Group 1: Company Overview and Market Position - Shandong Guoci Functional Materials Co., Ltd. is focused on various ceramic materials, with a strong emphasis on product positioning and core technology [2] - The company has a market share of approximately 40% in the dental materials sector [4] - The company’s DPF (Diesel Particulate Filter) products are competitively priced at around 100 RMB per liter, with an average vehicle value of approximately 2000 RMB [3] Group 2: Business Segments and Growth Potential - The MLCC (Multi-Layer Ceramic Capacitor) segment is experiencing strong demand, with a price increase of 10-20% due to rising production costs since 2017 [3] - The automotive catalyst segment, particularly the honeycomb ceramics, is expected to grow rapidly due to stricter environmental regulations [2] - The company anticipates significant growth in the zirconia segment driven by new applications in mobile phone backplates [2] Group 3: Production Capacity and Efficiency - The company’s total production capacity is around 10 million liters, with a utilization rate affected by complex product structures [5] - The production yield for DPF and GPF (Gasoline Particulate Filter) has reached 90%, with ongoing improvements [4] - The company has automated production processes in its Dongying factory, enhancing efficiency and addressing thermal shock issues [3] Group 4: Competitive Landscape and Strategic Positioning - The company maintains long-term stable relationships with key clients like Samsung and Fenghua Gaoke, which helps mitigate price volatility in raw materials [3] - The company’s core competitive advantage lies in its comprehensive product range and high-quality standards recognized within the industry [4] - The market for honeycomb ceramics is highly concentrated, with over 90% being dominated by a few players, indicating high entry barriers [5]

Important Notice, Table of Contents, and Definitions [Important Notice and Risks](index=2&type=section&id=重要提示与风险) This chapter presents the board's assurance of the annual report's integrity and outlines key operational risks such as technology development, project returns, raw material price volatility, accounts receivable, and goodwill impairment - The company faces key risks including: - **Technology Development Risk**: Rapid technological iteration in the new materials industry, high R&D investment, and long cycles pose risks of not meeting downstream customer demands - **Fundraising Project Risk**: Unfavorable changes in market conditions or technological routes may prevent fundraising projects from achieving expected benefits - **Raw Material Price Fluctuation Risk**: High proportion of raw material costs means price increases could lead to gross margin decline - **Accounts Receivable Recovery Risk**: Expanding business scale increases accounts receivable, potentially leading to bad debt risk if customers face operational difficulties - **Merger and Acquisition and Goodwill Risk**: M&A challenges the company's integration capabilities, with goodwill impairment risk if acquired entities' operations deteriorate[2],[3],[5],[6],[7] - The 2021 profit distribution plan proposes a cash dividend of **CNY 1.10 (tax inclusive)** per 10 shares to all shareholders, based on shares outstanding after deducting repurchased shares, with no bonus shares or capital reserve conversion to share capital[8](index=8&type=chunk) [Chairman's Statement](index=5&type=section&id=董事长致辞) Chairman Zhang Xi reviewed 2021 achievements, emphasizing the company's strategic expansion into new energy and precision ceramics as future growth engines, achieving sustained profit growth through lean management and talent development - The company strategically expanded into new sectors, establishing **New Energy and Precision Ceramics Business Units** as new engines for future growth[9](index=9&type=chunk) - The company achieved sustained profit growth by continuously advancing **CBS lean management** and strengthening talent development, addressing challenges like the pandemic and supply chain pressures[9](index=9&type=chunk) Company Profile and Key Financial Indicators [Company Information and Key Financial Data](index=11&type=section&id=公司信息与主要财务数据) This chapter provides basic corporate information and disclosure channels, with core financial data showing robust performance in 2021, including a **24.37% increase in operating revenue** and a **38.57% rise in net profit attributable to shareholders** Key Financial Data | Indicator | 2021 | 2020 | YoY Change | | :--- | :--- | :--- | :--- | | **Operating Revenue (CNY)** | 3,161,738,769.22 | 2,542,257,374.57 | 24.37% | | **Net Profit Attributable to Shareholders (CNY)** | 795,159,851.29 | 573,840,299.36 | 38.57% | | **Net Profit Attributable to Shareholders (Excluding Non-recurring Items) (CNY)** | 699,104,394.92 | 539,389,691.57 | 29.61% | | **Net Cash Flow from Operating Activities (CNY)** | 571,844,677.35 | 772,156,561.01 | -25.94% | | **Basic Earnings Per Share (CNY/share)** | 0.79 | 0.60 | 31.67% | | **Weighted Average Return on Net Assets** | 14.78% | 14.70% | 0.08% | | **Total Assets (CNY)** | 7,878,786,719.57 | 6,024,947,504.49 | 30.77% | Quarterly Financial Performance | Quarter | Operating Revenue (CNY) | Net Profit Attributable to Shareholders (CNY) | | :--- | :--- | :--- | | **First Quarter** | 620,675,361.53 | 185,967,992.97 | | **Second Quarter** | 852,624,888.09 | 208,438,921.22 | | **Third Quarter** | 800,018,902.74 | 207,057,384.03 | | **Fourth Quarter** | 888,419,616.86 | 193,695,553.07 | - In 2021, the company's total non-recurring gains and losses amounted to **CNY 96.06 million**, primarily from government subsidies and wealth management income[30](index=30&type=chunk) Management Discussion and Analysis [Industry Overview and Principal Businesses](index=15&type=section&id=行业情况与主要业务) The company, deeply rooted in new materials, has four business segments—electronic, catalytic, biomedical, and other materials—all achieving robust growth in 2021, driven by downstream demand and domestic substitution, resulting in **CNY 3.16 billion in operating revenue** and **CNY 795 million in net profit** - The company's business spans high-growth sectors like electronic components, new energy vehicles, exhaust catalysis, and dental care, with **domestic substitution** serving as a key industry growth driver[32],[33],[34] - Electronic Materials Segment: The company is a global leader in **MLCC powder materials**, holding an **80% domestic market share**, and is actively expanding production to meet surging demand for lithium battery separator coating materials like alumina and boehmite[32],[39],[41] - Catalytic Materials Segment: As one of the few domestic manufacturers to achieve **mass production of honeycomb ceramics**, the company is fully promoting domestic substitution driven by the implementation of **National VI emission standards**, with its silicon carbide DPF project achieving technological breakthroughs and mass production capability[32],[43] - Biomedical Materials Segment: The dental restoration materials business benefits from rapid industry growth, with **zirconia materials for dentures** selling well domestically and internationally, demonstrating significant overseas market expansion success[45](index=45&type=chunk) [Core Competitiveness Analysis](index=25&type=section&id=核心竞争力分析) The company's core competitiveness spans technology R&D, quality management, talent, lean management, and brand clientele, underpinned by seven core technology platforms, a robust quality system, CBS lean management, and strong partnerships with leading domestic and international manufacturers - The company has accumulated **seven core technologies**, including hydrothermal and formulation technologies, with prominent R&D advantages validated by certifications from platforms such as the National Enterprise Technology Center and CNAS National Laboratory[60](index=60&type=chunk) - The company has developed the **Guoci Business System (CBS)** as a core competency, ensuring strategic execution through deployment and daily management, fostering a culture of continuous improvement[64](index=64&type=chunk) - The company has established long-term stable partnerships with renowned domestic and international manufacturers, including **Samsung, CATL, BYD, and Fenghua Advanced Technology**, accumulating high-quality customer resources and brand reputation[65](index=65&type=chunk) [Analysis of Principal Operations](index=27&type=section&id=主营业务分析) This chapter analyzes the company's 2021 operating results, highlighting electronic and other materials as primary revenue sources, rapid growth in catalytic and other materials, the highest gross margin in biomedical materials, increased R&D investment, and a decrease in operating cash flow due to production expansion and raw material stockpiling Operating Revenue and Gross Margin by Business Segment | Business Segment | Operating Revenue (CNY) | % of Total Revenue | YoY Change | Gross Margin | | :--- | :--- | :--- | :--- | :--- | | **Electronic Materials Segment** | 1,045,533,385.80 | 33.07% | 19.53% | 47.24% | | **Catalytic Materials Segment** | 417,432,898.12 | 13.20% | 32.18% | 53.13% | | **Biomedical Materials Segment** | 694,939,838.71 | 21.98% | 19.44% | 62.33% | | **Other Materials Segment** | 1,003,832,646.59 | 31.75% | 30.39% | 28.05% (Building Ceramics) | - Sales to the company's top five customers accounted for **20.77%** of total annual sales, while purchases from the top five suppliers represented **20.21%** of total annual procurement, indicating reasonable customer and supplier concentration levels[75],[77] Key Expense Items | Expense Item | 2021 (CNY) | 2020 (CNY) | YoY Change | Key Change Explanation | | :--- | :--- | :--- | :--- | :--- | | **Selling Expenses** | 110,450,991.39 | 105,208,039.10 | 4.98% | - | | **Administrative Expenses** | 165,194,188.51 | 141,220,244.56 | 16.98% | - | | **Financial Expenses** | 16,054,219.37 | 30,218,597.18 | -46.87% | Increased deposit interest income | | **R&D Expenses** | 205,915,938.66 | 160,763,588.14 | 28.09% | - | - In 2021, R&D investment totaled **CNY 206 million**, accounting for **6.51% of operating revenue**, with **742 R&D personnel** comprising **18.89%** of the total workforce[81],[83] - Net cash flow from operating activities decreased by **25.94%** year-over-year, primarily due to expanded production scale, increased raw material procurement, and strategic stockpiling to mitigate supply shortages and price increases[96],[97] [Outlook for Future Development](index=45&type=section&id=公司未来发展的展望) The company will continue its dual-driven strategy of organic growth and M&A, planning organizational