Financial Performance - Revenue increased by 3.9% to RMB 7,175,804 thousand compared to RMB 6,906,524 thousand in the same period last year[2] - EBITDA rose by 14.2% to RMB 2,231,943 thousand from RMB 1,953,790 thousand year-over-year[2] - Profit before tax grew by 18.0% to RMB 1,901,702 thousand compared to RMB 1,612,155 thousand in the previous year[2] - Net profit attributable to the company's owners increased by 16.1% to RMB 1,491,404 thousand from RMB 1,284,496 thousand[2] - Basic earnings per share rose by 16.1% to 82.08 RMB cents from 70.69 RMB cents[2] - Interim dividend per share increased by 33.3% to 16.0 RMB cents from 12.0 RMB cents[2] - Total revenue for the first half of 2024 reached RMB 7,175,804 thousand, a 3.9% increase from RMB 6,906,524 thousand in the same period last year[13][14] Revenue Breakdown by Product - Revenue from intermediate products increased to RMB 3,081,282 thousand, up 14.5% YoY from RMB 2,692,115 thousand[13][14] - Revenue from active pharmaceutical ingredients (API) rose to RMB 3,917,640 thousand, a 1.8% increase from RMB 3,849,116 thousand YoY[13][14] - Revenue from finished dosage products slightly decreased to RMB 2,397,777 thousand, down 1.6% from RMB 2,436,110 thousand YoY[13][14] Revenue Breakdown by Region - Revenue from China (including Hong Kong) grew to RMB 5,748,478 thousand, a 3.7% increase from RMB 5,544,083 thousand YoY[15] - Revenue from Europe decreased to RMB 411,566 thousand, down 4.6% from RMB 431,526 thousand YoY[15] - Revenue from India increased to RMB 376,958 thousand, up 13.6% from RMB 331,769 thousand YoY[15] Research and Development - Research and development expenses increased to RMB 446,800 thousand from RMB 338,678 thousand, reflecting a focus on innovation[4] - R&D expenditure increased significantly to RMB 446,800 thousand, up 31.9% from RMB 338,678 thousand YoY[13][14] Assets and Liquidity - Total assets increased to RMB 15,411,907 thousand from RMB 14,390,448 thousand, indicating growth in the company's asset base[5] - Cash and cash equivalents rose significantly to RMB 6,554,830 thousand from RMB 4,261,989 thousand, reflecting improved liquidity[5] - Total equity increased to RMB 13,573,883 thousand from RMB 12,747,618 thousand, showing growth in shareholder value[6] - The company's cash and bank balances increased to RMB 7,321,900,000 as of June 30, 2024, up from RMB 5,234,200,000 on December 31, 2023[42] - Total assets grew to RMB 22,826,100,000 as of June 30, 2024, compared to RMB 21,017,200,000 at the end of 2023[42] - Net current assets rose to RMB 7,733,500,000 as of June 30, 2024, from RMB 7,160,500,000 on December 31, 2023[42] - The company's net cash and bank balances after deducting bank borrowings and trade payables stood at RMB 3,265,100,000 as of June 30, 2024, up from RMB 1,755,500,000 at the end of 2023[42] - The company's current ratio was 2.04 as of June 30, 2024, slightly down from 2.08 on December 31, 2023[42] Debt and Borrowings - The company's interest-bearing borrowings increased to RMB 2,439,400,000 as of June 30, 2024, up from RMB 1,496,900,000 at the end of 2023[42] Government Subsidies and Foreign Exchange - Government subsidies surged to RMB 100,709 thousand, a 189.3% increase from RMB 34,809 thousand YoY[16] - Net foreign exchange gains decreased to RMB 30,773 thousand, down 39.3% from RMB 50,682 thousand YoY[18] Legal and Environmental Initiatives - The company is involved in a legal case seeking to recover RMB 340,000,000 from Chengdu Evergrande, with a partial judgment of RMB 136,300,000 awarded[45] - The company's Inner Mongolia subsidiary launched a salt separation and acid-base conversion project, expected to reduce solid waste by 6,600 tons annually and cut CO2 emissions by 45,000 tons[46] Strategic Focus - The company is focusing on consolidating core industry advantages and enhancing R&D innovation capabilities in response to China's healthcare reform[47] Employee Count - The company employs approximately 15,000 staff in Hong Kong and Mainland China, unchanged from December 31, 2023[44]

Investment Rating - The report assigns a "Buy" rating to the company with a target price of HKD 11.97, indicating a potential upside of 30.0% from the current price of HKD 9.21 [1][12]. Core Insights - The company has demonstrated rapid revenue growth, with a 2023 revenue of RMB 137.39 billion, representing a year-on-year increase of 21.2%. The net profit attributable to shareholders reached RMB 27 billion, up 70.9% year-on-year, and the dividend per share increased by 108% to RMB 0.52 [6][9]. - The company is focusing on the diabetes and weight management sectors, with significant progress in new product development. A new GLP-1/GIP/GCG triple receptor agonist has received clinical trial approval in the U.S. and is expected to enter the Chinese market soon [7][10]. - The company plans to continue increasing its R&D investment, which reached RMB 8.08 billion in 2022, a 36% increase from the previous year. The revenue projections for 2024-2026 are RMB 151 billion, RMB 160.3 billion, and RMB 169.7 billion, respectively [10][12]. Financial Summary - In 2023, the company reported a total revenue of RMB 137.39 billion, with a gross profit margin of 46.11% and a net profit margin of 19.66% [14]. - The company’s total assets amounted to RMB 210 billion, with a net asset value of RMB 127 billion. The earnings per share (EPS) for 2023 was RMB 1.49, with projections of RMB 1.58, RMB 1.70, and RMB 1.80 for 2024, 2025, and 2026, respectively [2][14]. - The company’s market capitalization is approximately HKD 167 billion, with a total share count of 1.817 billion shares [2].

Summary of the Conference Call Company and Industry Involved - The conference call involved Huazhong Medicine, focusing on the pharmaceutical industry [1] Core Points and Arguments - The company held a summer strategy meeting to discuss its future direction and performance in the pharmaceutical sector [1] Other Important but Possibly Overlooked Content - The meeting aimed to engage with investors and provide insights into the company's strategic initiatives and market positioning [1]

Research and Development - The company has over 100 ongoing research projects and has obtained more than 100 patents[6]. - The company has expanded its product range to include biopharmaceuticals and veterinary medicines, with a global sales network covering nearly 80 countries and regions[6]. - The company has received clinical trial approvals for several first-class innovative drugs, including UBT251 injection for type 2 diabetes and TUL01101 tablets for moderate to severe atopic dermatitis[12]. - Research and development expenditure for the year reached RMB 808,300,000, reflecting a 36.2% increase year-on-year[24]. - The company is expanding its pipeline in areas such as metabolism, autoimmune diseases, ophthalmology, and anti-infection, with new drugs for dry eye disease and moderate to severe atopic dermatitis entering clinical trials[24]. - The company is developing 39 new human drug products, including 19 Class 1 new drug projects[37]. - The company’s new drug TUL12101 eye drops received approval for clinical trials in March 2023, targeting dry eye treatment[37]. - The company has been actively involved in the development of recombinant protein drugs, particularly in diabetes biopharmaceuticals, for over 18 years[61]. Financial Performance - The company reported a revenue of RMB 13,739,879,000 for 2023, representing a 21.2% increase from RMB 11,334,262,000 in 2022[17]. - Profit attributable to the company's owners reached RMB 2,701,350,000, a significant increase of 70.9% compared to RMB 1,581,094,000 in the previous year[17]. - Basic earnings per share rose to RMB 148.67, up 71.1% from RMB 86.89 in 2022[17]. - The company’s EBITDA was approximately RMB 3,976,700,000, reflecting a year-on-year growth of 50.6%[32]. - The company’s total comprehensive income for the year was RMB 2,701,270 thousand, compared to RMB 1,582,450 thousand in 2022, marking an increase of 70.8%[129]. - The company reported a pre-tax profit of RMB 3,344,148 thousand, which is an increase of 66.5% from RMB 2,006,766 thousand in 2022[127]. - The financial costs decreased to RMB 66,896 thousand from RMB 81,595 thousand, indicating a reduction of 18.0%[127]. - The company’s total assets increased to RMB 12,747,618 thousand in 2023, compared to RMB 10,609,431 thousand in 2022, representing a growth of approximately 20.1%[134]. Dividends and Shareholder Returns - The company plans to distribute a final dividend of RMB 28.0 per share and a special dividend of RMB 12.0 per share, totaling an annual dividend of RMB 52.0 per share, which is an increase of 108.0% from RMB 25.0 in 2022[17]. - The company reported a proposed final dividend of RMB 0.28 per share and a special dividend of RMB 0.12 per share, subject to shareholder approval at the upcoming annual general meeting[63]. - The total share premium and reserves available for distribution to shareholders is approximately RMB 4,790,000,000[66]. Corporate Governance - The company emphasizes strong governance with a diverse board and