Government Grants | 5,446 | 8,431 | | Others | 48,616 | 46,030 | | **Total Other Income** | **623,786** | **393,264** | [6 (Loss)/Profit Before Tax](index=10&type=section&id=6%20%E9%99%A4%E7%A8%85%EF%BC%88%E虧%E6%90%8D%EF%BC%89%E2%88%95%E6%BA%A2%E5%88%A9) The Group's loss before tax was primarily impacted by increased finance costs and a reduced reversal of impairment losses on intangible assets, while staff costs slightly decreased and depreciation and amortization expenses increased (Loss)/Profit Before Tax Components (RMB Thousand) | Item | For the Six Months Ended June 30, 2023 | For the Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Finance Costs | 536,380 | 482,527 | | Staff Costs | 441,045 | 459,121 | | Cost of Inventories | 11,419,654 | 9,824,236 | | Depreciation (Owned Property, Right-of-Use Assets, Investment Property) | 334,261 | 354,887 | | Amortization of Intangible Assets | 81,489 | 78,730 | | Reversal of Impairment Loss (Intangible Assets, Property) | — | (253,665) | | Net Exchange Loss | 119,158 | 160,847 | - The increase in finance costs was primarily due to higher interest on loans and borrowings, partially offset by capitalized interest[82](index=82&type=chunk) - Staff costs slightly decreased, primarily comprising salaries, wages and other benefits, contributions to defined contribution retirement plans, and equity-settled share-based payment expenses[72](index=72&type=chunk)[81](index=81&type=chunk) [7 Income Tax](index=11&type=section&id=7%20%E6%89%80%E5%BE%97%E7%A8%85) The Group's income tax expense significantly decreased, mainly due to reduced provision for China income tax and the generation of temporary differences for deferred tax, with Chinese subsidiaries taxed at 25% and Cayman Islands, BVI, and Hong Kong subsidiaries exempt Income Tax Expense (RMB Thousand) | Item | For the Six Months Ended June 30, 2023 | For the Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Provision for China Income Tax for the Period | 10,718 | 47,964 | | Deferred Tax: (Generation)/Reversal of Temporary Differences | (8,223) | 16,768 | | **Total Income Tax Expense** | **2,495** | **64,732** | - The Group's PRC subsidiaries are subject to a corporate income tax rate of **25%**[91](index=91&type=chunk) - Subsidiaries in the Cayman Islands, British Virgin Islands, and Hong Kong were not subject to income tax during the period[88](index=88&type=chunk)[90](index=90&type=chunk) [8 (Loss)/Earnings Per Share](index=12&type=section&id=8%20%E6%AF%8F%E8%82%A1%EF%BC%88%E虧%E6%90%8D%EF%BC%89%E2%88%95%E6%94%B6%E7%9B%8A) For the six months ended June 30, 2023, the loss attributable to equity holders of the Company resulted in both basic and diluted loss per share of RMB 14.4 cents, compared to earnings per share of RMB 0.3 cents in the prior period, with potential ordinary shares from the share award scheme having an anti-dilutive effect this period (Loss)/Earnings Per Share (RMB Cents) | Indicator | For the Six Months Ended June 30, 2023 | For the Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Basic (Loss)/Earnings Per Share | (14.4) | 0.3 | | Diluted (Loss)/Earnings Per Share | (14.4) | 0.3 | | Weighted Average Number of Ordinary Shares in Issue | 2,733,099,326 | 2,716,922,420 (Basic) / 2,724,245,883 (Diluted) | - For the six months ended June 30, 2023, potential ordinary shares from the share award scheme had an anti-dilutive effect as they would decrease the loss per share[94](index=94&type=chunk) [9 Intangible Assets](index=13&type=section&id=9%20%E7%84%A1%E5%BD%A2%E8%B3%87%E7%94%A2) The Group's intangible assets primarily comprise automotive dealership and operating rights, favorable lease contracts, trademarks, and software, with a slight decrease in net book value as of June 30, 2023, and management's impairment assessment confirmed no impairment losses Net Book Value of Intangible Assets (RMB Thousand) | Intangible Asset Category | As of June 30, 2023 | As of December 31, 2022 | | :--- | :--- | :--- | | Automotive Dealership and Operating Rights | 2,398,216 | 2,477,338 | | Favorable Lease Contracts | — | 6 | | Trademarks | 217,105 | 217,105 | | Software and Others | 8,756 | 10,623 | | **Total Net Book Value** | **2,624,077** | **2,705,072** | - Automotive dealership rights have an estimated useful life of **40 years**, and dealership operating rights **10 years**, both fair values determined using the multi-period excess earnings method[76](index=76&type=chunk)[104](index=104&type=chunk) - Management, with the assistance of external valuers, performed an impairment assessment and did not recognize any impairment losses for intangible assets (automotive dealership rights and/or goodwill)[105](index=105&type=chunk) [10 Other Financial Assets/(Liabilities)](index=15&type=section&id=10%20%E5%85%B6%E4%BB%96%E9%87%91%E8%9E%8D%E8%B3%87%E7%94%A2%E2%88%95%EF%BC%88%E8%B2%A0%E5%82%B5%EF%BC%89) The Group's other financial assets primarily include wealth management products, forward contracts, option contracts, and equity investment in Dongfeng Logistics, with a significant increase in financial assets at fair value through profit or loss, mainly driven by realized/unrealized gains on option contracts, and the Group has reclassified its equity investment in Dongfeng Logistics as a financial asset at fair value through profit or loss after losing significant influence Other Financial Assets/(Liabilities) (RMB Thousand) | Item | As of June 30, 2023 | As of December 31, 2022 | | :--- | :--- | :--- | | **Other Financial Assets at Fair Value Through Profit or Loss** | | | | Wealth Management Products (Current) | 133,105 | 89,969 | | Forward Contracts (Current) | 32,375 | 13,592 | | Option Contracts (Current) | 97,568 | — | | Equity Investment in Dongfeng Logistics (Non-current) | 944,947 | 944,947 | | **Other Financial Liabilities at Fair Value Through Profit or Loss** | | | | Forward Contracts | — | (91,516) | | Option Contracts | (5,977) | — | - For the six months ended June 30, 2023, net realized/unrealized gains on option contracts amounted to **RMB 149,764 thousand**, recognized under 'Other income' in the consolidated statement of profit or loss[109](index=109&type=chunk) - The Group has lost significant influence over Dongfeng Logistics and reclassified its equity investment as a financial asset at fair value through profit or loss, with a fair value of **RMB 944,947 thousand**[113](index=113&type=chunk)[114](index=114&type=chunk) - The Group plans to dispose of its entire equity interest in Dongfeng Logistics, but completion within one year is unlikely due to regulatory and shareholder approvals being outside the Group's control[111](index=111&type=chunk) [11 Inventories](index=17&type=section&id=11%20%E5%AD%98%E8%B2%A8) The Group's inventories primarily consist of vehicles, spare parts, and properties under development for sale, totaling RMB 3,580,553 thousand as of June 30, 2023, a decrease from year-end 2022 mainly due to reduced vehicle inventories Inventories Composition (RMB Thousand) | Inventory Category | As of June 30, 2023 | As of December 31, 2022 | | :--- | :--- | :--- | | 4S Dealership Business - Vehicles | 2,558,130 | 3,044,340 | | 4S Dealership Business - Vehicle Spare Parts | 295,850 | 313,179 | | 4S Dealership Business - Others | 47,434 | 46,166 | | Integrated Property Business - Properties Under Development for Sale | 679,139 | 660,585 | | **Total Inventories** | **3,580,553** | **4,064,270** | Amount of Inventories Recognized as Expense and Included in Profit or Loss (RMB Thousand) | Item | For the Six Months Ended June 30, 2023 | For the Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Carrying Amount of Inventories Sold | 11,372,991 | 9,790,629 | | Write-down of Inventories | 46,663 | 33,607 | | **Total** | **11,419,654** | **9,824,236** | [12 Trade and Bills Receivables](index=18&type=section&id=12%20%E8%B2%BF%E6%98%93%E6%87%89%E6%94%B6%E6%AC%BE%E9%A0%85%E5%8F%8A%E6%87%89%E6%94%B6%E7%A5%A8%E6%93%9A) As of June 30, 2023, the Group's total trade and bills receivables amounted to RMB 900,989 thousand, primarily comprising amounts due within three months, and the Group's strict credit risk management indicates a low default risk Aging Analysis of Trade and Bills Receivables (RMB Thousand) | Aging | As of June 30, 2023 | As of December 31, 2022 | | :--- | :--- | :--- | | Within 3 Months | 893,601 | 900,002 | | Over 3 Months but Within 1 Year | 2,163 | 2,178 | | Over 1 Year | 5,225 | 5,262 | | **Total** | **900,989** | **907,442** | - Trade receivables primarily consist of amounts due from individual customers and warranty deposits from automobile manufacturers, with default risk considered low[127](index=127&type=chunk) [13 Prepayments, Deposits and Other Receivables](index=19&type=section&id=13%20%E9%A0%90%E4%BB%98%E6%AC%BE%E9%A0%85%E3%80%81%E4%BF%9D%E8%AD%89%E9%87%91%E5%8F%8A%E5%85%B6%E4%BB%96%E6%87%89%E6%94%B6%E6%AC%BE%E9%A0%85) As of June 30, 2023, the Group's total prepayments, deposits, and other receivables amounted to RMB 4,265,095 thousand, an increase from year-end 2022 driven by higher other receivables, with all amounts expected to be recovered within one year Prepayments, Deposits and Other Receivables (RMB Thousand) | Item | As of June 30, 2023 | As of December 31, 2022 | | :--- | :--- | :--- | | Prepayments | 278,441 | 402,403 | | Deposits | 359,496 | 399,940 | | Other Receivables | 3,627,158 | 3,261,174 | | **Total** | **4,265,095** | **4,063,517** | - Other receivables primarily include supplier rebates earned through various arrangements with automobile manufacturers, assessed based on purchase or sales volume and performance[128](index=128&type=chunk) [14 Trade and Other Payables](index=19&type=section&id=14%20%E8%B2%BF%E6%98%93%E5%8F%8A%E5%85%B6%E4%BB%96%E6%87%89%E4%BB%98%E6%AC%BE%E9%A0%85) As of June 30, 2023, the Group's total trade and other payables amounted to RMB 4,300,082 thousand, a decrease from year-end 2022 primarily due to reductions in trade and bills payables and contract liabilities Aging Analysis of Trade and Other Payables (RMB Thousand) | Aging/Category | As of June 30, 2023 | As of December 31, 2022 | | :--- | :--- | :--- | | Trade and Bills Payables (Within 3 Months) | 2,798,811 | 3,379,485 | | Trade and Bills Payables (Over 3 Months but Within 1 Year) | 381,530 | 460,686 | | Contract Liabilities | 479,602 | 1,215,170 | | Other Payables and Accruals | 637,766 | 771,927 | | Amounts Due to Related Parties | 2,373 | 507 | | **Total Current** | **4,300,082** | **5,827,775** | | Long-term Payables (Non-current) | 168,364 | 186,648 | | **Total** | **4,468,446** | **6,014,423** | [15 Financial Guarantees Issued](index=20&type=section&id=15%20%E5%B7%B2%E6%8E%88%E5%87%BA%E8%B2%A1%E5%8B%99%E6%93%94%E4%BF%9D) Wuhan Zhengtong, a Group subsidiary, provided financial guarantees for Beijing Guangze's equity investment repurchase obligations and outstanding loan balances; despite an initial court ruling for joint liability, a second-instance judgment clarified its role as a deficiency guarantor, and a settlement agreement with the creditor, combined with collateral valuation, indicates an immaterial expected credit loss provision for the financial guarantee - Wuhan Zhengtong provided financial guarantees for Beijing Guangze, covering equity investment repurchase obligations and outstanding loan balances, with a maximum guarantee amount of **RMB 1.93 billion**[121](index=121&type=chunk)[130](index=130&type=chunk) - The first-instance judgment held Wuhan Zhengtong jointly liable for Beijing Guangze's debts, but the second-instance judgment overturned this, clarifying Wuhan Zhengtong as a deficiency guarantor[132](index=132&type=chunk)[135](index=135&type=chunk) - Wuhan Zhengtong reached a settlement agreement with Yuchen Fengze, where Yuchen Fengze agreed to assist in disposing of collateral to recover the debt, limiting the Group's cash exposure to the difference between collateral disposal proceeds and the debt[135](index=135&type=chunk)[146](index=146&type=chunk) - As of June 30, 2023, the fair value and estimated net realizable value of the pledged assets were **RMB 2.79 billion** and **RMB 1.97 billion**, respectively, and the expected credit loss provision for the financial guarantee was assessed as immaterial[136](index=136&type=chunk)[147](index=147&type=chunk) [16 Dividends](index=22&type=section&id=16%20%E8%82%A1%E6%81%AF) The Board does not recommend an interim dividend for the six months ended June 30, 2023, and no proposed final dividend for the previous financial year was approved or paid during the reporting period - The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2023[123](index=123&type=chunk)[215](index=215&type=chunk) - No proposed final dividend for the previous financial year was approved or paid during the reporting period[137](index=137&type=chunk) [17 Perpetual Bonds](index=22&type=section&id=17%20%E6%B0%B8%E4%B9%85%E5%82%B5%E5%88%B8) The Group issued three perpetual bonds totaling RMB 1.299951 billion, which are classified as equity due to their indefinite term and discretionary redemption or interest payment, with Perpetual Bonds 1 and 2 recognized in non-controlling interests and Perpetual Bond 3 in equity attributable to equity holders of the Company - Wuhan Zhengtong issued Perpetual Bond 1 (**RMB 200 million**, initial annual interest rate **8.5%**) and Perpetual Bond 2 (**RMB 200 million**, initial annual interest rates **8.5%** and **8.0%**), both with no fixed maturity and discretionary redemption or interest payment[124](index=124&type=chunk)[138](index=138&type=chunk)[149](index=149&type=chunk) - A short-term loan of **US$124.547 million** (approximately **RMB 899.951 million**) from Guomao Hong Kong to the Company was converted into Perpetual Bond 3, with an annual interest rate of **5.0%**, no fixed maturity, and discretionary redemption or interest payment[151](index=151&type=chunk) - Perpetual Bonds 1 to 3 are all classified as equity, with Perpetual Bonds 1 and 2 recognized in non-controlling interests and Perpetual Bond 3 directly in total equity attributable to equity holders of the Company in the consolidated statement of financial position[152](index=152&type=chunk) [18 Contingent Liabilities](index=23&type=section&id=18%20%E6%88%96%E7%84%B6%E8%B2%A0%E5%82%B5) Wuhan Zhengtong, a Group subsidiary, entered into a general contracting agreement with Beijing Guangze, and subsequently received payment notices from subcontractors due to Beijing Guangze's non-performance; based on external legal advice, Beijing Guangze is the primary debtor, and the Group's likelihood of making payments is low, thus no provision has been made - Wuhan Zhengtong entered into a general contracting agreement with Beijing Guangze for 4S dealership and related commercial projects; due to Beijing Guangze's non-performance, the Group received payment notices totaling **RMB 6 million** from subcontractors[153](index=153&type=chunk) - External legal counsel opined that Beijing Guangze is the primary debtor, and the likelihood of the Group being sued by subcontractors and making payments is low, thus no provision has been made[139](index=139&type=chunk)[155](index=155&type=chunk) [19 Comparative Figures](index=24&type=section&id=19%20%E6%AF%94%E8%BC%83%E6%95%B8%E5%AD%97) Certain comparative figures have been adjusted to conform to the current period's presentation - Certain comparative figures have been adjusted to conform to the current period's presentation[141](index=141&type=chunk) [Management Discussion and Analysis](index=25&type=section&id=%E7%AE%A1%E7%90%86%E5%B1%A4%E8%A8%8E%E8%AB%96%E5%8F%8A%E5%88%86%E6%9E%90) This section reviews the Group's operating results and management initiatives for H1 2023, highlighting revenue growth despite market challenges through focus on luxury brands, optimized after-sales services, expanded used car exports, and strengthened financial services, alongside significant progress in governance, risk prevention, human resources, and