Company Information Company Basic Information Refeng Power Group (2025), incorporated in the Cayman Islands, operates from China and Hong Kong, governed by executive and independent non-executive directors, and supported by key committees - The company is incorporated in the Cayman Islands with stock code 202556 - The Board of Directors includes four executive directors, such as Mr. Meng Lianzhou (Chairman and CEO), and three independent non-executive directors, such as Mr. Wei Anli10 - The company has established an Audit Committee, a Nomination Committee, and a Remuneration Committee to enhance corporate governance10 - The auditor is KPMG, and the legal counsel is Messrs. Chiu & Partners10 Company Overview Principal Business and Competitive Advantages Refeng Power Group, a professional cylinder block manufacturer in Hebei, China, produces cylinder blocks, cylinder heads, and auxiliary components, serving leading Chinese automakers with strong manufacturing and R&D - The Group is a professional cylinder block manufacturer in Shenzhou City, Hebei Province, China, with main products being cylinder blocks, cylinder heads, and auxiliary cylinder block components1314 - As of December 31, 2020, the Group owned and operated 3 precision casting lines and 18 machining lines13 - Competitive advantages include: being a professional cylinder block manufacturer and renowned cylinder head producer in China, highly flexible production facilities, continuous optimization and innovative production processes and technologies, and excellent design and R&D capabilities15 Financial Summary Overview of Key Financial Data The Group's 2020 revenue grew 22.1% to RMB 433.5 million, gross profit rose 24.3% to RMB 106.5 million, and profit for the year increased 11.6% to RMB 33.6 million, with net current assets decreasing and gearing ratio rising to 16.7% Key Items from the Consolidated Statement of Profit or Loss and Other Comprehensive Income (RMB in thousands) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 433,475 | 355,049 | 610,734 | 700,365 | 669,894 | | Gross Profit | 106,492 | 85,680 | 217,400 | 190,051 | 193,101 | | Gross Margin | 24.6% | 24.1% | 31.1% | 31.0% | 28.8% | | Profit for the Year | 33,600 | 30,115 | 102,349 | 94,798 | 93,725 | | Net Profit Margin | 7.8% | 8.5% | 16.8% | 13.5% | 14.0% | | Basic and Diluted Earnings Per Share (RMB) | 0.042 | 0.038 | 0.128 | 0.158 | 0.156 | Key Items from the Consolidated Statement of Financial Position (RMB in thousands) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | Non-current Assets | 835,239 | 797,345 | 670,730 | 770,444 | 749,506 | | Current Assets | 605,434 | 522,000 | 637,939 | 459,685 | 377,772 | | Current Liabilities | 427,670 | 317,225 | 376,253 | 438,612 | 446,698 | | Net Current Assets / (Net Current Liabilities) | 177,764 | 204,775 | 199,327 | 12,987 | 1,519 | | Non-current Liabilities | 54,744 | 61,802 | 63,607 | 180,786 | 162,973 | | Net Assets | 958,259 | 940,318 | 906,164 | 581,707 | 509,276 | | Gearing Ratio | 16.7% | 12.9% | 23.1% | 39.2% | 39.4% | Chairman's Report 2020 Annual Performance and Challenges Despite pandemic challenges, the Group's 2020 revenue grew 22.1% to RMB 433.5 million and gross profit rose 24.3% to RMB 106.5 million, but increased competition and client financial issues led to a RMB 13.5 million bad debt provision - Revenue in 2020 increased by approximately 22.1% year-on-year to RMB 433.5 million, and gross profit increased by approximately 24.3% year-on-year to RMB 106.5 million104 - Due to a client filing for bankruptcy, the Group made an additional provision for bad debts of approximately RMB 13.5 million in 2020104 Strategic Adjustments and Future Outlook The Group actively adjusted its client structure, adding FAW Group as a key client for in-depth cooperation on lightweight products, while also exploring products like motor housings and hybrid power cylinder blocks in line with new energy vehicle trends, and strengthening cooperation with industrial vehicle companies in the diesel cylinder block sector; in 2021, the focus will be on developing new energy vehicles, automotive lightweighting, and non-engine parts businesses - The Group added FAW Group as a key client, and both parties will extensively collaborate on lightweight series products, such as aluminum cylinder blocks104 - Actively exploring new energy vehicle development, cooperating on motor housing production, and seeking opportunities for hybrid power cylinder blocks and other related products104 - Strengthening cooperation with industrial vehicle companies in the diesel cylinder block sector, with Deutz sample submission completed in 2020 and mass production expected to commence in 2021104 - In 2021, the Group will focus on developing new energy vehicles, automotive lightweighting, and non-engine parts businesses, and seek directions for next-generation automotive parts in R&D or collaboration106 Biographies of Directors and Senior Management Executive Directors' Biographies The Group's four executive directors, including Mr. Meng Lianzhou (Chairman and CEO), each possess over 20 years of experience in the cylinder block and cylinder head manufacturing industry, overseeing the Group's overall strategy, business operations, product R&D, and financial management - Mr. Meng Lianzhou (60), Chairman and CEO, is responsible for overall strategic development and business development, with over 20 years of experience in the cylinder block and cylinder head manufacturing industry114 - Mr. Liu Zhanwen (68), Executive Director, is responsible for overall business operations, with over 20 years of experience in the cylinder block and cylinder head manufacturing industry114 - Mr. Zhang Yuexuan (72), Executive Director, is responsible for overall product R&D, with over 20 years of experience in the cylinder block and cylinder head manufacturing industry118 - Mr. Liu Enwang (59), Executive Director, is responsible for overall financial management, possessing extensive financial experience118 Independent Non-Executive Directors' Biographies The three independent non-executive directors, Mr. Wei Anli, Mr. Ren Keqiang, and Mr. Yu Zhenqiu, possess extensive professional knowledge and experience in the internal combustion engine industry, investment management, and accounting, corporate finance, and auditing, respectively, providing independent and objective opinions to the Board - Mr. Wei Anli (68), Independent Non-Executive Director, has held various positions in the China Internal Combustion Engine Industry Association, possessing rich internal combustion engine industry experience124 - Mr. Ren Keqiang (47), Independent Non-Executive Director, has over 13 years of experience in investment and management124 - Mr. Yu Zhenqiu (48), Independent Non-Executive Director, has over 25 years of experience in accounting, corporate finance, compliance, and