experienced management team to drive strategic initiatives[58]. - The board consists of six executive directors and three independent non-executive directors, with five established committees for oversight[91]. - The company has adopted corporate governance practices in line with the Hong Kong Stock Exchange's requirements, ensuring high standards of governance[89]. - The board of directors has established a policy to achieve a balanced strategy goal for diversity among board members, with a current gender diversity ratio of 33.3% (3 out of 9 directors being female)[94]. - The company has implemented a policy to consider diversity factors in the recruitment and selection of senior management and staff[94]. Market Expansion and Strategic Initiatives - The company is actively pursuing market expansion through trade relationships with BRICS countries and along the Belt and Road Initiative, enhancing its global sales network[27]. - The company has launched a cross-border production product, vitamin C effervescent tablets, in the Greater Bay Area, marking a significant milestone[10]. - The company has completed the acquisition of I, which is projected to add $J million in annual revenue and strengthen its market position[180]. - Strategic initiatives include a focus on sustainability, with plans to reduce carbon emissions by K% by 2025[181]. Risk Management and Compliance - The company is actively managing currency exchange risks through treasury policies and forward contracts[43]. - The company has maintained compliance with applicable laws and regulations, with no significant violations reported during the fiscal year ending December 31, 2023[85]. - The internal control system was deemed sufficient and effective by the board, with no significant events affecting the group's ability to continue as a going concern[107]. Investor Relations - The company emphasizes the importance of effective communication with shareholders to enhance investor relations and understanding of business performance and strategy[112]. - The investor relations team, led by the Vice Chairman and the Director of Investor Relations, will continue to engage with investors through various platforms, including roadshows and conference calls[112]. - The company is committed to maintaining high-quality investor relations as part of its management philosophy[112]. Management and Staffing - The company employed approximately 15,000 staff as of December 31, 2023, an increase from 14,000 in 2022[44]. - The executive team includes Mr. Tsoi Hoi Shan as Chairman and Executive Director, with over 23 years of experience in quality control[53]. - The company has experienced significant management continuity, with key executives having over 20 years of experience in the pharmaceutical industry[60][61]. Financial Reporting and Accounting Standards - The financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards and reflect a true and fair view of the group's financial position as of December 31, 2023[114]. - The company expects that the application of the revised Hong Kong Financial Reporting Standards will not have a significant impact on the consolidated financial statements in the foreseeable future[160]. - The group has not yet applied the temporary exception related to the OECD's Pillar Two rules, as the relevant jurisdictions have not implemented these rules[149].

Investment Rating - The investment rating for the company is upgraded to "Buy" with a target price of HKD 11.58 [3][12]. Core Views - The company's 2023 earnings exceeded expectations, with a revenue growth of 21.2% to RMB 13.74 billion, driven by a significant recovery in demand for intermediates and active pharmaceutical ingredients in overseas markets, as well as a gradual recovery in the domestic market [1]. - The company expects stable revenue growth from 2024 to 2026, with a projected CAGR of 6.9% from 2023 to 2026, supported by improving demand in the pharmaceutical sector, a rebound in insulin business revenue, and continued growth in the animal health business [2]. - The company has multiple diabetes drugs in its R&D pipeline, with potential approvals for liraglutide, degludec insulin, and semaglutide expected in 2024 and 2025, which could provide new revenue growth points [2]. Summary by Sections Financial Performance - In 2023, the company's revenue reached RMB 13.74 billion, a 21.2% increase year-on-year, slightly above expectations. The revenue from intermediates and active pharmaceutical ingredients grew by 44.9% and 23.7%, respectively [1]. - The gross profit margin improved from 43.8% to 46.1%, and the net profit attributable to shareholders increased by 70.9% to approximately RMB 2.70 billion, exceeding expectations by 18.8% [1][8]. Revenue Forecast - Revenue forecasts for 2024 and 2025 have been slightly raised by 0.05% and 2.5%, respectively, with expected revenues of RMB 15.10 billion and RMB 15.94 billion [2][9]. - The insulin business, which saw a 4.9% decline in 2023, is expected to recover starting in 2024, with a projected CAGR of 11.4% from 2023 to 2026 [2]. Valuation - The target price has been adjusted to HKD 11.58 based on a 7.0x 2024E PER valuation, reflecting an increase in net profit estimates for 2024 and 2025 by 21.2% and 23.0%, respectively [3][10].

Investment Rating - The report maintains a "Buy" rating for the company [1] Core Insights - The company achieved a total revenue of 137.40 billion CNY in 2023, representing a year-on-year growth of 21.22%, while the net profit reached 27.01 billion CNY, up 70.85% year-on-year [4][7] - The intermediate and raw material drug segments showed strong performance, with revenue from intermediates and raw materials growing by 44.9% and 23.7% respectively [4][7] - The company has a rich pipeline in the diabetes field, with significant progress in GLP-1 products, including the submission of liraglutide injection for production and completion of Phase III clinical enrollment for semaglutide injection [12][14] Financial Performance - The company's revenue forecast for 2024-2026 is projected at 150.47 billion CNY, 158.06 billion CNY, and 165.92 billion CNY, with respective year-on-year growth rates of 9.40%, 5.04%, and 4.97% [4][17] - The net profit forecast for the same period is expected to be 28.70 billion CNY, 29.95 billion CNY, and 31.15 billion CNY, with year-on-year growth rates of 6.23%, 4.36%, and 4.00% [4][17] - The gross margin for 2023 was 46.11%, an increase of 2.27 percentage points, while the net margin was 19.66%, up 5.71 percentage points [9][10] Segment Performance - The formulation segment generated revenue of 50.24 billion CNY, with a growth of 10.2%, while the insulin series saw a decline of 4.93% to 11.18 billion CNY [4][7] - The antibiotic segment, including animal health products, achieved sales of 35.33 billion CNY, marking a growth of 15.3% [4][7] - The overseas business contributed 26.16 billion CNY in revenue, reflecting a growth of 10.3%, while domestic revenue reached 61.00 billion CNY, up 38.57% [4][7] Research and Development - The company has established a comprehensive coverage in the diabetes sector, with projects including degludec insulin injection and liraglutide injection [12][14] - Significant advancements in GLP-1 products were noted, with multiple clinical trials progressing and approvals being sought for various indications [12][14]

Financial Performance - Revenue for 2023 reached RMB 13,739,879,000, a 21.2% increase compared to 2022[2] - Net profit attributable to the company's owners surged by 70.9% to RMB 2,701,400,000[4] - The company's EBITDA rose by 50.6% to RMB 3,976,692,000 in 2023[2] - The company's pre-tax profit grew by 66.6% to RMB 3,344,148,000[2] - Revenue for 2023 reached RMB 13,739.879 million, a 21.2% increase from RMB 11,334.262 million in 2022[12] - Net profit for 2023 was RMB 2,700.845 million, up 70.8% from RMB 1,581.023 million in 2022[12] - Earnings per share for 2023 increased to RMB 148.67 cents, compared to RMB 86.89 cents in 2022[12] - Profit before tax for 2023 was RMB 3,344,148 thousand, up from RMB 2,006,766 thousand in 2022[22][24] - Revenue for the year ended December 31, 2023, was approximately RMB 13,739.9 million, an increase of 21.2% year-over-year[43] - EBITDA for the year was approximately RMB 3,976.7 million, up 50.6% year-over-year[43] - Net profit attributable to shareholders was RMB 2,701.4 million, a 70.9% increase year-over-year[43] R&D and Innovation - R&D investment increased by 36.2% to RMB 808,300,000 in 2023[5] - The company's GLP-1 drug UBT251 injection received clinical trial approvals in both China and the US[5] - Research and development costs rose to RMB 757,248 thousand in 2023, compared to RMB 593,598 thousand in 2022, reflecting increased investment in innovation[27] - The company invested RMB 808.3 million in R&D, a 36.2% increase year-over-year, with 39 new human drug products under development, including 19 Class 1 new drug projects[46] Global Expansion and Market Reach - The company's upstream products now cover nearly 80 countries and regions globally[6] - Revenue from China (including Hong