Financial Performance - Total revenue for the first half of 2022 was RMB 5,653,321, a decrease of 18.7% compared to RMB 6,953,406 in the same period of 2021[23]. - Gross profit for the first half of 2022 was RMB 2,705,607, down 29.2% from RMB 3,818,784 in the previous year[23]. - Adjusted net profit for the first half of 2022 was RMB 1,436,304, reflecting a 51.7% decline from RMB 2,975,225 in the first half of 2021[24]. - The company reported a decrease in gross margin to 47.9%, down 7.0 percentage points from 54.9% in the previous year[23]. - The total comprehensive income for the period was RMB 1,384,101 thousand, down 51.9% from RMB 2,878,816 thousand in the previous year[68]. - The company recorded a net profit of RMB 418,628 thousand for the six months ended June 30, 2022, compared to RMB 546,401 thousand in the same period of 2021, representing a decrease of approximately 23.4%[134]. - The net profit for the six months ended June 30, 2022, was RMB 1,384,690,000, a decrease of 52.2% compared to RMB 2,878,816,000 for the same period in 2021[154]. Research and Development - The company increased R&D investment, particularly in basic research, new materials, and aerosol medical fields, leading to the launch of a new ceramic atomization core technology platform for disposable electronic vaporization devices[19]. - R&D expenditure totaled RMB 604,120 thousand, an increase of 155.7% year-on-year, representing 10.7% of revenue compared to 3.4% in the same period last year[42]. - The company added over 300 R&D personnel, bringing the total to over 1,400, which is more than 40% of the total non-production staff[42]. - The company established 7 new research institutes, increasing the total to 14, focusing on new materials, medical research, and health-related applications of atomization technology[42]. - The company filed 929 new patent applications globally during the review period, including 381 invention patents, bringing the total to 4,337 patents, with 1,951 being invention patents[42]. Market and Sales - The company reported significant sales growth for its new disposable electronic vaporization products, which received positive market recognition[19]. - The company launched the Feelm Max ceramic atomization core technology platform for disposable electronic vapor devices, achieving significant sales growth in overseas markets[27]. - Revenue from enterprise customers was RMB 5,092,905 thousand, accounting for 90.1% of total revenue, down 21.6% year-on-year[51]. - Revenue from retail customers increased by 22.9% to RMB 560,416 thousand, rising from 6.6% to 9.9% of total revenue[51]. - In the US market, sales to enterprise customers decreased by 33.0% year-on-year, contributing 28.6% to total revenue[45]. - Sales in Europe and other markets increased by 42.1%, rising to 31.5% of total revenue[46]. Regulatory Compliance - The company actively applied for tobacco production licenses in compliance with Chinese regulatory requirements, with three subsidiaries already obtaining production licenses[19]. - The company is recognized as the manufacturer with the most models of vaporized electronic nicotine delivery systems (ENDS) products that have passed the Pre-Market Tobacco Application (PMTA) certification in the U.S.[19]. - The implementation of the "E-cigarette Management Measures" began on May 1, 2022, requiring compliance with national standards for e-cigarette products[33]. - The national standard for e-cigarettes (GB 41700-2022) was officially released on April 8, 2022, and will be implemented starting October 1, 2022[35]. - The company has established a dedicated team to coordinate compliance matters related to the "E-cigarette Management Measures" to ensure strict adherence to regulations[33]. Financial Position - As of June 30, 2022, total assets increased by 3.4% to RMB 23,653,877 from RMB 22,871,306 at the end of 2021[26]. - Cash and cash equivalents rose by 21.4% to RMB 13,875,609 compared to RMB 11,426,758 at the end of 2021[26]. - The asset-liability ratio increased to 16.8% from 15.8% at the end of 2021, indicating a slight rise in financial leverage[26]. - The company reported trade payables of RMB 794,580,000 as of June 30, 2022, a slight decrease from RMB 826,800,000 as of December 31, 2021[159]. - The company incurred capital expenditures of RMB 651,851 thousand for the acquisition of property, plant, and equipment, compared to RMB 480,254 thousand in the prior year[136]. Shareholder Information - The interim dividend declared for the six months ended June 30, 2022, is HKD 0.10 per share, compared to HKD 0.21 per share for the same period in 2021[95]. - The company has established various communication channels with shareholders and investors, including printed and electronic communications[94]. - The company’s major shareholders include Mr. Chen Zhiping and Mr. Liu Jincheng, who have significant holdings in the company[101]. - The company will suspend share registration from September 8 to September 13, 2022, to determine the shareholders entitled to the interim dividend[96]. - The company has a stock option plan approved by shareholders on September 30, 2019, allowing for the purchase of a total of 319,032,000 shares[104]. Strategic Initiatives - The company plans to leverage its technological advantages to redefine the disposable electronic vaporization market and enhance its offerings in the medical aerosol field[20]. - The introduction of high-level talent and expansion of organizational scale are expected to increase management and sales expenses in the short term[20]. - The company aims to diversify its revenue across different countries and regions while expanding its product portfolio in atomization technology for medical, health, and beauty applications[41]. - The company is committed to maintaining a leading position in technology and manufacturing through continuous automation and intelligent production improvements[44]. - The company plans to invest approximately RMB 1,500 million from 2022 to 2026 for the headquarters office project[80].

