Financial Performance - Revenue for the year ended December 31, 2024, was RMB 23,029,033,000, representing a 1.3% increase from RMB 22,725,317,000 in 2023[6] - Gross profit surged to RMB 2,863,372,000, a significant increase of 95.8% compared to RMB 1,462,615,000 in 2023[6] - The company reported a profit for the year of RMB 588,629,000, a turnaround from a loss of RMB 299,382,000 in 2023[6] - Earnings per share (basic and diluted) improved to RMB 0.60, compared to a loss of RMB 0.41 per share in 2023[6] - The Group's net profit for 2024 was approximately RMB 588.6 million, a significant recovery from a net loss of approximately RMB 299.4 million in the previous year[26] - Profit attributable to shareholders was approximately RMB553.5 million, compared to a loss of approximately RMB375.7 million in the previous year[26] - Basic earnings per share improved to RMB0.60, recovering from a basic loss per share of RMB0.41 in the previous year[26] Assets and Liabilities - Total assets decreased by 8.0% to RMB 20,982,724,000 from RMB 22,811,172,000 in 2023[8] - Total liabilities reduced by 16.9% to RMB 10,845,439,000 from RMB 13,055,814,000 in 2023[8] - The current ratio improved to 1.4 from 1.3 in 2023, indicating better short-term financial health[9] - Net debt to equity ratio decreased to 0.36 from 0.60 in 2023, reflecting a stronger equity position[9] Production and Capacity - The company operates approximately 4.21 million spindles and about 1,650 weaving and knitting machines as of December 31, 2024[11] - The Group's production capacity for knitted garment fabrics decreased significantly due to the sale of a loss-making factory, resulting in a sales volume drop from approximately 15,400 tonnes to approximately 10,900 tonnes and a revenue decline from approximately RMB 797.4 million to approximately RMB 551.6 million[42] - As of December 31, 2024, the Group's production facilities included approximately 4.21 million spindles, with a slight increase in yarn production capacity due to completed construction projects[50][54] Sales and Market Trends - The Group's revenue for the year increased by approximately 1.3% to approximately RMB 23.0 billion, with yarn sales accounting for approximately 77.8% of total revenue, amounting to approximately RMB 17.9 billion, representing a growth of approximately 2.1% compared to last year[35] - Sales volume of yarns grew by approximately 4.0% to approximately 770,000 tonnes, driven by recovering market demand and increased consumer interest in outdoor sports[36] - The textile industry in China saw total sales of approximately RMB2,398.8 billion in 2024, with a year-on-year growth of 3.6%[27] - The total sales of sizeable textile garment and apparel enterprises amounted to approximately RMB1,269.9 billion, representing a year-on-year increase of 2.8%[27] Cost Management - The cost of sales decreased by 5.2% to approximately RMB 20.2 billion in 2024, with raw materials accounting for about 76.1% of the total cost[72] - Selling and distribution costs for the year ended December 31, 2024, amounted to approximately RMB 650.1 million, representing an 11.0% decrease compared to 2023[77] - General and administrative expenses for the year ended December 31, 2024, were approximately RMB 1.156 billion, a decrease of 2.0% compared to 2023, accounting for 5.0% of the Group's revenue[78] Strategic Initiatives - The Group plans to continue its product differentiation strategy and focus on innovation to solidify its market position[22] - Strict control over capital expenditures will be maintained to ensure efficient utilization of financial resources[22] - The Group aims to enhance production efficiency and product quality through technological upgrades and modern intelligent manufacturing[22] - The Group is actively responding to market demand by leading the research and development of products that meet market needs[36] Risk Management - The Group faces significant risks including business and product concentration, which could adversely affect profitability if market trends shift or competition intensifies[117] - Cotton price fluctuations pose a risk to the Group's gross profit margin, as cotton is a major production material and its price may not align with end-product prices[119] - Foreign exchange and interest rate fluctuations could lead to material losses and increased financing costs, particularly with intensified USD/RMB exchange rate volatility[121] - The Group is implementing measures to mitigate risks associated with cotton price fluctuations, including stable procurement strategies and diversifying into synthetic fiber products[123] Corporate Governance - The Group is committed to maintaining high levels of corporate governance, with a Board comprising three executive Directors and three independent non-executive Directors[161] - The Board has mechanisms in place to ensure independent views, including regular meetings with independent non-executive Directors[163] - The company has adopted a Securities Code for directors' transactions, ensuring compliance with the Model Code[177] - The company has established a Remuneration Committee, Audit Committee, Nomination Committee, and ESG Committee, each with specific written terms of reference[190]

Investment Rating - The investment rating for Tianhong International Group is "Outperform the Market" [6][4][31] Core Views - The company is expected to return to profitability in 2024, with a significant increase in operating cash flow. Revenue is projected to grow by 1.3% to 23.03 billion yuan, driven by recovering overseas demand and improved capacity utilization [2][4] - The company aims to maintain a stable operating environment in the second half of 2024, with a focus on controlling capital expenditures and reducing debt pressure [3][4] Summary by Sections Financial Performance - In 2024, the company achieved a net profit of 554 million yuan, a significant turnaround from a loss in 2023, primarily due to a recovery in gross margin and optimized cost control [2][4] - Operating cash flow increased by 126% to 4.48 billion yuan, attributed to higher operating profits and reduced working capital requirements [2][4] - The company’s gross margin improved to 12.4% in 2024, with yarn business revenue accounting for 77.8% of total revenue [2][4] Management Outlook - The management has set ambitious targets for 2025, aiming to sell 800,000 tons of yarn and 100 million meters of woven fabric, while continuing to expand the proportion of high-margin products [3][4] - Capital expenditures for 2024 are planned at 830 million yuan, focusing on automation technology upgrades and distributed photovoltaic power stations [3][4] Profit Forecasts - The profit forecasts for 2025-2027 have been adjusted downwards, with expected net profits of 590 million, 750 million, and 970 million yuan respectively, reflecting a cautious outlook on global demand and cotton prices [4][31] - The target price has been revised to 4.1-4.8 HKD, corresponding to a PE ratio of 6-7x for 2025 [4][31] Market Position - The company is recognized as a leading global producer of cotton yarn, benefiting from early globalization strategies that provide a competitive edge in local supply chains and rapid response capabilities [4][31]

