[Company Profile and Key Financial Indicators](index=5&type=section&id=Item%202%20Company%20Profile%20and%20Key%20Financial%20Indicators) This section provides an overview of the company's basic information and key financial performance indicators for the past three years [Company Information](index=5&type=section&id=I.%20Company%20Information) This chapter provides basic information about CSSC Science & Technology Co., Ltd., including its name, stock code, legal representative, contact details, registered and office addresses, and information disclosure channels Company Basic Information | Item | Information | | :--- | :--- | | **Chinese Name** | CSSC Science & Technology Co., Ltd. | | **Chinese Abbreviation** | CSSC Technology | | **Stock Abbreviation** | CSSC Technology | | **Stock Code** | 600072 | | **Legal Representative** | Zhou Hui | | **Board Secretary** | Huang Laihe | | **Office Address** | 13th Floor, Jiangnan Shipyard Building, No. 600 Luban Road, Shanghai | [Key Financial Indicators](index=6&type=section&id=VII.%20Key%20Accounting%20Data%20and%20Financial%20Indicators%20for%20the%20Past%20Three%20Years) In 2020, the company's operating revenue was **1.875 billion yuan**, a significant year-on-year decrease of **43.67%** due to new revenue recognition standards, while net profit attributable to shareholders increased by **4.14%** to **143.46 million yuan**, primarily driven by non-recurring gains from equity disposal Key Accounting Data for the Past Three Years (Unit: Yuan) | Key Accounting Data | 2020 | 2019 | Year-on-year Change (%) | 2018 | | :--- | :--- | :--- | :--- | :--- | | **Operating Revenue** | 1,874,937,663.65 | 3,328,387,821.20 | -43.67 | 3,264,373,125.15 | | **Net Profit Attributable to Shareholders of Listed Company** | 143,459,993.44 | 137,750,838.39 | 4.14 | 65,427,430.33 | | **Net Profit Attributable to Shareholders of Listed Company (Excluding Non-recurring Gains/Losses)** | -28,195,594.52 | -74,182,215.06 | N/A | -78,412,167.69 | | **Net Cash Flow from Operating Activities** | 656,312,067.54 | 256,063,314.56 | 156.31 | -333,901,731.36 | | **Total Assets** | 9,052,054,033.92 | 9,195,870,028.85 | -1.56 | 10,527,625,393.33 | Key Financial Indicators for the Past Three Years | Key Financial Indicators | 2020 | 2019 | Change | 2018 | | :--- | :--- | :--- | :--- | :--- | | **Basic Earnings Per Share (Yuan/Share)** | 0.195 | 0.187 | 4.28% | 0.089 | | **Weighted Average Return on Net Assets (%)** | 3.69 | 3.62 | Increased by 0.07 percentage points | 1.78 | - **Operating revenue decreased** primarily due to the adoption of new revenue recognition standards, changing some project revenue recognition from gross to net method, or from period to point-in-time recognition[19](index=19&type=chunk) - **Net profit attributable to shareholders (excluding non-recurring gains/losses) narrowed its loss** due to increased revenue and gross margin from engineering design, survey, consulting, and supervision services at subsidiary CSSC No. 9 Institute, coupled with reduced R&D and financial expenses[19](index=19&type=chunk) - **Net cash flow from operating activities increased** due to improved collections from engineering contracting business at subsidiary CSSC No. 9 Institute[19](index=19&type=chunk) 2020 Non-recurring Gains and Losses Items (Unit: Yuan) | Item | Amount (Yuan) | Notes | | :--- | :--- | :--- | | Gains/Losses from Disposal of Non-current Assets | 156,247,749.76 | Primarily investment income of **156 million yuan** from the disposal of 20% equity in Xuzhou Sunshine | | Government Grants | 41,004,279.20 | - | | Other Non-operating Income and Expenses | -4,343,339.10 | - | | Income Tax Impact | -28,824,374.46 | - | | **Total** | **171,655,587.96** | - | [Business Overview](index=9&type=section&id=Item%203%20Business%20Overview) This section details the company's principal businesses, operating models, industry conditions, significant asset changes, and core competencies [Principal Business, Operating Model, and Industry Overview](index=9&type=section&id=I.%20Description%20of%20Principal%20Businesses%2C%20Operating%20Model%20and%20Industry%20Situation%20During%20the%20Reporting%20Period) The company's principal businesses remain unchanged, primarily conducted through its wholly-owned subsidiaries CSSC No. 9 Institute and CSSC Huahai, focusing on engineering services and marine equipment, respectively, while navigating a growing but less profitable construction sector and a challenging shipbuilding industry - The company's principal businesses are divided into two major segments: - **Engineering Services** (via CSSC No. 9 Institute): Including engineering design, survey, consulting, supervision, EPC (Engineering, Procurement, and Construction) general contracting, and land consolidation services[24](index=24&type=chunk) - **Marine Equipment** (via CSSC Huahai): Including hatch covers, passages, ramps, and other marine equipment[24](index=24&type=chunk) - CSSC No. 9 Institute is actively advancing its "3+2" strategic layout, focusing on design consulting, EPC general contracting, and urbanization construction (investment and financing) as foundations, while expanding into technology industrialization and smart factory digital platform construction as two new businesses[24](index=24&type=chunk)[31](index=31&type=chunk) - In 2020, CSSC No. 9 Institute signed **742 new projects** with a total contract value of approximately **3.09 billion RMB**[26](index=26&type=chunk)[35](index=35&type=chunk) - Industry analysis indicates that the total output value of the construction industry increased by **6.24%** year-on-year, but the industry's profit margin on output value has declined for four consecutive years[27](index=27&type=chunk) - In the shipbuilding industry, national shipbuilding completion volume increased by **4.9%** year-on-year, but new orders and order backlog both decreased[27](index=27&type=chunk) [Significant Changes in Major Assets](index=10&type=section&id=II.%20Explanation%20of%20Significant%20Changes%20in%20Major%20Assets%20During%20the%20Reporting%20Period) During the reporting period, the company executed two significant equity disposals, including the transfer of **20%** equity in Xuzhou CSSC Sunshine Investment Development Co., Ltd. for **128 million yuan** and initiating the public listing for **100%** equity in Jiangnan Dairuisi (Nantong) Marine Equipment Manufacturing Co., Ltd - The company publicly listed and transferred **20%** equity in Xuzhou CSSC Sunshine, which was successfully acquired by Shanghai Haichuan Real Estate Co., Ltd. for **127.65 million yuan**[28](index=28&type=chunk)[29](index=29&type=chunk) - The company initiated the public listing process for **100%** equity in Jiangnan Dairuisi, with an appraised value of **305 million yuan**[30](index=30&type=chunk) [Analysis of Core Competencies](index=11&type=section&id=III.%20Analysis%20of%20Core%20Competencies%20During%20the%20Reporting%20Period) The company's core competencies are rooted in its subsidiary CSSC No. 9 Institute's comprehensive engineering service capabilities and technological innovation, expanding from traditional shipyard design to green building, BIM, and smart manufacturing, supported by its '3+2' strategic layout and significant patent applications - The company's core competencies are reflected in five major business areas: - **Design Consulting Business**: Leveraging its overall shipyard design advantages to expand into green building and smart city domains[31](index=31&type=chunk) - **General Contracting Business**: Building integrated design, procurement, and construction service capabilities[31](index=31&type=chunk) - **Investment and Financing Business**: Extending the industry chain through PPP and other models[31](index=31&type=chunk) - **Technology Industrialization Business**: Promoting the commercialization of technological achievements in hydraulic engineering, environmental protection, and interior decoration[31](index=31&type=chunk) - **Smart Factory Digital Platform**: Applying big data and AI to shipyard planning, construction, and operation and maintenance[31](index=31&type=chunk) - During the reporting period, the company applied for **176 patents** (including **133 invention patents**) in areas such as smart shipyards and engineering equipment, with **61 granted**; it also led the compilation of **1 international standard** and **5 national standards**[33](index=33&type=chunk) [Management Discussion and Analysis](index=12&type=section&id=Item%204%20Management%20Discussion%20and%20Analysis) This section provides an in-depth analysis of the company's operational performance, financial position, industry trends, and future outlook [Overview of Operations](index=12&type=section&id=I.%20Management%20Discussion%20and%20Analysis) In 2020, the company's operating revenue decreased by **43.67%** to **1.875 billion yuan** due to new revenue recognition standards for engineering general contracting, while net profit attributable to shareholders increased to **143 million yuan**, primarily driven by a **156 million yuan** investment gain from equity disposal 2020 Key Operating Data (Unit: Billion Yuan) | Indicator | 2020 | Year-on-year Change | | :--- | :--- | :--- | | **Operating Revenue** | 1.875 | -43.67% | | **Net Profit Attributable to Parent Company** | 0.143 | +4.14% | | **Net Profit Attributable to Parent Company (Excluding Non-recurring Gains/Losses)** | -0.028 | Loss narrowed | - The significant decrease in operating revenue was primarily due to the adoption of new revenue recognition standards, which changed the revenue recognition method for some engineering general contracting projects from the gross method to the net method, or from period-based to point-in-time recognition[35](index=35&type=chunk) - The growth in net profit attributable to the parent company mainly stemmed from non-recurring gains and losses, specifically an investment income of approximately **156 million yuan** from the disposal of **20%** equity in Xuzhou CSSC Sunshine[36](index=36&type=chunk)[47](index=47&type=chunk) [Analysis of Principal Business](index=13&type=section&id=(I)%20Analysis%20of%20Principal%20Business) Operating costs decreased by **47.15%** in line with revenue, while R&D and financial expenses significantly declined by **44.50%** and **24.36%** respectively, leading to a **156.31%** increase in net cash flow from operating activities and a **569.87%** increase in net cash flow from investing activities, despite a **56.06%** drop in engineering general contracting revenue due to accounting changes Changes in Key Income Statement and Cash Flow Statement Items (Unit: Yuan) | Item | Current Period (Yuan) | Prior Period (Yuan) | Change (%) | | :--- | :--- | :--- | :--- | | **Operating Revenue** | 1,874,937,663.65 | 3,328,387,821.20 | -43.67 | | **Operating Cost** | 1,610,835,265.69 | 3,048,016,914.76 | -47.15 | | **Research and Development Expenses** | 60,895,832.50 | 109,713,680.59 | -44.50 | | **Financial Expenses** | 41,134,560.62 | 54,382,707.99 | -24.36 | | **Net Cash Flow from Operating Activities** | 656,312,067.54 | 256,063,314.56 | 156.31 | | **Net Cash Flow from Investing Activities** | 674,371,127.50 | 100,671,364.73 | 569.87 | Principal Business by Product (Unit: Yuan) | Product Segment | Operating Revenue (Yuan) | Year-on-year Change in Operating Revenue (%) | Gross Margin (%) | Gross Margin Change Year-on-year | | :--- | :--- | :--- | :--- | :--- | | **Engineering Design, Survey, Consulting, and Supervision** | 557,471,602.64 | 6.43 | 18.10 | Increased by 0.49 percentage points | | **Engineering General Contracting** | 1,189,519,048.50 | -56.06 | 9.40 | Increased by 3.46 percentage points | | **Marine Accessories** | 67,017,766.91 | 20.69 | 22.61 | Increased by 8.11 percentage points | - Total R&D investment amounted to **60.90 million yuan**, accounting for **3.25%** of operating revenue[45](index=45&type=chunk) [Analysis of Assets and Liabilities](index=17&type=section&id=(III)%20Analysis%20of%20Assets%20and%20Liabilities) As of the reporting period end, total assets slightly decreased by **1.56%** to **9.052 billion yuan**, with significant structural changes including the addition of **1.447 billion yuan** in contract assets and a **43.97%** increase in inventory due to new revenue standards, while liabilities decreased with a **66.31%** reduction in short-term borrowings and a **39.31%** reduction in long-term borrowings - The adoption of new revenue recognition standards led to significant changes in the balance sheet structure: - **Assets**: New "Contract Assets" item with an ending balance of **1.447 billion yuan**; "Inventories" increased by **43.97%**; "Advances from Customers" decreased by **99.79%**[48](index=48&type=chunk)[49](index=49&type=chunk) - **Liabilities**: New "Contract Liabilities" item with an ending balance of **741 million yuan**; "Other Current Liabilities" decreased by **80.77%**[48](index=48&type=chunk)[49](index=49&type=chunk) - The completion and capitalization of the industrial building under subsidiary CSSC No. 9 Institute resulted in "Construction in Progress" being cleared, and "Fixed Assets" and "Investment Properties" significantly increasing by **256.60%** and **256.94%**, respectively[48](index=48&type=chunk)[49](index=49&type=chunk) - The company's debt scale decreased, with "Short-term Borrowings" down by **66.31%** and "Long-term Borrowings" down by **39.31%**, primarily due to loan repayments by subsidiary CSSC No. 9 Institute[49](index=49&type=chunk) [Industry Operating Information Analysis](index=19&type=section&id=(IV)%20Analysis%20of%20Industry%20Operating%20Information) During the reporting period, the company's construction business completed **1,157 projects** totaling **582.89 million yuan**, had **144 projects** under construction valued at **1.028 billion yuan**, and signed **742 new projects** worth **3.09 billion yuan**, resulting in a total order backlog of **3.671 billion yuan** at period-end Construction Industry Operating Data (Unit: Ten Thousand Yuan) | Item | Quantity (Units) | Total Amount (Ten Thousand Yuan) | | :--- | :--- | :--- | | **Projects Completed During Reporting Period** | 1,157 | 58,289 | | **Projects Under Construction During Reporting Period** | 144 | 102,814 | | **New Projects Signed During Reporting Period** | 742 | 309,000 | | **Order Backlog at End of Reporting Period** | - | 367,065 | [Significant Asset and Equity Disposals](index=22&type=section&id=(VI)%20Significant%20Asset%20and%20Equity%20Disposals) During the reporting period, the company completed two significant equity disposals: the successful transfer of **20%** equity in Xuzhou CSSC Sunshine for **127.65 million yuan**, generating substantial investment income, and the initiation of public listing for **100%** equity in Jiangnan Dairuisi based on an appraised value of **304.58 million yuan** - Publicly listed and transferred **20%** equity in Xuzhou CSSC Sunshine, with a transaction price of **127.65 million yuan**[63](index=63&type=chunk) - Publicly listed and transferred **100%** equity in Jiangnan Dairuisi, with an appraised value of **304.58 million yuan**[64](index=64&type=chunk) [Discussion and Analysis of Future Development](index=23&type=section&id=(I)%20Industry%20Landscape%20and%20Trends) The company anticipates a rebound in the global marine market in 2021 but expects continued pressure from raw material costs and exchange rates, while domestic infrastructure and urbanization plans offer opportunities for the construction sector, with a 2021 revenue target of approximately **2 billion yuan**, despite facing risks in project management, market competition, cash flow, external investments, and legal disputes - The company's development strategy remains consistent with the previous year, adhering to the "CSSC Science & Technology Co., Ltd. 2018-2025 Development Strategic Plan (Outline)"[68](index=68&type=chunk) - The 2021 operating plan targets achieving approximately **2 billion yuan** in operating revenue[68](index=68&type=chunk) - The company faces several key risks, including: - **Project Management Risk**: Increased difficulty in managing project progress, quality, and safety[68](index=68&type=chunk)[69](index=69&type=chunk) - **Market Change and Competition Risk**: Macroeconomic uncertainties and intense market competition[68](index=68&type=chunk)[69](index=69&type=chunk) - **Cash Flow Risk**: Long payback periods for investment and financing projects, leading to significant working capital pressure[68](index=68&type=chunk)[69](index=69&type=chunk) - **External Investment Risk**: Suboptimal returns from some external equity investments[68](index=68&type=chunk)[69](index=69&type=chunk) - **Legal Dispute Risk**: Increasingly complex legal relationships in projects[68](index=68&type=chunk)[69](index=69&type=chunk) [Significant Matters](index=25&type=section&id=Item%205%20Significant%20Matters) This section covers the company's profit distribution plan, changes in accounting policies, and significant litigation or arbitration cases [Profit Distribution Plan](index=25&type=section&id=I.%20Proposed%20Profit%20Distribution%20or%20Capital%20Reserve%20to%20Share%20Capital%20Plan%20for%20Ordinary%20Shares) The board proposes a 2020 profit distribution of **0.60 yuan** cash dividend (tax inclusive) per **10 shares**, totaling **44.17 million yuan**, representing **30.79%** of net profit attributable to shareholders, with no capital reserve conversion to share capital Cash Dividend Distribution for the Past Three Years | Dividend Year | Dividend Per 10 Shares (Yuan, Tax Inclusive) | Cash Dividend Amount (Yuan, Tax Inclusive) | Ratio to Net Profit Attributable to Parent Company (%) | | :--- | :--- | :--- | :--- | | **2020** | 0.60 | 44,174,992.98 | 30.79 | | **2019** | 0.57 | 41,966,243.33 | 30.47 | | **2018** | 0.20 | 14,724,997.66 | 22.50 | [Changes in Accounting Policies and Estimates](index=27&type=section&id=V.%20Analysis%20and%20Explanation%20of%20Reasons%20and%20Impacts%20of%20Changes%20in%20Accounting%20Policies%2C%20Accounting%20Estimates%20or%20Correction%20of%20Significant%20Accounting%20Errors) During the reporting period, the company adopted new revenue standards from January 1, 2020, leading to retrospective adjustments impacting accounts receivable, inventory, contract assets, and liabilities, and also changed its accounting estimate for bad debt provisions for receivables from October 1, 2020, increasing credit impairment losses by **45.90 million yuan** - The company adopted new revenue recognition standards effective January 1, 2020, without adjusting comparative period information, applying retrospective adjustment to opening retained earnings and related financial statement items[78](index=78&type=chunk) Major Impacts of New Revenue Standards on January 1, 2020 Balance Sheet (Unit: Yuan) | Item | Adjustment Impact Amount (Yuan) | | :--- | :--- | | Accounts Receivable | -139,826,991.85 | | Inventories | -99,481,108.48 | | **Contract Assets (New)** | **1,607,698,171.37** | | Advances from Customers | -151,520,244.26 | | **Contract Liabilities (New)** | **443,267,289.76** | | Retained Earnings | -1,708,857.43 | - The company changed its accounting estimate for bad debt provisions for receivables, which resulted in an increase of **45,895,809.97 yuan** in credit impairment losses for 2020[80](index=80&type=chunk)[81](index=81&type=chunk) [Significant Litigation and Arbitration Matters](index=29&type=section&id=X.%20Significant%20Litigation%20and%20Arbitration%20Matters) During the reporting period, the company was involved in several significant lawsuits, including a final judgment by the Supreme People's Court in the Beijing Zhongguancun construction contract dispute, where the company was awarded **26.49 million yuan** in engineering fees and interest, while a construction contract dispute with Shandong Construction Group involving approximately **95.53 million yuan** remains ongoing - In the engineering payment dispute with Beijing Zhongguancun, the Supreme People's Court's final judgment ruled in favor of the company, awarding **26.49 million yuan** in engineering fees and corresponding interest[86](index=86&type=chunk) - The construction engineering contract dispute with Shandong Construction Group is still under trial, with the plaintiff seeking payment of **95.53 million yuan** in engineering fees and interest[87](index=87&type=chunk) [Share Changes and Shareholder Information](index=52&type=section&id=Item%206%20Changes%20in%20Ordinary%20Shares%20and%20Shareholder%20Information) This section details the company's ordinary share changes, total shareholder count, and information on the top ten shareholders and actual controller [Shareholders and Actual Controller Information](index=53&type=section&id=III.%20Shareholders%20and%20Actual%20Controller%20Information) As of the end of 2020, the company had **101,675** ordinary shareholders, with China State Shipbuilding Corporation Limited and its subsidiary Jiangnan Shipyard (Group) Co., Ltd. collectively holding **41.28%** as the controlling shareholder Top Ten Shareholders' Holdings | Shareholder Name | Shares Held at Period-End | Proportion (%) | | :--- | :--- | :--- | | China State Shipbuilding Corporation Limited | 275,204,726 | 37.38 | | Jiangnan Shipyard (Group) Co., Ltd. | 28,727,521 | 3.90 | | Liang Shengyi | 6,000,000 | 0.81 | | Fang Guowei | 6,000,000 | 0.81 | | HKSCC Nominees Limited | 4,092,748 | 0.56 | [Directors, Supervisors, Senior Management, and Employees](index=57&type=section&id=Item%208%20Directors%2C%20Supervisors%2C%20Senior%20Management%2C%20and%20Employees) This section provides information on the shareholdings and remuneration of directors, supervisors, and senior management, as well as overall employee statistics [Changes in Holdings and Remuneration of Directors, Supervisors, and Senior Management](index=57&type=section&id=I.%20Changes%20in%20Holdings%20and%20Remuneration) During the reporting period, none of the company's directors, supervisors, or senior management held company shares, with their total pre-tax remuneration amounting to **8.4006 million yuan**, including **1.1407 million yuan** for Chairman and General Manager Zhou Hui Remuneration of Selected Directors, Supervisors, and Senior Management (Unit: Ten Thousand Yuan) | Name | Position | Total Pre-tax Remuneration Received from Company During Reporting Period (Ten Thousand Yuan) | | :--- | :--- | :--- | | Zhou Hui | Chairman, General Manager | 114.07 | | Gao Kang | Director (Resigned) | 124.37 | | Wang Rui | Chief Accountant | 112.35 | | Xu Jian | Independent Director | 8.00 | | **Total** | **/** | **840.06** | [Employee Information](index=64&type=section&id=VI.%20Employee%20Information%20of%20Parent%20Company%20and%20Major%20Subsidiaries) As of the reporting period end, the company and its major subsidiaries employed **1,609 staff**, with production personnel forming the largest group at **1,018**, and over **78%** of employees holding a bachelor's degree or higher, reflecting a highly qualified workforce Employee Professional Structure | Professional Category | Number of Employees | | :--- | :--- | | Production Personnel | 1,018 | | Technical Personnel | 292 | | Administrative Personnel | 201 | | Sales Personnel | 51 | | Financial Personnel | 47 | | **Total** | **1,609** | [Corporate Governance](index=65&type=section&id=Item%209%20Corporate%20Governance) This section outlines the company's corporate governance structure, compliance with regulations, and internal control effectiveness [Overview of Corporate Governance](index=65&type=section&id=I.%20Explanation%20of%20Corporate%20Governance%20Related%20Matters) During the reporting period, the company's corporate governance structure complied with the Company Law and CSRC regulations, with no significant discrepancies, maintaining effective internal controls over financial reporting as confirmed by an unqualified audit report - The company's actual corporate governance situation has no discrepancies with the requirements of the Company Law and relevant regulations of the China Securities Regulatory Commission[156](index=156&type=chunk) - The company disclosed its self-evaluation report on internal control and obtained a standard unqualified internal control audit report from Tianjian Certified Public Accountants (Special General Partnership), which concluded that the company maintained effective internal controls over financial reporting in all material respects as of December 31, 2020[165](index=165&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk) [Financial Report](index=69&type=section&id=Item%2011%20Financial%20Report) This section presents the company's audited financial statements, including the audit report and detailed notes to the financial statements [Audit Report](index=69&type=section&id=I.%20Audit%20Report) Tianjian Certified Public Accountants (Special General Partnership) issued a standard unqualified audit opinion on the company's 2020 financial statements, highlighting accounts receivable impairment and revenue recognition as key audit matters due to their materiality and significant management judgment - The auditing firm is Tianjian Certified Public Accountants (Special General Partnership), which issued a standard unqualified audit opinion[3](index=3&type=chunk)[169](index=169&type=chunk) - Key audit matters include: - **Impairment of Accounts Receivable**: Due to the significant amount and the substantial management judgment involved in impairment assessment[171](index=171&type=chunk) - **Revenue Recognition**: As operating revenue is a key performance indicator, and revenue recognition for engineering general contracting business involves significant management judgment[171](index=171&type=chunk)[173](index=173&type=chunk) [Financial Statements](index=74&type=section&id=II.%20Financial%20Statements) This chapter presents the company's audited consolidated and parent company balance sheets, income statements, cash flow statements, and statements of changes in owners' equity for the year 2020 [Consolidated Balance Sheet](index=74&type=section&id=Consolidated%20Balance%20Sheet) This section presents the company's consolidated balance sheet as of December 31, 2020, detailing its assets, liabilities, and owners' equity Consolidated Balance Sheet Summary (December 31, 2020) | Item | Amount (Yuan) | | :--- | :--- | | **Total Assets** | **9,052,054,033.92** | | Total Current Assets | 6,701,420,946.56 | | Total Non-current Assets | 2,350,633,087.36 | | **Total Liabilities** | **4,799,879,425.75** | | Total Current Liabilities | 3,427,767,534.44 | | Total Non-current Liabilities | 1,372,111,891.31 | | **Total Owners' Equity** | **4,252,174,608.17** | | Owners' Equity Attributable to Parent Company | 3,923,608,083.05 | [Consolidated Income Statement](index=78&type=section&id=Consolidated%20Income%20Statement) This section presents the company's consolidated income statement for the year 2020, detailing its revenues, expenses, and net profit Consolidated Income Statement Summary (2020) | Item | Amount (Yuan) | | :--- | :--- | | **Total Operating Revenue** | **1,874,937,663.65** | | **Operating Profit** | 170,345,478.77 | | **Total Profit** | 165,841,735.21 | | **Net Profit** | 139,673,695.78 | | **Net Profit Attributable to Owners of Parent Company** | **143,459,993.44** | | **Basic Earnings Per Share (Yuan/Share)** | 0.195 | [Consolidated Cash Flow Statement](index=82&type=section&id=Consolidated%20Cash%20Flow%20Statement) This section presents the company's consolidated cash flow statement for the year 2020, detailing cash flows from operating, investing, and financing activities Consolidated Cash Flow Statement Summary (2020) | Item | Amount (Yuan) | | :--- | :--- | | **Net Cash Flow from Operating Activities** | **656,312,067.54** | | **Net Cash Flow from Investing Activities** | 674,371,127.50 | | **Net Cash Flow from Financing Activities** | -1,269,583,456.50 | | **Net Increase in Cash and Cash Equivalents** | 59,780,397.47 | [Notes to Consolidated Financial Statements](index=119&type=section&id=VII.%20Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed explanations for key items in the financial statements, including a **56.06%** decrease in engineering general contracting revenue due to accounting standard changes, a significant increase in investment income to **182 million yuan** from equity disposal, and the initial recognition of **1.447 billion yuan** in contract assets and **741 million yuan** in contract liabilities - Due to the adoption of new revenue recognition standards, the company initially recognized contract assets with an ending balance of **1.447 billion yuan** and contract liabilities with an ending balance of **741 million yuan**[317](index=317&type=chunk)[318](index=318&type=chunk)[372](index=372&type=chunk) - Investment income totaled **182 million yuan**, of which **156 million yuan** was generated from the disposal of long-term equity investment (Xuzhou CSSC Sunshine)[425](index=425&type=chunk) - The company has **1.027 billion yuan** in restricted monetary funds, primarily consisting of time deposits and letter of guarantee deposits[447](index=447&type=chunk)