Kong) increased to RMB 11,124,265 thousand in 2023, compared to RMB 8,962,740 thousand in 2022[25] - Revenue from Europe grew to RMB 783,732 thousand in 2023, up from RMB 631,282 thousand in 2022[25] - Revenue from India reached RMB 673,922 thousand in 2023, compared to RMB 556,336 thousand in 2022[25] - Revenue from South America increased to RMB 340,391 thousand in 2023, up from RMB 297,594 thousand in 2022[25] - Overseas sales of intermediate products and APIs reached RMB 2,615.6 million, accounting for 19.0% of total sales[44] Product Segments and Revenue Breakdown - Revenue from intermediate products increased to RMB 5,753,101 thousand in 2023, up from RMB 4,317,709 thousand in 2022[22][24] - Revenue from active pharmaceutical ingredients (API) rose to RMB 7,392,185 thousand in 2023, compared to RMB 6,044,904 thousand in 2022[22][24] - Revenue from finished dosage products grew to RMB 5,023,821 thousand in 2023, up from RMB 4,560,331 thousand in 2022[22][24] - Total revenue for 2023 reached RMB 13,739,879 thousand, a significant increase from RMB 11,334,262 thousand in 2022[22][24] - Intermediate products and active pharmaceutical ingredients (API) segments saw revenue increases of 33.2% and 22.3%, respectively, with profit increases of 116.0% and 102.7%[43] Capital and Asset Management - Total assets as of December 31, 2023, were RMB 14,390.448 million, up from RMB 11,946.598 million in 2022[13] - Non-current assets grew to RMB 7,229.979 million in 2023, compared to RMB 6,464.679 million in 2022[13] - Current assets increased to RMB 13,787.201 million in 2023, up from RMB 12,514.946 million in 2022[13] - The company's equity attributable to owners rose to RMB 12,734.778 million in 2023, from RMB 10,608.086 million in 2022[15] - The company invested RMB 1,143,439 thousand in property, plant, and equipment in 2023, a significant increase from RMB 701,986 thousand in 2022[34] - Trade receivables and bills receivable totaled RMB 6,314,480 thousand in 2023, up from RMB 4,911,704 thousand in 2022, with credit loss provisions of RMB 12,459 thousand for trade receivables[35] - The company typically offers trade customers a credit period of 45 to 120 days, with selected customers potentially receiving extended credit based on trade volume and historical settlement records[36] - The aging analysis of trade receivables shows that 0 to 30 days receivables amounted to RMB 920,770 thousand in 2023, down from RMB 1,026,413 thousand in 2022[37] - Trade payables and other payables totaled RMB 2,238,152 thousand in 2023, with supplier financing arrangements accounting for RMB 1,981,929 thousand[39] - Capital commitments for the acquisition of property, plant, and equipment amounted to RMB 989,055 thousand in 2023, up from RMB 355,691 thousand in 2022[40] - The company pledged assets worth RMB 22,440 thousand in property, plant, and equipment and RMB 972,249 thousand in bank deposits as collateral for bank credit in 2023[41] - The company's current assets increased to RMB 13,787,200,000 in 2023 from RMB 12,514,900,000 in 2022, with net current assets rising to RMB 7,160,500,000 from RMB 5,481,900,000[49] - The current ratio improved to 2.08 in 2023 compared to 1.78 in 2022[49] - Total assets grew to RMB 21,017,200,000 in 2023 from RMB 18,979,600,000 in 2022, while total liabilities decreased to RMB 8,269,600,000 from RMB 8,370,200,000[49] - Equity attributable to owners of the company increased to RMB 12,734,800,000 in 2023 from RMB 10,608,100,000 in 2022[49] - Net cash and bank balances after deducting borrowings and supplier financing arrangements stood at RMB 1,755,500,000 in 2023, up from RMB 1,394,600,000 in 2022[49] - The company held RMB 5,234.2 million in bank deposits, cash, and cash equivalents as of December 31, 2023[48] - The company's interest-bearing borrowings were RMB 1,496.9 million, all due within five years, with RMB 23.9 million in fixed-rate loans and RMB 1,473.0 million in floating-rate loans[48] Dividends and Shareholder Returns - The company's total dividend for 2023 increased by 108% to RMB 52 cents per share[2] - Dividends declared for 2023 totaled RMB 581,448 thousand, up from RMB 272,636 thousand in 2022, reflecting higher interim and special dividends[32] - The company proposed a final dividend of RMB 28 cents per share and a special dividend of RMB 12 cents per share for 2023, totaling RMB 726,811 thousand[32] Employee and Social Responsibility - The company added over 5,000 jobs in the past decade, contributing to social responsibility efforts[10] - The company launched a stock incentive plan in 2023 to align employee interests with corporate value[10] - The company is committed to green factory construction, supporting national carbon neutrality goals[10] - Employee costs, including salaries and benefits, rose to RMB 1,648,745 thousand in 2023, compared to RMB 1,397,006 thousand in 2022[31] - The company employed approximately 15,000 staff in Hong Kong and Mainland China as of December 31, 2023, compared to 14,000 in 2022[51] - The company granted a total of 12,096,900 reward shares to selected participants under the 2023 Share Award Scheme[52] Legal and Contingent Liabilities - The company won a lawsuit against Chengdu Evergrande, with the court ordering payment of approximately RMB 136,300,000, though the company has appealed the decision[53] - The company has no significant contingent liabilities as of December 31, 2023[52] Financial Costs and Taxation - Financial costs decreased to RMB 66,896 thousand in 2023 from RMB 81,595 thousand in 2022, primarily due to lower borrowing interest[28] - Tax expenses increased to RMB 643,303 thousand in 2023, up from RMB 425,743 thousand in 2022, mainly due to higher corporate income tax in China[29] - The company's financial costs decreased by 18.0% to RMB 66.9 million, with net cash and bank balances of RMB 1,755.5 million as of December 31, 2023[47] Other Income and Expenses - Other income increased to RMB 212,475 thousand in 2023, up from RMB 165,817 thousand in 2022, driven by higher bank interest income and subsidy income[26] - Depreciation of property, plant, and equipment increased to RMB 536,303 thousand in 2023 from RMB 521,834 thousand in 2022[31] Treasury and Risk Management - The company maintains a treasury policy to monitor and manage currency exchange rate risks, using forward contracts as needed[50] Production and Infrastructure - The company launched the construction of the Zhuhai Lianbang Gaolan Port API project in November 2023[7] - The company's animal health business experienced rapid growth, with new production bases under construction in Inner Mongolia and Zhuhai[9] - The company's new production base in Zhuhai Gaolan Port, with a total construction area of 120,000 square meters, began construction in November 2023, aiming to enhance the automation and scale of API production[44]

Financial Performance - Revenue for the six months ended June 30, 2023, reached RMB 6,906,524 thousand, a 33.3% increase from RMB 5,181,925 thousand in the same period of 2022[6] - EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) increased by 71.2% to RMB 1,953,790 thousand, compared to RMB 1,140,996 thousand in the previous year[6] - Profit before tax surged by 95.0% to RMB 1,612,155 thousand, up from RMB 826,954 thousand year-over-year[6] - Net profit attributable to the owners of the company was RMB 1,284,496 thousand, reflecting a 104.0% increase from RMB 629,517 thousand in the prior year[6] - Basic earnings per share rose by 104.6% to RMB 70.69, compared to RMB 34.55 in the same period last year[6] - Total comprehensive income for the period amounted to RMB 1,285,591 thousand, compared to RMB 631,731 thousand in the previous year[16] - The company reported a significant increase in other income, totaling RMB 92,491 thousand, compared to RMB 72,641 thousand in the prior year[16] - The company’s pre-tax profit for the six months ended June 30, 2023, was RMB 1,612,155 thousand, compared to RMB 826,954 thousand for the same period in 2022, indicating a growth of approximately 95.1%[43] - Bank interest income increased to RMB 51,432 thousand, up from RMB 29,512 thousand, representing a growth of 74.2% year-over-year[47] - Total other income reached RMB 92,491 thousand, compared to RMB 72,641 thousand in the previous year, marking a 27.2% increase[47] Dividends and Shareholder Returns - The interim dividend per share was increased by 140.0% to RMB 12.0, up from RMB 5.0 in the previous year[6] - The total dividends declared for the period included a final dividend of RMB 0.14 per share, amounting to RMB 254,384,000, and a special dividend of RMB 0.109021 per share, totaling RMB 109,021,000, resulting in total dividends of RMB 363,405,000 for 2023, up from RMB 181,757,000 in 2022[63] - The interim dividend declared for the six months ended June 30, 2023, was RMB 0.12 per share, totaling RMB 218,043,000, compared to RMB 0.05 per share and RMB 90,879,000 in 2022[64] Assets and Liabilities - As of June 30, 2023, total assets amounted to RMB 13,212,085 thousand, an increase of 5.6% from RMB 12,514,946 thousand as of December 