Financial Results Clarification - Texhong International Group Limited announced a clarification regarding its annual results for the year ending December 31, 2024, correcting titles in the financial statements[2] - The corrected titles in the announcement include "Consolidated Income Statement" and "Consolidated Balance Sheet" instead of the previously stated "Condensed Consolidated Income Statement" and "Condensed Consolidated Balance Sheet"[2] - All other information in the annual results announcement remains unchanged[2]

Group 1 - The company reported a revenue of RMB 23.029 billion for the year ending December 31, 2024, representing a year-on-year growth of 1.34% [1] - The company achieved a profit attributable to shareholders of RMB 554 million, marking a turnaround from previous losses [1] - The earnings per share were RMB 0.6, and the company proposed a final dividend of HKD 0.1 per share [1] Group 2 - The company is facing a complex market environment in 2024 but is proactively addressing challenges by restoring production and optimizing product structure [1] - The company has improved its raw material procurement strategy and inventory management to effectively reduce risks [1] - The company plans to continue its capital expenditure control measures and improve its asset-liability structure to enhance financial stability [1] Group 3 - Looking ahead to 2025, the industry is expected to face intensified competition and ongoing cost pressures [2] - The company aims to leverage its management experience and brand influence to navigate market challenges and maintain confidence in the future [2] - The company will focus on product differentiation, quality improvement, and innovation to strengthen its market position [2] Group 4 - The company intends to invest in technological upgrades to enhance production efficiency and product quality [2] - Management innovation will be a key focus, with efforts to optimize management processes and improve organizational effectiveness [2] - The company aims to achieve superior performance in future market competition through these strategic initiatives [2]

Financial Performance - Revenue increased by 1.3% to RMB 23.003 billion[4] - Net profit amounted to RMB 588.6 million, compared to a loss of RMB 299.4 million in the previous year[6] - Profit attributable to shareholders was RMB 553.6 million, a significant recovery from a loss of RMB 375.7 million[5] - Basic earnings per share were RMB 0.60, compared to a loss of RMB 0.41 per share last year[5] - The gross profit for 2024 was approximately RMB 2.86 billion, significantly up from RMB 1.46 billion in 2023, with a gross margin increase of 6.0 percentage points to 12.4%[70] - The group reported a net income of RMB 185,696,000 for the year 2024, compared to RMB 169,194,000 in 2023, reflecting an increase in profitability[21] - The company achieved a turnaround with a net profit attributable to shareholders of approximately RMB 553.5 million, compared to a loss of about RMB 375.7 million in the previous year[62] Revenue Breakdown - Total revenue for the year ending December 31, 2024, reached RMB 36,737,273,000, with external customer revenue contributing RMB 23,029,033,000[16] - Revenue from external customers in Asia accounted for 91.7% of total revenue, while revenue from the Americas accounted for 7.7%[15] - The company reported a significant increase in revenue from yarn sales in China, totaling RMB 21,814,080,000[16] - Yarn sales accounted for RMB 17.91 billion in 2024, up 2.1% from RMB 17.54 billion in 2023, while woven fabric sales increased by 5.7% to RMB 2.17 billion[68] Cost and Expenses - The cost of materials and consumables decreased to RMB 16,018,473,000 in 2024 from RMB 16,229,059,000 in 2023, indicating a reduction of approximately 1.3%[20] - Employee benefits expenses slightly decreased to RMB 2,329,459,000 in 2024 from RMB 2,366,827,000 in 2023, a decline of about 1.6%[20] - Financial expenses netted RMB 387,993,000 in 2024, down from RMB 517,592,000 in 2023, showing a reduction of approximately 25%[20] - The cost of sales decreased by 5.2% to approximately RMB 20.2 billion in 2024, with raw material costs constituting 76.1% of total sales costs[71] Assets and Liabilities - Total assets decreased to RMB 20.983 billion from RMB 22.811 billion[7] - Total liabilities reduced to RMB 10.845 billion from RMB 13.056 billion[8] - The total assets of the group as of December 31, 2024, amounted to RMB 20,982,724, with total liabilities at RMB 10,845,439[17] - As of December 31, 2024, the company's total bank borrowings decreased to approximately RMB 6.40 billion from RMB 7.73 billion in 2023, indicating improved financial health[79] Dividends and Shareholder Returns - The board declared a final dividend of HKD 0.10 per share[4] - The total dividend paid for 2024 amounted to RMB 83,474,000, with a proposed final dividend of HKD 0.10 per share, compared to no dividends in 2023[35][38] - The board aims to maintain a long-term stable dividend payout ratio of approximately 30% of the net profit attributable to the owners of the company, proposing a final dividend of HKD 0.10 per share for the year ended December 31, 2024[90] Operational Efficiency - Operating cash flow for 2024 was RMB 4.48 billion, a substantial increase from RMB 1.99 billion in 2023, driven by improved sales and operational efficiency[76] - The company's inventory turnover days decreased from 109 days in 2023 to 87 days in 2024, reflecting better inventory management[77] - The company's current ratio improved to 1.40 in 2024 from 1.28 in 2023, indicating better liquidity[79] Market and Industry Trends - The textile industry in China achieved a total revenue of approximately RMB 2.399 trillion in 2024, with a year-on-year growth of 