Financial Performance - The company's operating revenue for the first half of 2020 was CNY 624,968,108.76, a decrease of 48.74% compared to CNY 1,219,229,321.99 in the same period last year[19]. - The net profit attributable to shareholders of the listed company was CNY 3,961,887.25, down 94.39% from CNY 70,651,280.63 in the previous year[19]. - The total operating revenue for the first half of 2020 was CNY 624,968,108.76, a decrease of 48.7% compared to CNY 1,219,229,321.99 in the same period of 2019[135]. - The company achieved operating revenue of RMB 624.97 million, with its wholly-owned subsidiary, China Shipbuilding Industry Corporation No. 9 Institute, contributing RMB 591.27 million, accounting for 94.61% of total revenue[38]. - The company reported a significant increase in other income, which rose to CNY 6,730,935.36 from CNY 3,173,308.09 in the previous year[136]. - The total comprehensive income for the first half of 2020 was CNY 15,278,029.76, down from CNY 51,247,712.37, a decline of approximately 70.2%[140]. - The company reported a net loss of approximately $39.47 million for the period, compared to a loss of $18.74 million in the previous period, indicating a significant increase in losses[151]. - The total revenue for the group reached approximately 651.84 million, with a slight increase of 0.13% compared to the previous period[80]. Cash Flow and Liquidity - The net cash flow from operating activities was CNY -366,967,771.80, showing a slight improvement from CNY -431,604,134.90 in the previous year[19]. - The cash flow from operating activities showed a net outflow of ¥366,967,771.80, an improvement from the previous year's outflow of ¥431,604,134.90[53]. - The cash and cash equivalents at the end of the period amounted to ¥2,072,292,866.32, representing 19.59% of total assets, an increase of 55.06% from the previous year[59]. - The total cash and cash equivalents at the end of the period amounted to 12,425,078.85 RMB, down from 430,366,640.60 RMB at the end of the previous year[146]. - The company reported a significant increase in interest income to CNY 12,894,080.91 from CNY 3,372,828.50, marking an increase of about 282.5%[139]. - The cash flow from operating activities was negatively impacted by a total outflow of 23,930,911.56 RMB, which was higher than 20,566,927.77 RMB in the same period last year[145]. Assets and Liabilities - The total assets increased by 15.06% to CNY 10,580,549,546.81 from CNY 9,195,870,028.85 at the end of the previous year[19]. - The company's total assets as of June 30, 2020, were CNY 3,823,304,298.41, slightly down from CNY 3,824,273,885.45 at the end of 2019[133]. - The total liabilities of the company were CNY 6,617,261,650.65, up from CNY 5,198,360,336.78, reflecting a rise of approximately 27.29%[129]. - The company's total liabilities were 3,694,665,000 at the end of the reporting period[168]. - The company's cash and cash equivalents decreased to CNY 2,072,292,866.32 from CNY 2,353,872,900.86, a decline of about 11.93%[127]. - The company's long-term receivables decreased by 13.74% to ¥1,425,449,679.46 from ¥1,652,581,742.31 year-on-year[59]. Profitability and Margins - The basic earnings per share decreased by 94.79% to CNY 0.005 from CNY 0.096 in the same period last year[20]. - The weighted average return on net assets decreased by 1.76 percentage points to 0.10% from 1.86% in the previous year[20]. - The gross profit margin for engineering design, surveying, consulting, and supervision increased to 28.70%, up from 27.84% in the previous year, while the gross profit margin for engineering general contracting decreased to 12.32%[41]. - The total operating costs amounted to RMB 498.74 million, with a significant decrease in costs for engineering general contracting due to changes in revenue recognition standards and project delays caused by the COVID-19 pandemic[41]. Risks and Challenges - The company faced risks related to project delays and revenue recognition changes due to the impact of the pandemic[21]. - The company faced operational risks due to the impact of the COVID-19 pandemic, affecting project timelines and supply chains[66]. - The company faces market risks due to project delays and suspensions caused by the COVID-19 pandemic, which may impact its competitive position in the engineering design industry[67]. - Financial risks are heightened as the company relies on EPC and PPP models, leading to significant accounts receivable and inventory, which may strain liquidity[68]. - The company is facing increased competition from large engineering design firms with high qualifications and strong performance records[67]. Strategic Initiatives and Future Outlook - The company aims to enhance its design consulting and engineering contracting capabilities while expanding into mechanical, municipal, and civil construction markets[29]. - The company is committed to high-quality development and innovation, focusing on technology and management model improvements to adapt to market changes[28]. - The company plans to expand its market presence and invest in new product development[86]. - The company is exploring potential mergers and acquisitions to strengthen its market position and expand its product offerings[152]. - The company plans to continue implementing targeted poverty alleviation projects in the second half of 2020, focusing on education and healthcare improvements[100]. Research and Development - The company completed 85 patent applications during the reporting period, including 2 invention patents, and received 18 awards for technological progress and excellent engineering design[35]. - The company is engaged in the development of new products and technologies, including the domestic production of binding systems, which is currently undergoing acceptance testing[39]. - The company has allocated approximately $1.93 million for special reserves, indicating a strategic approach to risk management[157]. - The company aims to enhance its technological capabilities through ongoing research and development initiatives[152]. Related Party Transactions - The company has engaged in related party transactions, including purchasing engineering services from its subsidiaries, with transaction amounts such as RMB 6,541,868.31 for engineering fees[78]. - The company has adhered to market pricing principles for related party transactions, ensuring compliance with regulations[78]. - The total amount of related party transactions reported is consistent with market prices, with no significant deviations noted[78]. Environmental and Social Responsibility - The company actively participated in poverty alleviation efforts, purchasing agricultural products worth RMB 127,100 for support[97]. - The company has established environmental protection measures, ensuring no exceedance of pollution limits during the reporting period[101]. - The company transferred and disposed of 525.12 tons of hazardous waste through qualified units during the reporting period[104]. - The company’s subsidiaries have maintained compliance with environmental standards, with no reported exceedances in emissions[102].

[Definitions](index=4&type=section&id=第一节%20释义) This section provides definitions for key professional terms and company abbreviations used throughout the report - This chapter defines key professional terms and company abbreviations, including CSSC Group, CSSC Ninth Design and Research Institute, PPP, and EPC, to enhance report comprehension[9](index=9&type=chunk) [Company Profile and Key Financial Indicators](index=4&type=section&id=第二节%20公司简介和主要财务指标) This section presents the company's fundamental information and a summary of its financial performance over the past three years [Company Information and Contact Details](index=4&type=section&id=2.1%20公司信息与联系方式) This section provides the company's basic business information, stock profile, contact details, and information disclosure channels - The company's full name is CSSC Technology Co., Ltd., with stock code **600072**, listed on the Shanghai Stock Exchange[10](index=10&type=chunk)[14](index=14&type=chunk) - The company's domestic accounting firm is Tianjian Certified Public Accountants (Special General Partnership)[15](index=15&type=chunk) [Key Accounting Data and Financial Indicators for the Past Three Years](index=5&type=section&id=2.2%20近三年主要会计数据和财务指标) In 2019, the company achieved operating revenue of 3.328 billion yuan, a year-on-year increase of 1.96%, with net profit attributable to shareholders significantly growing by 110.54% to 137.75 million yuan, primarily due to asset disposal gains, and net cash flow from operating activities turning positive at 256.06 million yuan Main Accounting Data | Main Accounting Data | 2019 (Yuan) | 2018 (Yuan) | YoY Change (%) | 2017 (Yuan) | | :--- | :--- | :--- | :--- | :--- | | Operating Revenue | 3,328,387,821.20 | 3,264,373,125.15 | 1.96 | 4,263,628,598.18 | | Net Profit Attributable to Shareholders of the Listed Company | 137,750,838.39 | 65,427,430.33 | 110.54 | 30,419,191.59 | | Net Profit Attributable to Shareholders of the Listed Company After Deducting Non-recurring Gains and Losses | -74,182,215.06 | -78,412,167.69 | Not Applicable | 7,702,375.42 | | Net Cash Flow from Operating Activities | 256,063,314.56 | -333,901,731.36 | Not Applicable | -1,054,616,839.10 | | Net Assets Attributable to Shareholders of the Listed Company | 3,882,673,958.99 | 3,718,262,301.58 | 4.42 | 3,653,201,662.71 | | Total Assets | 9,195,870,028.85 | 10,527,625,393.33 | -12.65 | 10,945,048,146.16 | Key Financial Indicators | Key Financial Indicators | 2019 | 2018 | YoY Change (%) | 2017 | | :--- | :--- | :--- | :--- | :--- | | Basic Earnings Per Share (yuan/share) | 0.187 | 0.089 | 110.11 | 0.041 | | Weighted Average Return on Net Assets (%) | 3.62 | 1.78 | Increased by 1.84 percentage points | 0.84 | - Significant changes in financial indicators are attributed to: **Net profit significantly increased** due to substantial asset disposal gains from the transfer of Changxing Island land and 50% equity in Yangzhou Sanwan Investment Development Co., Ltd[19](index=19&type=chunk) **Total assets decreased** following the deconsolidation of Yangzhou Sanwan after the equity transfer[19](index=19&type=chunk) **Net operating cash flow turned positive** primarily due to increased collections from CSSC Ninth Design and Research Institute's general contracting business[19](index=19&type=chunk) [Non-recurring Gains and Losses Items and Amounts](index=7&type=section&id=2.3%20非经常性损益项目和金额) In 2019, the company's total non-recurring gains and losses amounted to 211.93 million yuan, constituting a major portion of the net profit for the year, with non-current asset disposal gains and losses reaching 232.80 million yuan, primarily from the transfer of subsidiary equity and land assets Non-recurring Gains and Losses Items and Amounts | Non-recurring Gains and Losses Item | 2019 Amount (Yuan) | 2018 Amount (Yuan) | 2017 Amount (Yuan) | | :--- | :--- | :--- | :--- | | Non-current Asset Disposal Gains and Losses | 232,799,047.26 | 146,810,093.43 | -2,906,826.56 | | Government Subsidies Included in Current Profit/Loss | 9,425,414.29 | 14,642,070.29 | 22,389,132.59 | | Other Non-operating Income and Expenses | -3,433,175.63 | 5,141,511.04 | 1,875,585.09 | | **Total** | **211,933,053.45** | **143,839,598.02** | **22,716,816.17** | - Non-current asset disposal gains primarily stemmed from the transfer of **50% equity in Yangzhou Sanwan Company** by subsidiary CSSC Ninth Design and Research Institute and the disposal of **Changxing Island land and structures** by the company's headquarters[22](index=22&type=chunk) [Company Business Overview](index=8&type=section&id=第三节%20公司业务概要) This section outlines the company's core businesses, operating model, and relevant industry conditions, highlighting its strategic focus and competitive advantages [Main Business, Operating Model, and Industry Conditions](index=8&type=section&id=3.1%20主要业务%E3%80%81经营模式及行业情况) The company's core business, primarily through CSSC Ninth Design and Research Institute, encompasses engineering design, general contracting, and land development, with a strategic focus on marine-related projects amidst a slowing construction sector and challenging shipbuilding industry - The company's core business is primarily conducted by its wholly-owned subsidiary, **CSSC Ninth Design and Research Institute**, covering engineering design, survey, consulting, supervision, general contracting, and land development services[25](index=25&type=chunk) - CSSC Ninth Design and Research Institute is implementing a **"3+2" strategic layout**, expanding from traditional design consulting, general contracting, and urbanization construction to include technology industrialization and smart factory digital platform construction[26](index=26&type=chunk) - Industry analysis indicates a **slowdown in construction output growth** and a **severe decline in new vessel demand** for the shipbuilding industry in 2019, impacted by global economic conditions[28](index=28&type=chunk) [Explanation of Major Changes in Main Assets](index=9&type=section&id=3.2%20主要资产重大变化说明) During the reporting period, the company undertook two significant asset sales, including the transfer of 50% equity of Yangzhou Sanwan Investment Development Co., Ltd. for 456 million yuan and the sale of Changxing Island land use rights for approximately 118 million yuan - The company successfully transferred **50% equity in Yangzhou Sanwan Investment Development Co., Ltd.