digitalization - For H1 2023, Group revenue was approximately **RMB 12,310 million**, a **11.2%** year-on-year increase, while gross profit was approximately **RMB 630 million**, a **33.6%** year-on-year decrease[169](index=169&type=chunk) - Amidst a volatile market, the Group continued to focus on luxury and ultra-luxury vehicle sales and after-sales services, while also monitoring the rise of domestic brands and exploring new growth opportunities[157](index=157&type=chunk)[1](index=1&type=chunk) [Business Review](index=25&type=section&id=%E6%A5%AD%E5%8B%99%E5%9B%9E%E9%A1%A7) In H1 2023, the Chinese automotive industry faced challenges including the transition to National VI A standards, NEV price adjustments, and price wars, yet the Group maintained stable operations by focusing on luxury and ultra-luxury brand sales and after-sales services, earning 193 awards - In H1 2023, the Group's stores received **193 awards**, including **165 manufacturer awards** and **28 government, media, and industry association awards**[143](index=143&type=chunk) - The market faced challenges such as promotional waves, intense industry competition, and inventory clearance pressure from the National VI B emission standard transition; domestic passenger vehicle retail sales grew by **2.7%** year-on-year, but consumer sentiment and price recovery still require time[158](index=158&type=chunk) [(I) Automobile Dealership Segment](index=25&type=section&id=(%E4%B8%80)%20%E6%B1%BD%E8%BB%8A%E7%B6%93%E9%8A%B7%E6%9D%BF%E5%A1%8A) The automobile dealership segment actively responded to market changes in H1 2023, achieving a 17.1% year-on-year increase in new car sales units, with luxury brands growing by 22.1%, after-sales service revenue reaching RMB 1,426 million, and used car business gaining export qualifications and strengthening retail, while automotive finance performed well with new insurance policies up 7% and renewals up 13%, and the Group continued to optimize its network, expand new brands, and strengthen cooperation with OEMs - The Group represents luxury and ultra-luxury brands such as Porsche, Mercedes-Benz, BMW, Audi, Jaguar Land Rover, Volvo, and Hongqi, as well as mid-to-high-end brands like FAW-Volkswagen and Buick[183](index=183&type=chunk) - The Group actively responded to market changes, completing upgrades and renovations for **9 core brand stores and showrooms**, and expanding key account supply chain business and new media marketing channels[171](index=171&type=chunk) [1. New Car Sales Business](index=25&type=section&id=1.%20%E6%96%B0%E8%BB%8A%E9%8A%B7%E5%94%AE%E6%A5%AD%E5%8B%99) In H1 2023, the Group sold 30,560 new cars, a 17.1% year-on-year increase, with luxury and ultra-luxury brands accounting for 26,187 units, up 22.1%, achieved through enhanced communication with manufacturers, store upgrades, key account expansion, and new media marketing New Car Sales Data | Indicator | For the Six Months Ended June 30, 2023 | Year-on-Year Growth | | :--- | :--- | :--- | | New Car Sales Units | 30,560 | 17.1% | | Luxury and Ultra-Luxury Car Sales Units | 26,187 | 22.1% | [2. After-sales Service Business](index=27&type=section&id=2.%20%E5%94%AE%E5%BE%8C%E6%9C%8D%E5%8B%99%E6%A5%AD%E5%8B%99) The Group maintained a customer-centric approach, enhancing digital customer operations and online mall optimization to provide convenient after-sales services, accumulating 574,600 after-sales service units and generating approximately RMB 1,426 million in revenue for the six months ended June 30, 2023 - The Group enhanced digital customer operations through self-developed information systems, WeChat mini-programs, and enterprise WeChat, offering services like maintenance reminders and online consultations[159](index=159&type=chunk) After-sales Service Data | Indicator | For the Six Months Ended June 30, 2023 | | :--- | :--- | | Automotive After-sales Service Units | 574,600 | | After-sales Service Revenue | Approximately RMB 1,426 Million | [3. Used Car Business](index=27&type=section&id=3.%20%E4%BA%8C%E6%89%8B%E8%BB%8A%E6%A5%AD%E5%8B%99) In H1 2023, China's used car transaction volume increased by 15.6% year-on-year, and the Group updated its standardized used car management system, focused on strengthening retail business, and obtained used car export qualifications in July 2023 to accelerate business expansion - From January to June 2023, China's cumulative used car transaction volume reached **8.7686 million units**, a **15.6%** year-on-year increase, with a transaction value of **RMB 551.726 billion**[160](index=160&type=chunk) - The Group updated its standardized used car management system, enhancing retail business quality through increased external procurement support, establishing benchmark retail outlets, and sharing vehicle sources[162](index=162&type=chunk) - The Group obtained used car export qualifications in July 2023 and has commenced export operations, accelerating expansion and building a full-link supply chain system[162](index=162&type=chunk) [4. Automotive Finance Business](index=28&type=section&id=4.%20%E6%B1%BD%E8%BB%8A%E9%87%91%E8%9E%8D%E6%A5%AD%E5%8B%99) The Group's automotive finance business performed well in H1 2023, with new insurance policies up 7% year-on-year, renewals up 13%, and dual-insurance product sales reaching RMB 76 million, as the Group focused on customer needs and innovative insurance services to enhance customer retention and store comprehensive profit Automotive Finance Business Data | Indicator | For the Six Months Ended June 30, 2023 | Year-on-Year Increase | | :--- | :--- | :--- | | New Insurance Policies Units | 26,000 | 7% | | New Car Insurance Penetration Rate | 94% | N/A | | Renewal Insurance Policies Units | 93,000 | 13% | | Dual-Insurance Product Sales | RMB 76 Million | N/A | [Company Network Development and Layout](index=29&type=section&id=%E5%85%AC%E5%8F%B8%E7%B6%B2%E7%B5%A1%E7%99%BC%E5%B1%95%E8%88%87%E4%BD%88%E5%B1%80) As of June 30, 2023, the Group operated 109 outlets and had 3 under construction across 16 provinces and 37 cities in China, opening 2 new 4S stores and 2 NIO service centers in H1, expanding its luxury brand advantage and entering the new energy sector, while actively advancing core brand projects, strengthening OEM cooperation, and streamlining underperforming brands and outlets Outlet Details (As of June 30, 2023) | Outlet Type | Operating Outlets | Outlets Under Construction | Total | | :--- | :--- | :--- | :--- | | Luxury and Ultra-Luxury Brand 5S/4S Stores | 58 | 1 | 59 | | Mid-to-High-End and New Energy Brand 4S Stores | 17 | 1 | 18 | | Luxury Brand City Showrooms | 5 | 0 | 5 | | Luxury Brand Authorized Service Centers | 4 | 1 | 5 | | Mid-to-High-End and New Energy Brand Showrooms | 1 | 0 | 1 | | Mid-to-High-End and New Energy Brand Service Centers | 5 | 0 | 5 | | Self-operated Outlets | 19 | 0 | 19 | | **Total** | **109** | **3** | **112** | - In H1 2023, the Group opened **one Mercedes-Benz 4S store**, **one Great Wall Haval 4S store**, and **two NIO service centers**, continuously expanding its traditional luxury brand advantage and venturing into new energy vehicle maintenance[1](index=1&type=chunk) - The Group actively advanced core and highly profitable brand projects, aligning with brand image upgrades and new energy transformation, while streamlining underperforming brands and outlets to enhance overall profitability[166](index=166&type=chunk) [(II) Supply Chain Business Segment](index=30&type=section&id=(%E4%BA%8C)%20%E4%BE%9B%E6%87%89%E9%8F%88%E6%A5%AD%E5%8B%99%E6%9D%BF%E5%A1%8A) In H1 2023, the Group's supply chain business segment achieved total revenue of RMB 303 million, with Shengze Jietong making new progress in vehicle logistics, warehousing, and spare parts, and being recognized among the "2023 Top 50 Car Carrier Self-Owned Capacity" - For H1 2023, the Group's supply chain business segment achieved total revenue of **RMB 303 million**[186](index=186&type=chunk) - Shengze Jietong added Dongfeng Honda Chongqing Port last-mile distribution business, successfully introduced XPeng Motors vehicle warehousing business, and won the bid for the nationwide transportation and distribution project of BWI Group auto parts[166](index=166&type=chunk) - The construction of Hannan Logistics Base is largely complete, poised to become a comprehensive logistics hub integrating spare parts logistics, vehicle logistics, and vehicle warehousing businesses[166](index=166&type=chunk) - Shengze Jietong was recognized by the China Federation of Logistics & Purchasing Automotive Logistics Branch as one of the '2023 Top 50 Car Carrier Self-Owned Capacity' for its business development and cost management achievements[176](index=176&type=chunk) [(III) Management Enhancement](index=31&type=section&id=(%E4%B8%89)%20%E7%AE%A1%E7%90%86%E6%8F%90%E5%8D%87) In H1 2023, the Group optimized and enhanced its governance, organizational structure, internal oversight, risk prevention, human resources, and digitalization, including revising policies, establishing an ESG committee, optimizing executive responsibilities, strengthening internal audits, formulating operational risk management policies, refining compensation systems, and accelerating digital operation project development - In terms of standardized governance, **31 new/revised policies** were introduced, **5 abolished**, clarifying decision-making, execution, and oversight responsibilities, and optimizing approval authorities[187](index=187&type=chunk) - Regarding organizational structure, an Environmental, Social, and Governance (ESG) Committee was established under the Board, and executive division of labor and headquarters department responsibilities were adjusted and optimized[187](index=187&type=chunk) - In internal audit and supervision, audit priorities were emphasized, issue rectification promoted, and internal control research, diagnosis, and system optimization projects initiated[188](index=188&type=chunk) - For risk prevention, dynamic risk analysis and assessment were conducted, operational risk management policies formulated, and management of financing, guarantees, and foreign exchange transactions strengthened[177](index=177&type=chunk) - In human resources, the compensation system was optimized, an employee career management system established, and internal competitive recruitment and market-based selection for mid-to-high-level positions promoted[177](index=177&type=chunk) - For digitalization, a series of automotive information projects were independently designed and developed, including client-side enterprise WeChat mini-programs, electronic vehicle tag inventory management systems, and test drive and courtesy car management systems[178](index=178&type=chunk) [Financial Review](index=33&type=section&id=%E8%B2%A1%E5%8B%99%E5%9B%9E%E9%A1%A7) This section provides a detailed review of the Group's H1 2023 financial performance, covering revenue growth, gross profit decline, expense variations, period loss, liquidity, capital expenditure, inventory management, pledged assets, and foreign currency risk hedging, highlighting the impact of reduced new car sales gross profit margin on overall profitability [Operating Revenue](index=33&type=section&id=%E7%87%9F%E6%A5%AD%E6%94%B6%E5%85%A5) For the six months ended June 30, 2023, the Group's operating revenue was approximately RMB 12,310 million, an 11.2% year-on-year increase, primarily driven by higher new car sales volume, with new car sales revenue accounting for 86.0% and after-sales service revenue for 11.6% of total revenue Operating Revenue Composition and Growth | Item | H1 2023 (RMB Million) | H1 2022 (RMB Million) | Year-on-Year Growth/Decrease | | :--- | :--- | :--- | :--- | | Total Revenue | 12,310 | 11,069 | +11.2% | | New Car Sales Revenue | 10,581 | 9,281 | +14.0% | | After-sales Service Revenue | 1,426 | 1,468 | -2.9% | | New Car Sales Revenue as % of Total Revenue | 86.0% | 83.8% | +2.2 percentage points | | Luxury and Ultra-Luxury Car Sales Revenue as % of New Car Sales Revenue | 95.0% | 93.5% | +1.5 percentage points | [Cost of Sales](index=33&type=section&id=%E9%8A%B7%E5%94%AE%E6%88%90%E6%9C%AC) For the six months ended June 30, 2023, the Group's cost of sales was approximately RMB 11,679 million, a 15.4% year-on-year increase, mainly due to higher new car sales volume and promotional activities for some inventory vehicles, with new car sales cost rising by 20.6% while after-sales service cost decreased by 21.0% due to operational cost control Cost of Sales Composition and Growth | Item | H1 2023 (RMB Million) | H1 2022 (RMB Million) | Year-on-Year Growth/Decrease | | :--- | :--- | :--- | :--- | | Total Cost of Sales | 11,679 | 10,120 | +15.4% | | New Car Sales Cost | 10,558 | 8,755 | +20.6% | | After-sales Service Cost | 851 | 1,077 | -21.0% | - The decrease in after-sales service cost of sales was primarily due to operational cost control at integrated and mid-to-high-end brand stores[181](index=181&type=chunk) [Gross Profit and Gross Profit Margin](index=33&type=section&id=%E6%AF%9B%E5%88%A9%E5%8F%8A%E6%AF%9B%E5%88%A9%E7%8E%87) For the six months ended June 30, 2023, the Group's gross profit was approximately RMB 630 million, a 33.6% year-on-year decrease, with a gross profit margin of 5.1%, down 3.5 percentage points from the prior period, primarily due to lower average selling prices for new cars Gross Profit and Gross Profit Margin | Indicator | H1 2023 (RMB Million) | H1 2022 (RMB Million) | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Gross Profit | 630 | 949 | -33.6% | | Gross Profit Margin | 5.1% | 8.6% | -3.5 percentage points | - The decline in gross profit and gross profit margin was primarily due to lower average selling prices for new cars[205](index=205&type=chunk) [Selling and Distribution Expenses](index=34&type=section&id=%E9%8A%B7%E5%94%AE%E5%8F%8A%E5%88%86%E9%8A%B7%E9%96%8B%E6%94%AF) For the six months ended June 30, 2023, the Group's selling and distribution expenses were approximately RMB 566 million, a 4.4% year-on-year increase, mainly due to higher marketing expenses and staff costs Selling and Distribution Expenses (RMB Million) | Indicator | H1 2023 | H1 2022 | Year-on-Year Growth | | :--- | :--- | :--- | :--- | | Selling and Distribution Expenses | 566 | 542 | +4.4% | - The increase in selling and distribution expenses was primarily due to higher marketing expenses and staff costs[5](index=5&type=chunk) [Administrative Expenses](index=34&type=section&id=%E8%A1%8C%E6%94%BF%E9%96%8B%E6%94%AF) For the six months ended June 30, 2023, the Group's administrative expenses were approximately RMB 535 million, a 7.0% year-on-year increase, primarily due to higher depreciation and amortization from new store openings Administrative Expenses (RMB Million) | Indicator | H1 2023 | H1 2022 | Year-on-Year Growth | | :--- | :--- | :--- | :--- | | Administrative Expenses | 535 | 500 | +7.0% | - The increase in administrative expenses was primarily due to higher depreciation and amortization resulting from new store openings[6](index=6&type=chunk) [Operating Profit](index=34&type=section&id=%E7%B6%93%E7%87%9F%E6%BA%A2%E5%88%A9) For the six months ended June 30, 2023, the Group's operating profit was approximately RMB 153 million, a significant decrease from RMB 533 million in the prior period, primarily due to lower new car sales gross profit margin Operating Profit (RMB Million) | Indicator | H1 2023 | H1 2022 | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Operating Profit | 153 | 533 | Significant Decrease | - The primary reason for the decline in operating profit was the decrease in new car sales gross profit margin during the period[189](index=189&type=chunk) [Income Tax](index=34&type=section&id=%E6%89%80%E5%BE%97%E7%A8%85) For the six months ended June 30, 2023, the Group's income tax expense was approximately RMB 2 million, a significant reduction from RMB 65 million in the prior period Income Tax Expense (RMB Million) | Indicator | H1 2023 | H1 2022 | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Income Tax Expense | 2 | 65 | Significant Decrease | [Contingent Liabilities](index=34&type=section&id=%E6%88%96%E7%84%B6%E8%B2%A0%E5%82%B5) As of June 30, 2023, the Group had no other significant contingent liabilities apart from those related to certain construction projects disclosed in Note 18 to the interim financial information - As of June 30, 2023, the Group had no other significant contingent liabilities, except for contingent matters related to certain construction projects disclosed in Note 18[191](index=191&type=chunk) [(Loss)/Profit for the Period](index=34&type=section&id=%E6%9C%9F%E5%85%A7%EF%BC%88%E虧%E6%90%8D%EF%BC%89%E2%88%95%E6%BA%A2%E5%88%A9) For the six months ended June 30, 2023, the Group recorded a loss for the period of approximately RMB 386 million, compared to a profit of approximately RMB 6 million in the prior period, primarily due to lower new car sales gross profit margin (Loss)/Profit for the Period (RMB Million) | Indicator | H1 2023 | H1 2022 | Year-on-Year Change | | :--- | :--- | :--- | :--- | | (Loss)/Profit for the Period | (386) | 6 | Turned to Loss | - The primary reason for the period turning to loss was the decrease in new car sales gross profit margin[192](index=192&type=chunk) [Current Assets and Current Liabilities](index=34&type=section&id=%E6%B5%81%E5%8B%95%E8%B3%87%E7%94%A2%E5%8F%8A%E6%B5%81%E5%8B%95%E8%B2%A0%E5%82%B5) As of June 30, 2023, the Group's current assets were approximately RMB 14,610 million, an increase of approximately RMB 780 million from year-end 2022, while current liabilities were approximately RMB 20,339 million, an increase of approximately RMB 1,428 million, mainly due to higher business-related short-term bank borrowings Current Assets and Current Liabilities (RMB Million) | Indicator | As of June 30, 2023 | As of December 31, 2022 | Change | | :--- | :--- | :--- | :--- | | Current Assets | 14,610 | 13,830 | +780 | | Current Liabilities | 20,339 | 18,911 | +1,428 | | Primary Reason for Increase in Current Liabilities | Increase in business-related short-term bank borrowings | N/A | N/A | [Cash Flow](index=35&type=section&id=%E7%8F%BE%E9%87%91%E6%B5%81%E9%87%8F) For the six months ended June 30, 2023, the Group's net cash from operating activities was a net outflow of approximately RMB 446 million, compared to a net inflow of approximately RMB 171 million in the prior period, primarily due to lower new car sales gross profit, with cash and cash equivalents slightly decreasing Cash Flow (RMB Million) | Indicator | H1 2023 | H1 2022 | Change | | :--- | :--- | :--- | :--- | | Net Cash from Operating Activities | (446) (Net Outflow) | 171 (Net Inflow) | Turned to Net Outflow | | Cash and Cash Equivalents | 705 | 734 (As of Dec 31, 2022) | -29 | - The net cash outflow from operating activities was primarily due to the decrease in new car sales gross profit[208](index=208&type=chunk) [Capital Expenditure and Investments](index=35&type=section&id=%E8%B3%87%E6%9C%AC%E9%96%8B%E6%94%AF%E5%8F%8A%E6%8A%95%E8%B3%87) For the six months ended June 30, 2023, the Group's capital expenditure and investments were approximately RMB 401 million, an increase from RMB 371 million in the prior period, primarily due to upgrades and renovations of some stores Capital Expenditure and Investments (RMB Million) | Indicator | H1 2023 | H1 2022 | Year-on-Year Growth | | :--- | :--- | :--- | :--- | | Capital Expenditure and Investments | 401 | 371 | +30 | - The increase in capital expenditure and investments was primarily due to upgrades and renovations of some stores[195](index=195&type=chunk) [Inventories](index=36&type=section&id=%E5%AD%98%E8%B2%A8) As of June 30, 2023, the Group's inventories were approximately RMB 3,581 million, a decrease of approximately RMB 483 million from year-end 2022, primarily due to reduced new car ending inventory, with average inventory turnover days increasing to 49.4 days Inventories and Turnover Days (RMB Million) | Indicator | As of June 30, 2023 | As of December 31, 2022 | Change | | :--- | :--- | :--- | :--- | | Inventories | 3,581 | 4,064 | -483 | | Average Inventory Turnover Days (Days) | 49.4 | 40.8 (H1 2022) | +8.6 | - The decrease in inventories was primarily due to the Group reducing its new car ending inventory[210](index=210&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=%E6%B5%81%E5%8B%95%E8%B3%87%E9%87%91%E5%8F%8A%E8%B3%87%E6%9C%AC%E8%B3%87%E6%BA%90) As of June 30, 2023, the Group's cash and bank balances were approximately RMB 5,600 million, an increase of approximately RMB 909 million from year-end 2022, with total loans and borrowings and lease liabilities amounting to approximately RMB 21,448 million, and the net gearing ratio significantly decreased to approximately 1,347.3% but remains high Liquidity and Capital Resources (RMB Million) | Indicator | As of June 30, 2023 | As of December 31, 2022 | Change | | :--- | :--- | :--- | :--- | | Cash and Bank Balances | 5,600 | 4,691 | +909 | | Loans and Borrowings, Lease Liabilities | 21,448 | 20,018 | +1,430 | | Net Gearing Ratio | 1,347.3% | 6,828.9% | Significant Decrease | - The Group will actively improve operating efficiency and consider various methods to enhance its financial position and reduce leverage[11](index=11&type=chunk) [Pledged Assets](index=37&type=section&id=%E6%8A%B5%E6%8A%BC%E8%B3%87%E7%94%A2) As of June 30, 2023, the Group's pledged assets were approximately RMB 9,648 million, an increase of approximately RMB 1,645 million from year-end 2022, serving as collateral for loans and borrowings used for daily business operations Pledged Assets (RMB Million) | Indicator | As of June 30, 2023 | As of December 31, 2022 | Change | | :--- | :--- | :--- | :--- | | Pledged Assets | 9,648 | 8,003 | +1,645 | - Pledged assets serve as collateral for loans and borrowings, used for daily business working capital[212](index=212&type=chunk) [Foreign Currency Investments and Hedging](index=37&type=section&id=%E5%A4%96%E5%B9%A3%E6%8A%95%E8%B3%87%E5%8F%8A%E5%B0%8D%E6%B2%96) For the six months ended June 30, 2023, the Group held no foreign currency investments and primarily conducted business in RMB, but used forward foreign exchange instruments and option foreign exchange instruments to hedge part of its foreign currency risk for future USD loan repayments - For the six months ended June 30, 2023, the Group held no foreign currency investments[199](index=199&type=chunk) - The Group uses forward foreign exchange instruments and option foreign exchange instruments to hedge part of its foreign currency risk for future USD loan repayments[210](index=210&type=chunk) [Employees and Remuneration Policy](index=37&type=section&id=%E5%83%B1%E5%93%A1%E5%8F%8A%E8%96%AA%E9%85%AC%E6%94%BF%E7%AD%96) As of June 30, 2023, the Group employed 7,093 staff in China, with staff costs of approximately RMB 441 million, and emphasizes human resources by offering competitive remuneration and benefit plans to attract and retain high-quality employees Employee and Remuneration Data | Indicator | As of June 30, 2023 | As of December 31, 2022 | | :--- | :--- | :--- | | Number of Employees (China) | 7,093 | 7,181 | | Staff Costs (RMB Million) | 441 (H1) | 459 (H1 2022) | - The Group offers competitive remuneration and benefit plans, including retirement benefits, work injury compensation benefits, maternity insurance, medical, and unemployment benefit schemes[213](index=213&type=chunk) [Future Outlook and Strategies](index=37&type=section&id=%E6%9C%AA%E4%BE%86%E5%B1%95%E6%9C%9B%E5%8F%8A%E7%AD%96%E7%95%A5) The Company will capitalize on market opportunities from NEV purchase tax subsidies and consumption recovery policies by strengthening management to improve operational quality, vigorously expanding used car export business, and actively assessing automotive dealership industry trends, focusing on new energy and new dealership model market opportunities - The Company will strengthen management and improve operational quality through refined assessment methods and a focus on per capita efficiency[214](index=214&type=chunk) - Leveraging existing store resources and channels, combined with favorable policies, market conditions, and logistics, the Company will vigorously expand its used car export business[214](index=214&type=chunk) - The Company will actively assess the development trends and directions of the automotive dealership industry, focusing on market opportunities under new energy and new dealership models, and selecting appropriate times to participate in dealership, maintenance, and related businesses of new entrants and domestic brands with significant growth potential[20](index=20&type=chunk)[214](index=214&type=chunk) - The long-term network expansion strategy will continue to focus on luxury automotive brands, deepen comprehensive cooperation with various OEMs (including new energy projects), strengthen strategic partnership status, and continuously optimize brand structure and store-level profitability[200](index=200&type=chunk) [Review of Interim Results](index=38&type=section&id=%E5%AF%A9%E9%96%B1%E4%B8%AD%E6%9C%9F%E6%A5%AD%E7%B8%BE) The Company's Audit Committee reviewed the unaudited condensed consolidated interim financial statements for the six months ended June 30, 2023, which were also reviewed by external auditor KPMG in accordance with Hong Kong Standard on Review Engagements 2410 - The Audit Committee, comprising three independent non-executive directors, has reviewed the interim financial statements[14](index=14&type=chunk) - The Group's external auditor, KPMG, has reviewed the interim financial statements in accordance with Hong Kong Standard on Review Engagements 2410 issued by the Hong Kong Institute of Certified Public Accountants[21](index=21&type=chunk) [Interim Dividend](index=38&type=section&id=%E4%B8%AD%E6%9C%9F%E8%82%A1%E6%81%AF) The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2023 - The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2023[215](index=215&type=chunk) [Post-Reporting Period Events](index=38&type=section&id=%E5%A0%B1%E5%91%8A%E6%9C%9F%E5%BE%8C%E4%BA%8B%E9%A0%85) Subsequent to the reporting period, Mr. Zeng Tingyi ceased to be an executive director and authorized representative, while Mr. Huang Junfeng was appointed as an executive director, and Ms. Fung Wai Sum, the company secretary, was appointed as an authorized representative - Effective July 31, 2023, Mr. Zeng Tingyi ceased to be an executive director and authorized representative of the Company[216](index=216&type=chunk) - Mr. Huang Junfeng was appointed as an executive director of the Company, and Ms. Fung Wai Sum, the company secretary, was appointed as the authorized representative of the Company[216](index=216&type=chunk) [Purchase, Sale or Redemption of the Company's Listed Securities](index=38&type=section&id=%E8%B3%BC%E8%B2%B7%E3%80%81%E5%87%BA%E5%94%AE%E6%88%96%E8%B4%96%E5%9B%9E%E6%9C%AC%E5%85%AC%E5%8F%B8%E4%B8%8A%E5%B8%82%E8%AD%89%E5%88%B8) For the six months ended June 30, 2023, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities - For the six months ended June 30, 2023, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[15](index=15&type=chunk) [Use of Proceeds](index=38&type=section&id=%E6%89%80%E5%BE%97%E6%AC%BE%E9%A0%85%E7%94%A8%E9%80%94) The Company completed a placement in June 2023, with net proceeds of approximately HK$56.34 million intended entirely for bank loan repayment; as of June 30, 2023, the funds were unutilized but have been fully utilized by the announcement date - The Company entered into a placing agreement on June 7, 2023, to place **122,560,000 shares** at **HK$0.48 per share**, raising net proceeds of approximately **HK$56.34 million**[224](index=224&type=chunk) Use of Placing Proceeds | Use | Percentage of Proceeds Used | Placing Proceeds (HK$ Million) | Actual Use as of June 30, 2023 (HK$ Million) | Unutilized Net Proceeds as of June 30, 2023 (HK$ Million) | | :--- | :--- | :--- | :--- | :--- | | Repayment of Bank Loans | 100% | 56.34 | 0 | 56.34 | - As of the announcement date (August 29, 2023), the aforementioned net proceeds have been fully utilized for their intended purpose[16](index=16&type=chunk) [Corporate Governance](index=39&type=section&id=%E4%BC%81%E6%A5%AD%E7%AE%A1%E6%B2%BB) The Company is committed to high standards of corporate governance, has adopted the Corporate Governance Code in Appendix 14 of the Listing Rules, and complied with its provisions for the six months ended June 30, 2023, with regular reviews planned to enhance corporate governance practices - The Group is committed to upholding high standards of corporate governance to safeguard shareholders' interests and enhance corporate value and accountability[23](index=23&type=chunk) - The Company has adopted the Corporate Governance Code set out in Appendix 14 of the Listing Rules and complied with its provisions for the six months ended June 30, 2023[218](index=218&type=chunk) [Directors' Securities Transactions](index=39&type=section&id=%E8%91%A3%E4%BA%8B%E9%80%B2%E8%A1%8C%E8%AD%89%E5%88%B8%E4%BA%A4%E6%98%93) The Company has adopted a code for securities transactions by directors, with standards no less exacting than those in Appendix 10 of the Listing Rules, and all current directors confirmed compliance for the six months ended June 30, 2023 - The Company has adopted a code for securities transactions by directors with standards no less exacting than those set out in Appendix 10 of the Listing Rules[226](index=226&type=chunk) - All current directors confirmed their compliance with the securities dealing code and the Model Code throughout the six months ended June 30, 2023[226](index=226&type=chunk) [Publication of Interim Results Announcement](index=40&type=section&id=%E5%88%8A%E7%99%BB%E4%B8%AD%E6%9C%9F%E6%A5%AD%E7%B8%BE%E5%85%AC%E5%91%8A) This interim results announcement is available on the HKEX and Company websites, and the full interim report containing all information required by the Listing Rules will be dispatched to shareholders and published on these websites later - This interim results announcement is available on the websites of Hong Kong Exchanges and Clearing Limited (http://www.hkexnews.hk) and the Company (http://www.zhengtongauto.com)[228](index=228&type=chunk) - The Company's interim report for the six months ended June 30, 2023, containing all information required by the Listing Rules, will be dispatched to shareholders and published on the aforementioned websites later[228](index=228&type=chunk) [Acknowledgements](index=40&type=section&id=%E8%87%B4%E8%AC%9D) The Board extends its sincere gratitude to the Group's management team and employees for their dedicated service and diligence, and to shareholders and business partners for their strong support of the Group - The Board sincerely thanks the Group's management team and employees for their dedicated service and diligence, and shareholders and business partners for their strong support of the Group[18](index=18&type=chunk)

