华众车载(06830) - 2021 - 中期财报

Company Information This section provides fundamental company information for Huazhong In-Vehicle Holdings Co., Ltd., including board members, committee structures, registered office, and listing details - The Board comprises executive directors (including Chairman and CEO Mr. Zhou Minfeng, Vice Chairman Mr. Wu Bichao), non-executive, and independent non-executive directors, ensuring diverse and independent management[3] - The company has an Audit Committee, Remuneration Committee, and Nomination Committee to enhance corporate governance, with Mr. Yu Shuli, an independent non-executive director, chairing the Audit and Remuneration Committees[3] - The company's shares are listed on the Main Board of The Stock Exchange of Hong Kong Limited under stock code 6830[3] Management Discussion and Analysis This section details Huazhong In-Vehicle Holdings Co., Ltd.'s business, market performance, financial position, liquidity, capital commitments, foreign exchange risk, share capital structure, contingent liabilities, asset pledges, gearing ratio, material investments, employee and remuneration policies, post-reporting events, and future prospects for the six months ended June 30, 2021, highlighting significant growth in revenue and profit driven by automotive market recovery Business and Market Review The Group primarily manufactures and sells automotive interior and exterior structural and decorative parts, molds and tools, air conditioner or heater casings, liquid reservoirs, and other non-automotive products, achieving a 17.6% year-on-year revenue growth and a 56.9% increase in profit attributable to owners of the parent for the six months ended June 30, 2021, driven by automotive market recovery - The Group's core business involves the manufacturing and sale of automotive interior and exterior structural and decorative parts, molds and tools, air conditioner or heater casings and liquid reservoirs, and other non-automotive products[4] 2021 First Half Key Financial Performance | Indicator | Six Months Ended June 30, 2021 (RMB thousands) | Six Months Ended June 30, 2020 (RMB thousands) | Year-on-Year Growth (%) | | :--- | :------------------------------------- | :------------------------------------- | :----------- | | Revenue | 892,299 | 758,941 | 17.6 | | Profit attributable to owners of the parent | 34,170 | 21,781 | 56.9 | Financial Review This section analyzes the Group's revenue composition, gross profit margin, other income and expenses, share of profit of joint ventures, finance income and costs, and income tax, noting that automotive interior and exterior structural and decorative parts remain the primary revenue source, with significant growth in non-automotive product revenue and gross profit margin, leading to an overall improved gross profit margin Revenue The Group's revenue primarily derives from five product categories, with total revenue of RMB 892,299,000 for the six months ended June 30, 2021, where automotive interior and exterior structural and decorative parts contributed the most, and non-automotive products showed the most significant growth in revenue and gross profit margin 2021 First Half Revenue and Gross Profit Margin by Product Category | Product Category | 2021 First Half Revenue (RMB thousands) | 2021 First Half Gross Profit Margin (%) | 2020 First Half Revenue (RMB thousands) | 2020 First Half Gross Profit Margin (%) | | :--- | :---------------------------- | :--------------------- | :---------------------------- | :--------------------- | | Automotive interior and exterior structural and decorative parts | 758,775 | 25.9 | 585,523 | 24.5 | | Molds and tools | 36,487 | 22.8 | 78,870 | 29.5 | | Air conditioner and heater casings and liquid reservoirs | 53,858 | 24.0 | 29,871 | 15.5 | | Non-automotive products | 25,056 | 52.1 | 9,480 | 19.6 | | Sale of raw materials | 18,123 | 1.6 | 55,197 | 15.5 | | Total | 892,299 | 25.9 | 758,941 | 24.0 | - Revenue from automotive interior and exterior structural and decorative parts increased to RMB 758,775,000, accounting for 85.0% of total revenue, with a slight increase in gross profit margin to 25.9%, primarily due to increased sales orders from the automotive market recovery[7] - Revenue from non-automotive products significantly increased to RMB 25,056,000, with its gross profit margin rising sharply from 19.6% to 52.1%[7] Other Income and Gains For the six months ended June 30, 2021, the Group's other income and gains amounted to approximately RMB 15,575,000, representing a decrease of approximately 8.7% compared to the same period last year - Other income and gains amounted to RMB 15,575,000, a decrease of approximately 8.7% from RMB 17,066,000 in the same period last year[8] Selling and Distribution Expenses For the six months ended June 30, 2021, selling and distribution expenses increased by approximately 24.7% to RMB 68,899,000, mainly due to higher packaging and transportation costs resulting from increased sales volume - Selling and distribution expenses increased by approximately 24.7% to RMB 68,899,000, primarily due to increased packaging and transportation expenses from higher sales volume[9] Administrative Expenses For the six months