adjustments in 2022 to establish new energy and precision ceramics business units, advance fundraising project expansion, and implement share buybacks for employee incentives, while also addressing potential risks like technology development and raw material price fluctuations - The core of the 2022 operating plan involves organizational restructuring, establishing **New Energy Business Unit** (based on alumina and boehmite for lithium battery separator coatings) and **Precision Ceramics Business Unit** to seize market opportunities and enhance product added value[116],[117] - The company plans to repurchase shares using **CNY 150 million to CNY 300 million** of its own funds for equity incentives or employee stock ownership plans, aiming to enhance talent motivation[120](index=120&type=chunk) - The company identified five major risks: **technology development, fundraising project returns, raw material price fluctuations, accounts receivable recovery, and M&A goodwill**, and has formulated corresponding countermeasures such as strengthening R&D, optimizing procurement systems, and enhancing customer credit management[123],[125],[126],[128],[129] Corporate Governance [Overview of Corporate Governance](index=51&type=section&id=公司治理概况) During the reporting period, the company operated in strict compliance with laws, maintaining a sound corporate governance structure and independence from its actual controller, with detailed disclosures on board meetings, executive appointments, compensation, and internal control implementation, confirming no material discrepancies with regulations - The company's actual corporate governance structure complies with relevant regulations, including the **Guidelines for Corporate Governance of Listed Companies**, with no material discrepancies[133](index=133&type=chunk) - The company has **no controlling shareholder**, with **Chairman Zhang Xi** serving as the actual controller, and maintains independence from the actual controller in business, personnel, assets, organization, and finance[140],[234] Meeting Frequencies in 2021 | Category | Number of Meetings in 2021 | | :--- | :--- | | **Annual/Extraordinary General Meetings** | 3 | | **Board of Directors Meetings** | 7 | | **Supervisory Board Meetings** | 7 | - In 2021, the total compensation for the company's directors, supervisors, and senior management amounted to **CNY 7.55 million**[153],[155] - The company's internal control system is sound and effective, with both the internal control self-assessment report and the auditor's internal control attestation report receiving **standard unqualified opinions**[175],[181] Environmental and Social Responsibility [Environmental Protection and Social Responsibility](index=70&type=section&id=环境保护与社会责任) This chapter details the company's environmental and social responsibility performance, including pollutant emissions and control measures for key subsidiaries, disclosure of an administrative penalty for hazardous waste management at Jiangsu Guoci (now rectified), and initiatives like rooftop PV projects and a planned new energy business unit to reduce carbon emissions - The company's subsidiaries, **Jiangsu Guoci New Material Technology Co., Ltd.** and **Foshan Sanshui Kanglitai Inorganic Synthetic Materials Co., Ltd.**, are designated as key pollutant-discharging units, with detailed reporting on their pollutant emission data and pollution control facility operations[184],[186],[187] - During the reporting period, Jiangsu Guoci received an administrative penalty of **CNY 119,400** for violating the Solid Waste Pollution Prevention and Control Law, primarily due to issues with hazardous waste management plans not being formulated or filed, which the company has since rectified[189](index=189&type=chunk) - To reduce carbon emissions, the company has completed its **Phase I rooftop photovoltaic project**, generating approximately **1.299 million kWh annually**, and plans to establish a new energy business unit to focus on new energy development in alignment with the national 'dual carbon' strategy[191](index=191&type=chunk) Significant Matters [Overview of Significant Matters](index=74&type=section&id=重大事项概述) This chapter discloses material events impacting the company, including strict adherence to restructuring commitments, absence of irregular guarantees or fund occupation, and significant capital operations like business divestitures, strategic investor introductions, and new company establishments to optimize structure and expand markets - The company and related parties strictly fulfilled commitments made during asset restructuring and refinancing, including **share lock-up** and **avoidance of horizontal competition** during the reporting period[194],[195],[196] - Subsidiary **Shenzhen Aiercai Technology Co., Ltd.** introduced a strategic investor, with the company transferring **8.89% equity for CNY 200 million**, while the investor provided a **CNY 500 million** special development loan[218](index=218&type=chunk) - The company established several new subsidiaries, including **Shenzhen Aiercai New Material Co., Ltd.**, **Hainan Guoci New Material Co., Ltd.**, and a wholly-owned grandchild company in the United States, to support business expansion[217],[219] - The company divested **Shenzhen Aiercai Technology's** structural ceramics business, transferring it to the newly established **Shenzhen Aiercai New Material Co., Ltd.