3.6%[54] - The total profit for the textile and apparel industry in China was approximately RMB 62.4 billion in 2024, reflecting a year-on-year increase of 1.5%[54] - The global economic environment remains complex, with ongoing challenges such as rising costs and geopolitical risks impacting the textile industry[56] Strategic Initiatives - The company plans to continue focusing on product differentiation and innovation to strengthen its market position in 2025[52] - The company is focusing on digital technology and generative AI applications to enhance production efficiency and product quality while reducing costs[65] - The company plans to sell approximately 800,000 tons of yarn, 100 million meters of woven fabric, and 10,000 tons of knitted fabric in 2025, excluding trade business sales[65] - The company has constructed a 50 MW solar power station in China and plans to continue building distributed solar power stations in 2025 to support environmental sustainability[65] Governance and Compliance - The board consists of three executive directors and three independent non-executive directors, adhering to the corporate governance code applicable during the reporting period[93] - The company has adopted a strict code of conduct for securities trading by directors, confirming compliance for the year ending December 31, 2024[95] - The Audit Committee, composed of three independent non-executive directors, has reviewed the audited consolidated financial statements for the year ending December 31, 2024, with no disagreements on accounting policies[97]

Financial Performance - Revenue for the six months ended June 30, 2024, was RMB 11,243,529, an increase of 4.2% compared to RMB 10,794,419 in the same period of 2023[8]. - Gross profit for the period was RMB 1,479,549, significantly up from RMB 256,745 in 2023, indicating a substantial recovery in profitability[8]. - Operating profit for the first half of 2024 was RMB 610,456, compared to an operating loss of RMB 445,099 in the previous year[8]. - Profit for the period reached RMB 282,269, a turnaround from a loss of RMB 740,178 in the same period last year[9]. - Basic earnings per share for the period was RMB 0.29, compared to a loss per share of RMB (0.81) in 2023[9]. - Total comprehensive income for the period attributable to owners of the company was RMB 281,419, compared to a loss of RMB 682,427 in the previous year[10]. - Other income increased to RMB 83,663 from RMB 57,284 in the same period of 2023, reflecting improved operational performance[8]. - The company reported a profit for the period of RMB 269,938 for the six months ended June 30, 2024, compared to a profit of RMB 7,535,924 at the beginning of the year[15]. Financial Position - Total assets decreased to RMB 21,572,140, down 5.4% from RMB 22,811,172 as of December 31, 2023[11]. - Non-current assets decreased to RMB 10,774,868, a decline of 2.9% from RMB 11,103,716[11]. - Current assets decreased to RMB 10,797,272, down 7.8% from RMB 11,707,456[12]. - Total equity attributable to owners increased to RMB 9,430,498, up 3.1% from RMB 9,149,079[12]. - Non-controlling interests decreased to RMB 490,261, down 19.2% from RMB 606,279[12]. - Total liabilities decreased to RMB 11,651,381, down 10.8% from RMB 13,055,814[13]. - Cash and cash equivalents increased to RMB 2,674,857, up 23.7% from RMB 2,161,795[11]. - Trade and bills receivables increased to RMB 1,713,033, up 8.9% from RMB 1,571,477[11]. Cash Flow - Net cash flows generated from operating activities for the six months ended June 30, 2024, amounted to RMB 2,403,440, compared to RMB 196,344 in the same period of 2023, representing a significant increase of over 1,125%[16]. - Cash flows from investing activities yielded a net inflow of RMB 903,716 for the first half of 2024, contrasting with a net outflow of RMB 264,048 in the prior year[17]. - Proceeds from borrowings in financing activities totaled RMB 4,733,365, while repayments of borrowings were RMB 4,881,099, indicating a net cash outflow in financing activities of RMB 2,800,389[17]. Cost Management - The company is focusing on cost management strategies, as evidenced by the reduction in various expense categories compared to the previous year[65]. - Interest expenses decreased from RMB 274,692,000 in 2023 to RMB 240,368,000 in 2024, a reduction of approximately 12.5%[71]. - Total finance costs incurred decreased from RMB 360,979,000 in 2023 to RMB 262,619,000 in 2024, representing a decline of about 27.3%[71]. - Net finance costs also saw a decrease from RMB 317,496,000 in 2023 to RMB 224,694,000 in 2024, a reduction of approximately 29.3%[71]. Taxation - Current tax on profits for the period was RMB 75,834,000 in 2024, compared to RMB 82,217,000 in 2023, indicating a decrease of about 7.9%[74]. - The effective income tax rate for subsidiaries in Mainland China is 25%, with sixteen subsidiaries qualifying for a preferential rate of 15%[74]. - Subsidiaries in Vietnam are entitled to four years of income tax exemption followed by nine years of a 50% tax reduction based on a 20% rate[76]. Investments and Assets - The closing net book amount of property, plant, and equipment as of June 30, 2024, is RMB 8,273,521, a decrease of 14.3% from RMB 9,506,379 as of June 30, 2023[96]. - The total amount recognized for associates and joint ventures in the condensed consolidated balance sheet as of June 30, 2024, was RMB 364,543, a decrease from RMB 379,038 as of December 31, 2023[114]. - The Group's inventories as of June 30, 2024, totaled RMB 5,070,113,000, down from RMB 5,244,583,000 at the end of 2023, reflecting a decrease of about 3.3%[132]. Financial Instruments and Risks - The Group's activities expose it to various financial risks, including foreign exchange risk, price risk, cash flow and fair value interest rate risk, credit risk, and liquidity risk[35]. - The Group's risk management policies have not changed since the last year-end[35]. - The Group held forward foreign exchange contracts, cross currency swap contracts, cotton future contracts, and cotton option contracts as of June 30, 2024, with fair values determined using active market quotes[40]. Shareholder Information - The share option scheme allows for a maximum of 30% of the ordinary shares to be issued upon the exercise of all outstanding options, ensuring alignment with shareholder interests[195]. - The total number of ordinary shares remained at 4,000,000 shares with a par value of HKD 0.1 each as of both June 30, 2024, and December 31, 2023[167].