ended June 30, 2021, administrative expenses increased by approximately 32.0% to RMB 129,638,000, mainly due to higher staff costs, research and development expenses, and professional service fees - Administrative expenses increased by approximately 32.0% to RMB 129,638,000, mainly due to increases in staff costs, research and development expenses, and professional service fees[10] Share of Profit of Joint Ventures For the six months ended June 30, 2021, the Group recorded a share of profit of joint ventures of RMB 18,291,000, a significant increase from RMB 8,639,000 in the same period last year - Share of profit of joint ventures increased to RMB 18,291,000, compared to RMB 8,639,000 in the same period last year[11] Finance Income The Group's finance income significantly increased by approximately 170.7% to RMB 6,120,000, primarily due to higher interest income from cash and bank balances and loans to suppliers - Finance income significantly increased by approximately 170.7% to RMB 6,120,000, mainly from interest income on cash and bank balances and loans to suppliers[12] Finance Costs The Group's finance costs decreased by approximately 7.4% to RMB 17,895,000, primarily due to an overall reduction in financing costs - Finance costs decreased by approximately 7.4% to RMB 17,895,000, mainly due to a decrease in overall financing costs[13] Income Tax Expense The Group's income tax expense increased by approximately 6.9% to RMB 8,721,000, primarily due to an increase in taxable profit - Income tax expense increased by approximately 6.9% to RMB 8,721,000, primarily due to an increase in taxable profit[14] Liquidity and Financial Resources The Group achieved a net cash inflow of RMB 26,468,000 in the first half of 2021, a significant improvement from a net cash outflow in the prior year, driven by a substantial reduction in net cash used in operating activities, increased net cash from financing activities, and decreased net cash used in investing activities 2021 First Half Cash Flow Overview | Activity Category | Six Months Ended June 30, 2021 (RMB thousands) | Six Months Ended June 30, 2020 (RMB thousands) | | :--- | :------------------------------------- | :------------------------------------- | | Net cash used in operating activities | (15,168) | (86,732) | | Net cash used in investing activities | (41,583) | (66,821) | | Net cash generated from financing activities | 83,219 | 42,404 | | Net cash inflow/(outflow) | 26,468 | (111,149) | - As of June 30, 2021, cash and cash equivalents amounted to approximately RMB 120,897,000, an increase from RMB 94,429,000 at the end of 2020[15] - Total interest-bearing bank borrowings were approximately RMB 820,311,000, of which approximately RMB 635,990,000 are due within one year, and the Board expects to repay or renew these with internal funds[15] Capital Commitments As of June 30, 2021, the Group's capital commitments amounted to approximately RMB 130,472,000, primarily for the purchase of property, plant, and equipment, a slight decrease from the end of 2020 - Capital commitments amounted to approximately RMB 130,472,000 (December 31, 2020: RMB 137,364,000), mainly for the purchase of property, plant, and equipment[16] Foreign Exchange Risk The Group's sales, purchases, cash, and borrowings are primarily denominated in RMB, resulting in minimal foreign exchange fluctuation risk; currently, no foreign currency hedging policy is in place, but management will monitor and consider hedging if necessary - The Group's sales and purchases are primarily denominated in RMB, while cash and cash equivalents are mainly denominated in RMB and HKD, and borrowings are denominated in RMB[17] - Due to minimal foreign exchange fluctuation risk, the Group currently does not employ any foreign currency hedging policy, but management will closely monitor and consider hedging if significant impacts arise[17] Share Capital Structure As of June 30, 2021, the total number of issued and fully paid ordinary shares of the Company was 1,769,193,800 - As of June 30, 2021, the total number of issued and fully paid ordinary shares of the Company was 1,769,193,800[18] Contingent Liabilities As of June 30, 2021, the Group had no material contingent liabilities - As of June 30, 2021, the Group had no material contingent liabilities (December 31, 2020: nil)[18] Pledge of Assets As of June 30, 2021, certain of the Group's interest-bearing bank and other borrowings were secured by assets totaling approximately RMB 149,221,000, a decrease in total pledged assets compared to the end of 2020 Carrying Value of Pledged Assets | Asset Category | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :------------------------- | :--------------------------- | | Property, plant and equipment | 7,527 | 18,694 | | Investment properties | 1,321 | 929 | | Right-of-use assets — prepaid land lease payments | 31,373 | 35,937 | | Pledged deposits | 109,000 | 109,000 | | Total | 149,221 | 164,560 | Gearing Ratio As of June 30, 2021, the Group's gearing ratio was approximately 62.3%, consistent with the end of 2020 - As of June 30, 2021, the Group's gearing ratio was approximately 62.3% (December 31, 2020: 62.3%)[21] Material Investments, Acquisitions and