Financial Performance - LX Technology Group Limited reported a revenue increase of 25% year-over-year, reaching HKD 500 million for the fiscal year 2024[1]. - The company reported a net profit of HKD 100 million, representing a 10% increase compared to the previous year[1]. - The company's revenue for the year was RMB 2,371.7 million, representing a 32.3% increase from approximately RMB 1,793.1 million in the same period of 2023[15]. - Revenue from the equipment recycling business was approximately RMB 1,835.7 million, an increase of about 42.7% compared to approximately RMB 1,286.4 million in 2023[22]. - Total revenue for the year ended December 31, 2024, was approximately RMB 2,371.7 million, an increase of about 32.3% compared to RMB 1,793.1 million in 2023[31]. - The company's gross profit for the year was approximately RMB 196.4 million, an increase of about 33.0% compared to RMB 147.6 million in 2023, attributed to the successful turnaround of the equipment recovery business[39]. - The gross margin improved slightly from approximately 8.2% in 2023 to about 8.3% in the current year[39]. - The company recorded a net loss of approximately RMB 58.3 million, a reduction from a net loss of about RMB 131.0 million in the previous year, mainly due to increased gross profit and strategic control of expenses[50]. - Adjusted EBITDA increased by approximately 17.6% from about RMB 241.0 million in 2023 to approximately RMB 283.4 million this year[52]. User Growth and Market Expansion - User data indicated a growth in active users by 40%, totaling 1.2 million users by the end of 2024[1]. - The company plans to launch three new products in the next fiscal year, targeting a market expansion of 15% in the Asia-Pacific region[1]. - Future guidance estimates a revenue growth of 20% for the next fiscal year, projecting revenues of approximately HKD 600 million[1]. - The company aims to enhance product offerings and expand market reach to meet evolving customer demands and maintain long-term growth[30]. Research and Development - LX Technology Group Limited is investing HKD 50 million in R&D for new technologies aimed at enhancing product offerings[1]. - The company aims to strengthen its capabilities in automation, data analysis, and AI-driven solutions to improve operational efficiency[21]. - The integrated AI tool introduced by the company enhances internal processes and workflow management, reducing contract risks and improving development efficiency[21]. - The company launched AI-driven dedicated servers to enhance performance and efficiency, supporting digital transformation for enterprises[16]. Corporate Governance - The company has a governance report prepared for the fiscal year ending December 31, 2024, indicating a commitment to corporate governance practices[91]. - The board consists of seven members, including three executive directors, one non-executive director, and three independent non-executive directors[97]. - The company has adopted a comprehensive code of conduct for securities trading, ensuring all directors strictly comply with the regulations[94]. - The independent non-executive directors exceed one-third of the board, ensuring compliance with listing rules[99]. - The company aims to enhance its corporate governance practices and ensure adherence to the corporate governance code[93]. Employee and Human Resources - As of December 31, 2024, the company had 970 full-time employees, a decrease from 1,143 employees as of December 31, 2023, due to strategic human resource optimization[71]. - Employee compensation (excluding director remuneration) for the year was approximately RMB 193.8 million, compared to RMB 192.1 million for the year ended December 31, 2023[71]. - The company encourages gender diversity in the workplace and aims to maintain the current gender ratio among employees[120]. - The board consists of seven members, with one female director, achieving gender diversity at the board level[117]. Risk Management - The company has established a risk management internal audit mechanism to oversee and evaluate risk management and internal controls[124]. - The board is responsible for the effectiveness of the risk management and internal control systems, which are reviewed at least annually[128]. - A risk control system model has been developed to assess customer creditworthiness and potential risks, integrating online smart credit evaluation and offline manual assistance[126]. Shareholder Communication - The company emphasizes effective communication with shareholders through various channels, including annual meetings and performance announcements[132]. - The company regularly updates its website to provide shareholders with the latest information on recent developments[132]. - The board is committed to reviewing and improving communication policies to safeguard shareholder interests[138]. Sustainability and ESG Initiatives - LX Technology Group Limited is committed to ESG initiatives, allocating 5% of its budget towards sustainability projects[1]. - The company continues to focus on sustainable development and circular economy principles as core business values[16]. Financial Risks and Borrowings - The company’s bank borrowings increased to RMB 531.2 million in 2024 from RMB 455.0 million in 2023, reflecting a rise of about 16.7%[65]. - The company has established a team to determine credit limits and monitor trade and lease receivables to mitigate credit risk[127]. - The group faces financial risks that could impact its business performance, which are detailed in the financial statements[151].

Core Viewpoint - Lingxiong Technology, the first stock in China's DaaS industry, reported a revenue of approximately 2.372 billion RMB for 2024, marking a year-on-year growth of about 32.3%, and continues to lead the industry for several consecutive years [1] Group 1: Financial Performance - Revenue for 2024 reached approximately 2.372 billion RMB, a year-on-year increase of about 32.3% [1] - Gross profit increased significantly by 33% to approximately 196 million RMB [1] - Adjusted EBITDA grew by 17.6% to approximately 283 million RMB [1] - The equipment recycling business revenue rose by 42.7% to approximately 1.836 billion RMB [3] - Equipment subscription service revenue increased by 9.1% to approximately 380 million RMB [3] - Gross margin for equipment subscription services improved to about 24.6% [7] Group 2: Business Model and Market Position - Lingxiong Technology is recognized as the largest enterprise-level DaaS provider in China, demonstrating resilience through its DaaS business model [1][2] - The DaaS service model can reduce initial investment by 97.4% compared to traditional methods and lower operational costs by 10% to 30% over three years [3] - The company has maintained its industry-leading position since 2021, with a consistent focus on customer needs and service innovation [4] Group 3: Strategic Initiatives and Innovations - The launch of the Xiaoxiong Ubao APP enhances internal operational efficiency and customer maintenance [7] - The integration of AI technology is expected to significantly improve customer service efficiency and quality [7] - The development of a SaaS-based IT asset management system has been recognized as a high-tech product in Guangdong Province for 2024 [7] Group 4: Industry Outlook - The DaaS market in China is projected to grow significantly, with market penetration expected to rise from about 5% to 10% in the next five years [9] - Government policies promoting equipment updates and green transitions are expected to bolster the DaaS industry [8] - The demand for DaaS services is anticipated to increase as companies seek to reduce costs and improve efficiency [8]

Group 1 - Lingxiong Technology Group Limited, a leading company in the Device as a Service (DaaS) industry, has donated teaching equipment to a primary school in Guangdong Province, marking an important initiative for corporate social responsibility [1][2] - The donation consists of 50 standardized computers and supporting facilities, which were refurbished from second-hand units using advanced IT remanufacturing technology [1][2] - The company has a history of contributing to rural education and digital infrastructure development across various regions in China, leveraging its DaaS service model and IT equipment remanufacturing capabilities [2] Group 2 - The donation event was attended by key figures including the chairman of Lingxiong Technology, highlighting the company's commitment to social engagement and gratitude towards community support [1][2] - Lingxiong Technology, as the parent company of Bear U Rental, has been recognized as a national-level specialized and innovative "little giant" enterprise, emphasizing its significant role in the industry [2] - The initiative aims to enhance educational resources in rural areas and support the broader goal of rural revitalization through technological innovation [2]