31, 2022[18] - Non-current assets reached RMB 6,557,875 thousand, up from RMB 6,464,679 thousand, reflecting a growth of 1.4%[18] - Current liabilities increased to RMB 7,063,733 thousand from RMB 7,033,027 thousand, indicating a slight rise of 0.4%[19] - The net asset value stood at RMB 11,531,617 thousand, representing a 8.7% increase from RMB 10,609,431 thousand[19] - The total equity attributable to owners of the company was RMB 11,530,528 thousand, reflecting a growth of 8.7% from RMB 10,608,086 thousand[19] - The company reported cash and cash equivalents of RMB 4,744,842 thousand, showing a marginal increase from RMB 4,743,071 thousand[18] - The deferred tax liabilities rose to RMB 251,296 thousand from RMB 194,069 thousand, marking a significant increase of 29.5%[19] - The company’s goodwill remained stable at RMB 3,031 thousand, unchanged from the previous period[18] Cash Flow and Investments - Operating cash flow for the six months ended June 30, 2023, was RMB 1,470,153 thousand, a significant increase from RMB 806,708 thousand in the same period of 2022, representing an increase of approximately 82%[25] - The company reported a net cash generated from operating activities of RMB 1,197,471 thousand for the first half of 2023, compared to RMB 659,552 thousand in the prior year, reflecting a growth of about 82%[25] - Cash used in investing activities amounted to RMB 381,558 thousand for the six months ended June 30, 2023, compared to RMB 125,527 thousand in the same period of 2022, indicating an increase in investment outflows[27] - The company recorded a significant increase in cash and cash equivalents at the end of the period, totaling RMB 4,744,842 thousand, up from RMB 4,037,956 thousand at the end of June 2022, marking an increase of approximately 17.5%[27] - The company incurred a financial cost of RMB 38,736 thousand in the first half of 2023, compared to RMB 21,802 thousand in the same period of 2022, representing an increase of about 77%[25] Revenue Breakdown - The revenue breakdown shows that the antibiotic products generated RMB 5,144,679 thousand, while insulin products contributed RMB 474,634 thousand for the six months ended June 30, 2023[38] - The revenue from the Chinese market (including Hong Kong) was RMB 5,544,083 thousand, up from RMB 4,129,014 thousand in the previous year, indicating a growth of about 34.4%[41] - The revenue from the Indian market increased to RMB 331,769 thousand in 2023 from RMB 204,031 thousand in 2022, marking a growth of approximately 62.5%[41] - The company’s total external customer revenue from Europe was RMB 431,526 thousand, up from RMB 308,533 thousand in the previous year, representing an increase of about 39.8%[41] - The segment revenue for intermediates was RMB 2,692,115 thousand, raw materials was RMB 3,849,116 thousand, and formulation products was RMB 2,436,110 thousand for the six months ended June 30, 2023[43] Research and Development - The company invested RMB 350,300,000 in drug research and development, a 44.4% increase year-on-year[103] - The company has 34 new human drug products in development, including 16 first-class new drugs[103] - The company is actively pursuing new drug research and development, aiming to enhance its industrialization capabilities and accelerate the commercialization process[112] Corporate Governance and Shareholder Engagement - The company has adopted high standards of corporate governance to protect shareholder interests and enhance group performance[126] - The audit committee reviewed the unaudited condensed consolidated financial statements for the six months ending June 30, 2023[129] - The board expresses gratitude to shareholders and partners for their support during the first half of 2023[131] Legal and Regulatory Matters - The company is awaiting a judgment from the Chengdu Intermediate People's Court regarding a lawsuit to recover approximately RMB 340,000,000 from Chengdu Evergrande[110] Employee and Director Compensation - Total employee costs, including director remuneration, rose to RMB 769,768 thousand, compared to RMB 642,765 thousand, an increase of 19.8%[59] - The total remuneration for directors for the six months ended June 30, 2023, was RMB 9,630,000, compared to RMB 9,242,000 for the same period in 2022[90]

Financial Performance - Revenue for the six months ended June 30, 2023, was RMB 6,906,524 thousand, representing a 33.3% increase from RMB 5,181,925 thousand in the same period of 2022[2] - Profit before interest, tax, depreciation, and amortization (EBITDA) was RMB 1,953,790 thousand, up 71.2% from RMB 1,140,996 thousand year-on-year[2] - Profit attributable to owners of the company reached RMB 1,284,496 thousand, a significant increase of 104.0% compared to RMB 629,517 thousand in the previous year[2] - Basic earnings per share rose to RMB 70.69, reflecting a 104.6% increase from RMB 34.55[2] - The profit before tax for the period was RMB 1,612,155 thousand, reflecting strong operational performance[13] - The total segment profit for the six months ended June 30, 2023, was RMB 919,831 thousand, compared to RMB 826,954 thousand for the same period in 2022, showing a growth of approximately 11.2%[15] - The company reported a net foreign exchange gain of RMB 50,682 thousand for the six months ended June 30, 2023, compared to a loss of RMB 48,568 thousand in the same period of 2022[19] - The income tax expense for the six months ended June 30, 2023, was RMB 327,915,000, up from RMB 197,437,000 in the same period of 2022, reflecting a growth of 66.1%[21] - The financial cost for the company was approximately RMB 38,700,000, representing a year-on-year increase of 77.7%[42] Dividends - The interim dividend per share was declared at RMB 12.0, a 140.0% increase from RMB 5.0 in the prior period[2] - The company declared an interim dividend of RMB 0.12 per share for the six months ended June 30, 2023, totaling RMB 218,043,000, compared to RMB 0.05 per share totaling RMB 90,879,000 for the same period in 2022[26] - The total dividend declared for the year included a final dividend of RMB 0.14 per share and a special dividend of RMB 0.06 per share, totaling RMB 363,405,000 for the six months ended June 30, 2023, compared to RMB 181,757,000 for the same period in 2022[25] Assets and Liabilities - Total assets as of June 30, 2023, amounted to RMB 13,212,085 thousand, compared to RMB 12,514,946 thousand at the end of 2022[5] - Net current assets increased to RMB 6,148,352 thousand from RMB 5,481,919 thousand at the end of 2022[5] - Non-current liabilities decreased to RMB 1,174,610 thousand from RMB 1,337,167 thousand at the end of 2022[6] - The company's net asset value increased to RMB 11,531,617 thousand from RMB 10,609,431 thousand at the end of 2022[6] - The company's total liabilities decreased to approximately RMB 8,238,300,000 as of June 30, 2023, from RMB 8,370,200,000 as of December 31, 2022[44] Revenue Segmentation - The revenue from intermediates was RMB 2,692,115 thousand, while the revenue from APIs and formulations were RMB 3,849,116 thousand and RMB 2,436,110 thousand respectively, contributing to a total segment revenue of RMB 8,977,341 thousand[14] - The revenue from the Chinese market (including Hong Kong) was RMB 5,544,083 thousand, an increase from RMB 4,129,014 thousand in the previous year, reflecting a growth of approximately 34.4%[16] - Revenue from intermediates, active pharmaceutical ingredients, and formulations was approximately RMB 2,692,100,000, RMB 3,849,100,000, and RMB 2,436,100,000 respectively, with year-on-year increases of 37.2%, 34.6%, and 29.1%[38] - The intermediate and raw materials segment recorded external sales revenue of approximately RMB 1,047,400,000 and RMB 3,423,000,000, representing year-on-year increases of 41.4% and 34.1% respectively[39] - The formulation products segment achieved sales revenue of approximately RMB 2,436,100,000, a year-on-year increase of 29.1%[40] - Antibiotic products, including animal health products, recorded sales revenue of RMB 1,725,000,000, reflecting a year-on-year growth of 50.5%[40] Investments and Expenditures - The total expenditure on property, plant, and equipment for the six months ended June 30, 2023, was approximately RMB 395,085,000, an increase from RMB 281,759,000 in the same period of 2022, marking a rise of 40.3%[27] - The company invested RMB 350,300,000 in drug research and development, marking a year-on-year increase of 44.4%[41] - As of June 30, 2023, the company had capital expenditure commitments of RMB 497,212,000 for property, plant, and equipment[35] Corporate Governance and Management - The board emphasizes strong corporate governance as essential for protecting shareholder interests and enhancing group performance, adhering to the corporate governance code[51] - The company currently does not have a CEO, with plans to appoint one at an appropriate time[52] - The Audit Committee, composed of three independent non-executive directors, has reviewed the unaudited condensed consolidated financial statements for the six months ending June 30, 2023[53] Future Outlook - The company anticipates a recovery phase in the Chinese economy post-pandemic, with a focus on consolidating core industry advantages and enhancing cost control along the supply chain[49] Legal Matters - The company is involved in a lawsuit against Chengdu Evergrande, seeking to recover approximately RMB 340 million in unpaid receivables and related damages, with the first hearing held on February 21, 2023, and the second on June 6, 2023, currently awaiting a judgment[47] Shareholder Engagement - The board expresses gratitude to shareholders and partners for their support during the first half of 2023, highlighting the contributions of all employees[55]