Disposals of Subsidiaries, Associates and Joint Ventures, and Future Plans for Material Investments or Capital Assets For the six months ended June 30, 2021, the Group held no material investments, nor did it undertake any material acquisitions or disposals of subsidiaries, associates, or joint ventures, and the Board currently has no authorized plans for any material investments or additions to capital assets - For the six months ended June 30, 2021, the Group held no material investments or undertook any material acquisitions or disposals of subsidiaries, associates, and joint ventures[22] - As of the date of this report, the Board has not authorized any plans for material investments or additions to capital assets[22] Employees and Remuneration Policy As of June 30, 2021, the Group employed 2,790 staff, with total staff costs of approximately RMB 125,054,000; the Group's remuneration policy aligns with relevant laws, market conditions, and employee performance, and grants share options to outstanding performers - As of June 30, 2021, the Group had 2,790 employees (June 30, 2020: 2,778 employees)[23] - For the six months ended June 30, 2021, the Group's total staff costs were approximately RMB 125,054,000 (first half of 2020: RMB 95,946,000)[23] - The remuneration policy complies with relevant laws, market conditions, and employee performance, and grants share options to eligible individuals for outstanding performance and contributions[23] Events After Reporting Period From June 30, 2021, to the date of this report, the Group has not undertaken any material post-reporting period events - From June 30, 2021, to the date of this report, the Group has not undertaken any material post-reporting period events[24] Prospects The Group anticipates continued revenue and profit growth for the full year 2021, benefiting from the sustained recovery of China's automotive market and rapid development of new energy vehicles, focusing on its "plastic-for-steel" technological advantage, expanding new energy vehicle clientele, and enhancing business scale and enterprise value through automation, increased R&D, and M&A opportunities - China's automotive market continued to recover in the first half of 2021, with significant year-on-year growth in production and sales, projecting full-year automotive sales to reach 27 million units and new energy vehicle sales to increase by approximately 76%[24] - The Group will leverage its "plastic-for-steel" technological advantage, strategically develop new energy vehicles, expand its client base and orders in this sector, and maintain its strategy of serving mid-to-high-end passenger vehicle brands[24] - Future plans include enhancing automation, expanding new plant production capacity, increasing internal optimization and R&D efforts, developing high-value-added fabric panels and one-stop component solutions, and exploring upstream and downstream industry chain expansion and potential M&A opportunities[25] Forward-Looking Statements This section cautions readers that forward-looking statements in the management discussion and analysis involve known and unknown risks and uncertainties, and actual results may differ materially from expectations - Forward-looking statements represent only the Company's expectations or beliefs regarding future events and involve known and unknown risks and uncertainties[26] - Actual results, performance, or events may differ materially from those expressed or implied in such statements[26] Corporate Governance and Other Information This section outlines Huazhong In-Vehicle Holdings Co., Ltd.'s corporate governance practices, including compliance with the Corporate Governance Code, updates on directors' information, equity interests of directors and chief executives, share option schemes, substantial shareholders' interests, and the responsibilities of the Audit Committee; the company generally complies with the Corporate Governance Code, with a deviation where the Chairman and Chief Executive Officer roles are held by the same individual Corporate Governance Code The Company has adopted the Corporate Governance Code set out in Appendix 14 to the Hong Kong Listing Rules and has complied with all applicable code provisions for the six months ended June 30, 2021, with one exception where the roles of Chairman and Chief Executive Officer are held by the same person - The Company has adopted and complied with all applicable code provisions of the Corporate Governance Code for the entire six months ended June 30, 2021, with one deviation[28] - Deviation from Code Provision A.2.1: Mr. Zhou Minfeng concurrently holds the positions of Chairman and Chief Executive Officer, a structure the Board believes allows for effective execution of business strategies and operations[29] Standard Code for Securities Transactions by Directors of Listed Issuers The Company has adopted the Standard Code set out in Appendix 10 to the Listing Rules, and all directors confirmed compliance with this code for the six months ended June 30, 2021 - The Company has adopted the Standard Code for Securities Transactions by Directors of Listed Issuers, and all directors confirmed compliance with this code for the six months ended