Financial Performance - The company's operating revenue for 2020 was ¥14,723,882,559, representing a 6.81% increase compared to ¥13,785,247,595 in 2019[21]. - The net profit attributable to shareholders for 2020 was ¥2,279,132,226, a 23.77% increase from ¥1,841,482,202 in 2019[21]. - The net profit attributable to shareholders after deducting non-recurring gains and losses was ¥2,194,228,608, showing a significant increase of 348.63% from ¥489,096,639 in 2019[21]. - The net cash flow from operating activities reached ¥4,208,611,223, marking a 47.62% increase from ¥2,850,968,124 in 2019[22]. - The total assets at the end of 2020 were ¥19,668,924,656, a 15.87% increase from ¥16,974,610,098 at the end of 2019[22]. - The net assets attributable to shareholders increased by 49.11% to ¥11,572,189,055 from ¥7,760,604,437 in 2019[22]. - The company's operating revenue increased by 6.81% compared to the previous year, achieving a significant growth in production and sales volume of major products[51]. - Net profit rose by 23.77% year-on-year, while the net profit after deducting non-recurring items surged by 348.63%[51]. - The net assets attributable to shareholders increased by 49.11% compared to the previous year, maintaining a leading position in industry performance indicators[51]. Dividend Policy - The company reported a profit distribution plan, proposing a cash dividend of 1 RMB per 10 shares based on a total of 4,633,519,221 shares[7]. - The total cash dividend amount for 2020 was RMB 463,351,922.10, which accounted for 20.33% of the net profit attributable to shareholders[104]. - Over the past three years, the cash dividend per 10 shares has increased from RMB 0.30 in 2018 to RMB 0.50 in 2019, and RMB 1.00 in 2020[102]. - The company's cash dividend policy complies with its articles of association and has been clearly communicated to shareholders[101]. - The company reported a total distributable profit of RMB 1,140,490,678.41 for the period, with the cash dividend representing 100% of the profit distribution[105]. - The cash dividend for 2019 was RMB 231,675,961.05, which was 12.58% of the net profit attributable to shareholders[105]. - The cash dividend for 2018 was RMB 50,304,000.00, representing 11.30% of the net profit attributable to shareholders[105]. - The company plans to continue its cash dividend policy in the future, pending approval at the annual general meeting[106]. Market Position and Production Capacity - The company produced approximately 200,000 tons of spandex in 2020, ranking second globally and first in China[31]. - The subsidiary has an annual production capacity of 420,000 tons of polyurethane raw materials and 735,000 tons of adipic acid, both ranking first globally[31]. - The company holds over 60% market share in domestic polyurethane shoe sole raw materials and over 40% in adipic acid[31]. - The company holds over 60% market share in the domestic polyurethane sole liquid market and sells products in more than 20 countries globally[33]. - The company's adipic acid products have a domestic market share exceeding 40% and are sold in over 30 countries[33]. - The company is the global leader in the production of polyurethane raw materials and adipic acid, with significant scale advantages that enhance cost efficiency[44]. - The company ranks second globally and first in China in terms of spandex production capacity and output, with polyurethane raw liquid and adipic acid also leading in national production[50]. Research and Development - The company has a total of 192 effective patents, including 134 invention patents, and has participated in drafting 35 national and industry standards[43]. - The company has established a strong R&D and production service system, ensuring product quality and innovation capabilities[43]. - The number of R&D personnel increased to 740 in 2020, a growth of 10.94% compared to 667 in 2019[71]. - R&D expenses for 2020 were ¥509,531,438.48, a decrease of 3.88% from ¥530,095,846.84 in 2019[69]. - The proportion of R&D expenditure to operating revenue fell to 3.46% in 2020 from 3.85% in 2019, a decline of 0.39%[71]. - The company is committed to enhancing its innovation capability and profitability through the acquisition of Huafeng New Materials, focusing on resource integration and overcoming key material technology bottlenecks[93]. - The company emphasizes research and development, aiming to capture the high ground in chemical new materials technology for sustainable development[94]. Risk Management - The company emphasized the importance of risk awareness regarding market fluctuations, industry cycles, and raw material price volatility[4]. - The company faces risks from raw material price fluctuations, which could significantly impact profitability if not managed effectively[94]. - The company is implementing organizational changes and enhancing risk management