Investment Rating - The investment rating for Tianhong International Group (02678.HK) is "Outperform the Market" [1][4][12]. Core Views - The company reported a 4.2% year-on-year revenue growth to 11.24 billion HKD in the first half of 2024, driven primarily by its yarn business, which saw an 8.9% increase in revenue [1]. - The net profit turned positive at 270 million HKD, compared to a loss of 750 million HKD in the same period last year, with a significant improvement in gross margin by 10.8 percentage points to 13.2% [1]. - The company is focusing on optimizing internal costs and enhancing automation, which is expected to reduce labor and electricity costs [1]. Summary by Sections Financial Performance - Revenue for the first half of 2024 reached 11.24 billion HKD, a 4.2% increase year-on-year [1]. - The gross margin improved significantly, rising to 13.2%, with a net profit of 270 million HKD, marking a turnaround from a loss of 750 million HKD in the previous year [1][10]. - The company plans to distribute an interim dividend of 0.1 HKD per share, with a payout ratio of approximately 31% [1]. Business Segments - Yarn business revenue increased by 8.9% to 8.81 billion HKD, accounting for 78.4% of total revenue, with volume and price growth of 6.6% and 2.2%, respectively [1]. - The woven fabric segment saw a decline in revenue by 3.2% to 990 million HKD due to weak overseas market recovery [1]. - The knitted fabric segment's revenue dropped by 25.5% due to the sale of a factory in Vietnam, but profitability improved post-sale [1]. Future Outlook - The company aims to sell 400,000 tons of yarn, 48 million meters of woven fabric, and 6,000 tons of knitted fabric in the second half of 2024, with an overall yarn sales target of 770,000 tons for the year [1]. - The long-term outlook remains positive, with expected net profits of 590 million HKD, 760 million HKD, and 920 million HKD for 2024-2026, reflecting growth rates of 29.2% and 21.5% for 2025-2026 [1][9].

Financial Performance - Revenue for the six months ended June 30, 2024, increased by 4.2% to RMB 11.243 billion compared to RMB 10.794 billion for the same period in 2023[2]. - Net profit for the period was RMB 282.3 million, a significant recovery from a net loss of RMB 740.2 million in the same period last year[4]. - Basic earnings per share for the period were RMB 0.29, compared to a loss per share of RMB 0.81 in the previous year[3]. - Operating profit for the period was RMB 610.5 million, a turnaround from an operating loss of RMB 445.1 million in the prior year[3]. - The company reported a total comprehensive income of RMB 296.1 million for the period, compared to a loss of RMB 667.8 million in the previous year[4]. - The consolidated gross profit margin improved from approximately 2.4% in the previous year to about 13.2% in the review period[39]. - The overall gross margin improved significantly from approximately 2.4% to 13.2% due to increased capacity utilization and inventory clearance[49]. - Yarn sales revenue reached approximately RMB 8.8123 billion, representing an increase of about 8.9% year-on-year[41]. - The average gross margin for yarn significantly improved to 12.5%, up from 0.7% in the same period last year[42]. Assets and Liabilities - Total assets as of June 30, 2024, were RMB 21.572 billion, down from RMB 22.811 billion at the end of 2023[5]. - Total liabilities decreased to RMB 11.651 billion from RMB 13.056 billion at the end of 2023[7]. - The company’s equity attributable to owners increased to RMB 9.921 billion from RMB 9.755 billion at the end of 2023[6]. - The company's asset-liability ratio decreased to 54% as of June 30, 2024, down from 57% at the end of the previous year[39]. - The current ratio improved to 1.38 as of June 30, 2024, compared to 1.28 as of December 31, 2023[56]. - The debt-to-equity ratio decreased to 0.81 as of June 30, 2024, from 0.84 as of December 31, 2023[56]. Cash Flow and Investments - Cash and cash equivalents increased to RMB 2.675 billion from RMB 2.162 billion at the end of 2023[5]. - The group’s bank and cash balance was approximately RMB 2.71 billion, an increase from RMB 2.23 billion as of December 31, 2023, primarily due to increased cash inflow from operating activities[55]. - The group’s capital expenditure for the six months ended June 30, 2024, was approximately RMB 290 million, down from RMB 572.6 million for the same period in 2023[58]. - No significant investments, acquisitions, or disposals were made by the company during the review period[59]. Inventory and Receivables - Total inventory as of June 30, 2024, was RMB 5,070,113,000, a decrease from RMB 5,244,583,000 as of December 31, 2023[28]. - Trade receivables amounted to RMB 1,713,033,000 as of June 30, 2024, compared to RMB 1,571,477,000 as of December 31, 2023, indicating an increase in receivables[29]. - The fair value of trade and notes receivables is close to their carrying value, indicating stable financial health in receivables management[33]. - The group’s inventory decreased by approximately RMB 174.5 million to about RMB 5.07 billion as of June 30, 2024, compared to RMB 5.25 billion as of December 31, 2023[55]. Operational Efficiency - The company maintained strict operational capital control, resulting in a reduction in working capital compared to the same period last year[39]. - The company actively adjusted its product structure and focused on differentiated markets, which enhanced profitability compared to the previous year[38]. - The company plans to continue optimizing its product mix and enhancing vertical integration across business segments to improve financial performance[51]. - The company is focusing on enhancing or divesting low-efficiency assets to concentrate on its core business and increase R&D investment in green and environmentally friendly products[53]. - The company aims to improve production efficiency and reduce costs through technological upgrades of existing equipment[52]. Tax and Compliance - The company is currently assessing risks associated with the implementation