Financial Performance - The company's revenue for the year ended December 31, 2024, was approximately RMB 2,371.7 million, an increase of about 32.3% compared to RMB 1,793.1 million for the year ended December 31, 2023[4]. - The net loss for the year was approximately RMB 58.3 million, a decrease of about 55.5% from RMB 131.0 million for the previous year[4]. - Adjusted EBITDA for the year was approximately RMB 283.4 million, an increase of about 17.6% from RMB 241.0 million for the year ended December 31, 2023[4]. - The company's total revenue for the year ended December 31, 2024, was approximately RMB 2,371.7 million, an increase of 32.3% compared to RMB 1,793.1 million in 2023, primarily driven by growth in equipment recovery and subscription services[16]. - The company reported a pre-tax loss of RMB 56,952,000 for 2024, an improvement from a loss of RMB 131,268,000 in 2023[87]. Revenue Breakdown - Revenue from the equipment recycling business was approximately RMB 1,835.7 million, an increase of about 42.7% from RMB 1,286.4 million in the previous year[7]. - Revenue from equipment subscription services was approximately RMB 379.5 million, an increase of about 9.1% from RMB 347.9 million in the previous year[9]. - Equipment recovery revenue increased by 42.7% year-over-year to RMB 1,835.7 million, with sales volume rising approximately 20% from 810,559 units in 2023 to 972,396 units in 2024[17][18]. - The company plans to continue expanding its equipment subscription services, which generated RMB 536,031 thousand in revenue in 2024[73]. Customer Metrics - The number of equipment sold increased by 20.0% to 972,396 units from 810,559 units in the previous year[8]. - The average revenue contribution per recycling customer increased by 6.5% to RMB 692,190 from RMB 649,692 in the previous year[8]. - The number of long-term equipment subscription customers grew from 21,615 in 2023 to 23,818 in 2024, contributing to a total subscription volume increase from 5,744,050 units to 6,175,846 units[19]. Profitability and Costs - The gross profit for the equipment recovery business was approximately RMB 9.8 million, a turnaround from a gross loss of RMB 27.9 million in 2023, with a gross margin of 0.5% compared to a gross loss margin of 2.2%[24]. - The gross profit from equipment subscription services increased from approximately RMB 72.1 million in 2023 to RMB 93.2 million in 2024, with the gross margin rising from 20.7% to 24.6%[25]. - IT technology subscription services saw a decrease in gross profit from approximately RMB 103.5 million in 2023 to RMB 93.4 million in 2024, with the gross margin declining from 65.1% to 59.7%[26]. - Total sales costs for the year were approximately RMB 2,175.3 million, representing about 91.7% of total revenue, compared to 91.8% in 2023[22]. Expenses and Financial Management - Distribution and selling expenses increased by approximately 11.4% to RMB 143.1 million, while the percentage of these expenses relative to revenue decreased from about 7.2% to 6.0%[28]. - Administrative expenses decreased by approximately 8.5% to RMB 93.8 million, with the percentage of these expenses relative to revenue declining from about 5.7% to 4.0%[29]. - R&D expenses decreased by approximately 1.7% from RMB 255 million to RMB 251 million, with R&D expenses as a percentage of revenue dropping from about 1.4% to 1.1%[30]. - Financing costs increased by approximately 13.9% from RMB 418 million to RMB 476 million due to increased borrowing to meet business expansion funding needs[31]. Assets and Liabilities - Current assets increased by approximately 10.5% from RMB 8.09 billion to RMB 8.93 billion, with a current ratio of approximately 1.2 times[40]. - Inventory rose from approximately RMB 790 million to RMB 1.03 billion, driven by increased disposal demand for obsolete IT equipment[42]. - Trade and lease receivables increased significantly from approximately RMB 1.06 billion to RMB 2.56 billion, mainly due to increased sales in the equipment recovery business[43]. - Trade payables decreased from approximately RMB 1.48 billion to RMB 1.07 billion, as more trade payables were settled before the end of the year[45]. Cash Flow and Investments - As of December 31, 2024, bank balances and cash were approximately RMB 295.9 million, down from RMB 416.6 million as of December 31, 2023, due to increased investments in business development[48]. - The company's total bank borrowings amounted to approximately RMB 531.2 million as of December 31, 2024, compared to RMB 455.0 million as of December 31, 2023[49]. - The capital debt ratio increased to 113.0% as of December 31, 2024, from 93.6% as of December 31, 2023[50]. - The company did not engage in any significant investments, acquisitions, or disposals during the year[51]. Dividends and Shareholder Information - The company has not proposed any final dividends for the year, consistent with the previous year[63]. - The weighted average number of ordinary shares for calculating diluted loss per share was 306,927,579 for 2024, compared to 305,378,399 for 2023[87]. Other Financial Metrics - Other income rose from approximately RMB 18.5 million in 2023 to RMB 28.0 million in 2024, mainly due to government funding received of approximately RMB 11.8 million[27]. - The company recorded a tax credit of approximately RMB 55 million for the current year, compared to a tax expense of approximately RMB 25 million for the previous year[32]. - Adjusted net loss (non-IFRS measure) was approximately RMB 305 million, down from approximately RMB 674 million in the previous year[34]. - Adjusted EBITDA (non-IFRS measure) increased by approximately 17.6% from RMB 2.41 billion to RMB 2.83 billion[35].

[Company Information and Definitions](index=3&type=section&id=%E5%85%AC%E5%8F%B8%E8%B3%87%E6%96%99%E8%88%87%E9%87%8B%E7%BE%A9) This section provides essential corporate details and defines key terms used throughout the report for clarity [Company Information](index=3&type=section&id=%E5%85%AC%E5%8F%B8%E8%B3%87%E6%96%99) This section provides basic corporate information for Lingxiong Technology Group Co., Ltd., including board members, committee structures, registered office, principal place of business, share registrar, auditor, principal bankers, and company website - The company's Chairman is Mr. Hu Zuoxiong, who also serves as Chief Executive Officer[20](index=20&type=chunk) - The company's Hong Kong stock code is **2436**[21](index=21&type=chunk) [Definitions](index=5&type=section&id=%E9%87%8B%E7%BE%A9) This section defines key terms used in the report, such as DaaS (Device as a Service), the Group, and the Reporting Period (six months ended June 30, 2024), providing a foundation for understanding the report's content - The reporting period is defined as the six months ended June 30, 2024[26](index=26&type=chunk) - DaaS refers to Device as a Service[23](index=23&type=chunk) [Chairman's Report](index=8&type=section&id=%E4%B8%BB%E5%B8%AD%E5%A0%B1%E5%91%8A) Chairman Hu Zuoxiong reviews the first half of 2024 performance, highlighting significant growth in revenue and gross profit driven by enhanced sales and marketing capabilities, while outlining future strategies including AI integration and continued investment - In the first half of 2024, the Group achieved significant growth in both revenue and gross profit, primarily attributed to strengthened sales and marketing functions[29](index=29&type=chunk) - Industry trends indicate that new technologies like AI and IoT will drive increased demand for efficient and sustainable device full lifecycle management solutions, with Chengdu, Wuhan, Nanjing, and Hangzhou emerging as potential second growth poles for the DaaS market[29](index=29&type=chunk) - Future strategic priorities include continuous investment in sales and marketing capabilities, leveraging synergies from print equipment integration, and incorporating emerging technologies like AI into service offerings[30](index=30&type=chunk) [Management Discussion and Analysis](index=10&type=section&id=%E7%AE%A1%E7%90%86%E5%B1%A4%E8%A8%8E%E8%AB%96%E8%88%87%E5%88%86%E6%9E%90) This section provides an in-depth review of the company's operational performance, financial results, and future strategic outlook for the reporting period [Business Review and Outlook](index=10&type=section&id=%E6%A5%AD%E5%8B%99%E5%9B%9E%E9%A1%A7%E8%88%87%E5%B1%95%E6%9C%9B) In the first half of 2024, the company achieved record half-year revenue of approximately RMB 942.6 million, a 14.6% year-on-year increase, with device recycling business turning profitable and future plans focusing on AI integration - Revenue in the first half of 2024 reached approximately **RMB 942.6 million**, a year-on-year increase of **14.6%**[32](index=32&type=chunk) - The device recycling business significantly improved, turning from a gross loss of approximately **RMB 11.2 million** in the same period last year to a gross profit of approximately **RMB 7.7 million** in the current period[32](index=32&type=chunk) - Future focus will be on investing in AI technology to systematically manage increasing contracts, orders, and inquiries, streamlining processes, and enhancing response speed and service quality[41](index=41&type=chunk) [Device Recycling Business](index=11&type=section&id=%E8%A8%AD%E5%82%99%E5%9B%9E%E6%94%B6%E6%A5%AD%E5%8B%99) The device recycling business generated approximately RMB 681.9 million in revenue during the reporting period, a 17.0% year-on-year increase, with significant growth in devices sold and customer numbers despite a decrease in average revenue per customer Device Recycling Business Key Operating Data | Metric | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Growth Rate | | :--- | :--- | :--- | :--- | | Number