中国宏光(08646) - 2020 Q1 - 季度财报

Company Information Board of Directors and Committee Members This section lists the executive directors, independent non-executive directors, and members of the audit, remuneration, and nomination committees of China Hongguang Holdings Limited, specifying the chairman for each committee - Executive Directors include Mr. Wei Jiakun (CEO), Ms. Lin Weishan (Chairperson), Mr. Chen Biming, and Ms. Li Wanna[6] - Independent Non-Executive Directors are Ms. Chen Xiuyan, Mr. Jia Xiaogang, and Mr. Wu Yong[6] - The Audit Committee is chaired by Ms. Chen Xiuyan, the Remuneration Committee by Mr. Wu Yong, and the Nomination Committee by Mr. Jia Xiaogang[6] Company Contact and Professional Advisors This section provides the company's key contact information and professional advisor details, including joint company secretaries, authorized representatives, auditor, registered office, headquarters, principal place of business, share registrar, principal bankers, company website, and legal counsel - Joint Company Secretaries are Mr. Wang Zhangqi and Mr. Weng Weilin, with Mr. Wei Jiakun and Mr. Weng Weilin as Authorized Representatives[6] - The auditor is KPMG, and the compliance advisor is Dongxing Securities (Hong Kong) Company Limited[6] - The company's registered office is in the Cayman Islands, its headquarters and principal place of business in China are in Jieyang City, Guangdong Province, China, and its principal place of business in Hong Kong is in Central, Hong Kong[6] - The Hong Kong Share Registrar is Computershare Hong Kong Investor Services Limited, and the company website is www.hongguang.hk[8](index=8&type=chunk) Unaudited First Quarter Results Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For the three months ended March 31, 2020, the Group's revenue and profit significantly decreased, primarily due to the COVID-19 pandemic, with profit for the period falling by approximately 80% year-on-year, and basic and diluted earnings per share decreasing accordingly Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income (For the three months ended March 31) | Metric | 2020 (RMB '000) | 2019 (RMB '000) | Change Rate | | :----------- | :------------------ | :------------------ | :------- | | Revenue | 23,226 | 43,971 | -47.2% | | Cost of Sales | 16,667 | 30,869 | -46.0% | | Gross Profit | 6,559 | 13,102 | -50.0% | | Operating Profit | 2,642 | 8,969 | -70.6% | | Profit Before Tax | 1,814 | 8,420 | -78.5% | | Profit for the Period | 1,441 | 7,156 | -79.8% | | Earnings Per Share (RMB) | 0.006 | 0.032 | -81.25% | Unaudited Condensed Consolidated Statement of Changes in Equity As of March 31, 2020, the Group's total equity significantly increased due to the total comprehensive income for the period and the issuance of shares after the initial public offering, despite a decrease in profit for the period Condensed Consolidated Statement of Changes in Equity (As of March 31) | Metric | Balance as of March 31, 2019 (RMB '000) | Balance as of March 31, 2020 (RMB '000) | | :----------- | :----------------------------- | :----------------------------- | | Share Capital | –* | 2,693 | | Share Premium | 11,464 | 53,664 | | Retained Earnings | 77,971 | 98,913 | | Total Equity | 91,423 | 157,440 | - The issuance of shares after the initial public offering, net of issuance costs, contributed to an increase of RMB 44,893 thousand in total equity[13] Notes to the Unaudited Condensed Consolidated Results This section provides detailed notes to the condensed consolidated results, covering general information, significant accounting policies, revenue and segment reporting, other net income, components of profit before tax, income tax, earnings per share, and dividend policy, offering deeper context and explanation for the financial statements General Information China Hongguang Holdings Limited was incorporated in the Cayman Islands on May 25, 2017, and listed on GEM of the Hong Kong Stock Exchange on January 13, 2020, with the Group primarily engaged in manufacturing and selling architectural glass products in China - The Company completed its listing on January 13, 2020[16] - The Group is principally engaged in the manufacture and sale of architectural glass products in the People's Republic of China[16] Significant Accounting Policies The Group's unaudited condensed consolidated results are prepared in accordance with Hong Kong Financial Reporting Standards, with consistent application of all new and revised standards, including HKFRS 16 "Leases", presented in RMB and measured on a historical cost basis - The unaudited condensed consolidated results are prepared in accordance with all applicable Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants[17] - The Group has consistently applied all applicable new and revised Hong Kong Financial Reporting Standards, including HKFRS 16 "Leases"[19] - The financial statements are presented in RMB and prepared on a historical cost basis[21][24] Revenue and Segment Reporting All of the Group's revenue is derived from the sale of glass products in China, primarily categorized into energy-saving safety glass products and smart glass products, with the Group having only one operating segment and a diversified customer base where no single customer accounts for over 10% of revenue - All of the Group's revenue is derived from the sale of glass products in China[30] Revenue from Contracts with Customers by Major Product Line (For the three months ended March 31) | Product Type | 2020 (RMB '000) | 2019 (RMB '000) | | :--------------- | :------------------ | :------------------ | | Sale of energy-saving safety glass products | 20,732 | 40,752 | | Sale of smart glass products | 2,494 | 3,219 | | Total | 23,226 | 43,971 | - The Group has only one operating segment, which is the sale of glass products[37] Other Net Income The Group's other net income primarily includes government grants and other income, totaling RMB 278 thousand for the three months ended March 31, 2020, a slight increase from the same period last year Other Net Income (For the three months ended March 31) | Item | 2020 (RMB '000) | 2019 (RMB '000) | | :------- | :------------------ | :------------------ | | Government grants | 240 | 254 | | Others | 38 | (12) | Profit Before Tax Profit before tax is influenced by finance costs, staff costs, and other items such as depreciation, impairment losses, research and development costs, and inventory costs; for the three months ended March 31, 2020, finance costs increased, and impairment losses on trade and other receivables significantly rose Finance Costs (For the three months ended March 31) | Item | 2020 (RMB '000) | 2019 (RMB '000) | | :--------------- | :------------------ | :------------------ | | Interest on bank loans and other borrowings | 828 | 550 | Staff Costs (For the three months ended March 31) | Item | 2020 (RMB '000) | 2019 (RMB '000) | | :------------------- | :------------------ | :------------------ | | Contributions to defined contribution retirement plans | 53 | 73 | | Salaries, wages and other benefits | 1,224 | 1,173 | | Total | 1,277 | 1,246 | Other Items (For the three months ended March 31) | Item | 2020 (RMB '000) | 2019 (RMB '000) | | :----------------------- | :------------------ | :------------------ | | Depreciation of property, plant and equipment | 612 | 721 | | Depreciation of right-of-use assets | 37 | 13 | | Impairment losses on trade and other receivables | 3,613 | 2,249 | | Research and development costs | 2,166 | 2,235 | | Cost of inventories | 16,667 | 30,869 | Income Tax in Condensed Consolidated Statement of Profit or Loss The Group's income tax expense primarily consists of PRC income tax provision, with its PRC subsidiary, Hongguang Glass, enjoying a preferential income tax rate of 15% as a "High and New Technology Enterprise" Income Tax (For the three months ended March 31) | Item | 2020 (RMB '000) | 2019 (RMB '000) | | :------- | :------------------ | :------------------ | | Current tax | 373 | 1,264 | - The PRC subsidiary, Jieyang Hongguang Coated Glass Co., Ltd., enjoys a preferential income tax rate of 15% due to its recognition as a "High and New Technology Enterprise"[60] Earnings Per Share For the three months ended March 31, 2020, basic and diluted earnings per share significantly decreased to RMB 0.006, compared to RMB 0.032 in the prior year, with diluted earnings per share being the same as basic earnings per share due to the absence of potentially dilutive ordinary shares - Basic and diluted earnings per share were RMB 0.006 (2019: RMB 0.032)[63] - Earnings per share are calculated based on the profit attributable to equity holders of the Company of RMB 1,441,000 and 225,000,000 ordinary shares issued for the three months ended March 31, 2020[63] - There were no potentially dilutive ordinary shares, so diluted earnings per share are the same as basic earnings per share[64] Dividends The Board of Directors does not recommend the payment of any dividends for the three months