TEXHONG INTERNATIONAL GROUP LIMITED 天 虹 國 際 集 團 有 限 公 司 (於開曼群島註冊成立之有限公司) (Incorporated in the Cayman Islands with limited liability) Stock Code 股份代號：2678 ANNUAL REPORT 年 2024報 TEXHONG INTERNATIONAL GROUP LIMITED 天 虹 國 際 集 團 有 限 公 司 Annual Report 年報 2024 TABLE OF CONTENTS 目錄 | 2 | Financial Highlights | | --- | --- | | | 財務摘要 | | 3 | Corporate Profile | | | 企業簡介 | | 4 | Chairman's Statement | | | 主席報告書 | | 7 | Management Discussion and Analysis | | | 管理層討論及分析 | | 30 | Corporate Governance Report | | | 企業管治報告 ...

证券研究报告 | 2025年04月02日 天虹国际集团（02678.HK） 2024 年扭亏为盈，经营性现金流净额大幅增长 优于大市 2024 年收入恢复正增长，净利扭亏为盈。公司是全球棉纱龙头生产商。2024 年收入增长 1.3%至 230.29 亿元，主要受益于海外需求回暖及产能利用率提 升。其中，纱线/梭织面料/针织面料收入分别同比变动+2.1%/+5.7%/-30.0% 至 179/21/5 亿元。纱线业务收入占比 77.8%，平均售价-1.8%至 2.32 万元/ 吨，降幅收窄，同时，纱线毛利率同比+6.0%，主要由于高价库存消化完毕 及越南产能满产。2024 年公司财务费用与现金流改善，主要由于债务规模缩 减（总借贷减少 13.28 亿元至 63.96 亿元）及海外加息压力缓解。2024 年公 司净利润 5.54 亿元，同比大幅扭亏，主因毛利率修复（+6%至 12.4%）及费 用管控优化。经营现金流量净额 44.8 亿元，增长 126%，主要由于经营利润 的增加以及营运资金占用的减少；投资活动现金净额 5.4 亿元，同比大幅增 长（2023 年为 0.3 亿元），主要由于收回处置土地和厂房的剩余款 ...

香港交易及結算所有限公司及香港聯合交易所有限公司對本公佈之內容概不負責， 對其準確性或完整性亦不發表任何聲明，並明確表示，概不對因本公佈全部或任何 部分內容而產生或因倚賴該等內容而引致之任何損失承擔任何責任。 TEXHONG INTERNATIONAL GROUP LIMITED 天虹國際集團有限公司 （於開曼群島註冊成立之有限公司） （股份代號：2678） 有關截至二零二四年十二月三十一日止年度之 全年業績公佈之 澄清公佈 茲提述天虹國際集團有限公司（「本公司」）於二零二五年三月二十七日刊發截至二零 二四年十二月三十一日止年度之全年業績公佈（「二零二四年業績公佈」）。除文義另 有所指外，本公佈所用詞彙將與二零二四年業績公佈所界定者具有相同涵義。 董事會注意到二零二四年業績公佈第2頁及第4頁中不慎出現文書之誤，該兩處標題 應分別為「綜合收益表」（而非「簡明綜合收益表」）及「綜合資產負債表」（而非「簡明綜 合資產負債表」）。 除前述所披露者外，二零二四年業績公佈之所有其他資料維持不變。前述澄清乃補 充二零二四年業績公佈並應與其一併閱讀。 承董事會命 天虹國際集團有限公司 主席 洪天祝 香港，二零二五年三月二十八 ...

智通财经APP讯，天虹国际集团(02678)发布截至2024年12月31日止年度业绩，集团收入人民币230.29亿 元，同比增长1.34%;股东应占溢利5.54亿元，同比扭亏为盈;每股盈利0.6元;拟派末期股息每股10港仙。 集团于上一年度经历亏损后，面对2024年依旧复杂的市场环境，更积极主动地应对挑战。公司一方面全 力恢复生产，力求达致满负荷运转;另一方面大幅调整及优化产品结构，提升各工厂的生产效率，同时 投入资源开发高附加值并迎合潮流的新产品。此外，集团亦进一步完善原料采购策略，强化库存管理， 按市场价格波动及生产计划灵活调整采购节奏，有效降低了风险。在资金管理方面，公司延续了上一年 度严格管控资本支出的方针，并进一步改善资产负债结构、降低整体债务水准，以增强财务的稳健性。 经过多方面的不懈努力，集团整体盈利水准显著改善，成功摆脱了过去两年宏观环境波动所带来的负面 影响。 展望2025年，行业竞争将日益激烈，加上成本上涨压力持续，国际政策及环境的变化亦将促使行业格局 进一步调整与整合。然而，集团凭借多年积累的管理经验及品牌影响力，有能力应对市场的各种挑战， 并对未来怀抱信心。公司将秉承产品差异化策略，不 ...

香港交易及結算所有限公司及香港聯合交易所有限公司對本公佈之內容概不負責，對其 準確性或完整性亦不發表任何聲明，並明確表示，概不對因本公佈全部或任何部分內容 而產生或因倚賴該等內容而引致之任何損失承擔任何責任。 TEXHONG INTERNATIONAL GROUP LIMITED 天虹國際集團有限公 司 （股份代號：2678） （於開曼群島註冊成立之有限公司） 截至二零二四年十二月三十一日止年度之 全年業績公佈 財務摘要 天虹國際集團有限公司（「本公司」）董事（「董事」）會（「董事會」）提呈本公司及其附屬公司 （統稱「本集團」）截至二零二四年十二月三十一日止財政年度之經審核綜合業績，連同二 零二三年度比較數字。 – 1 – • 收入上升1.3%至人民幣230億元 • 毛利率上升6.0個百分點至12.4% • 純利為人民幣5.886億元 • 股東應佔溢利為人民幣5.535億元 • 每股基本盈利為人民幣0.60元 • 董事會宣佈派付末期股息每股10港仙 簡明綜合收益表 截至二零二四年十二月三十一日止年度 | | | 截至十二月三十一日止年度 | | | --- | --- | --- | --- | | | 附註 ...

天 虹 國 際 集 團 有 限 公 司 TEXHONG INTERNATIONAL GROUP LIMITED (Incorporated in the Cayman Islands with limited liability) (於開曼群島註冊成立之有限公司) Stock Code 股份代號：2678 2024" INTERMA 報 ( )R TABLE OF CONTENTS 目錄 2 Corporate Information 公司資料 4 Condensed Consolidated Income Statement 簡明綜合收益表 6 Condensed Consolidated Statement of Comprehensive Income 簡明綜合全面收益表 7 Condensed Consolidated Balance Sheet 簡明綜合資產負債表 10 Condensed Consolidated Statement of Changes in Equity 簡明綜合權益變動表 12 Condensed Consolidated Cash Flow Statement 簡明綜合現金 ...

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]