DONGFENG GROUP(00489)2024-04-29 23:00Vehicle Sales Performance - Total vehicle sales in 2023 were approximately 2.0882 million units, a decrease of 15.3% year-on-year[6] - Sales of self-owned brand passenger vehicles were 347,400 units, down 30.2% year-on-year[6] - Commercial vehicle sales reached approximately 343,400 units, an increase of 10.3% year-on-year[6] - New energy vehicle sales accounted for approximately 348,000 units, representing a 2.7 percentage point increase in the company's total sales[6] - The high-end brand Lantu achieved sales of over 50,000 units, a year-on-year increase of 159.1%[6] - Overseas export sales reached 169,100 units, a year-on-year increase of 14.3%, setting a historical record[6] - Sales from January to February 2024 were 331,000 units, a year-on-year increase of 26.2%[8] - Dongfeng Motor Group aims to sell 2.7 million vehicles in 2024, a 29% increase from 2023, with passenger vehicle sales target at 2.28 million units (30% growth) and commercial vehicle sales target at 420,000 units (22% growth)[17] Financial Performance - The company achieved sales revenue of 99.315 billion yuan, with a net loss attributable to shareholders of 3.996 billion yuan[6] - The company's cash reserves exceeded 100 billion yuan by the end of 2023[6] - The asset-liability ratio was 51.7%, with operating cash flow increasing by 1.991 billion yuan year-on-year[6] - Total revenue for 2023 was RMB 99.315 billion, an increase of 7.2% year-on-year, primarily driven by Dongfeng Commercial Vehicle, Dongfeng Liuzhou Motor, and Voyah[78] - Commercial vehicle revenue increased by 28.1% year-on-year to RMB 49.538 billion, while passenger vehicle revenue decreased by 8.96% to RMB 42.543 billion[80][81] - Automotive financial business revenue decreased by 4.5% year-on-year to RMB 6.151 billion due to reduced loan scale and interest rates[82] - Gross profit increased by 7.2% year-on-year to RMB 9.466 billion, with a gross margin of 9.5%, driven by improved profitability in self-owned passenger vehicles and NEV businesses[83] - Shareholder attributable loss was RMB 39.96 billion in 2023, compared to a profit of RMB 102.65 billion in 2022, with a net profit margin of -4.0% and a return on equity of -2.6%[93] Production Capacity and R&D - Dongfeng Motor Group's total vehicle production capacity reached 3.98 million units by the end of 2023, an increase of 140,000 units compared to 2022, with passenger vehicle capacity at 3.36 million units and commercial vehicle capacity at 620,000 units[13] - The company's capital expenditure in 2023 was RMB 12.487 billion, a 32% increase year-over-year, driven by investments in new energy vehicle projects and R&D[16] - The company produced and sold 34 new energy passenger vehicle models and 9 new energy commercial vehicle models by the end of 2023[12] - The company's R&D expenditure and intangible asset purchases in 2023 amounted to RMB 3.711 billion, while fixed assets and other expenditures totaled RMB 8.776 billion[16] Market and Industry Trends - China's GDP grew by 5.2% year-on-year in 2023, with total vehicle production and sales reaching 30.16 million and 30.09 million units, up 11.6% and 12.0% respectively, setting a new historical high[76] - New energy vehicle (NEV) production and sales reached 9.587 million and 9.495 million units, up 35.8% and 37.9% respectively, with a market share of 31.6%, an increase of 5.9 percentage points year-on-year[76] - The company's total sales in 2023 were approximately 2.0882 million units, a year-on-year decrease of 15.3%, with sales revenue of RMB 99.315 billion and a gross margin of 9.5%[77] - Commercial vehicle sales increased by 10.3% year-on-year to 343,400 units, driven by macroeconomic recovery and favorable policies[77] - NEV sales reached 348,000 units, accounting for 2.7 percentage points more of the company's total sales, with the high-end brand Voyah achieving sales of 50,000 units, up 159.1% year-on-year[77] Corporate Governance and Leadership - Yang Qing, Executive Director, Chairman, and President, has extensive experience in the automotive industry, having held various leadership roles since 1988[100] - You Zheng, Executive Director and Vice President, holds a Master's in Business Administration and has significant experience in product planning and project management[101] - Zong Qingsheng, Independent Non-Executive Director, has a strong background in international business and investment management, with over 30 years of experience[102] - Leung Wai Lap, Independent Non-Executive Director, is a seasoned accountant with extensive experience in