June 30, 2021[30] Update on Directors' Information This section updates changes in the Board of Directors, including Mr. Wu Bichao's appointment as Vice Chairman and re-designation as an executive director, and the renewal of engagement letters for several directors - Independent non-executive director Mr. Wu Bichao was appointed Vice Chairman of the Board (effective January 27, 2021) and re-designated as an executive director (effective March 1, 2021)[31] - The engagement letters for executive director Mr. Wu Bichao, non-executive director Ms. Lai Caiyong, and independent non-executive director Mr. Wang Lianzhang were all renewed for a three-year term[31] Directors' and Chief Executive's Interests and Short Positions in Shares, Underlying Shares and Debentures As of June 30, 2021, directors and the chief executive held long positions in the Company's shares, with Mr. Zhou Minfeng holding the vast majority of interests through his wholly-owned Huayou Holdings Limited, and additional shares through spousal interests Directors' Long Positions in the Company (as of June 30, 2021) | Director's Name | Capacity/Nature of Interest | Number of Shares | Approximate Percentage of Issued Shares | | :--- | :--- | :--- | :--- | | Mr. Zhou Minfeng | Interest in controlled corporation (Huayou Holdings Limited) | 1,320,000,000 | 74.61% | | Mr. Zhou Minfeng | Spouse's interest (Ms. Chen Chun'er) | 1,100,000 | 0.06% | | Mr. Wang Lianzhang | Beneficial owner | 1,000,000 | 0.06% | Share Option Schemes The Company terminated the 2011 Share Option Scheme on June 2, 2021, though unexercised options granted thereunder remain valid; concurrently, shareholders approved the adoption of a new 2021 Share Option Scheme to incentivize participants, with no options granted, exercised, lapsed, or cancelled under either scheme as of the report date - The 2011 Share Option Scheme was terminated on June 2, 2021, but unexercised share options granted before termination remain valid[35] - The 2021 Share Option Scheme was adopted with shareholder approval on June 2, 2021, for a ten-year term, aiming to encourage or reward participants for their contributions to the Group[36] - As of the six months ended June 30, 2021, and the date of this report, no unexercised share options existed, and no share options were granted, exercised, lapsed, or cancelled under either scheme[35][36] Arrangement to Purchase Shares or Debentures by Directors For the six months ended June 30, 2021, no rights to acquire benefits by means of the acquisition of shares or debentures of the Company were granted to or exercised by the directors or their respective spouses or minor children - For the six months ended June 30, 2021, no rights to acquire benefits by means of the acquisition of shares or debentures of the Company were granted to or exercised by the directors or their respective spouses or minor children[37] Substantial Shareholders' Interests and Short Positions in Shares and Underlying Shares As of June 30, 2021, Huayou Holdings Limited, wholly-owned by Mr. Zhou Minfeng, was the Company's substantial shareholder, holding 74.61% of the shares; Mr. Zhou Minfeng's spouse, Ms. Chen Chun'er, also held some shares and was deemed to hold interests in Huayou Holdings Substantial Shareholders' Long Positions in the Company (as of June 30, 2021) | Name | Capacity/Nature of Interest | Number of Shares | Approximate Percentage of Issued Shares | | :--- | :--- | :--- | :--- | | Huayou Holdings Limited | Beneficial owner | 1,320,000,000 | 74.61% | | Ms. Chen Chun'er | Beneficial owner | 1,100,000 | 0.06% | | Ms. Chen Chun'er | Spouse's interest (through Mr. Zhou Minfeng's interest in Huayou Holdings) | 1,320,000,000 | 74.61% | Equity Interests in Group Companies (10% or more) | Name | Shareholder | Approximate Percentage of Equity Interest | | :--- | :--- | :--- | | Shanghai Huaxin | Shanghai Automotive Air Conditioner Factory | 30% | | Shanghai Huaxin | Shanghai Beicai Industrial Co., Ltd. | 19% | | Changxing Huaxin Automotive Rubber and Plastic Products Co., Ltd. | Shanghai Automotive Air Conditioner Factory | 30% | | Changxing Huaxin Automotive Rubber and Plastic Products Co., Ltd. | Shanghai Beicai Industrial Co., Ltd. | 19% | Audit Committee The Audit Committee, composed of three independent non-executive directors, is responsible for reviewing and overseeing the Group's financial reporting process, risk management, and internal control systems; the committee has reviewed the Group's interim results for the six months ended June 30, 2021, and deemed them prepared in accordance with applicable accounting standards, rules, and regulations with proper disclosure - The Audit Committee comprises three independent non-executive directors, with Mr. Yu Shuli as Chairman[42] - The Committee has reviewed the Group's interim results for the six months ended June 30, 2021, and is of the opinion that they were prepared in accordance with applicable accounting standards, rules, and regulations and properly disclosed[42] Purchase, Sale or Redemption of the Company's Listed Securities For the six months ended June 30, 2021, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities - For the six months ended June 30, 