Financial Performance - For the fiscal year ending December 31, 2023, the company's revenue was approximately RMB 718.5 million, an increase of about 19.7% compared to RMB 600.5 million for the previous year[18]. - The net profit attributable to equity shareholders for the same period was approximately RMB 11.3 million, a decrease of about 44.8% from RMB 20.4 million in the prior year[18]. - Total revenue from customer contracts for 2023 was RMB 718,487,000, an increase from RMB 600,487,000 in 2022, representing a growth of 19.7%[66]. - The pre-tax profit for 2023 was RMB 10,006,000, compared to RMB 8,249,000 in 2022, indicating an increase of 21.3%[60]. - The company reported a loss of RMB 5,348,000 in trade receivables impairment in 2023, compared to a gain of RMB 5,833,000 in 2022[71]. - Net profit for the year decreased from approximately RMB 20.4 million for the year ended December 31, 2022, to approximately RMB 11.3 million for the year ended December 31, 2023, a decrease of about 44.8%[159]. Sales and Production - The sales volume of industrial vehicle cylinder blocks increased by approximately 78.5%, from about 64,000 units in 2022 to approximately 114,000 units in 2023[2]. - The sales volume of commercial vehicle cylinder blocks increased by about 6.0%, from approximately 254,000 units in 2022 to about 269,000 units in 2023[9]. - The sales volume of passenger car cylinder bodies increased by approximately 19.5% from about 202,000 units in 2022 to approximately 242,000 units in 2023[22]. - Cylinder head sales increased from approximately 194,000 units in 2022 to about 219,000 units in 2023, representing a growth of approximately 12.5%[110]. - The sales orders from new customers significantly contributed to the growth in industrial vehicle cylinder block sales[2]. Market and Strategic Focus - The company anticipates continued growth in passenger vehicle cylinder block sales due to increasing demand for plug-in hybrid vehicles[8]. - The company is optimistic about new product development for electric vehicles, which is expected to boost orders from leading automotive manufacturers in 2024[19]. - The company plans to allocate more resources to both domestic and overseas markets to capture potential customers in the commercial vehicle sector[1]. - The company aims to expand its overseas market presence, expecting increased demand for industrial vehicle cylinder bodies due to development in non-road areas[118]. - The company is focusing on the development of new energy vehicles and related upstream and downstream industries to achieve long-term growth[132]. Financial Position and Assets - The total assets less current liabilities increased to RMB 1,156.3 million in 2023 from RMB 1,025.3 million in 2022[13]. - The company's long-term bank borrowings as of 2023 were RMB 159,322,000, compared to RMB 4,612,000 in 2022, reflecting a substantial increase in financing[90]. - Trade receivables as of December 31, 2023, were RMB 213,720,000, an increase of 7.5% from RMB 198,801,000 in 2022[83]. - The debt-to-asset ratio rose from approximately 23.9% as of December 31, 2022, to approximately 24.7% as of December 31, 2023, mainly due to an increase in interest-bearing borrowings[150]. Costs and Expenses - Employee costs increased to RMB 83,471,000 in 2023 from RMB 75,127,000 in 2022, reflecting a rise of 11.5%[61]. - Interest expenses for borrowings rose to RMB 9,765,000 in 2023, up from RMB 8,048,000 in 2022, marking an increase of 21.4%[60]. - Administrative expenses increased by approximately 3.0% from about RMB 72.9 million to about RMB 75.1 million, primarily due to increased R&D costs[143]. - The research and development costs increased to RMB 24,741,000 in 2023 from RMB 21,129,000 in 2022, reflecting a growth of 16.5%[71]. Corporate Governance and Compliance - The company has maintained strict compliance with corporate governance codes throughout the fiscal year[185]. - The company maintains high levels of corporate governance and has adopted the corporate governance code as per the listing rules, with a deviation regarding the roles of Chairman and CEO being held by the same individual[196]. - All directors confirmed compliance with the standard code of conduct for securities trading as of the fiscal year ending December 31, 2023[197]. Future Plans and Investments - The company plans to build two new machining lines to enhance production capabilities[111]. - The company plans to continue capital expenditures to purchase machinery and equipment to enhance production capacity and optimize production lines[125]. - The company has initiated upgrades to its electric vehicle component manufacturing facilities and is investing more resources in developing new products for electric vehicles to meet market demand[168]. - The company has established an overseas project development team to expand its overseas market presence and has completed detailed plans for execution[134].

Share Capital and Dividends - As of June 30, 2023, the total issued and paid-up ordinary shares remained at 800,000,000, with a par value of RMB 66,425 thousand[1] - The company declared an interim dividend of HKD 0.015 per share for the six months ended June 30, 2023, down from HKD 0.017 per share in the same period last year, totaling HKD 12,000,000[11] - The company will suspend share transfer registration from October 25 to October 27, 2023, in preparation for the dividend payment[140] Financial Performance - Revenue for the first half of 2023 reached RMB 341,929,000, representing a 20.5% increase compared to RMB 283,737,000 in the same period of 2022[34] - Gross profit for the same period was RMB 50,359,000, an 8.9% increase from RMB 46,224,000, with a gross margin of 14.7%, down from 16.3%[34] - Profit attributable to equity shareholders decreased by 3.3% to RMB 11,980,000 from RMB 12,393,000, with a net profit margin of 3.5%, down from 4.4%[34] - The comprehensive income for the six months ended June 30, 2023, was RMB 13,166 thousand, compared to RMB 12,393 thousand for the same period in 2022[165] - The profit for the six months ended June 30, 2023, decreased to approximately RMB 12.0 million, a decline of about 3.3% from RMB 12.4 million for the same period in 2022[86] Assets and Liabilities - The total value of properties, plants, equipment, and receivables pledged for bank loans was approximately RMB 143,226,000 as of June 30, 2023, up from RMB 109,808,000 at the end of 2022[24] - Total liabilities were RMB 543,119 thousand, down from RMB 578,704 thousand as of December 31, 2022[162] - The net current asset value increased to RMB 158,142 thousand from RMB 35,491 thousand as of December 31, 2022[162] - The total asset value minus current liabilities reached RMB 1,130,876 thousand, up from RMB 1,025,302 thousand as of December 31, 2022[162] Cash Flow and Liquidity - Cash and cash equivalents increased significantly to RMB 76,113 thousand as of June 30, 2023, up from RMB 11,550 thousand as of December 31, 2022, marking a 558.5% growth[19] - Operating cash flow for the period was RMB 62,042 thousand, an increase from RMB 30,250 thousand in the previous period[196] - The net increase in cash and cash equivalents was RMB 64,967 thousand, significantly higher than RMB 3,121 thousand in the previous period[196] - The company plans to maintain optimal liquidity to support operational needs and growth strategies, with no significant external debt financing plans anticipated in the near term[87] Trade Receivables and Payables - Trade receivables and other receivables net amount to RMB 356,056 thousand as of June 30, 2023, compared to RMB 317,346 thousand as of December 31, 2022, representing a 12.2% increase[5] - Trade payables rose by approximately 8.3%, from about RMB 250.8 million as of December 31, 2022, to approximately RMB 271.7 million as of June 30, 2023[101] - Trade receivables aged analysis shows that receivables within one month increased to RMB 114,611 thousand as of June 30, 2023, compared to RMB 100,339 thousand as of December 31, 2022, a growth of 14.4%[19] Production and Operations - The company operates 5 precision casting lines and 31 machining lines, with 24 dedicated to cylinder blocks, 5 to cylinder heads, and 2 for other auxiliary components[31] - The company has established four new machining lines and one precision casting line to adapt to market changes and trends towards carbon neutrality and environmental protection[92] - The company initiated a digital factory construction project to enhance operational efficiency, reduce delivery cycles, and improve product quality[65] - The company plans to continue optimizing and innovating production processes and technologies to enhance competitiveness[32] Market and Sales Performance - The sales volume of passenger vehicle cylinder bodies increased significantly, with a growth of 44.1% in new energy vehicle sales, reaching 3.7 million units in the first half of 2023[58] - The revenue contribution from commercial vehicle cylinder bodies decreased from approximately 46.6% in the first half of 2022 to about 36.3% in the first half of 2023, with sales volume dropping by approximately 5.6%[60] - The sales volume of industrial vehicle cylinder bodies surged by approximately 68.2%, increasing from around 30,000 units in the first half of 2022 to about 50,000 units in the first half of 2023[61] - The automotive market in China is expected to see steady growth in production and sales, with a reported increase of 9.3% and 9.8% respectively in the first half of 2023 compared to the previous year[53] Risk Management - The group faces financial risks including interest rate risk, credit risk, and liquidity risk, which are regularly monitored and managed by the management team[110][111] - The geopolitical tensions have introduced uncertainties that may affect raw material supply and product demand, impacting the group's operational and financial conditions[109] - The company has established internal controls and risk management procedures to address various operational, financial, and market risks, which are deemed sufficient and effective by the board[139] Employee and Corporate Governance - Employee costs totaled approximately RMB 40.4 million for the six months ended June 30, 2023, representing an increase of about 1.5% compared to RMB 39.8 million for the same period in 2022[120] - The company aims to enhance employee satisfaction and competitiveness through the establishment of a corporate culture and human resources system starting from June 2023[64] - The company has complied with corporate governance codes and will continue to review its governance policies[142] Shareholding Structure - As of June 30, 2023, the company has a significant shareholder, Long Leap Ventures Limited, holding 411,042,000 shares, representing 51.38% of the total shares[134] - The shareholding structure indicates that key executives, including Mr. Meng Lianzhou, hold substantial interests in the company, with 51.38% ownership through controlled entities[145] - The company’s major shareholders include Liu Zhanwen and Zhang Yuexuan, who also hold significant shares in Long Leap Ventures Limited[145]

Financial Performance - Revenue for the six months ended June 30, 2023, was approximately RMB 341.9 million, an increase from RMB 283.7 million for the same period in 2022, representing a growth of about 20.5%[30] - Gross profit increased from approximately RMB 46.2 million for the six months ended June 30, 2022, to approximately RMB 50.4 million for the same period in 2023, reflecting a growth of about 8.9%[9] - The company reported a profit attributable to equity shareholders of approximately RMB 11.98 million for the six months ended June 30, 2023, compared to RMB 12.39 million for the same period in 2022[29] - Net profit attributable to equity shareholders was RMB 11,980 thousand, down 3.3% from RMB 12,393 thousand in the previous year[43] - Basic and diluted earnings per share were RMB 1.50, compared to RMB 1.55 in the same period last year[43] Revenue Breakdown - Sales revenue from cylinder head products increased from approximately RMB 43.5 million for the six months ended June 30, 2022, to approximately RMB 68.2 million for the same period in 2023, a growth of about 56.7%[20] - Total sales revenue for cylinder bodies reached RMB 271,472,000, up from RMB 238,784,000 in the same period last year, reflecting a growth of 13.7%[78] - The sales volume of cylinder bodies increased by approximately 19.7%, from about 252,000 units for the six months ended June 30, 2022, to about 302,000 units for the six months ended June 30, 2023[140] - The sales volume of cylinder heads increased by approximately 27.3%, from about 84,000 units in the first half of 2022 to approximately 107,000 units in the first half of 2023[107] - The sales revenue of cylinder auxiliary components increased from approximately RMB 1.5 million for the six months ended June 30, 2022, to approximately RMB 2.3 million for the six months ended June 30, 2023, a growth of about 57.6%[114] Cost and Expenses - The gross margin decreased from 16.3% in the first half of 2022 to 14.7% in the first half of 2023, primarily due to a decline in the gross margin of cylinder head sales from 21.3% to 4.8%[9] - Administrative expenses decreased from approximately RMB 36.4 million for the six months ended June 30, 2022, to approximately RMB 35.5 million for the same period in 2023, a reduction of about 2.4%[21] - Selling expenses increased from approximately RMB 3.8 million for the six months ended June 30, 2022, to approximately RMB 4.7 million for the six months ended June 30, 2023, an increase of about 22.1% primarily due to higher employee costs and after-sales service expenses[145] - Employee costs for the six months ended June 30, 2023, totaled approximately RMB 40.4 million, an increase of about 1.5% from RMB 39.8 million for the six months ended June 30, 2022[156] Assets and Liabilities - The total assets as of June 30, 2023, were RMB 1,674,995 thousand, compared to RMB 1,604,006 thousand as of December 31, 2022[46] - The total liabilities as of June 30, 2023, were RMB 677,119 thousand, a slight decrease from RMB 678,704 thousand at the end of 2022[46] - Trade receivables and notes receivable net amount increased from approximately RMB 257.1 million as of December 31, 2022, to approximately RMB 302.6 million as of June 30, 2023, an increase of about 17.7%[22] - Cash and cash equivalents increased from approximately RMB 11.6 million as of December 31, 2022, to approximately RMB 76.1 million as of June 30, 2023, due to an increase in interest-bearing borrowings[120] Government Grants and Subsidies - For the six months ended June 30, 2023, the company reported government grants of RMB 6,345,000, a decrease of 55.3% from RMB 14,181,000 in the same period of 2022[59] - The company confirmed government subsidies of approximately RMB 6.3 million for the six months ended June 30, 2023, down from RMB 14.2 million for the six months ended June 30, 2022[144] Market and Strategic Focus - The automotive market in China is expected to see steady growth in production and sales, with production and sales reaching 13.248 million and 13.239 million vehicles respectively in the first half of 2023, representing year-on-year increases of 9.3% and 9.8%[73] - The company plans to focus on the domestic new energy vehicle market and expand its overseas business, with a detailed development plan already completed for new customer acquisition[137] - The company is focusing on enhancing its research and development capabilities for automotive engine cylinder bodies to meet the growing market demand, which is expected to drive further industry growth[74] Risk Management - The main financial risks faced by the group include interest rate risk, credit risk, and liquidity risk, with regular meetings held to analyze and manage these risks[186] - Interest rate risk primarily arises from interest-bearing borrowings, affecting cash flow and fair value[187] - The group has established internal monitoring and risk management procedures to address various operational, financial, and market risks[189] - The board believes that the current risk management measures are sufficient and effective[190] Corporate Governance - The company has strictly adhered to corporate governance codes during the six months ending June 30, 2023[194] - All directors confirmed compliance with the relevant provisions of the standard code for securities trading by directors during the six months ending June 30, 2023[200]