** for **456 million yuan** through public listing[30](index=30&type=chunk) - The company transferred state-owned construction land use rights on **Changxing Island** to related party Jiangnan Heavy Industry Co., Ltd. for approximately **118 million yuan** via a non-public agreement[30](index=30&type=chunk) [Analysis of Core Competitiveness](index=10&type=section&id=3.3%20核心竞争力分析) The company's core competitiveness primarily resides in its wholly-owned subsidiary CSSC Ninth Design and Research Institute, which holds a leading position in marine engineering planning and design, possessing top-tier qualifications across 21 industries, supported by 219 effective patents - CSSC Ninth Design and Research Institute holds comprehensive **Grade A engineering design and survey qualifications**, enabling it to provide construction engineering services across **21 industries**, including overseas general contracting and Level 1 confidentiality[32](index=32&type=chunk)[34](index=34&type=chunk)[36](index=36&type=chunk) - The company's comprehensive business layout spans **design consulting, general contracting, investment and financing, technology industrialization, and smart factory digital platform innovation**, establishing a complete industrial chain service capability[31](index=31&type=chunk)[33](index=33&type=chunk) - Strong technological innovation is evidenced by **219 effective patents** (including 68 invention patents), establishing core advantages in smart shipyards, luxury cruise interiors, and energy-saving environmental protection, supporting business expansion[33](index=33&type=chunk) [Discussion and Analysis of Operations](index=12&type=section&id=第四节%20经营情况讨论与分析) This section provides a detailed discussion and analysis of the company's operating performance, key financial metrics, investment activities, and future development plans [Discussion and Analysis of Operations](index=12&type=section&id=4.1%20经营情况讨论与分析) In 2019, the company's operating revenue grew by 1.96% to 3.328 billion yuan, driven by increases in engineering design and general contracting, while land development revenue declined, and subsidiaries advanced strategic projects and market positions - Company operating revenue showed stable growth, primarily driven by **engineering design, consulting, and supervision services (+24.16%)** and **engineering general contracting services (+5.94%)**[37](index=37&type=chunk) - Land development business revenue significantly declined due to **policy and market shifts**, leading to changes in development models, with the company mitigating impact by transferring related project equity[37](index=37&type=chunk) - Subsidiaries CSSC Ninth Design and Research Institute and CSSC Huahai achieved new progress, with the former securing multiple design and general contracting projects and the latter signing several marine channel equipment contracts[37](index=37&type=chunk)[38](index=38&type=chunk) [Key Operating Performance During the Reporting Period](index=13&type=section&id=4.2%20报告期内主要经营情况) In 2019, the company achieved operating revenue of 3.328 billion yuan, a 1.96% year-on-year increase, and net profit attributable to parent company shareholders of 137.75 million yuan, up 110.54%, with profit growth mainly driven by approximately 231 million yuan in non-recurring gains and losses from asset disposals, and engineering general contracting remaining the primary revenue source Business Segments Revenue Breakdown | Business Segment | Operating Revenue (Yuan) | Proportion of Total Revenue (%) | | :--- | :--- | :--- | | Engineering Design, Survey, Consulting, and Supervision | 523,786,142.69 | 15.7 | | Engineering General Contracting | 2,706,993,686.19 | 81.4 | | Land Development Services | 14,215,236.29 | 0.4 | | Marine Equipment | 55,529,062.76 | 1.7 | - Net profit attributable to parent company shareholders significantly increased, primarily driven by **non-recurring gains and losses** totaling approximately **231 million yuan**, from the transfer of Changxing Island land and 50% equity in Yangzhou Sanwan[38](index=38&type=chunk) - Non-recurring net profit loss narrowed, primarily due to subsidiary CSSC Huahai's **strategic contraction of its loss-making marine equipment business**[38](index=38&type=chunk) [Analysis of Main Business](index=13&type=section&id=4.2.1%20主营业务分析) In 2019, engineering general contracting was the largest revenue component with a low gross margin, while engineering design and consulting revenue grew but with declining gross margin; land development and marine equipment revenues significantly decreased, though marine equipment's gross margin improved, and financial expenses notably declined due to reduced interest, with R&D investment increasing to 110 million yuan Key Financial Data Comparison | Item | Current Period (Yuan) | Prior Period (Yuan) | Change (%) | | :--- | :--- | :--- | :--- | | Operating Revenue | 3,328,387,821.20 | 3,264,373,125.15 | 1.96 | | Operating Cost | 3,048,016,914.76 | 2,935,504,343.97 | 3.83 | | Financial Expenses | 54,382,707.99 | 173,524,118.88 | -68.66 | | Net Cash Flow from Operating Activities | 256,063,314.56 | -333,901,731.36 | Not Applicable | Revenue, Cost, and Gross Margin by Product | By Product | Operating Revenue (Yuan) | Operating Cost (Yuan) | Gross Margin (%) | YoY Change in Operating Revenue (%) | | :--- | :--- | :--- | :--- | :--- | | Engineering Design, Survey, Consulting, and Supervision | 523,786,142.69 | 431,527,182.11 | 17.61 | 24.16 | | Engineering General Contracting | 2,706,993,686.19 | 2,546,128,149.29 | 5.94 | 3.86 | | Land Development Services | 14,215,236.29 | 0 | 100.00 | -85.98 | | Marine Equipment | 55,529,062.76 | 47,479,230.91 | 14.50 | -49.81 | - Sales to the **top five customers** constituted **53.73%** of total annual sales, with **related party sales at 19.63%**, indicating a degree of reliance on key clients and affiliates[47](index=47&type=chunk) R&D Investment | R&D Investment | Amount (Yuan) | | :--- | :--- | | Current Period Capitalized R&D Investment | 109,713,680.59 | | Total R&D Investment as % of Operating Revenue | 3.30% | | Number of Company R&D Personnel | 270 | | Proportion of R&D Personnel to Total Company Personnel (%) | 17.40% | [Analysis of Assets and Liabilities](index=17&type=section&id=4.2.2%20资产%E3%80%81负债情况分析) As of the end of 2019, the company's total assets decreased by 12.65% to 9.196 billion yuan, with significant changes in asset structure including a substantial increase in cash and cash equivalents and a decrease in prepayments, inventories, and long-term receivables due to asset disposals, while the liability structure saw a reduction in short-term liabilities and an increase in long-term borrowings, reflecting debt optimization Asset Items Changes | Asset Item | Period-end (Yuan) | Period-beginning (Yuan) | Change (%) | Main Reason | | :--- | :--- | :--- | :--- | :--- | | Cash and Cash Equivalents | 2,354,000,000 | 1,287,000,000 | 82.87 | Increased collection of project payments | | Prepayments | 211,000,000 | 1,065,000,000 | -80.21 | Disposal of Yangzhou Sanwan equity | | Inventories | 734,000,000 | 1,293,000,000 | -43.19 | Disposal of Yangzhou Sanwan equity | | Long-term Receivables | 1,644,000,000 | 2,346,000,000 | -29.94 | Disposal of Yangzhou Sanwan equity | Liability Items Changes | Liability Item | Period-end (Yuan) | Period-beginning (Yuan) | Change (%) | Main Reason | | :--- | :--- | :--- | :--- | :--- | | Notes Payable | 11,000,000 | 218,000,000 | -94.89 | Decrease in notes payable | | Accounts Payable | 1,248,000,000 | 831,000,000 | 50.15 | Increase in project payables | | Non-current Liabilities Due Within One Year | 201,000,000 | 950,000,000 | -78.83 | Decrease in long-term borrowings due within 1 year | | Long-term Borrowings | 2,113,000,000 | 1,260,000,000 | 67.70 | Increase in long-term borrowings | [Analysis of Investment Status and Major Asset Sales](index=23&type=section&id=4.2.3%20投资状况分析与重大资产出售) During the reporting period, the company's investment activities included a planned but terminated major asset restructuring to acquire Haiying Group, and two successful major asset sales: the transfer of 50% equity in Yangzhou Sanwan for 456 million yuan and Changxing Island land for approximately 118 million yuan, which generated significant non-recurring gains - The company's planned **major asset restructuring** to acquire **100% equity of Haiying Enterprise Group Co., Ltd.** by issuing shares was **not approved by the CSRC** and terminated in December 2019[68](index=68&type=chunk) - The company successfully completed two major asset sales: **transferring 50% equity in Yangzhou Sanwan for 456 million yuan** and **transferring Changxing Island land to a related party for approximately 118 million yuan**[70](index=70&type=chunk)[71](index=71&type=chunk) [Analysis of Major Holding and Associate Companies](index=25&type=section&id=4.2.4%20主要控股参股公司分析) The company's primary profit contributor is its wholly-owned subsidiary CSSC Ninth Design and Research Institute, which reported a net profit of 105 million yuan in 2019, while another wholly-owned subsidiary, CSSC Huahai Marine Equipment Co., Ltd., incurred a net loss of 41.15 million yuan, and its associate companies, Shanghai Jiangnan Shipbuilding Pipe Industry Co., Ltd. and Guangzhou Longxue Pipe Industry Co., Ltd., were profitable Major Holding and Associate Companies Performance | Investee Name | Shareholding (%) | 2019 Operating Revenue (Ten Thousand Yuan) | 2019 Net Profit (Ten Thousand Yuan) | Main Business | | :--- | :--- | :--- | :--- | :--- | | CSSC Ninth Design and Research Institute Co., Ltd. | 100.00 | 325,852 | 10,500 | Engineering survey, design, consulting, general contracting | | CSSC Huahai Marine Equipment Co., Ltd. | 100.00 | 4,629 | -4,115 | Marine cargo access equipment, etc | | Shanghai Jiangnan Shipbuilding Pipe Industry Co., Ltd. | 45.00 | 21,182 | 39 | Metal pipe fabrication and surface treatment | | Guangzhou Longxue Pipe Industry Co., Ltd. | 28.57 | 17,817 | 247 | Metal pipe fabrication design, manufacturing, etc | [Discussion and Analysis of Company's Future Development](index=26&type=section&id=4.3%20公司未来发展的讨论与分析) Looking ahead, the company anticipates the global shipbuilding industry to remain at a low point in 2020, but infrastructure investment is expected to rebound, offering opportunities for the construction sector, with the company focusing on improving development quality and strengthening market value management, while addressing key risks including policy, cash flow, human resources, production management, and legal disputes - Industry trends indicate limited global new vessel transactions in 2020, but a potential **rebound in domestic infrastructure investment**, with urban clusters and new infrastructure offering opportunities for the construction sector[74](index=74&type=chunk) - The **2020 operating plan** projects approximately **1.75 billion yuan in operating revenue** (adjusted for accounting standard changes), focusing on enhancing development quality, strengthening accounts receivable collection, improving market value management, and subsidiaries expanding core businesses and markets[76](index=76&type=chunk) - Key risks include **policy risks** from strict PPP project controls, **cash flow risks** due to long government project collection cycles, **human resources risks** from talent loss, **production management risks** in large-scale projects, and potential **legal dispute risks** from complex project relationships[77](index=77&type=chunk)[78](index=78&type=chunk) [Significant Matters](index=28&type=section&id=第五节%20重要事项) This section details the company's key events during the reporting period, including profit distribution, changes in accounting policies, major litigation, and significant related party transactions [Profit Distribution and Dividends](index=28&type=section&id=5.1%20利润分配与分红) The company's board of directors proposed a 2019 cash dividend plan to distribute 0.57 yuan (tax inclusive) per 10 shares based on the total share capital, totaling approximately 41.97 million yuan in cash, representing 30.47% of the net profit attributable to parent company shareholders for the year, subject to shareholder approval Dividend Distribution Plan | Dividend Year | Dividend per 10 Shares (Yuan, Tax Incl.) | Cash Dividend Amount (Yuan, Tax Incl.) | Ratio to Net Profit Attributable to Ordinary Shareholders (%) | | :--- | :--- | :--- | :--- | | 2019 | 0.57 | 41,966,243.33 | 30.47 | | 2018 | 0.2 | 14,724,997.66 | 22.50 | | 2017 | 0 | 0 | 0 | [Changes in Accounting Policies and Estimates](index=30&type=section&id=5.2%20会计政策%E3%80%81会计估计变更) During the reporting period, the company implemented significant accounting policy changes as required by the Ministry of Finance, including adopting new financial statement formats with retrospective adjustments and transitioning to the "expected credit loss model" for financial asset impairment measurement from January 1, 2019, also with retrospective adjustments to opening balances - The company adopted the **2019 revised financial statement format** by the Ministry of Finance, retrospectively adjusting 2018 statement items[87](index=87&type=chunk)[88](index=88&type=chunk) - Effective January 1, 2019, the company adopted **new financial instrument standards (CAS 22, 23, 24, 37)**, transitioning from an "incurred loss model" to an **"expected credit loss model"** for financial asset impairment measurement[88](index=88&type=chunk) - Implementation of new financial