auditing, and is a Fellow of the Hong Kong Institute of Certified Public Accountants128 Senior Management Biographies The Group's senior management includes Mr. Wei Xilai (Chairman's Secretary), Mr. Xie Fei (Executive Deputy General Manager), Mr. Wen Qingwei (Deputy General Manager), and Mr. Wang Jiawei (CFO and Company Secretary), who are responsible for administration, business operations, product development and quality control, and finance and company secretarial matters, respectively - Mr. Wei Xilai (36), Chairman's Secretary, is responsible for overall administrative work128 - Mr. Xie Fei (46), Executive Deputy General Manager, is responsible for the overall management of business operations129 - Mr. Wen Qingwei (49), Deputy General Manager, is responsible for overall product development and quality control133 - Mr. Wang Jiawei (41), CFO and Company Secretary, is responsible for overseeing finance, banking management, and company secretarial duties133 Management Discussion and Analysis Industry Overview In 2020, China's automotive market experienced a rebound after an initial decline due to the pandemic, with sales decreasing by only 1.9% year-on-year, while new energy vehicle sales reached a record high; national policies strongly support the development of new energy vehicles, and the industry has entered a phase of inventory competition, making component R&D and production critical - China's automobile sales in 2020 were 25.311 million units, a year-on-year decrease of 1.9%, ranking first globally for 12 consecutive years137 - New energy vehicle sales reached 1.367 million units, a year-on-year increase of 10.9%, setting a new historical record137 - The "New Energy Vehicle Industry Development Plan (2021–2035)" was introduced, promoting the enhancement of R&D capabilities for core components of new energy vehicles138 Business Review The Group's business was affected by the pandemic in the first half of 2020, but operations normalized in the second half, achieving steady development through optimized client structure and product portfolio; commercial vehicle cylinder block and cylinder head sales grew significantly, and the Group successfully entered Deutz's supplier list and deepened cooperation with FAW Group on lightweight products - In the second half of 2020, with effective control of the pandemic, the Group's production and sales returned to normal, and consumer demand steadily recovered139 Revenue and Sales Volume by Segment and Major Product Type for 2020 and 2019 | Product Type | 2020 Revenue (RMB in thousands) | 2020 Sales Volume (units) | 2019 Revenue (RMB in thousands) | 2019 Sales Volume (units) | Revenue Change (%) | Sales Volume Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Passenger Vehicle Cylinder Blocks | 48,228 | 56,470 | 48,009 | 58,155 | +0.5% | -2.9% | | Commercial Vehicle Cylinder Blocks | 238,306 | 236,107 | 180,633 | 180,038 | +31.9% | +31.1% | | Motorized Industrial Vehicle Cylinder Blocks | 56,240 | 52,037 | 49,896 | 46,148 | +12.7% | +12.8% | | Cylinder Blocks Subtotal | 342,774 | 344,614 | 278,538 | 284,341 | +23.1% | +21.2% | | Cylinder Heads | 84,546 | 131,846 | 60,319 | 107,639 | +40.2% | +22.5% | | Auxiliary Cylinder Block Components | 6,155 | 78,466 | 16,192 | 709,282 | -62.0% | -88.9% | | Total | 433,475 | | 355,049 | | +22.1% | | - Commercial vehicle cylinder block sales volume increased by approximately 31.1%, primarily due to a significant increase in demand for 493 cylinder blocks sold to one client144 - Successfully entered Deutz AG's supplier list, completed sample submission in 2020, with mass production expected to commence in 2021145 - Added FAW Group as a key client, with deep cooperation on lightweight series products (including aluminum cylinder blocks), and FAW's 4GB product planning projects an annual demand of 150,000 cylinder blocks149 Production Facilities, New Products, and R&D All of the Group's production facilities are located in Shenzhou City, Hebei Province, China, with 3 precision casting lines and 18 machining lines as of the end of 2020; it is expected that the renovation and construction of 9 new machining lines and 1 precision casting line will be completed by the end of 2021 to enhance production efficiency and launch over 12 new products - As of December 31, 2020, the Group owned and operated 3 precision casting lines and 18 machining lines150 - Expected to complete the renovation and construction of 9 new machining lines and 1 precision casting line by the end of 2021, which will enhance production efficiency and offer over 12 new products150 Outlook Looking ahead to 2021, China's automotive industry is expected to recover overall, with new energy vehicle sales projected to exceed 5 million units by 2025, and the lightweighting market offering vast opportunities; the Group will continue to be customer-centric and technology-driven, focusing on new energy vehicles, automotive lightweighting, and non-engine parts businesses, while strengthening deep cooperation with major automakers - China's automotive industry is expected to recover overall in 2021, with new energy vehicle sales projected to exceed 5 million units by 2025151 - The Group will focus on developing new energy vehicles, automotive lightweighting, and non-engine parts businesses, and seek directions for next-generation automotive parts in R&D or collaboration151 - Will strengthen deep cooperation with major automakers such as FAW Group to jointly explore development opportunities in new energy and lightweighting151 Financial Review Revenue in 2020 increased by 22.1% to RMB 433.5 million, primarily driven by increased sales of cylinder blocks and cylinder heads; gross profit grew by 24.3%, with gross margin rising to 24.6%; profit for the year increased by 11.6% to RMB 33.6 million, though net profit margin slightly decreased due to lower other income, and impairment losses on trade receivables increased due to client bankruptcy - Revenue increased by approximately 22.1% from approximately RMB 355.0 million in 2019 to approximately RMB 433.5 million in 2020153 - Revenue from cylinder block sales increased by approximately 23.1% to RMB 342.8 million, with sales volume increasing to approximately 345,000 units154 - Revenue from cylinder head sales increased by approximately 40.2% to RMB 84.5 million, with sales volume increasing to approximately 132,000 units155 - Gross profit increased by approximately 24.3% to RMB 106.5 million, with gross margin increasing from 24.1% to 24.6%157 - Other income decreased by approximately 44.6% to RMB 22.0 million, primarily due to a reduction in government grants159 - Impairment losses on trade receivables increased by approximately 29.4% to RMB 15.6 million, primarily due to the bankruptcy of a client162 - Profit for the year increased by approximately 11.6% to RMB 33.6 million, while