Revenue and Profitability - Revenue decreased by approximately 11.7% from RMB 679.8 million for the year ended December 31, 2021, to RMB 600.5 million for the year ended December 31, 2022[2]. - Revenue from cylinder sales decreased by approximately 7.7% from RMB 523.0 million to RMB 482.5 million, attributed to a decrease in average selling price from RMB 994.7 to RMB 928.7 per unit[3]. - Revenue from cylinder head sales decreased by approximately 24.7% from RMB 151.1 million to RMB 113.8 million, with sales volume dropping from approximately 242,000 units to 194,000 units[6]. - Gross profit decreased by approximately 17.6% from RMB 118.2 million to RMB 97.5 million, with gross margin declining from 17.4% to 16.2%[8]. - Other income decreased by approximately 9.6% from RMB 25.7 million to RMB 23.2 million, primarily due to a reduction in government subsidies received[9]. - Net profit decreased by approximately 44.2% from RMB 36.6 million to RMB 20.4 million, with net profit margin declining from 5.4% to 3.4%[17]. Expenses and Financial Position - Selling expenses increased by approximately 39.6% from RMB 7.6 million to RMB 10.5 million, mainly due to increased travel and marketing-related expenses[10]. - Administrative expenses decreased by approximately 6.2% from RMB 77.7 million to RMB 72.9 million, attributed to a reduction in R&D costs[13]. - Trade receivables decreased by approximately 2.3% from RMB 263.2 million to RMB 257.1 million, with an increase in expected loss rate[21]. - Bank loans increased from approximately RMB 160.0 million to RMB 235.4 million, with collateral being the group's pledged properties and equipment[23]. - The company's bank loans increased by approximately RMB 754 million, resulting in a debt-to-asset ratio rise from about 16.4% as of December 31, 2021, to approximately 23.9% as of December 31, 2022[24]. - As of December 31, 2022, the total employee cost was approximately RMB 75.1 million, a decrease of about 7.7% compared to RMB 81.4 million in 2021[61]. Capital Expenditures and Commitments - Capital expenditures for the year ended December 31, 2022, amounted to approximately RMB 1.632 billion, up from RMB 1.153 billion in 2021, primarily related to the establishment of new product machining lines and equipment upgrades[26]. - As of December 31, 2022, the company's contracted capital commitments for properties, plants, and equipment were approximately RMB 205 million, down from RMB 333 million as of December 31, 2021[27]. Employee and Management - The employee turnover rate decreased to 0.98% for the year ended December 31, 2022, attributed to more stable production during the reporting period[41]. - The company employed a total of 816 full-time employees in China as of December 31, 2022, with the majority in production (506 employees)[34]. - The management team was restructured in July 2022 to enhance internal management and operational efficiency[65]. - The total number of employees trained in 2021 was 749, with 584 male and 165 female employees receiving training[46]. - Senior management received an average of 6.8 training hours, while middle management received 7.4 hours, and other employees received 6.4 hours[46]. Risk Management and Compliance - The company has established internal controls and risk management procedures to address various operational, financial, and market risks[75]. - The company’s financial risks include interest rate risk, credit risk, and liquidity risk, which are regularly analyzed and managed by the management team[72]. - The company has implemented quality control measures throughout the production process to ensure high product quality[88]. - The company has established compliance procedures to ensure adherence to applicable laws and regulations affecting its operations[132]. - The company has not faced any significant threats regarding infringement of third-party intellectual property during the reporting period[97]. Environmental and Social Responsibility - The company has implemented strict energy-saving measures in compliance with China's Energy Conservation Law, aiming to reduce energy consumption and promote environmental sustainability[30]. - The company has successfully passed the international environmental management system certification ISO 14001, indicating its commitment to environmental protection[30]. - The group encourages employee participation in community support and charitable activities, particularly in response to the COVID-19 pandemic[99]. Corporate Governance - The board of directors includes a mix of executive and independent non-executive members, with terms set to renew automatically unless terminated[139]. - The company has established a diversity policy aiming for at least 1/3 of its members to be independent non-executive directors[179]. - The company has a structured approach to monitoring the implementation of its diversity policy[179]. - The independent auditor's report confirms the appropriateness of the accounting policies and estimates used by the board of directors[155]. - The company has a robust governance framework in place, regularly reviewing its corporate governance policies and compliance with legal and regulatory requirements[173]. Shareholder Information - The company reported a significant ownership structure, with Meng Lianzhou holding 51.38% of the shares[188]. - Major shareholder Longyue holds 411,042,000 shares, representing 51.38% of the total equity[193]. - Shareholder Liang Cheng Holdings owns 67,868,000 shares, accounting for 8.48% of the total equity[193]. - Shareholder Hongxie Enterprises holds 46,864,000 shares, which is 5.86% of the total equity[193].

Clarifications and Corrections - The company issued a clarification regarding a typographical error in the annual results announcement for the year ended December 31, 2022[1] - All information in the annual results announcement remains unchanged except for the clarified section[4] Shareholder Information - The company will suspend the transfer of shares from May 24, 2023, to May 30, 2023, to determine shareholders eligible to attend and vote at the annual general meeting[2]

Revenue and Sales Performance - For the year ended December 31, 2022, the total revenue was approximately RMB 600.5 million, a decrease of about 11.6% from RMB 679.8 million in 2021[4] - The sales volume of passenger vehicle cylinder heads increased to 202,198 units in 2022, up from 140,037 units in 2021, representing a growth of approximately 44.4%[4] - The revenue from commercial vehicle cylinder heads decreased to RMB 247.4 million in 2022, accounting for 41.2% of total revenue, down from 47.5% in 2021[4] - The sales revenue from industrial vehicle cylinder heads increased from approximately 9.9% of total cylinder head sales in 2021 to about 15.0% in 2022[7] - Total revenue from customer contracts decreased to RMB 600,487,000 in 2022 from RMB 679,763,000 in 2021, representing a decline of approximately 11.6%[83] - The commercial vehicle sales volume for 2022 was 3.185 million units, a year-on-year decline of 31.9%, while production volume was 3.30 million units, down 31.2%[116] - In 2022, sales of new energy passenger vehicles reached 6.9 million units, marking a year-on-year increase of 93.4%[117] Profitability and Financial Performance - Gross profit for the same period was approximately RMB 97.5 million, down 17.6% from RMB 118.2 million in the previous year, resulting in a gross margin of 16.2%, a decline of 1.2%[48] - Net profit for the year was approximately RMB 20.4 million, representing a significant decrease of 44.2% from RMB 36.6 million in 2021, with a net profit margin of 3.4%, down 2.0%[48] - Operating profit decreased to RMB 31,407 thousand from RMB 48,462 thousand[56] - Profit before tax was RMB 23,158 thousand, down from RMB 42,015 thousand[56] - Basic and diluted earnings per share were RMB 0.026, compared to RMB 0.046 in the previous year[56] - The profit attributable to equity shareholders for the year was RMB 20,412 thousand, down from RMB 36,570 thousand[56] - The total comprehensive income attributable to equity shareholders for the year was RMB 22,509 thousand, compared to RMB 35,562 thousand in the previous year[56] Expenses and Cost Management - Administrative expenses decreased by approximately 6.2% to RMB 72.9 million in 2022, down from RMB 77.7 million in 2021[14] - The total employee costs for the year amounted to approximately RMB 75.1 million, a decrease of about 7.7% compared to RMB 81.4 million in the previous year[40] - R&D expenses decreased to RMB 21,129,000 in 2022 from RMB 24,973,000 in 2021, a reduction of approximately 15.5%[94] - Depreciation expenses increased to RMB 85,852,000 in 2022 from RMB 64,239,000 in 2021, an increase of approximately 33.6%[94] - The group's financing costs increased by approximately 28.0% from about RMB 6.4 million for the year ended December 31, 2021, to about RMB 8.2 million for the year ended December 31, 2022, due to an increase in average bank loan balances[173] Assets and Liabilities - Non-current assets totaled RMB 989,811 thousand, an increase from RMB 921,216 thousand[58] - Current assets increased to RMB 614,195 thousand from RMB 590,459 thousand[58] - Total liabilities increased to RMB 578,704 thousand from RMB 489,485 thousand[58] - The net asset value was RMB 984,532 thousand, up from RMB 974,196 thousand[58] - The asset-liability ratio increased from approximately 16.4% as of December 31, 2021, to approximately 23.9% as of December 31, 2022, primarily due to an increase in bank loans[134] Market Outlook and Strategic Initiatives - The company expects the demand for new energy vehicles to maintain rapid growth in 2023, which will drive the sales of plug-in hybrid cylinder heads[5] - The company anticipates stable growth in customer demand in 2023, driven by the normalization of infrastructure investment and other sectors in China, which is expected to improve revenue and performance[42] - The company expects the commercial vehicle market to rebound in 2023, with a projected sales volume of 3.8 million units, representing a year-on-year growth of 15%[116] - The company plans to focus more on product development in the new energy vehicle sector and lightweight vehicles, leveraging its experience in casting[23] - The company plans to diversify its customer base and product offerings to reduce reliance on individual customers and products[118] - The company has engaged in discussions with overseas quality customers to develop new products for local markets, indicating a strategy for market expansion[146] - The company believes its technology and product quality can meet international standards, aiming to enter more overseas markets through potential collaborations[146] Corporate Governance and Compliance - The board of directors has adopted the corporate governance code and has complied with its provisions, with some exceptions noted[44] - The company has not violated any financial covenants related to its bank loans as of December 31, 2022[110] Other Financial Metrics - The impairment loss on trade receivables decreased from approximately RMB 10.2 million in 2021 to about RMB 5.8 million in 2022, a reduction of approximately 42.8%[33] - Interest income dropped significantly to RMB 242,000 in 2022 from RMB 644,000 in 2021, a decline of approximately 62.4%[74] - The company received government grants totaling RMB 22,762,000 in 2022, a decrease from RMB 23,859,000 in 2021[74] - The company reported a total of RMB 317,346,000 in trade and other receivables as of December 31, 2022, compared to RMB 309,296,000 in 2021, indicating a slight increase of about 2.6%[82] - The company's trade and other payables increased to RMB 339.952 million in 2022 from RMB 327.232 million in 2021[108] - The company reported a contract liability of RMB 6.755 million as of December 31, 2022, compared to RMB 5.028 million in 2021[113]

Financial Performance - Revenue for the six months ended June 30, 2022, was RMB 283,737,000, a decrease of 23.7% compared to RMB 371,669,000 for the same period in 2021[23]. - Gross profit for the same period was RMB 46,224,000, down 44.6% from RMB 83,370,000 in 2021, resulting in a gross margin of 16.3% compared to 22.4% in the previous year[24][25]. - Profit for the period was RMB 12,393,000, a decline of 62.5% from RMB 32,962,000 in 2021, with a net profit margin of 8.9% compared to 4.4% in the prior year[26][27]. - Basic and diluted earnings per share were RMB 1.55, down from RMB 4.12 in the same period of 2021[28]. - The group's revenue for the first half of 2022 was approximately RMB 283.7 million, a decrease of 23.7% compared to RMB 371.7 million in the same period of 2021[60]. - The group's profit for the first half of 2022 was approximately RMB 12.4 million, down 62.4% from RMB 33.0 million in the same period of 2021[60]. - Total revenue decreased from approximately RMB 3,717 million for the six months ended June 30, 2021, to approximately RMB 2,837 million for the six months ended June 30, 2022, a decrease of about 23.7% attributed to lower sales of cylinders and cylinder heads[71]. - Gross profit decreased from approximately RMB 834 million to approximately RMB 462 million, a decline of about 44.6%, with gross margin dropping from 22.4% to 16.3% due to increased raw material costs and operating expenses[75]. - Operating profit decreased to RMB 16,889 thousand, representing a decline of 58.8% from RMB 40,956 thousand in the previous year[152]. - Net profit decreased from approximately RMB 330 million to approximately RMB 124 million, a decline of about 62.4%, with net profit margin dropping from 8.9% to 4.4% due to reduced gross margin[82]. Sales and Market Performance - Sales volume of passenger car cylinder blocks decreased by approximately 26.4%, from about 115,000 units in the first half of 2021 to about 85,000 units in the first half of 2022[62]. - The revenue share of passenger car cylinder blocks dropped from approximately 31.1% in the first half of 2021 to about 24.8% in the first half of 2022[62]. - Sales volume of commercial vehicle cylinder blocks increased by approximately 4.1%, from about 132,000 units in the first half of 2021 to about 138,000 units in the first half of 2022[63]. - The revenue share of commercial vehicle cylinder blocks rose from approximately 33.7% in the first half of 2021 to about 46.6% in the first half of 2022[63]. - The revenue share of industrial vehicle cylinder blocks increased from approximately 9.0% in the first half of 2021 to about 12.8% in the first half of 2022[64]. - Cylinder sales revenue increased from approximately RMB 333 million for the six months ended June 30, 2021, to approximately RMB 362 million for the six months ended June 30, 2022, representing an increase due to higher average selling prices of higher-standard products[66]. - Cylinder head sales volume decreased from approximately 145,000 units to approximately 84,000 units, a decline of about 41.7%, primarily due to a major customer's reduced orders, although demand from BYD and DEUTZ AG continued to increase[67]. Assets and Liabilities - Non-current assets amounted to RMB 931,145,000 as of June 30, 2022, compared to RMB 921,216,000 at the end of 2021[40][41]. - Current assets increased to RMB 669,532,000 from RMB 590,459,000 at the end of 2021[42]. - Current liabilities rose to RMB 568,688,000 from RMB 489,485,000 at the end of 2021[44]. - The debt-to-equity ratio was 19.7% as of June 30, 2022, compared to 16.4% at the end of 2021[52]. - The capital-to-debt ratio rose from approximately 16.4% as of December 31, 2021, to approximately 19.7% as of June 30, 2022, due to an increase in bank and other loans by RMB 35.0 million[99]. - Trade receivables and notes increased from approximately RMB 263.2 million as of December 31, 2021, to approximately RMB 264.4 million as of June 30, 2022, representing a growth of about 0.5%[85]. - Trade payables and notes rose from approximately RMB 214.0 million as of December 31, 2021, to approximately RMB 216.4 million as of June 30, 2022, an increase of about 1.1%[86]. - Bank loans increased from approximately RMB 160.0 million as of December 31, 2021, to approximately