Financial Performance - Revenue for 2021 reached RMB 13,755,242 thousand, a significant increase from RMB 10,009,937 thousand in 2020[11] - Gross profit margin improved to 53.6% in 2021, up from 52.9% in 2020[11] - Net profit and total comprehensive income for 2021 was RMB 5,286,991 thousand, compared to RMB 2,399,921 thousand in 2020[11] - Adjusted net profit for 2021 was RMB 5,442,613 thousand, up from RMB 3,893,428 thousand in 2020[12] - Total assets increased to RMB 22,871,306 thousand in 2021 from RMB 14,773,809 thousand in 2020[11] - Cash and cash equivalents stood at RMB 11,426,758 thousand in 2021, compared to RMB 9,557,802 thousand in 2020[11] - Non-current assets grew to RMB 4,885,534 thousand in 2021 from RMB 2,333,221 thousand in 2020[11] - Current assets increased to RMB 17,985,772 thousand in 2021 from RMB 12,440,588 thousand in 2020[11] - Total equity/assets net worth rose to RMB 19,246,359 thousand in 2021 from RMB 12,399,721 thousand in 2020[11] - Adjusted net profit margin rose to 39.6% in 2021, compared to 38.9% in 2020[18] - Sales revenue reached RMB 13.76 billion in 2021, a year-on-year increase of 37.4%[24] - Revenue from enterprise customers grew by 37.4% to approximately RMB 12,593,523 thousand, surpassing the RMB 10 billion mark for the first time[37] - Revenue from retail customers increased by 37.1% to approximately RMB 1,161,719 thousand[38] - Export revenue accounted for 66.0% of total revenue, amounting to approximately RMB 9,082,316 thousand[37] - Domestic sales revenue accounted for 34.0% of total revenue, amounting to approximately RMB 4,672,926 thousand[37] - Total revenue for the period was approximately RMB 13.755 billion, a 37.4% year-on-year increase, with gross profit rising 39.3% to RMB 7.377 billion and a gross margin of 53.6%[45] - Adjusted net profit increased by 39.8% to approximately RMB 5.443 billion, driven by revenue growth and improved cost efficiency[45] - Revenue from Mainland China surged by 104.1% to RMB 5,530,301 thousand, reflecting economic recovery and increased customer orders[50] - Gross profit rose by 39.3% to RMB 7,377,039 thousand, with gross margin improving from 52.9% to 53.6% due to scale effects and product mix changes[52] - Net profit and total comprehensive income for the year surged by 120.3% to approximately RMB 5,286,991 thousand, with adjusted net profit increasing by 39.8% to RMB 5,442,613 thousand, primarily due to revenue growth, improved gross margin, and other income gains[67] Costs and Expenses - Raw material costs increased by 30.3% to RMB 4,467,152 thousand, accounting for 70.0% of total cost of sales[53] - Labor costs grew by 49.3% to RMB 1,011,034 thousand, representing 15.9% of total cost of sales, partly due to reduced government subsidies[54] - Distribution and sales expenses increased by 33.8% to RMB 192,916 thousand, driven by expanded marketing activities[55] - Administrative expenses rose by 26.5% to RMB 863,701 thousand, but decreased as a percentage of revenue from 6.8% to 6.3% due to cost-saving measures[57] - R&D expenses grew by 59.7% to RMB 670,629 thousand, with R&D as a percentage of revenue increasing from 4.2% to 4.9%[58] - Employee compensation and benefits in R&D surged by 76.5% to RMB 374,637 thousand, reflecting increased investment in talent and research areas[58] - Tax expenses increased by 28.5% to approximately RMB 922,375 thousand, accounting for 16.9% of adjusted net profit, driven by higher taxable profits[66] Market and Sales - Sales to enterprise customers grew by 37.4% year-on-year in 2021[24] - Sales to retail customers increased by 37.1% year-on-year in 2021[24] - The company's market share in the global atomization technology sector continues to grow[24] - The company's sales to the top five customers accounted for approximately 75.5% of total sales in 2021, with the largest customer contributing about 34.3% of total sales[119] - Purchases from the top five suppliers accounted for approximately 28.3% of total purchases in 2021, with the largest supplier contributing about 10.9% of total purchases[119] Regulatory and Geographic Revenue - The company faces regulatory challenges in key markets, such as the FDA's PMTA requirements in the US, which impact 12.2% of total revenue[25] - China's revenue contribution accounted for 40.2% of total revenue in 2021, with a significant portion affected by new tobacco regulations[26] - The U.S. revenue contribution, excluding products resold through Hong Kong, was approximately 37.1% in 2021[28] - Hong Kong's revenue contribution was 27.5% in 2021, with new regulations banning the import, production, and sale of e-cigarettes effective from April 2022[27] - The UK's revenue contribution was 11.1% in 2021, with regulatory changes post-Brexit requiring separate product notifications for Great Britain and Northern Ireland[27] - Japan and the EU contributed 1.5% and 3.0% respectively to revenue in 2021, with no significant regulatory changes reported[27] Research and Development - The company launched a new fully automated atomizer production line with a record efficiency of 7,200 atomizers per hour[20] - The company continues