of Devices Sold (units) | 449,029 | 341,957 | 31.3% | | Number of Device Recycling Customers | 1,309 | 766 | 70.9% | | Average Revenue per Device Recycling Customer (RMB) | 520,896 | 760,579 | -31.5% | | Average Sales Value (RMB/per device) | 1,472.3 | 1,377.4 | 6.9% | [Device Subscription Services](index=11&type=section&id=%E8%A8%AD%E5%82%99%E8%A8%82%E9%96%B1%E6%9C%8D%E5%8B%99) Device subscription services revenue reached approximately RMB 183.7 million, a 13.0% year-on-year increase, with growth in both new and used equipment subscriptions, and steady increases in total subscribed devices and available devices Device Subscription Services Key Operating Data | Metric | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Growth Rate | | :--- | :--- | :--- | :--- | | Revenue from Device Subscription Services (RMB thousand) | 183,730 | 162,561 | 13.0% | | — New Devices | 151,551 | 134,876 | 12.4% | | — Used Devices | 32,179 | 27,685 | 16.2% | | Total Device Subscriptions (units) | 3,112,036 | 2,700,602 | 15.2% | | Total Devices Available for Subscription | 610,557 | 533,660 | 14.4% | [IT Technical Subscription Services](index=12&type=section&id=IT%E6%8A%80%E8%A1%93%E8%A8%82%E9%96%B1%E6%9C%8D%E5%8B%99) IT technical subscription services revenue was approximately RMB 77.0 million, a slight decrease of 0.3% year-on-year, with long-term subscription revenue increasing while short-term subscription revenue declined IT Technical Subscription Services Revenue Breakdown | Item | 2024 (RMB thousand) | 2023 (RMB thousand) | Growth Rate | | :--- | :--- | :--- | :--- | | Revenue from IT Technical Subscription Services | 77,015 | 77,227 | -0.3% | | — Long-term Subscriptions | 58,685 | 57,332 | 2.4% | | — Short-term Subscriptions | 18,330 | 19,895 | -7.9% | [Financial Review](index=13&type=section&id=%E8%B2%A1%E5%8B%99%E5%9B%9E%E9%A1%A7) During the reporting period, the Group's total revenue increased by 14.6% to RMB 942.6 million, gross profit significantly grew by 32.9% to RMB 92.9 million with margin improving from 8.5% to 9.9%, and adjusted EBITDA increased by 4.5% to RMB 140.2 million Financial Summary | Metric | 2024 H1 (RMB thousand) | 2023 H1 (RMB thousand) | Change | | :--- | :--- | :--- | :--- | | Total Revenue | 942,598 | 822,391 | +14.6% | | Gross Profit | 92,880 | 69,907 | +32.9% | | Gross Profit Margin | 9.9% | 8.5% | +1.4pp | | Loss Attributable to Owners of the Company | (39,792) | (42,359) | Loss narrowed | | Adjusted Loss (Non-IFRS) | (22,304) | (11,365) | Loss widened | | Adjusted EBITDA (Non-IFRS) | 140,159 | 134,146 | +4.5% | - Distribution and selling expenses significantly increased by **48.2%** year-on-year to **RMB 77.3 million**, primarily due to expanding the sales and marketing team and conducting more aggressive marketing activities[54](index=54&type=chunk) - As of June 30, 2024, the capital gearing ratio was **117.0%**, an increase from **93.6%** at the end of 2023[66](index=66&type=chunk) [Revenue Analysis](index=13&type=section&id=%E6%94%B6%E5%85%A5%E5%88%86%E6%9E%90) Total revenue increased by 14.6%, primarily driven by growth in device recycling business (+17.0%) and device subscription services (+13.0%), with Shenzhen contributing 82.9% of revenue as the core market Revenue by Business Segment | Business Segment | 2024 H1 (RMB thousand) | Proportion | 2023 H1 (RMB thousand) | Proportion | Growth Rate | | :--- | :--- | :--- | :--- | :--- | :--- | | Device Recycling Revenue | 681,853 | 72.3% | 582,603 | 70.8% | 17.0% | | Device Subscription Services | 183,730 | 19.5% | 162,561 | 19.8% | 13.0% | | IT Technical Subscription Services | 77,015 | 8.2% | 77,227 | 9.4% | -0.3% | | **Total** | **942,598** | **100%** | **822,391** | **100.0%** | **14.6%** | [Gross Profit Analysis](index=15&type=section&id=%E6%AF%9B%E5%88%A9%E5%88%86%E6%9E%90) Total gross profit increased by 32.9%, with the gross profit margin improving from 8.5% to 9.9%, driven by the device recycling business turning profitable and an increase in device subscription services gross margin, despite a decrease in IT technical subscription services margin Gross Profit and Gross Profit Margin by Business Segment | Business Segment | 2024 H1 Gross Profit (RMB thousand) | 2024 H1 Gross Profit Margin | 2023 H1 Gross Profit (RMB thousand) | 2023 H1 Gross Profit Margin | | :--- | :--- | :--- | :--- | :--- | | Device Recycling Revenue | 7,677 | 1.1% | (11,179) | (1.9)% | | Device Subscription Services | 39,746 | 21.6% | 29,298 | 18.0% | | IT Technical Subscription Services | 45,457 | 59.0% | 51,788 | 67.1% | | **Total** | **92,880** | **9.9%** | **69,907** | **8.5%** | [Non-IFRS Measures](index=17&type=section&id=Non-IFRS%20Measures) To provide additional financial insights, the company disclosed non-IFRS measures, with adjusted loss at RMB 22.3 million and adjusted EBITDA increasing by 4.5% to RMB 140.2 million, primarily adjusted for share-based payments, foreign exchange, and one-off professional fees Reconciliation of Loss for the Period to Adjusted Loss | Item | 2024 (RMB thousand) | 2023 (RMB thousand) | | :--- | :--- | :--- | | Loss for the Period | (40,583) | (42,359) | | Add: Share-based Payment Expenses | 18,332 | 35,721 | | Add: Foreign Exchange Gain | (53) | (8,382) | | Add: One-off Professional Fees | — | 3,655 | | **Adjusted Loss** | **(22,304)** | **(11,365)** | Reconciliation of Loss for the Period to Adjusted EBITDA | Item | 2024 (RMB thousand) | 2023 (RMB thousand) | | :--- | :--- | :--- | | Loss for the Period | (40,583) | (42,359) | | Add: Income Tax Credit | (3,539) | (743) | | Add: Finance Costs | 23,613 | 19,840 | | Add: Depreciation and Amortization | 142,722 | 128,739 | | Add: Other Adjustments | 18,279 | 29,994 | | **Adjusted EBITDA** | **140,159** | **134,146** | [Corporate Governance and Other Information](index=22&type=section&id=%E4%BC%81%E6%A5%AD%E7%AE%A1%E6%B2%BB%E5%8F%8A%E5%85%B6%E4%BB%96%E8%B3%87%E6%96%99) This section details the company's corporate governance practices, dividend policy, equity incentive plans, interests of directors and major shareholders, and the utilization of IPO proceeds [Corporate Governance and Compliance](index=22&type=section&id=Corporate%20Governance%20and%20Compliance) The Group is committed to high standards of corporate governance, complying with all code provisions of the Corporate Governance Code during the reporting period, except for the combined roles of Chairman and CEO, which the Board deems beneficial for continuity - The roles of Chairman and Chief Executive Officer are combined and held by Mr. Hu Zuoxiong, which deviates from code provision C.2.1 of the Corporate Governance Code, but the Board believes this arrangement is in the best interests of the company and its shareholders[74](index=74&type=chunk) [Dividends and Equity Incentives](index=23&type=section&id=Dividends%20and%20Equity%20Incentives) The Board resolved not to declare an interim dividend for 2024, and while no new share options were granted under the LX Brothers plan, 3,251,389 restricted share awards were granted under the Beauty Bear plan on January 12, 2024 - The Board resolved not to declare any interim dividend for the six months ended June 30, 2024[75](index=75&type=chunk) - On January 12, 2024, **3,251,389** awards were granted to **245** employees, including two directors, under the Restricted Share Award Scheme, entitling them to subscribe for an equivalent number of shares[83](index=83&type=chunk) [Interests of Directors, Chief Executives, and Major Shareholders](index=26&type=section&id=Interests%20of%20Directors%2C%20Chief%20Executives%2C%20and%20Major%20Shareholders) This section details the interests of the company's directors, chief executives, and major shareholders in the company's shares, related shares, and debentures as of June 30, 2024, with Chairman Hu Zuoxiong holding approximately 39.36% of the total share interest - Chairman Mr. Hu Zuoxiong collectively holds approximately **39.36%** of the company's share interests through controlled corporations and beneficial ownership[90](index=90&type=chunk) - Major shareholders (holding over 5%) include Bear Family (**21.26%**), Hunan TV & Broadcast Intermediary Co., Ltd. (**13.12%**), UBS Trustees (B.V.I.) Limited (**11.21%**, on behalf of Mr. Liu Qiangdong), Shenzhen Oriental Fortune Capital Investment Management Co., Ltd. (**10.44%**), Shanghai Tongyun (**9.32%**), Beauty Bear (**7.64%**), Little Bear (**5.40%**), Mr. Hua (total **6.94%**), and LX Brothers (**5.06%**)[98](index=98&type=chunk) [Use of Proceeds from Listing](index=30&type=section&id=Use%20of%20Proceeds%20from%20Listing) The company utilized approximately RMB 91.8 million of its RMB 307.9 million net listing proceeds as of June 30, 2024, with RMB 216.1 million remaining unutilized, all in line with the prospectus plan Summary of Use of Proceeds from Listing (As of June 30, 2024) | Planned Use | Net Allocation (RMB million) | Utilized During Reporting Period (RMB million) | Cumulative Unutilized (RMB million) | | :--- | :--- | :--- | :--- | | Enhance Customer Experience | 138.55 | 26.98 | 65.51 | | Expand Customer Base and Market Share | 76.98 | 16.91 | 46.84 | | System Upgrades and Product Development | 46.18 | 0.90 | 43.66 | | Strengthen Risk Management Capabilities | 15.40 | 0.25 | 15.05 | | Working Capital and General Corporate Purposes | 30.79 | 0.00 | 0.00 | | **Total** | **307.90** | **45.04** | **171.06** | [Condensed Consolidated Financial Statements](index=35&type=section&id=%E7%B0%A1%E6%98%8E%E7%B6%9C%E5%90%88%E8%B2%A1%E5%8B%99%E5%A0%B1%E8%A1%A8) This section presents the Group's condensed consolidated financial performance, position, and cash flows for the reporting period, along with explanatory notes [Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=35&type=section&id=Condensed%20Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) For the six months ended June 30, 2024, the Group reported revenue of RMB 942.6 million, a 14.6% increase, with gross profit of RMB 92.9 million, and a narrowed loss for the period of RMB 40.6 million Statement of Profit or Loss Summary | Item (RMB thousand) | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Revenue | 942,598 | 822,391 | | Gross Profit | 92,880 | 69,907 | | Loss Before Tax | (44,122) | (43,102) | | Loss for the Period | (40,583) | (42,359) | | Loss Attributable to Owners of the Company | (39,792) | (42,359) | | Basic Loss Per Share (RMB) | (0.13) | (0.14) | [Condensed Consolidated Statement of Financial Position](index=36&type=section&id=Condensed%20Consolidated%20Statement%20of%20Financial%20Position) As of June 30, 2024, the Group's total assets were RMB 1.753 billion, total liabilities RMB 1.036 billion, and net assets RMB 718 million, with a current ratio of approximately 1.2 times and cash and cash equivalents of RMB 456 million Statement of Financial Position Summary | Item (RMB thousand) | As of June 30, 2024 | As of December 31, 2023 | | :--- | :--- | :--- | | Total Non-current Assets | 838,184 | 872,361 | | Total Current Assets | 915,463 | 808,735 | | **Total Assets** | **1,753,647** | **1,681,096** | | Total Current Liabilities | 753,443 | 645,173 | | Total Non-current Liabilities | 282,619 | 296,114 | | **Total Liabilities** | **1,036,062** | **941,287** | | **Net Assets** | **717,585** | **739,809** | [Condensed Consolidated Statement of Cash Flows](index=39&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) During the reporting period, net cash generated from operating activities was RMB 50.25 million, with net cash outflow from investing activities of RMB 103.1 million and net cash inflow from financing activities of RMB 118.6 million, resulting in period-end cash and cash equivalents of RMB 456.4 million Cash Flow Statement Summary | Item (RMB thousand) | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net Cash Generated from Operating Activities | 50,252 | 53,242 | | Net Cash (Used in)/Generated from Investing Activities | (103,063) | 144,112 | | Net Cash Generated from Financing Activities | 118,589 | 31,157 | | **Net Increase in Cash and Cash Equivalents** | **65,778** | **228,511** | | Cash and Cash Equivalents at Beginning of Period | 390,658 | 156,274 | | **Cash and Cash Equivalents at End of Period** | **456,436** | **386,808** | [Notes to the Condensed Consolidated Financial Statements](index=40&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) The financial statement notes provide detailed explanations, including revenue breakdown by business segment and type, the 15% preferential tax rate for Lingxiong (Shenzhen), basic and diluted loss per share calculations, and disclosures on related party transactions and share-based payment expenses - Revenue primarily originates from China and is categorized into two main business segments: device recycling business and device subscription services, with customer contract revenue at **RMB 783 million** and lease income from device subscription services at **RMB 160 million**[142](index=142&type=chunk)[145](index=145&type=chunk) - The principal operating entity, Lingxiong (Shenzhen), benefits from a **15%** preferential corporate income tax rate for high-tech enterprises, valid until the 2025 fiscal year[150](index=150&type=chunk) - During the reporting period, total expenses related to share-based payment transactions were approximately **RMB 18.33 million**, with approximately **RMB 7.94 million** recognized under the LX Brothers scheme and approximately **RMB 10.39 million** under the Beauty Bear scheme[172](index=172&type=chunk)[176](index=176&type=chunk)[178](index=178&type=chunk)

Financial Summary [Financial Highlights](index=1&type=section&id=Financial%20Highlights) The Group achieved a 14.8% revenue increase to RMB 943 million and a 32.9% gross profit increase to RMB 92.9 million, with adjusted EBITDA up 4.5% to RMB 140 million, while net loss attributable to owners slightly narrowed Key Financial Indicators for H1 2024 | Indicator | For the Six Months Ended June 30, 2024 (RMB in millions) | For the Six Months Ended June 30, 2023 (RMB in millions) | | :--- | :--- | :--- | | Revenue | Approx. RMB 942.6 | Approx. RMB 822.4 | | Gross Profit | Approx. RMB 92.9 | RMB 69.9 | | Loss Attributable to Owners of the Company | Approx. RMB 39.8 | Approx. RMB 42.4 | | Adjusted EBITDA | Approx. RMB 140.2 | RMB 134.1 | Management Discussion and Analysis [Business Review](index=2&type=section&id=Business%20Review) The Group achieved record half-year revenue of RMB 942.6 million, a 14.6% year-on-year increase, driven by equipment recycling and subscription services, with equipment recycling notably turning gross loss into gross profit - Half-year revenue reached a new high of **RMB 942.6 million**, representing a **14.6% year-on-year increase**[4](index=4&type=chunk) - Equipment recycling business significantly improved, turning a gross loss of approximately **RMB 11.2 million** in the prior period into a gross profit of approximately **RMB 7.7 million** in the current period[4](index=4&type=chunk) [Equipment Recycling Business](index=3&type=section&id=Equipment%20Recycling%20Business) Equipment recycling revenue surged 17.0% to RMB 681.9 million, driven by a 31.3% increase in units sold and a 70.9% rise in customer numbers, despite a decrease in average revenue per customer Equipment Recycling Business Operating Data | Indicator | H1 2024 | H1 2023 | Growth Rate | | :--- | :--- | :--- | :--- | | Revenue | RMB 681.9 million | RMB 582.6 million | +17.0% | | Number of Units Sold (Units) | 449,029 | 341,957 | +31.3% | | Number of Equipment Recycling Customers | 1,309 | 766 | +70.9% | | Average Revenue Per Customer (RMB) | 520,896 | 760,579 | -31.5% | | Average Sales Value (RMB/Unit) | 1,472.3 | 1,377.4 | +6.9% | [Equipment Subscription Business](index=4&type=section&id=Equipment%20Subscription%20Business) Equipment subscription revenue increased by 13.0% to RMB 183.7 million, with both new and used equipment subscriptions growing, and total subscription volume rising 15.2% driven by new equipment Equipment Subscription Business Operating Data | Indicator | H1 2024 (RMB in thousands) | H1 2023 (RMB in thousands) | Growth Rate | | :--- | :--- | :--- | :--- | | **Revenue** | **183,730** | **162,561** | **13.0%** | | — New Equipment | 151,551 | 134,876 | 12.4% | | — Used Equipment | 32,179 | 27,685 | 16.2% | | **Total Equipment Subscriptions (Units)** | **3,112,036** | **2,700,602** | **15.2%** | | — New Equipment | 2,505,320 | 2,102,924 | 19.1% | | — Used Equipment | 606,716 | 597,678 | 1.5% | [IT Technology Subscription Services](index=4&type=section&id=IT%20Technology%20Subscription%20Services) IT technology subscription services revenue remained largely flat, with a slight 0.3% decrease to RMB 77 million, as growth in long-term subscriptions was offset by a decline in short-term subscriptions IT Technology Subscription Services Revenue Composition | Revenue Source | H1 2024 (RMB in thousands) | H1 2023 (RMB in thousands) | Growth Rate | | :--- | :--- | :--- | :--- | | **Total Revenue** | **77,015** | **77,227** | **-0.3%** | | — Long-term Subscriptions | 58,685 | 57,332 | 2.4% | | — Short-term Subscriptions | 18,330 | 19,895 | -7.9% | [Future Outlook](index=5&type=section&id=Future%20Outlook) The Group plans to integrate AI deeply into core business operations, focusing on front-end processes and mid-office management to enhance operational efficiency, systematically manage growing demands, and provide customized services, especially for SMEs, to reduce costs and improve efficiency - The strategic core involves deeply integrating AI into front-end business processes and mid-office management to systematically manage contracts, orders, consultations, and demands[12](index=12&type=chunk) - Leveraging AI's data analysis capabilities, the aim is to proactively predict and resolve issues, offering customized solutions to enhance customer experience, particularly for small and medium-sized enterprises[12](index=12&type=chunk) Financial Review [Revenue Analysis](index=6&type=section&id=Revenue%20Analysis) Total revenue increased by 14.6% to RMB 942.6 million, primarily driven by growth in equipment recycling and subscription services, with equipment recycling remaining the largest contributor at 72.3% and Shenzhen being the dominant geographical revenue source Revenue by Business Segment | Business Segment | H1 2024 (RMB in thousands) | Proportion | H1 2023 (RMB in thousands) | Proportion | Growth Rate | | :--- | :--- | :--- | :--- | :--- | :--- | | Equipment Recycling Revenue | 681,853 | 72.3% | 582,603 | 70.8% | 17.0% | | Equipment Subscription Services | 183,730 | 19.5% | 162,561 | 19.8% | 13.0% | | IT Technology Subscription Services | 77,015 | 