RMB 195.0 million as of June 30, 2022, reflecting a growth of about 21.9%[87]. Cash Flow and Investments - Operating cash flow for the first half of 2022 was RMB 30,250 thousand, a decrease of 70% from RMB 100,837 thousand in the same period of 2021[168]. - Net cash used in investing activities was RMB (54,497) thousand, compared to RMB (65,835) thousand in the first half of 2021, indicating a reduction in investment outflow[168]. - Financing activities generated a net cash inflow of RMB 29,250 thousand, a significant improvement from a net outflow of RMB (8,611) thousand in the same period of 2021[168]. - The net increase in cash and cash equivalents was RMB 3,121 thousand, down from RMB 19,923 thousand in the first half of 2021[168]. - The cash and cash equivalents at the end of the period were RMB 23,055 thousand, down from RMB 46,243 thousand at the end of the first half of 2021[168]. Future Outlook and Strategic Initiatives - The group plans to launch a new project with China FAW Group in Q4 2022, which is expected to generate additional revenue[62]. - The group has opened a new subsidiary in Shiyan, Hubei Province, to collaborate with Dongfeng Motor Group on heavy-duty commercial vehicle cylinder blocks and cylinder heads, with production expected to start in the second half of 2022[63]. - The group anticipates improved revenue and operational performance in the second half of 2022 due to management restructuring and new product launches[60]. - The company plans to launch two new products in the second half of the year, including 3.9L and 5.7L cylinder models, to attract more customer orders and improve revenue[66]. - The company has completed the construction of one precision casting line and six machining lines, with additional lines expected to be operational in the second half of 2022 to expand production capacity[68]. Shareholder Structure and Governance - As of June 30, 2022, Meng Lianzhou holds 411,042,000 shares, representing a 51.38% ownership stake in the company[119]. - The company has a significant concentration of ownership, with major shareholders including Meng Lianzhou, Liu Zhaohuo, and Zhang Yaoxuan, each holding substantial stakes[138]. - The total number of shares held by major shareholders amounts to 411,042,000 shares, which constitutes 51.38% of the total shares[138]. - The company has established a unified action agreement among its major shareholders to ensure coordinated decision-making[145]. - The company has a diverse shareholder base, including both individual and corporate entities, with the largest minority shareholder holding 67,868,000 shares, or 8.48%[138]. - The company’s governance structure includes significant oversight from its board of directors, ensuring adherence to regulatory requirements[117]. - The company has disclosed no additional interests or positions held by directors or senior management beyond those already reported as of June 30, 2022[145]. - The company’s compliance with the Securities and Futures Ordinance is regularly updated in its register of interests[141]. - The ownership structure indicates a strong alignment of interests among major shareholders, which may positively influence corporate strategy and performance[145].

Financial Performance - Revenue for the year ended December 31, 2021, was RMB 610.734 million, a decrease of 12.8% from RMB 700.365 million in 2020[28] - Gross profit for 2021 was RMB 118.220 million, with a gross margin of 24.6%, compared to RMB 106.492 million and a gross margin of 24.1% in 2020[31][37] - Net profit for the year was RMB 36.570 million, representing a net profit margin of 13.5%, up from RMB 33.600 million and a margin of 5.4% in 2020[40][46] - Basic and diluted earnings per share for 2021 were RMB 0.046, compared to RMB 0.158 in 2020[51] - The group's revenue for the year ended December 31, 2021, was approximately RMB 679.8 million, an increase of 56.8% compared to RMB 433.5 million in 2020[124] - The group's profit for the year was approximately RMB 36.6 million, up 8.8% from RMB 33.6 million in 2020[124] - The annual profit increased from approximately RMB 336 million for the year ended December 31, 2020, to approximately RMB 366 million for the year ended December 31, 2021, representing an increase of about 8.8%[157] Assets and Liabilities - Non-current assets as of December 31, 2021, totaled RMB 921.216 million, an increase from RMB 835.239 million in 2020[65] - Current assets were RMB 590.459 million, a slight decrease from RMB 605.434 million in 2020[70] - Current liabilities amounted to RMB 489.485 million, up from RMB 427.670 million in 2020[75] - The company's net asset value was RMB 974.196 million, compared to RMB 958.259 million in 2020[90] - The debt-to-equity ratio was 16.4%, a slight decrease from 16.7% in 2020, indicating stable financial leverage[96] - The debt-to-equity ratio was reported at 39.2% as of the end of the reporting period[100] - Trade receivables and notes decreased from approximately RMB 2,827 million as of December 31, 2020, to approximately RMB 2,632 million as of December 31, 2021, a decrease of about 6.9%[159] - Trade payables and notes increased from approximately RMB 1,583 million as of December 31, 2020, to approximately RMB 2,140 million as of December 31, 2021, an increase of about 35.2%[160] - The bank loans remained stable at RMB 1,600 million as of December 31, 2021, and December 31, 2020[161] - The company has no significant contingent liabilities or guarantees as of December 31, 2021[174] Production and Sales - The company operates three precision casting lines and 26 machining lines, enhancing its production capacity to meet customer demands[15] - The sales volume of core products, cylinder blocks and cylinder heads, increased by 57% to 750,000 units for the year ended December 31, 2021[102] - Sales of passenger vehicle cylinder blocks increased significantly, with revenue rising from approximately 11.1% of total revenue in 2020 to 19.5% in 2021, and sales volume increasing by about 148.0%[128] - The sales volume of commercial vehicle cylinder blocks increased from approximately 236,000 units in 2020 to about 311,000 units in 2021, representing a growth of approximately 31.6%[130] - The sales revenue of commercial vehicle cylinder blocks decreased from about 55.0% of total revenue in 2020 to approximately 47.5% in 2021 due to the significant increase in passenger vehicle cylinder block sales[130] - Sales volume of engine blocks rose from approximately 345,000 units for the year ended December 31, 2020, to approximately 508,000 units for the year ended December 31, 2021, an increase of about 52.6%[142] - Sales volume of cylinder heads surged from approximately 132,000 units for the year ended December 31, 2020, to approximately 242,000 units for the year ended December 31, 2021, reflecting an increase of about 83.3%[136] Strategic Initiatives - The company aims to become the largest professional manufacturer of cylinder blocks and cylinder heads in China by 2025[103] - The management team is focused on executing the development strategy set at the beginning of the year despite industry challenges[102] - The company is actively engaging with major domestic and international automotive groups to expand its business and enter the new energy vehicle sector[103] - The company plans to implement a five-year plan by 2025 focusing on "stable growth, cost control, and structural adjustment" to become the largest professional manufacturer of automotive engine blocks and cylinder heads in China[138] - The company has completed the construction of 14 new machining lines and one precision casting line, with additional lines expected to be operational in 2022[137] - The company anticipates a gradual recovery in the Chinese automotive industry in 2022, following disruptions from chip shortages and rising raw material prices[138] Research and Development - The company has invested $10 million in R&D for innovative technologies aimed at improving operational efficiency[116] - New product development includes the launch of a next-generation engine, expected to enhance performance by 30%[116] - The group has actively developed a clean diesel engine cylinder block and cylinder head for Foton Motor, meeting fuel and emission standards for 2025, with mass production expected in March 2022[130] - The group has completed product localization for the 472QA cylinder block and cylinder head in collaboration with BYD, with mass production starting in January 2022[129] - The group is expanding into the heavy commercial vehicle market by collaborating with Dongfeng Motor Group to process DDi11 cylinder blocks and cylinder heads, with mass production expected to begin in the second half of 2022[131] Market Trends - The semiconductor shortage is expected to continue affecting the automotive industry in 2022, but relief is anticipated in the second half of the year[102] - The sales of new energy vehicles in China reached 3.5 million units in 2021, a year-on-year increase of 157.6%, with a market penetration rate rising to 13.4%[122] - The sales of Chinese brand passenger vehicles reached 9.5 million units in 2021, a year-on-year increase of 23.1%, with a market share of 44.4%[122] Operational Efficiency - The company has implemented new compliance measures, resulting in a 5% reduction in operational risks[116] - The total employee costs for the year ended December 31, 2021, were approximately RMB 814 million, an increase of about 31.5% compared to RMB 619 million for the year ended December 31, 2020[179] - Administrative expenses increased from approximately RMB 53.7 million for the year ended December 31, 2020, to approximately RMB 77.7 million for the year ended December 31, 2021, an increase of about 44.6%[151] - The company plans to maintain optimal liquidity to support operational needs and growth strategies in the future[158] Governance and Management - The management team has over 25 years of combined experience in the automotive sector, enhancing strategic decision-making capabilities[116] - The board of directors includes members with extensive backgrounds in finance and investment, strengthening corporate governance[116]

Financial Performance - For the six months ended June 30, 2021, the company reported revenue of RMB 371.669 million, a 124.4% increase from RMB 165.972 million for the same period in 2020[11]. - Gross profit for the same period was RMB 83.370 million, compared to RMB 35.676 million in the previous year, resulting in a gross margin of 22.4%[11]. - Net profit for the six months ended June 30, 2021, was RMB 32.962 million, up from RMB 15.262 million in the same period of 2020, reflecting a net profit margin of 8.9%[11]. - The company's profit for the same period was approximately RMB 33.0 million, reflecting a growth of about 116.0% year-on-year[16]. - Revenue from cylinder sales increased from RMB 134.7 million for the six months ended June 30, 2020, to RMB 274.2 million for the six months ended June 30, 2021, representing a growth of approximately 103.5%[29]. - Revenue from cylinder head sales rose from RMB 28.2 million to RMB 93.2 million, marking an increase of about 230.9% due to higher customer demand[30]. - Profit for the period surged from RMB 15.3 million to RMB 33.0 million, a significant increase of approximately 116.0%[40]. - Operating profit increased to RMB 40,956 thousand, a growth of 76.5% from RMB 23,160 thousand year-on-year[82]. - Basic and diluted earnings per share for the period were RMB 4.12, compared to RMB 1.91 for the same period in 2020[82]. Sales and Production - The company sold 300,000 engine blocks during the first half of 2021, a decrease from 400,000 units sold in the same period of 2020[11]. - The sales volume of passenger car cylinder blocks surged approximately 410% from about 23,000 units in the six months ended June 30, 2020, to approximately 115,000 units in the same period of 2021[20]. - The sales volume of commercial vehicle cylinder blocks rose approximately 55.0% from about 85,000 units to approximately 132,000 units year-on-year[21]. - The sales volume of industrial vehicle cylinder blocks increased by approximately 11.3%, from about 29,000 units to approximately 32,000 units[22]. - The company plans to complete the construction of six new machining lines and one precision casting line by the end of 2021, which will enhance production capacity and allow for the introduction of over three new products[25]. Assets and Liabilities - As of June 30, 2021, total non-current assets amounted to RMB 872.632 million, while current assets were RMB 693.159 million[13]. - The company's total liabilities were RMB 523.596 million, resulting in a net asset value of RMB 990.717 million and a debt-to-equity ratio of 15.7%[13]. - Total assets as of June 30, 2021, were RMB 1,042,195 thousand, an increase from RMB 1,013,003 thousand as of December 31, 2020[89]. - Net current assets were RMB 169,563 thousand, slightly down from RMB 177,764 thousand at the end of 2020[89]. - The total inventory amounted to RMB 234,942 thousand, an increase from RMB 208,087 thousand as of December 31, 2020, reflecting a growth of approximately 12.8%[139]. Expenses and Cash Flow - Selling expenses rose from RMB 5.0 million to RMB 12.0 million, an increase of approximately 141.9%, aligned with revenue growth[35]. - Administrative expenses increased from RMB 25.3 million to RMB 38.6 million, a rise of about 52.5%, mainly due to increased R&D costs and employee benefits[36]. - Operating cash flow for the six months ended June 30, 2021, was RMB 94,369 thousand, a significant increase from RMB 33,866 thousand in the same period of 2020, representing an increase of 178%[102]. - Cash and cash equivalents increased by RMB 19,923 thousand for the six months ended June 30, 2021, compared to a decrease of RMB (15,719) thousand in the same period of 2020[102]. - The company reported a total cash and cash equivalents balance of RMB 46,243 thousand as of June 30, 2021, up from RMB 33,476 thousand at the end of the same period in 2020[102]. Shareholder Information - The company declared an interim dividend of HKD 0.03 per share, amounting to approximately HKD 24 million, compared to HKD 0.02 per share for the six months ended June 30, 2020[62]. - The company holds 411,042,000 shares, representing approximately 51.38% ownership by Meng Lianzhou and Liu Zhanwen[68]. - Long Leap has a beneficial ownership of 411,042,000 shares, equating to 51.38%[75]. - The beneficial ownership structure indicates a significant concentration of shares among a few individuals, with Meng Lianzhou and Liu Zhanwen each holding 51.38%[71]. - The total issued and paid-up ordinary shares remained at 800,000,000 as of June 30, 2021, consistent with the number as of June 30, 2020[154]. Strategic Initiatives - The company aims to enhance its production processes and technology to meet the specific needs of leading automotive manufacturers in China[9]. - The company is focused on continuous optimization and innovation in its production processes to maintain competitive advantages in the market[9]. - Future strategies include expanding production capacity and enhancing research and development capabilities to support new product offerings[9]. - The company is collaborating with domestic commercial vehicle and industrial vehicle leaders to develop heavy truck cylinder blocks and small excavator cylinder blocks that meet the National VI emission standards[26]. - The company anticipates that the maximum annual production capacity for hybrid cylinder blocks and related components could reach between 50,000 to 100,000 units[26]. Compliance and Governance - The company has established an audit committee consisting of three independent non-executive directors to oversee financial reporting and internal controls[81]. - The company has applied the amendments to IFRS 16 regarding COVID-19-related rent concessions, extending the eligibility period for rent reductions until June 30, 2022[111]. - The financial report indicates that the company has not adopted any new standards or interpretations that have not yet come into effect during the current accounting period, ensuring compliance with existing accounting policies[106]. - The company is subject to the Securities and Futures Ordinance, which governs the disclosure of shareholdings[71].