ended March 31, 2020 - The Directors do not recommend the payment of any dividends for the three months ended March 31, 2020 (2019: nil)[66] Approval of Financial Information This financial information was approved and authorized for issue by the Board of Directors on May 13, 2020 - This financial information was approved and authorized for issue by the Board of Directors on May 13, 2020[67] Management Discussion and Analysis Introduction The Group primarily manufactures and sells architectural glass products, including energy-saving safety glass and smart glass, under its "Hongguang" brand in Southern China, boasting a diversified product portfolio and strong R&D capabilities - The Group primarily manufactures and sells architectural glass products, including energy-saving safety glass products and smart glass products, under its own "Hongguang" brand in Southern China[70] - A diversified product portfolio helps enhance profitability and adapt to market conditions and industry trends[70] - The Group possesses strong R&D capabilities, particularly in patented technologies and technical expertise[70] Business Review This section briefly reviews the Group's first-quarter performance for the three months ended March 31, 2020, providing comparative figures for the corresponding period last year - The Board is pleased to present the Group's first-quarter results for the three months ended March 31, 2020, along with comparative figures for the corresponding period ended March 31, 2019[71] Financial Review The Group faced significant challenges in Q1 2020, with total revenue and profit for the period sharply declining due to the COVID-19 pandemic; while gross margin remained largely stable, selling and marketing expenses decreased, finance costs rose due to increased bank loans, and income tax expense fell with reduced revenue Revenue The Group's total revenue decreased by 47% from RMB 43,971 thousand in the same period of 2019 to RMB 23,226 thousand in Q1 2020, primarily due to production and operational delays caused by the COVID-19 pandemic and disruptions to customer project commencement Revenue Breakdown by Product Type (For the three months ended March 31) | Product Type | 2020 (RMB '000) | % of Total Revenue | 2019 (RMB '000) | % of Total Revenue | | :--------------- | :------------------ | :------------- | :------------------ | :------------- | | Energy-saving safety glass products | 20,732 | 89.3% | 40,752 | 92.7% | | Smart glass products | 2,494 | 10.7% | 3,219 | 7.3% | | Total | 23,226 | 100.0% | 43,971 | 100.0% | - Total revenue decreased by 47%, mainly due to delays in resuming production and operations caused by the COVID-19 pandemic, which also affected customer project progress and order fulfillment[74][75] Gross Profit and Gross Margin The Group's gross profit decreased from RMB 13,101 thousand in the same period of 2019 to RMB 6,559 thousand in Q1 2020, primarily due to lower total revenue, while the gross margin remained largely stable, slightly decreasing to 28.2% Gross Profit and Gross Margin by Product Type (For the three months ended March 31) | Product Type | 2020 Gross Profit (RMB '000) | 2020 Gross Margin | 2019 Gross Profit (RMB '000) | 2019 Gross Margin | | :--------------- | :---------------------- | :----------- | :---------------------- | :----------- | | Energy-saving safety glass products | 5,775 | 27.9% | 12,064 | 29.6% | | Smart glass products | 784 | 31.4% | 1,038 | 32.2% | | Total Gross Profit/Gross Margin | 6,559 | 28.2% | 13,101 | 29.8% | - The decrease in gross profit was mainly due to the decrease in total revenue during the period[78] - Gross margin remained largely stable with a slight decrease (2020: 28.2%; 2019: 29.8%)[78] Other Net Income The Group's other net income slightly increased from RMB 253 thousand in the same period of 2019 to RMB 272 thousand in Q1 2020 - Other net income slightly increased from RMB 253 thousand to RMB 272 thousand[79] Cost of Sales The Group's cost of sales decreased from RMB 30,908 thousand in the same period of 2019 to RMB 16,734 thousand in Q1 2020, primarily due to a decrease in sales revenue - Cost of sales decreased, mainly due to the decrease in sales revenue[80] Selling and Marketing Expenses The Group's selling and marketing expenses decreased from RMB 366 thousand in the same period of 2019 to RMB 84 thousand in Q1 2020, primarily due to reduced marketing efforts impacted by the COVID-19 pandemic - Selling and marketing expenses decreased, mainly due to reduced marketing