net profit margin decreased from 8.5% to 7.8%165 Liquidity, Financial Resources, and Capital Structure The Group's liquidity primarily stems from cash generated from operating activities and bank loans; in 2020, cash and cash equivalents decreased, trade receivables and bills receivable increased but turnover days shortened, and trade payables significantly increased; the rise in bank loans led to an increase in the gearing ratio to 16.7%; capital expenditure increased, mainly for new production line construction and existing line upgrades, with most of the net proceeds from the global offering already utilized - As of December 31, 2020, cash and cash equivalents were approximately RMB 26.3 million (2019: RMB 49.3 million)167 - Trade receivables and bills receivable increased by approximately 11.8% to RMB 282.7 million, with turnover days decreasing from 204 days to 152 days168 - Trade payables increased by approximately 54.7% to RMB 158.3 million, with turnover days increasing from 138 days to 144 days169 - Bank loans increased to approximately RMB 160.0 million, and the gearing ratio increased from 12.9% to 16.7%170173 - Capital expenditure was approximately RMB 102.8 million, primarily for establishing machining lines for new products and upgrading existing production lines175 - As of December 31, 2020, the unutilized balance of net proceeds from the global offering was approximately RMB 20.0 million188 - As of December 31, 2020, the Group had 760 employees, with total staff costs of approximately RMB 61.9 million, a year-on-year decrease of 2.5%, mainly due to reduced social insurance contributions180 Directors' Report Principal Business and Business Review The Company operates as an investment holding company, with its subsidiaries primarily engaged in the design, manufacture, and sale of cylinder blocks and cylinder heads; details of the business review can be found in the "Management Discussion and Analysis" section - The Company is an investment holding company, and the Group's principal business is the design, manufacture, and sale of cylinder blocks and cylinder heads193 Key Risks and Uncertainties The Group faces operational risks (high customer concentration, with the top five clients accounting for 80.9% of total revenue), financial risks (interest rate, credit, liquidity), and market risks (evolving industry standards, technological developments, intense competition); the Board has established internal control and risk management procedures to address these risks - Operational risk: The top five clients accounted for approximately 80.9% of total revenue (2019: 77.0%), with the largest client accounting for approximately 34.0% (2019: 24.7%)194201 - Financial risks: Primarily exposed to interest rate risk, credit risk, and liquidity risk195 - Market risks: Evolving industry standards, frequent new product launches, rapid technological developments, and changing customer demands196 - The Group has established a set of internal control and risk management procedures, which the Directors consider to be adequate and effective199 Final Dividend and Dividend Policy The Company paid an interim dividend of HKD 2.0 cents per share on October 23, 2020, but does not recommend a final dividend for the 2020 fiscal year; the company has adopted a dividend policy aimed at balancing profit sharing with shareholders and retaining sufficient reserves for future development, with dividend amounts determined at the Board's discretion - An interim dividend of HKD 2.0 cents per share was paid on October 23, 2020 (2019: nil)203 - The Board does not recommend the payment of a final dividend for the year ended December 31, 2020 (2019: nil)204 - The company has adopted a dividend policy aimed at allowing shareholders to share in profits while retaining sufficient reserves for future development205 Directors' and Major Shareholders' Interests As of December 31, 2020, executive directors Mr. Meng Lianzhou, Mr. Liu Zhanwen, Mr. Zhang Yuexuan, and Mr. Liu Enwang collectively held 51.38% of the Company's shares through Longyue; additionally, major shareholders such as Bright Journey Holdings Limited, Grand Harmony Enterprises Limited, and Mao Yang Limited also held significant shares; the Board confirmed that no directors had competing interests or rights to acquire shares or debentures Directors' Interests and Short Positions in Shares, Underlying Shares, and Debentures (as of December 31, 2020) | Director's Name | Capacity / Nature of Interest | Number and Class of Securities | Approximate Percentage of Shareholding | | :--- | :--- | :--- | :--- | | Meng Lianzhou | Interest in controlled corporation | 411,042,000 shares (L) | 51.38% | | Liu Zhanwen | Interest in controlled corporation | 411,042,000 shares (L) | 51.38% | | Zhang Yuexuan | Interest in controlled corporation | 411,042,000 shares (L) | 51.38% | | Liu Enwang | Interest in controlled corporation | 411,042,000 shares (L) | 51.38% | Major Shareholders' Interests and Short Positions in the Company's Shares and Underlying Shares (as of December 31, 2020) | Shareholder's Name | Capacity / Nature of Interest | Number and Class of Securities | Approximate Percentage of Shareholding | | :--- | :--- | :--- | :--- | | Longyue | Beneficial owner | 411,042,000 shares(L) | 51.38% | | Bright Journey Holdings Limited | Beneficial owner | 67,868,000 shares(L) | 8.48% | | Grand Harmony Enterprises Limited | Beneficial owner | 46,864,000 shares(L) | 5.86% | | Mao Yang Limited | Beneficial owner | 46,864,000 shares(L) | 5.86% | - None of the controlling shareholders, directors, or their respective close associates had any interest in any business that directly or indirectly competes or may compete with the Group's business226 Share Option Scheme The Company adopted a share option scheme in 2017 to incentivize participants who contribute to the Group's business success; the scheme has a 10-year validity, with a total option grant limit of 10% of issued shares and an individual limit of 1%; as of the report date, no options had been granted, exercised, or cancelled under the scheme - The Share Option Scheme was adopted on December 11, 2017, to incentivize or reward selected participants who contribute to the Group's business success248 - The scheme has a validity period of 10 years, and the total number of shares that may be allotted and issued upon exercise of all options shall not exceed 10% of the issued shares (80,000,000 shares)251 - The total number of shares issued to each participant in any 12-month period shall not exceed 1% of the Company's then-issued share capital251 - As of the date of this report, the Company had not granted, exercised, or cancelled any share options under the Share Option Scheme253 Other Corporate Governance Matters The Group complies with relevant laws and regulations, independent non-executive directors have