8.2% | 77,227 | 9.4% | -0.3% | | **Total** | **942,598** | **100%** | **822,391** | **100.0%** | **14.6%** | - The growth in equipment recycling revenue was primarily due to an increase in the number of units sold from **342,000** to **449,000**[15](index=15&type=chunk) - The increase in equipment subscription services revenue was driven by a rise in total equipment subscriptions and customer numbers, with customers growing from **16,727** to **22,726**[17](index=17&type=chunk) Revenue by Geographical Location | Region | H1 2024 (RMB in thousands) | Proportion | H1 2023 (RMB in thousands) | Proportion | | :--- | :--- | :--- | :--- | :--- | | Shenzhen | 781,815 | 82.9% | 662,658 | 80.6% | | Shanghai | 54,335 | 5.8% | 30,389 | 3.7% | | Others | 106,448 | 11.3% | 129,444 | 15.7% | | **Total** | **942,598** | **100.0%** | **822,391** | **100.0%** | [Gross Profit and Gross Margin](index=9&type=section&id=Gross%20Profit%20and%20Gross%20Margin) Overall gross profit increased by 32.9% to RMB 92.9 million, with gross margin rising from 8.5% to 9.9%, primarily due to the significant turnaround in equipment recycling business and improved equipment subscription service margins, despite a decline in IT technology subscription service margins Gross Profit and Gross Margin by Business Segment | Business Segment | H1 2024 Gross Profit (RMB in thousands) | Gross Margin | H1 2023 (Gross Loss)/Gross Profit (RMB in thousands) | Gross Margin | | :--- | :--- | :--- | :--- | :--- | | Equipment Recycling Revenue | 7,677 | 1.1% | (11,179) | (1.9)% | | Equipment Subscription Services | 39,746 | 21.6% | 29,298 | 18.0% | | IT Technology Subscription Services | 45,457 | 59.0% | 51,788 | 67.1% | | **Total** | **92,880** | **9.9%** | **69,907** | **8.5%** | - The equipment recycling business turned profitable, primarily due to an increase in the average sales value of units sold from **RMB 1,377** to **RMB 1,472**[22](index=22&type=chunk) - Equipment subscription services gross margin improved as revenue growth outpaced cost increases, and the average equipment utilization rate rose from **85.6%** to **86.5%**[23](index=23&type=chunk)[24](index=24&type=chunk) [Operating Expenses and Profitability](index=10&type=section&id=Operating%20Expenses%20and%20Profitability) To expand market share, distribution and selling expenses increased by 48.2% to RMB 77.3 million, while administrative expenses decreased by 4.5% and R&D expenses rose by 14.2% due to AI investments, resulting in a narrowed loss attributable to owners and a 4.5% increase in adjusted EBITDA - Distribution and selling expenses increased by **48.2%** year-on-year to **RMB 77.3 million**, primarily due to the expansion of sales and marketing teams[27](index=27&type=chunk) - Administrative expenses decreased by **4.5%** year-on-year to **RMB 47.1 million**, mainly due to a reduction in share-based payments[28](index=28&type=chunk) - Research and development expenses increased by **14.2%** year-on-year to **RMB 14.5 million**, primarily due to expenses incurred from AI research and development[29](index=29&type=chunk) Reconciliation of Loss to Adjusted EBITDA | Indicator (RMB in thousands) | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Loss for the Period | (40,583) | (42,359) | | Adjusted Loss (Non-IFRS) | (22,304) | (11,365) | | Adjusted EBITDA (Non-IFRS) | 140,159 | 134,146 | [Financial Position and Liquidity](index=14&type=section&id=Financial%20Position%20and%20Liquidity) As of June 30, 2024, the Group's current assets totaled RMB 915.5 million with a current ratio of 1.2, while bank balances and cash increased to RMB 477.8 million, and total bank and other borrowings rose to RMB 839.5 million, leading to a capital gearing ratio increase to 117.0% - Current assets increased by **13.2%** to **RMB 915.5 million**, with a current ratio of **1.2 times** (2023 year-end: 1.3 times)[35](index=35&type=chunk) - Bank balances and cash increased to **RMB 477.8 million** (2023 year-end: RMB 416.6 million), primarily due to increased cash generated from business operations[43](index=43&type=chunk) - Total bank and other borrowings increased to **RMB 839.5 million** (2023 year-end: RMB 692.2 million) to support business growth[44](index=44&type=chunk) - The capital gearing ratio rose to **117.0%** (2023 year-end: 93.6%)[45](index=45&type=chunk) Other Information [Employees and Remuneration Policy](index=17&type=section&id=Employees%20and%20Remuneration%20Policy) As of June 30, 2024, the Group's full-time employees decreased to 1,052 from 1,143 at year-end 2023, with total employee remuneration for the period remaining stable at approximately RMB 93.8 million, supported by competitive compensation and incentive plans - As of June 30, 2024, the Group had **1,052** full-time employees, a decrease from **1,143** at the end of 2023[48](index=48&type=chunk) - Employee remuneration for the period was approximately **RMB 93.8 million**, largely consistent with approximately **RMB 93.9 million** in the prior period[48](index=48&type=chunk) [Corporate Governance and Dividends](index=18&type=section&id=Corporate%20Governance%20and%20Dividends) The Group adheres to corporate governance codes, with a deviation where the Chairman and CEO roles are combined, deemed beneficial for management continuity, and the Board resolved not to declare an interim dividend for the period - The roles of Chairman and Chief Executive Officer are held by the same individual, Mr. Hu Zuoxiong, a deviation from Corporate Governance Code provision C.2.1, which the Board believes is in the best interest of the Company and its shareholders[50](index=50&type=chunk) - The Board resolved not to declare an interim dividend for the six months ended June 30, 2024[52](index=52&type=chunk) Condensed Consolidated Financial Statements [Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=20&type=section&id=Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) For the six months ended June 30, 2024, the Group reported revenue of RMB 942.6 million and gross profit of RMB 92.9 million, with total loss and comprehensive expenses for the period slightly decreasing to RMB 40.6 million, and basic and diluted loss per share at RMB 0.13 Consolidated Statement of Profit or Loss Summary | Item (RMB in thousands) | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Revenue | 942,598 | 822,391 | | Gross Profit | 92,880 | 69,907 | | Loss Before Tax | (44,122) | (43,102) | | Loss and Total Comprehensive Expenses for the Period | (40,583) | (42,359) | | Loss Attributable to Owners of the Company | (39,792) | (42,359) | | Basic Loss Per Share (RMB) | (0.13) | (0.14) | [Consolidated Statement of Financial Position](index=21&type=section&id=Consolidated%20Statement%20of%20Financial%20Position) As of June 30, 2024, the Group's total assets were RMB 1.7537 billion, total liabilities RMB 1.0361 billion, and net assets RMB 717.6 million, with net assets slightly decreasing compared to year-end 2023, while net current assets remained stable at RMB 162 million Consolidated Statement of Financial Position Summary | Item (RMB in thousands) | As of June 30, 2024 | As of December 31, 2023 | | :--- | :--- | :--- | | Total Non-current Assets | 838,184 | 872,361 | | Total Current Assets | 915,463 | 808,735 | | Total Current Liabilities | 753,443 | 645,173 | | Total Non-current Liabilities | 282,619 | 296,114 | | **Net Assets** | **717,585** | **739,809** |

Company Overview and Structure - LX Technology Group Limited was incorporated in the Cayman Islands on January 10, 2022, and its shares are listed on the Main Board (Stock Code: 2436)[15] - The company's main business location and headquarters are located at 5th Floor, Building 501, Cuilin Building, No. 10 Kaifeng Road, Meilin Subdistrict, Futian District, Shenzhen, China[4] - The company's IPO was completed on November 24, 2022, marking its listing date[22] - The company's major shareholders include Bear Family, Little Bear, LX Brothers, and Beauty Bear[16] - The company's website is www.bearrental.com[7] - The company's compliance advisor is Haitong International Capital Limited, and its legal advisor for Hong Kong law is Sidley Austin LLP[6] - The company's major banks include Bank of China Limited, Shenzhen Branch, and China Merchants Bank, Shenzhen Branch[7] Financial Performance and Metrics - Revenue increased by 7.8% to RMB 1,793.1 million, driven by growth across all three service lines: equipment recycling, equipment subscription, and IT technology subscription services[31][41] - Equipment recycling business revenue grew by 8.1% to RMB 1,286.4 million, with the number of recycling customers increasing by 86.8% to 1,980[32][33] - Equipment subscription service revenue rose by 9.0% to RMB 347.9 million, with total equipment subscriptions increasing by 15.9% to 5,744,050 units[34][35] - IT technology subscription service revenue increased by 2.4% to RMB 158.8 million, with long-term subscriptions growing by 3.3%[36][37] - Revenue from long-term equipment subscriptions increased by 13.5% to RMB 292.8 million, while short-term equipment subscriptions declined by 10.1% to RMB 55.1 million[41] - Equipment recycling revenue increased by 8.1% to RMB 1,286.39 million in 2023, driven by higher sales of laptops and other IT equipment[43] - Sales cost increased to RMB 1,645.5 million in 2023, representing 91.8% of