Financial Performance - Revenue increased by 6.29% to RMB 13,690,520,000, reaching a historical high[8] - Net profit for 2021 was RMB 1,275,383,000, a decrease of 34.90% compared to the previous year[8] - EBITDA decreased by 34.15% to RMB 1,755,164,000, reflecting challenges in cost management[8] - In 2021, the company achieved a total revenue of RMB 13,691 million, an increase of RMB 811 million or 6.29% compared to RMB 12,880 million in 2020[15] - The company's net profit for the year was approximately RMB 1,275 million, a decrease of RMB 685 million or 34.92% from RMB 1,960 million in the previous year, primarily due to rising raw material prices[15] - The comprehensive gross profit margin decreased to 17.95%, down 5.42 percentage points from 23.37% in 2020[15] - The company reported a total comprehensive income of RMB 1,297,424 thousand for the year, down from RMB 1,993,372 thousand in 2020[149] - The company reported a total comprehensive income of RMB 1,297,381,000 for the year, compared to RMB 1,993,372,000 in the previous year[153] Cash Flow and Dividends - Cash flow from operating activities was RMB 517,000,000, with total cash and financial assets amounting to RMB 6,514,000,000[12] - Proposed dividend of RMB 0.22 per share, with a payout ratio of 60% of net profit[12] - The company declared a final dividend of HKD 0.22 per share for the year ended December 31, 2021, compared to a final dividend of HKD 0.33 per share for the previous year, totaling HKD 1,412 million (approximately RMB 1,187 million) for the prior year[37] - Declared dividends for the year amounted to RMB 1,186,910,000, reflecting a significant cash outflow from retained earnings[152] - The company paid dividends of RMB 1,186,910 thousand in 2021, an increase from RMB 976,062 thousand in 2020[155] Market Position and Sales - The company retained the largest market share in the domestic loader market and ranked among the top three in forklifts[12] - The sales volume of loaders maintained the industry-leading position, while forklift sales exceeded 75,000 units, solidifying a top-three position in the industry[13] - Export sales increased significantly by 74.04% to approximately RMB 1,504 million, compared to RMB 864 million in 2020[16] - The market share of forklifts increased to 25.7%, up 4.7% from the previous year, while excavator sales decreased to 13.7%, down 5.1% from 2020[15] - Wheel loader sales increased by 5.2% to approximately RMB 6,611 million, accounting for 48.3% of total sales[17] - Forklift sales rose by 29.7% to RMB 3,516 million, representing 25.7% of total sales[18] - Excavator sales decreased by 22.5% to RMB 1,873 million, making up 13.7% of total sales[19] Research and Development - The company focused on enhancing product quality and invested more in R&D, particularly in new energy loaders and forklifts[13] - R&D expenses increased by approximately RMB 44 million due to enhanced investment in electric forklift development[28] - The company will continue to increase investment in product research and development, focusing on four major product categories and core components to improve product structure and performance[30] - The company aims to enhance the level of product series and accelerate the transformation and upgrading of products, particularly in the development and application of new energy technologies[30] - The company plans to strengthen its digitalization and intelligent transformation efforts, increasing R&D expenditure and enhancing the overall level of its technical team[30] Risk Management and Corporate Governance - The company emphasized risk control and management innovation to ensure operational quality amid fierce market competition[13] - The board of directors is committed to maintaining high standards of corporate governance and transparency to enhance shareholder value[66] - The company has adopted a corporate governance code to ensure compliance with securities trading standards among directors[71] - The company aims to enhance its management practices to improve competitiveness and operational efficiency, ensuring sustainable development for greater shareholder returns[71] - The company has implemented a comprehensive budget management and performance evaluation system to monitor operational conditions and adjust management measures accordingly[86] Environmental and Social Responsibility - The company is committed to improving its environmental performance and reducing pollution during its production processes[52] - The company has established an ISO 14001 environmental management system to ensure effective operation and continuous improvement in environmental management[107] - The company aims to reduce the impact of its operations on the environment through clean production and pollution control initiatives[107] - The company has invested over 100 million in environmental governance over the past three years, achieving a 100% compliance rate for emissions standards[118] - The company has implemented a strict anti-corruption framework, ensuring compliance with internal and external regulations[135] Employee and Workforce Management - Employee count stood at 8,198 as of December 31, 2021, with an average monthly turnover rate of 1.46%[116] - The company offers over 1,000 training courses covering various modules, enhancing employees' professional knowledge and skills[120] - The company has achieved national secondary certification for safety production standardization, with 100% coverage of safety operation procedures across all positions[118] - The company strictly adheres to labor laws, ensuring no violations related to labor standards were found during the reporting period[121] Financial Position and Assets - Total assets as of December 31, 2021, amounted to RMB 16,602,217 thousand, compared to RMB 17,274,236 thousand in 2020[150] - Total current liabilities decreased to RMB 5,659,178,000 from RMB 7,095,283,000, representing a reduction of approximately 20.2% year-over-year[151] - Net current assets increased to RMB 6,808,737,000, up from RMB 6,108,074,000, reflecting a growth of about 11.4%[151] - Non-current liabilities totaled RMB 738,250,000, significantly up from RMB 84,678,000, marking an increase of approximately 769.5%[151] - Net asset value reached RMB 10,204,789,000, compared to RMB 10,094,275,000, showing a growth of about 1.1%[151] Audit and Compliance - The audit aimed to provide reasonable assurance that the financial statements are free from material misstatement due to fraud or error[146] - The company’s directors are responsible for preparing true and fair consolidated financial statements in accordance with applicable financial reporting standards[145] - The audit procedures were designed to identify and assess risks of material misstatement in the financial statements[146] - The external auditor, Ernst & Young, received approximately RMB 2.89 million for audit and review services for the year ended December 31, 2021, compared to RMB 2.76 million in 2020[79]

[Financial Highlights](index=3&type=section&id=Financial%20Highlights) This chapter summarizes the consolidated financial performance of China Lonking Holdings Limited and its subsidiaries for the six months ended June 30, 2021, showing significant revenue growth but a decline in profitability metrics compared to the prior period 2021 H1 Key Financial Indicators Comparison | Indicator | Six Months Ended June 30, 2021 (RMB thousands) | Six Months Ended June 30, 2020 (RMB thousands) | Change (+/-) | | :--- | :--- | :--- | :--- | | Revenue | 8,191,260 | 6,513,807 | +25.75% | | Operating Profit | 1,028,647 | 1,064,603 | -3.38% | | EBITDA | 1,284,374 | 1,291,572 | -0.56% | | Profit attributable to owners of the parent | 944,563 | 943,608 | +0.10% | | Basic earnings per share | 0.22 | 0.22 | +0.00% | | Net asset value per share | 2.30 | 2.11 | +9.00% | | Consolidated gross profit margin | 18.69% | 22.89% | -4.20% | | Net profit margin | 11.53% | 14.49% | -2.96% | | EBITDA margin | 15.68% | 19.83% | -4.15% | | Return on equity | 9.58% | 10.44% | -0.86% | | Current ratio | 1.77 | 1.80 | -0.03% | | Interest coverage ratio | 70.40 | 84.70 | -14.30% | | Total debt to equity ratio | 87.94% | 77.65% | +10.29% | | Inventory turnover days | 102 | 107 | -5 Days | | Trade and bills payables turnover days | 140 | 140 | +0 Days | | Trade receivables turnover days | 93 | 83 | +10 Days | [Review Report on Interim Condensed Consolidated Financial Information](index=5&type=section&id=Review%20Report%20on%20Interim%20Condensed%20Consolidated%20Financial%20Information) Ernst & Young has reviewed the Group's interim condensed consolidated financial information for the six months ended June 30, 2021, finding no material matters suggesting non-compliance with HKAS 34 - The review was conducted in accordance with Hong Kong Standard on Review Engagements 2410 issued by the HKICPA, with a scope smaller than an audit, thus no audit opinion is expressed[9](index=9&type=chunk) - The review concluded that no matters were found to suggest the interim condensed consolidated financial information was not prepared in all material respects in accordance with HKAS 34[10](index=10&type=chunk) [Interim Condensed Consolidated Statement of Profit or Loss](index=7&type=section&id=Interim%20Condensed%20Consolidated%20Statement%20of%20Profit%20or%20Loss) This chapter presents the Group's consolidated profit or loss for the six months ended June 30, 2021, showing significant revenue growth but decreased gross profit margin and profit before tax, with profit for the period remaining stable Interim Condensed Consolidated Statement of Profit or Loss Key Data | Indicator | Six Months Ended June 30, 2021 (RMB thousands) | Six Months Ended June 30, 2020 (RMB thousands) | | :--- | :--- | :--- | | Revenue | 8,191,260 | 6,513,807 | | Cost of sales | (6,660,466) | (5,023,023) | | Gross profit | 1,530,794 | 1,490,784 | | Profit before tax | 1,101,954 | 1,125,055 | | Income tax expense | (157,367) | (181,219) | | Profit for the period | 944,587 | 943,836 | | Profit attributable to owners of the parent | 944,563 | 943,608 | | Basic earnings per share (RMB) | 0.22 | 0.22 | [Interim Condensed Consolidated Statement of Comprehensive Income](index=8&type=section&id=Interim%20Condensed%20Consolidated%20Statement%20of%20Comprehensive%20Income) This chapter presents the Group's comprehensive income for the six months ended June 30, 2021, with total comprehensive income for the period increasing due to exchange differences and fair value changes of financial assets Interim Condensed Consolidated Statement of Comprehensive Income Key Data | Indicator | Six Months Ended June 30, 2021 (RMB thousands) | Six Months Ended June 30, 2020 (RMB thousands) | | :--- | :--- | :--- | | Profit for the period | 944,587 | 943,836 | | Financial assets at fair value through other comprehensive income: fair value changes | (2,955) | 792 | | Income tax effect | 446 | (119) | | Exchange differences arising from translation of overseas operations | 15,170 | (3,912) | | Other comprehensive income/(loss) for the period, net of tax | 12,661 | (3,239) | | Total comprehensive income for the period | 957,248 | 940,597 | | Total comprehensive income attributable to owners of the parent | 957,224 | 940,368 | [Interim Condensed Consolidated Statement of Financial Position](index=9&type=section&id=Interim%20Condensed%20Consolidated%20Statement%20of%20Financial%20Position) This chapter presents the Group's financial position as of June 30, 2021, showing increases in total assets and current assets, a slight decrease in total equity, and increases in both current and non-current liabilities Interim Condensed Consolidated Statement of Financial Position Key Data | Indicator | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | Total non-current assets | 4,471,104 | 4,070,879 | | Total current assets | 14,068,366 | 13,203,357 | | Total current liabilities | 7,939,337 | 7,095,283 | | Total non-current liabilities | 735,520 | 84,678 | | Net assets | 9,864,613 | 10,094,275 | | Equity attributable to owners of the parent | 9,862,108 | 10,091,794 | | Total equity | 9,864,613 | 10,094,275 | [Interim Condensed Consolidated Statement of Changes in Equity](index=12&type=section&id=Interim%20Condensed%20Consolidated%20Statement%20of%20Changes%20in%20Equity) This chapter details the Group's equity movements for the six months ended June 30, 2021, showing total comprehensive income of RMB 957,248 thousands, but a reduction in total equity due to factors like declared dividends - As of June 30, 2021, equity attributable to owners of the parent was **RMB 9,862,108 thousands**, a decrease from **RMB 10,091,794 thousands** as of January 1, 2020[17](index=17&type=chunk) - Total comprehensive income for the period was **RMB 957,248 thousands**, of which **RMB 957,224 thousands** was attributable to owners of the parent[17](index=17&type=chunk) - Dividends declared during the period amounted to **RMB 1,186,910 thousands**, leading to a reduction in equity[17](index=17&type=chunk) [Interim Condensed Consolidated Statement of Cash Flows](index=14&type=section&id=Interim%20Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) This chapter presents the Group's cash flows for the six months ended June 30, 2021, showing increased net cash from operating activities, a shift from net outflow to net inflow from investing activities, reduced net cash outflow from financing activities, and a net increase in cash and cash equivalents Interim Condensed Consolidated Statement of Cash Flows Key Data | Indicator | Six Months Ended June 30, 2021 (RMB thousands) | Six Months Ended June 30, 2020 (RMB thousands) | | :--- | :--- | :--- | | Net cash flows from operating activities | 446,941 | 406,669 | | Net cash flows from/(used in) investing activities | 57,790 | (113,611) | | Net cash flows used in financing activities | (46,780) | (61,843) | | Net increase in cash and cash equivalents | 457,951 | 231,215 | | Cash and cash equivalents at end of period | 3,241,892 | 2,733,009 | [Notes to the Interim Condensed Consolidated Financial Information](index=16&type=section&id=Notes%20to%20the%20Interim%20Condensed%20Consolidated%20Financial%20Information) This chapter provides detailed notes to the interim condensed consolidated financial information, covering company information, accounting policies, revenue recognition, segment information, asset and liability composition, equity changes, related party transactions, and fair value measurement of financial instruments [1. Company Information](index=16&type=section&id=1.