confirmed their independence, and controlling shareholders adhere to non-compete undertakings; KPMG will be re-appointed at the Annual General Meeting; as of December 31, 2020, the Company's distributable reserves amounted to RMB 136.0 million - For the year ended December 31, 2020, the Group had no material breaches or non-compliance with any applicable laws and regulations that significantly affected its business and operations211 - The Company has received annual confirmations of independence from each independent non-executive director and considers all independent non-executive directors to be independent266 - Controlling shareholders and directors have confirmed strict compliance with the non-compete undertaking268 - KPMG will retire and is eligible and willing to be re-appointed as the Company's auditor at the forthcoming Annual General Meeting269 - As of December 31, 2020, the Company's distributable reserves amounted to RMB 136.0 million216 Corporate Governance Report Board of Directors and Compliance with Corporate Governance Code The Company's Board of Directors, comprising four executive directors and three independent non-executive directors, is committed to maintaining high standards of corporate governance; the company generally complies with the Corporate Governance Code, though the roles of Chairman and Chief Executive Officer are combined, an arrangement the Board believes fosters consistent internal leadership and efficient strategic execution; the Board regularly reviews this arrangement and provides continuous professional development for directors - The Board of Directors comprises four executive directors and three independent non-executive directors279 - The Company has consistently complied with the Corporate Governance Code, except for the combined roles of Chairman and Chief Executive Officer held by Mr. Meng Lianzhou, which is a deviation from Code Provision A.2.1278 - The Board believes that combining the roles helps ensure consistent internal leadership within the Group and enhances the effectiveness and efficiency of overall strategic planning278 - All Directors participate in continuous professional development programs to enhance and refresh their knowledge and skills283 Operation of Board Committees The Board has established an Audit Committee, a Remuneration Committee, and a Nomination Committee, each with clear written terms of reference and adequate resources; the Audit Committee reviews financial statements and oversees internal controls; the Remuneration Committee advises on remuneration policies; and the Nomination Committee reviews the Board's structure and assesses independence, adopting a nomination policy to ensure Board diversity - The Audit Committee comprises three independent non-executive directors, with Mr. Yu Zhenqiu as Chairman, responsible for reviewing financial statements, external auditor's reports, and overseeing internal control and risk management systems306 - The Remuneration Committee comprises one executive director and two independent non-executive directors, with Mr. Ren Keqiang as Chairman, responsible for advising on the overall remuneration policy and structure for directors and senior management307 - The Nomination Committee comprises one executive director and two independent non-executive directors, with Mr. Wei Anli as Chairman, responsible for reviewing the Board's structure, size, and composition, and assessing the independence of independent non-executive directors315 - The nomination policy emphasizes selection criteria including candidates' qualifications, capabilities, work experience, leadership skills, and professional ethics, and seeks to achieve diversity in Board membership318320 Board Diversity Policy The Company has adopted a Board Diversity Policy aimed at achieving diversity through objective criteria and merit-based principles; measurable objectives include at least 1/3 independent non-executive directors, at least one independent non-executive director with accounting professional qualifications, and at least half of the Board members having over 7 years of professional industry experience; these objectives were met in 2020 - The Board Diversity Policy aims to achieve diversity through merit-based principles and objective criteria, considering factors such as gender, age, cultural and educational background, ethnicity, professional experience, skills, knowledge, and length of service335336 - Measurable objectives include: at least 1/3 of Board members must be independent non-executive directors; at least one independent non-executive director must possess accounting or relevant financial management professional qualifications; and at least half of Board members must have 7 years or more of experience in their professional industry336 - The Nomination Committee believes that the Board achieved the measurable objectives set for implementing the Board Diversity Policy in 2020336 Financial Reporting and Internal Control Systems The Board is responsible for preparing financial statements in accordance with International Financial Reporting Standards and ensuring the effectiveness of risk management and internal control systems; the company has an internal audit function that regularly reviews the effectiveness of risk management and internal controls; furthermore, the company has established policies for handling and disseminating inside information - The Board confirms its responsibility to prepare the Group's consolidated financial statements in accordance with International Financial Reporting Standards and to ensure the effectiveness of risk management and internal control systems342343 - Internal control and risk management procedures cover operational, financial, legal, and market risks, and an internal audit function is in place to assess their effectiveness343346 - The Company has established policies for handling and disseminating inside information, providing guidance to directors, senior officers, and relevant employees347 Shareholders' Rights and Investor Relations Shareholders holding not less than 10% of the paid-up share capital with voting rights may request an extraordinary general meeting and submit written inquiries to the Board; the company communicates with shareholders and investors through multiple channels, including annual general meetings, annual and interim reports, announcements, circulars, and the company website - One or more shareholders holding not less than one-tenth of the paid-up share capital of the Company carrying the right to vote at general meetings may request the directors to convene an extraordinary general meeting353 - Shareholders and investors may mail written inquiries to the Company's principal place of business in Hong Kong or email them to ir@hbsgt.com354 - The Company has established multiple communication channels, including annual