of the OECD Pillar Two legislation, which may affect its tax obligations in Vietnam[25]. - The company has engaged tax experts to assist in applying the new legislation due to its complexity and potential impacts on tax liabilities[25]. - The average effective tax rate for entities operating in Vietnam was 12.20% as of June 30, 2024, which is below the 15% minimum tax rate stipulated by the OECD Pillar Two model rules[25]. Employee and Governance - The total employee cost incurred by the company during the review period was approximately RMB 1.2 billion, compared to RMB 1.3 billion for the six months ended June 30, 2023[61]. - As of June 30, 2024, the company employed 27,011 staff, a decrease from 27,655 as of December 31, 2023, with 47% being female employees[61]. - The company has established an audit committee composed of three independent non-executive directors to oversee financial reporting and internal control systems[68]. - The remuneration committee is responsible for formulating the remuneration policies for the board and senior management, consisting of three independent non-executive directors[69]. - The nomination committee is tasked with reviewing the board's structure and assessing the independence of non-executive directors[70]. - The ESG committee is responsible for monitoring compliance with environmental, social, and governance regulations[71]. Market and Sales - Revenue from external customers accounted for 92.4% from Asia and 7.2% from the Americas, compared to 91.3% and 8.0% respectively in the previous year[10]. - The proportion of sales from the Chinese market slightly decreased from approximately 67.4% to 66.3%, with the top ten customers accounting for about 12.9% of total revenue[51]. - The textile industry in China saw a revenue increase of approximately 4.5% year-on-year, with net profit growth of about 19.3% in the first half of 2024[40]. - The sales volume of grey fabric reached approximately 21.9 million meters, a decrease of about 14.8% compared to the same period last year, with revenue dropping to approximately RMB 189 million[43]. - The sales volume of woven fabrics slightly decreased by 1.6% to approximately 43.6 million meters, while the gross margin improved from 12.1% to 18.8% due to favorable cotton yarn cost trends and a stronger USD against RMB[44]. - The sales volume of knitted fabrics fell significantly from approximately 7,700 tons to about 5,800 tons, resulting in a revenue decline of 25.5% to approximately RMB 298.7 million, although the gross margin increased from 9.2% to 11.4%[45]. - Trade business revenue decreased to approximately RMB 630 million, down 35.7% year-on-year, with a gross margin improvement from 5.7% to 12.3%[46]. - Non-woven fabric sales revenue increased slightly to approximately RMB 35.3 million, compared to RMB 34.1 million in the same period last year[47].

Financial Performance - Revenue for 2023 decreased by 4.5% to RMB 22,725,317 thousand compared to 2022[4] - Gross profit for 2023 dropped significantly by 46.9% to RMB 1,462,615 thousand[4] - The company reported a net loss of RMB 299,382 thousand in 2023, a sharp decline of 248.8% from the previous year's profit[4] - Total assets decreased by 12.8% to RMB 22,811,172 thousand as of 31 December 2023[5] - Current assets declined by 14.1% to RMB 11,707,456 thousand in 2023[5] - Return on equity (ROE) for 2023 was -4%, a significant drop from 2% in 2022[6] - The company's sales revenue in 2023 was approximately RMB 22.7 billion, with a net loss of approximately RMB 299.4 million, marking the first financial loss since its establishment[14][18] - Revenue decreased by 4.5% year-on-year to RMB 22.7 billion, and the net loss was RMB 299.4 million compared to a net profit of RMB 201.2 million in the previous year[18] - The company's basic loss per share was RMB 0.41, compared to a basic earning per share of RMB 0.17 in the previous year[18] - The company's loss attributable to shareholders was approximately RMB 375.7 million, compared to a profit of approximately RMB 156.8 million in the previous year[18] - Group revenue decreased by 4.5% to approximately RMB22.7 billion, with yarn sales accounting for 77.2% of total revenue at RMB17.5 billion, remaining flat compared to the previous year[25][28] - Garment fabric revenue decreased by 18.8% to approximately RMB2.9 billion due to weak overseas market demand[25][28] - Yarn sales volume increased by 12.7% to over 740,000 tonnes, with revenue remaining flat at RMB17.5 billion due to raw material price fluctuations[26][28] - Grey fabric sales volume increased by 9.9% to 55.3 million meters, but revenue decreased to RMB531.7 million, with gross profit margin dropping to 6.1% from 10.2%[27][28] - Woven garment fabric sales volume decreased by 22.9% to 89.7 million meters, with revenue dropping 22.3% to RMB2,056.3 million and gross profit margin declining to 12.7%[29][32] - Knitted garment fabric sales volume increased by 2.8% to 15,400 tonnes, but revenue decreased by 8.0% to RMB797.4 million, with gross profit margin improving to 8.7% from 5.3%[30][32] - Non-woven fabric sales revenue slightly increased to RMB70.0 million in 2023, as the company adjusted product structure to adapt to market demand changes[31][32] - Jeanswear business generated sales revenue of approximately RMB20.4 million, mainly from garment factories in China, with a gross profit margin of 6.0%[31][32] - The Group's overall gross profit margin declined to 6.4% from 11.6% in 2022, with a loss attributable to shareholders of approximately RMB375.7 million, compared to a profit of RMB156.8 million in the previous year[33][37] - Basic loss per share was RMB0.41, compared to basic earnings per share of RMB0.17 in 2022[33][37] - Yarn sales decreased by 0.3% in 2023 compared to 2022, with sales revenue dropping from RMB 17,587.45 million to RMB 17,537.02 million[45] - Grey fabrics sales declined by 27.0% in 2023, with revenue falling from RMB 727.98 million to RMB 531.66 million[45] - Woven garment fabrics sales dropped by 22.3% in 2023, with revenue decreasing