[Financial Highlights](index=1&type=section&id=Financial%20Highlights) The company reported significant financial growth for the six months ended June 30, 2023, with revenue increasing by 33.3% and profit attributable to owners of the Company surging by 104.0% Key Financial Highlights for the Six Months Ended June 30, 2023 | Metric | 2023 (Thousand RMB) | 2022 (Thousand RMB) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 6,906,524 | 5,181,925 | 33.3% | | EBITDA | 1,953,790 | 1,140,996 | 71.2% | | Profit before tax | 1,612,155 | 826,954 | 95.0% | | Profit for the period attributable to owners of the Company | 1,284,496 | 629,517 | 104.0% | | Basic EPS (RMB cents) | 70.69 | 34.55 | 104.6% | | Interim Dividend per Share (RMB cents) | 12.0 | 5.0 | 140.0% | [Condensed Consolidated Financial Statements](index=2&type=section&id=Condensed%20Consolidated%20Financial%20Statements) This section presents the condensed consolidated financial performance and position, highlighting significant growth in revenue and profit, alongside a strengthened balance sheet [Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=2&type=section&id=Condensed%20Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) For the six months ended June 30, 2023, the Group's revenue increased by 33.3% to RMB 6.91 billion, gross profit rose by 42.5% to RMB 3.21 billion, and profit for the period attributable to owners of the Company surged by 104.0% to RMB 1.28 billion, with basic EPS at RMB 70.69 cents Key Data from Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income | Metric | 2023 (Thousand RMB) | 2022 (Thousand RMB) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 6,906,524 | 5,181,925 | 33.3% | | Cost of sales | (3,693,226) | (2,927,960) | 26.1% | | Gross profit | 3,213,298 | 2,253,965 | 42.5% | | Other income | 92,491 | 72,641 | 27.3% | | Net other gains and losses | 52,472 | (71,251) | Significant improvement | | Selling and distribution expenses | (974,906) | (805,744) | 21.0% | | Administrative expenses | (380,688) | (344,847) | 10.4% | | Research and development expenses | (338,678) | (242,607) | 39.6% | | Finance costs | (38,736) | (21,802) | 77.7% | | Profit before tax | 1,612,155 | 826,954 | 95.0% | | Income tax expense | (327,915) | (197,437) | 66.1% | | Profit for the period | 1,284,240 | 629,517 | 104.0% | | Profit for the period attributable to owners of the Company | 1,284,496 | 629,517 | 104.0% | | Basic EPS (RMB cents) | 70.69 | 34.55 | 104.6% | [Condensed Consolidated Statement of Financial Position](index=3&type=section&id=Condensed%20Consolidated%20Statement%20of%20Financial%20Position) As of June 30, 2023, the Group's total assets increased to RMB 19.77 billion, total liabilities slightly decreased to RMB 8.24 billion, and equity attributable to owners of the Company grew to RMB 11.53 billion, indicating a robust financial position with improved net current assets and current ratio Key Data from Condensed Consolidated Statement of Financial Position | Metric | June 30, 2023 (Thousand RMB) | December 31, 2022 (Thousand RMB) | Change (%) | | :--- | :--- | :--- | :--- | | **Assets** | | | | | Non-current assets | 6,557,875 | 6,464,679 | 1.4% | | Current assets | 13,212,085 | 12,514,946 | 5.6% | | **Total assets** | 19,769,960 | 18,979,625 | 4.2% | | **Liabilities** | | | | | Current liabilities | 7,063,733 | 7,033,027 | 0.4% | | Non-current liabilities | 1,174,610 | 1,337,167 | -12.1% | | **Total liabilities** | 8,238,343 | 8,370,194 | -1.6% | | **Equity** | | | | | Equity attributable to owners of the Company | 11,530,528 | 10,608,086 | 8.7% | | Non-controlling interests | 1,089 | 1,345 | -19.0% | | **Total equity** | 11,531,617 | 10,609,431 | 8.7% | | Net current assets | 6,148,352 | 5,481,919 | 12.1% | | Current ratio | 1.87 | 1.78 | 5.1% | [Notes to the Financial Statements](index=5&type=section&id=Notes%20to%20the%20Financial%20Statements) This section provides detailed explanations and disclosures regarding the accounting policies, financial performance, and position of the Group [1. Basis of Presentation](index=5&type=section&id=1.%20Basis%20of%20Presentation) The condensed consolidated financial statements are prepared in accordance with HKAS 34 'Interim Financial Reporting' and the disclosure requirements of Appendix 16 to the HKEX Listing Rules - The financial statements comply with HKAS 34 and the disclosure requirements of Appendix 16 to the HKEX Listing Rules[8](index=8&type=chunk) [2. Significant Accounting Policies](index=5&type=section&id=2.%20Significant%20Accounting%20Policies) The condensed consolidated financial statements are prepared on a historical cost basis, with certain financial instruments measured at fair value, and accounting policies remain consistent with 2022, except for new HKFRS amendments - The financial statements are primarily prepared on a historical cost basis, with certain financial instruments measured at fair value[9](index=9&type=chunk) - Accounting policies are largely consistent with the 2022 annual financial statements, with changes only due to the application of newly amended HKFRS[9](index=9&type=chunk) [Application of Amended Hong Kong Financial Reporting Standards](index=5&type=section&id=Application%20of%20Amended%20Hong%20Kong%20Financial%20Reporting%20Standards) The Group first applied HKFRS amendments effective January 1, 2023, during this interim period, which had no material impact on its financial performance, position, or disclosures - Amendments to HKFRS 17 and HKAS 8, 12 were applied during the period[11](index=11&type=chunk) - These amendments had no material impact on the Group's financial performance, position, or disclosures for the current and prior periods[11](index=11&type=chunk) [2.1 Impact of Application of Amendments to HKAS 12 Income Taxes (International Tax Reform – Pillar Two Model Rules)](index=5&type=section&id=2.1%20Impact%20of%20Application%20of%20Amendments%20to%20HKAS%2012%20Income%20Taxes%20(International%20Tax%20Reform%20–%20Pillar%20Two%20Model%20Rules)) The Group has not yet applied the temporary exception in HKAS 12 regarding Pillar Two legislation, as its entities are not in relevant jurisdictions, and will disclose information when the legislation becomes effective - The Group has not yet applied the temporary exception in HKAS 12 regarding Pillar Two legislation[12](index=12&type=chunk) - The Group's entities are not currently in jurisdictions where Pillar Two legislation has been enacted or substantively enacted[12](index=12&type=chunk) - Relevant qualitative and quantitative information will be disclosed when Pillar Two legislation is enacted or becomes effective[12](index=12&type=chunk) [3. Revenue and Segment Information](index=6&type=section&id=3.%20Revenue%20and%20Segment%20Information) The Group's revenue primarily stems from three business segments: intermediates, APIs, and finished products, categorized by customer geographical markets, all showing significant growth in H1 2023, with China being the largest contributor - The Group has three main business revenue streams: intermediates, APIs, and finished products[14](index=14&type=chunk) [(a) Segment Revenue and Results](index=6&type=section&id=(a)%20Segment%20Revenue%20and%20Results) For the six months ended June 30, 2023, segment revenue (including inter-segment sales) for intermediates, APIs, and finished products grew by 37.2%, 34.6%, and 29.1% respectively, with intermediates and APIs showing strong profit growth while finished products slightly declined Segment Revenue and Results (For the six months ended June 30, 2023) | Segment | External Sales (Thousand RMB) | Inter-segment Sales (Thousand RMB) | Segment Revenue (Thousand RMB) | Segment Profit (Thousand RMB) | | :--- | :--- | :--- | :--- | :--- | | Intermediates | 1,047,439 | 1,644,676 | 2,692,115 | 814,405 | | APIs | 3,422,975 | 426,141 | 3,849,116 | 427,956 | | Finished Products | 2,436,110 | - | 2,436,110 | 303,767 | | **Consolidated** | **6,906,524** | **-** | **6,906,524** | **1,546,128** | Year-on-Year Change in Segment Revenue and Results (For the six months ended June 30, 2023) | Segment | Segment Revenue YoY Growth (%) | Segment Profit YoY Growth (%) | | :--- | :--- | :--- | | Intermediates | 37.2% | 89.8% | | APIs | 34.6% | 133.4% | | Finished Products | 29.1% | -1.2% | [(b) Geographical Information](index=7&type=section&id=(b)%20Geographical%20Information) China (including Hong Kong) remained the Group's largest revenue source in H1 2023, contributing RMB 5.54 billion, a 34.3% increase year-on-year, with other markets like Europe, India, and South America also showing significant growth Revenue by Customer Geographical Market (Thousand RMB) | Region | 2023 | 2022 | | :--- | :--- | :--- | | PRC (including Hong Kong) | 5,544,083 | 4,129,014 | | Europe | 431,526 | 308,533 | | India | 331,769 | 204,031 | | Middle East | 26,046 | 32,208 | | South America | 170,335 | 124,404 | | Other Asia | 308,142 | 263,667 | | Other Regions | 94,623 | 120,068 | | **Total** | **6,906,524** | **5,181,925** | [4. Other Income](index=7&type=section&id=4.