general meetings, annual and interim reports, announcements, circulars, and the company website355 Environmental, Social and Governance Report About This Report This Environmental, Social and Governance Report outlines the Group's principles of corporate social responsibility and sustainable development philosophy for the 2020 fiscal year, covering the environmental and social performance of all major subsidiaries; the report is prepared in accordance with the Environmental, Social and Governance Reporting Guide set out in Appendix 27 of the Listing Rules, and emphasizes communication with key stakeholders such as shareholders, government, employees, customers, business partners, and the community - This report outlines the Group's principles of corporate social responsibility and sustainable development philosophy for the year ended December 31, 2020360 - The report covers the overall environmental and social performance of all major subsidiaries of the Group, with primary data sourced from Hebei Ruifeng Power Cylinder Block Co., Ltd360362 - The report is prepared in accordance with the Environmental, Social and Governance Reporting Guide set out in Appendix 27 of the Listing Rules363 - The Group has identified key stakeholders, including shareholders, government and regulatory authorities, employees, business partners, the public, and the community, and actively exchanges information with them369 Environmental Management The Group is committed to reducing the potential adverse environmental impact of its production, implementing measures such as installing dust purification devices, developing cutting fluid treatment systems, and adopting lost foam casting lines; in 2020, hazardous waste decreased by 16.2%; total electricity and water consumption increased by 17.0% and 20.5% respectively, partly due to disinfection measures during the pandemic; the Group strictly complies with environmental laws and regulations and has obtained ISO14001 certification - The Group installed dust purification and collection devices, developed cutting fluid treatment devices (recyclable for reuse), and adopted self-developed lost foam casting lines to reduce environmental impact372 - Hazardous waste decreased from approximately 1.91 tonnes in 2019 to approximately 1.60 tonnes in 2020, a reduction of approximately 16.2%374 Hebei Ruifeng Total Electricity Consumption and Carbon Emissions for 2019 and 2020 | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Electricity Consumption (MWh) | 58,623.0 | 50,089.0 | | Carbon Emissions (tonnes) | 45,715.0 | 39,060.0 | Hebei Ruifeng Total Water Consumption and Carbon Emissions for 2019 and 2020 | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Water Consumption (thousand tonnes) | 54.4 | 45.2 | | Carbon Emissions (tonnes) | 22.3 | 18.5 | - From 2019 to 2020, total electricity consumption and total water consumption increased by approximately 17.0% and 20.5% respectively, with the rise in total water consumption mainly due to encouraging regular disinfection for employees after resuming work392 - The Group strictly complies with laws and regulations such as the Energy Conservation Law, Air Pollution Prevention and Control Law, and Water Pollution Prevention and Control Law of the People's Republic of China, and has introduced the international environmental management system certification ISO14001392393 Social and Employee Management As of the end of 2020, the Group had 760 employees, with 550 in the production department; the company offers competitive compensation and benefits and regular training, but some employees' social insurance and housing provident fund contributions were underpaid; in 2020, employee turnover decreased to 6.3%, and average training hours increased; the company prioritizes occupational health and safety, with no major accidents, and strictly adheres to fair recruitment and labor standards, prohibiting child and forced labor Number of Full-time Employees by Function as of December 31, 2020 | Function | Number | | :--- | :--- | | Directors and Senior Management | 15 | | R&D | 31 | | Production | 550 | | Procurement | 13 | | Sales and Marketing | 20 | | Quality Control | 18 | | Finance | 9 | | Administration and Support | 73 | | Total | 760 | - The Group failed to fully pay social insurance contributions for some employees and did not register housing provident fund accounts or fully pay housing provident fund contributions410 - For the year ended December 31, 2020, the employee turnover rate decreased to 6.3% (2019: 13.2%)411412 - Average training hours per employee increased from 92 hours in 2019 to 116 hours in 2020416 - No major accidents occurred in the Group's production processes, nor were there any claims for personal injury or property damage413 - The Group strictly complies with labor laws and regulations, strictly prohibits the employment of child labor and forced labor, and adheres to fair, open, and just recruitment principles417418419 Supply Chain Management and Quality Control The Group maintains solid relationships with key clients and manages its supply chain through diversified procurement (at least three suppliers for each major raw material); the company implements stringent quality control measures covering raw materials, production processes, and finished product inspection, and has obtained ISO/TS 16949 certification; in 2020, no significant claims or product recalls due to product liability occurred - The Group has established solid relationships with major clients, primarily large automobile manufacturers and engine manufacturers in China422 - The Group's policy is to procure each major raw material and key component from at least three different suppliers to avoid reliance on a single supplier423 - The Group implements various quality control, inspection, and testing procedures throughout the entire production process, and has a Quality Control Department comprising 51 quality control inspectors424 - Production facilities have been ISO/TS 16949 certified since 2012, with current validity until 2021430 - During the reporting period, the Group did not face any significant claims due to product liability, nor did it recall products for safety and health reasons430 Intellectual Property, Data Protection, and Anti-Corruption The Group values intellectual property protection, holding 12 Chinese patents and several registered trademarks as of the end of 2020; the company has established confidentiality policies to protect employee privacy and trade secrets, and regulates employee conduct through employee handbooks and whistleblowing policies to prevent bribery, corruption, and other misconduct, with no violations reported during the period - As of December 31, 2020, the Group owned 12 Chinese patents (11 utility models, 1 invention patent), 2 Chinese registered trademarks, and 2 Hong Kong registered