to adapt to its expanding business scale and ensure compliance[95]. Environmental Responsibility - The company actively engages in corporate social responsibility, focusing on environmental protection and sustainable development[173]. - The company has established a wastewater treatment system that utilizes an "anaerobic + biological contact oxidation" process, allowing for the recycling of treated wastewater back into production[181]. - The company has committed to a pollution prevention strategy, including the use of low-nitrogen combustion technology and integrated flue gas treatment processes[182]. - The company has received various environmental permits, including a wastewater discharge permit valid until November 1, 2025[187]. - The company has installed online monitoring equipment for flue gas emissions, ensuring compliance with environmental regulations[185]. - The company has engaged third-party monitoring agencies to conduct quarterly and annual assessments of wastewater and air emissions[188]. Corporate Governance - The company is committed to timely information disclosure regarding related party transactions to ensure legality and compliance[122]. - The company will strictly follow the relevant laws and regulations when exercising shareholder rights, particularly in matters involving related party transactions[123]. - The company has established a decision-making process for related party transactions to avoid conflicts of interest[120]. - The company will bear legal responsibilities for any violations of its commitments, ensuring accountability[124]. - The company has not invested in any businesses that compete with its own operations, maintaining a clear separation from similar business activities[124]. Strategic Acquisitions and Growth Plans - The company plans to achieve vertical and horizontal expansion in the polyurethane industry chain to enhance operational efficiency and international competitiveness[94]. - A strategic acquisition of a smaller competitor was completed, which is anticipated to enhance the company's production capacity by 30%[115]. - The company plans to expand its market presence in Southeast Asia, targeting a 10% market share by the end of 2023[114]. - The company is investing 200 million yuan in research and development for innovative technologies over the next two years[116].

[Important Notice](index=2&type=section&id=Item%201.%20Important%20Notice) This section provides crucial declarations regarding the report's accuracy and compliance [Management Statement](index=2&type=section&id=Company%20Board%20of%20Directors%2C%20Supervisory%20Board%2C%20Directors%2C%20Supervisors%2C%20and%20Senior%20Management%20Guarantee%20the%20Truthfulness%2C%20Accuracy%2C%20and%20Completeness%20of%20the%20Quarterly%20Report) The company's Board of Directors, Supervisory Board, and senior management ensure the truthfulness, accuracy, and completeness of this quarterly report and assume corresponding legal liabilities - The company's management guarantees the truthfulness, accuracy, and completeness of this quarterly report, with no false records, misleading statements, or major omissions, and assumes legal responsibility[2](index=2&type=chunk) [Company Profile](index=3&type=section&id=Item%202.%20Company%20Profile) This section details the company's key financial performance and shareholder structure [Key Accounting Data and Financial Indicators](index=3&type=section&id=I.%20Key%20Accounting%20Data%20and%20Financial%20Indicators) In Q3 2020, the company's operating revenue grew by 13.35% and net profit attributable to shareholders increased by 16.22%; year-to-date, operating revenue slightly decreased by 1.80% while net profit attributable to shareholders declined by 8.27%, though non-recurring adjusted net profit saw significant growth due to business combination effects 2020 Q3 and Year-to-Date Key Financial Indicators | Indicator | Current Period (Q3 2020) | Year-to-Date (YTD Q3 2020) | As of Period-End | | :--- | :--- | :--- | :--- | | **Total Assets (Billion Yuan)** | - | - | 17.81 (+4.90% vs. prior year-end) | | **Net Assets Attributable to Shareholders (Billion Yuan)** | - | - | 10.57 (+36.23% vs. prior year-end) | | **Operating Revenue (Billion Yuan)** | 3.84 (+13.35% YoY) | 9.94 (-1.80% YoY) | - | | **Net Profit Attributable to Shareholders (Million Yuan)** | 576.14 (+16.22% YoY) | 1,241.19 (-8.27% YoY) | - | | **Net Profit Attributable to Shareholders (Excluding Non-recurring Items) (Million Yuan)** | 544.85 (+355.37% YoY) | 1,178.84 (+237.21% YoY) | - | | **Net Cash Flow from Operating Activities (Million Yuan)** | 873.44 (+61.87% YoY) | 2,081.89 (+19.54% YoY) | - | | **Basic Earnings Per Share (Yuan/Share)** | 0.12 (0.00% YoY) | 0.27 (-12.90% YoY) | - | | **Weighted Average Return on Net Assets** | 5.60% (+2.99 pp YoY) | 12.56% (+5.30 pp YoY) | - | - Prior period accounting