to invest in R&D for atomization technology, exploring applications in healthcare, beauty, and wellness[21] - R&D expenditure increased by 59.7% to approximately RMB 670.629 million, accounting for 4.9% of revenue, up from 4.2% in the previous year[39] - The company filed 1,187 new patent applications globally, including 605 invention patents, bringing the total number of patent applications to 3,408, with 1,570 being invention patents[39] - The company plans to establish at least 5 new research institutes in 2022, focusing on new materials, innovative vaporization technologies, and medical vaporization products[43] - R&D expenditure for 2022 is projected to reach approximately RMB 1.68 billion, exceeding the total R&D investment of the past six years[44] - The company launched the Feelm Air, a next-generation ultra-thin e-vaporizer solution, featuring a seven-layer composite heating film and a thinner ceramic core[44] Production and Capacity - Production capacity utilization rates were 67.6% for enterprise customers and 90.7% for retail customers, with total production reaching 1,748.4 million standard units for enterprise and 22.4 million for retail[41] - The company invested approximately RMB 977 million to acquire a commercial land plot in Shenzhen for the construction of its headquarters, with a planned construction area of 66,000 square meters[42] - Total investment in property, plant, and equipment and intangible assets during the review period: RMB 1,234,123 thousand, mainly for expanding production scale and increasing R&D activities[75] - Capital commitments for land use rights and property, plant, and equipment as of December 31, 2021: RMB 390,128 thousand, compared to RMB 70,272 thousand in 2020[76] - Significant investment of approximately RMB 977 million in a commercial land plot in Shenzhen for the construction of the company's headquarters, with a planned completion by the end of 2026[77] - Planned investment of approximately RMB 1,500 million over the next five years for the headquarters office building project[78] Market Growth and Projections - The global electronic vaporization device market is expected to grow at a CAGR of 25.3% from 2022 to 2026[35] - The company maintained its position as the world's largest electronic vaporization device manufacturer, with a market share increase from 18.9% in 2020 to 22.8% in 2021[35] - The global closed-system electronic vaporization device market is expected to grow at a CAGR of 24.6% from 2022 to 2026[35] - The global open-system electronic vaporization device market is expected to grow at a CAGR of 11.0% from 2022 to 2026[35] - The global special-purpose electronic vaporization device market is expected to grow at a CAGR of 45.8% from 2022 to 2026[35] - Global e-vapor device market is expected to grow at a CAGR of 25.3% from 2022 to 2026, according to Frost & Sullivan[43] Dividends and Shareholder Returns - The Board proposed a final dividend of 18 HK cents per ordinary share for the year ended December 31, 2021[17] - The board proposed a final dividend of 18 HK cents per ordinary share for the year ended December 31, 2021, subject to approval at the annual general meeting[124] - The company's annual general meeting is scheduled to be held on May 27, 2022[125] - The company will suspend share transfer registration from May 24, 2022, to May 27, 2022, to determine shareholders eligible to attend the annual general meeting and vote[126] - The company will suspend share transfer registration from June 6, 2022, to June 8, 2022, to determine shareholders eligible for the final dividend[126] Share Options and Incentives - The company granted a total of 319,032,000 share options under the Pre-IPO Share Option Plan to eligible participants[130] - The exercise price for each share option granted under the Pre-IPO Share Option Plan is RMB 0.38[132] - The Pre-IPO Share Option Plan has a maximum term of 10 years from the date of the option offer[131] - The Pre-IPO Share Option Plan was effective from the adoption date (September 30, 2019) to the listing date (July 10, 2020)[133] - The total number of share options granted under the Pre-IPO Share Option Scheme as of December 31, 2021, was 16,000,000 for Chen Zhiping, with an exercise price of RMB 0.38[134] - Wang Guisheng exercised 6,000,000 share options during the period, with an exercise price of RMB 0.38[134] - Li Xiaoping exercised 1,192,000 share options during the period, with an exercise price of RMB 0.38[134] - Yuan Xiang exercised 52,000 share options during the period, with an exercise price of RMB 0.38[134] - Xiong Fei exercised 81,000 share options during the period, with an exercise price of RMB 0.38[134] - Other employees exercised 39,535,000 share options during the period, with an exercise price of RMB 0.38[134] - The Post-IPO Share Option Plan was conditionally approved and adopted on June 15, 2020, with the purpose of encouraging and rewarding eligible participants for their contributions to the group[136][137] - The maximum number of shares that can be issued under the Post-IPO Share Option Plan and other share option plans is 10% of the total issued