%20Company%20Information) The Group's principal activities include manufacturing and distributing construction machinery and providing finance lease services; the Company is incorporated in the Cayman Islands and listed on the HKEX, with Ms. Ni Yinying as the ultimate controlling party - The Group's principal activities are the manufacture and distribution of wheel loaders, road rollers, excavators, forklifts, and other construction machinery, and the provision of finance leases[22](index=22&type=chunk) - The Company was incorporated in the Cayman Islands on May 11, 2004, and its shares are listed on the Main Board of the Stock Exchange of Hong Kong[22](index=22&type=chunk) - Ms. Ni Yinying, a non-executive director of the Company, is the ultimate controlling party of the Company[22](index=22&type=chunk) [2. Basis of Preparation and Changes in the Group's Accounting Policies](index=16&type=section&id=2.%20Basis%20of%20Preparation%20and%20Changes%20in%20the%20Group's%20Accounting%20Policies) This interim condensed consolidated financial information is prepared in accordance with HKAS 34, with accounting policies consistent with the annual financial statements, and the adoption of revised HKFRSs had no material impact [2.1 Basis of Preparation](index=16&type=section&id=2.1%20Basis%20of%20Preparation) The interim condensed consolidated financial information is prepared in accordance with HKAS 34 "Interim Financial Reporting" and should be read in conjunction with the Group's annual financial statements as of December 31, 2020 - The interim condensed consolidated financial information is prepared in accordance with Hong Kong Accounting Standard 34 'Interim Financial Reporting'[23](index=23&type=chunk) - This information does not include all disclosures required in annual financial statements and should be read in conjunction with the annual financial statements as of December 31, 2020[23](index=23&type=chunk) [2.2 Changes in Accounting Policies and Disclosures](index=17&type=section&id=2.2%20Changes%20in%20Accounting%20Policies%20and%20Disclosures) The accounting policies adopted for this interim condensed consolidated financial information are consistent with the annual consolidated financial statements, with the initial adoption of revised HKFRSs having no material impact on performance or financial position - Accounting policies are consistent with the 2020 annual consolidated financial statements, with only the initial adoption of revised Hong Kong Financial Reporting Standards[24](index=24&type=chunk) - The adoption of new and revised standards had no significant impact on the preparation and presentation of the results and financial position for current and prior periods[24](index=24&type=chunk) [3. Revenue from Contracts with Customers](index=17&type=section&id=3.%20Revenue%20from%20Contracts%20with%20Customers) The Group's revenue from customer contracts primarily stems from the sale of construction machinery, recognized when goods are transferred, with approximately 9% of sales denominated in non-functional currencies - The Group's revenue from contracts with customers primarily arises from the sale of wheel loaders, road rollers, excavators, forklifts, and other construction machinery[25](index=25&type=chunk) - Revenue is recognized when goods are transferred at a point in time[25](index=25&type=chunk) - Approximately **9%** (2020: 5%) of sales are denominated in currencies other than the functional currency of the operating units[25](index=25&type=chunk) [4. Operating Segment Information](index=18&type=section&id=4.%20Operating%20Segment%20Information) The Group's operating segments include sales of construction machinery, finance leases, and financial investments, with construction machinery sales contributing the majority of revenue and segment results, and total revenue increasing by 25.75% year-on-year for the six months ended June 30, 2021 Operating Segment Revenue and Results (Six Months Ended June 30, 2021) | Segment | Revenue (RMB thousands) | Results (RMB thousands) | | :--- | :--- | :--- | | Sales of construction machinery | 8,191,112 | 938,540 | | Finance leases of construction machinery | 148 | 106 | | Financial investments | – | 101,178 | | Total | 8,191,260 | 1,039,824 | Analysis of Construction Machinery Sales by Product (Six Months Ended June 30, 2021) | Product | 2021 (RMB thousands) | 2021 (%) | 2020 (RMB thousands) | 2020 (%) | | :--- | :--- | :--- | :--- | :--- | | Wheel loaders | 3,897,669 | 47.6 | 3,216,119 | 49.4 | | Excavators | 1,264,224 | 15.4 | 1,282,636 | 19.7 | | Forklifts | 2,087,748 | 25.5 | 1,348,666 | 20.7 | | Parts | 888,015 | 10.8 | 617,112 | 9.5 | | Road rollers | 53,456 | 0.7 | 48,524 | 0.7 | | Subtotal | 8,191,112 | 100.0 | 6,513,057 | 100.0 | | Finance lease interest income | 148 | – | 750 | – | | Total | 8,191,260 | 100.0 | 6,513,807 | 100.0 | - The Group's operating activities are not seasonal[30](index=30&type=chunk) [5. Other Income and Other Gains and Losses](index=21&type=section&id=5.%20Other%20Income%20and%20Other%20Gains%20and%20Losses) This chapter analyzes the Group's other income and other gains and losses for the six months ended June 30, 2021, showing government grants as the primary source of other income, while other gains and losses were mainly influenced by gains from disposal of a subsidiary and fair value gains on financial assets Analysis of Other Income | Item | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | Government grants | 35,807 | 27,309 | | Penalty income | 17 | 1,905 | | Others | 2,868 | 9,400 | | Total | 38,692 | 38,614 | Analysis of Other Gains and Losses | Item | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | Loss on disposal of items of property, plant and equipment | (749) | (260) | | Write-down of inventories to net realizable value | 10,358 | 163 | | Fair value gains on financial assets at fair value through profit or loss, net | 96,461 | 305,616 | | Gains on derivative instruments | 4,717 | 4,717 | | Gains on bills receivable | 5,306 | – | | Gains on disposal of a subsidiary | 213,530 | – | | Exchange (losses)/gains | (5,515) | 5,026 | | Total | 324,108 | 247,327 | [6. Profit Before Tax](index=22&type=section&id=6.%20Profit%20Before%20Tax) This chapter outlines the composition of profit before tax for the six months ended June 30, 2021, with major expenses including inventory costs, depreciation, staff costs, and product warranty provisions, offset by gains from disposal of a subsidiary and fair value gains Major Deductions/(Credits) from Profit Before Tax | Item | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | Cost of inventories recognized as expense | 6,660,466 | 5,023,023 | | Depreciation of property, plant and equipment | 164,078 | 150,140 | | Staff costs, including directors' emoluments | 389,691 | 318,134 | | Provision for product warranties | 143,985 | 111,739 | | Gains on disposal of a subsidiary | (213,530) | – | | Fair value gains | (96,461) | (305,616) | | Interest income | (89,186) | (73,893) | | Government grants related to income | (35,807) | (27,309) | [7. Income Tax Expense](index=23&type=section&id=7.%20Income%20Tax%20Expense) This chapter explains the Group's income tax expense for the six months ended June 30, 2021, primarily comprising current income tax expense and deferred income tax expense, totaling RMB 157,367 thousands Composition of Income Tax Expense | Item | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | Current income tax expense | 149,670 | 161,292 | | Deferred income tax expense related to origination and reversal of temporary differences | 7,697 | 19,927 | | Income tax expense recognized in the consolidated statement of profit or loss | 157,367 | 181,219 | [8. Dividends Payable to Shareholders](index=23&type=section&id=8.%20Dividends%20Payable%20to%20Shareholders) The Board does not recommend an interim dividend for the six months ended June 30, 2021, while the 2020 final dividend of HKD 0.33 per share was paid on July 23, 2021 - The Directors do not recommend the payment of an interim dividend for the six months ended June 30, 2021[35](index=35&type=chunk) - The proposed final dividend of **HKD 0.33** per ordinary share for the year ended December 31, 2020, was paid on July 23, 2021[35](index=35&type=chunk) [9. Property, Plant and Equipment](index=23&type=section&id=9.%20Property%2C%20Plant%20and%20Equipment) For the six months ended June 30, 2021, the Group purchased property, plant and equipment worth RMB 148,415 thousands and disposed of assets with a net book value of RMB 760 thousands, resulting in a net loss of RMB 749 thousands - For the six months ended June 30, 2021, the Group purchased assets (including property, plant and machinery) at a cost of **RMB 148,415 thousands**, an increase compared to the same period last year[36](index=36&type=chunk) - The Group disposed of assets with a net book value of **RMB 760 thousands**, resulting in a net loss on disposal of **RMB 749 thousands**[36](index=36&type=chunk) [10. Inventories](index=24&type=section&id=10.%20Inventories) This chapter presents the Group's inventory composition as of June 30, 2021, totaling RMB 3,713,262 thousands, a slight decrease from the end of 2020, primarily consisting of finished goods, raw materials, and work in progress Composition of Inventories | Item | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | Raw materials | 1,305,379 | 1,190,225 | | Work in progress | 232,217 | 198,312 | | Finished goods | 2,175,666 | 2,365,355 | | Total | 3,713,262 | 3,753,892 | [11. Trade Receivables](index=24&type=section&id=11.%20Trade%20Receivables) The Group offers trade customers credit terms of 6 to 24 months, with total trade receivables amounting to RMB 4,570,684 thousands as of June 30, 2021, an increase from the end of 2020, with the 0-90 days aging category being the largest - The Group offers trade customers credit terms of **6 to 24 months**, with longer terms available for customers with good credit records[38](index=38&type=chunk) Aging Analysis of Trade Receivables | Aging | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | 0 to 90 days | 2,454,603 | 2,083,775 | | 91 to 180 days | 1,168,054 | 835,302 | | 181 to 360 days | 773,862 | 740,618 | | Over 1 year | 174,165 | 130,517 | | Total | 4,570,684 | 3,790,212 | | Less: Non-current portion | (666,339) | (603,090) | | Current portion | 3,904,345 | 3,187,122 | [12. Prepayments, Deposits and Other Receivables](index=25&type=section&id=12.