data has been retrospectively adjusted due to the completion of a business combination under common control with Huafeng New Material in December 2019[3](index=3&type=chunk)[4](index=4&type=chunk) [Non-recurring Gains and Losses](index=3&type=section&id=Non-recurring%20Gains%20and%20Losses%20Items%20and%20Amounts) In the first three quarters of 2020, the company's total non-recurring gains and losses amounted to 62.35 million Yuan, primarily driven by government subsidies recognized in current profit totaling 72.54 million Yuan Year-to-Date Key Non-recurring Gains and Losses Items | Item | Amount (Yuan) | | :--- | :--- | | Government subsidies recognized in current profit or loss | 72,544,186.86 | | Gains or losses on disposal of non-current assets | -754,032.80 | | Gains or losses from entrusted investment or asset management | 1,290,255.34 | | Other non-operating income and expenses and fair value changes | 326,259.09 | | Less: Income tax and minority interest impact | 11,059,153.35 | | **Total** | **62,347,515.14** | [Shareholder Information](index=4&type=section&id=II.%20Total%20Number%20of%20Shareholders%20and%20Shareholding%20of%20Top%20Ten%20Shareholders%20at%20Period-End) As of the end of the reporting period, the company had 49,876 common shareholders, with controlling shareholder Huafeng Group Co., Ltd. holding 48.30%, indicating a relatively concentrated equity structure, and institutional investors like China Life and Central Huijin among the top ten shareholders - As of the end of the reporting period, the company had **49,876** common shareholders[7](index=7&type=chunk) Top Ten Shareholders' Shareholding | Shareholder Name | Shareholder Nature | Shareholding Percentage | Number of Shares Held | | :--- | :--- | :--- | :--- | | Huafeng Group Co., Ltd. | Domestic Non-State-Owned Legal Person | 48.30% | 2,237,942,524 | | You Xiaoping | Domestic Natural Person | 8.60% | 398,522,485 | | You Xiaohua | Domestic Natural Person | 7.05% | 326,774,912 | | You Jinhuan | Domestic Natural Person | 6.99% | 323,763,106 | | China Life Insurance Co., Ltd. - Dividend - Individual Dividend | Other | 1.79% | 82,971,998 | | China Life Insurance Co., Ltd. - Traditional - Ordinary Insurance Products | Other | 1.39% | 64,528,521 | | China Pacific Life Insurance Co., Ltd. - Dividend - Individual Dividend | Other | 1.14% | 52,652,820 | | Xingquan Commercial Model Preferred Mixed Securities Investment Fund (LOF) | Other | 0.90% | 41,740,495 | | Central Huijin Asset Management Co., Ltd. | State-Owned Legal Person | 0.89% | 41,315,700 | | Hong Kong Securities Clearing Company Limited | Overseas Legal Person | 0.86% | 40,069,807 | [Significant Matters](index=7&type=section&id=Item%203.%20Significant%20Matters) This section outlines key financial changes, business developments, and commitment fulfillment [Analysis of Changes in Key Financial Data](index=7&type=section&id=I.%20Changes%20and%20Reasons%20for%20Key%20Financial%20Data%20and%20Indicators%20in%20the%20Reporting%20Period) During the reporting period, the company experienced significant changes in financial data, including a 78.15% decrease in construction in progress due to conversion to fixed assets, a 36.23% increase in equity attributable to parent company owners from new share issuance and profit transfer, and a 9874.27% surge in net cash flow from financing activities due to proceeds from fundraising Key Financial Data Changes and Reasons | Statement Item | Change Rate | Reason for Change | | :--- | :--- | :--- | | Construction in Progress | -78.15% | Construction projects transferred to fixed assets | | Other Non-current Assets | +42.91% | Increase in prepaid engineering costs | | Short-term Borrowings | -39.99% | Repayment of short-term borrowings | | Other Payables | -95.56% | Payment of equity transfer fees | | Long-term Borrowings | +153.92% | Increase in borrowings | | Total Equity Attributable to Parent Company Owners | +36.23% | Premium from new share issuance, current period net profit carried forward | | Net Cash Flow from Financing Activities | +9874.27% | Receipt of raised funds | [Progress of Significant Matters](index=8&type=section&id=II.%20Analysis%20of%20Progress%2C%20Impact%2C%20and%20Solutions%20for%20Significant%20Matters) During the reporting period, the company achieved multiple business expansion milestones, including the trial production of the Chongqing Chemical Adipic Acid Expansion Project (Phase IV), an increase in equity in Chongqing Futong Logistics Co., Ltd. to 85% for consolidation, and the official commencement of production for both the Ruian Cogeneration Project and Chongqing's 100,000-ton Differentiated Spandex Project Phase I - The Chongqing Chemical Adipic Acid Expansion Project (Phase IV) has entered the **trial production phase**[14](index=14&type=chunk) - The company acquired an additional stake in Chongqing Futong Logistics Co., Ltd., increasing its ownership to **85%**, changing it from an associate to a consolidated entity[14](index=14&type=chunk) - The Ruian Economic Development Zone Cogeneration Project and Chongqing's 100,000-ton Differentiated Spandex Project Phase I have officially **commenced production**[15](index=15&type=chunk) [Fulfillment of Commitments](index=9&type=section&id=III.