trademarks434 - The Group has established a confidentiality policy, prohibiting all employees from disclosing any confidential information, and ensuring data security through access controls433 - The Group's employee handbook regulates employee conduct regarding conflicts of interest, bribery, corruption, and other misconduct, and implements an effective whistleblowing policy435 - During the reporting period, there were no violations of bribery and corruption-related laws and regulations435 Community Engagement The Group actively fulfills its corporate social responsibility, organizing employees to participate in employee medical mutual aid activities and anti-epidemic efforts during the COVID-19 outbreak in China in 2020 - The Group organized employees to participate in employee medical mutual aid activities and anti-epidemic efforts to fulfill its corporate social responsibility436 Independent Auditor's Report Opinion and Basis for Opinion KPMG issued an unmodified opinion on Refeng Power Group Co., Ltd.'s consolidated financial statements for the year ended December 31, 2020, deeming them to present a true and fair view of the Group's financial position, performance, and cash flows in accordance with International Financial Reporting Standards and to comply with the disclosure requirements of the Hong Kong Companies Ordinance - KPMG issued an unmodified opinion on the consolidated financial statements438 - The consolidated financial statements present a true and fair view of the Group's consolidated financial position as of December 31, 2020, and its consolidated financial performance and consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards438 - The audit was conducted in accordance with Hong Kong Standards on Auditing, and the auditor is independent of the Group and has fulfilled professional ethical responsibilities439 Key Audit Matters The auditor identified two key audit matters: the timing of revenue recognition and the loss allowance for trade receivables; revenue recognition is critical due to diverse sales contract terms and the risk of manipulation, while loss allowance is critical due to its materiality and the subjectivity of management's judgment; the auditor performed detailed audit procedures on these matters - Key audit matters include the timing of revenue recognition, as revenue is a key performance indicator for the Group, and there is a potential risk of manipulation and non-compliance with specific terms of sales contracts444 - Key audit matters include the loss allowance for trade receivables, as it is material to the Group, and the recognition of expected credit losses is inherently subjective, requiring significant management judgment446 Directors' and Auditor's Responsibilities Directors are responsible for preparing true and fair consolidated financial statements in accordance with International Financial Reporting Standards and implementing necessary internal controls; the auditor's responsibility is to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to exercise professional judgment and skepticism in performing audit procedures - Directors are responsible for preparing consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards and the disclosure requirements of the Hong Kong Companies Ordinance, and for implementing necessary internal controls450 - The auditor's objective is to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error451 - The auditor exercises professional judgment and maintains professional skepticism throughout the audit, identifies and assesses risks of material misstatement, and obtains sufficient and appropriate audit evidence455 Consolidated Statement of Profit or Loss and Other Comprehensive Income 2020 Consolidated Performance The Group's revenue for 2020 was RMB 433.5 million, and gross profit was RMB 106.5 million; profit attributable to equity holders of the Company for the year was RMB 33.6 million, with basic and diluted earnings per share of RMB 0.042; other comprehensive income for the year was negative RMB 2.024 million, resulting in a total comprehensive income attributable to equity holders of the Company of RMB 31.576 million for the year Consolidated Statement of Profit or Loss and Other Comprehensive Income (RMB in thousands) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Revenue | 433,475 | 355,049 | | Cost of Sales | (326,983) | (269,369) | | Gross Profit | 106,492 | 85,680 | | Other Income | 21,989 | 39,658 | | Selling Expenses | (12,156) | (10,929) | | Administrative Expenses | (53,705) | (56,740) | | Impairment Loss on Trade Receivables | (15,587) | (12,044) | | Operating Profit | 47,033 | 45,625 | | Finance Costs | (7,501) | (10,660) | | Profit Before Tax | 39,532 | 34,965 | | Income Tax | (5,932) | (4,850) | | Profit for the Year Attributable to Equity Holders of the Company | 33,600 | 30,115 | | Basic and Diluted Earnings Per Share (RMB) | 0.042 | 0.038 | | Other Comprehensive Income for the Year (after tax) | (2,024) | 4,039 | | Total Comprehensive Income for the Year Attributable to Equity Holders of the Company | 31,576 | 34,154 | Consolidated Statement of Financial Position Consolidated Financial Position as of Year-End 2020 As of December 31, 2020, the Group's non-current assets were RMB 835.2 million, and current assets were RMB 605.4 million; current liabilities were RMB 427.7 million, and non-current liabilities were RMB 54.7 million; net assets amounted to RMB 958.3 million, and total equity was RMB 958.3 million Consolidated Statement of Financial Position (RMB in thousands) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Non-current Assets | | | | Property, Plant and Equipment | 710,157 | 671,419 | | Right-of-use Assets | 111,458 | 113,753 | | Deferred Tax Assets | 13,624 | 12,173 | | Total Non-current Assets | 835,239 | 797,345 | | Current Assets | | | | Inventories | 197,094 | 161,239 | | Trade and Other Receivables | 375,851 | 304,231 | | Prepaid Income Tax | 6,171 | 7,247 | | Cash and Cash Equivalents | 26,318 | 49,283 | | Total Current Assets | 605,434 | 522,000 | | Current Liabilities | | | | Trade and Other Payables | 265,433 | 194,429 | | Bank Loans | 160,000 | 120,920 | | Lease Liabilities | 236 | 67 | | Warranty Provisions | 2,001 | 1,809 | | Total Current Liabilities | 427,670 | 317,225 | | Net Current Assets | 177,764 | 204,775 | | Total Assets Less Current Liabilities | 1,013,003 | 1,002,120 | | Non-current Liabilities | | | | Deferred Income | 46,993 | 54,019 | | Lease Liabilities | 88 | - | | Warranty Provisions | 2,542 | 2,926 | | Deferred Tax Liabilities | 5,121 | 4,857 | | Total Non-current Liabilities | 54,744 | 61,802 | | Net Assets | 958,259 | 940,318 | | Capital and Reserves | | | | Share Capital | 66,425 | 66,425 | | Reserves | 891,834 | 873,893 | | Total Equity | 958,259 | 940,318 | Consolidated Statement of Changes in Equity 2020 