%20Prepayments%2C%20Deposits%20and%20Other%20Receivables) This chapter presents the Group's prepayments, deposits, and other receivables as of June 30, 2021, totaling RMB 686,882 thousands, a decrease from the end of 2020, primarily including prepayments, deductible VAT, and net loans receivable Composition of Prepayments, Deposits and Other Receivables | Item | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | Prepayments | 481,979 | 623,774 | | Deductible VAT | 67,061 | 93,516 | | Receivables for consideration on disposal of a subsidiary | 27,639 | – | | Deposits | 2,590 | 3,147 | | Total other receivables | 107,613 | 157,061 | | Total | 686,882 | 877,498 | - A significant portion of other receivables includes loans receivable from sales agents for machine repurchases, with the recovery of finance lease receivables being unsatisfactory due to deteriorating external operating conditions[40](index=40&type=chunk) [13. Financial Assets at Fair Value Through Other Comprehensive Income](index=26&type=section&id=13.%20Financial%20Assets%20at%20Fair%20Value%20Through%20Other%20Comprehensive%20Income) The Group classifies bills receivable held for collecting cash flows and for sale as financial assets at fair value through other comprehensive income, amounting to RMB 326,521 thousands as of June 30, 2021 - The Group has classified bills receivable held for collecting contractual cash flows and for selling as financial assets at fair value through other comprehensive income[42](index=42&type=chunk) Financial Assets at Fair Value Through Other Comprehensive Income | Item | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | Bills receivable, at fair value | 326,521 | 211,428 | [14. Equity Investments at Fair Value Through Other Comprehensive Income](index=26&type=section&id=14.%20Equity%20Investments%20at%20Fair%20Value%20Through%20Other%20Comprehensive%20Income) The Group has irrevocably designated unlisted equity investments as at fair value through other comprehensive income due to their strategic nature, totaling RMB 1,450 thousands as of June 30, 2021 - Unlisted equity investments have been irrevocably designated as at fair value through other comprehensive income due to their strategic nature[43](index=43&type=chunk) Equity Investments at Fair Value Through Other Comprehensive Income | Item | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | Unlisted equity investments, at fair value | 1,450 | 1,450 | [15. Financial Assets at Fair Value Through Profit or Loss](index=27&type=section&id=15.%20Financial%20Assets%20at%20Fair%20Value%20Through%20Profit%20or%20Loss) The Group's financial assets at fair value through profit or loss primarily comprise listed and unlisted equity investments, totaling RMB 2,443,042 thousands, with unlisted investments being wealth management and fund products issued by PRC financial institutions Composition of Financial Assets at Fair Value Through Profit or Loss | Item | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | Listed equity investments, at fair value – non-current | 270,414 | 289,730 | | Unlisted equity investments, at fair value – current | 1,605,664 | 1,538,021 | | Unlisted equity investments, at fair value – non-current | 566,964 | 518,830 | | Total | 2,443,042 | 2,346,581 | - Listed equity investments are classified as financial assets at fair value through profit or loss as they are held for trading purposes[44](index=44&type=chunk) - Unlisted equity investments are wealth management and fund investment products issued by PRC financial institutions and investment companies, which are mandatorily classified as financial assets at fair value through profit or loss because their contractual cash flows are not solely payments of principal and interest[45](index=45&type=chunk) [16. Cash and Cash Equivalents and Pledged Bank Deposits](index=27&type=section&id=16.%20Cash%20and%20Cash%20Equivalents%20and%20Pledged%20Bank%20Deposits) This chapter presents the Group's cash and cash equivalents and pledged bank deposits as of June 30, 2021, totaling RMB 4,183,889 thousands, with cash and bank balances amounting to RMB 3,241,892 thousands Cash and Cash Equivalents and Pledged Bank Deposits | Item | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | Cash and bank balances | 3,241,892 | 2,480,567 | | Time deposits | 941,997 | 1,137,547 | | Total | 4,183,889 | 3,618,114 | | Less: Pledged for long-term bank loans | (356,000) | – | | Less: Pledged for short-term bank loans | – | (356,000) | | Less: Pledged for bank acceptance bills | (493,922) | (441,251) | | Less: Other pledged | (92,075) | (40,296) | | Cash and cash equivalents | 3,241,892 | 2,780,567 | - Pledged bank deposits refer to deposits pledged to banks to obtain bank borrowings or financing, and are classified as current or non-current assets accordingly[46](index=46&type=chunk) [17. Trade and Bills Payables](index=28&type=section&id=17.%20Trade%20and%20Bills%20Payables) This chapter presents the aging analysis of the Group's trade and bills payables as of June 30, 2021, totaling RMB 5,303,825 thousands, with the 0-180 days aging category accounting for the vast majority Aging Analysis of Trade and Bills Payables | Aging | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | 0 to 180 days | 5,238,278 | 4,812,807 | | 181 days to 1 year | 13,070 | 28,308 | | 1 to 2 years | 8,899 | 32,771 | | 2 to 3 years | 19,018 | 9,497 | | Over 3 years | 24,560 | 16,775 | | Total | 5,303,825 | 4,900,158 | - Bills payable have an aging period of within six months and are secured by pledged bank deposits of **RMB 493,922 thousands**[47](index=47&type=chunk) [18. Other Payables and Accruals](index=28&type=section&id=18.%20Other%20Payables%20and%20Accruals) This chapter presents the Group's other payables and accruals as of June 30, 2021, totaling RMB 1,100,465 thousands, primarily including accrued sales commissions, wages and salaries payable, and contract liabilities Composition of Other Payables and Accruals | Item | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | Accrued sales commissions | 659,499 | 582,684 | | Other payables | 89,921 | 81,514 | | Wages and salaries payable | 114,316 | 161,226 | | Contract liabilities | 68,500 | 77,422 | | Payables for acquisition of property, plant and equipment | 31,895 | 28,473 | | Other taxes payable | 9,341 | 10,489 | | Finance lease deposits | 7,762 | 8,100 | | Investment management fees | 38,662 | 43,662 | | Other accrued expenses | 80,569 | 65,253 | | Total | 1,100,465 | 1,058,823 | [19. Interest-Bearing Bank Borrowings](index=29&type=section&id=19.%20Interest-Bearing%20Bank%20Borrowings) This chapter presents the Group's interest-bearing bank borrowings as of June 30, 2021, totaling RMB 656,863 thousands, all of which are non-current secured bank loans pledged by certain time deposits Interest-Bearing Bank Borrowings | Item | Effective Annual Interest Rate (%) | Maturity | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | :--- | :--- | | Current bank loans – secured | – | 2021 | – | 663,452 | | Non-current bank loans – secured | 1.30-1.35 | 2024 | 656,863 | – | | Total | | | 656,863 | 663,452 | - Certain bank loans of the Group are secured by pledged time deposits of **RMB 356,000 thousands**[51](index=51&type=chunk) [20. Commitments](index=29&type=section&id=20.%20Commitments) This chapter discloses the Group's capital commitments of RMB 43,929,410 thousands as of June 30, 2021, primarily related to the acquisition of property, plant and equipment in Shanghai, Fujian, and Jiangxi, China - As of June 30, 2021, the Group had capital commitments of **RMB 43,929,410**, primarily related to the acquisition of property, plant and equipment located in Shanghai, Fujian, and Jiangxi, China[52](index=52&type=chunk) [21. Disposal of a Subsidiary](index=30&type=section&id=21.%20Disposal%20of%20a%20Subsidiary) On January 21, 2021, the Group disposed of its entire equity interest in Henan Lonking Machinery Manufacturing Co., Ltd. for a cash consideration of RMB 745,000 thousands, recognizing a gain of approximately RMB 213,530 thousands and generating net cash and cash equivalents inflow of RMB 240,818 thousands - On January 21, 2021, the Group disposed of its entire equity interest in Henan Lonking Machinery Manufacturing Co., Ltd. for a cash consideration of **RMB 745,000 thousands**[53](index=53&type=chunk) - A gain of **RMB 213,530 thousands** was recognized from the disposal of the subsidiary[54](index=54&type=chunk) Analysis of Net Cash and Cash Equivalents Inflow from Disposal of a Subsidiary | Item | June 30, 2021 (RMB thousands) | | :--- | :--- | | Cash consideration | 745,000 | | Cash and bank balances disposed of | (476,543) | | Cash consideration not yet received as of June 30, 2021 | (27,639) | | Net cash and cash equivalents inflow from disposal of a subsidiary | 240,818 | [22. Related Party Transactions](index=31&type=section&id=22.%20Related%20Party%20Transactions) This chapter discloses the total amount and balances of the Group's related party transactions for the six months ended June 30, 2021, primarily involving purchases from and receivables/payables to related parties, and also lists key management personnel remuneration Transactions and Balances with Key Related Parties (Six Months Ended June 30, 2021) | Related Party | Transaction Type | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | :--- | | Longyan Jinlong Machinery Co., Ltd. | Purchases from related parties | 38,649 | 26,900 | | | Amounts due to related parties | 6,882 | 10,138 | | Hercules (Shanghai) Automation Equipment Co., Ltd. | Purchases from related parties | 27,033 | 15,117 | | | Amounts due from related parties | 1,863 | 12,935 | | | Amounts due to related parties | 6,913 | 7,852 | | Shanghai Ruifande Machinery Co., Ltd. | Sales to related parties | 4 | 4 | | | Amounts due from related parties | 256 | 252 | | | Amounts due to related parties | 56 | 56 | | Shanghai Longtui Environmental Technology Co., Ltd. | Sales to related parties | – | 346 | | | Purchases from related parties | 362 | 222 | | | Amounts due from related parties | 10 | 10 | | | Amounts due to related parties | 191 | 408 | Key Management Personnel Remuneration | Item | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | Short-term employee benefits | 12,249 | 12,000 | | Contributions to retirement schemes | 79 | 41 | | Total remuneration paid to key management personnel | 12,328 | 12,041 | [23. Financial Instruments by Category](index=33&type=section&id=23.%20Financial%20Instruments%20by%20Category) This chapter details the carrying amounts of the Group's financial assets and liabilities by category as of June 30, 2021, and December 31, 2020, including financial instruments measured at fair value through profit or loss, fair value through other comprehensive income, and amortized cost - As of June 30, 2021, total financial liabilities amounted to **RMB 6,142,970 thousands**, primarily comprising trade and bills payables, financial liabilities included in other payables and accruals, and interest-bearing bank borrowings[62](index=62&type=chunk) - As of December 31, 2020, total financial liabilities amounted to **RMB 5,743,844 thousands**[65](index=65&type=chunk) [24. Fair Value and Fair Value Hierarchy of Financial Instruments](index=36&type=section&id=24.