Financial Performance - In 2022, the company's revenue was RMB 22,606,790, an increase from RMB 20,985,529 in 2021, reflecting a growth of approximately 7.7%[35] - The company reported a loss attributable to equity shareholders of RMB 296,285 in 2022, a significant improvement compared to a loss of RMB 3,622,131 in 2021[35] - The total liabilities of the company increased to RMB 27,508,315 in 2022 from RMB 25,589,165 in 2021, reflecting a rise of approximately 7.5%[36] - The group's net cash inflow from operating activities for the year was approximately RMB 159 million, slightly up from RMB 156 million in 2021[19] - The group's gross profit for the year ended December 31, 2022, was approximately RMB 1,587 million, an increase of about 28.4% compared to RMB 1,236 million in 2021, primarily due to increased new car sales and controlled sales costs[84] - The net loss for the year ended December 31, 2022, was approximately RMB 297 million, a decrease of about 92.1% from RMB 3,781 million in 2021, with a loss margin of approximately 1.3%[87] Assets and Liabilities - As of December 31, 2022, the total assets of the company were RMB 27,732,759, compared to RMB 26,129,786 in 2021, indicating a growth of about 6.1%[36] - As of December 31, 2022, the group's cash and cash equivalents were approximately RMB 734 million, an increase of about RMB 525 million from RMB 209 million as of December 31, 2021[19] - The group's current assets as of December 31, 2022, were approximately RMB 13,830 million, an increase of about RMB 1,039 million from RMB 12,791 million in 2021[90] - The group's current liabilities as of December 31, 2022, were approximately RMB 18,911 million, a decrease of about RMB 2,930 million from RMB 21,841 million in 2021, mainly due to a reduction in short-term loans[90] Sales and Distribution - The group sold a total of 56,264 new vehicles in the year ended December 31, 2022, representing a year-on-year growth of approximately 9.4%, including 45,334 luxury and ultra-luxury vehicles, which grew by about 14.2%[54] - New car sales revenue was approximately RMB 18,845 million, up about 10.9% from RMB 16,989 million in 2021, accounting for 83.4% of total revenue in 2022[74] - The sales of luxury and ultra-luxury brand vehicles generated revenue of approximately RMB 17,491 million, a year-on-year increase of about 13.0% from RMB 15,483 million in 2021, representing 92.8% of new car sales revenue[74] - The group achieved a total of 1,070,313 after-sales service instances in 2022, generating after-sales service revenue of approximately RMB 3,081 million[55] Inventory and Supply Chain - The group's inventory as of December 31, 2022, was approximately RMB 4,064 million, an increase of about RMB 1,415 million from RMB 2,649 million in 2021, primarily due to increased new car inventory based on market demand[20] - The average inventory turnover days for 2022 was 48.4 days, an increase of 16.9 days from 31.5 days in 2021, attributed to expanded operational scale and increased year-end inventory due to the pandemic[20] - The group's sales cost for the year was approximately RMB 21,020 million, an increase of about 6.4% from RMB 19,750 million in 2021, consistent with the rise in new car sales[75] Strategic Initiatives - The company aims to focus on luxury and ultra-luxury car brands, enhancing strategic partnerships with major manufacturers, including those in the new energy sector[25] - The company is actively adapting to market opportunities in the automotive distribution industry, particularly in new energy and new distribution models[25] - The company plans to expand its used car business and explore opportunities in the new energy service industry, aiming for higher gross profit returns[107] - The company is actively seeking collaboration opportunities with other established new energy dealers to facilitate business transformation and upgrade[41] Corporate Governance - The board of directors consists of six members, including three executive directors and three independent non-executive directors[121] - The board has established an independence assessment mechanism to enhance board efficiency and identify areas for improvement[132] - The company has implemented a training program for newly appointed directors to ensure they understand the business and regulatory responsibilities[134] - The company has arranged directors' and officers' liability insurance to protect its executives from legal actions arising from company activities[126] Employee and Management - As of December 31, 2022, the company employed 7,181 staff, a decrease from 7,760 in the previous year, with employee costs for the year amounting to approximately RMB 985 million[104] - The company has adopted a competitive compensation and benefits plan to attract and retain high-quality employees, including a four-tier training system for staff development[110] - The company emphasizes maintaining competitiveness and risk resistance as it transitions from a private enterprise to a state-owned enterprise management mechanism[47] Market Trends - The penetration rate of new energy vehicles in the Chinese market reached nearly 30% in 2022, indicating a significant shift in consumer demand[40] - The automotive industry in China saw a year-on-year increase of 11.2% in production and 9.5% in sales, with total passenger vehicle production and sales reaching 23.83 million and 23.56 million units, respectively[40] - The company anticipates a strong rebound in automotive consumption in 2023, driven by economic recovery and increased domestic demand[111]

[Performance Highlights](index=1&type=section&id=Performance%20Highlights) The Group significantly narrowed its loss in 2022, driven by comprehensive efforts in business recovery, expansion, and internal management, supported by its state-owned shareholder, laying a solid foundation for sustainable development | Indicator | 2022 (RMB million) | 2021 (RMB million) | Year-on-year Change | | :--- | :--- | :--- | :--- | | Revenue | 22,607 | 20,986 | +7.7% | | Gross Profit | 1,587 | 1,236 | +28.4% | | Operating Profit/(Loss) | 834 | (957) | Turnaround to profit (increase of 1,791) | | Finance Costs | 1,007 | 1,302 | -22.7% | | Loss for the Year | 297 | 3,781 | -92.1% | | Net Assets (as of December 31, 2022) | 224 | N/A | N/A | | Adjusted Net Assets (Non-GAAP) | 1,224 | N/A | N/A | - Total gross profit margin increased by **1.1 percentage points** from **5.9% in 2021** to **7.0% in 2022**[197](index=197&type=chunk) - Adjusted net assets (non-GAAP financial measure) consider a **RMB 1 billion** long-term loan from the largest shareholder Xiamen C&D Group Co., Ltd. to reflect its positive impact on the company's going concern ability[199](index=199&type=chunk) [Consolidated Financial Statements](index=3&type=section&id=Consolidated%20Financial%20Statements) This section presents the Group's consolidated financial results and position for 2022, including income, comprehensive income, and balance sheets, showing a significant reduction in net loss and increased total assets [Consolidated Income Statement](index=3&type=section&id=Consolidated%20Income%20Statement) The consolidated income statement shows the Group achieved significant operating performance improvement in 2022, turning an operating loss into profit and substantially reducing the loss for the year | Indicator (RMB thousand) | 2022 | 2021 | Year-on-year Change | | :--- | :--- | :--- | :--- | | Revenue | 22,606,790 | 20,985,529 | +7.7% | | Cost of Sales | (21,019,912) | (19,749,970) | +6.4% | | Gross Profit | 1,586,878 | 1,235,559 | +28.4% | | Other Income | 1,506,316 | 556,634 | +170.6% | | Selling and Distribution Expenses | (1,211,482) | (1,281,469) | -5.5% | | Administrative Expenses | (1,280,537) | (1,151,222) | +11.2% | | Reversal of Impairment Loss/(Loss) on Intangible Assets | 232,426 | (316,617) | N/A | | Operating Profit/(Loss) | 833,601 | (957,115) | Turnaround to profit | | Finance Costs | (1,006,998) | (1,301,874) | -22.7% | | Share of Profits of Associates | 43,055 | 45,340 | -5.0% | | Loss Before Tax | (130,342) | (2,213,649) | -94.1% | | Income Tax | (167,079) | 9,641 | N/A | | Loss for the Year | (297,421) | (3,780,767) | -92.1% | | Loss for the Year Attributable to Equity Holders of the Company (Continuing Operations) | (296,285) | (2,200,181) | -86.5% | | Basic and Diluted Loss Per Share (Continuing Operations, RMB cents) | (10.9) | (81.3) | -86.6% | [Consolidated Statement of Comprehensive Income](index=5&type=section&id=Consolidated%20Statement%20of%20Comprehensive%20Income) The consolidated statement of comprehensive income reflects a substantial narrowing of the Group's total comprehensive loss in 2022, primarily due to reduced net loss, despite foreign currency translation differences | Indicator (RMB thousand) | 2022 | 2021 | | :--- | :--- | :--- | | Loss for the Year | (297,421) | (3,780,767) | | Other Comprehensive Income (after tax): | | | | Exchange differences on translation of financial statements of overseas companies | (20,623) | 6,541 | | Total Comprehensive Income for the Year | (318,044) | (3,774,226) | | Attributable to Equity Holders of the Company (Continuing Operations) | (316,908) | (2,193,640) | | Attributable to Equity Holders of the Company (Discontinued Operations) | — | (1,421,950) | | Attributable to Non-controlling Interests (Continuing Operations) | (1,136) | (3,827) | | Attributable to Non-controlling Interests (Discontinued Operations) | — | (154,809) | [Consolidated Balance Sheet](index=6&type=section&id=Consolidated%20Balance%20Sheet) The consolidated balance sheet shows increased non-current and current assets by year-end 2022, with improved net assets due to reduced current liabilities, reflecting asset-liability structure adjustments | Asset/Liability Category (RMB thousand) | December 31, 2022 | December 31, 2021 | Year-on-year Change | | :--- | :--- | :--- | :--- | | **Non-current Assets** | | | | | Property, Plant and Equipment | 5,766,306 | 5,688,860 | +1.4% | | Investment Properties | 303,593 | 115,631 | +162.5% | | Right-of-use Assets | 2,606,585 | 2,915,812 | -10.7% | | Intangible Assets | 2,705,072 | 2,631,734 | +2.8% | | Goodwill | 566,736 | 566,736 | 0.0% | | Interests in Associates | 15,341 | 533,367 | -97.1% | | Deferred Tax Assets | 673,051 | 616,626 | +9.2% | | Long-term Trade and Other Receivables | 321,037 | 270,075 | +18.9% | | Other Financial Assets | 944,947 | — | N/A | | **Current Assets** | | | | | Inventories | 4,064,270 | 2,649,031 | +53.4% | | Trade Receivables and Bills Receivable | 907,442 | 1,005,066 | -9.7% | | Prepayments, Deposits and Other Receivables | 4,063,517 | 4,294,473 | -5.4% | | Other Financial Assets | 103,561 | 122,589 | -15.5% | | Pledged Bank Deposits | 3,957,215 | 2,696,460 | +46.7% | | Time Deposits | — | 413,841 | -100.0% | | Cash and Cash Equivalents | 734,086 | 208,771 | +251.6% | | Assets Held for Sale | — | 1,400,714 | -100.0% | | **Current Liabilities** | | | | | Loans and Borrowings | 12,234,030 | 14,776,527 | -17.2% | | Bonds Payable | — | 365,936 | -100.0% | | Lease Liabilities | 363,493 | 309,477 | +17.4% | | Trade and Other Payables | 5,827,775 | 5,974,680 | -2.5% | | Income Tax Payable | 394,662 | 414,378 | -4.8% | | Other Financial Liabilities | 91,516 | — | N/A | | **Non-current Liabilities** | | | | | Loans and Borrowings | 6,439,857 | 1,519,457 | +323.8% | | Lease Liabilities | 981,073 | 1,169,334 | -16.2% | | Deferred Tax Liabilities | 989,261 | 839,606 | +17.8% | | Trade and Other Payables | 186,648 | 219,770 | -15.1% | | **Net Assets** | 224,444 | 540,621 | -58.5% | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section details consolidated financial statement data, covering company overview, accounting policies, revenue, expenses, taxes, loss per share, asset valuation, liabilities, and financial risk management [General Information](index=8&type=section&id=General%20Information) The Group primarily operates 4S dealership, supply chain, and integrated property businesses in China, incorporated in the Cayman Islands in 2010 - China Zhengtong Auto Services Holdings Limited was incorporated in the Cayman Islands on **July 9, 2010**[220](index=220&type=chunk) - The Group primarily engages in **4S dealership business**, **supply chain business**, and **integrated property business** in the People's Republic of China[220](index=220&type=chunk) - The consolidated financial statements are presented in **RMB** and prepared on a **historical cost basis**, except for certain financial assets[208](index=208&type=chunk) [Significant Accounting Policies](index=8&type=section&id=Significant%20Accounting%20Policies) The Group's financial statements are prepared under Hong Kong Financial Reporting Standards on a going concern basis, supported by its major shareholder despite net loss and net current liabilities - The financial statements are prepared in accordance with all applicable **Hong Kong Financial Reporting Standards**, Hong Kong Generally Accepted Accounting Principles, and the disclosure requirements of the Hong Kong Companies Ordinance[221](index=221&type=chunk) - The Group adopted several new and revised Hong Kong Financial Reporting Standards, which had **no significant impact** on the Group's results and financial position for the current or prior periods[221](index=221&type=chunk)[212](index=212&type=chunk)[223](index=223&type=chunk)[240](index=240&type=chunk) - Financial guarantees issued are initially recognized at **fair value**, subsequently measured at the higher of the initial recognition amount less cumulative amortization and the expected credit loss provision[213](index=213&type=chunk)[223](index=223&type=chunk)[224](index=224&type=chunk)[241](index=241&type=chunk)[242](index=242&type=chunk) - Despite a **net loss of RMB 297 million** and **net current liabilities of RMB 5.081 billion** in 2022, the Group prepared its financial statements on a **going concern basis**, supported by financial assistance from its controlling shareholder C&D Group[211](index=211&type=chunk) [Revenue](index=10&type=section&id=Revenue) The Group's 2022 revenue increased by **7.7%**, primarily driven by passenger vehicle sales, especially luxury brands, while after-sales service revenue slightly decreased - The Group is primarily engaged in the sale of passenger vehicles, provision of after-sales services, provision of logistics services, sale of lubricants, and financial services[244](index=244&type=chunk) Revenue Sources (Continuing Operations, RMB thousand) | Revenue Source | 2022 | 2021 | Year-on-year Change | | :--- | :--- | :--- | :--- | | Sale of Passenger Vehicles | 18,844,892 | 16,988,912 | +10.9% | | Provision of After-sales Services | 3,081,406 | 3,104,557 | -0.8% | | Provision of Logistics Services | 472,588 | 613,298 | -22.9% | | Sale of Lubricants | 207,089 | 269,766 | -23.2% | | **Total** | **22,605,975** | **20,976,533** | **+7.8%** | - The Group does not include revenue information regarding remaining performance obligations for passenger vehicle sales contracts with an expected duration of **one year or less**[228](index=228&type=chunk) [Other Income](index=11&type=section&id=Other%20Income) The Group's other income significantly increased by **170.6%** in 2022, mainly due to increased service income and fair value remeasurement gains from Dongfeng Logistics Other Income Sources (Continuing Operations, RMB thousand) | Income Source | 2022 | 2021 | Year-on-year Change | | :--- | :--- | :--- | :--- | | Service Income | 633,895 | 389,932 | +62.6% | | Interest Income from Bank Deposits | 37,443 | 14,126 | +165.0% | | Net Gain on Disposal of Property, Plant and Equipment | 100,728 | 261,737 | -61.5% | | Gain on Remeasurement of Fair Value related to Dongfeng Logistics | 424,271 | — | N/A | | Realized/Unrealized Gain/(Loss) on Other Financial Instruments | 242,654 | (116,775) | N/A | | Gross Rental Income from Investment Properties | 15,787 | 2,958 | +433.7% | | Others | 51,538 | 4,656 | +1006.8% | | **Total** | **1,506,316** | **556,634** | **+170.6%** | [Loss Before Tax](index=12&type=section&id=Loss%20Before%20Tax) The Group's loss before tax significantly narrowed in 2022, primarily due to reduced finance costs and improved exchange losses, with stable growth in staff and inventory costs Finance Costs (Continuing Operations, RMB thousand) | Indicator | 2022 | 2021 | Year-on-year Change | | :--- | :--- | :--- | :--- | | Interest on Loans and Borrowings and Bonds Payable | 957,414 | 1,254,898 | -23.7% | | Interest on Lease Liabilities | 90,556 | 89,807 | +0.8% | | Finance Costs on Business Combination Consideration | 9,083 | 16,048 | -43.4% | | Other Finance Costs | 22,852 | 23,717 | -3.7% | | Less: Capitalized Interest | (72,907) | (82,596) | -11.7% | | **Total Finance Costs** | **1,006,998** | **1,301,874** | **-22.7%** | Staff Costs (Continuing Operations, RMB thousand) | Indicator | 2022 | 