Company Information [Company Basic Information](index=3&type=section&id=%E5%85%AC%E5%8F%B8%E5%9F%BA%E6%9C%AC%E4%BF%A1%E6%81%AF) Refeng Power Group (2025), incorporated in the Cayman Islands, operates from China and Hong Kong, governed by executive and independent non-executive directors, and supported by key committees - The company is incorporated in the Cayman Islands with **stock code 2025**[5](index=5&type=chunk)[6](index=6&type=chunk) - The Board of Directors includes four executive directors, such as Mr. Meng Lianzhou (Chairman and CEO), and three independent non-executive directors, such as Mr. Wei Anli[10](index=10&type=chunk) - The company has established an Audit Committee, a Nomination Committee, and a Remuneration Committee to enhance corporate governance[10](index=10&type=chunk) - The auditor is KPMG, and the legal counsel is Messrs. Chiu & Partners[10](index=10&type=chunk) Company Overview [Principal Business and Competitive Advantages](index=5&type=section&id=%E4%B8%BB%E8%90%A5%E4%B8%9A%E5%8A%A1%E4%B8%8E%E7%AB%9E%E4%BA%89%E4%BC%98%E5%8A%BF) Refeng Power Group, a professional cylinder block manufacturer in Hebei, China, produces cylinder blocks, cylinder heads, and auxiliary components, serving leading Chinese automakers with strong manufacturing and R&D - The Group is a professional cylinder block manufacturer in Shenzhou City, Hebei Province, China, with main products being cylinder blocks, cylinder heads, and auxiliary cylinder block components[13](index=13&type=chunk)[14](index=14&type=chunk) - As of December 31, 2020, the Group owned and operated **3 precision casting lines** and **18 machining lines**[13](index=13&type=chunk) - Competitive advantages include: being a professional cylinder block manufacturer and renowned cylinder head producer in China, highly flexible production facilities, continuous optimization and innovative production processes and technologies, and excellent design and R&D capabilities[15](index=15&type=chunk) Financial Summary [Overview of Key Financial Data](index=6&type=section&id=%E5%85%B3%E9%94%AE%E8%B4%A2%E5%8A%A1%E6%95%B0%E6%8D%AE%E6%A6%82%E8%A7%88) The Group's 2020 revenue grew 22.1% to RMB 433.5 million, gross profit rose 24.3% to RMB 106.5 million, and profit for the year increased 11.6% to RMB 33.6 million, with net current assets decreasing and gearing ratio rising to 16.7% Key Items from the Consolidated Statement of Profit or Loss and Other Comprehensive Income (RMB in thousands) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 433,475 | 355,049 | 610,734 | 700,365 | 669,894 | | Gross Profit | 106,492 | 85,680 | 217,400 | 190,051 | 193,101 | | Gross Margin | 24.6% | 24.1% | 31.1% | 31.0% | 28.8% | | Profit for the Year | 33,600 | 30,115 | 102,349 | 94,798 | 93,725 | | Net Profit Margin | 7.8% | 8.5% | 16.8% | 13.5% | 14.0% | | Basic and Diluted Earnings Per Share (RMB) | 0.042 | 0.038 | 0.128 | 0.158 | 0.156 | Key Items from the Consolidated Statement of Financial Position (RMB in thousands) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | Non-current Assets | 835,239 | 797,345 | 670,730 | 770,444 | 749,506 | | Current Assets | 605,434 | 522,000 | 637,939 | 459,685 | 377,772 | | Current Liabilities | 427,670 | 317,225 | 376,253 | 438,612 | 446,698 | | Net Current Assets / (Net Current Liabilities) | 177,764 | 204,775 | 199,327 | 12,987 | 1,519 | | Non-current Liabilities | 54,744 | 61,802 | 63,607 | 180,786 | 162,973 | | Net Assets | 958,259 | 940,318 | 906,164 | 581,707 | 509,276 | | Gearing Ratio | 16.7% | 12.9% | 23.1% | 39.2% | 39.4% | Chairman's Report [2020 Annual Performance and Challenges](index=8&type=section&id=2020%E5%B9%B4%E5%BA%A6%E4%B8%9A%E7%BB%A9%E4%B8%8E%E6%8C%91%E6%88%98) Despite pandemic challenges, the Group's 2020 revenue grew 22.1% to RMB 433.5 million and gross profit rose 24.3% to RMB 106.5 million, but increased competition and client financial issues led to a RMB 13.5 million bad debt provision - Revenue in 2020 increased by approximately **22.1%** year-on-year to **RMB 433.5 million**, and gross profit increased by approximately **24.3%** year-on-year to **RMB 106.5 million**[104](index=104&type=chunk) - Due to a client filing for bankruptcy, the Group made an additional provision for bad debts of approximately **RMB 13.5 million** in 2020[104](index=104&type=chunk) [Strategic Adjustments and Future Outlook](index=8&type=section&id=%E6%88%98%E7%95%A5%E8%B0%83%E6%95%B4%E4%B8%8E%E6%9C%AA%E6%9D%A5%E5%B1%95%E6%9C%9B) The Group actively adjusted its client structure, adding FAW Group as a key client for in-depth cooperation on lightweight products, while also exploring products like motor housings and hybrid power cylinder blocks in line with new energy vehicle trends, and strengthening cooperation with industrial vehicle companies in the diesel cylinder block sector; in 2021, the focus will be on developing new energy vehicles, automotive lightweighting, and non-engine parts businesses - The Group added **FAW Group** as a key client, and both parties will extensively collaborate on lightweight series products, such as aluminum cylinder blocks[104](index=104&type=chunk) - Actively exploring new energy vehicle development, cooperating on motor housing production, and seeking opportunities for hybrid power cylinder blocks and other related products[104](index=104&type=chunk) - Strengthening cooperation with industrial vehicle companies in the diesel cylinder block sector, with Deutz sample submission completed in 2020 and mass production expected to commence in **2021**[104](index=104&type=chunk) - In **2021**, the Group will focus on developing new energy vehicles, automotive lightweighting, and non-engine parts businesses, and seek directions for next-generation automotive parts in R&D or collaboration[106](index=106&type=chunk) Biographies of Directors and Senior Management [Executive Directors' Biographies](index=10&type=section&id=%E6%89%A7%E8%A1%8C%E8%91%A3%E4%BA%8B%E5%B1%A5%E5%8E%86) The Group's four executive directors, including Mr. Meng Lianzhou (Chairman and CEO), each possess over 20 years of experience in the cylinder block and cylinder head manufacturing industry, overseeing the Group's overall strategy, business operations, product R&D, and financial management - Mr. Meng Lianzhou (60), Chairman and CEO, is responsible for overall strategic development and business development, with over **20 years** of experience in the cylinder block and cylinder head manufacturing industry[114](index=114&type=chunk) - Mr. Liu Zhanwen (68), Executive Director, is responsible for overall business operations, with over **20 years** of experience in the cylinder block and cylinder head manufacturing industry[114](index=114&type=chunk) - Mr. Zhang Yuexuan (72), Executive Director, is responsible for overall product R&D, with over **20 years** of experience in the cylinder block and cylinder head manufacturing industry[118](index=118&type=chunk) - Mr. Liu Enwang (59), Executive Director, is responsible for overall financial management, possessing extensive financial experience[118](index=118&type=chunk) [Independent Non-Executive Directors' Biographies](index=12&type=section&id=%E7%8B%AC%E7%AB%8B%E9%9D%9E%E6%89%A7%E8%A1%8C%E8%91%A3%E4%BA%8B%E5%B1%A5%E5%8E%86) The three independent non-executive directors, Mr. Wei Anli, Mr. Ren Keqiang, and Mr. Yu Zhenqiu, possess extensive professional knowledge and experience in the internal combustion engine industry, investment management, and accounting, corporate finance, and auditing, respectively, providing independent and objective opinions to the Board - Mr. Wei Anli (68), Independent Non-Executive Director, has held various positions in the China Internal Combustion Engine Industry Association, possessing rich internal combustion engine industry experience[124](index=124&type=chunk) - Mr. Ren Keqiang (47), Independent Non-Executive Director, has over **13 years** of experience in investment and management[124](index=124&type=chunk) - Mr. Yu Zhenqiu (48), Independent Non-Executive Director, has over **25 years** of experience in accounting, corporate finance, compliance, and auditing, and is a Fellow of the Hong Kong Institute of Certified Public Accountants[128](index=128&type=chunk) [Senior Management Biographies](index=13&type=section&id=%E9%AB%98%E7%BA%A7%E7%AE%A1%E7%90%86%E5%B1%82%E5%B1%A5%E5%8E%86) The Group's senior management includes Mr. Wei Xilai (Chairman's Secretary), Mr. Xie Fei (Executive Deputy General Manager), Mr. Wen Qingwei (Deputy General Manager), and Mr. Wang Jiawei (CFO and Company Secretary), who are responsible for administration, business operations, product development and quality control, and finance and company secretarial matters, respectively - Mr. Wei Xilai (36), Chairman's Secretary, is responsible for overall administrative work[128](index=128&type=chunk) - Mr. Xie Fei (46), Executive Deputy General Manager, is responsible for the overall management of business operations[129](index=129&type=chunk) - Mr. Wen Qingwei (49), Deputy General Manager, is responsible for overall product development and quality control[133](index=133&type=chunk) - Mr. Wang Jiawei (41), CFO and Company Secretary, is responsible for overseeing finance, banking management, and company secretarial duties[133](index=133&type=chunk) Management Discussion and Analysis [Industry Overview](index=15&type=section&id=%E8%A1%8C%E4%B8%9A%E6%A6%82%E8%A7%88) In 2020, China's automotive market experienced a rebound after an initial decline due to the pandemic, with sales decreasing by only 1.9% year-on-year, while new energy vehicle sales reached a record high; national policies strongly support the development of new energy vehicles, and the industry has entered a phase of inventory competition, making component R&D and production critical - China's automobile sales in 2020 were **25.311 million units**, a year-on-year decrease of **1.9%**, ranking first globally for **12 consecutive years**[137](index=137&type=chunk) - New energy vehicle sales reached **1.367 million units**, a year-on-year increase of **10.9%**, setting a new historical record[137](index=137&type=chunk) - The "New Energy Vehicle Industry Development Plan (2021–2035)" was introduced, promoting the enhancement of R&D capabilities for core components of new energy vehicles[138](index=138&type=chunk) [Business Review](index=15&type=section&id=%E4%B8%9A%E5%8A%A1%E5%9B%9E%E9%A1%BE) The Group's business was affected by the pandemic in the first half of 2020, but operations normalized in the second half, achieving steady development through optimized client structure and product portfolio; commercial vehicle cylinder block and cylinder head sales grew significantly, and the Group successfully entered Deutz's supplier list and deepened cooperation with FAW Group on lightweight products - In the second half of **2020**, with effective control of the pandemic, the Group's production and sales returned to normal, and consumer demand steadily recovered[139](index=139&type=chunk) Revenue and Sales Volume by Segment and Major Product Type for 2020 and 2019 | Product Type | 2020 Revenue (RMB in thousands) | 2020 Sales Volume (units) | 2019 Revenue (RMB in thousands) | 2019 Sales Volume (units) | Revenue Change (%) | Sales Volume Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Passenger Vehicle Cylinder Blocks | 48,228 | 56,470 | 48,009 | 58,155 | +0.5% | -2.9% | | Commercial Vehicle Cylinder Blocks | 238,306 | 236,107 | 180,633 | 180,038 | +31.9% | +31.1% | | Motorized Industrial Vehicle Cylinder Blocks | 56,240 | 52,037 | 49,896 | 46,148 | +12.7% | +12.8% | | **Cylinder Blocks Subtotal** | **342,774** | **344,614** | **278,538** | **284,341** | **+23.1%** | **+21.2%** | | Cylinder Heads | 84,546 | 131,846 | 60,319 | 107,639 | +40.2% | +22.5% | | Auxiliary Cylinder Block Components | 6,155 | 78,466 | 16,192 | 709,282 | -62.0% | -88.9% | | **Total** | **433,475** | | **355,049** | | **+22.1%** | | - Commercial vehicle cylinder block sales volume increased by approximately **31.1%**, primarily due to a significant increase in demand for 493 cylinder blocks sold to one client[144](index=144&type=chunk) - Successfully entered Deutz AG's supplier list, completed sample submission in **2020**, with mass production expected to commence in **2021**[145](index=145&type=chunk) - Added **FAW Group** as a key client, with deep cooperation on lightweight series products (including aluminum cylinder blocks), and FAW's 4GB product planning projects an annual demand of **150,000 cylinder blocks**[149](index=149&type=chunk) [Production Facilities, New Products, and R&D](index=18&type=section&id=%E7%94%9F%E4%BA%A7%E8%AE%BE%E6%96%BD%E5%8F%8A%E6%96%B0%E4%BA%A7%E5%93%81%E5%8F%8A%E7%A0%94%E5%8F%91) All of the Group's production facilities are located in Shenzhou City, Hebei Province, China, with 3 precision