%20Other%20Income) The Group's other income totaled RMB 92.49 million in H1 2023, a 27.3% year-on-year increase, primarily driven by bank interest income, scrap sales, and government grants, with bank interest showing significant growth Other Income Details (Thousand RMB) | Item | 2023 | 2022 | | :--- | :--- | :--- | | Bank interest income | 51,432 | 29,512 | | Scrap sales | 2,576 | 2,191 | | Subsidy income | 34,809 | 33,778 | | Miscellaneous income | 3,674 | 7,160 | | **Total** | **92,491** | **72,641** | - Subsidy income includes grants from PRC government authorities for capital expenditure, R&D activities, and unconditional awards[17](index=17&type=chunk) - RMB **0.529 million** (2022: RMB 0.65 million) in Covid-19 related subsidies from the Hong Kong government were recognized during the period[18](index=18&type=chunk) [5. Net Other Gains and Losses](index=8&type=section&id=5.%20Net%20Other%20Gains%20and%20Losses) The Group recorded net other gains of RMB 52.47 million in H1 2023, a significant improvement from a loss of RMB 71.25 million in the prior year, mainly due to net foreign exchange gains and fair value gains from derivative financial instruments Net Other Gains and Losses Details (Thousand RMB) | Item | 2023 | 2022 | | :--- | :--- | :--- | | Net foreign exchange gains (losses) | 50,682 | (48,568) | | Net fair value gains from derivative financial instruments | 24,231 | 308 | | Gains on disposal of financial assets at fair value through profit or loss | 36,690 | - | | Fair value gains on financial assets at fair value through profit or loss | 54 | - | | Net loss on disposal of property, plant and equipment | (2,330) | (2,803) | | Write-off of property, plant and equipment | (56,087) | (19,263) | | Others | (768) | (925) | | **Total** | **52,472** | **(71,251)** | - The Group manages foreign exchange risk through cross currency interest rate swap contracts and foreign currency forward contracts, which are not accounted for as hedging instruments[19](index=19&type=chunk) [6. Finance Costs](index=8&type=section&id=6.%20Finance%20Costs) The Group's finance costs for H1 2023 increased by 77.7% to RMB 38.74 million, primarily due to interest on borrowings, with a portion capitalized into property, plant and equipment Finance Costs Details (Thousand RMB) | Item | 2023 | 2022 | | :--- | :--- | :--- | | Interest on borrowings | 44,288 | 23,752 | | Interest on lease liabilities | 260 | 293 | | Less: Amount capitalized into property, plant and equipment | (5,812) | (2,243) | | **Total** | **38,736** | **21,802** | - The average capitalization rate for borrowing costs was **4.28%** (2022: 2.42%)[20](index=20&type=chunk) [7. Income Tax Expense](index=9&type=section&id=7.%20Income%20Tax%20Expense) The Group's income tax expense for H1 2023 increased by 66.1% to RMB 327.92 million, mainly comprising PRC corporate income tax, withholding tax on interest income and distributed profits, and deferred tax expense, with certain PRC entities benefiting from a 15% high-tech enterprise tax rate Income Tax Expense Details (Thousand RMB) | Item | 2023 | 2022 | | :--- | :--- | :--- | | PRC corporate income tax | 256,986 | 148,635 | | PRC withholding tax on interest income | 3,594 | 2,294 | | PRC withholding tax on distributed profits of PRC subsidiaries | 9,785 | 16,500 | | Deferred tax expense | 57,550 | 30,008 | | **Income tax expense** | **327,915** | **197,437** | - Certain PRC Group entities, as high-tech enterprises, enjoy a **15%** preferential tax rate[22](index=22&type=chunk) - The Group applies a **5%** withholding tax rate for dividends distributed by PRC entities to non-PRC tax residents[22](index=22&type=chunk) [8. Profit for the Period](index=10&type=section&id=8.%20Profit%20for%20the%20Period) Profit for the period was derived after deducting employee costs of RMB 769.77 million, depreciation of RMB 294.13 million, amortization of intangible assets of RMB 8.77 million, and net inventory provision of RMB 5.29 million Items Deducted from Profit for the Period (Thousand RMB) | Item | 2023 | 2022 | | :--- | :--- | :--- | | Employee costs (including directors' emoluments) | 769,768 | 642,765 | | Depreciation of right-of-use assets | 5,468 | 5,198 | | Depreciation of property, plant and equipment | 288,665 | 278,560 | | Amortization of intangible assets | 8,766 | 8,482 | | Net provision for (reversal of provision for) inventories | 5,292 | 432 | | Cost of inventories recognized as expense | 3,693,226 | 2,927,960 | [9. Earnings Per Share](index=10&type=section&id=9.%20Earnings%20Per%20Share) Basic earnings per share attributable to owners of the Company for the six months ended June 30, 2023, significantly increased to RMB 70.69 cents from RMB 34.55 cents in the prior year, with no diluted EPS presented due to the absence of potential ordinary shares EPS Calculation (Thousand RMB) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Profit for the period attributable to owners of the Company for basic EPS calculation | 1,284,496 | 629,517 | | Weighted average number of ordinary shares (thousands) | 1,817,027 | 1,822,167 | | **Basic EPS (RMB cents)** | **70.69** | **34.55** | - No diluted EPS is presented as there were no potential ordinary shares in issue for both periods[24](index=24&type=chunk) [10. Dividends](index=11&type=section&id=10.%20Dividends) The Group recognized total dividends of RMB 363.41 million in H1 2023, including final and special dividends for 2022, and the Board declared an interim dividend of RMB 12 cents per share, totaling RMB 218.04 million, a 140% increase year-on-year Dividends Recognized and Declared (Thousand RMB) | Item | 2023 | 2022 | | :--- | :--- | :--- | | 2022 final dividend (RMB 14 cents per share) | 254,384 | 145,406 | | 2022 special dividend (RMB 6 cents per share) | 109,021 | 36,351 | | **Total dividends recognized as distribution during the year** | **363,405** | **181,757** | | Interim dividend declared (RMB 12 cents per share) | 218,043 | 90,879 | [11. Movements in Property, Plant and Equipment](index=11&type=section&id=11.%20Movements%20in%20Property,%20Plant%20and%20Equipment) The Group incurred capital expenditure of approximately RMB 395 million on property, plant and equipment in H1 2023, primarily for expansion and upgrades in Zhuhai and Inner Mongolia, while also incurring total losses of RMB 58.42 million from asset disposals and write-offs - Capital expenditure on property, plant and equipment in H1 2023 was approximately **RMB 395 million**, a **40.2%** year-on-year increase[27](index=27&type=chunk) - Primarily for the expansion and upgrade of production plants and office buildings in Zhuhai and Inner Mongolia, China[27](index=27&type=chunk) - Disposal and write-off of assets resulted in total losses of approximately **RMB 58.417 million**[27](index=27&type=chunk) [12. Trade and Bills Receivables, Other Receivables, Deposits and Prepayments](index=12&type=section&id=12.%20Trade%20and%20Bills%20Receivables,%20Other%20Receivables,%20Deposits%20and%20Prepayments) As of June 30, 2023, the Group's total trade and bills receivables, other receivables, deposits, and prepayments amounted to RMB 5.58 billion, a 13.6% increase from year-end 2022, with typical credit terms of 60 to 120 days for trade customers Trade and Other Receivables Details (Thousand RMB) | Item | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Trade receivables (net of provision) | 2,468,584 | 2,103,912 | | Bills receivable - bank acceptance (net of provision) | 2,563,480 | 2,359,376 | | Bills receivable - commercial (net of provision) | 1,351 | 12,534 | | Consideration receivable (net of provision) | 339,574 | 339,574 | | VAT recoverable | 114,862 | 115,866 | | Other receivables, deposits and prepayments (net of provision) | 429,696 | 320,016 | | **Total** | **5,577,973** | **4,911,704** | - Trade customers are generally granted credit terms of **60 to 120 days**, while bank and commercial bills receivable have maturity periods of **90 days to 1 year**[28](index=28&type=chunk) [13. Trade and Other Payables](index=14&type=section&id=13.