2021 | Year-on-year Change | | :--- | :--- | :--- | :--- | | Salaries, Wages and Other Benefits | 924,812 | 1,009,023 | -8.3% | | Contributions to Defined Contribution Retirement Plans | 58,640 | 56,251 | +4.2% | | Equity-settled Share-based Transactions | 1,867 | 15,926 | -88.3% | | **Total Staff Costs** | **985,319** | **1,081,200** | **-8.8%** | Other Items (Continuing Operations, RMB thousand) | Indicator | 2022 | 2021 | Year-on-year Change | | :--- | :--- | :--- | :--- | | Cost of Inventories | 20,454,963 | 19,070,743 | +7.2% | | Depreciation (Owned Property, Plant and Equipment) | 306,469 | 361,024 | -15.0% | | Depreciation (Right-of-use Assets) | 342,546 | 379,291 | -9.7% | | Depreciation (Investment Properties) | 3,955 | 571 | +592.6% | | Amortization of Intangible Assets | 160,999 | 161,114 | -0.1% | | Operating Lease Expenses | 6,878 | 8,069 | -14.8% | | Net Exchange Loss/(Gain) | 398,206 | (181,000) | N/A | | Impairment (Reversal)/Loss (Goodwill) | — | 127,055 | N/A | | Impairment (Reversal)/Loss (Intangible Assets) | (232,426) | 189,562 | N/A | | Impairment (Reversal)/Loss (Property, Plant and Equipment) | (21,239) | 311,777 | N/A | | Auditor's Remuneration | 9,800 | 9,800 | 0.0% | [Income Tax](index=15&type=section&id=Income%20Tax) The Group's 2022 income tax expense was **RMB 167 million**, with a negative effective tax rate due to non-deductible expenses; Hong Kong subsidiaries were exempt, while Chinese subsidiaries faced a **25%** corporate income tax rate Income Tax (Continuing Operations, RMB thousand) | Indicator | 2022 | 2021 | | :--- | :--- | :--- | | Current Tax: Provision for Income Tax for the Year | 73,849 | 113,148 | | Deferred Tax: Origination and Reversal of Temporary Differences | 93,230 | (122,789) | | **Total Income Tax** | **167,079** | **(9,641)** | Reconciliation of Income Tax to Accounting Loss (RMB thousand) | Indicator | 2022 | 2021 | | :--- | :--- | :--- | | Loss Before Tax | (130,342) | (2,213,649) | | Nominal Tax at PRC Income Tax Rate of 25% | (32,586) | (553,412) | | Non-deductible Expenses (net of non-taxable income) | 185,961 | 191,570 | | Unrecognized Unused Tax Losses | 24,468 | 363,536 | | Share of Profits Recognized by Equity Method | (10,764) | (11,335) | | **Income Tax** | **167,079** | **(9,641)** | - Hong Kong subsidiaries did not earn any assessable profits subject to Hong Kong profits tax during the year, thus **no provision** for Hong Kong profits tax was made[6](index=6&type=chunk) - The Group's PRC subsidiaries are subject to PRC corporate income tax at a rate of **25%**[269](index=269&type=chunk) [Loss Per Share](index=17&type=section&id=Loss%20Per%20Share) The Group's basic loss per share significantly decreased in 2022, with diluted loss per share matching basic, reflecting a substantial narrowing of losses from continuing operations Basic Loss Per Share (RMB cents) | Indicator | 2022 | 2021 | Year-on-year Change | | :--- | :--- | :--- | :--- | | Continuing Operations | (10.9) | (81.3) | -86.6% | | Discontinued Operations | — | (52.5) | N/A | | **Total** | **(10.9)** | **(133.8)** | **-91.8%** | - Basic loss per share for 2022 is calculated based on the loss from continuing operations of **RMB 296,285,000** and the weighted average number of ordinary shares outstanding of **2,720,254,036 shares**[180](index=180&type=chunk)[255](index=255&type=chunk) - Diluted loss per share is equal to basic loss per share as the potential ordinary shares from restricted shares have an **anti-dilutive effect**[271](index=271&type=chunk) [Intangible Assets](index=18&type=section&id=Intangible%20Assets) This section details the Group's intangible assets, including valuation, amortization, and impairment test results for automobile dealership rights and trademarks, with a significant impairment reversal for dealership rights in 2022 reflecting improved operations [Automobile Dealership Rights](index=19&type=section&id=Automobile%20Dealership%20Rights) Automobile dealership rights recognized an impairment loss reversal of approximately **RMB 232 million** in 2022 due to resumed normal operations and long-term agreements for some 4S dealerships - Automobile dealership rights generated before business combinations have an estimated useful life of **10 years**, with fair value determined using the multi-period excess earnings method[9](index=9&type=chunk) - Automobile dealership rights generated before business combinations have an estimated useful life of **40 years**, with fair value determined using the multi-period excess earnings method[257](index=257&type=chunk) - In 2022, some dealerships resumed their original long-term dealership agreements, leading to an increase in future cash inflows and the recognition of an impairment loss reversal for intangible assets—automobile dealership rights of approximately **RMB 232 million** (2021: nil)[11](index=11&type=chunk)[274](index=274&type=chunk)[259](index=259&type=chunk) [Trademark](index=22&type=section&id=Trademark) The Group's trademarks have an **indefinite useful life**, with **no impairment loss** recognized in 2022 - Trademarks arising from the acquisition of Tsinghua Tongfang Co., Ltd. have an **indefinite useful life**, with fair value determined using the relief from royalty method[16](index=16&type=chunk) - For the year ended December 31, 2022, **no impairment loss** was recognized for trademarks (2021: impairment loss of **RMB 29,963,000**)[187](index=187&type=chunk) [Impairment Test of Intangible Assets and Goodwill](index=20&type=section&id=Impairment%20Test%20of%20Intangible%20Assets%20and%20Goodwill) Impairment tests, based on five-year budgets and industry forecasts, showed significant revenue growth rate changes in 2022 due to dealership recovery, with no further impairment losses for other intangible assets - The recoverable amount of cash-generating units is determined based on value in use, with cash flow forecasts based on management-approved **five-year financial budgets** and a **3% growth rate** for periods beyond five years[13](index=13&type=chunk) - Key inputs and assumptions for impairment tests include annual revenue growth rate, gross profit margin, working capital as a percentage of revenue, and discount rate[291](index=291&type=chunk) Key Inputs and Assumptions for Impairment Tests | Input Value | 2023 | 2024 | 2025-2027 | | :--- | :--- | :--- | :--- | | Annual Revenue Growth Rate | 3.0%~46.4% | 3.0%~48.9% | 3.0%~30.0% | | Gross Profit Margin | 5.1%~13.0% | 5.2%~14.0% | | | Working Capital as % of Revenue | –11.4%~7.4% | –11.4%~14.2% | | | **As of December 31, 2021** | **2022** | **2023** | **2024-2026** | | Annual Revenue Growth Rate | –1.6%~79.0% | 3.0%~36.1% | 3.0%~12.0% | | Gross Profit Margin | 5.3%~14.2% | 5.9%~14.5% | | | Working Capital as % of Revenue | –31.0%~13.9% | –31.0%~13.9% | | - The main change in 2022 was the variation in revenue growth, with a significant adjustment in the expected revenue growth rate for some dealerships that resumed normal operations, reflecting a return to pre-pandemic levels[19](index=19&type=chunk) - As of December 31, 2022, except for cash-generating units that resumed normal operations, **no further impairment losses** were recognized for other cash-generating units containing intangible assets (2021: intangible assets impairment loss of **RMB 160 million**, goodwill impairment loss of **RMB 127 million**)[181](index=181&type=chunk) [Goodwill](index=22&type=section&id=Goodwill) The Group's goodwill is primarily allocated to the **4S dealership business**, with **no impairment loss** recognized in 2022 Goodwill Allocation (RMB thousand) | Goodwill Allocation | December 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | 4S Dealership Business | 566,736 | 566,736 | - For the year ended December 31, 2022, **no impairment loss** was recognized for goodwill (2021: impairment loss of **RMB 127,055,000**)[276](index=276&type=chunk) [Interests in Associates](index=23&type=section&id=Interests%20in%20Associates) The Group lost significant influence over Dongfeng Logistics in December 2022, ceasing equity method accounting and remeasuring its interest as a fair value financial asset, recognizing a **RMB 424 million** remeasurement gain - The Group has held a **14.43% equity interest** in Dongfeng Logistics, which primarily provides logistics services, since **January 16, 2020**[21](index=21&type=chunk) - The Group lost significant influence over Dongfeng Logistics in **December 2022** due to plans to dispose of all its equity interest and the resignation of nominated directors[279](index=279&type=chunk)[296](index=296&type=chunk) - From the date of losing significant influence, the Group ceased to account for its investment in Dongfeng Logistics using the **equity method** and recognized it as a financial asset measured at **fair value**[279](index=279&type=chunk) - The Group recognized a remeasurement gain of **RMB 424,271,000** in "Other Income" in 2022, representing the difference between the fair value and carrying amount on the date of losing significant influence[279](index=279&type=chunk) Financial Performance of Dongfeng Logistics | Indicator (RMB thousand) | Period up to Loss of Significant Influence | Year ended December 31, 2021 | | :--- | :--- | :--- | | Revenue | 4,374,626 | 5,304,961 | | Profit from Continuing Operations | 303,850 | 312,862 | | Total Comprehensive Income | 303,850 | 312,862 | Group's Share of Associate's Performance (RMB thousand) | Indicator | 2022 | 2021 | | :--- | :--- | :--- | | Group's Share of Associate's Continuing (Loss)/Profit | (790) | 1,210 | | Total Comprehensive Income | (790) | 1,210 | | Total Carrying Amount of Interests in Associates | 15,341 | 533,367 | [Inventories](index=25&type=section&id=Inventories) The Group's total inventory significantly increased by **53.4%** at year-end 2022, mainly due to increased automobile inventory, with some pledged as collateral and a reversal of write-downs due to consumer preference changes Inventory Categories (RMB thousand) | Inventory Category | December 31, 2022 | December 31, 2021 | Year-on-year Change | | :--- | :--- | :--- | :--- | | **4S Dealership Business** | | | | | Automobiles | 3,044,340 | 1,796,851 | +69.4% | | Auto Parts | 313,179 | 216,724 | +44.5% | | Others | 46,166 | 43,917 | +5.1% | | **Integrated Property Business** | | | | | Properties Under Development for Sale | 660,585 | 591,539 | +11.7% | | **Total Inventories** | **4,064,270** | **2,649,031** | **+53.4%** | - Inventories with a carrying amount of **RMB 1,048,425,000** were pledged as collateral for bills payable (2021: **RMB 565,866,000**)[24](index=24&type=chunk) - Inventories with a carrying amount of **RMB 1,121,577,000** were pledged as collateral for loans and borrowings from banks and other financial institutions (2021: **RMB 901,237,000**)[281](index=281&type=chunk) Inventory Amounts Recognized as Expense and Included in Profit or Loss (RMB thousand) | Indicator | 2022 | 2021 | Year-on-year Change | | :--- | :--- | :--- | :--- | | Carrying Amount of Inventories Sold | 20,426,938 | 18,975,817 | +7.6% | | Inventory Write-downs | 54,386 | 54,352 | +0.1% | | Reversal of Inventory Write-downs | (26,361) | (8,270) | +218.7% | | Reassessment of Rebates Receivable | — | 48,844 | N/A | | **Total** | **20,454,963** | **19,070,743** | **+7.2%** | - The reversal of inventory write-downs provided in prior years was due to consumer preference changes leading to an increase in the estimated net realizable value of certain automobiles[26](index=26&type=chunk) [Trade and Other Receivables](index=26&type=section&id=Trade%20and%20Other%20Receivables) The Group's total trade receivables and bills receivable slightly decreased at year-end 2022, remaining high, with all amounts expected to be recovered within **one year** Receivables Categories (RMB thousand) | Receivables Category | December 31, 2022 | December 31, 2021 | Year-on-year Change | | :--- | :--- | :--- | :--- | | Trade Receivables | 907,123 | 1,004,158 | -9.6% | | Bills Receivable | 319 | 908 | -64.8% | | **Total** | **907,442** | **1,005,066** | **-9.7%** | - All trade receivables and bills receivable are expected to be recovered within **one year**[300](index=300&type=chunk) Aging Analysis (by Invoice Date, RMB thousand) | Aging Analysis | December 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Within 3 Months | 900,002 | 976,505 | | Over 3 Months but Within 1 Year | 2,178 | 7,565 | | Over 1 Year | 5,262 | 20,996 | | **Total** | **907,442** | **1,005,066** | Prepayments, Deposits and Other Receivables (RMB thousand) | Category | December 31, 2022 | December 31, 2021 | Year-on-year Change | | :--- | :--- | :--- | :--- | | Prepayments | 402,403 | 583,669 | -31.0% | | Deposits | 399,940 | 475,735 | -16.0% | | Other Receivables | 3,261,174 | 3,235,069 | +0.8% | | **Total** | **4,063,517** | **4,294,473** | **-5.4%** | - All prepayments, deposits, and other receivables are expected to be recovered within **one year**[285](index=285&type=chunk) [Trade and Other Payables](index=27&type=section&id=Trade%20and%20Other%20Payables) The Group's total trade and other payables slightly decreased at year-end 2022, with trade payables significantly down and bills payable up, some secured by inventory and bank deposits Payables Categories (RMB thousand) | Payables Category | December 31, 2022 | December 31, 2021 | Year-on-year Change | | :--- | :--- | :--- | :--- | | **Current** | | | | | Trade Payables | 358,737 | 1,102,712 | -67.5% | | Bills Payable | 3,481,434 | 2,829,084 | +23.1% | | Contract Liabilities | 1,215,170 | 1,150,320 | +5.6% | | Other Payables and Accruals | 771,927 | 891,626 | -13.4% | | Amounts Due to Related Parties | 507 | 938 | -46.0% | | **Non-current** | | | | | Long-term Payables | 186,648 | 219,770 | -15.1% | | **Total** | **6,014,423** | **6,194,450** | **-2.9%** | - As of December 31, 2022, bills payable of **RMB 3,481,434,000** were secured by inventories totaling **RMB 1,048,425,000**[302](index=302&type=chunk) - As of December 31, 2022, bills payable of **RMB 2,574,097,000** were secured by pledged bank deposits of **RMB 1,413,887,000**[287](index=287&type=chunk) - The amount included in the opening balance of contract liabilities recognized as revenue during the year was **RMB 1,129,473,000** (2021: **RMB 890,824,000**)[43](index=43&type=chunk) Aging Analysis (by Invoice Date, RMB thousand) | Aging Analysis | December 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Within 3 Months | 3,379,485 | 3,715,365 | | Over 3 Months but Within 6 Months | 454,091 | 211,543 | | Over 6 Months but Within 12 Months | 6,595 | 4,888 | | **Total** | **3,840,171** | **3,931,796** | [Dividends](index=28&type=section&id=Dividends) The Group neither proposed nor paid any final dividends in **2022 and 2021** - For the years ended December 31, 2022 and 2021, **no proposed dividends** for the previous financial year were approved and paid[30](index=30&type=chunk)[289](index=289&type=chunk) [Financial Risk Management and Fair Value of Financial Instruments](index=28&type=section&id=Financial%20Risk%20Management%20and%20Fair%20Value%20of%20Financial%20Instruments) This section outlines the Group's liquidity risk management, details non-derivative financial liability maturities, and assesses issued financial guarantees and related legal proceedings [Liquidity Risk](index=28&type=section&id=Liquidity%20Risk) The Group manages liquidity risk by maintaining **sufficient cash reserves** and **bank financing** to meet maturing obligations - Liquidity risk is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due[44](index=44&type=chunk) - The Group manages liquidity risk by regularly monitoring current and expected liquidity requirements, ensuring sufficient cash reserves and committed financing from major financial institutions[304](index=304&type=chunk) Contractual Undiscounted Cash Outflows (RMB thousand) | Contractual Undiscounted Cash Outflows (RMB thousand) | Within 1 Year