**, to achieve specialized operation of business segments[217](index=217&type=chunk) Changes in Shares and Shareholder Information [Share Changes and Shareholder Structure](index=90&type=section&id=股份变动与股东结构) During the reporting period, the company's total share capital remained unchanged, with share structure shifts due to restricted share unlocking from a 2018 asset acquisition, while Chairman Zhang Xi remained the largest shareholder and Hong Kong Securities Clearing Company Limited the second largest - The total share capital remained unchanged at **1,003,810,338 shares** during the reporting period; due to the unlocking of restricted shares, the proportion of restricted shares decreased from **24.60% to 21.47%**[222](index=222&type=chunk) Top Shareholders | Shareholder Name | Shareholding Percentage | Shares Held at Period End | Restricted Shares Held | | :--- | :--- | :--- | :--- | | **Zhang Xi** | 23.19% | 232,736,041 | 174,552,031 | | **Hong Kong Securities Clearing Company Limited** | 22.25% | 223,337,608 | 0 | | **Dongying Aoyuan Industry and Trade Co., Ltd.** | 3.87% | 38,831,569 | 0 | | **Ruiyuan Growth Value Mixed Securities Investment Fund** | 3.01% | 30,260,772 | 0 | | **Fullgoal Tianhui Selected Growth Mixed Securities Investment Fund** | 2.19% | 22,000,000 | 0 | - The company has a **dispersed equity structure** with **no controlling shareholder**, and **Chairman Zhang Xi** is the actual controller[233],[234] Financial Report [Audit Report](index=99&type=section&id=审计报告) Lixin Certified Public Accountants (Special General Partnership) issued a **standard unqualified audit opinion** on the company's 2021 financial statements, affirming their fair presentation of financial position, operating results, and cash flows, with key audit matters focusing on revenue recognition and goodwill impairment - The auditing firm issued a **standard unqualified audit opinion**, affirming that the financial statements fairly present the company's financial position and operating results for 2021[241],[242] - Key audit matters include: 1. **Revenue Recognition**: Given operating revenue is a key performance indicator, there is an inherent risk of management manipulating the timing of revenue recognition to achieve specific targets 2. **Goodwill Impairment**: As of the end of 2021, the company's goodwill book value was **CNY 1.53 billion**, with impairment testing involving significant accounting estimates and judgments, posing a higher risk[245](index=245&type=chunk) [Key Financial Statements and Notes](index=103&type=section&id=主要财务报表及附注) This chapter presents detailed consolidated and parent company financial statements, including balance sheets, income statements, cash flow statements, and statements of changes in equity, with notes on key items, showing total assets of **CNY 7.88 billion**, equity attributable to the parent company of **CNY 5.74 billion**, total operating revenue of **CNY 3.16 billion**, and net profit of **CNY 845 million** for the year Key Consolidated Balance Sheet Items | Key Consolidated Balance Sheet Items | As of Dec 31, 2021 (CNY) | As of Dec 31, 2020 (CNY) | | :--- | :--- | :--- | | **Total Assets** | 7,878,786,719.57 | 6,024,947,504.49 | | **Total Liabilities** | 1,742,556,634.24 | 655,790,634.84 | | **Equity Attributable to Parent Company Owners** | 5,743,129,732.42 | 4,995,224,063.61 | | **Goodwill** | 1,529,719,141.01 | 1,532,398,407.55 | Key Consolidated Income Statement Items | Key Consolidated Income Statement Items | For the Year Ended 2021 (CNY) | For the Year Ended 2020 (CNY) | | :--- | :--- | :--- | | **Total Operating Revenue** | 3,161,738,769.22 | 2,542,257,374.57 | | **Total Operating Costs** | 2,258,100,562.29 | 1,827,667,414.45 | | **Net Profit** | 844,845,209.99 | 621,190,220.49 | - Changes in the consolidation scope during the reporting period primarily include the establishment of new subsidiaries such as **Shenzhen Aiercai New Material**, **Hainan Guoci**, and **Aiercai Dental USA**, as well as the deregistration and disposal of some subsidiaries with no substantial business operations[520](index=520&type=chunk)

Business Strategy and Development - In 2021, the company proposed to establish a new energy division to capitalize on opportunities in the new energy sector, aiming to enhance its market position and product advantages[10]. - The company is focused on expanding its precision ceramics business to increase product value and extend its material supply chain[10]. - The company aims to maintain its competitive edge and market share by continuously innovating and providing high-quality products and services[10]. - The company is actively involved in R&D for new materials, contributing to its recognition with multiple national awards and standards-setting roles in the industry[32]. - The company is focused on expanding its product offerings and enhancing its competitive position through technological advancements and strategic market initiatives[32]. - The company has established a dual-driven strategy of "internal growth + external mergers and acquisitions," evolving from a single entity to a diversified new materials platform over ten years[115]. - In 2022, the company plans to focus on key businesses aligned with national policies and industry demands, particularly