shares as of the listing date, or 574,351,272 shares[138] - The total number of shares that can be issued under all share option plans at any time cannot exceed 30% of the total issued shares[138] - The total number of stock options granted under the post-IPO share option plan in 2021 was 39,791,000 shares, distributed on April 1 (26,388,000 shares), July 9 (3,670,000 shares), and September 30 (9,733,000 shares)[142] - The closing share prices on the day before the option grant dates were HK$47.30 (April 1), HK$42.95 (July 9), and HK$35.50 (September 30)[142] - The exercise price for stock options granted under the post-IPO share option plan must not be lower than the highest of: the closing price on the grant date, the average closing price of the five trading days preceding the grant date, or the face value of the shares[141] - The post-IPO share option plan has a remaining lifespan of 10 years from the listing date (July 10, 2020), after which no further options will be granted[142] - The maximum number of shares that can be issued under all share option plans (including exercised, canceled, and unexercised options) within any 12-month period must not exceed 1% of the total issued shares[139] - For participants who are substantial shareholders or independent non-executive directors, the total value of shares issued upon exercise of all options granted within 12 months must not exceed HK$5,000,000[139] - The company adopted a Share Award Plan on September 2, 2021, to reward eligible participants for their contributions to the group's growth and development[144] - As of December 31, 2021, the total number of unexercised stock options held by employees was 6,620,668 shares (granted on April 1), 821,000 shares (granted on July 9), and 2,464,500 shares (granted on September 30)[143] - The company's share incentive plan has a validity period of 10 years, starting from the adoption date, with the board having the authority to terminate it early, provided that the termination does not affect the vested rights of any selected participants[146] - The maximum number of shares that the trustee may hold at any point during the plan's validity period shall not exceed 2% of the company's total issued share capital, and the maximum number of shares that may be awarded under the plan shall not exceed 5% of the company's total issued share capital[149] - On September 2, 2021, the company's board approved the adoption of the share incentive plan, and as of December 31, 2021, the trustee purchased 1,412,700 and 1,449,000 shares in the market on September 15, 2021, and November 5, 2021, respectively[151] - On December 24, 2021, the company granted 4,797,300 award shares to specific selected participants under the terms of the share incentive plan[151] - The share incentive plan allows for the award of shares to eligible participants, including employees, non-executive directors, consultants, and other contributors to the company's development and growth[145] - The trustee is required to transfer and vest the legal and beneficial ownership of the award shares to the selected participants as soon as practicable after the latest of the earliest vesting date specified in the award notice, receipt of necessary documents, and achievement of any performance targets[148] - If a selected participant who is an employee ceases to be an employee due to corporate restructuring, any awards granted to them will immediately lapse and be canceled[149] - The trustee is prohibited from exercising voting rights and must waive voting rights for any shares held under the trust, including award shares, additional shares, returned shares, bonus shares, and dividend shares[150] - The share incentive plan will terminate on the earlier of the 10th anniversary of the adoption date or the early termination date determined by the board or committee, without affecting the vested rights of any selected participants[150] Corporate Governance and Board Structure - The Board of Directors consists of 7 members, including 3 independent non-executive directors and 1 non-executive director, ensuring sufficient checks and balances[91] - The Chairman and CEO roles are held by the same individual, Mr. Chen Zhiping, which the Board considers appropriate for shareholder interests[91] - The company has a policy for the continuous professional development of directors, with all directors participating in training types A and B during the reporting period[94] - The Board held 5 meetings, the Audit Committee held 3 meetings, and other committees held a total of 3 meetings during the year ending December 31, 2021[95] - The company holds at least four regular board meetings annually, with agendas and documents sent to directors at least 3 days in advance[96] - All directors and relevant employees strictly complied with the Model Code for Securities Transactions as of December 31, 2021[97] - The company has adopted a Board Diversity Policy to enhance diversity, which is considered a key element in maintaining competitive advantage[98] - The Nomination Committee reviews the board's structure annually and considers diversity in