2021, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[43] Interim Dividend The Board has resolved not to declare an interim dividend for the six months ended June 30, 2021 - The Board has resolved not to declare an interim dividend for the six months ended June 30, 2021 (six months ended June 30, 2020: nil)[43] Acknowledgement The Chairman of the Board takes this opportunity to express gratitude for the valuable advice and guidance from the directors, and the diligent work and loyal service of all Group employees - The Chairman of the Board expresses gratitude for the valuable advice and guidance from the directors, and the diligent work and loyal service of all Group employees[44] Interim Condensed Consolidated Statement of Profit or Loss This statement presents the Group's consolidated profit or loss for the six months ended June 30, 2021, showing significant growth in revenue, gross profit, profit before tax, and profit for the period, alongside a substantial increase in earnings per share attributable to owners of the parent Interim Condensed Consolidated Statement of Profit or Loss Summary (Six Months Ended June 30) | Indicator | 2021 (RMB thousands) | 2020 (RMB thousands) | Year-on-Year Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 892,299 | 758,941 | 17.6 | | Cost of sales | (661,462) | (577,037) | 14.6 | | Gross profit | 230,837 | 181,904 | 26.9 | | Other income and gains | 15,575 | 17,066 | (8.7) | | Selling and distribution expenses | (68,899) | (55,248) | 24.7 | | Administrative expenses | (129,638) | (98,176) | 32.0 | | Share of profit of joint ventures | 18,291 | 8,639 | 111.7 | | Finance income | 6,120 | 2,261 | 170.7 | | Finance costs | (17,895) | (19,317) | (7.4) | | Profit before tax | 45,156 | 31,336 | 44.1 | | Income tax expense | (8,721) | (8,158) | 6.9 | | Profit for the period | 36,435 | 23,178 | 57.2 | | Profit attributable to owners of the parent | 34,170 | 21,781 | 56.9 | | Earnings per share attributable to ordinary equity holders of the parent (RMB) | 0.0193 | 0.0123 | 56.9 | Interim Condensed Consolidated Statement of Comprehensive Income This statement presents the Group's consolidated comprehensive income for the six months ended June 30, 2021, with total comprehensive income for the period amounting to RMB 36,435,000, primarily contributed by profit for the period, and no other comprehensive loss or income compared to the prior year Interim Condensed Consolidated Statement of Comprehensive Income Summary (Six Months Ended June 30) | Indicator | 2021 (RMB thousands) | 2020 (RMB thousands) | Year-on-Year Change (%) | | :--- | :--- | :--- | :--- | | Profit for the period | 36,435 | 23,178 | 57.2 | | Other comprehensive loss, net of tax, that may be reclassified to profit or loss in subsequent periods | — | — | N/A | | Other comprehensive (loss)/income, net of tax, that will not be reclassified to profit or loss in subsequent periods | — | (8,520) | N/A | | Other comprehensive (loss)/income for the period, net of tax | — | (8,520) | N/A | | Total comprehensive income for the period | 36,435 | 14,658 | 148.6 | | Attributable to: Owners of the parent | 34,170 | 13,261 | 157.7 | | Non-controlling interests | 2,265 | 1,397 | 62.1 | Interim Condensed Consolidated Statement of Financial Position This statement presents the Group's financial position as of June 30, 2021, showing growth in total assets and total equity, and an improvement in net current liabilities; despite net current liabilities, the Board prepared this financial information on a going concern basis, supported by unutilized credit facilities and cost control measures Interim Condensed Consolidated Statement of Financial Position Summary (as of June 30) | Indicator | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Total non-current assets | 1,517,696 | 1,513,285 | 0.3 | | Total current assets | 1,820,934 | 1,733,493 | 5.0 | | Total current liabilities | 1,909,809 | 1,852,914 | 3.1 | | Net current liabilities | (88,875) | (119,421) | (25.6) | | Total assets less current liabilities | 1,428,821 | 1,393,864 | 2.5 | | Total non-current liabilities | 218,927 | 209,648 | 4.4 | | Net assets | 1,209,894 | 1,184,216 | 2.2 | | Total equity | 1,209,894 | 1,184,216 | 2.2 | - As of June 30, 2021, the Group recorded consolidated net current liabilities of RMB 88,875,000, but the Board prepared the financial information on a going concern basis, citing unutilized credit facilities (approximately RMB 813,105,000) and ongoing cost control measures[57] Interim Condensed Consolidated Statement of Changes in Equity This statement presents the Group's equity changes for the six months ended June 30, 2021, with the increase in total equity primarily reflecting profit for the period, while also accounting for the final dividend declared for 2020 Interim Condensed Consolidated Statement of Changes in Equity Summary (Six Months Ended June 30) | Equity Component | January 1, 2021 (Audited) (RMB thousands) | Profit for the Period (RMB thousands) | 2020 Final Dividend (RMB thousands) | June 30, 2021 (Unaudited) (RMB thousands) | | :--- | :--- | :--- | :--- | :--- | | Share capital | 142,956 | — | — | 142,956 | | Reserves | 1,000,514 | 34,170 | (10,757) | 1,023,927 | | Equity attributable to owners of the parent | 1,143,470 | 34,170 | (10,757) | 1,166,883 | | Non-controlling interests | 40,746 | 2,265 | — | 43,011 | | Total equity | 1,184,216 | 36,435 | (10,757) | 1,209,894 | - The Group declared a 2020 final dividend of RMB 10,757,000 during the period[51] Interim Condensed Consolidated Statement of Cash Flows This statement presents the Group's cash flows for the six months ended June 30, 2021, recording a net cash inflow of RMB 26,468,000, a significant improvement from the net cash outflow of RMB 111,149,000 in the prior year, primarily due to improved operating cash flow and net inflows from financing activities Interim Condensed Consolidated Statement of Cash Flows Summary (Six Months Ended June 30) | Activity Category | 2021 (RMB thousands) | 2020 (RMB thousands) | Change (RMB thousands) | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | (15,168) | (86,732) | 71,564 | | Net cash used in investing activities | (41,583) | (66,821) | 25,238 | | Net cash generated from financing activities | 83,219 | 42,404 | 40,815 | | Net increase/(decrease) in cash and cash equivalents | 26,468 | (111,149) | 137,617 | | Cash and cash equivalents at beginning of period | 94,429 | 188,250 | (93,821) | | Cash and cash equivalents at end of period | 120,897 | 77,101 | 43,796 | - Net cash used in operating activities significantly decreased from RMB 86,732,000 in the first half of 2020 to RMB 15,168,000 in the first half of 2021[52] - Net cash generated from financing activities significantly increased, primarily from bank loans[53] Notes to the Interim Condensed Consolidated Financial Information This section provides detailed notes to the interim condensed consolidated financial information, covering company information, basis of preparation, changes in accounting policies, operating segment information, revenue and other income, various expenses, income tax, dividends, earnings per share, property, plant and equipment, receivables, payables, commitments, related party transactions, and fair value information of financial instruments, offering deeper explanations and disclosures for the financial statements 1. Company Information This note reiterates Huazhong In-Vehicle Holdings Co., Ltd.'s incorporation details, listing status, and primary business activities, which involve the manufacturing and sale of automotive and non-automotive products - The Company was incorporated in the Cayman Islands on December 3, 2010, and listed on the Main Board of the Stock Exchange of Hong Kong on January 12, 2012[55] - The Group primarily engages in the manufacturing and sale of automotive interior and exterior structural and decorative parts, molds and tools, air conditioner or heater casings and liquid reservoirs, and other non-automotive products[55] 2.1 Basis of Preparation The interim condensed consolidated financial information is prepared in accordance with International Accounting Standard 34 and should be read in conjunction with the annual consolidated financial statements; despite net current liabilities, the Board prepared this financial information on a going concern basis, supported by unutilized credit facilities and cost control measures - The interim condensed consolidated financial information is prepared in accordance with International Accounting Standard 34 Interim Financial Reporting[56] - Despite recording consolidated net current liabilities of RMB 88,875,000 as of June 30, 2021, the Board prepared the financial information on a going concern basis, citing unutilized credit facilities (approximately RMB 813,105,000) and ongoing cost control measures[57] 2.2 Changes in Accounting Policies and Disclosures The accounting policies adopted in preparing the interim condensed consolidated financial information are consistent with those of the prior year, and the newly adopted revised International Financial Reporting Standards had no impact on the Group's financial position or performance - The accounting policies adopted in preparing the interim condensed consolidated financial information are consistent with those applied in the preparation of the Group's annual consolidated financial statements for the year ended December 31, 2020[58] - The newly adopted revised International Financial Reporting Standards (such as Interest Rate Benchmark Reform, COVID-19-Related Rent Concessions) had no impact on the Group's interim financial position or performance[59] 3. Operating Segment Information The Group operates as a single business unit, thus no segment analysis is presented, and non-current assets are primarily located in mainland China - The Group is organized as a single business unit, primarily engaged in the production and sale of automotive interior and exterior decorative and structural parts, molds and tools, air conditioner or heater casings and liquid reservoirs, and other non-automotive products, hence no segment analysis is presented[60] - As of June 30, 2021, the Group's non-current assets (excluding financial instruments and deferred tax assets) were primarily located in mainland China, amounting to RMB 1,434,199,000[61] 4. Revenue, Other Income and Gains This note provides a breakdown of revenue by type