casting lines and 18 machining lines as of the end of 2020; it is expected that the renovation and construction of 9 new machining lines and 1 precision casting line will be completed by the end of 2021 to enhance production efficiency and launch over 12 new products - As of December 31, 2020, the Group owned and operated **3 precision casting lines** and **18 machining lines**[150](index=150&type=chunk) - Expected to complete the renovation and construction of **9 new machining lines** and **1 precision casting line** by the end of **2021**, which will enhance production efficiency and offer over **12 new products**[150](index=150&type=chunk) [Outlook](index=18&type=section&id=%E5%B1%95%E6%9C%9B) Looking ahead to 2021, China's automotive industry is expected to recover overall, with new energy vehicle sales projected to exceed 5 million units by 2025, and the lightweighting market offering vast opportunities; the Group will continue to be customer-centric and technology-driven, focusing on new energy vehicles, automotive lightweighting, and non-engine parts businesses, while strengthening deep cooperation with major automakers - China's automotive industry is expected to recover overall in **2021**, with new energy vehicle sales projected to exceed **5 million units** by **2025**[151](index=151&type=chunk) - The Group will focus on developing new energy vehicles, automotive lightweighting, and non-engine parts businesses, and seek directions for next-generation automotive parts in R&D or collaboration[151](index=151&type=chunk) - Will strengthen deep cooperation with major automakers such as **FAW Group** to jointly explore development opportunities in new energy and lightweighting[151](index=151&type=chunk) [Financial Review](index=19&type=section&id=%E8%B4%A2%E5%8A%A1%E5%9B%9E%E9%A1%BE) Revenue in 2020 increased by 22.1% to RMB 433.5 million, primarily driven by increased sales of cylinder blocks and cylinder heads; gross profit grew by 24.3%, with gross margin rising to 24.6%; profit for the year increased by 11.6% to RMB 33.6 million, though net profit margin slightly decreased due to lower other income, and impairment losses on trade receivables increased due to client bankruptcy - Revenue increased by approximately **22.1%** from approximately **RMB 355.0 million** in 2019 to approximately **RMB 433.5 million** in 2020[153](index=153&type=chunk) - Revenue from cylinder block sales increased by approximately **23.1%** to **RMB 342.8 million**, with sales volume increasing to approximately **345,000 units**[154](index=154&type=chunk) - Revenue from cylinder head sales increased by approximately **40.2%** to **RMB 84.5 million**, with sales volume increasing to approximately **132,000 units**[155](index=155&type=chunk) - Gross profit increased by approximately **24.3%** to **RMB 106.5 million**, with gross margin increasing from **24.1%** to **24.6%**[157](index=157&type=chunk) - Other income decreased by approximately **44.6%** to **RMB 22.0 million**, primarily due to a reduction in government grants[159](index=159&type=chunk) - Impairment losses on trade receivables increased by approximately **29.4%** to **RMB 15.6 million**, primarily due to the bankruptcy of a client[162](index=162&type=chunk) - Profit for the year increased by approximately **11.6%** to **RMB 33.6 million**, while net profit margin decreased from **8.5%** to **7.8%**[165](index=165&type=chunk) [Liquidity, Financial Resources, and Capital Structure](index=21&type=section&id=%E6%B5%81%E5%8A%A8%E8%B5%84%E9%87%91%E3%80%81%E8%B4%A2%E5%8A%A1%E8%B5%84%E6%BA%90%E5%8F%8A%E8%B5%84%E6%9C%AC%E6%9E%B6%E6%9E%84) The Group's liquidity primarily stems from cash generated from operating activities and bank loans; in 2020, cash and cash equivalents decreased, trade receivables and bills receivable increased but turnover days shortened, and trade payables significantly increased; the rise in bank loans led to an increase in the gearing ratio to 16.7%; capital expenditure increased, mainly for new production line construction and existing line upgrades, with most of the net proceeds from the global offering already utilized - As of December 31, 2020, cash and cash equivalents were approximately **RMB 26.3 million** (2019: RMB 49.3 million)[167](index=167&type=chunk) - Trade receivables and bills receivable increased by approximately **11.8%** to **RMB 282.7 million**, with turnover days decreasing from **204 days** to **152 days**[168](index=168&type=chunk) - Trade payables increased by approximately **54.7%** to **RMB 158.3 million**, with turnover days increasing from **138 days** to **144 days**[169](index=169&type=chunk) - Bank loans increased to approximately **RMB 160.0 million**, and the gearing ratio increased from **12.9%** to **16.7%**[170](index=170&type=chunk)[173](index=173&type=chunk) - Capital expenditure was approximately **RMB 102.8 million**, primarily for establishing machining lines for new products and upgrading existing production lines[175](index=175&type=chunk) - As of December 31, 2020, the unutilized balance of net proceeds from the global offering was approximately **RMB 20.0 million**[188](index=188&type=chunk) - As of December 31, 2020, the Group had **760 employees**, with total staff costs of approximately **RMB 61.9 million**, a year-on-year decrease of **2.5%**, mainly due to reduced social insurance contributions[180](index=180&type=chunk) Directors' Report [Principal Business and Business Review](index=25&type=section&id=%E4%B8%BB%E8%A6%81%E4%B8%9A%E5%8A%A1%E5%8F%8A%E4%B8%9A%E5%8A%A1%E5%9B%9E%E9%A1%BE) The Company operates as an investment holding company, with its subsidiaries primarily engaged in the design, manufacture, and sale of cylinder blocks and cylinder heads; details of the business review can be found in the "Management Discussion and Analysis" section - The Company is an investment holding company, and the Group's principal business is the design, manufacture, and sale of cylinder blocks and cylinder heads[193](index=193&type=chunk) [Key Risks and Uncertainties](index=25&type=section&id=%E4%B8%BB%E8%A6%81%E9%A3%8E%E9%99%A9%E5%8F%8A%E4%B8%8D%E7%A1%AE%E5%AE%9A%E6%80%A7) The Group faces operational risks (high customer concentration, with the top five clients accounting for 80.9% of total revenue), financial risks (interest rate, credit, liquidity), and market risks (evolving industry standards, technological developments, intense competition); the Board has established internal control and risk management procedures to address these risks - Operational risk: The top five clients accounted for approximately **80.9%** of total revenue (2019: 77.0%), with the largest client accounting for approximately **34.0%** (2019: 24.7%)[194](index=194&type=chunk)[201](index=201&type=chunk) - Financial risks: Primarily exposed to interest rate risk, credit risk, and liquidity risk[195](index=195&type=chunk) - Market risks: Evolving industry standards, frequent new product launches, rapid technological developments, and changing customer demands[196](index=196&type=chunk) - The Group has established a set of internal control and risk management procedures, which the Directors consider to be adequate and effective[199](index=199&type=chunk) [Final Dividend and Dividend Policy](index=26&type=section&id=%E6%9C%AB%E6%9C%9F%E8%82%A1%E6%81%AF%E5%8F%8A%E8%82%A1%E6%81%AF%E6%94%BF%E7%AD%96) The Company paid an interim dividend of HKD 2.0 cents per share on October 23, 2020, but does not recommend a final dividend for the 2020 fiscal year; the company has adopted a dividend policy aimed at balancing profit sharing with shareholders and retaining sufficient reserves for future development, with dividend amounts determined at the Board's discretion - An interim dividend of **HKD 2.0 cents** per share was paid on October 23, 2020 (2019: nil)[203](index=203&type=chunk) - The Board does not recommend the payment of a final dividend for the year ended December 31, 2020 (2019: nil)[204](index=204&type=chunk) - The company has adopted a dividend policy aimed at allowing shareholders to share in profits while retaining sufficient reserves for future development[205](index=205&type=chunk) [Directors' and Major Shareholders' Interests](index=30&type=section&id=%E8%91%A3%E4%BA%8B%E5%8F%8A%E4%B8%BB%E8%A6%81%E8%82%A1%E4%B8%9C%E6%9D%83%E7%9B%8A) As of December 31, 2020, executive directors Mr. Meng Lianzhou, Mr. Liu Zhanwen, Mr. Zhang Yuexuan, and Mr. Liu Enwang collectively held 51.38% of the Company's shares through Longyue; additionally, major shareholders such as Bright Journey Holdings Limited, Grand Harmony Enterprises Limited, and Mao Yang Limited also held significant shares; the Board confirmed that no directors had competing interests or rights to acquire shares or debentures Directors' Interests and Short Positions in Shares, Underlying Shares, and Debentures (as of December 31, 2020) | Director's Name | Capacity / Nature of Interest | Number and Class of Securities | Approximate Percentage of Shareholding | | :--- | :--- | :--- | :--- | | Meng Lianzhou | Interest in controlled corporation | 411,042,000 shares (L) | 51.38% | | Liu Zhanwen | Interest in controlled corporation | 411,042,000 shares (L) | 51.38% | | Zhang Yuexuan | Interest in controlled corporation | 411,042,000 shares (L) | 51.38% | | Liu Enwang | Interest in controlled corporation | 411,042,000 shares (L) | 51.38% | Major Shareholders' Interests and Short Positions in the Company's Shares and Underlying Shares (as of December 31, 2020) | Shareholder's Name | Capacity / Nature of Interest | Number and Class of Securities | Approximate Percentage of Shareholding | | :--- | :--- | :--- | :--- | | Longyue | Beneficial owner | 411,042,000 shares(L) | 51.38% | | Bright Journey Holdings Limited | Beneficial owner | 67,868,000 shares(L) | 8.48% | | Grand Harmony Enterprises Limited | Beneficial owner | 46,864,000 shares(L) | 5.86% | | Mao Yang Limited | Beneficial owner | 46,864,000 shares(L) | 5.86% | - None of the controlling shareholders, directors, or their respective close associates had any interest in any business that directly or indirectly competes or may compete with the Group's business[226](index=226&type=chunk) [Share Option Scheme](index=33&type=section&id=%E8%B4%AD%E8%82%A1%E6%9D%83%E8%AE%A1%E5%88%92) The Company adopted a share option scheme in 2017 to incentivize participants who contribute to the Group's business success; the scheme has a 10-year validity, with a total option grant limit of 10% of issued shares and an individual limit of 1%; as of the report date, no options had been granted, exercised, or cancelled under the scheme - The Share Option Scheme was adopted on **December 11, 2017**, to incentivize or reward selected participants who contribute to the Group's business success[248](index=248&type=chunk) - The scheme has a validity period of **10 years**, and the total number of shares that may be allotted and issued upon exercise of all options shall not exceed **10%** of the issued shares (**80,000,000 shares**)[251](index=251&type=chunk) - The total number of shares issued to each participant in any **12-month period** shall not exceed **1%** of the Company's then-issued share capital[251](index=251&type=chunk) - As of the date of this report, the Company had not granted, exercised, or cancelled any share options under the Share Option Scheme[253](index=253&type=chunk) [Other Corporate Governance Matters](index=25&type=section&id=%E5%85%B6%E4%BB%96%E5%85%AC%E5%8F%B8%E6%B2%BB%E7%90%86%E4%BA%8B%E9%A1%B9) The Group complies with relevant laws and regulations, independent non-executive directors have confirmed their independence, and controlling shareholders adhere to non-compete undertakings; KPMG will be re-appointed at the Annual General Meeting; as of December 31, 2020, the Company's distributable reserves amounted to RMB 136.0 million - For the year ended December 31, 2020, the Group had no material breaches or non-compliance with any applicable laws and regulations that significantly affected its business and operations[211](index=211&type=chunk) - The Company has received annual confirmations of independence from each independent non-executive director and considers all independent non-executive directors to be independent[266](index=266&type=chunk) - Controlling shareholders and directors have confirmed strict compliance with the non-compete undertaking[268](index=268&type=chunk) - KPMG will retire and is eligible and willing to be re-appointed as the Company's auditor at the forthcoming Annual General Meeting[269](index=269&type=chunk) - As of December 31, 2020, the Company's distributable reserves amounted to **RMB 136.0 million**[216](index=216&type=chunk) Corporate Governance Report [Board of Directors and Compliance with Corporate Governance