gender, age, cultural background, professional experience, and skills[99] - The company has a Director Nomination Policy to ensure a balanced board with diverse skills, experience, and perspectives[100] - The Audit Committee includes three independent non-executive directors and focuses on financial reporting, risk management, and internal controls[104] - The Audit Committee held three meetings with external auditors in 2021 to review financial statements and discuss audit procedures[105] - The Nomination Committee evaluates board composition and considers factors like gender, age, and industry experience for board appointments[106] - The company's remuneration committee, chaired by Mr. Yan Xiaoying, is responsible for recommending the overall remuneration policy and structure for directors and senior management[107] - The company's senior management salary range for the fiscal year ending December 31, 2021, includes 2 individuals earning between 0 HKD and 10,000,000 HKD, and 1 individual earning between 10,000,001 HKD and 20,000,000 HKD[109] - The company's independent external auditor, Deloitte Touche Tohmatsu, received approximately 3,300,000 RMB for audit services and 973,000 RMB for non-audit services during the fiscal year ending December 31, 2021[113] - The company's risk management and internal control systems are designed to manage operational efficiency, ensure asset protection, maintain proper accounting records, and comply with relevant

Financial Performance - Revenue for the first half of 2021 reached RMB 6,953,406 thousand, representing a 79.2% increase compared to RMB 3,880,518 thousand in the same period of 2020[23] - Gross profit for the same period was RMB 3,818,784 thousand, a 100.9% increase from RMB 1,900,512 thousand year-on-year[23] - Profit before tax surged to RMB 3,396,859 thousand, marking a significant increase of 1,012.5% from RMB 305,329 thousand in the previous year[23] - The gross profit margin improved to 54.9%, up 5.9 percentage points from 49.0% in the prior year[23] - Adjusted net profit for the period was RMB 2,975,225 thousand, a 127.5% increase from RMB 1,307,973 thousand in the same period of 2020[24] - The adjusted net profit margin rose to 42.8%, an increase of 9.1 percentage points compared to 33.7% in the previous year[23] - Total comprehensive income for the period was RMB 2,878,816 thousand, a dramatic rise of 3,655.3% compared to RMB 76,661 thousand in the same period last year[191] Assets and Liabilities - Total assets increased by 38.7% to RMB 20,497,014,000 compared to RMB 14,773,809,000 in the previous period[26] - Total equity rose by 43.6% to RMB 17,807,707,000 from RMB 12,399,721,000[26] - Cash and cash equivalents grew by 5.2% to RMB 10,053,906,000, up from RMB 9,557,802,000[26] - The debt-to-asset ratio decreased by 3.0 percentage points to 13.1% from 16.1%[26] - The current ratio improved by 99.7 percentage points to 689.7% from 590.0%[26] - The company’s total liabilities were RMB 2,436.9 million, up from RMB 2,108.4 million at the end of 2020[122] Production and Capacity - The company has launched a new generation of automated production lines, achieving a record production efficiency of 7,200 standard atomizers per hour[19] - The production capacity for enterprise customer products was increased to 2,815.0 million standard units per year as of June 30, 2021[47] - The company plans to enhance automation and smart production lines based on customer and product characteristics to improve operational efficiency[49] - The group is expanding production capacity according to established plans, with the first phase of the industrial park in Jiangmen progressing smoothly[49] Research and Development - The company continues to enhance its research and development capabilities, particularly in the medical aerosol field, by recruiting top talent[19] - Research and development expenses increased by approximately 13.1% compared to the same period last year, with a focus on in-depth research of atomization mechanisms and applications in healthcare[43] - The company established a research institute in the United States during the review period, enhancing its global research capabilities and talent acquisition[43] - The company continues to focus on R&D in atomization technology, particularly in the medical field, to enhance its long-term competitiveness[189] Market and Revenue Contribution - Revenue contribution from new tobacco products in China was 45.4% as of June 30, 2021[34] - Revenue contribution from Hong Kong was 25.5% as of June 30, 2021[36] - Revenue contribution from Japan was 1.2% as of June 30, 2021[37] - Revenue contribution from the EU was 2.5% as of June 30, 2021[38] - Revenue from products sold to enterprise customers recorded an increase of approximately 86.2%, driven by the global recognition of the FEELM brand ceramic atomization technology[48] Shareholder Information - The company declared an interim dividend of HKD 0.21 per share for the six months ended June 30, 2021, compared to zero for the same period in 2020[94] - Major shareholders include Zhao Zihan with 39.18% and SMR & Alon Limited with 33.34% of total