or On Demand (2022) | 1 to 5 Years (2022) | Over 5 Years (2022) | Total (2022) | Balance Sheet Carrying Amount (2022) | | :--- | :--- | :--- | :--- | :--- | :--- | | Loans and Borrowings | 12,260,131 | 6,889,521 | 22,095 | 19,171,747 | 18,673,887 | | Lease Liabilities | 369,019 | 939,532 | 394,460 | 1,703,011 | 1,344,566 | | Other Financial Liabilities | 91,578 | — | — | 91,578 | 91,516 | | Trade and Other Payables | 5,827,775 | 355,000 | — | 6,182,775 | 6,014,423 | | **Total Liquidity Risk Excluding Issued Financial Guarantees** | **18,548,503** | **8,184,053** | **416,555** | **27,149,111** | **26,124,392** | | | | | | | | | Contractual Undiscounted Cash Outflows (RMB thousand) | Within 1 Year or On Demand (2021) | 1 to 5 Years (2021) | Over 5 Years (2021) | Total (2021) | Balance Sheet Carrying Amount (2021) | | :--- | :--- | :--- | :--- | :--- | :--- | | Loans and Borrowings | 15,232,831 | 1,588,420 | — | 16,821,251 | 16,295,984 | | Lease Liabilities | 372,157 | 1,129,605 | 643,928 | 2,145,690 | 1,478,811 | | Bonds Payable | 374,286 | — | — | 374,286 | 365,936 | | Trade and Other Payables | 5,974,680 | 284,000 | 71,000 | 6,329,680 | 6,194,450 | | **Total Liquidity Risk Excluding Issued Financial Guarantees** | **21,953,954** | **3,002,025** | **714,928** | **25,670,907** | **24,335,181** | [Issued Financial Guarantees](index=29&type=section&id=Issued%20Financial%20Guarantees) Wuhan Zhengtong provided financial guarantees for Beijing Guangze's equity repurchase and loan repayment, with pledged assets; despite unfavorable rulings, the Group's cash exposure is expected to be immaterial via settlement and collateral disposal - Wuhan Zhengtong provided financial guarantees for Beijing Guangze's equity repurchase obligations and outstanding loan balances, secured by certain land use rights and properties of Beijing Zunbaocheng and Beijing Baoze[32](index=32&type=chunk)[33](index=33&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk) - In 2021, a court ruling required Beijing Guangze to pay an equity repurchase price of **RMB 420 million** and loan principal of **RMB 1.35 billion** plus interest, with Wuhan Zhengtong bearing joint and several liability[34](index=34&type=chunk)[47](index=47&type=chunk)[169](index=169&type=chunk)[149](index=149&type=chunk)[185](index=185&type=chunk)[307](index=307&type=chunk) - In January 2023, Wuhan Zhengtong reached a settlement agreement with Yuchen Fengze, where Wuhan Zhengtong withdrew its appeal against the first-instance loan judgment, and Yuchen Fengze agreed to assist in disposing of the collateral to recover the debt[36](index=36&type=chunk)[150](index=150&type=chunk) - In June 2022, the second-instance judgment for the equity repurchase first-instance ruling determined that Wuhan Zhengtong only bears **general guarantee liability** within the scope of payable amounts and has the right to seek recourse from Beijing Guangze after fulfilling its guarantee obligations[308](index=308&type=chunk)[169](index=169&type=chunk) - As of December 31, 2022, the fair value and estimated net realizable value of the pledged assets were **RMB 2.79 billion** and **RMB 1.97 billion**, respectively[38](index=38&type=chunk) - The maximum amount guaranteed by Wuhan Zhengtong under the 2020 shortfall make-up agreement was **RMB 1.93 billion** (2021: **RMB 1.83 billion**)[50](index=50&type=chunk) - The expected credit loss provision for financial guarantees was assessed as **immaterial**, considering the value and volatility of pledged assets[51](index=51&type=chunk) [Contingent Liabilities](index=31&type=section&id=Contingent%20Liabilities) The Group faces contingent liabilities from a general contracting agreement, with a subcontractor's payment notice, but deems the likelihood of being pursued for payment as **remote**, thus no provision is made - In 2018, Wuhan Zhengtong entered into a general contracting agreement with Beijing Guangze to engage it in the development, construction, reconstruction, and expansion of 4S dealerships and related commercial projects[40](index=40&type=chunk) - In July 2022, due to Beijing Guangze's failure to fulfill its obligations, the Group received a payment notice of **RMB 6 million** from a subcontractor[40](index=40&type=chunk) - After fully considering legal advice, the Company's directors believe that the likelihood of the Group being sued by the subcontractor to claim payment is **remote**, and therefore **no provision** has been made[293](index=293&type=chunk) - In January 2023, the Group filed a lawsuit against Beijing Guangze, alleging its failure to fulfill obligations under the general contracting agreement[310](index=310&type=chunk) - As of December 31, 2022, the Group had **no other significant contingent liabilities** apart from the aforementioned matters[311](index=311&type=chunk) [Non-Adjusting Events After Reporting Period](index=31&type=section&id=Non-Adjusting%20Events%20After%20Reporting%20Period) The Board approved a plan to dispose of **100% equity interest** in Shenzhen Huianqi Investment Consulting Co., Ltd., expected to be a **major transaction** under Listing Rules requiring shareholder approval - On **February 28, 2023**, the Board approved the disposal of **100% equity interest** in Shenzhen Huianqi Investment Consulting Co., Ltd., which holds property interests in a plot of land in Shenzhen[54](index=54&type=chunk)[133](index=133&type=chunk) - The potential disposal is intended to be conducted through public bidding, with a provisional initial price of approximately **RMB 800 million**[54](index=54&type=chunk)[133](index=133&type=chunk) - The potential disposal, if materialized, is expected to constitute a **major transaction** under Chapter 14 of the Listing Rules, subject to reporting, announcement, circular, and shareholder approval requirements[106](index=106&type=chunk) [Business Review](index=32&type=section&id=Business%20Review) In 2022, the Group significantly narrowed losses in a challenging market by focusing on luxury auto sales and after-sales services, achieving strong results in business recovery, expansion, and management with state-owned shareholder support [Overall Business Performance](index=32&type=section&id=Overall%20Business%20Performance) In 2022, despite automotive industry pressures, the Group significantly improved operating performance and reduced losses by focusing on luxury and ultra-luxury brand businesses - In 2022, the automotive industry faced **triple pressures** of supply shocks, demand contraction, and weakening expectations due to chip shortages and recurring epidemics[52](index=52&type=chunk)[53](index=53&type=chunk) - The Group continued to focus on **luxury and ultra-luxury brands** for automobile sales and after-sales service businesses, prioritizing business recovery and improving operational quality[52](index=52&type=chunk) - With the **five-year strategic plan** and state-owned shareholder support, the Group achieved good results in business recovery, authorization maintenance, business expansion, financing, internal control, and talent development, leading to a **significant reduction in losses**[52](index=52&type=chunk) - The Group recorded revenue of approximately **RMB 22,607 million** (2021: approximately **RMB 20,986 million**) and gross profit of approximately **RMB 1,587 million** (2021: **RMB 1,236 million**)[56](index=56&type=chunk) - Loss attributable to equity holders of the Group was approximately **RMB 296 million** (2021: approximately **RMB 3,622 million**) and basic loss per share was approximately **RMB 10.9 cents** (2021: approximately **RMB 133.8 cents**)[56](index=56&type=chunk) - In 2022, the Group's stores collectively received **249 awards** from automobile manufacturers, local governments, industry media, and industry associations[56](index=56&type=chunk) [Automobile Dealership Segment](index=32&type=section&id=Automobile%20Dealership%20Segment) The automobile dealership segment saw new car sales growth in 2022, particularly for luxury brands, enhancing after-sales service and market layout through digital customer management and network optimization [New Car Sales Business](index=32&type=section&id=New%20Car%20Sales%20Business) The Group's new car sales volume increased by **9.4%** in 2022, with luxury and ultra-luxury brands growing by **14.2%**, enhancing sales efficiency and customer experience through manufacturer cooperation and digital tools - For the year ended December 31, 2022, the Group's new car sales totaled **56,264 units**, a year-on-year increase of approximately **9.4%**[59](index=59&type=chunk) - Sales of luxury and ultra-luxury brand automobiles totaled **45,334 units**, a year-on-year increase of approximately **14.2%**[59](index=59&type=chunk) - The Group deepened communication and cooperation with brand manufacturers to obtain high-quality vehicle resources and successfully met manufacturer targets[80](index=80&type=chunk) - Launched electronic signature function for sales transaction documents, addressing customer difficulties in purchasing cars during the epidemic and improving sales business processing efficiency[80](index=80&type=chunk) [After-Sales Service Business](index=33&type=section&id=After-Sales%20Service%20Business) The Group's 2022 after-sales service revenue was approximately **RMB 3.081 billion**, continuously enhancing customer experience and satisfaction through digital customer management, personalized services, and innovative models - In 2022, the Group achieved **1,070,313 after-sales service visits**, generating after-sales service revenue of approximately **RMB 3,081 million**[62](index=62&type=chunk) - The Group is committed to being customer-centric, promoting digital customer management based on its independently developed information management system, establishing multi-channel links, and promptly responding to customer needs[60](index=60&type=chunk) - Provided personalized product services to customers, supporting "one-stop" services for online payment, offline consumption, and after-sales consultation, enhancing customer experience[60](index=60&type=chunk) - Promoted "door-to-door pick-up and delivery service" and launched anti-epidemic packages during the epidemic, actively expanding business boundaries and customer base[60](index=60&type=chunk) [Network Development and Layout](index=34&type=section&id=Network%20Development%20and%20Layout) The Group optimized brand structure and store profitability, operating **109 outlets** and **7 planned outlets** by year-end 2022, actively expanding its new energy brand layout - As of December 31, 2022, the Group operated **109 outlets** in 38 cities across 17 provinces and municipalities nationwide, and had **7 authorized dealerships** under construction[81](index=81&type=chunk) - The Group represents luxury and ultra-luxury automobile brands including Porsche, Mercedes-Benz, BMW, Audi, Jaguar Land Rover, Volvo, Hongqi, as well as mid-to-high-end brands such as FAW-Volkswagen, Buick, and Dongfeng Nissan[81](index=81&type=chunk) Outlets by Type | Outlet Type | Operating Outlets | Authorized Outlets Under Construction | Total | | :--- | :--- | :--- | :--- | | Luxury and Ultra-Luxury Brand 5S/4S Stores | 62 | 2 | 64 | | Mid-to-High-End and New Energy Brand 4S Stores | 12 | 2 | 14 | | Luxury Brand City Showrooms | 7 | 0 | 7 | | Luxury Brand Authorized Service Centers | 6 | 1 | 7 | | Mid-to-High-End and New Energy Brand Service Centers | 2 | 2 | 4 | | Self-operated Online Stores | 20 | 0 | 20 | | **Total** | **109** | **7** | **116** | - In 2022, a new Porsche Center, a Hozon Auto brand store, and a Tesla authorized body and paint center were opened, continuously expanding the industrial layout in the new energy sector[81](index=81&type=chunk) - The Group focused on promoting core and highly profitable brand projects, streamlining and strategically adjusting some less profitable brands and outlets to improve overall profitability[83](index=83&type=chunk) [Derivative and Emerging Business Segment](index=35&type=section&id=Derivative%20and%20Emerging%20Business%20Segment) The Group's derivative and emerging business segments accelerated in 2022, with breakthrough growth in insurance agency and used car businesses, and active expansion into the new energy sector with multiple new energy brand authorizations [Derivative Business](index=35&type=section&id=Derivative%20Business) The Group's derivative business performed strongly in 2022, with dual-protection product sales reaching **RMB 80 million**, car insurance new/renewal policies and premium scale increasing year-on-year, and used car business achieving breakthrough growth in scale and profitability - In 2022, the Group achieved dual-protection product sales of approximately **RMB 80 million**, with cumulative sales of nearly **10,000 units**[67](index=67&type=chunk) - In the same year, new and renewal car insurance policies and premium scale increased by **11%** and **15%** year-on-year, respectively[67](index=67&type=chunk) - The "Dual Protection Worry-Free" product was vigorously promoted across the Group, with sales penetration exceeding **40%**, contributing to increased output value and enhanced customer stickiness[84](index=84&type=chunk)[85](index=85&type=chunk) - The Group reported used car sales of **10,564 units**; the used car business contributed gross profit exceeding **RMB 48 million**, a year-on-year increase of over **20%**[67](index=67&type=chunk) - The Group restructured its used car business management system, introduced several industry-leading auction platforms, broadened sales channels, improved turnover efficiency, and enhanced transaction transparency[86](index=86&type=chunk) [Emerging Business](index=37&type=section&id=Emerging%20Business) The Group added multiple new energy brand authorizations in 2022 and established an emerging business team to actively expand its industrial layout and market opportunities in the new energy sector - In 2022, the Group added new energy brand authorizations, including Guangzhou Hozon Auto 4S store, Yichang and Xiangyang NIO service centers, and Jieyang Tesla body and paint center[68](index=68&type=chunk) - The company established an emerging business team to continuously expand its industrial layout in the new energy sector, actively promoting ongoing and reserve projects, and exploring and identifying opportunities for joint ventures and project acquisitions in the new energy market[68](index=68&type=chunk)[88](index=88&type=chunk) [Supply Chain Business Segment](index=37&type=section&id=Supply%20Chain%20Business%20Segment) Shengze Jietong overcame logistics demand challenges in 2022, achieving nearly **RMB 491 million** in total revenue, improving gross profit margin and pre-tax profit through cost reduction, and successfully expanding vehicle logistics and spare parts warehousing - Shengze Jietong's vehicle logistics and spare parts warehousing businesses achieved total revenue of nearly **RMB 491 million**, with an overall gross profit margin increase of **2.02%** and a year-on-year increase of **32.81%** in pre-tax profit[69](index=69&type=chunk) - In terms of vehicle business, Shengze Jietong successfully participated in bidding projects for FAW-Volkswagen, Hongqi, Bestune, and Dongfeng Nissan's vehicle businesses for the next three years[89](index=89&type=chunk) - In terms of warehousing business, it successfully expanded Kangshifu and Dongfeng Fengshen warehousing businesses, and officially entered SAIC Anji's supplier logistics system during the year[89](index=89&type=chunk) - Shengze Jietong obtained high-tech enterprise qualification, was awarded "China's Auto Valley Top Ten Modern Service Enterprises," and was included in the "National Integrated Hub Supply Chain Strengthening" project library[90](index=90&type=chunk) [Management Enhancement](index=38&type=section&id=Management%20Enhancement) In 2022, the Group comprehensively optimized its management system, covering