efforts caused by delays in activity resumption due to the COVID-19 pandemic[82] General and Administrative Expenses The Group's general and administrative expenses remained largely at a similar level, with a slight change from RMB 4,009 thousand in the same period of 2019 to RMB 4,181 thousand in Q1 2020, and R&D costs also remained stable - General and administrative expenses remained largely at a similar level[83] - Research and development costs remained stable, with a slight change from RMB 2,235 thousand to RMB 2,166 thousand[83] Finance Costs The Group's finance costs increased from RMB 550 thousand in the same period of 2019 to RMB 828 thousand in Q1 2020, primarily due to an increase in bank loan amounts - Finance costs increased due to an increase in the amount of bank loans[84] Staff Costs The Group's staff costs remained at a similar level to last year, with a slight change from RMB 1,277 thousand in the same period of 2019 to RMB 1,246 thousand in Q1 2020 - Staff costs remained at a similar level to last year[85] Income Tax Expense The Group's income tax expense decreased from RMB 1,264 thousand in the same period of 2019 to RMB 373 thousand in Q1 2020, mainly due to the poorer revenue performance of its indirect wholly-owned subsidiary, Jieyang Hongguang Coated Glass Co., Ltd., compared to last year - Income tax expense decreased, mainly due to the poorer revenue performance of the indirect wholly-owned subsidiary, Jieyang Hongguang Coated Glass Co., Ltd., compared to last year[86] Profit for the Period Due to the aforementioned factors, the Group's after-tax profit for the three months ended March 31, 2020, was RMB 1,370 thousand, a decrease of approximately 80.9% compared to RMB 7,155 thousand in the same period of 2019, primarily due to a significant decline in revenue while related expenses remained unchanged - After-tax profit for the period was RMB 1,370 thousand, a decrease of approximately 80.9% compared to the same period last year[89] - The significant decrease in profit was mainly due to a substantial decline in revenue in the corresponding period of 2020 while related expenses remained unchanged[89] Human Resources and Remuneration Policy As of March 31, 2020, the Group employed a total of 74 full-time employees, with staff costs amounting to approximately RMB 1,246 thousand - As of March 31, 2020, the Group employed a total of 74 full-time employees[90] - For the three months ended March 31, 2020, the Group's staff costs were approximately RMB 1,246 thousand[90] Material Investments For the three months ended March 31, 2020, the Group did not acquire or hold any material investments - For the three months ended March 31, 2020, the Group did not acquire or hold any material investments[91] Material Acquisitions/Disposals For the three months ended March 31, 2020, the Group did not make any material acquisitions or disposals of subsidiaries or associated companies - For the three months ended March 31, 2020, the Group did not make any material acquisitions or disposals of any subsidiaries or associated companies[92] Foreign Exchange Risk The Group's principal operations are conducted in China, with transactions denominated in RMB, and it does not have a foreign currency hedging policy; management monitors foreign exchange risk and will consider hedging when necessary - The Group's principal operations are conducted in China, and transactions are primarily denominated in RMB[93] - The Group does not have a foreign currency hedging policy, but management monitors foreign exchange risk and will consider hedging when necessary[93] Key Risks and Uncertainties Facing the Company The Company faces key risks including the impact of local and international regulations and the effects of the COVID-19 pandemic, which has led to a slowdown in the development of China's real estate market and architectural glass industry - The Group's business operations are subject to government policies and relevant regulations and guidelines set by regulatory bodies, and non-compliance may result in penalties[95] - The COVID-19 pandemic has affected the resumption of work across various industries in mainland China, leading to a slowdown in the real estate market and the architectural glass industry[96] Comparison of Business Objectives with Actual Business Development Since its listing on January 13, 2020, the Company has begun implementing the business objectives outlined in its prospectus, with no significant post-reporting period events