shares[100] - The company has a significant concentration of ownership, with the top five shareholders holding over 70% of the total shares[100] - The company continues to explore strategic initiatives to enhance shareholder value through equity incentives[103] Corporate Governance - The company has established an internal audit mechanism to independently assess the effectiveness of its risk management and internal control systems[89] - All directors confirmed compliance with the securities trading code for the six months ended June 30, 2021[90] - The company has a remuneration committee responsible for recommending compensation policies for directors and senior management[87] - The company has a nomination committee that reviews the board's structure and composition regularly[88] Financial Management - The company raised approximately HKD 7,909.9 million from its IPO, with net proceeds allocated as follows: 50% for capacity enhancement, 25% for automation implementation, and 20% for R&D investments[111] - The company plans to allocate 55% of its funds, approximately HKD 2,445.0 million, to expand production capacity by the end of 2026[114] - The company is investing HKD 1,582.0 million in R&D, including the establishment of a research institute in Shenzhen[112] Risk Management - The board believes that the foreign exchange risk is acceptable and will closely monitor the related risks[75] - If the USD/CNY exchange rate increases by 10%, the group's after-tax profit would increase by approximately RMB 81,274 thousand[76]

Financial Performance - Total revenue for 2020 reached RMB 10,009,937 thousand, representing a gross margin of 52.9%[7] - Adjusted net profit for 2020 was RMB 3,893,428 thousand, an increase from RMB 2,265,391 thousand in 2019[8] - The company reported a significant increase in adjusted comprehensive income, totaling RMB 2,399,921 thousand for 2020[8] - Gross margin increased to 52.9% in 2020, up from 44.0% in 2019[10] - Adjusted net profit margin rose to 38.9% in 2020, compared to 29.8% in 2019[10] - The company's revenue for the year 2020 was approximately RMB 10,009,937 thousand, representing a growth of about 31.5% compared to 2019[48] - Gross profit for the fiscal year was approximately RMB 5,295,813 thousand, up approximately 58.0% from RMB 3,352,352 thousand in 2019, with a gross margin of 52.9% compared to 44.0% in the previous year[57] - Adjusted net profit for the fiscal year was approximately RMB 3,893,428 thousand, reflecting a year-on-year increase of 71.9%[57] - The total comprehensive income for the year was approximately RMB 2,399,921 thousand, a 10.4% increase from RMB 2,173,789 thousand in 2019, with adjusted net profit rising by 71.9% to RMB 3,893,428 thousand[76] Assets and Liabilities - Non-current assets as of December 31, 2020, amounted to RMB 2,333,221 thousand, while current assets were RMB 12,440,588 thousand[7] - The total assets reached RMB 14,773,809 thousand, with total liabilities of RMB 2,108,440 thousand[7] - The company's cash and cash equivalents stood at RMB 9,557,802 thousand as of December 31, 2020[7] - The current ratio improved to 590.0% in 2020, up from 105.9% in 2019[10] - The debt-to-asset ratio significantly decreased to 16.1% in 2020 from 77.8% in 2019[10] - As of December 31, 2020, the group's current assets net amounted to RMB 10,332,148 thousand, significantly up from RMB 120,497 thousand in 2019, with cash and bank balances reaching RMB 9,557,802 thousand[77] - The debt-to-asset ratio was approximately 19.1% as of December 31, 2020, a significant decrease from 349.4% in 2019, reflecting improved financial stability[79] - The total capital expenditure for property, plant, and equipment was approximately RMB 413,024 thousand, up from RMB 396,793 thousand in 2019, supporting production scale expansion and R&D activities[83] Market and Growth Strategy - The company plans to focus on expanding its market presence and enhancing product development in the upcoming year[9] - The company aims to leverage its strong financial position to explore potential mergers and acquisitions in the market[9] - The company plans to increase R&D investment in aerosol technology and expand applications in healthcare and medical fields[13] - The company aims to diversify its revenue across different countries and regions while expanding its product portfolio[38] - The company is focused on promoting the application of electronic vaporization technology in the healthcare sector[38] - The company plans to expand its product categories in 2021, including the market development of heated non-combustible (HNB) products[55] - The company plans to establish industrial parks in Jiangmen and Shenzhen by the end of 2026, utilizing approximately HKD 3,954.9 million for this purpose[180] Research and Development - Research and development expenses amounted to approximately RMB 419,806 thousand, an increase of about 51.3%, representing about 4.2% of total revenue[49] - The company submitted pre-market tobacco applications (PMTA) to the FDA by the deadline of September 9, 2020, becoming one of the earliest manufacturers to do so[49] - A total