in the green and low-carbon sectors, by establishing a new energy division and a precision ceramics division[117]. Financial Performance - The company's operating revenue for 2021 was ¥3,161,738,769.22, representing a 24.37% increase from ¥2,542,257,374.57 in 2020[23]. - Net profit attributable to shareholders for 2021 was ¥795,159,851.29, a 38.57% increase compared to ¥573,840,299.36 in 2020[23]. - The net profit after deducting non-recurring gains and losses was ¥699,104,394.92, up 29.61% from ¥539,389,691.57 in the previous year[23]. - Basic earnings per share for 2021 was ¥0.79, reflecting a 31.67% increase from ¥0.60 in 2020[23]. - Total assets at the end of 2021 reached ¥7,878,786,719.57, a 30.77% increase from ¥6,024,947,504.49 at the end of 2020[23]. - The net cash flow from operating activities was ¥571,844,677.35, a decrease of 25.94% compared to ¥772,156,561.01 in 2020[23]. - The company reported a total revenue of 754.88 million for the year 2021[157]. Research and Development - The company has a strong focus on research and development, recognizing the challenges posed by rapid technological advancements and the need to meet customer demands[2]. - The company has trained 217 new engineering talents in new materials, 131 skilled workers, 27 technicians, and 5 senior technicians during the reporting period[52]. - Key R&D projects include the development of ultra-fine barium titanate materials, which aims to break foreign technology monopolies and enhance production capabilities[80]. - R&D investment amounted to ¥205,915,938.66 in 2021, an increase from ¥160,763,588.14 in 2020, representing a growth of 28.06%[83]. - The company has not capitalized any R&D expenses in the reported periods, maintaining a capitalization rate of 0.00%[83]. Market Position and Competition - The company holds an 80% market share in the domestic MLCC market and over 25% globally, positioning itself as a leading supplier in the electronic materials sector[32]. - The company has established a leading position in the domestic MLCC dielectric material market, driven by increased demand from 5G base station construction and the automotive sector[39]. - The company is a leading domestic producer of optical communication ceramic sleeves, benefiting from the ongoing 5G communication infrastructure development[36]. - The company has significantly increased its market share in zirconia ceramic blocks due to a substantial rise in domestic demand, with overseas demand also increasing due to factors like cost and service[45]. Risk Management - The company faces risks related to raw material price fluctuations, which could impact production costs and profit margins if prices rise without corresponding increases in product prices[5]. - The company has acknowledged the risk of not achieving expected benefits from fundraising projects due to adverse market conditions or changes in technology[4]. - The company faces risks related to technology development, including the need to keep pace with rapid advancements in new materials and technologies, which could impact its competitive edge[124]. - There is a risk that fundraising projects may not achieve expected benefits due to market fluctuations, which could affect the company's profitability[125]. Governance and Compliance - The company has established a performance evaluation system linking the compensation of directors and senior management to their performance[137]. - The company adheres to strict information disclosure practices, ensuring transparency and fairness for all investors[138]. - The company maintains independence from major shareholders, ensuring autonomous operations and decision-making[140]. - The company has a robust governance structure with a diverse team of executives and board members[151]. Environmental Responsibility - The company has committed to promoting green and low-carbon development and integrating "industrial internet" management with carbon trading[190]. - The company has implemented a clean production plan with 14 feasible solutions, including 12 low-cost and 2 medium/high-cost solutions, resulting in significant economic and environmental benefits[190]. - The rooftop photovoltaic project has generated 129.9 million kWh of electricity annually, contributing to both economic and environmental benefits[190]. - The company has made significant investments in pollution control facilities, including a 99% efficiency dust collection system for various production processes[186]. Talent Development - The company has established a "100-Year Guoci" talent development system to enhance employee skills and core competitiveness[52]. - The company has a structured approach to employee training, including external training opportunities and specific training for designated personnel[168]. - The company has implemented a comprehensive talent development plan to align employee growth with corporate strategic goals[66]. Dividend Policy - The company plans to distribute a cash dividend of 1.10 RMB per 10 shares (including tax) to all shareholders, with no bonus shares issued[9]. - The total distributable profit for the year is RMB 1,754,448,428.38, indicating a strong profitability during the reporting period[172]. - The company has a clear cash dividend policy that complies with its articles of association and shareholder resolutions[170].