of goods or services, geographical market, and point in time of revenue recognition, along with an analysis of other income and gains; sales of plastic parts and automotive parts are the main revenue sources, with mainland China contributing the vast majority of revenue Revenue by Type of Goods or Services (Six Months Ended June 30) | Classification of Goods or Services | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | Sale of plastic parts and automotive parts | 855,812 | 680,071 | | Sale of molds and tools | 36,487 | 78,870 | | Management services | 1,960 | 1,823 | | Total revenue from contracts with customers | 894,259 | 760,764 | Revenue by Geographical Market (Six Months Ended June 30) | Geographical Market | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | Mainland China | 860,130 | 739,644 | | Overseas | 34,129 | 21,120 | | Total revenue from contracts with customers | 894,259 | 760,764 | Other Income and Gains Analysis (Six Months Ended June 30) | Item | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | Rental income | 7,368 | 7,025 | | Government grants | 3,966 | 6,073 | | Management fees | 1,960 | 1,823 | | Gain on disposal of items of property, plant and equipment | 638 | 25 | | Others | 1,643 | 309 | | Total | 15,575 | 17,066 | 5. Finance Income This note details the sources of finance income, primarily comprising interest income from bank deposits and interest income from loans and receivables, with a significant increase in total amount Finance Income Details (Six Months Ended June 30) | Item | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | Interest income from bank deposits | 3,131 | 2,261 | | Interest income from loans and receivables | 2,989 | — | | Total | 6,120 | 2,261 | 6. Finance Costs This note outlines the composition of finance costs, mainly interest expenses on interest-bearing bank borrowings and lease liabilities, with a decrease in the total amount Finance Costs Details (Six Months Ended June 30) | Item | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | Interest expense on interest-bearing bank borrowings | 17,721 | 19,140 | | Interest expense on lease liabilities | 174 | 177 | | Total | 17,895 | 19,317 | 7. Profit Before Tax This note details the major expenses and income items affecting profit before tax, including cost of inventories recognized, depreciation, amortization, employee benefit expenses, net rental income, net exchange differences, and impairment of trade receivables Major Components of Profit Before Tax (Six Months Ended June 30) | Item | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | Cost of inventories recognized | 661,462 | 577,037 | | Depreciation of property, plant and equipment | 53,448 | 44,298 | | Employee benefit expenses (excluding directors' and chief executive's emoluments) | 125,054 | 95,946 | | Net rental income | (7,368) | (7,025) | | Net exchange differences | 8,115 | 3,037 | | Impairment of trade receivables | 347 | 1,300 | | Gain on disposal of items of property, plant and equipment | (638) | (25) | 8. Income Tax This note presents the main components of the Group's income tax expense for the period, including current income tax and deferred income tax, with an increase in the total amount Income Tax Expense Components (Six Months Ended June 30) | Item | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | Current income tax — expense for the period | 12,719 | 27,182 | | Deferred income tax | (3,998) | (19,024) | | Total income tax expense for the period | 8,721 | 8,158 | 9. Dividends This note discloses the final dividend declared for 2020 and confirms the Board's decision not to declare an interim dividend for the first half of 2021 - A final dividend of 0.6080 HK cents per ordinary share for 2020 was declared, totaling RMB 10,757,000[69] - The Board has resolved not to declare an interim dividend for the six months ended June 30, 2021[69] 10. Earnings Per Share Attributable to Ordinary Equity Holders of the Parent This note explains the calculation method for basic and diluted earnings per share and presents the profit attributable to owners of the parent and the weighted average number of ordinary shares used in the calculation - Basic earnings per share for the period are calculated based on the consolidated net profit attributable to owners of the parent and the weighted average number of 1,769,193,800 ordinary shares outstanding for the six months ended June 30, 2021[70] Basis for Basic and Diluted Earnings Per Share Calculation (Six Months Ended June 30) | Indicator | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | Profit attributable to owners of the parent for basic and diluted earnings per share calculation | 34,170 | 21,781 | | Weighted average number of ordinary shares outstanding during the period for basic earnings per share calculation (number of shares) | 1,769,193,800 | 1,769,193,800 | 11. Property, Plant and Equipment This note discloses the Group's investments and disposals in property, plant, and equipment, showing a significant decrease in total purchase cost during the period and an increase in net gain from asset disposals - For the six months ended June 30, 2021, the Group's total cost for purchasing property, plant