revenue, up from 88.0% in 2022[48] - Gross profit decreased by 25.9% to RMB 147.6 million in 2023, with gross margin dropping from 12.0% to 8.2%[49] - Equipment subscription service gross margin declined from 23.1% in 2022 to 20.7% in 2023, despite an increase in average utilization rate from 85.3% to 87.9%[51] - IT technology subscription service gross margin fell from 71.1% in 2022 to 65.1% in 2023, due to lower average subscription prices and increased employee costs[52] - R&D expenses decreased by 7.3% to RMB 25.5 million in 2023, accounting for 1.4% of revenue, down from 1.7% in 2022[55] - Administrative expenses rose by 18.1% to RMB 102.5 million in 2023, primarily due to increased professional fees and employee salaries[54] - Net loss for the year was approximately RMB 131.03 million, compared to a net profit of RMB 99.95 million in the previous year, primarily due to the absence of fair value gains on financial liabilities and increased administrative expenses[58] - Adjusted loss (non-IFRS) for the year was approximately RMB 67.4 million, compared to an adjusted profit of RMB 10.9 million in the previous year[59] - Adjusted EBITDA (non-IFRS) decreased by 15.5% from RMB 285.1 million in the previous year to RMB 241.0 million this year[60] - Share-based payment expenses for the year were approximately RMB 60.6 million, with RMB 17.8 million allocated to distribution and sales expenses, RMB 37.6 million to administrative expenses, and RMB 5.2 million to R&D expenses[61] - The company did not recommend paying any final dividend for the year ended December 31, 2023[140] Business Operations and Growth - The company's equipment lifecycle management solutions aim to improve the return on investment for enterprises and ensure the quality and efficiency of equipment operation[17] - Customer numbers increased significantly in 2023, with 1,980 customers in equipment recycling, 26,028 in equipment subscription, and 24,699 in IT technology subscription, representing year-on-year growth of 86.8%, 52.8%, and 63.3% respectively[26] - The company acquired 12,343 new long-term equipment subscription customers in 2023, a 112.0% increase compared to the previous year[26] - The business expanded to 10 new cities in 2023, including Tianjin, Shijiazhuang, Taiyuan, Shenyang, Hefei, and Chongqing[27] - The company refurbished over 1.33 million devices in 2023, reducing carbon emissions by 17,052.7 tons[29] - The company collaborated with industry leaders to penetrate the IT equipment subscription market for printing and copying devices[27] - The company participated in the drafting of national standards for enterprise credit evaluation indicators and guidelines[28] - The company aims to strengthen standardized business models to reduce initial IT equipment investment and maintenance costs for customers[28] - The company expects stable revenue and profit contributions from new customers in 2024 and 2025[26] - The company provided short-term equipment subscription services for major events, including the 19th Asian Games in Hangzhou and the 31st World University Summer Games in Chengdu[31] - The company aims to expand its IT equipment subscription scope, invest in cutting-edge IT technology solutions, and strengthen its equipment recycling business to promote environmental practices[39] - The company plans to further penetrate core cities and expand services to meet evolving customer needs in various business scenarios[39] - Long-term equipment subscription customers grew from 13,326 in 2022 to 21,615 in 2023, with total equipment subscriptions increasing from 4,957,703 to 5,744,050 units[44] - IT technology subscription service customers increased from 15,121 in 2022 to 24,699 in 2023, with monthly average subscriptions rising from 285,310 to 337,334 units[45] - Revenue from Shenzhen accounted for 82.9% of total revenue in 2023, up from 80.0% in 2022[47] Corporate Governance and Board Structure - The company's ESG (Environmental, Social, and Governance) initiatives are aligned with the Corporate Governance Code effective from January 1, 2023[14] - The company has adopted the Corporate Governance Code and complies with its provisions, with some deviations such as the Chairman also serving as the CEO, which is deemed appropriate for the company's management continuity and strategic implementation[89] - The Board of Directors is responsible for the overall leadership of the group, overseeing strategic decisions, and monitoring business performance, with daily management delegated to senior management[91] - The company has established three Board Committees: Audit Committee, Remuneration Committee, and Nomination Committee, to oversee specific areas of the company's affairs[91] - The company has adopted a comprehensive Code of Conduct for Securities Transactions by Directors, and all directors confirmed strict compliance with the applicable standards during the year[89] - The company has implemented measures to ensure that employees who may have access to unpublished inside information comply with the Standard Code of Conduct for Securities Transactions[90] - The company has strengthened its corporate governance practices and will continue to review and enhance them to ensure compliance with the Corporate Governance Code[89] - The company's Board consists of three executive directors, one non-executive director, and three independent non-executive directors, ensuring a high level of independence[89] - The company has rectified the oversight of not providing monthly updates to the Board and now distributes updates in accordance with the Corporate Governance Code[89] - The board of directors consists of 7 members, including 3 executive directors, 1 non-executive director, and 3 independent non-executive directors as of December 31, 2023[92] - The company has 3 independent non-executive directors, exceeding one-third of the total board members, with at least one possessing appropriate professional qualifications or accounting/financial management expertise[94] - All directors have participated in continuous professional development activities to update their knowledge and skills during the year[95] - Directors received training including attending briefings, lectures, meetings, and reading materials related to their duties and responsibilities[96] - The board is responsible for overseeing the preparation of financial statements to ensure they present a true and fair view of the company's financial position[97] - The board must hold at least 4 meetings annually, with notices sent at least 14 days in advance and agendas distributed 3 days prior to meetings[98] - All directors attended 8 out of 8 board meetings and 1 out of 1 annual general meeting, demonstrating full participation[100] - The audit committee held 9 meetings to review annual and interim financial reports, internal controls, and external auditor independence[101][102] - The audit committee members attended all scheduled meetings, with 9/9 attendance for Xu Nailing and Gan Zhicheng, and 6/6 for Yao Zhengwang[102] - The remuneration committee held 2 meetings to review and approve executive compensation policies and performance-based pay[104][105] - The nomination committee held 2 meetings to evaluate board structure, independence, and diversity policies[106][107] - The board ensures independence by including at least 3 independent non-executive directors, representing one-third of the board[99] - Directors with conflicts of interest are required to disclose and abstain from voting, ensuring impartial decision-making[99] - The audit committee reviewed financial reporting processes, risk management systems, and compliance procedures[102] - The remuneration committee members attended all meetings, with 2/2 attendance for Hu Zuoxiong and Xu Nailing, and 1/1 for Yao Zhengwang[105] - The nomination committee members attended all meetings, with 2/2 attendance for Hu Zuoxiong and Xu Nailing, and 1/1 for Yao Zhengwang[107] - The company aims to increase the proportion of female representation on the board to at least 20% within four years[108] Risk Management and Internal Controls - The company has established a risk management policy and internal audit mechanism to oversee and evaluate risk management and internal controls[116][117] - The company's internal legal department is responsible for reviewing and updating contracts, ensuring compliance with regulations, and obtaining necessary government approvals[118] - The company experienced equipment loss or damage incidents during the subscription period, with customer compensation amounting to RMB 7.2 million (2022: RMB 1.5 million)[119] - A risk control system model was developed, integrating an online intelligent credit evaluation system and offline manual assistance mechanisms to assess customer creditworthiness and potential risks[119] - The company has established internal control policies and procedures for idle cash management and investment management[120] - Internal control policies and procedures for the use, management, and supervision of IPO proceeds have been implemented, including monthly reviews and reports on actual usage[121][122] - A dedicated team has been assigned to determine credit limits and approvals, utilizing proprietary software for credit assessment of new clients[122] - The company has adopted credit