Group 1: Event Announcement - Shandong Guoci Materials Co., Ltd. will participate in the "2021 Annual Investor Online Collective Reception Day" organized by Shandong Securities Regulatory Bureau and Shandong Listed Companies Association [2] - The event will take place on November 16, 2021, from 14:00 to 16:00 [2] - Investors can join the event through the "Panjing Roadshow" online platform [2] Group 2: Communication and Transparency - The company aims to enhance communication with investors and improve transparency and governance [2] - Company executives, including Deputy General Manager Xu Shaomei and Securities Affairs Representative Zhao Hongyan, will engage with investors online [2] - The company assures that the information disclosed is true, accurate, and complete, with no false statements or significant omissions [2]

[Important Notice](index=2&type=section&id=Important%20Notice) This section provides essential declarations regarding the quarterly report's integrity and the responsibilities of the company's leadership [Board of Directors' Statement](index=2&type=section&id=Board%20of%20Directors'%20Statement) The company's Board of Directors, Supervisory Committee, and senior management ensure the truthfulness, accuracy, and completeness of this quarterly report and assume corresponding legal responsibilities, with key executives guaranteeing the financial statements' authenticity - The company's Board of Directors, Supervisory Committee, and all directors, supervisors, and senior management guarantee the truthfulness, accuracy, and completeness of the quarterly report, free from false records, misleading statements, or major omissions[2](index=2&type=chunk) - Company head Zhang Xi, chief accountant Xiao Qiang, and head of accounting department Wang Lianzhen declare that the financial statements in the quarterly report are true, accurate, and complete[2](index=2&type=chunk) [Company Profile](index=3&type=section&id=Company%20Profile) This section details the company's fundamental information, including key financial performance indicators and shareholder structure [Key Accounting Data and Financial Indicators](index=3&type=section&id=Key%20Accounting%20Data%20and%20Financial%20Indicators) In Q1 2021, the company achieved operating revenue of **CNY 621 million**, a 27.55% increase, and net profit attributable to shareholders of **CNY 186 million**, up 61.62%, with basic EPS at **CNY 0.19** and operating cash flow at **-CNY 77 million** Key Financial Indicators for Q1 2021 | Indicator | Current Period | Prior Period | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Operating Revenue (CNY) | 620,675,361.53 | 486,614,841.13 | 27.55% | | Net Profit Attributable to Shareholders (CNY) | 185,967,992.97 | 115,063,108.27 | 61.62% | | Net Profit Attributable to Shareholders (Excluding Non-recurring Items) (CNY) | 162,941,769.51 | 107,707,455.69 | 51.28% | | Net Cash Flow from Operating Activities (CNY) | -77,328,098.09 | 49,065,168.90 | -257.60% | | Basic Earnings Per Share (CNY/share) | 0.190 | 0.110 | 72.73% | | Weighted Average Return on Net Assets | 3.65% | 3.10% | Increased by 0.55 percentage points | | Total Assets (CNY) | 6,250,282,845.72 | - | Increased by 3.74% from end of prior year | | Net Assets Attributable to Shareholders (CNY) | 5,181,192,056.58 | - | Increased by 3.72% from end of prior year | Details of Non-recurring Gains and Losses | Item | Amount from Year-Beginning to End of Reporting Period (CNY) | | :--- | :--- | | Gains/Losses on Disposal of Non-current Assets | 58,858.71 | | Government Grants Recognized in Current Profit/Loss | 14,805,972.69 | | Gains/Losses from Entrusted Investments or Asset Management | 4,757,221.17 | | Other Non-operating Income/Expenses and Capital Occupation Fees | 8,605,368.51 | | Less: Income Tax and Minority Interest Impact | 5,201,197.62 | | **Total** | **23,026,223.46** | [Shareholder Information](index=4&type=section&id=Shareholder%20Information) As of the end of the reporting period, the company had **40,383** common shareholders, with controlling shareholder Zhang Xi holding 23.19% and Hong Kong Securities Clearing Company Limited holding 22.29% [Total Common Shareholders and Top Ten Shareholders' Holdings](index=4&type=section&id=Total%20Common%20Shareholders%20and%20Top%20Ten%20Shareholders'%20Holdings) As of the reporting period end, the company had **40,383** common shareholders, with Zhang Xi as the largest shareholder at 23.19% and Hong Kong Securities Clearing Company Limited at 22.29% - The total number of common shareholders at the end of the reporting period was **40,383**[6](index=6&type=chunk) Top Ten Shareholders' Holdings | Shareholder Name | Shareholder Nature | Shareholding Percentage | Number of Shares Held (shares) | | :--- | :--- | :--- | :--- | | Zhang Xi | Domestic Natural Person | 23.19% | 232,736,041 | | Hong Kong Securities Clearing Company Limited | Overseas Legal Person | 22.29% | 223,796,571 | | Dongying Aoyuan Industry and Trade Co., Ltd. | Domestic Non-state-owned Legal Person | 4.28% | 42,984,569 | | Ruoyuan Growth Value Mixed Securities Investment Fund | Domestic Non-state-owned Legal Person | 2.83% | 28,452,872 | | Fullgoal Tianhui Selected Growth Mixed Securities Investment Fund (LOF) | Domestic Non-state-owned Legal Person | 2.49% | 