from RMB 2,647.89 million to RMB 2,056.33 million[45] - Jeanswear sales plummeted by 77.7% in 2023, with revenue falling from RMB 91.34 million to RMB 20.41 million[45] - Non-woven fabrics sales increased by 12.8% in 2023, with revenue rising from RMB 62.07 million to RMB 69.98 million[45] - Total sales revenue decreased by 4.5% in 2023, dropping from RMB 23,805.35 million to RMB 22,725.32 million[45] - Gross profit margin decreased by 5.2 percentage points to 6.4% in 2023, with gross profit falling from RMB 2,755.6 million to RMB 1,462.6 million[52] - Raw materials cost accounted for 77.3% of total sales cost in 2023, with cotton being the major raw material[53] - The Chinese textile market accounted for 68.9% of the company's total sales in 2023[49] - The top ten largest customers accounted for approximately 13.4% of the company's total sales in 2023[50] - Selling and distribution costs decreased by 17.6% to approximately RMB730.4 million in 2023, mainly due to reduced freight and port charges compared to 2022[55] - General and administrative expenses decreased by 10.4% to approximately RMB1,178.6 million, accounting for 5.2% of the Group's revenue in 2023[55] - Net cash generated from operating activities increased to approximately RMB1,985.6 million in 2023, driven by improved inventory control and working capital efficiency[57] - Net cash generated from investing activities amounted to approximately RMB29.5 million in 2023, primarily due to reduced capital expenditures and partial receivables from asset disposals[57] - Net cash used in financing activities was approximately RMB2,337.6 million in 2023, mainly due to enhanced capital control and reduced bank borrowings[57] - Bank and cash balances (including pledged deposits) decreased to approximately RMB2,228.0 million as of 31 December 2023, compared to RMB2,580.1 million in 2022[58] - Inventories decreased by approximately RMB2,345.5 million to RMB5,244.6 million, with turnover days reduced to 109 days in 2023 from 126 days in 2022[58] - Trade and bills payables decreased by approximately RMB1,781.8 million to RMB3,364.7 million, with payable turnover days reduced to 72 days in 2023[61] - Total bank borrowings decreased by approximately RMB820.2 million to RMB7,723.2 million, with short-term borrowings reduced by RMB1,009.5 million[62] - Current ratio improved to 1.28 in 2023, compared to 1.12 in 2022, reflecting better liquidity management[64] - Total bank borrowings as of 31 December 2023 amounted to approximately RMB7,723.2 million, with 49.7% denominated in RMB, 6.8% in USD, 32.3% in HKD, 11.1% in VND, and 0.1% in AUD[65] - Current bank borrowings decreased to approximately RMB4,145.7 million as of 31 December 2023, down from RMB5,155.2 million in 2022, primarily due to repayment of short-term borrowings[67] - Capital expenditure for 2023 was approximately RMB899.0 million, a significant decrease from RMB2,391.0 million in 2022, mainly related to unfinished construction projects and asset acquisitions in Vietnam[69] - The Board does not recommend a final dividend for 2023 due to weakened demand in overseas textile markets, maintaining a long-term dividend payout ratio target of 30% of net profit[78] Operational Performance - Inventory turnover days improved to 109 days in 2023 from 126 days in 2022[6] - The company operates approximately 4.18 million spindles and 1,700 weaving and knitting machines as of 31 December 2023[8] - Texhong International Group has over 5,000 customers globally, with sales networks spanning multiple countries and regions[8] - The company's production bases are located in China, Vietnam, Turkey, and the Americas[8] - The domestic textile and apparel market experienced a substantial recovery in 2023, while overseas markets remained relatively lackluster with industry destocking efficiency falling short of expectations[11][13] - The company focused on controlling capital expenditures, optimizing resources, and streamlining management processes to foster a healthier internal environment[12][13] - The company prioritized investments with clear potential for return on investment and strategic alignment with long-term objectives to preserve financial flexibility[12][13] - The company strengthened regional production capacity and bolstered regional supply chain flexibility through vertical integration and supplier partnerships[12][13] - The company remains optimistic about the resilience of the textile industry and its own business, aiming to focus on innovation, sustainable development, and operational excellence in the upcoming year[15][17] - The company's efforts in the second half of the year led to positive changes, but the first-half loss resulted in an annual loss[14][16] - The Group targets to sell 760,000 tonnes of yarns, 92 million meters of woven garment fabrics, and 12,000 tonnes of knitted garment fabrics in 2024, excluding trading business sales[36][38] - The Group disposed of certain plots of land and buildings in Shaoxing for approximately RMB975.1 million as part of its restructuring efforts[40][42] - The Group plans to focus on high-end, intelligent, and green production trends, with increased R&D efforts in green and environmentally friendly products[39][42] - The Group is constructing yarn factories and a woven garment fabric factory in Vietnam to relocate production capacity from Shaoxing, China[39][42] - The Group's revenue from yarns decreased by approximately 0.3% in 2023 due to a decline in sales unit prices[43] - The Group had a total workforce of 27,655 employees as of 31 December 2023, with 52.3% being female employees, and total staff costs amounted to approximately RMB2.4 billion[76] - Core-spun yarn is the major earning source of the company, contributing significantly to its profitability[84] - The company plans to enhance customer communication, step up cooperation with raw material suppliers, and boost R&D input to improve product functionality and develop new products[85] - The company is exploring downstream industries and increasing the contribution of downstream