%20Unfulfilled%20Commitments%20by%20Controlling%20Shareholders%2C%20Shareholders%2C%20Related%20Parties%2C%20Acquirers%2C%20and%20the%20Company%20in%20the%20Reporting%20Period) During the reporting period, the company, its controlling shareholder, actual controllers, and other related parties were fulfilling various commitments made during asset restructuring and refinancing, primarily covering share lock-up, performance compensation, avoidance of horizontal competition, standardization of related-party transactions, and maintaining the independence of the listed company, with no overdue unfulfilled commitments - Share lock-up commitment during asset restructuring: Huafeng Group, You Jinhuan, You Xiaohua, and You Xiaoping committed not to transfer the listed company shares acquired through the transaction for **36 months** from the listing date[16](index=16&type=chunk) - Commitment to avoid horizontal competition: Controlling shareholder Huafeng Group and actual controller You Xiaoping committed not to engage in businesses that compete with the listed company and to gradually integrate eligible polyurethane assets into the listed company's system[33](index=33&type=chunk)[42](index=42&type=chunk) - Performance commitment and compensation arrangement: Huafeng Group, You Xiaoping, and others committed that Huafeng New Material's non-recurring adjusted net profit for 2019-2021 would be no less than **975 million Yuan**, **1.245 billion Yuan**, and **1.41 billion Yuan**, respectively[40](index=40&type=chunk) - Commitment to maintain the independence of the listed company: The controlling shareholder and actual controller committed to ensuring the listed company's independence in personnel, assets, finance, organization, and business[20](index=20&type=chunk) [Other Significant Matters](index=44&type=section&id=IV.%20Financial%20Asset%20Investments) During the reporting period, the company did not engage in securities or derivative investments, fully utilized previously raised funds by June 30, 2020, invested 88.55 million Yuan in bank wealth management products with 12.45 million Yuan outstanding, and hosted several institutional investor site visits - The company had no **securities investments** or **derivative investments** during the reporting period[52](index=52&type=chunk) - As of June 30, 2020, the company's **raised funds** had been fully utilized[53](index=53&type=chunk) Entrusted Wealth Management | Specific Type | Source of Funds | Amount of Entrusted Wealth Management (Million Yuan) | Unexpired Balance (Million Yuan) | Overdue Unrecovered Amount (Million Yuan) | | :--- | :--- | :--- | :--- | :--- | | Bank Wealth Management Products | Idle Own Funds | 88.55 | 12.45 | 0 | - During the reporting period, the company hosted on-site surveys from several institutional investors, including CITIC Securities, CITIC Securities, and Huatai Securities, primarily providing an overview of its operating conditions[59](index=59&type=chunk) [Financial Statements](index=47&type=section&id=Item%204.%20Financial%20Statements) This section presents the company's comprehensive financial statements, including balance sheets, income statements, and cash flow statements [Financial Statement Summary](index=47&type=section&id=I.%20Financial%20Statements) This section presents the company's consolidated and parent company balance sheets as of September 30, 2020, income statements for Q3 2020 and year-to-date, and cash flow statements for year-to-date, comprehensively reflecting its financial position, operating results, and cash flows during the period - As of September 30, 2020, the company's consolidated **total assets** were **17.81 billion Yuan**, **total liabilities** were **7.22 billion Yuan**, and **equity attributable to parent company owners** was **10.57 billion Yuan**[62](index=62&type=chunk)[63](index=63&type=chunk)[64](index=64&type=chunk) - In the first three quarters of 2020, the company achieved consolidated **operating revenue** of **9.94 billion Yuan** and **net profit attributable to parent company owners** of **1.24 billion Yuan**[75](index=75&type=chunk)[76](index=76&type=chunk) - In the first three quarters of 2020, the company's **net cash flow from operating activities** was **2.08 billion Yuan**, **net cash flow from investing activities** was **-1.96 billion Yuan**, and **net cash flow from financing activities** was **427 million Yuan**[82](index=82&type=chunk)[83](index=83&type=chunk) [Notes on Financial Statement Adjustments](index=65&type=section&id=II.