%20Fair%20Value%20and%20Fair%20Value%20Hierarchy%20of%20Financial%20Instruments) This chapter describes the Group's fair value measurement methods and hierarchy for financial instruments, with management assessing that the fair values of most short-term financial instruments approximate their carrying amounts, and fair values are estimated using market quotations and discounted cash flow models - Management assesses that the fair values of short-term financial instruments such as cash and cash equivalents, current portion of trade receivables, and trade and bills payables approximate their carrying amounts[66](index=66&type=chunk) - The fair value of listed equity investments is calculated based on market quotations, while unlisted investments are estimated using discounted cash flow valuation models[67](index=67&type=chunk) Fair Value Hierarchy of Assets Measured at Fair Value (As of June 30, 2021) | Item | Quoted Prices in Active Markets (Level 1) (RMB thousands) | Significant Observable Inputs (Level 2) (RMB thousands) | Significant Unobservable Inputs (Level 3) (RMB thousands) | Total (RMB thousands) | | :--- | :--- | :--- | :--- | :--- | | Financial assets at fair value through other comprehensive income | – | – | 326,521 | 326,521 | | Equity investments designated at fair value through other comprehensive income | – | – | 1,450 | 1,450 | | Financial assets at fair value through profit or loss | 270,414 | 2,172,628 | – | 2,443,042 | | Total | 270,414 | 2,172,628 | 327,971 | 2,771,013 | [Management Discussion and Analysis](index=40&type=section&id=Management%20Discussion%20and%20Analysis) This chapter discusses the Group's operating results, financial position, and outlook for the six months ended June 30, 2021, highlighting significant revenue growth and strong export performance, but a decline in consolidated gross profit margin, with management emphasizing strategies to consolidate market position, expand international markets, optimize product structure, and increase R&D investment [Performance and Business Review](index=40&type=section&id=Performance%20and%20Business%20Review) In the first half of 2021, the Group achieved total revenue of RMB 8,191 million, a 25.75% year-on-year increase, with export sales growing by 128.5% to 8.8% of total sales, though the consolidated gross profit margin decreased to 18.69% - The Group achieved total revenue of **RMB 8,191 million** in the first half, a year-on-year increase of **25.75%**[72](index=72&type=chunk) - Export sales increased by **128.5%** year-on-year, raising their proportion of total sales from **4.8%** in the prior period to **8.8%**[72](index=72&type=chunk) - The consolidated gross profit margin decreased by **4.20 percentage points** from **22.89%** in the same period of 2020 to **18.69%** in 2021[72](index=72&type=chunk) - The Group achieved a net profit of approximately **RMB 945 million** in the first half, a slight increase from **RMB 944 million** in the prior period[72](index=72&type=chunk) [Geographical Performance](index=41&type=section&id=Geographical%20Performance) In the first half of 2021, the Company's sales performed well overall, with significant increases in all regions except Southwest and Central China, and overseas sales growing by 128.5% to approximately RMB 717 million - Sales in the Northeast region increased by **39.7%** to **RMB 313 million**[73](index=73&type=chunk) - Sales in the Eastern and Southern regions increased by **32.9%** to **RMB 1,613 million** and **35.9%** to **RMB 933 million**, respectively[73](index=73&type=chunk) - Sales in the Northern and Northwestern regions increased by **25.8%** to **RMB 2,035 million** and **21.7%** to **RMB 831 million**, respectively[73](index=73&type=chunk) - Overseas sales increased by **128.5%** to approximately **RMB 717 million**[73](index=73&type=chunk) [Product Analysis](index=41&type=section&id=Product%20Analysis) In the first half of 2021, the Group's product sales significantly increased across categories, with wheel loaders remaining the primary product, forklifts becoming the second largest with notable growth, excavators experiencing a slight decline, and parts sales also growing substantially [Wheel Loaders](index=41&type=section&id=Wheel%20Loaders) In the first half of 2021, wheel loader sales reached RMB 3,898 million, a 21.2% increase year-on-year, with ZL50 loaders as the main model and rapid growth in small and medium-sized loaders - In the first half of 2021, wheel loader sales amounted to **RMB 3,898 million**, an increase of **21.2%** compared to the prior period[74](index=74&type=chunk) - ZL50 loaders were the main model, growing by **19.0%** to **RMB 3,121 million**[74](index=74&type=chunk) - Sales of small and medium-sized loaders grew rapidly, with ZL30 loaders increasing by **44.8%** to **RMB 378 million**[74](index=74&type=chunk) [Excavators](index=41&type=section&id=Excavators) Excavator product sales decreased by 1.4% year-on-year to RMB 1,264 million, reducing their proportion of the Group's sales revenue by approximately 4% to 15%, mainly due to slower infrastructure investment growth and increased industry competition - Excavator product sales decreased by **1.4%** year-on-year to **RMB 1,264 million**[75](index=75&type=chunk) - Excavator sales as a proportion of the Group's sales revenue decreased by approximately **4%** to **15%**[75](index=75&type=chunk) [Forklifts and Road Rollers](index=42&type=section&id=Forklifts%20and%20Road%20Rollers) Forklift product sales increased by 54.8% to RMB 2,088 million, becoming the Group's second-largest product, primarily driven by a significant increase in demand from the logistics and warehousing industries, while road roller sales grew by 10.2% to RMB 53 million - Forklift product sales increased by **54.8%** to **RMB 2,088 million**, becoming the Group's second-largest product[76](index=76&type=chunk) - Road roller sales increased by **10.2%** to **RMB 53 million**, accounting for **1%** of the Group's total sales[76](index=76&type=chunk) [Parts](index=42&type=section&id=Parts) During the period, as sales of the Group's other products significantly increased, demand for parts rose substantially, with parts sales growing by 43.9% to RMB 888 million - Parts sales increased by **43.9%** to **RMB 888 million**, primarily due to a significant increase in sales of the Group's other products[77](index=77&type=chunk) [Financial Review](index=42&type=section&id=Financial%20Review) This chapter reviews the Group's financial position, including increased cash and bank balances, maintained current ratio, changes in capital structure, growth in capital expenditure, and fluctuations in revenue, expenses, and receivables [Cash and Bank Balances](index=42&type=section&id=Cash%20and%20Bank%20Balances) As of June 30, 2021, the Group's cash and bank balances were approximately RMB 3,242 million, an increase of about RMB 461 million from the end of 2020, primarily from net cash inflow from operating activities - As of June 30, 2021, the Group had bank balances and cash of approximately **RMB 3,242 million**, an increase of approximately **RMB 461 million** from December 31, 2020[78](index=78&type=chunk) - The increase in cash and bank balances was primarily due to net cash inflow from operating activities of **RMB 447 million**, net cash inflow from investing activities of **RMB 58 million**, and net cash outflow from financing activities of **RMB 47 million**[78](index=78&type=chunk) - Pledged bank deposits amounted to approximately **RMB 942 million**, an increase of approximately **RMB 104 million** from the end of 2020[78](index=78&type=chunk) [Liquidity and Financial Resources](index=43&type=section&id=Liquidity%20and%20Financial%20Resources) The Group is committed to maintaining a solid financial position, with total shareholders' funds of approximately RMB 9,865 million and a current ratio of 1.77 as of June 30, 2021, and the Directors believe the Group has sufficient resources to support its operations - As of June 30, 2021, total shareholders' funds were approximately **RMB 9,865 million**, a **2.3%** decrease from December 31, 2020[80](index=80&type=chunk) - As of June 30, 2021, the Group's current ratio was **1.77** (December 31, 2020: 1.86)[80](index=80&type=chunk) - The Directors believe the Group has sufficient resources to support its working capital requirements and meet its foreseeable capital expenditures[80](index=80&type=chunk) [Capital Structure](index=43&type=section&id=Capital%20Structure) As of June 30, 2021, the Group's total debt-to-asset ratio was approximately 46.79%, an increase from 41.56% at the end of 2020, and no shares of the Company were purchased, sold, or redeemed by the Company or its subsidiaries during the period - As of June 30, 2021, the total debt-to-asset ratio was approximately **46.79%** (December 31, 2020: 41.56%)[81](index=81&type=chunk) - During the period ended June 30, 2021, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any shares of the Company or any other listed securities[81](index=81&type=chunk) [Capital Expenditure](index=43&type=section&id=Capital%20Expenditure) During the period, the Group added approximately RMB 148 million in property, plant and equipment to align with its strategy and product transformation, with these expenditures fully funded by internal resources and general borrowings - During the period, the Group added approximately **RMB 148 million** in property, plant and equipment, an increase from the prior period[82](index=82&type=chunk) - Capital expenditures were fully funded by the Group's internal resources and general borrowings[82](index=82&type=chunk) [Revenue](index=43&type=section&id=Revenue) In the first half of 2021, the Group's sales significantly increased, primarily driven by China's COVID-19 control, economic recovery, government domestic demand policies, and global economic recovery boosting international market sales - In the first half of 2021, the Group's sales significantly increased, mainly due to the control of the COVID-19 pandemic in China and a good economic recovery[83](index=83&type=chunk) - Under government policies to stabilize domestic demand and expand infrastructure, the construction machinery industry experienced strong demand[83](index=83&type=chunk) - Influenced by factors such as the post-pandemic global economic recovery, international market sales also increased significantly[83](index=83&type=chunk) [Disposal of a Subsidiary](index=44&type=section&id=Disposal%20of%20a%20Subsidiary) On January 21, 2021, the Group disposed of its entire equity interest in Henan Lonking Machinery Manufacturing Co., Ltd. for a cash consideration of RMB 745,000,000, recognizing a gain of approximately RMB 214 million - The Group disposed of its entire equity interest in Henan Lonking Machinery Manufacturing Co., Ltd. for a cash consideration of **RMB 745,000,000**[84](index=84&type=chunk) - The Group recognized a gain of approximately **RMB 214 million** from the disposal of the subsidiary[84](index=84&type=chunk) [Other Gains and Losses](index=44&type=section&id=Other%20Gains%20and%20Losses) Other gains and losses increased by approximately RMB 77 million year-on-year in the first half, primarily due to a recognized gain of about RMB 214 million from the disposal of the Henan subsidiary, partially offset by a decrease of approximately RMB 141 million in fair value gains from wealth management products - Other gains and losses increased by approximately **RMB 77 million** in the first half compared to the prior period[85](index=85&type=chunk) - This was primarily due to a recognized gain of approximately **RMB 214 million** from the disposal of the Henan subsidiary[85](index=85&type=chunk) - Fair value changes in wealth management products recognized in the current period amounted to approximately **RMB 96 million**, a decrease of approximately **RMB 141 million** from the prior period[85](index=85&type=chunk) [Selling and Distribution Expenses](index=44&type=section&id=Selling%20and%20Distribution%20Expenses) Selling and distribution expenses increased by approximately RMB 85 million year-on-year, mainly due to higher transportation costs resulting from significantly increased sales and a substantial rise in service costs due to increased service provisions - Selling and distribution expenses increased by approximately **RMB 85 million** compared to the prior period[86](index=86&type=chunk) - This was primarily due to increased transportation costs resulting from significantly higher sales during the period[86](index=86&type=chunk) - The corresponding increase in service provisions led to a substantial rise in service costs[86](index=86&type=chunk) [Research and Development Expenses](index=44&type=section&id=Research%20and%20Development%20Expenses) Research and development expenses significantly increased by 18.3% to approximately RMB 319 million during the period, largely in line with sales growth, primarily due to direct material inputs and higher labor costs for R&D activities - Research and development expenses significantly increased by **18.3%** to approximately **RMB 319 million** during the period[87](index=87&type=chunk) - The increase in R&D expenses was primarily due to direct material inputs and higher labor costs for R&D activities[87](index=87&type=chunk) [Trade Receivables](index=45&type=section&id=Trade%20Receivables) Trade receivables increased by approximately RMB 780 million, or 20.6%, at the end of the period compared to the end of 2020, primarily due to increased domestic and international sales during the period - Trade receivables increased by approximately **RMB 780 million**, or **20.6%**, at the end of the period compared to the end of 2020[89](index=89&type=chunk) - This was primarily due to increased domestic and international sales during the period[89](index=89&type=chunk) [Prepayments, Deposits and Other Receivables](index=45&type=section&id=Prepayments%2C%20Deposits%20and%20Other%20Receivables) Prepayments, deposits, and other receivables decreased by approximately RMB 191 million at the end of the period compared to the end of last year, mainly due to the Group's adjustment of raw material inventory in anticipation of lower market demand and operating rates in the second half, and reduced interest receivable - Prepayments, deposits, and other receivables decreased by approximately **RMB 191 million** at the end of the period compared to the end of last year[90](index=90&type=chunk) - This was primarily due to the Group's