Changes in Equity The Group's total equity increased from RMB 940.3 million at the beginning of 2020 to RMB 958.3 million at year-end; key changes included a profit for the year of RMB 33.6 million, an interim dividend declared of RMB 13.6 million, and a negative movement in exchange fluctuation reserve Consolidated Statement of Changes in Equity (RMB in thousands) | Metric | Share Capital | Share Premium | Statutory Reserve | Exchange Fluctuation Reserve | Retained Profits | Total Equity | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Balance as at January 1, 2019 | 66,425 | 149,670 | 21,384 | 6,449 | 662,236 | 906,164 | | Profit for the year 2019 | - | - | - | - | 30,115 | 30,115 | | Other comprehensive income for the year 2019 | - | - | - | 4,039 | - | 4,039 | | Transfer to reserves 2019 | - | - | 3,624 | - | (3,624) | - | | Balance as at December 31, 2019 and January 1, 2020 | 66,425 | 149,670 | 25,008 | 10,488 | 688,727 | 940,318 | | Profit for the year 2020 | - | - | - | - | 33,600 | 33,600 | | Other comprehensive income for the year 2020 | - | - | - | (2,024) | - | (2,024) | | Transfer to reserves 2020 | - | - | 3,711 | - | (3,711) | - | | Interim dividend declared 2020 | - | - | - | - | (13,635) | (13,635) | | Balance as at December 31, 2020 | 66,425 | 136,035 | 28,719 | 8,464 | 718,616 | 958,259 | Consolidated Statement of Cash Flows 2020 Cash Flows The Group generated net cash of RMB 61.5 million from operating activities, used net cash of RMB 102.3 million in investing activities, and generated net cash of RMB 17.7 million from financing activities in 2020; the combined effect resulted in a net decrease of RMB 23.1 million in cash and cash equivalents, with a year-end balance of RMB 26.3 million Consolidated Statement of Cash Flows (RMB in thousands) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Net cash generated from operating activities | 61,459 | 104,598 | | Net cash used in investing activities | (102,281) | (123,835) | | Net cash generated from / (used in) financing activities | 17,690 | (100,137) | | Net decrease in cash and cash equivalents | (23,132) | (119,374) | | Cash and cash equivalents at beginning of year | 49,283 | 170,036 | | Effect of exchange rate changes | 167 | (1,379) | | Cash and cash equivalents at end of year | 26,318 | 49,283 | Notes to the Financial Statements Company Information Refeng Power Group Co., Ltd. was incorporated in the Cayman Islands in 2017, listed on the Hong Kong Stock Exchange in 2018, and primarily engages in the design, manufacture, and sale of cylinder blocks and cylinder heads - The Company was incorporated in the Cayman Islands on May 2, 2017, and its shares were listed on the Main Board of The Stock Exchange of Hong Kong Limited on January 5, 2018723 - The Group is principally engaged in the design, manufacture, and sale of cylinder blocks and cylinder heads723 Significant Accounting Policies The Group's financial statements are prepared in accordance with International Financial Reporting Standards, measured at historical cost, and involve management's judgments, estimates, and assumptions; amendments to International Financial Reporting Standards effective for the current year or early adopted had no material impact on the Group's financial statements; the notes detail accounting policies for subsidiaries, property, plant and equipment, right-of-use assets, R&D expenses, credit losses and impairment of assets, inventories, contract costs, receivables, cash, payables, borrowings, employee benefits, income tax, provisions, revenue and other income, foreign currency translation, borrowing costs, related parties, and segment reporting - The financial statements are prepared in accordance with all applicable International Financial Reporting Standards and comply with the disclosure requirements of the Hong Kong Companies Ordinance724 - The financial statements are prepared on a historical cost basis, and their preparation involves management's judgments, estimates, and assumptions725 - Amendments to International Financial Reporting Standards effective for the first time in the current accounting period or early adopted had no material impact on the Group's results and financial position728 - Revenue is recognized when control over products or services is transferred to the customer at the agreed consideration that the Group expects to be entitled to788 - Government grants are recognized when there is reasonable assurance that the Group will receive the funds and comply with the attached conditions; grants compensating for asset costs are recognized as deferred income and amortized794 Accounting Judgments and Estimates In preparing its financial statements, the Group made significant judgments and estimates in key areas such as impairment losses on non-current assets, expected credit losses on trade receivables, recognition of deferred tax assets, depreciation of property, plant and equipment, and warranty provisions; these estimates are based on past experience and forecasts of future economic conditions, and changes in them could significantly impact future financial performance - The determination of impairment losses on non-current assets requires significant judgment regarding revenue levels and operating cost amounts803 - The measurement of expected credit losses on trade receivables is inherently subjective, requiring significant management judgment804 - The recognition of deferred tax assets involves multiple assumptions regarding the Group's future operating results, requiring significant management judgment805 - The estimated useful lives and residual values of property, plant and equipment are reviewed annually, and changes will affect depreciation expenses in future years819 - Warranty provisions are made based on recent claims experience, and their increase or decrease will affect profit or loss in future years820 Revenue and Segment Reporting The Group's revenue in 2020 was RMB 433.5 million, primarily from the sales of cylinder blocks, cylinder heads, and auxiliary cylinder block components; cylinder block sales revenue was RMB 342.8 million, and cylinder head sales were RMB 84.5 million; the Group's top five clients accounted for approximately 80.9% of total revenue, with the largest client accounting for 34.0%; the Group is divided into three reportable segments by product type: cylinder blocks, cylinder heads, and auxiliary cylinder block components, with the vast majority of revenue and operating assets located in China Revenue from Customer Contracts by Major Product (RMB in thousands) | Product Type | 2020 | 2019 | | :--- | :--- | :--- | | Sales of cylinder blocks | 342,774 | 278,538 | | Sales of cylinder heads | 84,546 | 60,319 | | Sales of auxiliary cylinder block components | 6,155 | 16,192 | | Total | 433,475 | 355,049 | - Revenue from the Group's largest client and top five