corporate restructuring and IPOs[103] - Hu Yiguang, Independent Non-Executive Director, is a senior partner at a leading law firm and has served as a legal advisor to major state-owned enterprises[104] - He Wei, Chairman of the Supervisory Board, has a Master's in Business Administration and extensive experience in corporate governance and human resources[105] - Jin Jun, Employee Supervisor, has a strong background in mechanical engineering and has held various leadership roles within the company[106] - Bao Hongxiang, Supervisor, has a Master's in Business Administration and extensive experience in financial oversight and auditing[107] - Feng Changjun, Vice President, has extensive experience in finance and management, having served in various leadership roles since 2001[108] - Li Jun, Board Secretary, has a strong background in automotive industry management, with roles at Dongfeng Motor Corporation and Shenlong Automobile[109] - Liao Xianzhi, Joint Company Secretary, has over 26 years of experience in accounting, financial management, and operations within the company[110] - Yuan Yingxin, Joint Company Secretary, brings over 25 years of corporate service experience, specializing in providing services to listed companies and multinational corporations[111] Financial Statements and Audits - The company's financial statements for 2023 were prepared in compliance with listing rules, company regulations, and international accounting standards, with no issues found in the financial management system[116] - The company's related-party transactions were conducted at fair market prices and conditions, with no harm to the company or shareholder interests[116] - The company's consolidated financial statements for 2023 were prepared in accordance with International Financial Reporting Standards (IFRS) and reflect a true and fair view of the financial position and performance[173] - The company's financial statements disclosed warranty provisions in detail, including accounting estimates, judgments, and related notes[176] - The company recorded an impairment provision of RMB 318 million for property, plant, and equipment (PP&E) and intangible assets for the year ended December 31, 2023[177] - The carrying value of PP&E and intangible assets as of December 31, 2023, was RMB 34,952 million[177] - The domestic automotive market's intense competition led to a decline in total sales and losses, resulting in impairment indicators for PP&E and intangible assets[177] - The company estimated the recoverable amount based on the value in use of cash-generating units, involving future cash flow projections and discount rate assumptions[177] - The impairment assessment is considered a key audit matter due to the sensitivity of assumptions to future market or economic conditions[177] Shareholder and Investor Relations - The company's controlling shareholder, Dongfeng Motor Group Co., Ltd., holds approximately 72.6% of the company's shares, with the remaining 27.4% held by public shareholders[121] - The company ensures equal treatment of all shareholders and protects their legal rights, with strict adherence to legal requirements for shareholder meetings[122] - Shareholders holding 10% or more of voting shares can request the board to convene an extraordinary general meeting or class meeting, and can convene the meeting themselves if the board fails to do so within 30 days[122] - Shareholders holding 5% or more of voting shares can propose new resolutions at the annual general meeting[123] - The company actively communicates with investors through analyst meetings, press conferences, non-deal roadshows, and reverse roadshows[124] - The company discloses monthly securities transaction reports as required by the Hong Kong Stock Exchange and quarterly reports for its ultra-short-term financing bonds as required by the China Interbank Market Dealers Association[124] Risk Management and Internal Controls - The company has established a comprehensive risk management and internal control system, including financial, operational, and compliance controls[167] - The company conducted a self-evaluation of internal control effectiveness, covering key areas such as safety management, quality control, and financial management[168] - No major risk events occurred during the reporting period, and the company focused on integrating risk management with business operations[168] - The internal audit function emphasized communication with external auditors and focused on decision-making processes, accounting information quality, and economic responsibility[168] - The Audit and