adjustment of raw material inventory in anticipation of lower market demand and operating rates in the second half[90](index=90&type=chunk) - The Group collected interest on time deposits matured during the period, leading to a decrease in interest receivable compared to the end of last year[90](index=90&type=chunk) [Capital Commitments](index=45&type=section&id=Capital%20Commitments) As of June 30, 2021, the Group had contracted capital expenditures of approximately RMB 44 million for the acquisition of property, plant and equipment, not yet accounted for in the financial statements, representing an increase from the end of 2020 - As of June 30, 2021, the Group had contracted capital expenditures of approximately **RMB 44 million** for the acquisition of property, plant and equipment, not yet accounted for in the financial statements[91](index=91&type=chunk) [Outlook](index=46&type=section&id=Outlook) The Group anticipates both opportunities and challenges in the construction machinery industry in the second half of 2021, and will continue to focus on core products, adhere to the "agency system" marketing principle, strengthen channel integration and market layout, enhance international expansion, and continuously improve quality management and increase R&D investment to adapt to market changes and achieve sustainable development - China's economy is steadily improving, with macro policies continuing to support the real economy, and resilient infrastructure and real estate investment will continue to unleash domestic demand in the construction machinery industry[92](index=92&type=chunk) - Overseas markets are expected to further boost exports of construction machinery products, benefiting from vaccine promotion and global economic recovery[92](index=92&type=chunk) - The Group will focus on the high-quality, sustainable development of its four main product categories: loaders, excavators, forklifts, road machinery, and core components[92](index=92&type=chunk) - In marketing, the Group will adhere to the 'agency system' principle, strengthen channel integration and market planning, optimize product structure, and utilize flexible 'one region, one policy' marketing strategies to expand overseas market share[92](index=92&type=chunk) - Regarding quality, the Group will continue to improve its quality management system, strengthen quality management and supervision of supplier products, and comprehensively enhance the quality of all product categories[92](index=92&type=chunk) - In R&D and technology, the Group will increase R&D investment, accelerate product transformation and upgrading, especially in the R&D reserves and market launch of large-tonnage loaders, new energy loaders, new energy forklifts, medium and large excavators, and related components[92](index=92&type=chunk)[93](index=93&type=chunk) - The Group will build a data-centric digital and intelligent platform, promote streamlined and information-based management processes, and accelerate the application of the Group's digital technology capabilities and the improvement of intelligent manufacturing levels[93](index=93&type=chunk) [Corporate Governance](index=47&type=section&id=Corporate%20Governance) This chapter outlines the Company's corporate governance practices, with the Board committed to maintaining high standards and complying with the Corporate Governance Code in Appendix 14 of the Listing Rules, noting certain deviations regarding directors' liability insurance, independent non-executive directors' attendance at general meetings, and the Chairman also serving as CEO [Code Provision A.1.8](index=47&type=section&id=Code%20Provision%20A.1.8) The Company has not yet made appropriate insurance arrangements for potential legal actions against directors, as the Board believes reasonably priced and adequately covered directors' liability insurance products are not yet available in the market - The Company has not yet arranged directors' liability insurance due to the lack of reasonably priced and adequately covered products in the market[95](index=95&type=chunk) [Code Provision A.6.7](index=47&type=section&id=Code%20Provision%20A.6.7) Three independent non-executive directors were unable to attend the Annual General Meeting held on May 26, 2021, deviating from the Code Provision requiring independent non-executive directors to attend general meetings - Three independent non-executive directors were unable to attend the Annual General Meeting held on May 26, 2021, due to other important commitments[96](index=96&type=chunk) [Code Provision A.4.3](index=48&type=section&id=Code%20Provision%20A.4.3) Mr. Qian Shizheng has served as an independent non-executive director for over nine years, and his re-election was approved by shareholders via an independent resolution at the 2021 Annual General Meeting, with the Board believing he maintains his independence - Mr. Qian Shizheng has been appointed as an independent non-executive director for over nine years, and his re-election was approved by shareholders via an independent resolution[97](index=97&type=chunk) - The Board believes Mr. Qian maintains his independence despite serving for over nine years, as his extensive experience meets the Group's needs and he provides independent judgment[97](index=97&type=chunk) [Code Provision A.2.1](index=48&type=section&id=Code%20Provision%20A.2.1) Mr. Li Xinyan, the Company's Chairman, also serves as Chief Executive Officer, deviating from the Code Provision requiring separation of these roles, but the Board believes this arrangement helps maintain policy continuity and business stability - Mr. Li Xinyan, the Company's Executive Director and Chairman of the Board, has also served as Chief Executive Officer since December 21, 2015, holding both positions concurrently[98](index=98&type=chunk) - The Board believes Mr. Li's concurrent holding of both positions is appropriate and in the best interests of the Company, helping to maintain policy continuity and business stability[98](index=98&type=chunk) [Compliance with the Model Code for Securities Transactions by Directors of Listed Issuers](index=49&type=section&id=Compliance%20with%20the%20Model%20Code%20for%20Securities%20Transactions%20by%20Directors%20of%20Listed%20Issuers) The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 of the Listing Rules, and all Directors confirmed compliance with its provisions during the year - The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 of the Listing Rules as its code of conduct for directors' securities transactions[100](index=100&type=chunk) - Following specific inquiries to all Directors, each Director confirmed compliance with the required standards set out in the Model Code during the year[100](index=100&type=chunk) [Improvements to Internal Control System](index=49&type=section&id=Improvements%20to%20Internal%20Control%20System) In the first half of 2021, the Company implemented several improvements to its internal control system, including strengthening supply chain management, enhancing monitoring and information management, refining decision-making mechanisms, reinforcing financial supervision, and establishing performance evaluation and assessment mechanisms - Further strengthening the management of the Group's supply chain to broaden channels, enhance quality, and make products more competitive[101](index=101&type=chunk) - Further improving the construction of the monitoring system and information management to achieve institutionalized, procedural, and standardized company operations[101](index=101&type=chunk) - Strengthening financial supervision by arranging a comprehensive audit of the Company by professionals at least every six months[101](index=101&type=chunk) - Establishing and further refining management team assessment procedures for effective supervision and establishing performance evaluation and assessment mechanisms[101](index=101&type=chunk) [Investor Relations Management](index=50&type=section&id=Investor%20Relations%20Management) This chapter emphasizes the Company's commitment to investor relations management, ensuring investor rights through effective communication and high transparency, maintaining good communication with domestic and international investors via conference calls despite the pandemic, and striving to create value for all stakeholders [Information Disclosure](index=50&type=section&id=Information%20Disclosure) The Company views effective communication as central to investor relations, believing high transparency and timely information dissemination are crucial for success, and communicated with 46 domestic and international investors through over 25 conference calls in the first half - The Company regards effective communication as the core of investor relations and believes that highly transparent management and timely dissemination of information to investors are crucial factors for the Company's success[102](index=102&type=chunk) - During the six months ended June 30, 2021, the Company received communications from **46** domestic and international investors, including over **25** conference calls[102](index=102&type=chunk) [Interests of Other Stakeholders](index=50&type=section&id=Interests%20of%20Other%20Stakeholders) While committed to maximizing shareholder value, the Company also strives to provide high-quality products and services to customers, development opportunities for employees, and demonstrates a strong sense of responsibility towards shareholders, investors, employees, customers, suppliers, and society, actively participating in public welfare - While committed to maximizing shareholder value, the Company also strives to provide high-quality products and services to customers and career development opportunities for employees[103](index=103&type=chunk) - The Company has a strong sense of responsibility towards shareholders, investors, employees, customers, suppliers, and society, and operates with integrity[103](index=103&type=chunk) - While pursuing profit growth, the Company also gives back to society by managing its business in compliance with relevant laws and environmental regulations, improving corporate governance, enhancing corporate transparency, and actively participating in public welfare and contributing to local social development[103](index=103&type=chunk) [Contact](index=50&type=section&id=Contact) This chapter provides investor relations contact information for communication - The investor relations contact person is Ms. Lv Zhenzhen, reachable at phone: **86-21-3760 2000 (5676)**, email: **Lzz@Lonking.cn**[103](index=103&type=chunk) [Disclosure of Interests](index=51&type=section&id=Disclosure%20of%20Interests) This chapter discloses the interests of the Company's Directors and Chief Executive in shares and underlying shares, as well as the interests of substantial shareholders in the Company's issued share capital, ensuring compliance with the Securities and Futures Ordinance [Directors' and Chief Executive's Interests in Shares and Underlying Shares](index=51&type=section&id=Directors'%20and%20Chief%20Executive's%20Interests%20in%20Shares%20and%20Underlying%20Shares) As of June 30, 2021, the Company's Directors and Chief Executive held registrable interests in the shares of the Company or its associated corporations, with Ms. Ni Yinying holding 56.03% of the Company's issued share capital [Long Positions in Shares and Underlying Shares of the Company](index=51&type=section&id=Long%20Positions%20in%20Shares%20and%20Underlying%20Shares%20of%20the%20Company) As of June 30, 2021, Ms. Ni Yinying held 2,398,273,188 ordinary shares of the Company, representing 56.03% of the issued share capital Directors' Long Positions in Shares of the Company | Director Name | Capacity | Number of Shares Held | Percentage of Issued Share Capital | | :--- | :--- | :--- | :--- | | Ni Yinying | Beneficial owner | 2,398,273,188 | 56.03% | | Chen Chao | Beneficial owner | 1,596,000 | 0.04% | | Zheng Kewen | Beneficial owner | 429,900 | 0.01% | | Total | | 2,400,299,088 | 56.08% | [Long Positions in Shares and Underlying Shares of Lonking (Shanghai) Machinery Co., Ltd., an Associated Corporation of the Company](index=52&type=section&id=Long%20Positions%20in%20Shares%20and%20Underlying%20Shares%20of%20Lonking%20%28Shanghai%29%20Machinery%20Co.%2C%20Ltd.