of 740 new patent applications were filed during the reporting period, including 341 invention patents, enhancing the company's technological leadership in the vaporization field[49] - The company has established an internal control system that is deemed effective and adequate in all material aspects as of December 31, 2020[120] Regulatory Environment - Regulatory changes, such as the PACT Act, will impact the transportation of electronic nicotine delivery systems and require close monitoring[19] - The PACT Act requires online retailers to comply with state tax laws and adult identity verification for shipping electronic nicotine delivery systems, posing significant compliance challenges for distributors and online retailers[20] - As of December 31, 2020, there were no significant new laws or regulations affecting the company's operations in China, Japan, or the EU[25][26] - In France, new regulations effective January 1, 2021, require manufacturers to participate in waste management for tobacco products, including heated tobacco devices[27] - The UK will implement new reporting requirements for manufacturers of electronic cigarettes and nicotine products starting January 1, 2021, following Brexit[32] - The company plans to continue monitoring global regulatory developments and adjust its R&D and production activities accordingly to ensure compliance[38] Corporate Governance - The board proposed a final dividend of HKD 0.27 per ordinary share for the year ended December 31, 2020[9] - The board consists of executive directors, non-executive directors, and independent non-executive directors, ensuring a diverse and experienced leadership team[97] - The board retains decision-making authority on significant matters, including policies, strategies, and major transactions[99] - The board consists of seven members, including three independent non-executive directors, ensuring a balance of power[100] - The company emphasizes strong corporate governance practices, adhering to the corporate governance code and maintaining transparency and accountability to shareholders[177] - The company has engaged auditors to report on the related transactions in accordance with the Hong Kong Listing Rules[94] Shareholder Information - The company raised approximately HKD 7,909.9 million from its IPO, with net proceeds allocated as follows: 50% for capacity enhancement, 25% for automation implementation, 20% for R&D investment, and 5% for operational funding[179] - The company has maintained a public float of at least 25% of its total issued share capital as of the report date[181] - Shareholders holding at least 10% of the paid-up capital have the right to request the board to convene a special general meeting[127] - The company encourages shareholders to communicate their opinions and suggestions during the annual general meeting[124] Risk Management - The company emphasizes the importance of risk management and internal control systems to achieve business objectives and mitigate risks[119] - The overall risk management process is integrated into daily operations, with management responsible for identifying and responding to risks[119] - The board is committed to reviewing the effectiveness of risk management and internal control systems regularly[119] Audit and Compliance - The audit committee consists of three independent non-executive directors, enhancing the oversight of financial and accounting practices[183] - The consolidated financial statements for the year ended December 31, 2020 were audited by Deloitte, ensuring compliance with Hong Kong Financial Reporting Standards[184] - The auditors maintained professional skepticism and identified risks of material misstatement due to fraud or error during the audit process[195] - The auditors communicated the planned audit scope, timing, and significant audit findings to the governance personnel[195] Employee and Management Information - The company has independent non-executive directors who have confirmed their independence according to the listing rules[152] - The company’s executive directors have extensive experience in the electronic atomization industry, with the CEO having over 10 years of experience[153] - The CFO has over 20 years of experience in financial management and has served as a director and senior management in publicly listed companies[154] - The company’s strategic planning and daily operations are led by the executive directors, ensuring alignment with business objectives[154]