products to diversify its revenue streams[85] - The company is facilitating the development of import and export business to tap into overseas markets[85] - The company is promoting diversified development in the textile industry to survive under adverse macro-environmental conditions[85] - The company faces risks from geographical concentration, with several production bases located in Mainland China, making it subject to economic, political, and social conditions in China[88] - The company is closely monitoring cotton futures and supply-demand balance to hedge risks and reduce reliance on cotton by diversifying synthetic fiber development[91] - The company is mitigating foreign exchange and interest rate risks by increasing RMB loans, using financial products like forward contracts, and monitoring economic data from the People's Bank of China and the Federal Reserve[91] - The Group has over 5,000 customers, with increasing business volume and types leading to higher total receivables[96] - Overseas market demand for textiles has declined, affecting the Group's profitability and increasing customer operation risks[96] - The Group faces product liability risks due to its wide and expanding product portfolio, with some customer claims regarding product quality[98] - Overseas textile market downturn has led to higher customer demands for product quality[98] - The Group operates in multiple countries and regions, facing tax risks due to varying tax regulations and increasing international tax compliance requirements[98] - The Group is exposed to financing risks due to its large business scale and high financing needs, with potential impacts on capital projects and operations if financing terms change[94] - The Group monitors credit terms and receivables in real-time, with alerts for overdue amounts and customers with abnormal operations[96] - The Group uses advanced measurement equipment and online quality control systems to manage production processes and mitigate product liability risks[98] - The Group engages local tax professionals and institutions to handle tax audits and ensure compliance with regional tax policies[98] - The Group diversifies its financing portfolio and maintains good relationships with financial institutions to mitigate financing risks[94] - The Group's electricity consumption in production is significant, and potential electricity shortages could adversely affect operations. Measures include equipping factories with generators, conducting technological renovations to reduce energy consumption, and liaising with the government for uninterrupted supply[101] - The Group faces human resources risks due to its labor-intensive industry. Despite advanced production facilities reducing labor needs, manpower requirements remain high. Strategies include performance-based rewards, expanded staff training, and improving employee living conditions[103] - Environmental protection compliance is a significant risk, with potential new regulations requiring substantial expenditure for facility upgrades. The Group selects suppliers ensuring environmental standards, establishes internal check systems, and monitors regulatory changes[104] - The Group operates in multiple jurisdictions, requiring compliance with various legal and regulatory frameworks, including the Securities and Futures Ordinance and Listing Rules of the Hong Kong Stock Exchange. Legal advisors and the company secretary ensure compliance and provide updates to the board[100] - The Group is expanding its operations abroad, which introduces cultural differences between foreign and Chinese employees. Training programs and local presence enhancement are strategies to mitigate this risk[103] Corporate Governance - The Board currently comprises five Directors, including two Executive Directors and three Independent Non-Executive Directors (INEDs), with one INED appointed and one retired in 2023[109][114] - The Board held six meetings and one general meeting in 2023, with all Executive Directors attending all meetings, while attendance varied among INEDs due to retirements and appointments[114] - The Board ensures independent oversight through mechanisms such as regular meetings between the Chairman and INEDs, and INEDs representing more than one-third of the Board[110][111] - The Board is responsible for strategic decisions, including investment plans, financial performance, and significant policies, with day-to-day operations delegated to senior management[114] - Board meetings are scheduled quarterly, with at least 14 days' notice and agendas distributed at least three days in advance[115] - Directors have access to Board papers, company secretary services, and senior management, and are updated on regulatory developments to ensure compliance[116] - The company provides continuous professional development for Directors to maintain their knowledge and skills, including updates on Listing Rules and regulatory changes[117] - The company has adopted a Securities Code for Directors' securities transactions, aligned with the Model Code for Securities Transactions by Directors of Listed Issuers[118] - The company's annual director's fees for the year ended 31 December 2023 were HKD125,000 for Mr. Ting Leung Huel Stephen, HKD150,000 for Professor Cheng Longdi, HKD180,000 for Professor Tao Xiaoming, and HKD120,273.97 for Mr. Shu Wa Tung, Laurence[125] - Mr. Ting Leung Huel Stephen ceased to be an independent non-executive director on 25 May 2023[125] - The company's Securities Code requires directors to notify designated directors and receive written acknowledgment before dealing in the company's securities and derivatives[122][126] - The company confirms that all directors have complied with the Securities Code and the Model Code during the year[123] - The roles of chairman and chief executive officer are separated, with Mr. Hong Tianzhu serving as chairman and Mr. Zhu Yongxiang as vice chairman and chief executive officer[124][127] - The Remuneration Committee comprises three independent non-executive directors: Mr. Shu Wa