Code](index=37&type=section&id=%E8%91%A3%E4%BA%8B%E4%BC%9A%E4%B8%8E%E4%BC%81%E4%B8%9A%E7%AE%A1%E6%B2%BB%E5%AE%88%E5%88%99%E9%81%B5%E5%AE%88%E6%83%85%E5%86%B5) The Company's Board of Directors, comprising four executive directors and three independent non-executive directors, is committed to maintaining high standards of corporate governance; the company generally complies with the Corporate Governance Code, though the roles of Chairman and Chief Executive Officer are combined, an arrangement the Board believes fosters consistent internal leadership and efficient strategic execution; the Board regularly reviews this arrangement and provides continuous professional development for directors - The Board of Directors comprises **four executive directors** and **three independent non-executive directors**[279](index=279&type=chunk) - The Company has consistently complied with the Corporate Governance Code, except for the combined roles of Chairman and Chief Executive Officer held by Mr. Meng Lianzhou, which is a deviation from Code Provision A.2.1[278](index=278&type=chunk) - The Board believes that combining the roles helps ensure consistent internal leadership within the Group and enhances the effectiveness and efficiency of overall strategic planning[278](index=278&type=chunk) - All Directors participate in continuous professional development programs to enhance and refresh their knowledge and skills[283](index=283&type=chunk) [Operation of Board Committees](index=39&type=section&id=%E8%91%A3%E4%BA%8B%E5%A7%94%E5%91%98%E4%BC%9A%E8%BF%90%E4%BD%9C) The Board has established an Audit Committee, a Remuneration Committee, and a Nomination Committee, each with clear written terms of reference and adequate resources; the Audit Committee reviews financial statements and oversees internal controls; the Remuneration Committee advises on remuneration policies; and the Nomination Committee reviews the Board's structure and assesses independence, adopting a nomination policy to ensure Board diversity - The Audit Committee comprises **three independent non-executive directors**, with Mr. Yu Zhenqiu as Chairman, responsible for reviewing financial statements, external auditor's reports, and overseeing internal control and risk management systems[306](index=306&type=chunk) - The Remuneration Committee comprises **one executive director** and **two independent non-executive directors**, with Mr. Ren Keqiang as Chairman, responsible for advising on the overall remuneration policy and structure for directors and senior management[307](index=307&type=chunk) - The Nomination Committee comprises **one executive director** and **two independent non-executive directors**, with Mr. Wei Anli as Chairman, responsible for reviewing the Board's structure, size, and composition, and assessing the independence of independent non-executive directors[315](index=315&type=chunk) - The nomination policy emphasizes selection criteria including candidates' qualifications, capabilities, work experience, leadership skills, and professional ethics, and seeks to achieve diversity in Board membership[318](index=318&type=chunk)[320](index=320&type=chunk) [Board Diversity Policy](index=44&type=section&id=%E8%91%A3%E4%BA%8B%E4%BC%9A%E6%88%90%E5%91%98%E5%A4%9A%E5%85%83%E5%8C%96%E6%94%BF%E7%AD%96) The Company has adopted a Board Diversity Policy aimed at achieving diversity through objective criteria and merit-based principles; measurable objectives include at least 1/3 independent non-executive directors, at least one independent non-executive director with accounting professional qualifications, and at least half of the Board members having over 7 years of professional industry experience; these objectives were met in 2020 - The Board Diversity Policy aims to achieve diversity through merit-based principles and objective criteria, considering factors such as gender, age, cultural and educational background, ethnicity, professional experience, skills, knowledge, and length of service[335](index=335&type=chunk)[336](index=336&type=chunk) - Measurable objectives include: at least **1/3** of Board members must be independent non-executive directors; at least **one** independent non-executive director must possess accounting or relevant financial management professional qualifications; and at least **half** of Board members must have **7 years or more** of experience in their professional industry[336](index=336&type=chunk) - The Nomination Committee believes that the Board achieved the measurable objectives set for implementing the Board Diversity Policy in **2020**[336](index=336&type=chunk) [Financial Reporting and Internal Control Systems](index=45&type=section&id=%E8%B4%A2%E5%8A%A1%E7%94%B3%E6%8A%A5%E5%8F%8A%E5%86%85%E9%83%A8%E7%9B%91%E6%8E%A7%E5%88%B6%E5%BA%A6) The Board is responsible for preparing financial statements in accordance with International Financial Reporting Standards and ensuring the effectiveness of risk management and internal control systems; the company has an internal audit function that regularly reviews the effectiveness of risk management and internal controls; furthermore, the company has established policies for handling and disseminating inside information - The Board confirms its responsibility to prepare the Group's consolidated financial statements in accordance with International Financial Reporting Standards and to ensure the effectiveness of risk management and internal control systems[342](index=342&type=chunk)[343](index=343&type=chunk) - Internal control and risk management procedures cover operational, financial, legal, and market risks, and an internal audit function is in place to assess their effectiveness[343](index=343&type=chunk)[346](index=346&type=chunk) - The Company has established policies for handling and disseminating inside information, providing guidance to directors, senior officers, and relevant employees[347](index=347&type=chunk) [Shareholders' Rights and Investor Relations](index=46&type=section&id=%E8%82%A1%E4%B8%9C%E6%9D%83%E5%88%A9%E5%8F%8A%E6%8A%95%E8%B5%84%E8%80%85%E5%85%B3%E7%B3%BB) Shareholders holding not less than 10% of the paid-up share capital with voting rights may request an extraordinary general meeting and submit written inquiries to the Board; the company communicates with shareholders and investors through multiple channels, including annual general meetings, annual and interim reports, announcements, circulars, and the company website - One or more shareholders holding not less than **one-tenth** of the paid-up share capital of the Company carrying the right to vote at general meetings may request the directors to convene an extraordinary general meeting[353](index=353&type=chunk) - Shareholders and investors may mail written inquiries to the Company's principal place of business in Hong Kong or email them to ir@hbsgt.com[354](index=354&type=chunk) - The Company has established multiple communication channels, including annual general meetings, annual and interim reports, announcements, circulars, and the company website[355](index=355&type=chunk) Environmental, Social and Governance Report [About This Report](index=48&type=section&id=%E5%85%B3%E4%BA%8E%E6%9C%AC%E6%8A%A5%E5%91%8A) This Environmental, Social and Governance Report outlines the Group's principles of corporate social responsibility and sustainable development philosophy for the 2020 fiscal year, covering the environmental and social performance of all major subsidiaries; the report is prepared in accordance with the Environmental, Social and Governance Reporting Guide set out in Appendix 27 of the Listing Rules, and emphasizes communication with key stakeholders such as shareholders, government, employees, customers, business partners, and the community - This report outlines the Group's principles of corporate social responsibility and sustainable development philosophy for the year ended December 31, 2020[360](index=360&type=chunk) - The report covers the overall environmental and social performance of all major subsidiaries of the Group, with primary data sourced from Hebei Ruifeng Power Cylinder Block Co., Ltd[360](index=360&type=chunk)[362](index=362&type=chunk) - The report is prepared in accordance with the Environmental, Social and Governance Reporting Guide set out in Appendix 27 of the Listing Rules[363](index=363&type=chunk) - The Group has identified key stakeholders, including shareholders, government and regulatory authorities, employees, business partners, the public, and the community, and actively exchanges information with them[369](index=369&type=chunk) [Environmental Management](index=51&type=section&id=%E7%8E%AF%E5%A2%83%E7%AE%A1%E7%90%86) The Group is committed to reducing the potential adverse environmental impact of its production, implementing measures such as installing dust purification devices, developing cutting fluid treatment systems, and adopting lost foam casting lines; in 2020, hazardous waste decreased by 16.2%; total electricity and water consumption increased by 17.0% and 20.5% respectively, partly due to disinfection measures during the pandemic; the Group strictly complies with environmental laws and regulations and has obtained ISO14001 certification - The Group installed dust purification and collection devices, developed cutting fluid treatment devices (recyclable for reuse), and adopted self-developed lost foam casting lines to reduce environmental impact[372](index=372&type=chunk) - Hazardous waste decreased from approximately **1.91 tonnes** in 2019 to approximately **1.60 tonnes** in 2020, a reduction of approximately **16.2%**[374](index=374&type=chunk) Hebei Ruifeng Total Electricity Consumption and Carbon Emissions for 2019 and 2020 | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Electricity Consumption (MWh) | 58,623.0 | 50,089.0 | | Carbon Emissions (tonnes) | 45,715.0 | 39,060.0 | Hebei Ruifeng Total Water Consumption and Carbon Emissions for 2019 and 2020 | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Water Consumption (thousand tonnes) | 54.4 | 45.2 | | Carbon Emissions (tonnes) | 22.3 | 18.5 | - From 2019 to 2020, total electricity consumption and total water consumption increased by approximately **17.0%** and **20.5%** respectively, with the rise in total water consumption mainly due to encouraging regular disinfection for employees after resuming work[392](index=392&type=chunk) - The Group strictly complies with laws and regulations such as the Energy Conservation Law, Air Pollution Prevention and Control Law, and Water Pollution Prevention and Control Law of the People's Republic of China, and has introduced the international environmental management system certification **ISO14001**[392](index=392&type=chunk)[393](index=393&type=chunk) [Social and Employee Management](index=54&type=section&id=%E7%A4%BE%E4%BC%9A%E4%B8%8E%E9%9B%87%E5%91%98%E7%AE%A1%E7%90%86) As of the end of 2020, the Group had 760 employees, with 550 in the production department; the company offers competitive compensation and benefits and regular training, but some employees' social insurance and housing provident fund contributions were underpaid; in 2020, employee turnover decreased to 6.3%, and average training hours increased; the company prioritizes occupational health and safety, with no major accidents, and strictly adheres to fair recruitment and labor standards, prohibiting child and forced labor Number of Full-time Employees by Function as of December 31, 2020 | Function | Number | | :--- | :--- | | Directors and Senior Management | 15 | | R&D | 31 | | Production | 550 | | Procurement | 13 | | Sales and Marketing | 20 | | Quality Control | 18 | | Finance | 9 | | Administration and Support | 73 | | **Total** | **760** | - The Group failed to fully pay social insurance contributions for some employees and did not register housing provident fund accounts or fully pay housing provident fund contributions[410](index=410&type=chunk) - For the year ended December 31, 2020, the employee turnover rate decreased to **6.3%** (2019: 13.2%)[411](index=411&type=chunk)[412](index=412&type=chunk) - Average training hours per employee increased from **92 hours** in 2019 to **116 hours** in 2020[416](index=416&type=chunk) - No major accidents occurred in the Group's production processes, nor were there any claims for personal injury or property damage[413](index=413&type=chunk) - The Group strictly complies with labor laws and regulations, strictly prohibits the employment of child labor and forced labor, and adheres to fair, open, and just recruitment principles[417](index=417&type=chunk)[418](index=418&type=chunk)[419](index=419&type=chunk) [Supply Chain Management and Quality Control](index=58&type=section&id=%E4%BE%9B%E5%BA%94%E9%93%BE%E7%AE%A1%E7%90%86%E5%8F%8A%E8%B4%A8%E9%87%8F%E6%8E%A7%E5%88%B6) The Group maintains solid relationships with key clients and manages its supply chain