25,000,000 | [Changes in Restricted Shares](index=6&type=section&id=Changes%20in%20Restricted%20Shares) During the period, total restricted shares decreased from **247 million** to **237 million**, primarily due to Zhang Xi lifting restrictions on **10,117,319** shares Restricted Share Movement Details | Shareholder Name | Restricted Shares at Beginning of Period (shares) | Restricted Shares Released This Period (shares) | Restricted Shares at End of Period (shares) | | :--- | :--- | :--- | :--- | | Zhang Xi | 184,669,350 | 10,117,319 | 174,552,031 | | **Total** | **246,915,271** | **10,117,319** | **236,797,952** | [Important Matters](index=7&type=section&id=Important%20Matters) This section outlines significant events and their impact on the company's operations and financial position [Explanation of Significant Changes in Key Financial Data](index=7&type=section&id=Explanation%20of%20Significant%20Changes%20in%20Key%20Financial%20Data) During the period, significant changes occurred across financial items, including a **264%** increase in trading financial assets, a substantial decrease in financial expenses, a **439.51%** rise in investment income, and a **257.60%** decrease in operating cash flow Significant Changes in Balance Sheet Items | Statement Item | Change Rate | Reason for Change | | :--- | :--- | :--- | | Trading Financial Assets | 264.00% | Purchase of wealth management products this period | | Prepayments | 78.20% | Increase in prepayments for raw materials | | Other Receivables | 325.92% | Increase in government subsidies receivable | | Other Non-current Assets | 231.57% | Increase in prepaid engineering and equipment costs this period | Significant Changes in Income Statement Items | Statement Item | Change Rate | Reason for Change | | :--- | :--- | :--- | | Financial Expenses | -1154.79% | Increase in deposit interest income and decrease in borrowing interest expense this period | | Other Income | 212.32% | Increase in government grants received this period | | Investment Income | 439.51% | Increase in wealth management income from temporarily idle raised funds | | Non-operating Expenses | -93.28% | Donations for epidemic in the same period last year | | Income Tax Expense | 79.32% | Increase in taxable income this period | Significant Changes in Cash Flow Statement Items | Statement Item | Change Rate | Reason for Change | | :--- | :--- | :--- | | Net Cash Flow from Operating Activities | -257.60% | Increase in raw material purchases and employee bonus payments this period | | Net Cash Flow from Investing Activities | -783.24% | Increase in wealth management product purchases this period | | Net Cash Flow from Financing Activities | -41.14% | Increase in cash dividends paid this period | [Business Review and Outlook](index=8&type=section&id=Business%20Review%20and%20Outlook) In Q1 2021, stable operations and strong demand for honeycomb ceramics and electronic materials drove significant revenue and profit growth, while the company identified and addressed five key risks including COVID-19, raw material prices, and exchange rate fluctuations [Operating Performance Review](index=8&type=section&id=Operating%20Performance%20Review) Q1 2021 performance growth was primarily driven by robust downstream customer demand and ample orders in honeycomb ceramics and electronic materials, leading to a **27.55%** increase in sales revenue - Performance growth was primarily driven by strong downstream customer product demand and ample orders in the company's honeycomb ceramic and electronic material businesses[15](index=15&type=chunk) - The company holds approximately **CNY 640 million** in ongoing dispersed orders[15](index=15&type=chunk) [Risk Factors and Countermeasures](index=9&type=section&id=Risk%20Factors%20and%20Countermeasures) The company identified five key risks: recurring COVID-19 impacts, rising raw material costs, accounts receivable collection, M&A integration, and exchange rate fluctuations, for which corresponding mitigation strategies have been developed - **COVID-19 recurrence risk**: Addressed by internal epidemic prevention measures (e.g., vaccination) and seizing import substitution opportunities to expand the domestic market[17](index=17&type=chunk) - **Raw material price fluctuation risk**: Managed by expanding supplier resources and securing key suppliers through equity participation or joint ventures to control costs and ensure supply[18](index=18&type=chunk) - **Accounts receivable collection risk**: Mitigated by strengthening customer credit management, engaging China Export & Credit Insurance Corporation for background checks, and utilizing letters of credit or insurance for some clients[19](index=19&type=chunk)[20](index=20&type=chunk) - **Merger and acquisition and goodwill impairment risk**: Addressed by integrating acquired entities into the company's business system (CBS) for rapid synergy and conducting annual goodwill impairment tests[21](index=21&type=chunk) - **Exchange rate fluctuation risk**: Mitigated by improving foreign exchange hedging, adopting diverse settlement methods, and agreeing on price adjustment mechanisms with clients[22](index=22&type=chunk)[23](index=23&type=chunk) [Progress of Important Matters](index=11&type=section&id=Progress%20of%20Important%20Matters) The company