%20Trade%20and%20Other%20Payables) As of June 30, 2023, the Group's total trade and other payables increased by 7.9% to RMB 5.79 billion, with a significant rise in trade payables under supplier financing arrangements, reflecting the Group's financing strategy Trade and Other Payables Details (Thousand RMB) | Item | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Trade payables | 1,634,607 | 1,970,355 | | Trade payables under supplier financing arrangements | 2,318,473 | 1,588,069 | | Other payables and accrued expenses | 482,330 | 485,992 | | Other tax payables | 181,924 | 158,654 | | Price concession liabilities | 39,284 | - | | Accrued freight charges | 78,323 | 76,441 | | Accrued salaries, staff welfare and untaken annual leave | 196,927 | 191,578 | | Accrued water, electricity and steam charges | 364,186 | 370,618 | | Deferred income from government grants | 88,036 | 95,859 | | Payables for acquisition of property, plant and equipment | 400,941 | 423,723 | | **Total** | **5,785,031** | **5,361,289** | - The Group is generally granted credit terms of **120 to 180 days** by its suppliers[32](index=32&type=chunk) - Price concession liabilities represent amounts expected to be refunded to customers due to price reductions from the 8th round of China's centralized drug procurement[34](index=34&type=chunk) [14. Capital Commitments](index=15&type=section&id=14.%20Capital%20Commitments) As of June 30, 2023, the Group's contracted but unprovided capital expenditure commitments for property, plant and equipment amounted to RMB 497.21 million, a 39.8% increase from year-end 2022 - Capital expenditure commitments amounted to **RMB 497.212 million** (December 31, 2022: RMB 355.691 million), a **39.8%** year-on-year increase[35](index=35&type=chunk) [15. Pledged or Restricted Assets](index=15&type=section&id=15.%20Pledged%20or%20Restricted%20Assets) As of June 30, 2023, the Group had pledged property, plant and equipment, right-of-use assets, bills receivable, and pledged bank deposits to banks as collateral for credit facilities, with certain right-of-use assets restricted Pledged Assets (Thousand RMB) | Item | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Property, plant and equipment | 384,621 | 416,896 | | Right-of-use assets | 165,226 | 167,837 | | Bills receivable - bank acceptance | 1,074,187 | 764,422 | | Pledged bank deposits | 674,355 | 694,704 | - Right-of-use assets related to lease liabilities cannot be used as collateral for borrowings[36](index=36&type=chunk) [16. Related Party Transactions](index=15&type=section&id=16.%20Related%20Party%20Transactions) Total emoluments for the Company's directors amounted to RMB 9.63 million during the period, a slight increase from the prior year, primarily comprising fees, salaries, other benefits, and retirement benefit scheme contributions Directors' Emoluments (Thousand RMB) | Item | 2023 | 2022 | | :--- | :--- | :--- | | Fees | 286 | 329 | | Salaries and other benefits | 9,300 | 8,869 | | Retirement benefit scheme contributions | 44 | 44 | | **Total** | **9,630** | **9,242** | [Management Discussion and Analysis](index=16&type=section&id=Management%20Discussion%20and%20Analysis) This section provides an overview of the Group's business performance, operational highlights, financial position, and strategic initiatives during the reporting period [Business Review](index=16&type=section&id=Business%20Review) In H1 2023, despite a weak global recovery, China's economy improved, and pharmaceutical reforms deepened, leading to the Group's turnover increasing by 33.3% to RMB 6.91 billion and profit attributable to owners of the Company surging by 104.0% to RMB 1.285 billion, with all segments showing significant revenue growth - Global economic recovery was weak, while China's economy improved, with the pharmaceutical sector focusing on "health," "innovation," and "cooperation"[38](index=38&type=chunk) - The 8th round of national centralized drug procurement proceeded orderly, and the national medical insurance drug catalog adjustment commenced[38](index=38&type=chunk) Key Financial Performance H1 2023 | Metric | Amount (RMB) | YoY Growth (%) | | :--- | :--- | :--- | | Turnover | 6,906,500,000 | 33.3% | | EBITDA | 1,953,800,000 | 71.2% | | Profit attributable to owners of the Company | 1,284,500,000 | 104.0% | | EPS | 70.69 cents | - | | Interim Dividend per Share | 12 cents | - | - Revenue from intermediates, APIs, and finished products segments increased by **37.2%**, **34.6%**, and **29.1%** respectively[38](index=38&type=chunk) [Intermediates and APIs Business](index=16&type=section&id=Intermediates%20and%20APIs%20Business) In H1 2023, external sales revenue for intermediates and APIs grew by 41.4% and 34.1% respectively, with overseas export sales increasing by 29.4% to RMB 1.362 billion, driven by recovering demand and stable market prices, reinforcing the Group's leading position Intermediates and APIs External Sales Revenue | Segment | H1 2023 External Sales Revenue (RMB) | YoY Growth (%) | | :--- | :--- | :--- | | Intermediates | 1,047,400,000 | 41.4% | | APIs | 3,423,000,000 | 34.1% | - Overseas export sales revenue was **RMB 1.362 billion**, a **29.4%** year-on-year increase, accounting for **19.7%** of total turnover[39](index=39&type=chunk) - Recovering overseas market demand led to stable price increases for related products[39](index=39&type=chunk) [Finished Products Business](index=16&type=section&id=Finished%20Products%20Business) In H1 2023, finished products sales revenue grew by 29.1% to RMB 2.436 billion, with strong growth in insulin analogues and antibiotics, including the successful bid for Piperacillin Sodium and Tazobactam Sodium for Injection in the 8th national centralized procurement, and significant growth in animal health products Finished Products Sales Revenue | Product Category | H1 2023 Sales Revenue (RMB) | YoY Growth (%) | | :--- | :--- | :--- | | Total Finished Products | 2,436,100,000 | 29.1% | | Diabetes Products | 498,000,000 | -19.6% | | - Human Insulin | 230,900,000 | - | | - Insulin Analogues | 267,100,000 | Sales volume grew rapidly | | Antibiotics (including Animal Health Products) | 1,725,000,000 | 50.5% | | - Piperacillin Sodium and Tazobactam Sodium for Injection | 386,600,000 | 22.7% | | - Amoxicillin Capsules | 247,100,000 | 17.7% | | Animal Health Products | 534,300,000 | 158.6% | - Piperacillin Sodium and Tazobactam Sodium for Injection (specification: **4.5g**) was selected in the 8th round of national centralized drug procurement[40](index=40&type=chunk) - Strategic cooperation with Muyuan Foods Co., Ltd. continues to advance steadily, aiming to build a leading brand in China's animal health industry[40](index=40&type=chunk) [Progress in Pharmaceutical R&D](index=17&type=section&id=Progress%20in%20Pharmaceutical%20R%26D) The Group's pharmaceutical R&D investment in H1 2023 increased by 44.4% to RMB 350.3 million, with 34 new human drug products under development (16 being Class 1 new drugs), achieving multiple clinical trial approvals and registration applications in endocrinology, autoimmune, ophthalmology, and high-end anti-infectives, including the first domestic approvals for insulin degludec liraglutide injection and semaglutide injection for weight management, and the second global application for a long-acting GLP-1/GIP/GCG triple agonist Pharmaceutical R&D Investment | Item | H1 2023 Investment (RMB) | YoY Growth (%) | | :--- | :--- | :--- | | Total R&D Investment | 350,300,000 | 44.4% | | Expensed R&D Investment | 338,700,000 | - | | Capitalized R&D Investment | 11,600,000 | - | - **34** new human drug products are under development, with **16** being Class 1 new drugs[41](index=41&type=chunk) - Class 1 new drug TUL12101 eye drops received clinical trial approval, a new generation small molecule RASP inhibitor for dry eye disease[41](index=41&type=chunk) - First domestic approvals for biosimilar clinical trials of insulin degludec liraglutide injection and semaglutide injection for weight management indications[41](index=41&type=chunk) - Clinical trial registration application for self-developed Class 1 innovative drug UBT251 injection (long-acting GLP-1/GIP/GCG triple agonist) was accepted, making it the first domestic and second global company to prepare it via chemical synthesis of peptides[41](index=41&type=chunk) - Amoxicillin Capsules (specification: **0.5g**) passed consistency evaluation, becoming the Group's third amoxicillin capsule product to do so[41](index=41&type=chunk) [Optimization of Financial Structure](index=17&type=section&id=Optimization%20of%20Financial%20Structure) The Group optimized its financial structure by adjusting domestic and overseas borrowing portfolios to reduce finance costs and enhance liquidity, with finance costs increasing by 77.7% to RMB 38.7 million, while prioritizing domestic RMB borrowings to improve financial flexibility and capital utilization efficiency - Adjusted domestic and overseas borrowing portfolios to reduce finance costs and optimize financial structure for enhanced liquidity[42](index=42&type=chunk) - Finance costs for the period were approximately **RMB 38.7 million**, a **77.7%** year-on-year increase[42](index=42&type=chunk) - Prioritized domestic RMB as the primary borrowing currency to enhance financial flexibility and capital utilization efficiency[42](index=42&type=chunk) [Liquidity and Financial Resources](index=17&type=section&id=Liquidity%20and%20Financial%20Resources) As of June 30, 2023, the Group maintained robust liquidity with bank balances and