instrument standards led to adjustments in the January 1, 2019 financial statements, with **retained earnings reduced by 19.21 million yuan** and **other comprehensive income increased by 49.90 million yuan**[90](index=90&type=chunk) [Major Litigation and Arbitration Matters](index=35&type=section&id=5.3%20重大诉讼%E3%80%81仲裁事项) During the reporting period, the company was involved in two major lawsuits: an engineering contract dispute with Beijing Zhongguancun for 90.50 million yuan, where the company won partial compensation in the first instance but faces an appeal, and a construction contract dispute where subsidiary CSSC Ninth Design and Research Institute was sued by Shandong Construction Group for 95.53 million yuan, with the case awaiting trial - The company is involved in a **90.50 million yuan engineering fee dispute** with Beijing Zhongguancun for the Xinjiang Cultural and Sports Center project; while the first instance awarded **41.32 million yuan plus interest** to the company, the opposing party has appealed[101](index=101&type=chunk)[102](index=102&type=chunk) - Subsidiary CSSC Ninth Design and Research Institute faces a lawsuit from Shandong Construction Group over a construction contract dispute, with claims for engineering fees and interest totaling **95.53 million yuan** for the Weifang Changle Jiulong Lake Community Resettlement Housing project[102](index=102&type=chunk) [Major Related Party Transactions](index=37&type=section&id=5.4%20重大关联交易) The company engaged in significant related party transactions during the period, including the transfer of Changxing Island land, a planned but terminated asset restructuring with CSSC Group, and extensive daily operational transactions for goods and services, particularly the provision of labor to related parties - The company's non-public agreement to transfer **Changxing Island land** to related party Jiangnan Heavy Industry Co., Ltd. constituted a **major asset sale related party transaction**[114](index=114&type=chunk) - The company engaged in extensive daily operating related party transactions with **CSSC Group and its subsidiaries**, including procurement, sales, and labor provision, with total transaction amounts **exceeding 1 billion yuan**[113](index=113&type=chunk) - Significant **creditor-debtor relationships** existed with related parties from normal operations, with **839 million yuan** in funds provided to and **350 million yuan** received from related parties at period-end[125](index=125&type=chunk) [Changes in Ordinary Shares and Shareholder Information](index=63&type=section&id=第六节%20普通股股份变动及股东情况) This section details the company's share capital stability, the lifting of restricted shares held by the controlling shareholder, and the composition of its major shareholders [Share Capital Changes and Shareholder Information](index=63&type=section&id=6.1%20股本变动与股东情况) During the reporting period, the company's total share capital remained unchanged, while the controlling shareholder CSSC Group's 135.47 million restricted shares were lifted on November 4, 2019, with the company having 110,129 shareholders at period-end, and its top two shareholders being state-owned legal entities with related party relationships - The company's **total ordinary shares and share capital structure remained unchanged** during the reporting period[148](index=148&type=chunk) - Controlling shareholder CSSC Group's **135,471,113 restricted shares** were **lifted on November 4, 2019**[150](index=150&type=chunk) Top Shareholders | Shareholder Name | Shares Held at Period-end | Proportion (%) | Shareholder Nature | | :--- | :--- | :--- | :--- | | China State Shipbuilding Corporation Limited | 275,204,726 | 37.38 | State-owned Legal Entity | | Jiangnan Shipyard (Group) Co., Ltd. | 28,727,521 | 3.90 | State-owned Legal Entity | [Controlling Shareholder and Actual Controller Information](index=65&type=section&id=6.2%20控股股东及实际控制人情况) The company's controlling shareholder is China State Shipbuilding Corporation Limited (CSSC Group), which directly and indirectly controls 41.28% of voting rights, and its actual controller is the State-owned Assets Supervision and Administration Commission of the State Council - The controlling shareholder, **China State Shipbuilding Corporation Limited (CSSC Group)**, directly and indirectly controls **41.28% of the company's voting rights**[504](index=504&type=chunk) - CSSC Group primarily focuses on R&D, design, production, and investment management across **weapons equipment, shipbuilding, and marine engineering sectors**[157](index=157&type=chunk) [Directors, Supervisors, Senior Management, and Employees](index=68&type=section&id=第八节%20董事%E3%80%81监事%E3%80%81高级管理人员和员工情况) This section provides an overview of the company's board of directors, supervisors, senior management, and employee structure, including their remuneration and professional composition [Holdings and Remuneration of Directors, Supervisors, and Senior Management](index=68&type=section&id=8.1%20董监高持股与报酬) During the reporting period, all current and former directors, supervisors, and senior management held no company shares, with their total pre-tax remuneration from the company amounting to 8.3638 million yuan, and some not receiving remuneration due to their positions in related parties - All directors, supervisors, and senior management held **zero shares** at both the beginning and end of the reporting period[162](index=162&type=chunk) Remuneration of Directors, Supervisors, and Senior Management | Name | Position | Total Pre-tax Remuneration from Company (Ten Thousand Yuan) | Receives Remuneration from Related Party | | :--- | :--- | :--- | :--- | | Zhou Hui | Chairman, Party Secretary, General Manager | 134.27 | No | | Gao Kang | Director | 140.71 | No | | Wang Jun | Director | / | Yes | | Jin Yi | Chairman of Supervisory Board, Secretary of Discipline Inspection Commission, Chairman of Labor Union | 95.26 | No | | Shen Liang | Chief Accountant | 80.67 | No | | **Total** | **/** | **836.38** | **/** | [Employee Information](index=73&type=section&id=8.2%20员工情况) As of the end of the reporting period, the company and its main subsidiaries had a total of 1,552 employees, with technicians comprising 71.4% and over 80% holding a bachelor's degree or higher, reflecting the company's technology-intensive nature, supported by a performance-linked remuneration policy and continuous training programs Employee Professional Structure | Professional Category | Number of Employees | Proportion (%) | | :--- | :--- | :--- | | Technical Personnel | 1,108 | 71.4% | | Production Personnel | 157 | 10.1% | | Administrative Personnel | 194 | 12.5% | | Financial Personnel | 44 | 2.8% | | Sales Personnel | 49 | 3.2% | | **Total** | **1,552** | **100%** | Employee Education Level | Education Level Category | Number of Employees | Proportion (%) | | :--- | :--- | :--- | | Postgraduate | 315 | 20.3% | | Bachelor's Degree | 928 | 59.8% | | Associate Degree | 212 | 13.7% | | Technical Secondary School and Below | 97 | 6.2% | | **Total** | **1,552** | **100%** | - The company's **remuneration policy is linked to profit assessment**, complemented by multi-level training programs for employees, including directors, supervisors, senior management, and professional technical staff[171](index=171&type=chunk)[172](index=172&type=chunk) [Corporate Governance](index=74&type=section&id=第九节%20公司治理) This section details the company's adherence to corporate governance principles, the operational effectiveness of its governance bodies, and its internal control framework [Overview of Corporate Governance](index=74&type=section&id=9.1%20公司治理概况) The company maintained a sound corporate governance structure in 2019, adhering to legal requirements with clear responsibilities across its shareholder meeting, board, supervisory board, and management, and its internal controls were deemed effective - The company's **corporate governance structure is sound**, complying with the Company Law and CSRC regulations, with no significant discrepancies[174](index=174&type=chunk) - A total of **12 board meetings** were held during the reporting period, comprising 3 in-person and 9 via communication[178](index=178&type=chunk) - The board's **audit, nomination, and remuneration and appraisal committees** all approved relevant proposals and provided professional opinions[180](index=180&type=chunk) - The company's internal control self-assessment and audit reports concluded that **effective internal controls over financial reporting** were maintained in all material aspects, with no significant deficiencies identified[183](index=183&type=chunk)[184](index=184&type=chunk) [Financial Report](index=77&type=section&id=第十一节%20财务报告) This section encompasses the independent audit report, the company's consolidated financial statements, and detailed notes providing further context and breakdowns of financial information [Audit Report](index=77&type=section&id=11.1%20审计报告) Tianjian Certified Public Accountants issued a standard unqualified audit opinion on the company's 2019 financial statements, confirming their fair presentation and highlighting accounts receivable impairment and revenue recognition as key audit matters - Tianjian Certified Public Accountants issued a **standard unqualified audit opinion**[187](index=187&type=chunk) - Key audit matter one: **Impairment of accounts receivable**, identified due to its significant amount (**1.133 billion yuan book balance**) and the substantial management judgment involved in impairment assessment[189](index=189&type=chunk)[190](index=190&type=chunk) - Key audit matter two: **Revenue recognition** for engineering general contracting, which constitutes **81.33% of total revenue** and uses the percentage-of-completion method, involves significant management judgment and inherent risks as a key performance indicator[191](index=191&type=chunk) [Consolidated Financial Statements](index=82&type=section&id=11.2%20合并财务报表) This section presents the company's 2019 consolidated balance sheet, income statement, cash flow statement, and statement of changes in owners' equity, providing a comprehensive overview of its financial position, operating results, and cash flows Consolidated Balance Sheet Highlights | Consolidated Balance Sheet Item | 2019 Year-end (Yuan) | 2018 Year-end (Yuan) | | :--- | :--- | :--- | | Total Assets | 9,195,870,028.85 | 10,527,625,393.33 | | Total Liabilities | 5,198,360,336.78 | 6,313,057,189.74 | | Equity Attributable to Parent Company Owners | 3,882,673,958.99 | 3,718,262,301.58 | Consolidated Income Statement Highlights | Consolidated Income Statement Item | 2019 Annual (Yuan) | 2018 Annual (Yuan) | | :--- | :--- | :--- | | Total Operating Revenue | 3,328,387,821.20 | 3,264,373,125.15 | | Total Profit | 118,935,327.91 | 50,305,672.49 | | Net Profit Attributable to Parent Company Shareholders | 137,750,838.39 | 65,427,430.33 | Consolidated Cash Flow Statement Highlights | Consolidated Cash Flow Statement Item | 2019 Annual (Yuan) | 2018 Annual (Yuan) | | :--- | :--- | :--- | | Net Cash Flow from Operating Activities | 256,063,314.56 | -333,901,731.36 | | Net Cash Flow from Investing Activities | 100,671,364.73 | 289,584,630.88 | | Net Cash Flow from Financing Activities | -131,272,192.30 | -256,593,895.32 | | Net Increase in Cash and Cash Equivalents | 226,313,819.74 | -299,656,694.09 | [Notes to Financial Statements](index=106&type=section&id=11.3%20财务报表附注) The notes to financial statements provide detailed information on the company's basic situation, basis of financial statement preparation, significant accounting policies and estimates, and detailed explanations for major items in the consolidated financial statements, covering key accounting policies, related party transactions, contingent liabilities, and subsequent events - The company implemented **new financial instrument standards** and **revised financial statement formats** from January 1, 2019, with related impacts retrospectively adjusted in opening balances[290](index=290&type=chunk)[291](index=291&type=chunk)[292](index=292&type=chunk) - Revenue recognition policy: **Engineering general contracting revenue** is recognized using the **percentage-of-completion method**, while **land development services revenue** is recognized based on client-confirmed project volume[280](index=280&type=chunk)[281](index=281&type=chunk) - The **scope of consolidation changed** due to the disposal of **50% equity in subsidiary Yangzhou Sanwan Company**, leading to its deconsolidation, and the deregistration of subsidiary Jiuyin Investment Company[471](index=471&type=chunk)[472](index=472&type=chunk) [Reference Documents](index=253&type=section&id=第十二节%20备查文件目录) This section lists the reference documents available for inspection, including the original annual report signed by the legal representative, audited financial statements, original audit report, and originals of all publicly disclosed documents from the reporting period - This section lists available reference documents, including the **original annual report signed by the legal representative**, **audited financial statements**, **original audit report**, and **originals of all publicly disclosed documents** from the reporting period[584](index=584&type=chunk)