through diversified procurement (at least three suppliers for each major raw material); the company implements stringent quality control measures covering raw materials, production processes, and finished product inspection, and has obtained ISO/TS 16949 certification; in 2020, no significant claims or product recalls due to product liability occurred - The Group has established solid relationships with major clients, primarily large automobile manufacturers and engine manufacturers in China[422](index=422&type=chunk) - The Group's policy is to procure each major raw material and key component from at least **three different suppliers** to avoid reliance on a single supplier[423](index=423&type=chunk) - The Group implements various quality control, inspection, and testing procedures throughout the entire production process, and has a Quality Control Department comprising **51 quality control inspectors**[424](index=424&type=chunk) - Production facilities have been **ISO/TS 16949 certified** since **2012**, with current validity until **2021**[430](index=430&type=chunk) - During the reporting period, the Group did not face any significant claims due to product liability, nor did it recall products for safety and health reasons[430](index=430&type=chunk) [Intellectual Property, Data Protection, and Anti-Corruption](index=59&type=section&id=%E7%9F%A5%E8%AF%86%E4%BA%A7%E6%9D%83%E3%80%81%E8%B5%84%E6%96%99%E4%BF%9D%E6%8A%A4%E5%8F%8A%E5%8F%8D%E8%B4%AA%E6%B1%A1) The Group values intellectual property protection, holding 12 Chinese patents and several registered trademarks as of the end of 2020; the company has established confidentiality policies to protect employee privacy and trade secrets, and regulates employee conduct through employee handbooks and whistleblowing policies to prevent bribery, corruption, and other misconduct, with no violations reported during the period - As of December 31, 2020, the Group owned **12 Chinese patents** (11 utility models, 1 invention patent), **2 Chinese registered trademarks**, and **2 Hong Kong registered trademarks**[434](index=434&type=chunk) - The Group has established a confidentiality policy, prohibiting all employees from disclosing any confidential information, and ensuring data security through access controls[433](index=433&type=chunk) - The Group's employee handbook regulates employee conduct regarding conflicts of interest, bribery, corruption, and other misconduct, and implements an effective whistleblowing policy[435](index=435&type=chunk) - During the reporting period, there were no violations of bribery and corruption-related laws and regulations[435](index=435&type=chunk) [Community Engagement](index=60&type=section&id=%E7%A4%BE%E5%8C%BA%E5%8F%82%E4%B8%8E) The Group actively fulfills its corporate social responsibility, organizing employees to participate in employee medical mutual aid activities and anti-epidemic efforts during the COVID-19 outbreak in China in 2020 - The Group organized employees to participate in employee medical mutual aid activities and anti-epidemic efforts to fulfill its corporate social responsibility[436](index=436&type=chunk) Independent Auditor's Report [Opinion and Basis for Opinion](index=61&type=section&id=%E6%84%8F%E8%A7%81%E5%8F%8A%E6%84%8F%E8%A7%81%E5%9F%BA%E5%87%86) KPMG issued an unmodified opinion on Refeng Power Group Co., Ltd.'s consolidated financial statements for the year ended December 31, 2020, deeming them to present a true and fair view of the Group's financial position, performance, and cash flows in accordance with International Financial Reporting Standards and to comply with the disclosure requirements of the Hong Kong Companies Ordinance - KPMG issued an **unmodified opinion** on the consolidated financial statements[438](index=438&type=chunk) - The consolidated financial statements present a true and fair view of the Group's consolidated financial position as of December 31, 2020, and its consolidated financial performance and consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards[438](index=438&type=chunk) - The audit was conducted in accordance with Hong Kong Standards on Auditing, and the auditor is independent of the Group and has fulfilled professional ethical responsibilities[439](index=439&type=chunk) [Key Audit Matters](index=61&type=section&id=%E5%85%B3%E9%94%AE%E5%AE%A1%E6%A0%B8%E4%BA%8B%E9%A1%B9) The auditor identified two key audit matters: the timing of revenue recognition and the loss allowance for trade receivables; revenue recognition is critical due to diverse sales contract terms and the risk of manipulation, while loss allowance is critical due to its materiality and the subjectivity of management's judgment; the auditor performed detailed audit procedures on these matters - Key audit matters include the timing of revenue recognition, as revenue is a key performance indicator for the Group, and there is a potential risk of manipulation and non-compliance with specific terms of sales contracts[444](index=444&type=chunk) - Key audit matters include the loss allowance for trade receivables, as it is material to the Group, and the recognition of expected credit losses is inherently subjective, requiring significant management judgment[446](index=446&type=chunk) [Directors' and Auditor's Responsibilities](index=64&type=section&id=%E8%91%A3%E4%BA%8B%E5%8F%8A%E6%A0%B8%E6%95%B0%E5%B8%88%E8%B4%A3%E4%BB%BB) Directors are responsible for preparing true and fair consolidated financial statements in accordance with International Financial Reporting Standards and implementing necessary internal controls; the auditor's responsibility is to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to exercise professional judgment and skepticism in performing audit procedures - Directors are responsible for preparing consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards and the disclosure requirements of the Hong Kong Companies Ordinance, and for implementing necessary internal controls[450](index=450&type=chunk) - The auditor's objective is to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error[451](index=451&type=chunk) - The auditor exercises professional judgment and maintains professional skepticism throughout the audit, identifies and assesses risks of material misstatement, and obtains sufficient and appropriate audit evidence[455](index=455&type=chunk) Consolidated Statement of Profit or Loss and Other Comprehensive Income [2020 Consolidated Performance](index=67&type=section&id=2020%E5%B9%B4%E5%BA%A6%E7%BB%BC%E5%90%88%E4%B8%9A%E7%BB%A9) The Group's revenue for 2020 was RMB 433.5 million, and gross profit was RMB 106.5 million; profit attributable to equity holders of the Company for the year was RMB 33.6 million, with basic and diluted earnings per share of RMB 0.042; other comprehensive income for the year was negative RMB 2.024 million, resulting in a total comprehensive income attributable to equity holders of the Company of RMB 31.576 million for the year Consolidated Statement of Profit or Loss and Other Comprehensive Income (RMB in thousands) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Revenue | 433,475 | 355,049 | | Cost of Sales | (326,983) | (269,369) | | Gross Profit | 106,492 | 85,680 | | Other Income | 21,989 | 39,658 | | Selling Expenses | (12,156) | (10,929) | | Administrative Expenses | (53,705) | (56,740) | | Impairment Loss on Trade Receivables | (15,587) | (12,044) | | Operating Profit | 47,033 | 45,625 | | Finance Costs | (7,501) | (10,660) | | Profit Before Tax | 39,532 | 34,965 | | Income Tax | (5,932) | (4,850) | | **Profit for the Year Attributable to Equity Holders of the Company** | **33,600** | **30,115** | | Basic and Diluted Earnings Per Share (RMB) | 0.042 | 0.038 | | Other Comprehensive Income for the Year (after tax) | (2,024) | 4,039 | | **Total Comprehensive Income for the Year Attributable to Equity Holders of the Company** | **31,576** | **34,154** | Consolidated Statement of Financial Position [Consolidated Financial Position as of Year-End 2020](index=69&type=section&id=2020%E5%B9%B4%E6%9C%AB%E7%BB%BC%E5%90%88%E8%B4%A2%E5%8A%A1%E7%8A%B6%E5%86%B5) As of December 31, 2020, the Group's non-current assets were RMB 835.2 million, and current assets were RMB 605.4 million; current liabilities were RMB 427.7 million, and non-current liabilities were RMB 54.7 million; net assets amounted to RMB 958.3 million, and total equity was RMB 958.3 million Consolidated Statement of Financial Position (RMB in thousands) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | **Non-current Assets** | | | | Property, Plant and Equipment | 710,157 | 671,419 | | Right-of-use Assets | 111,458 | 113,753 | | Deferred Tax Assets | 13,624 | 12,173 | | **Total Non-current Assets** | **835,239** | **797,345** | | **Current Assets** | | | | Inventories | 197,094 | 161,239 | | Trade and Other Receivables | 375,851 | 304,231 | | Prepaid Income Tax | 6,171 | 7,247 | | Cash and Cash Equivalents | 26,318 | 49,283 | | **Total Current Assets** | **605,434** | **522,000** | | **Current Liabilities** | | | | Trade and Other Payables | 265,433 | 194,429 | | Bank Loans | 160,000 | 120,920 | | Lease Liabilities | 236 | 67 | | Warranty Provisions | 2,001 | 1,809 | | **Total Current Liabilities** | **427,670** | **317,225** | | **Net Current Assets** | **177,764** | **204,775** | | **Total Assets Less Current Liabilities** | **1,013,003** | **1,002,120** | | **Non-current Liabilities** | | | | Deferred Income | 46,993 | 54,019 | | Lease Liabilities | 88 | - | | Warranty Provisions | 2,542 | 2,926 | | Deferred Tax Liabilities | 5,121 | 4,857 | | **Total Non-current Liabilities** | **54,744** | **61,802** | | **Net Assets** | **958,259** | **940,318** | | **Capital and Reserves** | | | | Share Capital | 66,425 | 66,425 | | Reserves | 891,834 | 873,893 | | **Total Equity** | **958,259** | **940,318** | Consolidated Statement of Changes in Equity [2020 Changes in Equity](index=71&type=section&id=2020%E5%B9%B4%E5%BA%A6%E6%9D%83%E7%9B%8A%E5%8F%98%E5%8A%A8) The Group's total equity increased from RMB 940.3 million at the beginning of 2020 to RMB 958.3 million at year-end; key changes included a profit for the year of RMB 33.6 million, an interim dividend declared of RMB 13.6 million, and a negative movement in exchange fluctuation reserve Consolidated Statement of Changes in Equity (RMB in thousands) | Metric | Share Capital | Share Premium | Statutory Reserve | Exchange Fluctuation Reserve | Retained Profits | Total Equity | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Balance as at January 1, 2019** | **66,425** | **149,670** | **21,384** | **6,449** | **662,236** | **906,164** | | Profit for the year 2019 | - | - | - | - | 30,115 | 30,115 | | Other comprehensive income for the year 2019 | - | - | - | 4,039 | - | 4,039 | | Transfer to reserves 2019 | - | - | 3,624 | - | (3,624) | - | | **Balance as at December 31, 2019 and January 1, 2020** | **66,425** | **149,670** | **25,008** | **10,488** | **688,727** | **940,318** | | Profit for the year 2020 | - | - | - | - | 33,600 | 33,600 | | Other comprehensive income for the year 2020 | - | - | - | (2,024) | - | (2,024) | | Transfer to reserves 2020 | - | - | 3,711 | - | (3,711) | - | | Interim dividend declared 2020 | - | - | - | - | (13,635) | (13,635) | | **Balance as at December 31, 2020** | **66,425** | **136,035** | **28,719** | **8,464** | **718,616** | **958,259** | Consolidated Statement of Cash Flows [2020 Cash Flows](index=72&type=section&id=2020%E5%B9%B4%E5%BA%A6%E7%8E%B0%E9%87%91%E6%B5%81%E9%87%8F) The Group generated net cash of RMB 61.5 million from operating activities, used net cash of RMB 102.3 million in investing activities, and generated net cash of RMB 17.7 million from financing activities in 2020; the combined effect resulted in a net decrease of RMB 23.1 million in cash and cash equivalents, with a year-end balance of RMB 26.3 million Consolidated Statement of Cash Flows (RMB in thousands) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Net cash generated from operating activities | 61,459 | 104,598 | | Net cash used in investing activities | (102,281) | (123,835) | | Net cash generated from / (used in) financing activities | 17,690 | (100,137) | | Net decrease in cash and cash equivalents | (23,132) | (119,374) | | Cash and cash equivalents at beginning of year | 49,283 | 170,036 | | Effect of exchange rate changes | 167 | (1,379) | | **Cash and cash equivalents at end of year** | **26,318** | **49,283** | Notes to the Financial Statements [Company Information](index=74&type=section&id=%E5%85%AC%E5%8F%B8%E8%B5%84%E6%96%99) Refeng Power Group Co., Ltd. was incorporated in the Cayman Islands in 2017, listed on the Hong Kong Stock Exchange in 2018, and primarily engages in the design, manufacture, and sale of cylinder blocks and cylinder heads - The Company was