management policies and procedures, including monitoring overdue payments and taking corrective actions such as legal proceedings[122] - An independent internal control review was conducted, and measures were taken to mitigate potential internal control risks[122] - The company has established a "Major Matters Reporting System" and "Announceable Transactions Management Measures" to regulate the identification, reporting, and disclosure of significant matters[123][124] - A succession plan for senior management and directors has been developed, including selection criteria, training, and promotion procedures[125] - The company has updated its anti-bribery and anti-corruption policies, establishing a dedicated email address for reporting and improving confidentiality procedures for whistleblowers[126] - The company has strengthened its related party transaction policies and procedures to ensure compliance with listing rules, with the enhanced policies approved by management and distributed to relevant employees[129] - The company has implemented specific anti-corruption and anti-bribery policies, including procedures to identify potential corruption and assign responsibilities to relevant personnel[129] - The company has adopted a whistleblowing policy to establish procedures for reporting suspicious misconduct, ensuring protection for whistleblowers and confidentiality of information[129] - The company has implemented internal policies for handling and disclosing inside information, including control procedures to prevent unauthorized access and use of such information[130] Shareholder and Investor Relations - The company's dividend policy outlines principles for distributing profits as dividends, subject to factors such as financial performance, cash flow, and capital requirements[131] - The company maintains multiple communication channels with shareholders, including annual and interim reports, announcements, and investor meetings[132] - Shareholders holding at least 10% of voting rights can request a special general meeting, with procedures outlined in the company's articles of association[134] - The company encourages shareholder participation in annual and special general meetings, providing opportunities to address questions to the board and external auditors[135] - The company has established a website (www.bearrental.com) as a primary channel for communication, financial disclosures, and investor relations[137] - The company will propose special resolutions at the annual general meeting to amend certain provisions of its articles of association, as detailed in announcements dated March 22 and April 26, 2024[138] Market and Competitive Landscape - The company's equipment recycling business faces uncertainties in gross margin due to factors such as demand for specific types and conditions of equipment, second-hand market IT equipment prices, and ESG awareness in China[144] - The company's future growth depends on the penetration rate of IT equipment subscription services, acceptance of equipment maintenance by third-party IT technology subscription service providers, and the digitalization of equipment management among SMEs in China[145] - The company's target customer base, primarily SMEs, may be more sensitive and vulnerable to economic downturns, which could significantly impact financial performance and future growth[146] - The company's equipment lifecycle management solutions market in China is still in its early stages, and demand may be affected by economic conditions, reduced corporate spending, and competition[145] Employee and Compensation Details - The company had 1,143 full-time employees as of December 31, 2023, an increase from 761 in the previous year, driven by the expansion of the sales and marketing team[75] - Employee compensation (excluding director compensation) amounted to RMB 192.1 million for the year ended December 31, 2023, slightly up from RMB 191.5 million in the previous year[75] - The company granted 3,251,389 restricted shares to 245 awardees under the Beauty Bear Employee Incentive Plan on January 12, 2024[76] - As of December 31, 2023, male employees accounted for 73.8% (843 employees) and female employees accounted for 26.2% (300 employees) of the total workforce[110] - Employees aged 30 and below made up 57.9% (662 employees), those aged 31-40 accounted for 37.4% (427 employees), and those aged 41 and above represented 4.7% (54 employees) of the total workforce[110] - All senior management members were male as of December 31, 2023[110] - The company's mandatory provident fund (MPF) plan requires a minimum statutory contribution of 5% of the relevant income for eligible employees, with a maximum contribution of HK$1,500 for employees earning more than HK$30,000 per month[187] Shareholding and Ownership Structure - Bear Family holds 75,107,558 shares, representing 21.26% of the company's issued share capital[195] - Beauty Bear holds 30,000,000 shares, representing 8.49% of the company's issued share capital[195] - Little Bear holds 19,063,215 shares, representing 5.40% of the company's issued share capital[195] - LX Brothers holds 17,880,602 shares, representing 5.06% of the company's issued share capital[195] - Hunan Dian Guang Media Co., Ltd. holds 46,335,877 shares, representing 13.12% of the company's issued share capital[195] - Shenzhen Dachen Caizhi Venture Capital Management Co., Ltd. holds 46,335,877 shares, representing 13.12% of the company's issued share capital[195] - Shanghai Tongyun Information Technology Partnership holds 32,941,239 shares, representing 9.32% of the company's issued share capital[195] - UBS Trustees (B.V.I.) Limited holds 39,645,668 shares, representing 11.22% of the company's issued share capital[195] - Mr. Liu Qiangdong holds 39,645,668 shares, representing 11.22% of the company's issued share capital[195] - Mr. Chen Wei holds 36,910,391 shares, representing 10.45% of the company's issued share capital[195] - Shanghai Yujun Enterprise Management Partnership holds 36,910,391 shares, managed by Shenzhen Fuhai SME Development Fund Equity Investment Management Co., Ltd., with SME Development Fund (Shenzhen Nanshan Limited Partnership) holding over one-third of the interests[197] - Beauty Bear's entire issued share capital is held by Teeroy Trust, with voting rights exercised by Mr. Hu, who is deemed to have an interest in the shares held by Beauty Bear under the Securities and Futures Ordinance[197] - Little Bear is owned by Mr. Hu (8.78%), Mr. He Jingwei (51.56%), Mr. Tang Youyuan (24.91%), and Mr. Cao Weijun (14.75%), with Mr. Hu exercising voting rights and thus deemed to have an interest in Little Bear's shares[197] - Gold Bear Technology Limited is wholly owned by Mr. Hua, who is deemed to have an interest in the shares held by Gold Bear Technology Limited under the Securities and Futures Ordinance[197] - Mr. Hua was granted 6,000,000 shares under the restricted share award plan, currently held by Teeroy Trust[197][198] - LX Brothers' entire issued share capital is held by Tricor Trust, with voting rights exercised by Mr. Hu, who is deemed to have an interest in the shares held by LX Brothers under the Securities and Futures Ordinance[198] - No directors or their close associates have any interests in businesses directly or indirectly competing with the company's business[200] Financial Position and Liabilities - Current assets increased by 11.2% to approximately RMB 808.7 million as of December 31, 2023, compared to RMB 727.1 million in the previous year[65] - Trade and

Investment Rating - The report maintains an "Outperform" rating for LX Technology [3][9][10] Core Views - The company's large-scale expansion of sales personnel has led to a short-term decline in profitability, with a significant increase in customer numbers laying the foundation for future business acceleration [9][10] - Revenue for 2023 was approximately RMB 1.793 billion, representing a year-on-year growth of 7.8% [4][5] - The adjusted EBITDA for 2023 was RMB 241 million, with an adjusted net loss of RMB 67.4 million [4][10] Financial Performance Summary - Revenue projections for 2024-2026 are RMB 2.027 billion (-16.1%)/2.396 billion (-28.1%)/2.958 billion, with the recycling business expected to maintain medium to low growth while equipment and IT service subscriptions are anticipated to grow at medium to high rates [5][10] - The adjusted EBITDA is projected to be RMB 367 million (-34.7%)/502 million (-41.7%)/630 million, with a CAGR of 20.7% from 2022 to 2025 [10][11] - The gross profit margin for 2023 was 8.2%, down approximately 3.8 percentage points from 2022 [4][11] Customer Growth and Market Position - The total number of customers significantly increased in 2023, with device subscription, IT services, and recycling business customers growing by 52.8%, 63.4%, and 86.8% respectively [5][10] - The company has over 590,000 devices available for subscription as of the end of 2023, indicating strong customer demand [5][10] Valuation and Target Price - The report uses an EV/EBITDA valuation method, assigning a multiple of 11 times for 2024, resulting in a target market value of RMB 3.58 billion, corresponding to HKD 3.88 billion, and a target price of HKD 11.0 per share [10][11]