[Definitions](index=5&type=section&id=Item%20I%20Definitions) This section provides a glossary of terms used throughout the report [Company Profile and Key Financial Indicators](index=5&type=section&id=Item%20II%20Company%20Profile%20and%20Key%20Financial%20Indicators) This section outlines the company's fundamental information and presents its key financial performance metrics over recent periods [Company Information](index=5&type=section&id=I.%20Company%20Information) This section provides basic corporate registration details, contact information, stock listing data, and disclosure channels for CSSC Science & Technology Co., Ltd | Item | Information | | :--- | :--- | | **Company Chinese Name** | 中船科技股份有限公司 | | **Company Chinese Abbreviation** | 中船科技 | | **Stock Abbreviation** | 中船科技 | | **Stock Code** | 600072 | | **Stock Exchange** | Shanghai Stock Exchange | | **Legal Representative** | Zhou Hui | [Key Accounting Data and Financial Indicators](index=6&type=section&id=VII.%20Key%20Accounting%20Data%20and%20Financial%20Indicators%20for%20the%20Past%20Three%20Years) In 2018, the company's operating revenue decreased by 23.44% to RMB 3.264 billion, primarily due to reduced land consolidation business and the parent company ceasing original marine equipment operations, while net profit attributable to shareholders increased by 115.09% to RMB 65.43 million, despite a significant decline in non-recurring net profit due to increased R&D and reduced investment income from associates and joint ventures Key Accounting Data for the Past Three Years (Unit: RMB) | Key Accounting Data | 2018 | 2017 | Change YoY (%) | 2016 | | :--- | :--- | :--- | :--- | :--- | | **Operating Revenue** | 3,264,373,125.15 | 4,263,628,598.18 | -23.44 | 5,304,151,934.91 | | **Net Profit Attributable to Shareholders of Listed Company** | 65,427,430.33 | 30,419,191.59 | 115.09 | -42,929,500.08 | | **Net Profit Attributable to Shareholders of Listed Company (Excluding Non-Recurring Items)** | -78,412,167.69 | 7,702,375.42 | Not Applicable | -141,964,704.34 | | **Net Cash Flow from Operating Activities** | -333,901,731.36 | -1,054,616,839.10 | Not Applicable | -702,114,914.05 | | **Net Assets Attributable to Shareholders of Listed Company** | 3,718,262,301.58 | 3,653,201,662.71 | 1.78 | 3,624,500,142.69 | | **Total Assets** | 10,527,625,393.33 | 10,945,048,146.16 | -3.81 | 11,177,662,074.36 | Key Financial Indicators for the Past Three Years | Key Financial Indicators | 2018 | 2017 | Change YoY (%) | 2016 | | :--- | :--- | :--- | :--- | :--- | | **Basic Earnings Per Share (RMB/share)** | 0.089 | 0.041 | 117.07 | -0.080 | | **Weighted Average Return on Net Assets (%)** | 1.78 | 0.84 | Increased by 0.94 percentage points | -1.52 | - The decrease in operating revenue was primarily due to a **RMB 642 million** reduction in land consolidation business income from subsidiary CSSC No. 9 Institute, and a **RMB 461 million** decrease in marine equipment business income as the parent company ceased original operations[19](index=19&type=chunk) [Quarterly Key Financial Data](index=8&type=section&id=IX.%202018%20Quarterly%20Key%20Financial%20Data) The company's 2018 quarterly performance showed significant fluctuations, with losses in Q2 and Q3, but a notable profit of RMB 62.79 million in Q4, reversing previous losses, though Q4 non-recurring net profit remained negative, indicating reliance on non-operating income 2018 Quarterly Key Financial Data (Unit: RMB) | Indicator | Q1 | Q2 | Q3 | Q4 | | :--- | :--- | :--- | :--- | :--- | | **Operating Revenue** | 579,830,015.16 | 866,761,893.34 | 809,611,973.38 | 1,008,169,243.27 | | **Net Profit Attributable to Shareholders of Listed Company** | 11,064,352.38 | -2,878,222.57 | -5,552,182.33 | 62,793,482.85 | | **Net Profit Attributable to Shareholders of Listed Company (Excluding Non-Recurring Items)** | 4,429,294.55 | -4,340,782.73 | -11,557,707.84 | -66,942,971.67 | | **Net Cash Flow from Operating Activities** | -349,663,071.71 | -213,161,647.16 | -213,178,164.79 | 442,101,152.30 | [Non-Recurring Gains and Losses Items and Amounts](index=8&type=section&id=X.%20Non-Recurring%20Gains%20and%20Losses%20Items%20and%20Amounts) In 2018, the company's total non-recurring gains and losses amounted to RMB 144 million, significantly impacting current profit, primarily driven by RMB 147 million from 'disposal gains/losses on non-current assets' due to a subsidiary's 21% equity transfer of Xuzhou Yangguang Company Non-Recurring Gains and Losses Items (Unit: RMB) | Non-Recurring Gains and Losses Item | 2018 Amount | 2017 Amount | 2016 Amount | | :--- | :--- | :--- | :--- | | **Disposal Gains/Losses on Non-Current Assets** | 146,810,093.43 | -2,906,826.56 | 24,311,559.19 | | **Government Grants Recognized in Current Profit/Loss** | 14,642,070.29 | 22,389,132.59 | 17,317,674.60 | | **Total** | **143,839,598.02** | **22,716,816.17** | **99,035,204.26** | [Business Overview](index=9&type=section&id=Item%20III%20Business%20Overview) This section provides a comprehensive overview of the company's principal businesses, operational models, and the industry landscape in which it operates [Principal Businesses, Business Model, and Industry Overview](index=9&type=section&id=I.%20Description%20of%20Principal%20Businesses%2C%20Business%20Model%2C%20and%20Industry%20Overview%20During%20the%20Reporting%20Period) The company's core business primarily involves engineering design, survey, general contracting, and land consolidation services by its wholly-owned subsidiary CSSC No. 9 Institute, supplemented by marine equipment business from CSSC Huahai, while transitioning to a holding platform company leveraging capital markets for industrial layout amidst a growing construction sector but a challenging, adjusting shipbuilding market - The company's core business is undertaken by its wholly-owned subsidiary **CSSC No. 9 Institute**, covering engineering design, survey, consulting, supervision, general contracting, and land consolidation services[25](index=25&type=chunk) - **CSSC No. 9 Institute** has established a '3+2' strategic layout: strengthening design consulting, optimizing general contracting, stabilizing investment and financing as three core businesses, and expanding into technology industrialization and smart factory digital platform construction as two new businesses[25](index=25&type=chunk) - The company released its **2018-2025 Development Strategic Plan**, outlining a transformation into a holding platform company, driving industrial layout through capital markets, and achieving diversified development with military-civilian integration as the main theme[26](index=26&type=chunk) [Analysis of Core Competencies](index=10&type=section&id=III.%20Analysis%20of%20Core%20Competencies%20During%20the%20Reporting%20Period) The company's core competencies lie in its leading position in marine engineering design, with over 60 years of experience and planning/designing over 90% of domestic shipbuilding and repair enterprises, alongside national leadership in hydraulic and underground engineering and large non-standard equipment design, supported by comprehensive Class A and Class 1 industry qualifications and 201 valid patents - The company holds a **leading position in marine engineering design**, having planned and designed over **90% of domestic shipbuilding and repair enterprises**[29](index=29&type=chunk) - It possesses a **nationally leading advantage in hydraulic and underground engineering**, including dock and pier design[31](index=31&type=chunk) - The company and its subsidiaries hold **comprehensive top-tier industry qualifications**, including Class A comprehensive engineering design, Class A comprehensive engineering survey, and Class 1 general contracting[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk) - During the reporting period, the company held **201 valid patents** (**63 invention patents**), demonstrating technological advantages in areas such as luxury cruise interior outfitting and non-ship equipment development[33](index=33&type=chunk) [Management Discussion and Analysis](index=12&type=section&id=Item%20IV%20Management%20Discussion%20and%20Analysis) This section provides a detailed discussion and analysis of the company's operational performance, financial condition, and future outlook [Management Discussion and Analysis](index=12&type=section&id=I.%20Management%20Discussion%20and%20Analysis) In 2018, the company's operating revenue reached RMB 3.264 billion, a 23.44% year-on-year decrease, primarily due to a significant decline in land consolidation services from subsidiary CSSC No. 9 Institute due to business model changes and slow project execution, yet CSSC No. 9 Institute remained the core operating entity, contributing 95.89% of revenue and actively expanding domestic and international general contracting and design consulting projects, while the parent company largely completed the cleanup of legacy projects - The company's **2018 operating revenue** was **RMB 3.264 billion**, a **23.44% year-on-year decrease**, primarily due to a significant decline in land consolidation services[34](index=34&type=chunk) - Wholly-owned subsidiary **CSSC No. 9 Institute** is the core operating entity, achieving **RMB 3.13 billion in revenue in 2018**, accounting for **95.89% of the company's total revenue**[35](index=35&type=chunk) - **CSSC No. 9 Institute** successfully undertook several significant domestic and international projects, including the **Zhanjiang Port General Terminal EPC General Contracting** and **Cambodian Military Port Support Base Design Consulting**[35](index=35&type=chunk) [Key Operating Performance During the Reporting Period](index=13&type=section&id=II.%20Key%20Operating%20Performance%20During%20the%20Reporting%20Period) During the reporting period, the company achieved RMB 3.264 billion in operating revenue and RMB 65.4274 million in net profit attributable to shareholders, with profit growth primarily driven by RMB 138 million in investment income from a subsidiary's equity transfer, while engineering general contracting constituted the main revenue at RMB 2.606 billion, land consolidation services significantly shrank to RMB 101 million, and R&D investment continuously increased by 28.47% [Analysis of Principal Business](index=13&type=section&id=%28I%29%20Analysis%20of%20Principal%20Business) In 2018, the company's principal business revenue decreased by 23.44% year-on-year, with operating costs down by 23.31%, primarily dragged by significant declines of 86.37% and 80.64% in land consolidation services and marine equipment revenue respectively, while engineering general contracting grew by 5.62%, and increased management and R&D expenses by 15.28% and 28.47% respectively indicated higher investment in compensation and research Key Income Statement Item Changes | Item | Current Period (RMB) | Prior Period (RMB) | Change (%) | | :--- | :--- | :--- | :--- | | **Operating Revenue** | 3,264,373,125.15 | 4,263,628,598.18 | -23.44 | | **Operating Cost** | 2,935,504,343.97 | 3,827,601,639.85 | -23.31 | | **Administrative Expenses** | 181,082,757.34 | 157,080,002.48 | 15.28 | | **R&D Expenses** | 98,409,899.30 | 76,603,076.68 | 28.47 | Principal Business by Product (Unit: RMB) | By Product | Operating Revenue | Operating Cost | Gross Margin (%) | Operating Revenue Change YoY (%) | | :--- | :--- | :--- | :--- | :--- | | **Engineering Design, Survey, Consulting, and Supervision** | 421,861,823.53 | 312,473,282.68 | 25.93 | -0.27 | | **Engineering General Contracting** | 2,606,485,238.52 | 2,401,019,211.71 | 7.88 | 5.62 | | **Land Consolidation Services** | 101,400,451.63 | 52,485,000.00 | 48.24 | -86.37 | | **Marine Equipment** | 110,634,971.32 | 149,133,165.50 | -34.80 | -80.64 | - The year-on-year decrease in land consolidation service revenue was primarily due to changes in business model and delayed demolition, while the reduction in marine equipment revenue resulted from the parent company ceasing to undertake this business since 2017 after the 2016 reorganization[41](index=41&type=chunk) [R&D Investment](index=16&type=section&id=4.%20R%26D%20Investment) In 2018, the company's R&D investment was fully expensed, totaling RMB 98.41 million, a 28.47% increase year-on-year, representing 3.01% of operating revenue, with 259 R&D personnel accounting for 14.63% of the total workforce 2018 R&D Investment Overview | Indicator | Value | | :--- | :--- | | **Expensed R&D Investment (RMB)** | 98,409,899.30 | | **Total R&D Investment (RMB)** | 98,409,899.30 | | **R&D Investment as % of Operating Revenue** | 3.01 | | **Number of Company R&D Personnel (Persons)** | 259 | | **R&D Personnel as % of Total Company Staff** | 14.63 | [Cash Flow Analysis](index=17&type=section&id=5.%20Cash%20Flow) In 2018, the company's cash flow improved; net cash flow from operating activities, though still negative, significantly increased year-on-year due to higher collections from subsidiary contracting businesses, while net cash flow from investing activities turned positive due to reduced investment payments, and net cash flow from financing activities decreased year-on-year due to increased loan repayments - Net cash flow from operating activities increased year-on-year, primarily due to **increased collections from subsidiary CSSC No. 9 Institute's contracting business**[48](index=48&type=chunk) - Net cash flow from investing activities increased year-on-year, primarily due to **reduced cash payments for investments by subsidiary CSSC No. 9 Institute** during the period[48](index=48&type=chunk) - Net cash flow from financing activities decreased year-on-year, primarily due to **increased loan repayments by subsidiary CSSC No. 9 Institute** during the period[48](index=48&type=chunk) [Explanation of Significant Profit Changes from Non-Principal Business](index=17&type=section&id=%28II%29%20Explanation%20of%20Significant%20Profit%20Changes%20from%20Non-Principal%20Business) The significant change in the company's 2018 profit was primarily driven by non-principal business activities, specifically the RMB 138 million investment income realized from subsidiary CSSC No. 9 Institute's transfer of its 21% equity in joint venture Xuzhou CSSC Yangguang Investment Development Co., Ltd., which was the main source of profit for the period - Subsidiary **CSSC No. 9 Institute's transfer of its 21% equity in joint venture Xuzhou CSSC Yangguang Investment Development Co., Ltd.