and equipment was RMB 51,032,000 (first half of 2020: RMB 116,016,000)[73] - The disposal of assets with a net book value of RMB 3,215,000 resulted in a net gain on disposal of RMB 638,000 (first half of 2020: RMB 25,000)[73] 12. Trade Receivables and Bills Receivable This note provides an aging analysis of trade receivables and bills receivable, indicating a decrease in the total amount as of June 30, 2021, with a notable reduction in receivables aged six months to one year Aging Analysis of Trade Receivables and Bills Receivable (as of June 30) | Aging | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | Within 3 months | 569,760 | 626,037 | | 3 to 6 months | 84,534 | 70,703 | | 6 months to 1 year | 46,152 | 89,171 | | Over 1 year | 36,140 | 33,767 | | Total | 736,586 | 819,678 | 13. Trade Payables and Bills Payable This note provides an aging analysis of trade payables and bills payable, indicating a decrease in the total amount as of June 30, 2021, with a significant reduction in payables aged one to two years Aging Analysis of Trade Payables and Bills Payable (as of June 30) | Aging | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | Within 3 months | 646,517 | 669,463 | | 3 to 12 months | 219,613 | 259,743 | | 1 to 2 years | 10,610 | 34,682 | | 2 to 3 years | 10,584 | — | | Over 3 years | 1,645 | 1,653 | | Total | 888,969 | 965,541 | 14. Commitments This note discloses the Group's capital commitments as of the reporting period end, primarily for contracted but unprovided acquisitions of property, plant, and equipment, with a slight decrease in the total amount - As of June 30, 2021, the Group's capital commitments for the acquisition of property, plant and equipment amounted to approximately RMB 130,472,000 (December 31, 2020: RMB 137,364,000)[77] 15. Related Party Transactions This note details significant transactions between the Group and its related parties, including sales of goods, purchases of goods, rental income, and management fee collection, all conducted at agreed prices and terms; it also discloses key management personnel's emoluments Summary of Related Party Transactions (Six Months Ended June 30) | Transaction Category | Related Party | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | :--- | | Sales of goods to | Joint ventures | 42,071 | 35,307 | | | Entities significantly influenced by Mr. Zhou's brother | 799 | 828 | | Purchases of goods from | Joint ventures | 32,294 | 27,157 | | | Entities significantly influenced by Mr. Zhou's brother | 4,069 | 5,230 | | | Entities significantly influenced by key management personnel | 2,611 | — | | Total rental income received from | Joint ventures | 4,950 | 5,397 | | | Subsidiaries of joint ventures | 3,267 | 3,238 | | Management fees received from | Joint ventures | 1,960 | 1,823 | Key Management Personnel's Emoluments (Six Months Ended June 30) | Item | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | Wages, salaries and other benefits | 2,938 | 1,324 | | Pension scheme contributions | 18 | 16 | | Total emoluments paid to key management personnel | 2,956 | 1,340 | 16. Fair Value and Fair Value Hierarchy of Financial Instruments This note explains the Group's fair value measurement methods and hierarchy for financial instruments, noting that the carrying amounts of most financial instruments approximate their fair values due to short maturities; unlisted equity investments are valued using market valuation techniques, and bills receivable are measured at fair value through other comprehensive income; the note also provides sensitivity analysis for significant unobservable inputs and fair value hierarchy classifications - Except for equity investments designated at fair value through other comprehensive income and non-current interest-bearing bank borrowings, the carrying amounts of the Group's financial instruments reasonably approximate their fair values due to their short maturities[81][82] - Certain unlisted equity investments designated at fair value through other comprehensive income are valued using market valuation techniques, based on forward price-to-earnings multiples and enterprise value to EBITDA multiples of comparable companies, adjusted for a discount for lack of marketability[82] Assets Measured at Fair Value (as of June 30, 2021) | Asset Category | Total (RMB thousands) | Level 1 (RMB thousands) | Level 2 (RMB thousands) | Level 3 (RMB thousands) | | :--- | :--- | :--- | :--- | :--- | | Equity investments designated at fair value through other comprehensive income | 69,797 | — | — | 69,797 | | Bills receivable at fair value through other comprehensive income | 124,515 | — | 124,515 | — | 17. Events After Reporting Period This note confirms that the Group had no material events after June 30, 2021 - The Group had no material events after June 30, 2021[89] 18. Approval of Interim Condensed Consolidated Financial Information This note states that the unaudited interim condensed consolidated financial statements were approved and authorized for issue by the Board of Directors on August 26, 2021 - The unaudited interim condensed consolidated financial statements were approved and authorized for issue by the Board of Directors on August 26, 2021[89]