governance, structure, HR, IT, cost reduction, audit, and risk prevention, to enhance operational efficiency and market responsiveness [Corporate Governance](index=38&type=section&id=Corporate%20Governance) The company established and improved a standardized corporate governance structure and scientific rules, clarified decision-making, execution, and supervision responsibilities, and comprehensively revised its rules and regulations - The company established and improved a standardized corporate governance structure and scientific rules of procedure, formulating various rules and systems that comply with listing compliance requirements and business development needs[71](index=71&type=chunk) - During the year, a comprehensive revision of the company's rules and regulations was initiated, covering the optimization and improvement of core control systems such as risk management, investment management, procurement and bidding, expense management, and internal supervision[71](index=71&type=chunk) [Organizational Structure](index=38&type=section&id=Organizational%20Structure) The Group optimized its organizational structure, separating Board Chairman and President roles, re-adjusting executive responsibilities, and streamlining headquarters and brand department structures - Following the principles of effective management, flat and lean structure, and stable adaptability, the roles of Board Chairman and President were separated, and executive responsibilities were re-adjusted to ensure clearer management responsibilities[91](index=91&type=chunk) - The responsibilities of the company's headquarters departments were re-evaluated and integrated accordingly, and the organizational structure of brand departments was adjusted to standardize job settings across brand management departments[91](index=91&type=chunk) [Human Resources](index=38&type=section&id=Human%20Resources) The Group optimized its remuneration system and employee career management, promoted internal and market-based selection for middle/senior management, and strengthened multi-faceted training and corporate culture - Optimized a scientific and reasonable remuneration system and established an employee career management system adapted to the development strategy[72](index=72&type=chunk) - Optimized the cadre selection mechanism and promoted internal competition and market-based selection for middle and senior management positions based on principles of fairness, impartiality, and openness[72](index=72&type=chunk) - Established channels for internal excellent talent exchange and learning, continuously improving talent discovery, growth, development, and incentive mechanisms[92](index=92&type=chunk) - Strengthened multi-faceted training to enhance the professional knowledge and skills of management and business personnel, and organized diverse corporate culture activities[92](index=92&type=chunk) [Information Technology Construction](index=39&type=section&id=Information%20Technology%20Construction) The Group independently developed automotive IT projects for digital customer lifecycle management and built a business indicator monitoring system to enhance refined management and data-driven decision support - Focused on digital operations and management throughout the customer full lifecycle, empowering the Group's innovative development and business upgrades[73](index=73&type=chunk) - Independently designed and developed a series of automotive information technology projects, including developing electronic signature functions, building client-side enterprise WeChat mini-programs, mobile terminal on-site vehicle inspection and registration for used cars, and dual-protection product system development[73](index=73&type=chunk) - Built a business indicator monitoring system and performance benchmarking system to solidify refined management and effectively respond to market changes and evolving consumer demands[73](index=73&type=chunk) [Cost Reduction and Efficiency Improvement](index=39&type=section&id=Cost%20Reduction%20and%20Efficiency%20Improvement) The Group effectively controlled procurement costs, improved capital utilization, and reduced financial expenses through standardized bidding, competitive negotiations, expanded financing, and debt restructuring - The company controlled overall procurement costs through standardized and unified bidding and procurement, and introduced competitive negotiations to reasonably extend supplier payment terms, improving capital utilization efficiency[115](index=115&type=chunk) - Controlled financial expenses and reduced financing costs by expanding financing channels, debt restructuring, and moderately reducing debt scale[115](index=115&type=chunk) [Internal Audit and Supervision](index=40&type=section&id=Internal%20Audit%20and%20Supervision) The Group established a multi-level supervision and inspection system, assessing control implementation through regular audits, special investigations, and store inspections, using IT to pre-warn risks and improve professional ethics risk prevention - The company has established a multi-level supervision and inspection system covering headquarters and various subsidiaries, assessing and supervising the implementation of controls in various business areas through increased frequency of regular audits, special investigations, and store inspections[74](index=74&type=chunk) - Utilized IT technology and systems to automatically identify and pre-warn risks, established dedicated channels for reporting occupational fraud, and improved the company's professional ethics risk prevention system[74](index=74&type=chunk) [Risk Prevention](index=40&type=section&id=Risk%20Prevention) The Group dynamically conducts risk analysis and assessment, formulates operational risk management systems, strengthens risk identification, early warning, and control, and established an emergency and public opinion management team - Dynamically conducted risk analysis and assessment in conjunction with the company's development stage and business expansion, and adjusted risk response strategies accordingly[116](index=116&type=chunk) - Formulated operational risk management systems to strengthen risk identification, early warning, and control; established and optimized the company's financing, guarantee, and foreign exchange transaction management systems to strictly control financial and financing business execution risks[116](index=116&type=chunk) - Established a leading group for emergency management and public opinion management, and established mechanisms for emergency response and public opinion handling[116](index=116&type=chunk) [Financial Review](index=40&type=section&id=Financial%20Review) This section reviews the Group's 2022 financial performance, covering revenue, profitability, expenses, assets, liabilities, cash flow, capital expenditure, financing, exchange risk, and pledged assets [Revenue](index=40&type=section&id=Revenue_FinancialReview) The Group's total revenue increased by **7.7%** in 2022, primarily driven by new car sales, with significant contributions from luxury and ultra-luxury brands, and a slight decrease in after-sales service revenue - For the year ended December 31, 2022, the Group recorded revenue of approximately **RMB 22,607 million**, an increase of approximately **7.7%** compared to approximately **RMB 20,986 million** in 2021, mainly due to increased new car sales during the year[117](index=117&type=chunk) - New car sales revenue in 2022 was approximately **RMB 18,845 million**, an increase of approximately **10.9%** compared to 2021, accounting for approximately **83.4%** of total revenue in 2022 (2021: **81.0%**)[117](index=117&type=chunk) - Revenue from luxury and ultra-luxury brand automobile sales was approximately **RMB 17,491 million**, an increase of approximately **13.0%** year-on-year, accounting for approximately **92.8%** of new car sales revenue in 2022 (2021: **91.1%**)[117](index=117&type=chunk) - After-sales service revenue was approximately **RMB 3,081 million**, a decrease of approximately **0.8%** compared to 2021, accounting for approximately **13.6%** of total revenue (a year-on-year decrease of **1.2 percentage points**)[117](index=117&type=chunk) [Cost of Sales](index=41&type=section&id=Cost%20of%20Sales) The Group's cost of sales increased by **6.4%** in 2022, consistent with new car sales growth; after-sales service cost of sales decreased by **15.4%**, mainly due to lower rental and labor expenses for some stores - For the year ended December 31, 2022, the Group's cost of sales was approximately **RMB 21,020 million**, an increase of approximately **6.4%** year-on-year compared to approximately **RMB 19,750 million** in 2021, consistent with the increase in new car sales[118](index=118&type=chunk) - New car sales cost increased by approximately **10.8%** to approximately **RMB 18,630 million** in 2022, mainly due to increased new car sales[118](index=118&type=chunk) - After-sales service cost of sales decreased by approximately **15.4%** to approximately **RMB 1,806 million**, mainly due to lower rental and labor expenses for some stores[118](index=118&type=chunk) [Gross Profit and Gross Margin](index=41&type=section&id=Gross%20Profit%20and%20Gross%20Margin) The Group's gross profit increased by **28.4%** in 2022, with gross margin rising to **7.0%**, mainly due to increased new car sales revenue, controlled cost of sales, and significantly decreased after-sales service costs - For the year ended December 31, 2022, the Group's gross profit was approximately **RMB 1,587 million**, an increase of approximately **28.4%** compared to 2021, with a gross profit margin of approximately **7.0%** (2021: **5.9%**)[77](index=77&type=chunk) - New car sales business generated gross profit of approximately **RMB 215 million** (2021: **RMB 182 million**), mainly due to increased revenue from new car sales and controlled cost of sales[119](index=119&type=chunk) - After-sales service gross profit increased by approximately **31.4%** from approximately **RMB 970 million** in 2021 to approximately **RMB 1,275 million**, mainly due to cost-saving measures[119](index=119&type=chunk) [Selling and Distribution Expenses](index=41&type=section&id=Selling%20and%20Distribution%20Expenses) The Group's selling and distribution expenses decreased by **5.5%** year-on-year in 2022, mainly due to reduced staff salary costs and discretionary bonuses - For the year ended December 31, 2022, the Group's selling and distribution expenses were approximately **RMB 1,211 million**, a decrease of approximately **5.5%** compared to 2021, mainly due to reduced staff salary costs and discretionary bonuses[78](index=78&type=chunk) [Administrative Expenses](index=42&type=section&id=Administrative%20Expenses) The Group's administrative expenses increased by **11.3%** year-on-year in 2022, mainly due to exchange losses on foreign currency loans and borrowings caused by RMB depreciation - For the year ended December 31, 2022, the Group's administrative expenses were approximately **RMB 1,281 million**, an increase of approximately **11.3%** compared to 2021, mainly due to exchange losses on foreign currency loans and borrowings caused by RMB depreciation in 2022[121](index=121&type=chunk) [Operating Profit](index=42&type=section&id=Operating%20Profit) The Group achieved an operating profit of approximately **RMB 834 million** in 2022, reversing the 2021 operating loss, with a **3.7%** operating profit margin, mainly due to overall operational improvement - For the year ended December 31, 2022, the Group recorded an operating profit of approximately **RMB 834 million**, compared to an operating loss of approximately **RMB 957 million** in 2021, with the turnaround mainly due to overall improvement in Group operations[122](index=122&type=chunk) - The Group's 2022 operating profit margin was approximately **3.7%**[122](index=122&type=chunk) [Income Tax](index=42&type=section&id=Income%20Tax_FinancialReview) The Group's 2022 income tax was approximately **RMB 167 million**, with a **negative effective tax rate**, mainly influenced by the tax impact of non-deductible expenses - For the year ended December 31, 2022, the Group's income tax was approximately **RMB 167 million**, with an effective tax rate of approximately **-128.2%** (2021: **0.4%**)[123](index=123&type=chunk) - The negative tax rate in 2022 was due to the tax impact of non-deductible expenses (net of non-taxable income)[123](index=123&type=chunk) [Loss for the Year](index=42&type=section&id=Loss%20for%20the%20Year_FinancialReview) The Group's loss for the year significantly decreased by **92.1%** in 2022, mainly due to a substantial increase in other income, business recovery, and cessation of losses at some stores - For the year ended December 31, 2022, the Group's loss for the year was approximately **RMB 297 million**, a decrease of approximately **92.1%** compared to 2021[123](index=123&type=chunk) - The reduction in loss was mainly due to a substantial increase in other income, business recovery, and cessation of losses at some closed stores[123](index=123&type=chunk) - The Group's loss rate was approximately **1.3%**, a decrease of **16.7 percentage points** compared to **18.0%** in 2021[123](index=123&type=chunk) [Contingencies](index=42&type=section&id=Contingencies) As of December 31, 2022, the Group had **no other significant contingent liabilities** apart from those disclosed - As of December 31, 2022, the Group had **no other significant contingent liabilities** apart from those disclosed in "Notes to Consolidated Financial Statements 17 Contingent Liabilities"[124](index=124&type=chunk) [Current Assets and Liabilities](index=42&type=section&id=Current%20Assets%20and%20Liabilities) The Group's current assets increased at year-end 2022, mainly due to increased inventory and pledged bank deposits; current liabilities decreased, primarily due to reduced short-term loans and borrowings - As of December 31, 2022, the Group's current assets were approximately **RMB 13,830 million**, an increase of approximately **RMB 1,039 million** compared to 2021, mainly due to increased inventory and pledged bank deposits[125](index=125&type=chunk) - As of December 31, 2022, the Group's current liabilities were approximately **RMB 18,911 million**, a decrease of approximately **RMB 2,930 million** compared to 2021, mainly due to a reduction in short-term loans and borrowings[126](index=126&type=chunk) [Adjusted Net Assets](index=43&type=section&id=Adjusted%20Net%20Assets) The Company's reported net assets were **RMB 224 million**, with adjusted net assets (non-GAAP) of **RMB 1.224 billion**, reflecting long-term loan support from the largest shareholder - The Company's reported net assets were approximately **RMB 224 million**, with adjusted net assets (non-GAAP financial measure) of approximately **RMB 1,224 million**[127](index=127&type=chunk) - Adjusted net assets are based on the net assets reported in the balance sheet as of December 31, 2022, adjusted for the impact of a **RMB 1 billion** long-term loan from the largest shareholder Xiamen C&D Group Co., Ltd.