completed its 2020 equity distribution in April 2021, paying a cash dividend of **CNY 1.00** per 10 shares based on a total share capital of **1,003,810,338** shares - The company implemented its 2020 annual equity distribution plan, paying a cash dividend of **CNY 1.00** per 10 shares, with the record date on April 15, 2021, and ex-dividend date on April 16, 2021[24](index=24&type=chunk) [Use of Raised Funds](index=11&type=section&id=Use%20of%20Raised%20Funds) The company disclosed the use of raised funds, with a revised committed investment of **CNY 822 million** for projects like MLCC dielectric materials and automotive honeycomb ceramics, having cumulatively invested **CNY 143 million** by period-end Progress of Raised Fund Investment Projects | Committed Investment Project | Adjusted Total Investment (CNY million) | Cumulative Investment as of Period-End (CNY million) | Investment Progress | | :--- | :--- | :--- | :--- | | Dielectric Materials for Ultra-miniature Multilayer Ceramic Capacitors (MLCC) | 200.00 | 38.02 | 10.60% | | Automotive Honeycomb Ceramic Manufacturing Project | 170.00 | 21.34 | 11.94% | | Annual Production of 3,000 Tons of High-Performance Rare Earth Functional Materials | 228.00 | 3.71 | 2.69% | | Replenishment of Working Capital | 224.30 | 80.32 | 36.63% | | **Total** | **822.30** | **143.39** | - | - Unused raised funds are held in the company's dedicated raised funds account[32](index=32&type=chunk) [Financial Statements](index=15&type=section&id=Financial%20Statements) This section presents the company's financial performance and position through its consolidated and parent company financial statements [Financial Statements](index=15&type=section&id=Financial%20Statements) This section presents the company's unaudited consolidated and parent company financial statements for Q1 2021, including the balance sheet, income statement, and cash flow statement [Consolidated Balance Sheet](index=15&type=section&id=Consolidated%20Balance%20Sheet) As of March 31, 2021, total assets were **CNY 6.25 billion**, up 3.74% from year-start, and equity attributable to parent company owners was **CNY 5.18 billion**, up 3.72% Consolidated Balance Sheet Key Items (March 31, 2021) | Item | Amount (CNY) | | :--- | :--- | | **Total Assets** | **6,250,282,845.72** | | Total Current Assets | 3,234,848,542.70 | | Total Non-current Assets | 3,015,434,303.02 | | **Total Liabilities** | **708,218,715.01** | | **Total Owners' Equity** | **5,542,064,130.71** | | Owners' Equity Attributable to Parent Company | 5,181,192,056.58 | [Consolidated Income Statement](index=23&type=section&id=Consolidated%20Income%20Statement) In Q1 2021, the company achieved total operating revenue of **CNY 621 million**, a 27.55% increase, and net profit attributable to parent company shareholders of **CNY 186 million**, up 61.62%, with basic EPS at **CNY 0.19** Consolidated Income Statement Key Items (Q1 2021) | Item | Amount for Current Period (CNY) | Amount for Prior Period (CNY) | | :--- | :--- | :--- | | Total Operating Revenue | 620,675,361.53 | 486,614,841.13 | | Operating Profit | 207,338,599.55 | 126,722,253.09 | | Total Profit | 217,157,010.53 | 132,479,424.23 | | Net Profit | 192,907,261.05 | 118,956,630.20 | | Net Profit Attributable to Parent Company Shareholders | 185,967,992.97 | 115,063,108.27 | | Basic Earnings Per Share (CNY/share) | 0.190 | 0.110 | [Consolidated Cash Flow Statement](index=28&type=section&id=Consolidated%20Cash%20Flow%20Statement) In Q1 2021, net cash flow from operating activities was **-CNY 77.33 million**, a significant decrease due to increased raw material purchases and employee bonuses, while investing cash flow was **-CNY 492 million** due to wealth management product purchases Consolidated Cash Flow Statement Key Items (Q1 2021) | Item | Amount for Current Period (CNY) | Amount for Prior Period (CNY) | | :--- | :--- | :--- | | Net Cash Flow from Operating Activities | -77,328,098.09 | 49,065,168.90 | | Net Cash Flow from Investing Activities | -492,441,280.62 | -55,754,269.24 | | Net Cash Flow from Financing Activities | -20,998,012.06 | -14,877,913.33 | | Net Increase in Cash and Cash Equivalents | -589,706,742.11 | -20,971,599.31 | | Cash and Cash Equivalents at Period-End | 510,621,926.76 | 198,037,284.68 | [Explanation of Financial Statement Adjustments](index=32&type=section&id=Explanation%20of%20Financial%20Statement%20Adjustments) Effective January 1, 2021, the company adopted new lease accounting standards, adjusting opening financial statements to recognize right-of-use assets, lease liabilities, and current non-current liabilities, with no impact on owners' equity - The company first adopted new lease accounting standards effective January 1, 2021, and retrospectively adjusted the opening financial statements for the current period[58](index=58&type=chunk) Consolidated Balance Sheet Opening Adjustments | Adjusted Item | Adjustment Amount (CNY) | | :--- | :--- | | Right-of-Use Assets | +13,156,057.35 | | Non-current Liabilities Due Within One Year | +6,723,995.66 | | Lease Liabilities | +6,432,061.69 | [Audit Report Explanation](index=37&type=section&id=Audit%20Report%20Explanation) The company's Q1 2021 report is unaudited - The company's first-quarter report is unaudited[66](index=66&type=chunk)