%2C%20an%20Associated%20Corporation%20of%20the%20Company) Mr. Li Xinyan and Ms. Ni Yinying indirectly hold 0.11% equity interest in Lonking (Shanghai) Machinery Co., Ltd. through Shanghai Lonking Machinery Co., Ltd Directors' Long Positions in Shares of Associated Corporations | Director Name | Capacity | Registered Capital | Percentage of Issued Share Capital | | :--- | :--- | :--- | :--- | | Mr. Li Xinyan | Corporation (Note 1) | 480,000 | 0.11% | | Ms. Ni Yinying | Corporation (Note 1) | 480,000 | 0.11% | - This **0.11%** equity interest in Lonking (Shanghai) Machinery Co., Ltd. is held by Shanghai Lonking Machinery Co., Ltd., which is owned by Mr. Li Xinyan and Ms. Ni Yinying with **39.5%** and **60.5%** equity interests, respectively[108](index=108&type=chunk) [Substantial Shareholders](index=52&type=section&id=Substantial%20Shareholders) As of June 30, 2021, in addition to the Directors' interests, Citigroup Inc. was a substantial shareholder of the Company, holding 213,321,188 ordinary shares, representing 4.98% of the issued share capital Substantial Shareholders' Long Positions in Shares of the Company | Shareholder Name | Capacity | Number of Ordinary Shares in which Interests are Held | Percentage of the Company's Issued Share Capital | | :--- | :--- | :--- | :--- | | Citigroup Inc. | Investment Manager | 213,321,188 | 4.98% | [Other Information](index=53&type=section&id=Other%20Information) This chapter provides other important information about the Group, including no interim dividend recommendation, employee and remuneration policies, no purchase, sale, or redemption of listed securities during the period, and the Audit Committee's review of interim results [Interim Dividend](index=53&type=section&id=Interim%20Dividend) The Directors do not recommend the payment of any interim dividend for the six months ended June 30, 2021 - The Directors do not recommend the payment of any interim dividend for the six months ended June 30, 2021[111](index=111&type=chunk) [Employees and Remuneration Policy](index=53&type=section&id=Employees%20and%20Remuneration%20Policy) The Group's employee remuneration policy is formulated by the Human Resources Department based on performance, qualifications, and abilities, with Directors' remuneration determined by the Remuneration Committee, and the Group employed approximately 8,237 staff as of June 30, 2021 - The Group's employee remuneration policy is formulated by the Human Resources Department based on employees' performance, qualifications, and abilities[112](index=112&type=chunk) - The remuneration of the Company's Directors is determined by the Remuneration Committee based on operating results, individual performance, and market statistics[112](index=112&type=chunk) - As of June 30, 2021, the Group employed approximately **8,237** staff[112](index=112&type=chunk) [Purchase, Sale or Redemption of the Company's Listed Securities](index=53&type=section&id=Purchase%2C%20Sale%20or%20Redemption%20of%20the%20Company's%20Listed%20Securities) During the period ended June 30, 2021, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any shares of the Company or any other listed securities - During the period ended June 30, 2021, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any shares of the Company or any other listed securities[113](index=113&type=chunk) [Audit Committee Review of Accounts](index=53&type=section&id=Audit%20Committee%20Review%20of%20Accounts) The Company's Audit Committee, together with management and external auditors, has reviewed the interim results for the six months ended June 30, 2021, and continuously reviews accounting principles and practices - The Audit Committee, together with management and external auditors, has continuously reviewed the accounting principles and practices adopted by the Group[113](index=113&type=chunk) - The interim results for the six months ended June 30, 2021, have been reviewed by the Company's Audit Committee[113](index=113&type=chunk) [Company Information](index=54&type=section&id=Company%20Information) This chapter provides detailed company information for China Lonking Holdings Limited, including Board members, committee compositions, company secretary, office addresses, legal advisers, auditor, stock code, and principal bankers [Board of Directors](index=54&type=section&id=Board%20of%20Directors) The Board of Directors comprises executive directors, a non-executive director, and independent non-executive directors, with Mr. Li Xinyan serving as Chairman and Chief Executive Officer - Executive Directors include Mr. Li Xinyan (Chairman and Chief Executive Officer), Mr. Chen Chao, Mr. Zheng Kewen, and Mr. Yin Kunlun[114](index=114&type=chunk) - The Non-executive Director is Ms. Ni Yinying[114](index=114&type=chunk) - Independent Non-executive Directors include Dr. Qian Shizheng, Mr. Wu Jianming, and Mr. Yu Taiwei[114](index=114&type=chunk) [Audit Committee](index=54&type=section&id=Audit%20Committee) The Audit Committee is chaired by Dr. Qian Shizheng, with Mr. Yu Taiwei and Ms. Ni Yinying as members - The Audit Committee is chaired by Dr. Qian Shizheng, with Mr. Yu Taiwei and Ms. Ni Yinying as members[114](index=114&type=chunk) [Remuneration Committee](index=54&type=section&id=Remuneration%20Committee) The Remuneration Committee is chaired by Dr. Qian Shizheng, with Ms. Ni Yinying as a member - The Remuneration Committee is chaired by Dr. Qian Shizheng, with Ms. Ni Yinying as a member[114](index=114&type=chunk) [Nomination Committee](index=54&type=section&id=Nomination%20Committee) The Nomination Committee is chaired by Mr. Yu Taiwei, with Ms. Ni Yinying as a member - The Nomination Committee is chaired by Mr. Yu Taiwei, with Ms. Ni Yinying as a member[114](index=114&type=chunk) [Executive Committee](index=54&type=section&id=Executive%20Committee) The Executive Committee is chaired by Mr. Li Xinyan, who also serves as Chief Executive Officer, with Mr. Chen Chao, Mr. Zheng Kewen, and Mr. Yin Kunlun as members - The Executive Committee is chaired by Mr. Li Xinyan, who also serves as Chief Executive Officer, with Mr. Chen Chao, Mr. Zheng Kewen, and Mr. Yin Kunlun as members[114](index=114&type=chunk) [Company Secretary](index=54&type=section&id=Company%20Secretary) The Company Secretary is Mr. Zhu Xun - The Company Secretary is Mr. Zhu Xun[114](index=114&type=chunk) [Head Office](index=54&type=section&id=Head%20Office) The Company's Head Office is located at No. 26 Minyi Road, Xinqiao Town, Songjiang Industrial Zone, Shanghai, China - The Head Office is located at No. 26 Minyi Road, Xinqiao Town, Songjiang Industrial Zone, Shanghai, China, Postcode: 201612[114](index=114&type=chunk) [Registered Office](index=54&type=section&id=Registered%20Office) The Company's Registered Office is located at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands - The Registered Office is located at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands[114](index=114&type=chunk) [Investor Relations](index=54&type=section&id=Investor%20Relations) Investor relations contact information is provided for communication - The investor relations contact person is Ms. Lv Zhenzhen, reachable at phone: **86-21-3760 2000 (5676)**, email: **Lzz@Lonking.cn**[114](index=114&type=chunk) [Principal Place of Business in Hong Kong](index=55&type=section&id=Principal%20Place%20of%20Business%20in%20Hong%20Kong) The Company's Principal P

Financial Performance - Revenue for the year increased by 9.68% to RMB 12,880,448,000 compared to RMB 11,743,824,000 in the previous year[8] - Net profit grew by 19.22% to RMB 1,959,235,000 from RMB 1,643,405,000 in 2019[8] - EBITDA increased by 13.19% to RMB 2,665,470,000, up from RMB 2,354,852,000[8] - The gross profit margin slightly decreased to 23.37% from 23.93% in the previous year[8] - The interest coverage ratio improved significantly to 135 from 50, reflecting better earnings relative to interest expenses[8] - The comprehensive gross profit margin was 23.37%, a slight decrease of 0.56 percentage points from 23.93% in the previous year[15] - The net profit for the year was approximately RMB 1,960 million, representing a year-on-year increase of 19.21% from RMB 1,644 million in the previous year[15] - The company reported a significant increase in trade payables, which rose by RMB 1,468,943 thousand in 2020 compared to RMB 208,949 thousand in 2019[141] - The retained earnings as of December 31, 2020, were RMB 7,001,348 thousand, up from RMB 6,099,776 thousand in 2019, showing an increase of approximately 14.8%[138] Market Position and Sales - The company maintained a market share of 1st in the domestic loader market, with excavator sales showing steady growth[12] - The sales of wheel loaders accounted for 49% of total sales, with total sales amounting to approximately RMB 6,284 million[18] - The sales revenue from the Northeast, Eastern, and Northwestern regions increased by 42%, 16%, and 17% respectively, reaching approximately RMB 463 million, RMB 2,417 million, and RMB 1,299 million[16] - The sales revenue from international markets surged by 40% to approximately RMB 864 million, driven by growth in the "Belt and Road" markets[16] - The sales proportion of excavators increased by 0.7% to 18.8%, while forklifts accounted for 21.0%, up by 0.8%[15] Cash Flow and Financial Health - The cash flow from operating activities was RMB 1,071,000,000, with total cash and financial assets at RMB 5,965,000,000 at year-end[12] - The company's debt-to-asset ratio at year-end was 42%, indicating a healthy financial structure[12] - As of December 31, 2020, the group had cash and bank balances of approximately RMB 2,781 million, up from RMB 2,502 million in 2019, an increase of about RMB 279 million[21][22] - Total net assets increased by 11% to approximately RMB 10,094 million as of December 31, 2020, compared to RMB 9,077 million in 2019[23] - The total debt-to-asset ratio was approximately 41.56% as of December 31, 2020, compared to 37.90% in 2019[24] Research and Development - The company emphasized R&D investment, particularly in new energy loaders and forklifts, leading to significant progress in these areas[14] - The company plans to continue investing in research and development, with R&D expenses amounting to RMB 578,946 thousand in 2020, compared to RMB 550,074 thousand in 2019[134] - New product development initiatives are underway, with an investment of HKD 200 million allocated for R&D in the next fiscal year[36] Dividends and Shareholder Value - The proposed dividend per share is HKD 0.33, totaling over HKD 1.4 billion, marking a historical high for the company[12] - The company proposed a final dividend of HKD 0.33 per share for the year ended December 31, 2020, compared to a final dividend of HKD 0.25 per share for the previous year, totaling HKD 1,070 million for 2019[40] - The total distributable reserves of the company as of December 31, 2020, amounted to approximately RMB 7,457 million, an increase from RMB 6,522 million in 2019[42] - The board of directors remains committed to enhancing shareholder value through sustainable growth strategies[34] Corporate Governance and Compliance - The board of directors consists of 9 members, including 5 executive directors, 1 non-executive director, and 3 independent non-executive directors[80] - The company has adopted the standard code of conduct for securities trading as per the listing rules, ensuring compliance by all directors for the year ended December 31, 2020[78] - The audit committee reviewed the financial statements and internal control mechanisms for the fiscal year ending December 31, 2020[84] - The board confirmed compliance with all applicable laws and regulations, with no significant violations impacting the business[66] Environmental and Social Responsibility - The company is committed to improving its environmental performance and reducing pollution during its production processes[60] - The company emitted a total of 263,709 tons of CO2, 0.548 tons of methane, and 0.0787 tons of nitrous oxide in 2020[102] - The company discharged 587,627 tons of wastewater, achieving a 100% compliance rate with urban drainage standards[102] - The company achieved an industrial water reuse rate of 85% and reduced water consumption significantly[105] - The company actively participates in social and public welfare activities, contributing to local community development while maintaining business growth[100] Risk Management - The company faces market risks due to a potential decline in demand for its products, including wheel loaders, road rollers, excavators, and forklifts, as the engineering machinery industry enters a relatively stable period[68] - The company relies on a limited number of suppliers for key raw materials and components, which poses operational risks if supply is disrupted[70] - The company has established a risk management and internal control system to identify and manage significant risks to achieve its business objectives[91] Employee and Workforce Management - The company employed approximately 8,220 employees as of December 31, 2020[59] - The average monthly employee turnover rate was 1.69% in 2020, with a total of 8,220 employees[107] - Male employees accounted for 84.86% of the workforce, with the majority aged between 26-40 years[108] - The company offers over 3,000 online training courses to enhance employee skills and knowledge, aligning career development with business growth[111] Financial Reporting and Audit - The independent auditor's report indicates that the audit provides reasonable assurance that the financial statements are free from material misstatement due to fraud or error[132] - The auditor evaluated the appropriateness of accounting policies and the reasonableness of accounting estimates and related disclosures made by the board[133] - The financial statements are prepared in accordance with Hong Kong Financial Reporting Standards and are based on historical cost conventions, except for certain financial instruments measured at fair value[150]