**, realizing **RMB 138 million in investment income**, was the primary reason for the significant change in profit[49](index=49&type=chunk) [Analysis of Assets and Liabilities](index=17&type=section&id=%28III%29%20Analysis%20of%20Assets%20and%20Liabilities) As of year-end 2018, the company's total assets were RMB 10.528 billion, a 3.81% year-on-year decrease; on the asset side, notes receivable significantly increased by 273.92% while long-term receivables decreased by 16.94%; on the liability side, both short-term and long-term borrowings substantially decreased by 48.47% and 42.99% respectively, mainly due to subsidiary loan repayments and reclassification of some long-term borrowings to current maturities, while other payables and long-term payables significantly increased due to shareholder loans received by subsidiaries Key Balance Sheet Item Changes | Item Name | Current Period End (RMB) | Prior Period End (RMB) | Change (%) | Primary Reason | | :--- | :--- | :--- | :--- | :--- | | **Notes Receivable** | 65,149,930.36 | 17,423,544.95 | 273.92 | Increase in subsidiary's notes receivable | | **Long-Term Receivables** | 2,346,298,344.09 | 2,824,766,157.57 | -16.94 | Decrease in subsidiary's long-term receivables | | **Short-Term Borrowings** | 1,080,000,000.00 | 2,096,000,000.00 | -48.47 | Increase in subsidiary's short-term loan repayments | | **Long-Term Borrowings** | 1,260,000,000.00 | 2,210,000,000.00 | -42.99 | Reclassification of some long-term borrowings to current maturities | | **Other Payables** | 875,744,729.78 | 473,679,233.19 | 84.88 | Increase in shareholder loans received by subsidiaries | | **Long-Term Payables** | 633,883,200.00 | 200,000,000.00 | 216.94 | Increase in long-term shareholder loans received by subsidiaries | [Industry Operating Information Analysis](index=18&type=section&id=%28IV%29%20Industry%20Operating%20Information%20Analysis) In 2018, the company completed 990 projects totaling RMB 97.842 billion and had 144 ongoing projects totaling RMB 167.783 billion; among major ongoing projects, the Jiangke University project (BT model) was 95% complete, and the Fenghua Affordable Housing project (BT model) was 100% complete, with RMB 506 million in completed but unsettled inventory Completed and Accepted Projects During the Reporting Period (Unit: RMB 10,000) | Sub-Industry | Building Construction | Infrastructure Engineering | Specialized Engineering | Other | Total | | :--- | :--- | :--- | :--- | :--- | | **Number of Projects (Units)** | 4 | 13 | 11 | 962 | 990 | | **Total Amount** | 38,964 | 31,138 | 2,172 | 25,568 | 97,842 | Ongoing Projects During the Reporting Period (Unit: RMB 10,000) | Sub-Industry | Building Construction | Infrastructure Engineering | Specialized Engineering | Other | Total | | :--- | :--- | :--- | :--- | :--- | | **Number of Projects (Units)** | 8 | 19 | 9 | 108 | 144 | | **Total Amount** | 86,632 | 69,869 | 11,281 | 1.47 | 167,783.47 | - The balance of completed but unsettled inventory was **RMB 505.9408 million**[59](index=59&type=chunk) [Investment Status Analysis](index=21&type=section&id=%28V%29%20Investment%20Status%20Analysis) During the reporting period, the company's most significant investment activity was a major asset sale, with wholly-owned subsidiary CSSC No. 9 Institute publicly listing and completing the transfer of 21% equity in Xuzhou CSSC Yangguang Investment Development Co., Ltd. in December 2018, while also initiating pre-listing procedures for the transfer of 50% equity in Yangzhou Sanwan Investment Development Co., Ltd., maintaining a largely stable total external equity investment [Overall Analysis of External Equity Investments](index=21&type=section&id=1.%20Overall%20Analysis%20of%20External%20Equity%20Investments) As of year-end 2018, the company's total long-term equity investments in joint ventures and associates amounted to RMB 194 million, remaining largely consistent with the beginning of the period Long-Term Equity Investment Status (Unit: RMB) | Item | Period-End Balance | Period-Start Balance | Change (%) | | :--- | :--- | :--- | :--- | | **Joint Ventures** | 42,444,755.07 | 45,109,640.72 | -5.91 | | **Associates** | 151,301,981.86 | 148,717,352.32 | 1.74 | | **Total** | 193,746,736.93 | 193,826,993.04 | -0.04 | [Major Asset and Equity Sales](index=21&type=section&id=%28VI%29%20Major%20Asset%20and%20Equity%20Sales) During the reporting period, the company's wholly-owned subsidiary CSSC No. 9 Institute successfully transferred 21% equity in Xuzhou CSSC Yangguang Investment Development Co., Ltd., completed in December 2018, while also initiating and obtaining board and shareholder approval for the transfer of 50% equity in Yangzhou Sanwan Investment Development Co., Ltd - Wholly-owned subsidiary **CSSC No. 9 Institute completed the sale of 21% equity in Xuzhou CSSC Yangguang Investment Development Co., Ltd.** in **December 2018**[63](index=63&type=chunk) - The company has initiated and received approval for the public listing and transfer of **50% equity in Yangzhou Sanwan Investment Development Co., Ltd.**, with an appraisal base date of March 31, 2018, and a proposed transfer value of **RMB 456 million**[63](index=63&type=chunk)[64](index=64&type=chunk) [Analysis of Major Holding and Participating Companies](index=22&type=section&id=%28VII%29%20Analysis%20of%20Major%20Holding%20and%20Participating%20Companies) Wholly-owned subsidiary CSSC No. 9 Institute is the company's core asset and primary revenue source, achieving RMB 3.14 billion in operating revenue and RMB 108 million in net profit in 2018, while another wholly-owned subsidiary, CSSC Huahai Marine Equipment Co., Ltd., incurred a significant loss with a net profit of -RMB 90 million Financial Status of Major Holding and Participating Companies (Unit: RMB 10,000) | Investee Name | Shareholding (%) | Operating Revenue | Net Assets | Net Profit | | :--- | :--- | :--- | :--- | :--- | | **CSSC No. 9 Design and Research Institute Engineering Co., Ltd.** | 100.00 | 314,000 | 306,658 | 10,761 | | **CSSC Huahai Marine Equipment Co., Ltd.** | 100.00 | 6,565 | 14,926 | -9,042 | [Company's Future Development Outlook](index=22&type=section&id=III.%20Discussion%20and%20Analysis%20of%20the%20Company%27s%20Future%20Development) The company plans to achieve approximately RMB 3.55 billion in operating revenue in 2019, continuing to advance its development strategy through M&A projects like acquiring 100% equity of Haiying Enterprise Group to optimize industrial structure, while subsidiary CSSC No. 9 Institute will focus on strengthening design consulting, optimizing general contracting, stabilizing investment and financing, and expanding into technology industrialization and smart factory digital platform construction, recognizing multiple risks including business structure transformation, policy, project management, and financial aspects [Industry Landscape and Trends](index=22&type=section&id=%28I%29%20Industry%20Landscape%20and%20Trends) In terms of macroeconomics, China's economy in 2019 will maintain steady progress with supply-side structural reform as the main theme; regarding industry trends, the global new shipbuilding market presents both opportunities and challenges, with an estimated transaction volume of around 70 million deadweight tons, while the construction industry will continue to promote industrial modernization and transformation, with EPC general contracting led by design units becoming a major trend - Global new shipbuilding orders are estimated at approximately **70 million DWT** in 2019, with China's shipbuilding completion volume around **35 million DWT** and new orders around **30 million DWT**[68](index=68&type=chunk) - The construction industry will continue to drive transformation and upgrading, with **EPC general contracting led by design units** gradually becoming the main trend in industry development[68](index=68&type=chunk) [Company Development Strategy](index=23&type=section&id=%28II%29%20Company%20Development%20Strategy) Based on its published '2018-2025 Development Strategic Plan Outline,' the company aims to become a diversified development platform for high-tech and new industries under CSSC Group, striving to establish a leading position in its principal business sectors through active industrial layout and diversified development to maximize company and shareholder value - The company's strategic goal is to build a **diversified development platform for high-tech and new industries** under **CSSC Group**, forming a management and control platform with multiple industries of certain scale[69](index=69&type=chunk) [Operating Plan](index=23&type=section&id=%28III%29%20Operating%20Plan) In 2019, the company plans to achieve approximately RMB 3.55 billion in operating revenue, with key initiatives including promoting the share issuance to acquire 100% equity of Haiying Enterprise Group for restructuring; subsidiary CSSC No. 9 Institute will focus on its '3+2' strategic layout, adjusting production organization to strengthen design, optimize general contracting, stabilize investment and financing, and advance technology industrialization and smart factory digital platform construction; subsidiary CSSC Huahai will concentrate on securing orders, improving management, increasing profits, and leveraging military qualifications to undertake military projects - **2019 operating target** is approximately **RMB 3.55 billion in operating revenue**[70](index=70&type=chunk) - Plans to vigorously promote the **major related-party transaction of issuing shares to acquire 100% equity of Haiying Enterprise Group Co., Ltd.** to optimize industrial structure[70](index=70&type=chunk) - **CSSC No. 9 Institute** will prioritize advancing **technology industrialization** and **smart factory digital platform construction** as two 'new' industries[71](index=71&type=chunk) [Potential Risks](index=24&type=section&id=%28IV%29%20Potential%20Risks) The company faces key risks including business structure transformation risk due to tightening national policies on PPP projects and SOE participation in real estate development, policy risk from macroeconomic changes significantly impacting PPP and other projects, engineering project management risk due to uncertainties in new model project implementation, and financial risk from substantial advance payments and loan guarantees in BT and EPC projects, leading to financial and liquidity pressures - **Business structure transformation risk**: Strict national control and supervision over **PPP projects** and **SOE participation in real estate development** impact the company's future business acquisition[72](index=72&type=chunk) - **Policy risk**: Regulatory documents issued by the Ministry of Finance, SASAC, and other departments impose higher requirements on **PPP projects**, and macroeconomic policies significantly impact the company's future development[72](index=72&type=chunk) - **Financial risk**: Advance payment projects like **BT, EPC, and PPP** generate substantial advance payments and loan guarantees, leading to certain financial risks and liquidity pressures for the company[72](index=72&type=chunk) [Significant Matters](index=25&type=section&id=Item%20V%20Significant%20Matters) This section details important events and actions undertaken by the company during the reporting period, including profit distribution, fulfillment of commitments, major related-party transactions, significant contracts, and social responsibility initiatives [Profit Distribution Plan](index=25&type=section&id=I.%20Ordinary%20Share%20Profit%20Distribution%20or%20Capital%20Reserve%20to%20Share%20Capital%20Increase%20Plan) The company's board proposed a 2018 profit distribution plan to distribute a cash dividend of RMB 0.2 (tax inclusive) per 10 shares to all shareholders based on a total share capital of 736 million shares, totaling RMB 14.725 million in cash, representing 22.50% of net profit attributable to shareholders, with no capital reserve conversion to share capital for the year; this plan awaits shareholder approval Dividend Distribution Plans for the Past Three Years | Dividend Year | Dividend Per 10 Shares (RMB, Tax Inclusive) | Cash Dividend Amount (RMB, Tax Inclusive) | Ratio of Cash Dividend to Net Profit Attributable to Ordinary Shareholders of Listed Company in Consolidated Statements (%) | | :--- | :--- | :--- | :--- | | **2018** | 0.2 | 14,724,997.66 | 22.50 | | **2017** | 0 | 0 | 0 | | **2016** | 0 | 0 | 0 | [Fulfillment of Commitments](index=25&type=section&id=II.%20Fulfillment%20of%20Commitments) During the reporting period, the company and its controlling shareholder CSSC Group strictly fulfilled all commitments related to major asset restructuring, including resolving horizontal competition and related-party transactions; regarding profit forecast compensation commitments, 7 companies under CSSC No. 9 Institute assessed by income approach and 3 projects assessed by hypothetical development method all met or exceeded their original cumulative net profit forecasts for 2018 - **CSSC Group's commitments** made during the major asset restructuring, including resolving **horizontal competition, related-party transactions, property defects, asset value guarantees, and profit forecast compensation**, were **strictly fulfilled** during the reporting period[77](index=77&type=chunk)[78](index=78&type=chunk) 2018 Profit Forecast Achievement (Unit: RMB 10,000) | Valuation Method | Commitment Party | 2018 Profit Forecast | 2018 Actual Profit | Difference | | :--- | :--- | :--- | :--- | :--- | | **Income Approach (7 Companies Total)** | CSSC Group | 1,720.81 | 2,593.30 | 872.49 | | **Hypothetical Development Method (3 Projects Cumulative)** | CSSC Group | 11,933.45 | 12,324.14 | 390.69 | [Significant Related-Party Transactions](index=31&type=section&id=XIV.%20Significant%20Related-Party%20Transactions) During the reporting period, the company engaged in multiple significant related-party transactions; in ordinary operations, it conducted approximately RMB 1.136 billion in goods purchase/sale and service provision transactions with intra-group affiliates and other related parties, while in fund movements, the company provided RMB 880 million in funds to related parties and received RMB 276 million from them as of period-end - The total amount of **related-party transactions related to ordinary operations was substantial**, with **provision of services** (contracting, survey, design, consulting) being the main component, and transactions with **Jiangnan Shipyard (Group) reaching RMB 495 million**[97](index=97&type=chunk)[99](index=99&type=chunk) - Wholly-owned subsidiary **CSSC Huahai provided a RMB 300 million entrusted loan to Jiangnan Dairuis**, and **CSSC No. 9 Institute made a capital increase to its controlled subsidiary CSSC Industrial Building Company**, both constituting related-party transactions that have completed the necessary approval procedures[94](index=94&type=chunk)[95](index=95&type=chunk) [Significant Contracts and Their Performance](index=38&type=section&id=XV.