incorporated in the Cayman Islands on **May 2, 2017**, and its shares were listed on the Main Board of The Stock Exchange of Hong Kong Limited on **January 5, 2018**[723](index=723&type=chunk) - The Group is principally engaged in the design, manufacture, and sale of cylinder blocks and cylinder heads[723](index=723&type=chunk) [Significant Accounting Policies](index=74&type=section&id=%E9%87%8D%E5%A4%A7%E4%BC%9A%E8%AE%A1%E6%94%BF%E7%AD%96) The Group's financial statements are prepared in accordance with International Financial Reporting Standards, measured at historical cost, and involve management's judgments, estimates, and assumptions; amendments to International Financial Reporting Standards effective for the current year or early adopted had no material impact on the Group's financial statements; the notes detail accounting policies for subsidiaries, property, plant and equipment, right-of-use assets, R&D expenses, credit losses and impairment of assets, inventories, contract costs, receivables, cash, payables, borrowings, employee benefits, income tax, provisions, revenue and other income, foreign currency translation, borrowing costs, related parties, and segment reporting - The financial statements are prepared in accordance with all applicable International Financial Reporting Standards and comply with the disclosure requirements of the Hong Kong Companies Ordinance[724](index=724&type=chunk) - The financial statements are prepared on a historical cost basis, and their preparation involves management's judgments, estimates, and assumptions[725](index=725&type=chunk) - Amendments to International Financial Reporting Standards effective for the first time in the current accounting period or early adopted had no material impact on the Group's results and financial position[728](index=728&type=chunk) - Revenue is recognized when control over products or services is transferred to the customer at the agreed consideration that the Group expects to be entitled to[788](index=788&type=chunk) - Government grants are recognized when there is reasonable assurance that the Group will receive the funds and comply with the attached conditions; grants compensating for asset costs are recognized as deferred income and amortized[794](index=794&type=chunk) [Accounting Judgments and Estimates](index=90&type=section&id=%E4%BC%9A%E8%AE%A1%E5%88%A4%E6%96%AD%E5%8F%8A%E4%BC%B0%E8%AE%A1) In preparing its financial statements, the Group made significant judgments and estimates in key areas such as impairment losses on non-current assets, expected credit losses on trade receivables, recognition of deferred tax assets, depreciation of property, plant and equipment, and warranty provisions; these estimates are based on past experience and forecasts of future economic conditions, and changes in them could significantly impact future financial performance - The determination of impairment losses on non-current assets requires significant judgment regarding revenue levels and operating cost amounts[803](index=803&type=chunk) - The measurement of expected credit losses on trade receivables is inherently subjective, requiring significant management judgment[804](index=804&type=chunk) - The recognition of deferred tax assets involves multiple assumptions regarding the Group's future operating results, requiring significant management judgment[805](index=805&type=chunk) - The estimated useful lives and residual values of property, plant and equipment are reviewed annually, and changes will affect depreciation expenses in future years[819](index=819&type=chunk) - Warranty provisions are made based on recent claims experience, and their increase or decrease will affect profit or loss in future years[820](index=820&type=chunk) [Revenue and Segment Reporting](index=91&type=section&id=%E6%94%B6%E5%85%A5%E5%8F%8A%E5%88%86%E9%83%A8%E6%8A%A5%E5%91%8A) The Group's revenue in 2020 was RMB 433.5 million, primarily from the sales of cylinder blocks, cylinder heads, and auxiliary cylinder block components; cylinder block sales revenue was RMB 342.8 million, and cylinder head sales were RMB 84.5 million; the Group's top five clients accounted for approximately 80.9% of total revenue, with the largest client accounting for 34.0%; the Group is divided into three reportable segments by product type: cylinder blocks, cylinder heads, and auxiliary cylinder block components, with the vast majority of revenue and operating assets located in China Revenue from Customer Contracts by Major Product (RMB in thousands) | Product Type | 2020 | 2019 | | :--- | :--- | :--- | | Sales of cylinder blocks | 342,774 | 278,538 | | Sales of cylinder heads | 84,546 | 60,319 | | Sales of auxiliary cylinder block components | 6,155 | 16,192 | | **Total** | **433,475** | **355,049** | - Revenue from the Group's largest client and top five clients accounted for approximately **34.0%** and **80.9%** respectively of the Group's total sales revenue[831](index=831&type=chunk) - The Group manages its business by product type, divided into three reportable segments: cylinder blocks, cylinder heads, and auxiliary cylinder block components[832](index=832&type=chunk)[833](index=833&type=chunk)[834](index=834&type=chunk) - The vast majority of the Group's revenue is generated from sales to customers in China, and the vast majority of its operating assets are located in China[897](index=897&type=chunk) [Other Income](index=94&type=section&id=%E5%85%B6%E4%BB%96%E6%94%B6%E7%9B%8A) The Group's other income in 2020 was RMB 21.989 million, a significant decrease of 44.6% from RMB 39.658 million in 2019, primarily due to reduced government grants Other Income (RMB in thousands) | Item | 2020 | 2019 | | :--- | :--- | :--- | | Government grants | 21,544 | 36,686 | | Interest income | 182 | 1,700 | | Net (loss) / gain on disposal of property, plant and equipment | (37) | 79 | | Others | 300 | 1,193 | | **Total** | **21,989** | **39,658** | - The decrease in other income was primarily due to a reduction in government grants[159](index=159&type=chunk) [Profit Before Tax](index=94&type=section&id=%E7%A8%8E%E5%89%8D%E5%88%A9%E6%B6%A6) The Group's profit before tax in 2020 was RMB 39.532 million; finance costs were RMB 7.501 million, mainly bank loan interest; total staff costs were RMB 61.9 million, with defined contribution retirement scheme contributions significantly reduced due to COVID-19 exemptions; other items such as depreciation expenses, impairment losses on trade receivables, and R&D costs are also presented - Profit before tax in 2020 was **RMB 39,532 thousand** (2019: RMB 34,965 thousand)[934](index=934&type=chunk)[935](index=935&type=chunk) Finance Costs (RMB in thousands) | Item | 2020 | 2019 | | :--- | :--- | :--- | | Interest on bank loans | 6,186 | 10,588 | | Bank charges and others | 1,295 | 48 | | Interest on lease liabilities | 20 | 24 | | **Total** | **7,501** | **10,660** | Staff Costs (RMB in thousands) | Item | 2020 | 2019 | | :--- | :--- | :--- | | Salaries, wages and other benefits | 61,584 | 58,913 | | Contributions to defined contribution retirement schemes | 316 | 4,593 | | **Total** | **61,900** | **63,506** | - In 2020, most of the defined contribution retirement scheme liabilities were exempted by local government authorities, with an exemption amount of approximately **RMB 3,293 thousand**[910](index=910&type=chunk) Other Items (RMB in thousands) | Item | 2020 | 2019 | | :--- | :--- | :--- | | Depreciation expenses – owned property, plant and equipment | 62,712 | 62,639 | | Depreciation expenses – right-of-use assets | 2,810 | 2,834 | | Impairment loss on trade receivables | 15,587 | 12,044 | | Research and development costs | 16,059 | 13,370 | | Cost of inventories | 326,983 | 269,369 | [Income Tax in the Consolidated Statement of Profit or Loss](index=96&type=section&id=%E7%BB%BC%E5%90%88%E6%8D%9F%E7%9B%8A%E8%A1%A8%E5%86%85%E7%9A%84%E6%89%80%E5%BE%97%E7%A8%8E) The Group's income tax expense in 2020 was RMB 5.932 million, an increase from 2019, primarily due to a withholding tax provision for retained profits to be distributed by a subsidiary; Chinese subsidiaries are subject to a 25% corporate income tax rate, with one high-tech enterprise enjoying a preferential rate of 15% and additional tax deductions for R&D costs Income Tax in the Consolidated Statement of Profit or Loss (RMB in thousands) | Item | 2020 | 2019 | | :--- | :--- | :--- | | Current tax – China corporate income tax | 7,119 | 6,805 | | Deferred tax | (1,187) | (1,955) | | **Total** | **5,932** | **4,850** | - The increase in income tax expense was primarily due to a withholding tax provision for retained profits to be distributed by a subsidiary for the year ended December 31, 2020[164](index=164&type=chunk) - The Group's subsidiaries established in China are subject to China corporate income tax at a rate of **25%**[953](index=953&type=chunk) - One subsidiary was approved as a high-tech enterprise, enjoying a preferential tax rate of **15%** and an additional **75%** tax deduction for eligible R&D costs[954](index=954&type=chunk) - A deferred tax liability of **RMB 5.121 million** (at a 10% withholding tax rate) has been provided for retained profits of approximately **RMB 51.2 million** of Hebei Ruifeng Power Cylinder Block Co., Ltd[955](index=955&type=chunk) [Directors' Emoluments](index=98&type=section&id=%E8%91%A3%E4%BA%8B%E9%85%AC%E9%87%91) The Group's total directors' emoluments in 2020 amounted to RMB 1.604 million, comprising directors' fees, salaries, allowances and benefits in kind, and discretionary bonuses; independent non-executive directors only received directors' fees; no directors waived remuneration during the year, nor were any emoluments paid as joining or leaving incentives Directors' Emoluments (RMB in thousands) | Director's Name | Directors' fees | Salaries, allowances and benefits in kind | Discretionary bonuses | Retirement scheme contributions | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | **2020** | | | | | | | Mr. Meng Lianzhou | 40 | 326 | 40 | - | 406 | | Mr. Liu Zhanwen | 40 | 183 | 28 | - | 251 | | Mr. Zhang Yuexuan | 40 | 291 | 40 | - | 371 | | Mr. Liu Enwang | 40 | 184 | 40 | - | 264 | | Mr. Ren Keqiang | 104 | - | - | - | 104 | | Mr. Yu Zhenqiu | 104 | - | - | - | 104 | | Mr. Wei Anli | 104 | - | - | - | 104 | | **Total** | **472** | **984** | **148** | **-** | **1,604** | | **2019** | | | | | | | Mr. Meng Lianzhou | 40 | 287 | 78 | - | 405 | | Mr. Liu Zhanwen | 40 | 144 | 31 | - | 215 | | Mr. Zhang Yuexuan | 40 | 256 | 66 | - | 362 | | Mr. Liu Enwang | 40 | 151 | 46 | - | 243 | | Mr. Ren Keqiang | 106 | - | - | - | 106 | | Mr. Yu Zhenqiu | 106 | - | - | - | 106 | | Mr. Wei Anli | 106 | - | - | - | 106 | | **Total** | **478** | **838** | **221** | **6** | **1,543** | - During the year, the Group did not pay any emoluments to directors as an inducement to join or upon joining the Group, or as compensation for loss of office; there were no arrangements for any director to waive or agree to waive any emoluments during the year[1069](index=1069&type=chunk) [Five Highest Paid Individuals](index=99&type=section&id=%E6%9C%80%E9%AB%98%E9%85%AC%E9%87%91%E4%BA%BA%E5%A3%AB) Among the Group's five highest-paid individuals, one was a director in 2020 (two in 2019); the total emoluments for the remaining four non-director individuals amounted to RMB 2.271 million - Among the five highest-paid individuals, one (2019: two) was a director[1070](index=1070&type=chunk) Total Emoluments of Non-Director Highest Paid Individuals (RMB in thousands) | Item | 2020 | 2019 | | :--- | :--- | :--- | | Salaries and other emoluments | 2,271 | 1,485 | [Basic and Diluted Earnings Per Share](index=99&type=section&id=%E6%AF%8F%E8%82%A1%E5%9F%BA%E6%9C%AC%E5%8F%8A%E6%91%8A%E8%96%84%E7%9B%88%E5%88%A9) The Group's basic earnings per share for 2020 was RMB 0.042, calculated based on a profit for the year of RMB 33.6 million and 800 million weighted average ordinary shares; as there were no potential dilutive shares, diluted earnings per share were identical to basic earnings per share - Basic earnings per share were calculated based on the profit for the year attributable to equity holders of the Company of **RMB 33,600,000** and the weighted average number of ordinary shares in issue of **800,000,000 shares**, amounting to **RMB 0.042**[1070](index=1070&type=chunk) - As the Company had no issued potential dilutive shares for the years ended December 31, 2020 and 2019, there was no difference between basic and diluted earnings per share[1071](index=1071&type=chunk) [Property, Plant and Equipment](index=100&type=section&id=%E7%89%A9%E4%B8%9A%E3%80%81%E5%8E%82%E6%88%BF%E5%8F%8A%E8%AE%BE%E5%A4%87) The Group's property, plant and equipment are primarily located in China, with additions of approximately RMB 102.8 million in 2020; as of December 31