[Financial Highlights](index=3&type=section&id=Financial%20Highlights) [Financial Highlights](index=3&type=section&id=Financial%20Highlights) For H1 2020, the company reported a slight revenue decrease but improved operating and net profits, with basic EPS increasing and mixed liquidity indicators Key Financial Data Summary for H1 2020 | Metric | For the six months ended June 30, 2020 (RMB thousand) | For the six months ended June 30, 2019 (RMB thousand) | Change | | :--- | :--- | :--- | :--- | | **Revenue** | 6,513,807 | 6,759,674 | -3.64% | | **Operating Profit** | 1,064,603 | 987,780 | +7.78% | | **Profit attributable to owners of the parent** | 943,836 | 886,621 | +6.45% | | **Basic earnings per share** | 0.22 RMB | 0.21 RMB | +4.76% | | **Overall gross profit margin** | 22.89% | 23.24% | -0.35 percentage points | | **Net profit margin** | 14.49% | 13.15% | +1.34 percentage points | | **Current ratio** | 1.80 | 2.19 | -0.39 | | **Inventory turnover days** | 107 days | 90 days | +17 days | [Review Report on Interim Financial Information](index=5&type=section&id=Review%20Report%20on%20Interim%20Condensed%20Consolidated%20Financial%20Information) [Review Report](index=5&type=section&id=Review%20Report%20on%20Interim%20Condensed%20Consolidated%20Financial%20Information) The interim condensed consolidated financial information has been reviewed by independent auditors, with a scope smaller than a full audit, thus no audit opinion is expressed - Independent auditors reviewed the interim condensed consolidated financial information for the six months ended June 30, 2020, with a scope smaller than a full audit, thus no audit opinion is expressed[8](index=8&type=chunk)[9](index=9&type=chunk) [Interim Condensed Consolidated Financial Statements](index=6&type=section&id=Interim%20Condensed%20Consolidated%20Financial%20Statements) [Interim Condensed Consolidated Statement of Profit or Loss](index=7&type=section&id=Interim%20Condensed%20Consolidated%20Statement%20of%20Profit%20or%20Loss) Despite a revenue decrease to RMB 6.51 billion in H1 2020, profit before tax and profit for the period increased due to positive other income and lower finance costs Key Profit or Loss Items for H1 2020 | Item | For the six months ended June 30, 2020 (RMB thousand) | For the six months ended June 30, 2019 (RMB thousand) | | :--- | :--- | :--- | | **Revenue** | 6,513,807 | 6,759,674 | | **Gross Profit** | 1,490,784 | 1,571,179 | | **Profit before tax** | 1,125,055 | 1,048,227 | | **Profit for the period** | 943,836 | 888,879 | | **Profit attributable to owners of the parent** | 943,608 | 888,621 | | **Basic and diluted earnings per share** | 0.22 RMB | 0.21 RMB | [Interim Condensed Consolidated Statement of Comprehensive Income](index=8&type=section&id=Interim%20Condensed%20Consolidated%20Statement%20of%20Comprehensive%20Income) Total comprehensive income for H1 2020 increased to RMB 941 million, primarily driven by profit for the period and foreign exchange differences from overseas operations - Total comprehensive income for the period was **RMB 941 million**, with **RMB 940 million** attributable to owners of the parent, primarily influenced by profit for the period and exchange differences from overseas operations[12](index=12&type=chunk) [Interim Condensed Consolidated Statement of Financial Position](index=9&type=section&id=Interim%20Condensed%20Consolidated%20Statement%20of%20Financial%20Position) As of June 30, 2020, total assets slightly increased to RMB 16.06 billion, with current assets rising and current liabilities significantly growing, while net assets remained stable Key Financial Position Items Changes | Item | As of June 30, 2020 (RMB thousand) | As of December 31, 2019 (RMB thousand) | | :--- | :--- | :--- | | **Total non-current assets** | 3,604,000 | 3,787,707 | | **Total current assets** | 12,457,814 | 10,829,996 | | **Total current liabilities** | 6,913,622 | 4,741,297 | | **Total non-current liabilities** | 106,692 | 799,441 | | **Net assets** | 9,041,500 | 9,076,965 | [Interim Condensed Consolidated Statement of Changes in Equity](index=12&type=section&id=Interim%20Condensed%20Consolidated%20Statement%20of%20Changes%20in%20Equity) Total equity slightly decreased to RMB 9.04 billion as of June 30, 2020, primarily due to total comprehensive income offset by the 2019 final dividend distribution - Total equity decreased by approximately **RMB 35.47 million**, primarily due to a **RMB 941 million** increase from total comprehensive income for the period, offset by a **RMB 976 million** decrease from the 2019 final dividend distribution[17](index=17&type=chunk) [Interim Condensed Consolidated Statement of Cash Flows](index=14&type=section&id=Interim%20Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) Net cash flow from operating activities significantly decreased to RMB 407 million in H1 2020, mainly due to increased trade receivables, while cash and cash equivalents increased to RMB 2.73 billion at period-end Cash Flow Overview for H1 2020 | Item | For the six months ended June 30, 2020 (RMB thousand) | For the six months ended June 30, 2019 (RMB thousand) | | :--- | :--- | :--- | | **Net cash flows from operating activities** | 406,669 | 850,146 | | **Net cash flows used in investing activities** | (113,611) | (70,466) | | **Net cash flows (used in)/from financing activities** | (61,843) | 79,433 | | **Net increase in cash and cash equivalents** | 231,215 | 859,113 | | **Cash and cash equivalents at end of period** | 2,733,009 | 3,424,131 | [Notes to the Financial Statements](index=16&type=section&id=Notes%20to%20the%20Interim%20Condensed%20Consolidated%20Financial%20Information) [Operating Segment Information](index=19&type=section&id=4.%20Operating%20Segment%20Information) The Group's business is primarily driven by construction machinery sales, with wheel loaders as the largest revenue source, followed by excavators and forklifts Segment Performance for H1 2020 | Segment | Revenue (RMB thousand) | Results (RMB thousand) | | :--- | :--- | :--- | | **Construction Machinery Sales** | 6,513,057 | 823,957 | | **Construction Machinery Finance Lease** | 750 | 262 | | **Financial Investments** | – | 242,398 | Product Revenue Composition for H1 2020 | Product | Revenue (RMB thousand) | Percentage | | :--- | :--- | :--- | | **Wheel Loaders** | 3,216,119 | 49.4% | | **Excavators** | 1,282,636 | 19.7% | | **Forklifts** | 1,348,666 | 20.7% | | **Parts** | 617,112 | 9.5% | | **Road Rollers** | 48,524 | 0.7% | [Dividends](index=24&type=section&id=8.%20Dividends%20Payable%20to%20Shareholders) The Board does not recommend an interim dividend for H1 2020, while the 2019 final dividend of HKD 0.25 per share was paid on July 20, 2020 - No interim dividend is recommended for H1 2020[39](index=39&type=chunk) - The 2019 final dividend of **HKD 0.25** per share was paid on July 20, 2020[39](index=39&type=chunk) [Trade Receivables](index=26&type=section&id=12.%20Trade%20Receivables) Net trade receivables increased significantly to RMB 2.97 billion as of June 30, 2020, with the majority aged within 90 days Trade Receivables Aging Analysis | Aging | As of June 30, 2020 (RMB thousand) | As of December 31, 2019 (RMB thousand) | | :--- | :--- | :--- | | **0 to 90 Days** | 2,095,697 | 1,395,345 | | **91 to 180 Days** | 417,991 | 421,823 | | **181 to 360 Days** | 375,237 | 363,494 | | **Over 1 Year** | 83,609 | 64,360 | [Management Discussion and Analysis](index=39&type=section&id=Management%20Discussion%20and%20Analysis) [Performance and Business Review](index=39&type=section&id=Performance%20and%20Business%20Review) Despite a slight revenue decrease in H1 2020 due to COVID-19, net profit grew due to effective cost control and stable financial investment income, with wheel loaders remaining the primary revenue source - Despite a **3.64%** year-on-year revenue decrease, net profit increased by **6.18%** year-on-year through cost control and investment income[72](index=72&type=chunk) - Export sales accounted for **4.8%** of total sales, growing by **21.7%** year-on-year[73](index=73&type=chunk) Major Product Sales Changes (H1 2020 vs H1 2019) | Product | Sales (RMB million) | Year-on-year Change | | :--- | :--- | :--- | | **Wheel Loaders** | 3,216 | -3.6% | | **Excavators** | 1,283 | -8.9% | | **Forklifts** | 1,349 | -0.1% | | **Road Rollers** | 49 | -31.9% | | **Parts** | 617 | +4.6% | [Financial Review](index=41&type=section&id=Financial%20Review) The Group's financial position remained solid with total shareholders' equity of RMB 9.04 billion, increased cash and bank balances, a current ratio of 1.80, and capital expenditure for strategic and product transformation - As of June 30, 2020, Group bank balances and cash were approximately **RMB 2.73 billion**, an increase of **RMB 231 million** from the beginning of the year[80](index=80&type=chunk) - The current ratio was **1.80**, and the total asset-liability ratio was approximately **43.71%**[81](index=81&type=chunk)[82](index=82&type=chunk) - Capital expenditure for property, plant, and equipment amounted to approximately **RMB 98 million** in H1 2020, supporting strategic and product transformation[83](index=83&type=chunk) [Outlook](index=44&type=section&id=Outlook) Management is optimistic about H2 2020, expecting increased infrastructure investment to drive demand for construction machinery, with the Group focusing on core products, quality, domestic market share, and international expansion - Increased national infrastructure investment is expected to boost demand for construction machinery in H2[90](index=90&type=chunk) - Strategic focus: Concentrate on four main products—wheel loaders, excavators, forklifts, and road machinery—to enhance quality, service, and cost-effectiveness[90](index=90&type=chunk) - Market strategy: Deepen domestic market penetration, consolidate the leading position in wheel loaders, increase excavator market share, and expand international presence by improving overseas marketing networks[90](index=90&type=chunk)[91](index=91&type=chunk) [Corporate Governance](index=45&type=section&id=Corporate%20Governance) [Corporate Governance](index=45&type=section&id=Corporate%20Governance) The company maintains high corporate governance standards, adhering to most Listing Rules, but disclosed deviations including lack of directors' liability insurance, non-attendance of independent non-executive directors at AGM, and combined Chairman and CEO roles - The company disclosed several deviations from the Corporate Governance Code: - **Code Provision A.1.8**: No liability insurance purchased for directors - **Code Provision A.6.7**: Three independent non-executive directors did not attend the 2020 AGM - **Code Provision A.2.1**: The roles of Chairman and Chief Executive Officer are not separated, both held by Mr. Li Xinyan[93](index=93&type=chunk)[94](index=94&type=chunk)[96](index=96&type=chunk) [Disclosure of Interests](index=49&type=section&id=Disclosure%20of%20Interests) [Disclosure of Interests](index=49&type=section&id=Disclosure%20of%20Interests) As of June 30, 2020, Chairman Mr. Li Xinyan and Non-executive Director Ms. Ni Yinying (couple) are the controlling shareholders, jointly holding 56.03% of issued share capital, with Citigroup Inc. holding 5.00% Directors' and Chief Executive's Interests | Director Name | Capacity | Number of Shares Held | Percentage of Issued Share Capital | | :--- | :--- | :--- | :--- | | **Li Xinyan and Ni Yinying** | Beneficial Owner | 2,398,273,188 | 56.03% | - Major shareholder Citigroup Inc. holds **214,427,208** shares, representing **5.00%** of the issued share capital[108](index=108&type=chunk) [Other Information](index=51&type=section&id=Other%20Information) [Other Information](index=51&type=section&id=Other%20Information) The Board did not recommend an interim dividend for H1 2020, the Group employed approximately 7,828 staff, and the interim results were reviewed by the Audit Committee - The Board did not recommend an interim dividend for the six months ended June 30, 2020[109](index=109&type=chunk) - As of June 30, 2020, the Group employed approximately **7,828** staff[110](index=110&type=chunk) - The interim results for the six months ended June 30, 2020, were reviewed by the company's Audit Committee[111](index=111&type=chunk) [Company Information](index=52&type=section&id=Company%20Information) [Company Information](index=52&type=section&id=Company%20Information) This section provides essential company details, including board and committee members, company secretary, registered office, principal place of business, legal advisors, auditor (Ernst & Young), and share registrar - The company's Chairman and Chief Executive Officer is Mr. Li Xinyan[112](index=112&type=chunk) - The company's auditor is Ernst & Young[113](index=113&type=chunk)