Risk Management Committee, composed entirely of independent non-executive directors, is responsible for reviewing financial reports and overseeing external auditors[154] - The Audit and Risk Management Committee held three meetings in 2023, reviewing key matters including the 2022 financial status report and the 2023 interim financial report[156] - The company's Audit and Risk Management Committee is responsible for evaluating and determining the nature and extent of risks the company is willing to accept in achieving its strategic objectives[155] - The Audit and Risk Management Committee ensures the internal audit function has sufficient resources and appropriate status within the company[155] - The Audit and Risk Management Committee reviews the company's financial controls, risk management, and internal control systems[155] - The Audit and Risk Management Committee ensures fair and independent investigation of concerns raised by employees or other stakeholders regarding financial reporting or internal controls[155] - The Audit and Risk Management Committee coordinates communication between internal and external auditors to ensure their work is aligned[155] Corporate Social Responsibility and Sustainability - The company's total donations for 2023 amounted to approximately RMB 11 million[22] - The company emphasizes the importance of maintaining a balance between shareholder, employee, and societal interests while focusing on environmental protection and public welfare[170] - Female employees account for approximately 18.22% of the total workforce, reflecting the company's ongoing efforts to achieve gender diversity[149] Joint Ventures and Partnerships - The company received a total of approximately RMB 2.349 billion in dividends from its joint ventures in 2023[19] - The company's joint ventures have no specific dividend policy, but dividends are typically declared when distributable profits are available[19] - Joint ventures and their subsidiaries, joint ventures, and associated enterprises of Dongfeng Motor Group purchased auto parts and production equipment from joint venture partners, with a total payment of RMB 43.196 billion as of December 31, 2023[70] - Dongfeng Honda Auto Parts Co., Ltd. continues to sell auto parts to Honda Trading (China) Co., Ltd. and Honda Motor (China) Investment Co., Ltd. as of December 31, 2023[71] - Dongfeng Honda Engine Co., Ltd. sold engines and related auto parts to GAC Honda Automobile Co., Ltd. for a total consideration of RMB 118 million in 2023[73] - Joint ventures and their subsidiaries paid a total of RMB 4.44 billion for technology licenses and technical support to their joint venture partners as of December 31, 2023[75] - The pricing principle for technology licenses and technical support between joint ventures and their partners is based on fair compensation for R&D costs, with costs evenly amortized over the operating period[75] - GAC Honda Automobile Co., Ltd. is required to purchase engines and related auto parts exclusively from Dongfeng Honda Engine Co., Ltd. during the joint venture period[72] - The investment return ratio for GAC Honda Automobile Co., Ltd. and Dongfeng Honda Engine Co., Ltd. is maintained based on their initial investment amounts of USD 139.94 million and USD 60.06 million, respectively[72] - Technology license and technical support agreements are negotiated under fair commercial terms and are governed by umbrella agreements[74] - Dongfeng Honda Engine Co., Ltd. was established to manufacture engines and related auto parts for GAC Honda Automobile Co., Ltd., a major joint venture of Honda in China[72] - The sales of auto parts by Dongfeng Honda Auto Parts Co., Ltd. to Honda Trading (China) Co., Ltd. are considered continuous connected transactions[71] - The terms for technology licenses and technical support are determined based on the expected lifespan of the vehicle models[74] Financial Transactions and Agreements - The company's total share capital as of December 31, 2023, was RMB 8,302,252,000, divided into 8,302,252,000 ordinary shares with a par value of RMB 1 each[22] - The company repurchased a total of 313.092 million H shares on the Hong Kong Stock Exchange in 2023[23] - The company's top five customers accounted for no more than 30% of its total revenue in 2023[22] - The company's H share repurchase program was authorized at the annual general meeting on June 20, 2023, to maintain investment value and market reputation[23] - The company's total reserves and equity changes for 2023 are detailed in the audited financial statements[21] - The company's