clients accounted for approximately 34.0% and 80.9% respectively of the Group's total sales revenue831 - The Group manages its business by product type, divided into three reportable segments: cylinder blocks, cylinder heads, and auxiliary cylinder block components832833834 - The vast majority of the Group's revenue is generated from sales to customers in China, and the vast majority of its operating assets are located in China897 Other Income The Group's other income in 2020 was RMB 21.989 million, a significant decrease of 44.6% from RMB 39.658 million in 2019, primarily due to reduced government grants Other Income (RMB in thousands) | Item | 2020 | 2019 | | :--- | :--- | :--- | | Government grants | 21,544 | 36,686 | | Interest income | 182 | 1,700 | | Net (loss) / gain on disposal of property, plant and equipment | (37) | 79 | | Others | 300 | 1,193 | | Total | 21,989 | 39,658 | - The decrease in other income was primarily due to a reduction in government grants159 Profit Before Tax The Group's profit before tax in 2020 was RMB 39.532 million; finance costs were RMB 7.501 million, mainly bank loan interest; total staff costs were RMB 61.9 million, with defined contribution retirement scheme contributions significantly reduced due to COVID-19 exemptions; other items such as depreciation expenses, impairment losses on trade receivables, and R&D costs are also presented - Profit before tax in 2020 was RMB 39,532 thousand (2019: RMB 34,965 thousand)934935 Finance Costs (RMB in thousands) | Item | 2020 | 2019 | | :--- | :--- | :--- | | Interest on bank loans | 6,186 | 10,588 | | Bank charges and others | 1,295 | 48 | | Interest on lease liabilities | 20 | 24 | | Total | 7,501 | 10,660 | Staff Costs (RMB in thousands) | Item | 2020 | 2019 | | :--- | :--- | :--- | | Salaries, wages and other benefits | 61,584 | 58,913 | | Contributions to defined contribution retirement schemes | 316 | 4,593 | | Total | 61,900 | 63,506 | - In 2020, most of the defined contribution retirement scheme liabilities were exempted by local government authorities, with an exemption amount of approximately RMB 3,293 thousand910 Other Items (RMB in thousands) | Item | 2020 | 2019 | | :--- | :--- | :--- | | Depreciation expenses – owned property, plant and equipment | 62,712 | 62,639 | | Depreciation expenses – right-of-use assets | 2,810 | 2,834 | | Impairment loss on trade receivables | 15,587 | 12,044 | | Research and development costs | 16,059 | 13,370 | | Cost of inventories | 326,983 | 269,369 | Income Tax in the Consolidated Statement of Profit or Loss The Group's income tax expense in 2020 was RMB 5.932 million, an increase from 2019, primarily due to a withholding tax provision for retained profits to be distributed by a subsidiary; Chinese subsidiaries are subject to a 25% corporate income tax rate, with one high-tech enterprise enjoying a preferential rate of 15% and additional tax deductions for R&D costs Income Tax in the Consolidated Statement of Profit or Loss (RMB in thousands) | Item | 2020 | 2019 | | :--- | :--- | :--- | | Current tax – China corporate income tax | 7,119 | 6,805 | | Deferred tax | (1,187) | (1,955) | | Total | 5,932 | 4,850 | - The increase in income tax expense was primarily due to a withholding tax provision for retained profits to be distributed by a subsidiary for the year ended December 31, 2020164 - The Group's subsidiaries established in China are subject to China corporate income tax at a rate of 25%953 - One subsidiary was approved as a high-tech enterprise, enjoying a preferential tax rate of 15% and an additional 75% tax deduction for eligible R&D costs954 - A deferred tax liability of RMB 5.121 million (at a 10% withholding tax rate) has been provided for retained profits of approximately RMB 51.2 million of Hebei Ruifeng Power Cylinder Block Co., Ltd955 Directors' Emoluments The Group's total directors' emoluments in 2020 amounted to RMB 1.604 million, comprising directors' fees, salaries, allowances and benefits in kind, and discretionary bonuses; independent non-executive directors only received directors' fees; no directors waived remuneration during the year, nor were any emoluments paid as joining or leaving incentives Directors' Emoluments (RMB in thousands) | Director's Name | Directors' fees | Salaries, allowances and benefits in kind | Discretionary bonuses | Retirement scheme contributions | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | 2020 | | | | | | | Mr. Meng Lianzhou | 40 | 326 | 40 | - | 406 | | Mr. Liu Zhanwen | 40 | 183 | 28 | - | 251 | | Mr. Zhang Yuexuan | 40 | 291 | 40 | - | 371 | | Mr. Liu Enwang | 40 | 184 | 40 | - | 264 | | Mr. Ren Keqiang | 104 | - | - | - | 104 | | Mr. Yu Zhenqiu | 104 | - | - | - | 104 | | Mr. Wei Anli | 104 | - | - | - | 104 | | Total | 472 | 984 | 148 | - | 1,604 | | 2019 | | | | | | | Mr. Meng Lianzhou | 40 | 287 | 78 | - | 405 | | Mr. Liu Zhanwen | 40 | 144 | 31 | - | 215 | | Mr. Zhang Yuexuan | 40 | 256 | 66 | - | 362 | | Mr. Liu Enwang | 40 | 151 | 46 | - | 243 | | Mr. Ren Keqiang | 106 | - | - | - | 106 | | Mr. Yu Zhenqiu | 106 | - | - | - | 106 | | Mr. Wei Anli | 106 | - | - | - | 106 | | Total | 478 | 838 | 221 | 6 | 1,543 | - During the year, the Group did not pay any emoluments to directors as an inducement to join or upon joining the Group, or as compensation for loss of office; there were no arrangements for any director to waive or agree to waive any emoluments during the year1069 Five Highest Paid Individuals Among the Group's five highest-paid individuals, one was a director in 2020 (two in 2019); the total emoluments for the remaining four non-director individuals amounted to RMB 2.271 million - Among the five highest-paid individuals, one (2019: two) was a director1070 Total Emoluments of Non-Director Highest Paid Individuals (RMB in thousands) | Item | 2020 | 2019 | | :--- | :--- | :--- | | Salaries and other emoluments | 2,271 | 1,485 | Basic and Diluted Earnings Per Share The Group's basic earnings per share for 2020 was RMB 0.042, calculated based on a profit for the year of RMB 33.6 million and 800 million weighted average ordinary shares; as there were no potential dilutive shares, diluted earnings per share were identical to basic earnings per share - Basic earnings per share were calculated based on the profit for the year attributable to equity holders of the Company of RMB 33,600,000 and the weighted average number of ordinary shares in issue of 800,000,000 shares, amounting to RMB 0.0421070 - As the Company had no issued potential dilutive shares for the years ended December 31, 2020 and 2019, there was no difference between basic and diluted earnings per share1071 Property, Plant and Equipment The Group's property, plant and equipment are primarily located in China, with additions of approximately RMB 102.8 million in 2020; as of December 31
瑞丰动力(02025) - 2020 - 年度财报