Financial Performance - The operating revenue for 2019 was RMB 11,743.82 million, a slight decrease of 1.05% compared to RMB 11,868.32 million in 2018[6]. - Net profit increased by 43.71% to RMB 1,643.40 million, reflecting strong cost control and a healthy financial condition[9]. - EBITDA for 2019 was RMB 2,354.85 million, an increase of 37.00% from RMB 1,718.86 million in 2018[6]. - The comprehensive gross profit margin increased to 23.93%, up by 0.97 percentage points from 22.96% in 2018[12]. - The total revenue of China Longgong Holdings Limited was approximately RMB 11,744 million, a decrease of 1.05% compared to RMB 11,868 million in 2018[12]. - The net profit for 2019 was approximately RMB 1,644 million, an increase of RMB 500 million from RMB 1,144 million in the previous year, primarily due to improved operational efficiency and cost control[12]. - The company reported a significant management team with extensive experience in various sectors, including supply chain management and financial oversight[26][27][28][29]. - The company reported a profit for the year of RMB 1,643,405,000, reflecting a strong performance compared to previous periods[129]. Cash Flow and Assets - Cash flow from operating activities was RMB 1,570 million, with total cash and financial assets amounting to RMB 5,510 million at the end of the period[9]. - As of December 31, 2019, the group's cash and bank balances were approximately RMB 2,502 million, a decrease of RMB 63 million from RMB 2,565 million in 2018[16]. - The total liabilities decreased significantly from RMB 5,865,164,000 in 2018 to RMB 5,540,738,000 in 2019, a reduction of about 5.5%[128]. - The company's net asset value increased to RMB 9,076,965,000 in 2019, up from RMB 8,207,183,000 in 2018, reflecting a growth of approximately 10.6%[128]. - The company's inventory increased to RMB 3,005,756,000 in 2019, compared to RMB 2,857,771,000 in 2018, marking an increase of about 5.2%[127]. Dividends and Shareholder Returns - The proposed dividend per share is HKD 0.25, with a total dividend payout exceeding HKD 1 billion, marking a historical high for the company[9]. - The company maintained a consistent dividend policy, reflecting its commitment to returning value to shareholders[32]. - The company declared a final dividend of RMB 548,195 for the year, consistent with its commitment to return value to shareholders[130]. Market Position and Sales - The company maintained a market share of first place in the domestic loader market, with sales growth in key products like excavators and forklifts aligning with industry trends[9]. - Sales revenue from wheel loaders was approximately RMB 6,026 million, accounting for 51.3% of total revenue, a decrease of 2.1% from the previous year[13]. - Excavators generated revenue of approximately RMB 2,122 million, representing 18.1% of total revenue, showing a slight increase from RMB 2,111 million in 2018[14]. - Sales in the North China region decreased by 4.2% to approximately RMB 2,997 million, while sales in East China increased by 5.4% to RMB 2,091 million[12]. Research and Development - The company has strengthened its focus on research and development, increasing investment in technology and talent acquisition to enhance core competitiveness[11]. - Research and development expenses were RMB 550,074 thousand, slightly up from RMB 544,503 thousand in 2018[125]. Corporate Governance - The board consists of both executive and independent non-executive directors, ensuring a diverse governance structure[35]. - The company emphasizes its commitment to technological innovation and market expansion, as evidenced by the qualifications of its management team[27][28]. - The board is committed to maintaining high standards of corporate governance and has adopted the principles of the Corporate Governance Code[63]. Environmental Responsibility - The company is committed to improving environmental performance and reducing pollution during its production processes[51]. - The company has established an ISO14001 environmental management system to ensure effective environmental management and reduce operational impact on the environment[93]. - In 2019, the company emitted 225,920 tons of CO2, 0.4641 tons of methane, and 0.0649 tons of nitrous oxide[94]. - The company processed 615,552 tons of wastewater in 2019, achieving a 100% compliance rate with discharge standards[94]. Risk Management - The company faces market risks due to a potential decline in demand for its products, including wheel loaders, road rollers, excavators, and forklifts, as the engineering machinery industry enters a relatively stable period[59]. - Financial risks may adversely affect the company's business, financial condition, and operating results[60]. - The company has established a risk management and internal control system to identify, assess, and manage significant risks to achieve its business objectives[82]. Employee Management - The company employed approximately 7,644 employees as of December 31, 2019[50]. - The average monthly employee turnover rate in 2019 was 2.26%, with a total of 7,644 employees as of December 31, 2019[99]. - The company offers over 3,000 training courses to enhance employee skills and knowledge, aligning career development with business growth[103]. Compliance and Integrity - The company has implemented strict anti-corruption measures, including requiring suppliers and agents to sign a "Integrity Agreement"[114]. - The internal audit and risk management departments reported no claims of bribery or extortion from stakeholders during the year[114]. - The company actively promotes a culture of integrity among its stakeholders, enhancing its corporate image[114].

Financial Performance - The company's revenue for 2018 was RMB 11,868,316,000, representing a 31.96% increase from RMB 8,994,097,000 in 2017[6] - Operating profit decreased by 7.16% to RMB 1,365,923,000 from RMB 1,471,196,000 in the previous year[6] - EBITDA for 2018 was RMB 1,718,857,000, down 6.1% from RMB 1,830,534,000 in 2017[6] - Profit attributable to equity holders of the parent increased by 9.39% to RMB 1,143,867,000 compared to RMB 1,045,635,000 in 2017[6] - Basic earnings per share rose by 12.5% to RMB 0.27 from RMB 0.24 in the previous year[6] - The company's gross profit margin decreased to 22.96% from 26.59% in 2017, a decline of 3.63%[6] - The net profit margin also fell to 9.64% from 11.63%, a decrease of 1.99%[6] - Revenue increased by 32% to RMB 11.87 billion, with excavator and forklift sales growing above industry average, maintaining the leading market position[9] - Net profit rose by 9% to RMB 1.14 billion, while net profit excluding investment gains increased by 56% to RMB 1.32 billion, with earnings per share at RMB 0.27[9] Financial Ratios and Metrics - Current ratio improved to 2.29 from 1.81, an increase of 26.52%[6] - The debt-to-equity ratio decreased to 66.77% from 71.46%, a reduction of 7.3%[6] - The company maintained a healthy debt-to-asset ratio of 42%, indicating a strong financial structure[9] - The total debt-to-asset ratio improved to approximately 41.68% from 44.06% in 2017[19] - Total equity increased by 6% to approximately RMB 8,207 million as of December 31, 2018, compared to RMB 7,730 million in 2017[18] Cash Flow and Investments - Operating cash flow reached RMB 810 million, with total cash and financial assets amounting to RMB 5.17 billion[9] - Cash and bank balances increased by approximately RMB 931 million to RMB 2,565 million as of December 31, 2018, from RMB 1,634 million in 2017[17] - The company reported a net cash inflow from investment activities of RMB 441,904 thousand in 2018, compared to a net cash outflow of RMB 1,410,809 thousand in 2017, indicating a positive turnaround[131] Sales and Revenue Breakdown - Wheel loader sales revenue reached RMB 6,154 million, an increase of 28% compared to RMB 4,826 million in 2017, accounting for 52% of total sales revenue[13] - Excavator revenue surged 59% to approximately RMB 2,111 million, up from RMB 1,330 million in 2017, representing about 18% of total revenue[14] - Forklift revenue increased by 26% to RMB 2,308 million, compared to RMB 1,826 million in 2017[15] - Parts revenue rose by 21% to RMB 899 million, up from RMB 742 million in 2017[16] - Sales in North China increased by 60% to approximately RMB 3.13 billion, accounting for 26% of total revenue[12] - Overseas sales revenue reached RMB 652 million, a decrease of 5% compared to the previous year[12] Dividends and Shareholder Returns - Proposed dividend of HKD 0.20 per share, achieving a record high payout ratio exceeding 60%[9] - The company proposed a final dividend of HKD 0.20 per share for the year ended December 31, 2018, compared to HKD 0.16 per share for the previous year, totaling HKD 685 million for the prior year[34] - The company paid dividends totaling RMB 549,027 thousand in 2018, compared to RMB 235,247 thousand in 2017, indicating an increase of approximately 133.0%[131] Research and Development - Research and development expenses increased to RMB 544,503 thousand in 2018 from RMB 381,967 thousand in 2017, indicating a focus on innovation[124] - The company emphasized enhancing product quality and R&D investment, focusing on core components and new product development[10] Corporate Governance - The company’s board consists of a mix of executive and independent non-executive directors, ensuring a balanced governance structure[39] - The board has established four committees: Executive Committee, Audit Committee, Remuneration Committee, and Nomination Committee, to enhance governance[72] - The board believes that the risk management and internal control systems are adequate and effective as of the end of the reporting period[84] - The company is committed to maintaining high standards of corporate governance and transparency to enhance shareholder value[66] Environmental and Social Responsibility - The company is committed to improving environmental performance and reducing pollution during production processes[52] - The company actively participates in social and public welfare activities, contributing to local community development while pursuing profit growth[93] - The company established an ISO14001 environmental management system to ensure effective environmental management and reduce operational impact on the environment[94] Risk Management - The company faces market risks due to declining demand for its products in the engineering machinery industry, which may adversely affect its financial condition and operating performance[61] - The company relies on a limited number of suppliers for key raw materials and components, which poses operational risks if supply is disrupted[62] - The company aims to continuously review and strengthen its business operations to identify and mitigate significant business risks[84] Employee and Workforce - The company employed approximately 8,424 employees as of December 31, 2018[51] - The average monthly employee turnover rate in 2018 was 1.77%, with a total of 8,424 employees as of December 31, 2018[100] - Male employees accounted for 86.56% of the workforce, with the majority aged between 26 and 40 years[100] Financial Reporting and Standards - The financial statements were prepared in accordance with Hong Kong Financial Reporting Standards, with values reported in Renminbi rounded to the nearest thousand[141] - The company adopted the new Hong Kong Financial Reporting Standard No. 9, which replaced the previous standard and impacted the classification and measurement of financial instruments[145] - The company has assessed control over subsidiaries based on the ability to influence returns and has consolidated financial statements accordingly[142]