%20Significant%20Contracts%20and%20Their%20Performance) During the reporting period, the company's total external guarantees amounted to RMB 532 million, representing 14.31% of its net assets, all provided to guaranteed parties with debt-to-asset ratios exceeding 70%; the company won the Zhanjiang Port Xiashan Port Area General Terminal EPC General Contracting Project with a bid amount of approximately RMB 501 million, and also had RMB 600 million in unexpired entrusted loans - Wholly-owned subsidiary **CSSC No. 9 Institute won the EPC (Design, Procurement, Construction) general contracting project for Zhanjiang Port Xiashan Port Area General Terminal Engineering**, with a total bid amount of **RMB 500,706,130.32**[111](index=111&type=chunk) External Guarantee Status (Unit: RMB) | Item | Amount | | :--- | :--- | | **Total Guarantee Balance at Period End (A+B)** | 532,000,000.00 | | **Ratio of Total Guarantee to Company's Net Assets (%)** | 14.31% | | **Debt Guarantee Amount Provided to Guaranteed Parties with Debt-to-Asset Ratio Exceeding 70% (D)** | 532,000,000.00 | [Social Responsibility](index=41&type=section&id=XVII.%20Work%20on%20Actively%20Fulfilling%20Social%20Responsibilities) The company actively fulfills its social responsibilities, participating in targeted poverty alleviation in Heqing County, Yunnan Province, investing RMB 281,100 in industrial poverty alleviation and agricultural product procurement; it organized blood donation and urban-rural pairing assistance, prioritizes employee rights with comprehensive compensation, benefits, and training systems, and disclosed pollution discharge and treatment facility operations for its invested subsidiaries Longxue Pipe Industry and Jiangnan Pipe Industry - The company actively participated in **targeted poverty alleviation in Heqing County, Yunnan Province**, investing **RMB 281,100** during the reporting period to support pig farming projects and purchase local agricultural products[112](index=112&type=chunk)[113](index=113&type=chunk)[114](index=114&type=chunk) - The company prioritizes **employee responsibility**, establishing supplementary provident fund and annuity systems, and conducting various employee care and cultural/sports activities[117](index=117&type=chunk) - The company disclosed pollution discharge information for **key polluting invested subsidiaries** (**Longxue Pipe Industry, Jiangnan Pipe Industry**) regarding **exhaust gas, wastewater, solid waste, and noise**, along with the construction and operation of pollution control facilities and relevant environmental permits[119](index=119&type=chunk)[120](index=120&type=chunk)[121](index=121&type=chunk)[125](index=125&type=chunk) [Share Changes and Shareholder Information](index=45&type=section&id=Item%20VI%20Ordinary%20Share%20Changes%20and%20Shareholder%20Information) This section details changes in the company's ordinary share capital and provides information on its shareholders and actual controller [Changes in Ordinary Share Capital](index=45&type=section&id=I.%20Changes%20in%20Ordinary%20Share%20Capital) During the reporting period, the company's total ordinary share capital and share structure remained unchanged, with a total share capital of 736,249,883 shares, of which 135,471,113 shares held by controlling shareholder CSSC Group are restricted shares due to A-share subscription, with a 36-month lock-up period expiring on November 4, 2019 - During the reporting period, the company's **total ordinary share capital and share structure remained unchanged**[131](index=131&type=chunk) Changes in Restricted Shares (Unit: Shares) | Shareholder Name | Restricted Shares at Year Start | Restricted Shares Released This Year | Restricted Shares at Year End | Reason for Restriction | Release Date | | :--- | :--- | :--- | :--- | :--- | :--- | | **CSSC Group** | 135,471,113 | 0 | 135,471,113 | A-share subscription, committed not to transfer for 36 months | November 4, 2019 | [Shareholders and Actual Controller Information](index=46&type=section&id=III.%20Shareholders%20and%20Actual%20Controller%20Information) As of year-end 2018, the company had 79,432 ordinary shareholders; the controlling shareholder is China State Shipbuilding Corporation Limited, holding a combined direct and indirect stake of 41.28% through concerted parties, while other top ten shareholders, excluding the controlling shareholder, each held less than 5% - As of the end of the reporting period, the company had **79,432 shareholders**[133](index=133&type=chunk) Top Five Shareholders' Shareholding | Shareholder Name | Shares Held at Period End (Shares) | Proportion (%) | Nature | | :--- | :--- | :--- | :--- | | **China State Shipbuilding Corporation Limited** | 275,204,726 | 37.38 | State-owned Legal Person | | **Jiangnan Shipyard (Group) Co., Ltd.** | 28,727,521 | 3.90 | State-owned Legal Person | | **Beijing Hengyu Tianze Fund Sales Co., Ltd. - Hengyu Tianze Ying·Ying No. 1 Private Investment Fund** | 21,608,920 | 2.93 | Unknown | | **Shanghai International Group Asset Management Co., Ltd.** | 12,607,879 | 1.71 | Unknown | | **Guangxi Railway Development Phase II Investment Fund Partnership (Limited Partnership)** | 11,062,385 | 1.50 | Unknown | - The company's **controlling shareholder and ultimate actual controller** are both **China State Shipbuilding Corporation Limited**[137](index=137&type=chunk)[139](index=139&type=chunk) [Directors, Supervisors, Senior Management, and Employees](index=50&type=section&id=Item%20VIII%20Directors%2C%20Supervisors%2C%20Senior%20Management%2C%20and%20Employees) This section provides information on the company's directors, supervisors, senior management, and employees, including their shareholdings, remuneration, and overall workforce structure [Changes in Shareholding and Remuneration of Directors, Supervisors, and Senior Management](index=50&type=section&id=I.%20Changes%20in%20Shareholding%20and%20Remuneration) During the reporting period, all current and former directors, supervisors, and senior management did not hold company shares, nor were there any changes in shareholding; in 2018, the company paid a total pre-tax remuneration of RMB 6.9851 million to directors, supervisors, and senior management, with some directors and supervisors not receiving remuneration from the company due to their positions in related parties - During the reporting period, **all directors, supervisors, and senior management did not hold company shares**[143](index=143&type=chunk)[144](index=144&type=chunk) - The total pre-tax remuneration received from the company during the reporting period amounted to **RMB 6.9851 million**[144](index=144&type=chunk) [Employee Information](index=56&type=section&id=VI.%20Employee%20Information%20of%20Parent%20Company%20and%20Major%20Subsidiaries) As of the end of the reporting period, the company had a total of 1,564 employees, with technical personnel being the largest group at 990; employees with bachelor's degrees or higher accounted for over 75% of the total, and the company implements a market-oriented compensation policy linking remuneration to performance, while providing comprehensive training programs to enhance professional capabilities Employee Professional Composition | Professional Category | Number of Persons | | :--- | :--- | | **Production Personnel** | 262 | | **Sales Personnel** | 53 | | **Technical Personnel** | 990 | | **Financial Personnel** | 43 | | **Administrative Personnel** | 216 | | **Total** | 1,564 | - The company implements a **market-oriented compensation policy**, linking all employee performance-based remuneration to performance appraisals, and contributes to **'five insurances and one housing fund' and enterprise annuity** as required[160](index=160&type=chunk) - The company formulated and implemented **annual training programs** covering topics such as accounting standards, capital operations, and project management, to **enhance employees' professional capabilities**[161](index=161&type=chunk)[162](index=162&type=chunk) [Corporate Governance](index=57&type=section&id=Item%20IX%20Corporate%20Governance) This section describes the company's corporate governance framework, including the roles and operations of its key governing bodies and its internal control systems [Overview of Corporate Governance](index=57&type=section&id=I.%20Explanation%20of%20Corporate%20Governance%20Related%20Matters) During the reporting period, the company continuously improved its corporate governance structure in strict accordance with the 'Company Law' and other regulations; the Shareholders' Meeting, Board of Directors, Board of Supervisors, and management team operated with clear responsibilities and in a standardized manner, successfully completing the re-election of the Eighth Board of Directors and Board of Supervisors with personnel composition meeting regulatory requirements, and there were no significant discrepancies between the company's actual governance and regulatory provisions - The company's **corporate governance structure is well-established**, with the **Shareholders' Meeting, Board of Directors, Board of Supervisors, and management team** each performing their duties with **clear responsibilities**, in compliance with regulatory requirements[163](index=163&type=chunk) - During the reporting period, the **re-election of the Eighth Board of Directors and Board of Supervisors was successfully completed**, with personnel composition meeting legal and regulatory requirements[163](index=163&type=chunk) [Internal Control Evaluation](index=59&type=section&id=VIII.%20Whether%20Internal%20Control%20Self-Evaluation%20Report%20is%20Disclosed) The company disclosed its 2018 Internal Control Self-Evaluation Report and Internal Control Audit Report, concluding that as of December 31, 2018, the company maintained effective internal controls over financial reporting in all material respects, with no significant deficiencies found in internal controls over financial or non-financial reporting - The company disclosed its **'2018 Internal Control Evaluation Report'**, concluding that the company has maintained **effective internal controls over financial reporting in all material respects**[170](index=170&type=chunk) - The company found **no significant deficiencies in internal controls over financial reporting or non-financial reporting**[170](index=170&type=chunk) - The company also disclosed the **'2018 Internal Control Audit Report'** issued by **ShineWing Certified Public Accountants (Special General Partnership)**[171](index=171&type=chunk) [Financial Report](index=61&type=section&id=Item%20X%20Financial%20Report) This section presents the company's audited financial statements for the reporting period, including the audit report, financial statements, basis of preparation, and detailed notes to the consolidated financial statements [Audit Report](index=61&type=section&id=I.%20Audit%20Report) ShineWing Certified Public Accountants (Special General Partnership) issued a standard unqualified audit opinion on the company's 2018 financial statements, concluding that the financial statements fairly presented the company's financial position and operating results in all material respects, with key audit matters being 'provision for doubtful accounts receivable' and 'revenue recognition using the percentage-of-completion method' - The auditing firm is **ShineWing Certified Public Accountants (Special General Partnership)**, which issued a **standard unqualified audit opinion**[3](index=3&type=chunk)[173](index=173&type=chunk) - Key audit matters include: - **Provision for doubtful accounts receivable**: Involves significant management judgment in assessing recoverability - **Revenue recognition using the percentage-of-completion method**: Involves significant management judgment and estimation in recognizing engineering general contracting revenue[175](index=175&type=chunk)[176](index=176&type=chunk)[178](index=178&type=chunk) [Financial Statements](index=65&type=section&id=II.%20Financial%20Statements) This section includes the company's 2018 consolidated and parent company balance sheets, income statements, cash flow statements, and statements of changes in owners' equity [Basis of Financial Statement Preparation](index=83&type=section&id=IV.%20Basis%20of%20Financial%20Statement%20Preparation) The company's financial statements are prepared on a going concern basis, comply with enterprise accounting standards, and fairly and completely reflect the company's financial position and operating results - Financial statements are prepared on a **going concern basis**[211](index=211&type=chunk) [Notes to Consolidated Financial Statement Items](index=100&type=section&id=VII.%20Notes%20to%20Consolidated%20Financial%20Statement%20Items) This section provides detailed explanations of the composition and changes in major accounts within the consolidated financial statements, including monetary funds, receivables, inventories, fixed assets, borrowings, and related-party transactions [Corporate Bonds Related Information](index=191&type=section&id=Item%20XI%20Corporate%20Bonds%20Related%20Information) This section provides information regarding the company's corporate bonds - During the reporting period, the company had **no corporate bond related information**[534](index=534&type=chunk) [Reference Documents Catalog](index=192&type=section&id=Item%20XII%20Reference%20Documents%20Catalog) This section lists all documents available for reference