Financial Performance - Revenue for the six months ended June 30, 2020, was RMB 3,880,518 thousand, representing an 18.5% increase from RMB 3,273,653 thousand in 2019[32]. - Gross profit for the same period was RMB 1,900,512 thousand, a 39.9% increase compared to RMB 1,358,449 thousand in 2019[32]. - The adjusted net profit for the period was RMB 1,307,973 thousand, which is a 40.4% increase from RMB 931,343 thousand in the previous year[33]. - The total comprehensive income for the period was RMB 76,661 thousand, a significant decrease of 91.7% from RMB 920,998 thousand in 2019[32]. - Revenue for the second quarter increased by approximately 38.9% year-on-year, contributing to a total revenue growth of about 18.5% for the first half of 2020[61]. - The net profit for the period was RMB 76,661 thousand, a significant decrease from RMB 1,096,606 thousand in the previous year, reflecting a decline of approximately 93%[157]. - The group reported a segment profit of RMB 1,388,916 thousand, an increase of 25.5% compared to RMB 1,106,951 thousand in the previous year[180]. Profitability Metrics - The gross margin improved to 49.0%, up 7.5 percentage points from 41.5% in 2019[32]. - The adjusted net profit margin increased to 33.7%, up 5.3 percentage points from 28.4% in the previous year[32]. - Gross profit increased by 39.9% to RMB 1,900,512 thousand, with a gross margin rising from 41.5% to 49.0%[77]. Assets and Liabilities - Total assets increased by 39.1% to RMB 4,592,715,000 as of June 30, 2020, compared to RMB 3,301,903,000 as of December 31, 2019[37]. - Total equity rose by 30.7% to RMB 960,384,000 from RMB 734,673,000 year-over-year[37]. - Cash and cash equivalents surged by 120.2% to RMB 1,610,245,000, up from RMB 731,394,000[37]. - The asset-liability ratio increased to 79.1%, up by 1.3 percentage points from 77.8%[37]. - Current ratio improved significantly to 194.5%, an increase of 88.6 percentage points from 105.9%[37]. - Total liabilities decreased to RMB 1,756,283 thousand from RMB 2,049,243 thousand, reflecting a reduction of about 14.3%[159]. Market and Sales Performance - Approximately 45.1% of the gross profit for the six months ended June 30, 2020, was derived from products sold in the U.S. market[44]. - Sales of electronic nicotine delivery system products in the US market increased by approximately 110.5% compared to the same period in 2019[46]. - Revenue from enterprise customers accounted for 89.9% of total revenue, increasing by 32.3% year-on-year, while revenue from retail customers decreased by 38.5%[73]. - Sales to the top three customers, who adjusted their product offerings to comply with flavor bans, still grew by about 149.1% in the four months ending June 30, 2020, compared to the same period in 2019[46]. - Revenue from electronic vaporization devices and components (excluding APV) reached RMB 3,489,724 thousand, up 32.4% from RMB 2,637,881 thousand in 2019[179]. Regulatory Environment - The regulatory landscape for electronic vaporization devices is evolving, with potential health risks under scrutiny and various regulations being considered[41]. - The company is actively preparing tobacco premarket applications for its products in compliance with U.S. regulations, with two major customers already in the process[44]. - The Hong Kong government proposed a bill to ban the import, manufacture, sale, distribution, and advertising of alternative smoking products, including electronic vapor products[49]. - The company has not been aware of any significant violations regarding flavor bans as of June 30, 2020[46]. Research and Development - The company plans to continue investing in research and development, particularly in atomization technology, to support sustainable growth[30]. - Research and development expenses increased by approximately 117.4% compared to the same period last year, focusing on product safety and user experience improvements[60]. - The company plans to continue investing in R&D, focusing on product safety, health, and consumer experience, and aims to submit PMTA applications for several proprietary brand products by September 9, 2020[70]. Operational Challenges and Responses - The company faced a production challenge in Q1 due to COVID-19, resulting in a production decrease of approximately one-third from planned levels[29]. - The company successfully restored production capacity to normal levels after the initial COVID-19 disruptions, meeting customer order demands[29]. - The company has established a COVID-19 prevention center and implemented strict measures to ensure employee safety, with no reported infections as of June 30, 2020[69]. Corporate Governance - The board consists of seven directors, including three independent non-executive directors, ensuring sufficient checks and balances[123]. - The internal audit mechanism has been established to independently assess the effectiveness of the risk management and internal control systems[124]. - The company has adopted a shareholder communication policy and procedures for nominating director candidates[128]. - The company has complied with the Corporate Governance Code since its listing on July 10, 2020[123]. IPO and Capital Utilization - The company raised approximately HKD 7,122.0 million from its initial public offering (IPO) and approximately HKD 6,875.8 million in net proceeds[149]. - Approximately 50% of the IPO proceeds will be used to expand production capacity, including establishing industrial parks in Jiangmen and Shenzhen[147]. - The company completed its IPO on July 10, 2020, issuing 574,352,000 shares at a price of HKD 12.4 per share[150]. - As of the report date, the company has not utilized the net proceeds, which are held in licensed banks in Hong Kong or mainland China as short-term deposits[149].