Revenue and Profitability - The company's revenue for the year ended December 31, 2023, was approximately RMB 1,793.1 million, an increase of 7.8% compared to RMB 1,664.0 million for the year ended December 31, 2022[2]. - The company recorded a net loss of approximately RMB 131.03 million for the year, compared to a net profit of approximately RMB 99.95 million for the previous year[2]. - Total revenue for the year was approximately RMB 1,793.1 million, an increase of 7.8% compared to RMB 1,664.0 million in 2022[14]. - Gross profit for the year was approximately RMB 147.6 million, a decrease of 25.9% from RMB 199.3 million in 2022, with a gross margin decline from 12.0% to 8.2%[21]. - The company reported a pre-tax loss of RMB 131,268,000 for 2023, compared to a profit of RMB 99,948,000 in 2022, marking a decline of 231.9%[79]. - Basic and diluted loss per share for the year was RMB (0.43), compared to earnings of RMB 0.72 per share in the previous year[58]. Business Segments Performance - Revenue from the equipment recycling business was approximately RMB 1,286.4 million, an increase of 8.1% from RMB 1,189.7 million in 2022[6]. - Revenue from the equipment subscription business was approximately RMB 347.9 million, a 9.0% increase from RMB 319.3 million in 2022[8]. - Revenue from IT technology subscription services was approximately RMB 158.8 million, a 2.4% increase from RMB 155.1 million in 2022[10]. - The number of customers for the equipment recycling business increased by 86.8% to 1,980, up from 1,060 in 2022[7]. - The number of long-term equipment subscription customers increased from 13,326 to 21,615, and total equipment subscriptions rose from 4,957,703 to 5,744,050[17]. Expenses and Costs - Distribution and selling expenses increased to approximately RMB 128.4 million, representing 7.2% of total revenue, down from 7.6% in 2022[25]. - Administrative expenses increased by approximately 18.1% from RMB 86.8 million to RMB 102.5 million, accounting for about 5.7% of revenue[26]. - R&D expenses decreased by approximately 7.3% from RMB 27.5 million to RMB 25.5 million, representing about 1.4% of revenue[27]. - Financing costs decreased by approximately 1.4% from RMB 42.4 million to RMB 41.8 million due to optimized borrowing structure[28]. - The company’s total employee costs, including salaries and benefits, rose to RMB 192,138,000 in 2023, compared to RMB 191,520,000 in 2022, indicating a slight increase of about 0.3%[77]. Assets and Liabilities - Current assets increased by approximately 11.2% from RMB 727.1 million to RMB 808.7 million, with a current ratio of about 1.3 times[36]. - Total liabilities increased to RMB 941,287 thousand in 2023 from RMB 753,549 thousand in 2022, indicating a rise of about 25%[60]. - Trade and lease receivables increased from approximately RMB 649 million as of December 31, 2022, to approximately RMB 1,060 million as of December 31, 2023, driven by increased subscription and sales across all service lines[39]. - Cash and cash equivalents increased from approximately RMB 1,838 million as of December 31, 2022, to approximately RMB 4,166 million as of December 31, 2023, primarily due to redemptions[44]. - The debt-to-equity ratio increased to 93.6% as of December 31, 2023, compared to 68.2% as of December 31, 2022[46]. Corporate Governance and Future Outlook - The company continues to seek new business development opportunities without any major future investment plans disclosed for the year[47]. - The company has implemented monthly updates to the board as per corporate governance guidelines since June 2023[53]. - The audit committee reviewed the consolidated financial statements and confirmed they were prepared in accordance with applicable accounting standards[55]. - The company expects no significant impact on financial performance from the adoption of new international financial reporting standards in the foreseeable future[62]. - The company plans to propose amendments to its Articles of Association at the upcoming annual general meeting to align with new regulatory requirements effective December 31, 2023[85].

Financial Performance - The company reported a significant increase in revenue, achieving a total of $150 million for the first half of 2023, representing a 25% growth compared to the same period in 2022[11]. - The company anticipates a revenue growth forecast of 30% for the full year 2023, projecting total revenue to reach approximately $300 million[11]. - Total revenue for the six months ended June 30, 2023, was RMB 822,391,000, a decrease of 3.9% compared to RMB 854,013,000 for the same period in 2022[122]. - Gross profit for the reporting period was approximately RMB 69.9 million, a decrease of about 29.8% from RMB 99.6 million in the same period of 2022, resulting in a gross margin decline from approximately 11.7% to 8.5%[34]. - The company reported a loss before tax of RMB 43,102 thousand, compared to a loss of RMB 7,105 thousand in the previous year, indicating a significant increase in losses[103]. - The company reported a loss of RMB 42,359 thousand for the period, compared to a loss of RMB 5,830 thousand in the previous year, indicating a significant increase in losses[43]. - Basic and diluted loss per share for the period was RMB 0.14, compared to RMB 0.05 and RMB 0.17 in the same period of 2022 respectively[102]. Customer Metrics - User subscriptions reached 500,000 by the end of June 2023, marking a 40% increase year-over-year[12]. - Customer retention rates improved to 85%, reflecting successful engagement strategies and service enhancements[12]. - The number of long-term equipment subscription customers reached 13,761, representing a year-on-year growth of approximately 38.1%[17]. - Revenue from equipment subscription services reached approximately RMB 162.6 million, an increase of about 8.1% compared to RMB 150.4 million in the same period of 2022[22]. - Total equipment subscription volume increased by 20.4% to 2,700,602 units, up from 2,243,465 units in the same period of 2022[22]. Market Expansion and Strategy - The company is expanding its market presence in Southeast Asia, targeting a 15% market share by the end of 2024[11]. - The company plans to pursue strategic acquisitions to enhance its product offerings, with a budget of $50 million allocated for potential targets in 2023[11]. - The company aims to enhance customer experience and expand its customer base and market share through improved service and product development[15]. - The company plans to enhance brand awareness and market influence through online and offline marketing strategies to capture more enterprise customers[25]. - The company plans to continue expanding its market presence and investing in new technologies to drive future growth[113]. Research and Development - Research and development expenses increased to $10 million, accounting for 6.7% of total revenue, focusing on innovative technology solutions[12]. - R&D expenses decreased by approximately 2.3% to about RMB 12.7 million from RMB 13.0 million in the same period of 2022, maintaining a stable percentage of about 1.5% of revenue[37]. Financial Position and Assets - Current assets as of June 30, 2023, were approximately RMB 816.5 million, up about 12.3% from RMB 727.1 million as of December 31, 2022[44]. - The company’s total equity as of June 30, 2023, was RMB 800,674 thousand, down from RMB 807,312 thousand at the end of 2022[107]. - The company’s trade and lease receivables increased significantly to RMB 125,200 thousand, up 93.1% from RMB 64,879 thousand as of December 31, 2022[104]. - The company reported a net cash inflow from investing activities of RMB 144,112 thousand, compared to a net cash outflow of RMB 171,934 thousand in the previous year[113]. Employee and Governance - Employee compensation for the period was approximately RMB 93.9 million, compared to RMB 85.2 million for the same period in 2022, reflecting a growth in workforce costs[56]. - The company has adopted a comprehensive code of conduct for securities trading, ensuring compliance among all directors during the reporting period[60]. - The board of directors consists of three executive directors, one non-executive director, and three independent non-executive directors, ensuring a high level of independence[60]. - The company aims to encourage eligible participants to contribute to its long-term interests through its employee incentive plans[159]. Shareholder Information - A total of 102 eligible participants were granted stock options to purchase 6,622,445 shares at an exercise price of HKD 0.01 per share, equivalent to approximately 5.06% of the issued shares as of the report date[62]. - The total unexercised stock options as of June 30, 2023, amounted to 17,880,602 shares[63]. - The company has issued a total of 353,259,000 shares, with net proceeds from the listing amounting to approximately HKD 338.1 million (approximately RMB 307.9 million) after deducting underwriting fees and related expenses[86]. Risks and Compliance - The company continues to monitor foreign exchange risks and has not implemented any foreign exchange hedging policies[55]. - The company has not declared or paid any dividends for the six months ended June 30, 2023, and does not intend to declare any dividends post-reporting period[129]. - The company has not engaged in any purchase, sale, or redemption of its listed securities during the reporting period[58].