largest shareholder, Dongfeng Motor Group Co., Ltd., holds 100% of the domestic shares and 10.10% of the H shares[26] - The company's board recommended no profit distribution for 2023, subject to approval at the annual general meeting on June 21, 2024[21] - The company has a total of 112,706 full-time employees as of December 31, 2023, with manufacturing workers accounting for 58.07% (65,475 employees) and engineering technicians making up 16.56% (18,667 employees)[36] - The company's five highest-paid individuals are detailed in the audited financial statements, with specific figures provided in Note 9[35] - The company's public shareholders hold more than 25% of the total issued share capital as of the annual report date[39] - The company has a trademark licensing agreement with Dongfeng Motor Group Co., Ltd., which allows the use of certain trademarks for product sales and commercial activities, with the agreement automatically renewing every ten years[40] - The company has made contributions to social security funds, including basic pension, supplementary pension, medical insurance, unemployment insurance, and housing provident funds, through accounts under Dongfeng Motor Group Co., Ltd.[42] - The annual transaction ceiling for automotive parts sales to Dongfeng Motor Group Co., Ltd. and its subsidiaries in 2023 is approximately RMB 1.5 billion, with actual payments amounting to RMB 351 million by the end of 2023[44] - The annual transaction ceiling for automotive parts procurement from Dongfeng Motor Group Co., Ltd. and its subsidiaries in 2023 is approximately RMB 580 million, with actual payments amounting to RMB 106 million by the end of 2023[46] - The annual transaction ceiling for logistics services from Dongfeng Motor Group Co., Ltd. and its subsidiaries in 2023 is approximately RMB 8 billion, with actual payments amounting to RMB 5.375 billion by the end of 2023[48] - The annual transaction ceiling for automotive inspection services from Dongfeng Motor Group Co., Ltd. and its subsidiaries in 2023 is approximately RMB 1 billion, with actual payments amounting to RMB 572 million by the end of 2023[50] - Dongfeng Motor Group has set an annual loan limit of RMB 1.5 billion for Dongfeng Motor Group Co., Ltd. and its subsidiaries for 2023[52] - As of December 31, 2023, the loan balance from Dongfeng Motor Group Co., Ltd. and its subsidiaries to Dongfeng Motor Group was approximately RMB 0[52] - The maximum deposit amount for Dongfeng Motor Group in Dongfeng Nissan Auto Finance Co., Ltd. for 2023 is set at RMB 3.0 billion[54] - As of December 31, 2023, the deposit balance of Dongfeng Motor Group in Dongfeng Nissan Auto Finance Co., Ltd. was approximately RMB 0[54] - The lease agreement between Dongfeng Motor Group and Dongfeng Motor Group Co., Ltd. has a term of three years, from January 4, 2023, to December 31, 2025[55] - The rental payment under the lease agreement is to be made semi-annually, with a penalty rate of 5% per day for late payments[55] - The net value of the right-of-use assets from leasing by Dongfeng Motor Group to Dongfeng Motor Group Co., Ltd. for 2023 is capped at RMB 1.5 billion[56] - As of December 31, 2023, the net value of the right-of-use assets from leasing by Dongfeng Motor Group (excluding Dongfeng Motor Co., Ltd.) to Dongfeng Motor Group Co., Ltd. was RMB 1.027 billion[56] - The net value of the right-of-use assets generated from the land lease between Dongfeng Motor Co., Ltd. and Dongfeng Motor Group Co., Ltd. is RMB 485 million as of December 31, 2023[57] - The total amount paid by Dongfeng Motor Group to Dongfeng Hongtai for mutual procurement of vehicles and auto parts is RMB 2.272 billion and RMB 383 million respectively as of December 31, 2023[59] - The annual upper limit for vehicle sales transactions between Dongfeng Motor Group and Dongfeng Nissan Finance Lease Co., Ltd. is RMB 1.00 billion for 2023, with actual purchases amounting to RMB 0.00 billion as of December 31, 2023[61] - The annual upper limit for auto parts procurement from Dongfeng Motor Group Co., Ltd. and its subsidiaries is RMB 100 million for 2023, with actual payments amounting to RMB 41.223 million as of December 31, 2023[63] - Dongfeng Motor Group and its subsidiaries provided entrusted loans to Dongfeng Nissan Finance Leasing Co., Ltd. with an annual limit of RMB 2.8 billion, but the actual amount provided as of December 31, 2023, was RMB 0.00 billion[65] - Dongfeng Motor Group signed a total vehicle and chassis sales agreement with Dongfeng Motor Group Co., Ltd., with an annual transaction limit of RMB 1.5 billion for 202