[127](index=127&type=chunk) - This non-GAAP financial measure aims to reflect the **positive impact** of C&D Group's financial support on the Company's going concern ability, providing investors with clearer financial performance[127](index=127&type=chunk) [Cash Flow](index=43&type=section&id=Cash%20Flow) The Group's cash and cash equivalents increased at year-end 2022, with stable net cash inflow from operating activities, primarily used for new car procurement, loan repayment, and working capital - As of December 31, 2022, the Group's cash and cash equivalents were approximately **RMB 734 million**, an increase of approximately **RMB 525 million** compared to 2021[128](index=128&type=chunk) - For the year ended December 31, 2022, the Group's net cash inflow from operating activities was approximately **RMB 159 million** (2021: **RMB 156 million**)[128](index=128&type=chunk) - The Group's funds were primarily used for purchasing new cars, spare parts, and automotive supplies, repaying loans, allocating working capital and daily expenses, and establishing or acquiring new dealerships[128](index=128&type=chunk) [Capital Expenditure and Investment](index=44&type=section&id=Capital%20Expenditure%20and%20Investment) The Group's capital expenditure and investment increased in 2022, mainly for **store upgrades and renovations** - For the year ended December 31, 2022, the Group's capital expenditure and investment were approximately **RMB 859 million** (2021: **RMB 661 million**), with the increase mainly due to store upgrades and renovations[103](index=103&type=chunk) [Inventories](index=44&type=section&id=Inventories_FinancialReview) The Group's inventory increased at year-end 2022, leading to increased average inventory turnover days, mainly due to expanded operations and epidemic impact - The Group's inventory as of December 31, 2022, was approximately **RMB 4,064 million**, an increase of approximately **RMB 1,415 million** compared to 2021, mainly due to the Group increasing new car inventory based on market demand[103](index=103&type=chunk) - The Group's 2022 average inventory turnover days were **48.4 days**, an increase of **16.9 days** compared to **31.5 days** in 2021, mainly due to expanded operations and increased year-end inventory caused by the epidemic[103](index=103&type=chunk) [Exchange Rate Risk](index=44&type=section&id=Exchange%20Rate%20Risk) The Group primarily conducts business in **RMB**, with foreign currency assets/liabilities not significantly impacting operating cash flow or liquidity, using forward foreign exchange contracts to hedge risk - The Group primarily conducts business in RMB, and although certain bank deposits and bank loans are denominated in foreign currencies, operating cash flow and liquidity were **not significantly impacted** by exchange rate fluctuations[104](index=104&type=chunk) - The Group uses **forward foreign exchange contracts** to hedge foreign exchange risk related to USD-denominated loans and borrowings[104](index=104&type=chunk) [Liquidity and Capital Resources](index=44&type=section&id=Liquidity%20and%20Capital%20Resources) The Group's working capital and capital expenditure primarily came from internal operating cash and bank borrowings, with both cash and cash equivalents and loans/borrowings increasing at year-end 2022 - The Group's working capital and capital expenditure primarily came from cash generated from internal operations and borrowings from major banks and other financial institutions[104](index=104&type=chunk) - As of December 31, 2022, the Group's cash and cash equivalents and bank deposits were approximately **RMB 4,691 million** (including: pledged bank deposits of approximately **RMB 3,957 million**, cash and cash equivalents of **RMB 734 million**), an increase of approximately **RMB 1,372 million** compared to 2021, mainly due to increased financing[104](index=104&type=chunk) - As of December 31, 2022, the Group's loans and borrowings and lease liabilities were approximately **RMB 20,018 million** (2021: approximately **RMB 18,141 million**), with the increase mainly due to new bank loans and borrowings[104](index=104&type=chunk) [Pledged Assets](index=45&type=section&id=Pledged%20Assets) The Group pledged certain assets as collateral for loans and borrowings, with total pledged assets increasing at year-end 2022, mainly due to increased inventory pledges for financing - The Group pledged certain assets as collateral for loans and borrowings, used as working capital for daily business operations[132](index=132&type=chunk) - As of December 31, 2022, the Group's pledged assets were approximately **RMB 8,003 million** (2021: approximately **RMB 6,310 million**), with the increase mainly due to increased inventory pledges required for financing[132](index=132&type=chunk) [Foreign Currency Investments and Hedging](index=45&type=section&id=Foreign%20Currency%20Investments%20and%20Hedging) The Group held **no significant foreign currency investments** in 2022, and operating cash flow or liquidity was **not significantly affected** by exchange rate changes - For the year ended December 31, 2022, the Group held **no significant foreign currency investments**[133](index=133&type=chunk) - The Group's working capital or liquidity was **not significantly affected** by changes in currency exchange rates[133](index=133&type=chunk) [Significant Events After Accounting Year End](index=45&type=section&id=Significant%20Events%20After%20Accounting%20Year%20End) The Board approved a plan to dispose of **100% equity interest** in Shenzhen Huianqi Investment Consulting Co., Ltd., expected to be a **major transaction** requiring shareholder approval - On **February 28, 2023**, the Board approved a proposed plan to dispose of **100% equity interest** in Shenzhen Huianqi Investment Consulting Co., Ltd.[133](index=133&type=chunk) - The potential disposal is intended to be conducted through public bidding, with a provisional initial pri

Financial Performance - For the six months ended June 30, 2022, the company recorded revenue of approximately RMB 11,069 million, representing a year-on-year growth of about 15.2%[4] - The gross profit for the same period was approximately RMB 949 million, showing a significant year-on-year increase of approximately 2,961.3%[4] - The group's revenue for the six months ended June 30, 2022, was approximately RMB 11,069 million, an increase of about 15.2% compared to RMB 9,612 million in the same period of 2021[30] - Revenue from new car sales was approximately RMB 9,281 million, up about 22.7% from RMB 7,566 million in the first half of 2021, accounting for 83.8% of total revenue[30] - The group's gross profit for the six months ended June 30, 2022, was approximately RMB 949 million, a significant increase of about 2,961.3% compared to RMB 31 million in the same period of 2021, with a gross margin of 8.6%[32] - Operating profit for the six months ended June 30, 2022, was approximately RMB 533 million, compared to an operating loss of approximately RMB 762 million in the same period of 2021[36] - The net profit for the six months ended June 30, 2022, was approximately RMB 6 million, a turnaround from a loss of approximately RMB 1,519 million in the first half of 2021[39] - The company reported a net profit of RMB 5,675 for the period, a significant turnaround from a net loss of RMB 1,518,695 in 2021[114] - The company reported a net profit of RMB 8,150,000 for the six months ended June 30, 2022, compared to a loss in the previous period[132] Sales and Market Performance - The company sold a total of 26,100 new vehicles, reflecting a year-on-year growth of approximately 6.9%, including 21,452 luxury and ultra-luxury vehicles, which grew by approximately 17.9%[6] - The after-sales service segment achieved a total of 573,615 service instances, generating after-sales service revenue of approximately RMB 1,468 million[8] - The company plans to focus on the automotive sales service business in the second half of 2022, particularly enhancing its luxury brand agency operations, aiming for continuous high-speed growth[53] - The company intends to expand its used car business significantly, improving the scale and profitability of certified used car retail operations, while also enhancing the market influence of its used car brand[53] - Revenue from after-sales services was RMB 1,467,521 thousand, a decrease of 9.0% from RMB 1,613,169 thousand in the previous year[149] Operational Efficiency and Strategy - The company is focusing on enhancing customer experience through digital management systems and personalized services, aiming to increase customer retention and expand its customer base[8] - The company is strategically closing underperforming outlets and transitioning brands to improve overall profitability while enhancing brand image and customer experience[12] - The company is focusing on optimizing brand structure and dealership profitability while exploring market opportunities in new energy and new dealership models[14] - The company is committed to enhancing its operational efficiency and cost advantages through digitalization and standardization of processes[53] - The company has adopted a restricted share award plan, with a total of 47,100,000 shares awarded since the adoption date, accounting for approximately 1.92% of the issued shares at that time[83] Financial Position and Assets - The group's cash and cash equivalents as of June 30, 2022, were approximately RMB 1,005 million, an increase of about RMB 796 million from RMB 209 million as of December 31, 2021[41] - The average inventory turnover days increased to 40.8 days for the first half of 2022, up from 27.5 days in the same period of 2021[47] - The group's current assets as of June 30, 2022, were approximately RMB 13,343 million, an increase of about RMB 552 million from RMB 12,791 million as of December 31, 2021[40] - The total assets as of June 30, 2022, amounted to RMB 13,610,174, compared to RMB 13,338,841 at the end of 2021, reflecting growth in asset base[121] - The total liabilities decreased to RMB 7,132,778,000 as of June 30, 2022, from RMB 7,140,928,000 at the end of the previous period[132] Governance and Compliance - The company has implemented a comprehensive governance structure to enhance decision-making and internal controls[26] - The company has established a risk management framework to identify and mitigate operational risks effectively[27] - The company is committed to high standards of corporate governance to protect shareholder interests and enhance corporate value and accountability[88] - The company has complied with the corporate governance code, with the roles of chairman and CEO being separated since March 10, 2022[96] - The audit committee, composed entirely of independent non-executive directors, reviewed the unaudited interim financial statements for the six months ended June 30, 2022[100] Challenges and Market Conditions - The supply chain segment reported a revenue of approximately RMB 220 million in the first half of 2022, a decrease of 24.4% year-on-year due to pandemic impacts and supply chain disruptions[23] - The second-hand car market saw a total transaction volume of 758.52 million units in the first half of 2022, a year-on-year decrease of 10.07%, but June alone saw a month-on-month increase of 19.20%[9] - The company has not engaged in any significant acquisitions or disposals of subsidiaries or joint ventures in the first half of 2022[61] Future Outlook - The company is actively developing new products and technologies, including a series of digital projects aimed at enhancing customer lifecycle management[27] - The company is actively collaborating with new energy vehicle brands to expand its service offerings in the new energy vehicle sector, leveraging its resources for rapid network expansion[53] - The company has plans for market expansion and new product development, although specific details were not disclosed in the report[110]

Financial Performance - In 2021, the company reported revenue of RMB 20,985.5 million, a 24.8% increase from RMB 16,880.9 million in 2020[10] - The company experienced a loss before tax of RMB 2,213.6 million in 2021, compared to a loss of RMB 10,395.4 million in 2020, indicating an improvement[10] - The gross profit for 2021 was approximately RMB 1,236 million, a significant recovery from a gross loss of RMB 5,173 million in 2020[29] - The net loss attributable to equity holders was approximately RMB 3,622 million, reduced from RMB 8,579 million in 2020, marking a decrease of about 57.8%[29] - The basic loss per share improved to approximately RMB 133.8 cents, down from RMB 334.8 cents in 2020, reflecting a reduction of about 60.1%[29] - The company reported a revenue of RMB 601 million for its supply chain business in 2021, representing a year-on-year growth of 3.72%[53] - New car sales revenue was approximately RMB 16,989 million, up about 34.8% from RMB 12,606 million in 2020, accounting for 81.0% of total revenue in 2021[70] - The net loss for the year was approximately RMB 3,781 million, a reduction of about 56.0% from RMB 8,589 million in 2020, with a loss margin of 18.0%[79] Operational Expansion - The company expanded its operational network to 118 locations across 40 cities in 17 provinces and municipalities by the end of 2021, adding 4 new outlets during the year[5] - The group opened 4 new operational outlets in 2021, bringing the total to 118 outlets across 40 cities in 17 provinces and municipalities[44] - The group has been authorized to establish 5 new dealership outlets for luxury brands, including Porsche and Mercedes-Benz, with plans for rapid development[44] - The company expanded its dealership network by adding one Porsche and one Mercedes-Benz dealership during the reporting period[29] Market Trends and Strategy - The luxury car sales segment showed significant growth, with the company focusing on high-end brands such as Porsche, BMW, and Mercedes-Benz[5] - The overall automotive market in China is shifting towards a concentration of leading dealers, with increased competition in the used car and after-sales service sectors[17] - The Chinese automotive market is projected to continue growing, with domestic brands capturing over 40% market share and significant increases in export volumes[17] - The company is strategically positioned to leverage the dual circulation model of the economy, enhancing its market presence amid changing consumer behaviors[17] - The company aims to enhance its after-sales service to meet the growing demand in the automotive market, emphasizing high-quality and rapid service[7] Technological Investment - The company is investing in new technologies and services to adapt to the evolving automotive ecosystem, including electric vehicles and integrated service offerings[17] - The group is actively pursuing digital transformation to drive innovation, focusing on customer lifecycle management and operational efficiency improvements[39] Customer Experience and Service - The group achieved a total of 1,352,572 after-sales service instances in 2021, generating after-sales service revenue of approximately RMB 3,105 million[33] - The company aims to enhance operational capabilities and customer experience through brand upgrades and increased interaction with manufacturers[44] - The company is actively entering the new energy vehicle market and enhancing its service experience in this sector[29] Corporate Governance - The company has committed to high standards of corporate governance to protect shareholder interests and enhance corporate value[113] - The board has delegated daily management responsibilities to the CEO and senior management while retaining oversight of strategic decisions[126] - The company has adopted a set of securities trading rules that are at least as stringent as the standard rules outlined in the listing rules[118] - The company has established three committees: remuneration, nomination, and audit, each with clear written terms of reference to oversee specific aspects of the company's affairs[149] ESG Commitment - The ESG report for 2021 highlights the company's commitment to environmental and social responsibilities, addressing key ESG issues of concern to stakeholders[185] - The group has identified key ESG issues including product health and safety, supply chain management, and customer privacy, focusing on performance improvement in these areas[194] - The group is committed to sustainable development, integrating ESG principles into all operational activities to minimize negative environmental impacts[197] - The group has established a top-down ESG governance structure, with the board overseeing environmental and social matters, including risk assessment and management[198]