Tung, Laurence, Professor Tao Xiaoming, and Professor Cheng Longdi[129] - The Remuneration Committee held two meetings during the year to review and discuss the existing policy and structure for the remuneration of Directors[132] - The Company adopted a share option scheme in April 2014 for a term of ten years to attract, retain, and motivate senior executives and key employees[135] - The Remuneration Committee is responsible for making recommendations on the remuneration packages of executive Directors and senior management, including benefits in kind, pension rights, and compensation payments[129] - The Remuneration Committee ensures that no director or any of their associates is involved in deciding their own remuneration[131] - The Remuneration Committee reviews and approves compensation arrangements related to the dismissal or removal of directors for misconduct[131] - The Remuneration Committee reviews and approves compensation payable to executive Directors and senior management for any loss or termination of office or appointment[131] - The Remuneration Committee considers salaries paid by comparable companies, time commitment, responsibilities, and employment conditions elsewhere in the Group[129] - The Remuneration Committee makes recommendations to the Board on the remuneration of non-executive Directors[129] - The Remuneration Committee reviews and/or approves matters relating to share schemes under Chapter 17 of the Listing Rules[131] - The Audit Committee reviewed and approved the audit scope and fees for the 2022 Final Audit, which covered the Group's financial year ended 31 December 2022[139] - The Audit Committee reviewed the external auditor's report on the findings of the 2022 Final Audit[139] - The Audit Committee reviewed the financial reports for the year ended 31 December 2022 and the six months ended 30 June 2023[139] - The Audit Committee reviewed the effectiveness of the Group's internal control system, including financial, operational, and compliance controls, as well as risk management functions[139] - The Audit Committee met twice during the year, with attendance records showing full participation by members except for one member who attended 1 out of 2 meetings[139] - The Audit Committee is responsible for monitoring the integrity of the Company's financial statements, annual reports, and accounts, as well as reviewing significant financial reporting judgments[136] - The Audit Committee ensures the independence and objectivity of the external auditor and reviews the effectiveness of the audit process[136] - The Audit Committee is chaired by an Independent Non-Executive Director with appropriate professional qualifications or accounting expertise[136] - The Audit Committee is tasked with reviewing the Group's financial and accounting policies and practices[137] - The Audit Committee reviews the external auditor's management letter and any material queries raised by the auditor regarding accounting records, financial accounts, or control systems[137] - The Nomination Committee was established on 1 April 2012 and currently consists of one executive director and three independent non-executive directors[140] - The Nomination Committee reviews the structure, size, and composition of the Board annually and makes recommendations to align with the company's corporate strategy[140] - The Nomination Committee assesses the independence of independent non-executive directors and recommends candidates for direct

Investment Rating - The report maintains a "Buy" rating for Tianhong International Group (02678 HK) with a target price range of 4 70-5 00 HKD [1][3] Core Views - Tianhong International Group experienced a 5% decline in revenue in 2023 due to overseas brand destocking, resulting in a net loss of 380 million RMB [1] - The company's gross margin recovered to 10% in H2 2023, driven by improved order demand and higher capacity utilization in Vietnam [1] - The company's yarn business remained stable with a slight revenue decline of 0 3%, while woven fabric and knitted fabric revenues dropped by 22 3% and 8 0% respectively [1] - The company's financial expenses increased due to higher debt levels from previous capital expenditures and overseas interest rate hikes [1] - Operating cash flow improved by 23% to 1 99 billion RMB in 2023, supported by better inventory management [1] Financial Performance - Revenue for 2023 decreased by 4 5% to 22 725 billion RMB, with a net loss of 376 million RMB compared to a profit of 157 million RMB in 2022 [1][2] - In H2 2023, revenue grew by 11% YoY, with yarn revenue increasing by 13 2% and gross margin recovering to 10 0% [1] - The company's net profit in H2 2023 was 370 million RMB, supported by the sale of its Vietnam knitted fabric business and domestic factory relocation [1] - The company's 2024-2026 net profit forecasts are 590 million, 760 million, and 920 million RMB, with growth rates of 29% and 22% in 2025 and 2026 respectively [1][9] Operational Highlights - The company plans to sell 760,000 tons of yarn, 92 million meters of woven fabric, and 120 million meters of knitted fabric in 2024 [1] - Capital expenditure in 2023 was 900 million RMB, significantly lower than previous years, and the company plans to continue controlling capital spending in 2024 [1] - The company aims to reduce foreign currency debt to alleviate interest expense pressure [1] Industry Outlook - The report highlights a recovery in demand, with overseas brand destocking nearing its end and cotton prices rising, which is expected to support order volume and pricing in 2024 [1][9] - The company's early globalization strategy and local supply chain advantages position it well to capture market share in the long term [1][9] Financial Metrics - The company's ROE is expected to improve from -4 1% in 2023 to 6 1%, 7 5%, and 8 6% in 2024-2026 [2][10] - The PE ratio is forecasted to decline from 22 6 in 2022 to 6 0, 4 7, and 3 8 in 2024-2026 [2][10] - The EV/EBITDA ratio is projected to decrease from 33 5 in 2023 to 8 3, 7 3, and 6 5 in 2024-2026 [2][10]