cash of approximately RMB 5.42 billion, interest-bearing borrowings of RMB 1.52 billion (45.4% fixed-rate), net current assets increasing to RMB 6.15 billion, and a current ratio of 1.87 Key Liquidity and Financial Resources Data | Metric | June 30, 2023 (RMB) | December 31, 2022 (RMB) | Change (%) | | :--- | :--- | :--- | :--- | | Pledged bank deposits, bank balances and cash | 5,419,200,000 | 5,437,800,000 | -0.3% | | Interest-bearing borrowings | 1,520,900,000 | 2,455,100,000 | -38.0% | | - Fixed-rate loans | 691,200,000 | 251,400,000 | 175.0% | | - Floating-rate loans | 829,700,000 | 2,203,700,000 | -62.4% | | Current assets | 13,212,100,000 | 12,514,900,000 | 5.6% | | Net current assets | 6,148,400,000 | 5,481,900,000 | 12.1% | | Current ratio | 1.87 | 1.78 | 5.1% | | Total assets | 19,770,000,000 | 18,979,600,000 | 4.2% | | Total liabilities | 8,238,300,000 | 8,370,200,000 | -1.6% | | Equity attributable to owners of the Company | 11,530,500,000 | 10,608,100,000 | 8.7% | | Net cash and bank balances (after deducting borrowings and supplier financing) | 1,579,900,000 | 1,394,600,000 | 13.3% | [Contingent Liabilities](index=18&type=section&id=Contingent%20Liabilities) The Group had no significant contingent liabilities as of June 30, 2023, and December 31, 2022 - The Group had no significant contingent liabilities at the end of the reporting period[45](index=45&type=chunk) [Foreign Currency Exchange Risk](index=18&type=section&id=Foreign%20Currency%20Exchange%20Risk) The Group's purchases and sales are primarily settled in RMB, USD, and HKD, with operating expenses mainly in RMB and HKD, and a treasury policy is in place to monitor and manage foreign exchange rate fluctuation risks, using forward contracts for hedging as needed - Purchases and sales are primarily settled in RMB, USD, and HKD, while operating expenses are mainly in RMB and HKD[45](index=45&type=chunk) - A treasury policy is established to monitor and manage foreign exchange rate fluctuation risks, with forward contracts used for hedging as needed[45](index=45&type=chunk) [Employees and Remuneration Policy](index=18&type=section&id=Employees%20and%20Remuneration%20Policy) As of June 30, 2023, the Group employed approximately 14,000 staff in Hong Kong and mainland China, with remuneration determined by basic salary, bonuses, other benefits, industry practice, and individual performance - As of June 30, 2023, the Group employed approximately **14,000** staff[46](index=46&type=chunk) - Employee remuneration is determined by basic salary, bonuses, other benefits, industry practice, and individual performance[46](index=46&type=chunk) [Litigation](index=18&type=section&id=Litigation) The Group has filed a lawsuit against Evergrande Real Estate Group Chengdu Co., Ltd. with the Chengdu Intermediate People's Court to recover approximately RMB 340 million in outstanding consideration and related damages, with the case currently awaiting first-instance judgment after two hearings - The Group filed a lawsuit against Evergrande Real Estate Group Chengdu Co., Ltd. to recover approximately **RMB 340 million** in outstanding consideration and damages[47](index=47&type=chunk) - The lawsuit has been transferred to the Chengdu Intermediate People's Court, with two hearings held, and is currently awaiting the first-instance judgment[47](index=47&type=chunk) [Proposed Adoption of Share Award Scheme](index=18&type=section&id=Proposed%20Adoption%20of%20Share%20Award%20Scheme) The Board proposes adopting a 2023 Share Award Scheme to recognize employee contributions, incentivize and retain talent, provide additional motivation for performance targets, and attract suitable talent to enhance Company value, subject to shareholder and HKEX approval - Proposed adoption of the 2023 Share Award Scheme aims to recognize contributions, incentivize talent retention, achieve performance targets, and attract talent[48](index=48&type=chunk) - The scheme is subject to shareholder approval and HKEX approval to become effective[48](index=48&type=chunk) [Outlook](index=19&type=section&id=Outlook) The Group anticipates China's economy to enter a recovery growth phase with stable medical demand, and plans to consolidate core industry advantages, strengthen supply chain cost control, advance brand strategy, accelerate market development, enhance R&D innovation, upgrade production facilities, and actively pursue external collaborations for long-term sustainable growth and industry leadership - China's economy is gradually entering a recovery growth phase, with normal medical institution visits and steady release of drug demand[49](index=49&type=chunk) - The Group will consolidate core industry advantages, strengthen supply chain cost control, advance brand strategy, and accelerate market development and commercialization processes[49](index=49&type=chunk) - Continuously enhance scientific research and innovation capabilities, efficiently advance new drug R&D and launch processes, upgrade production line facilities, and comprehensively improve industrialization capabilities[49](index=49&type=chunk) - Actively expand external cooperation to add momentum for the Group's long-term sustainable development, confident in consolidating and enhancing its industry position and influence[49](index=49&type=chunk) [Other Information](index=19&type=section&id=Other%20Information) This section covers disclosures on securities transactions, corporate governance, and administrative matters [Purchase, Redemption or Sale of the Company’s Listed Securities](index=19&type=section&id=Purchase,%20Redemption%20or%20Sale%20of%20the%20Company’s%20Listed%20Securities) Neither the Company nor its subsidiaries purchased, redeemed, or sold any of the Company's listed securities during the six months ended June 30, 2023 - Neither the Company nor its subsidiaries purchased, sold, or redeemed any of the Company's listed securities during the period[50](index=50&type=chunk) [Code for Securities Transactions by Directors](index=19&type=section&id=Code%20for%20Securities%20Transactions%20by%20Directors) The Company adopted the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the HKEX Listing Rules, and all directors confirmed full compliance during the period - The Company has adopted the Model Code as set out in Appendix 10 to the HKEX Listing Rules[50](index=50&type=chunk) - All directors confirmed full compliance with the Model Code during the period[50](index=50&type=chunk) [Corporate Governance](index=19&type=section&id=Corporate%20Governance) The Board is committed to maintaining high standards of corporate governance and has adopted and complied with the Corporate Governance Code in Appendix 14 to the Listing Rules, with a deviation from Code Provision C.2.1 - The Board is committed to maintaining and ensuring high standards of corporate governance[51](index=51&type=chunk) - The Company has adopted and consistently complied with the Corporate Governance Code as set out in Appendix 14 to the Listing Rules[51](index=51&type=chunk) [Code Provision C.2.1](index=19&type=section&id=Code%20Provision%20C.2.1) The Company deviates from Code Provision C.2.1 as the roles of Chairman and Chief Executive are not separate, with the Chief Executive position currently vacant and an appointment to be made at an appropriate time - The Company has no Chief Executive Officer, and the roles of Chairman and Chief Executive are not separated, deviating from Code Provision C.2.1[52](index=52&type=chunk) - The Company will make an appointment to fill the vacancy at an appropriate time[52](index=52&type=chunk) [Audit Committee](index=19&type=section&id=Audit%20Committee) The Audit Committee, comprising three independent non-executive directors, reviewed the unaudited condensed consolidated financial report for H1 2023, relying on the external auditor's review and management's representations - The Audit Committee comprises three independent non-executive directors: Mr. Zhang Pinwen, Professor Song Min, and Dr. Fu Qiushi[53](index=53&type=chunk) - The Audit Committee has reviewed the unaudited condensed consolidated financial report for the period and relied on the external auditor's review results[53](index=53&type=chunk) [Closure of Register of Members](index=19&type=section&id=Closure%20of%20Register%20of%20Members) The Company's register of members will be closed on September 18 and 19, 2023, to determine eligibility for the interim dividend, requiring shareholders to register transfers by 4:30 p.m. on September 15, 2023 - The register of members will be closed on **September 18 and 19, 2023**, to determine eligibility for the interim dividend[54](index=54&type=chunk) - Shareholders must register transfers by **4:30 p.m. on September 15, 2023**[54](index=54&type=chunk) [Acknowledgement](index=20&type=section&id=Acknowledgement) The Board extends its gratitude to shareholders, partners, and all employees for their trust, support, efforts, and contributions during H1 2023 - The Board thanks shareholders, partners, and all employees for their trust, support, and contributions in H1 2023[55](index=55&type=chunk)