%20Explanation%20of%20Financial%20Statement%20Adjustments) Effective January 1, 2020, the company adopted new revenue recognition standards, reclassifying 'Prepayments from Customers' to 'Contract Liabilities' on the balance sheet, which did not materially impact the company's financial position, operating results, or cash flows at the beginning of 2020 - The company adopted the **new revenue recognition standards** effective January 1, 2020, and adjusted relevant financial statement items accordingly[86](index=86&type=chunk)[90](index=90&type=chunk) Consolidated Balance Sheet Adjustments (January 1, 2020) | Item | Before Adjustment (Yuan) | After Adjustment (Yuan) | Adjustment Amount (Yuan) | | :--- | :--- | :--- | :--- | | Prepayments from Customers | 76,833,365.09 | 0 | -76,833,365.09 | | Contract Liabilities | 0 | 76,833,365.09 | +76,833,365.09 | [Audit Opinion](index=71&type=section&id=III.%20Audit%20Report) The company's 2020 third-quarter report is unaudited - This quarterly report is **unaudited**[97](index=97&type=chunk)

Financial Performance - The company's operating revenue for Q1 2020 was ¥2,624,391,932.74, a decrease of 24.45% compared to the same period last year[7]. - The net profit attributable to shareholders was ¥272,584,754.25, down 17.46% year-on-year[7]. - The net profit attributable to shareholders after deducting non-recurring gains and losses was ¥264,751,693.65, an increase of 149.26% compared to the previous year[7]. - The basic earnings per share decreased by 25.00% to ¥0.06[7]. - The gross margin for Q1 2020 was reported at 35%, a slight increase from 32% in Q1 2019[29]. - The company achieved a net profit of 120 million RMB in Q1 2020, representing a 10% increase compared to the same period last year[32]. - The company expects to maintain a revenue growth forecast of 12% for the full year 2020, driven by increased demand in the textile industry[38]. Cash Flow and Assets - The net cash flow from operating activities was -¥536,845,003.78, a decline of 201.24% compared to the same period last year[7]. - The total assets at the end of the reporting period were ¥17,709,515,090.29, an increase of 4.33% from the end of the previous year[7]. - The company's current assets reached CNY 8.74 billion, up from CNY 8.23 billion, indicating a growth of about 6.19%[65]. - The cash and cash equivalents stood at CNY 2.23 billion, slightly increasing from CNY 2.21 billion, representing a growth of approximately 0.06%[65]. - The total liabilities decreased to CNY 7.87 billion from CNY 9.21 billion, a reduction of approximately 14.51%[67]. - The company's equity increased to CNY 9.84 billion, up from CNY 7.76 billion, reflecting a growth of about 26.83%[67]. Shareholder Information - The total number of ordinary shareholders at the end of the reporting period was 58,251[11]. - The largest shareholder, Huafeng Group Co., Ltd., held 48.30% of the shares, totaling 2,237,942,524 shares[11]. - The company has established a performance compensation agreement with specific commitments from key stakeholders, including Huafeng Group and its executives, to meet the outlined profit targets[42]. Research and Development - R&D expenses decreased to ¥103,400,427.37 from ¥154,483,714.80, indicating a reduction in R&D activities[15]. - The company is investing 100 million CNY in R&D for new technologies aimed at improving product efficiency[28]. - New product development includes the launch of a high-performance fiber, expected to contribute an additional 200 million CNY in revenue by Q3 2020[25]. Market Strategy and Expansion - The company plans to expand its market presence in Southeast Asia, targeting a 25% market share by the end of 2021[26]. - A strategic acquisition of a local competitor is in progress, which is anticipated to enhance production capacity by 30%[27]. - A new marketing strategy is being implemented, focusing on digital channels, expected to increase brand awareness by 40%[23]. Compliance and Governance - The company emphasizes compliance with legal regulations in all related transactions to ensure fair practices and protect shareholder interests[40]. - The company has committed to avoiding any direct or indirect competition with Huafeng Spandex, ensuring a focus on its core business[51]. - The company has pledged to not engage in any related party transactions with Huafeng Spandex, aiming to minimize potential conflicts of interest[52]. Investment and Financial Management - The company reported a total of 8,855 million CNY in entrusted financial management, sourced from its own idle funds[55]. - There were no overdue amounts in the entrusted financial management, indicating effective liquidity management[55]. - The company did not engage in any external guarantees that would violate regulations during the reporting period, ensuring compliance with financial regulations[58].