materially impacting operations and financial performance as of the financial statement date - Since the Company's shares were listed on GEM of the Stock Exchange on January 13, 2020, up to the date of this report, we have begun implementing our business objectives as set out in the "Statement of Business Objectives and Use of Proceeds" section of the Company's prospectus dated December 31, 2019[97] - As of March 31, 2020, and up to the date of this report, there have been no significant events that have had a material impact on the Group's operations and financial performance[97] Prospects and Outlook The Group is leveraging funds raised from its listing to lay a solid foundation for future development and anticipates continued growth in demand for coated and smart glass in the Chinese market; despite COVID-19 challenges, the Group will seek value-added acquisition or investment opportunities to strengthen its position and enhance value - Funds raised from the listing provide a solid foundation for the Group's future development[98] - China's production of coated glass is expected to increase from 293 million square meters in 2018 to 427 million square meters in 2023, representing a CAGR of approximately 7.8%[101] - China's production of smart glass is expected to increase from 254,000 square meters in 2018 to 675,000 square meters in 2023, representing a CAGR of 21.6%[101] - The Group will strive to identify acquisition or investment opportunities that add value to China Hongguang to mitigate the impact of the COVID-19 pandemic, thereby strengthening the Group's position and enhancing its value[102] Dividends The Board of Directors does not recommend the payment of any dividends for the three months ended March 31, 2020 - The Directors do not recommend the payment of any dividends for the three months ended March 31, 2020 (2019: nil)[103] Other Information Directors' and Chief Executive's Interests and Short Positions in Shares, Underlying Shares, and Debentures of the Company or any Associated Corporation Mr. Wei Jiakun and Ms. Lin Weishan (Mr. Wei's spouse) are both deemed to have an interest in 150,750,000 shares held by Bright Global Limited, representing 50.25% of the total share capital Directors' and Chief Executive's Shareholdings (As of March 31) | Name | Nature of Interest | Total Number of Shares Held (L) | Percentage of Shareholding | | :--------- | :---------------------------- | :--------------- | :--------- | | Mr. Wei Jiakun | Settlor of a discretionary trust; Spouse's interest | 150,750,000 | 50.25% | | Ms. Lin Weishan | Settlor of a discretionary trust; Spouse's interest | 150,750,000 | 50.25% | - These shares are held by Bright Global Limited, whose entire issued share capital is held by Wei Family Limited, which in turn is wholly owned by IQ EQ (BVI) Limited (as trustee of The Wei Family Trust)[105] Directors' Rights to Acquire Shares or Debentures For the three months ended March 31, 2020, neither the Company nor any of its subsidiaries or associated corporations entered into any arrangements enabling directors and chief executives to acquire benefits by means of acquiring shares or debentures - At no time during the three months ended March 31, 2020, was the Company or any of its subsidiaries or associated corporations a party to any arrangement to enable the Directors and chief executive of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate[109] Substantial Shareholders' and Other Persons' Interests and Short Positions in Shares and Underlying Shares of the Company In addition to the directors, Bright Global Limited and its affiliates, Dongsheng Venture Capital Limited and its beneficial owner Ms. Wang Yaqing, and Liche International Holdings Limited and its beneficial owner Mr. Li Wei, all hold shares in the Company, constituting substantial shareholder interests Substantial Shareholders' and Other Persons' Shareholdings (As of March 31) | Name/Entity | Capacity/Nature of Interest | Total Number of Shares Held (L) | Percentage of Shareholding | | :------------------- | :-------------------- | :--------------- | :--------- | | Bright Global Limited | Beneficial owner | 150,750,000 | 50.25% | | Wei Family Limited | Interest in controlled corporation | 150,750,000 | 50.25% | | IQ EQ (BVI) Limited | Trustee of a trust | 150,750,000 | 50.25% | | Wei Jiakun | Settlor of a discretionary trust; Spouse's interest | 150,750,000 | 50.25% | | Lin Weishan | Settlor of a discretionary trust; Spouse's interest | 150,750,000 | 50.25% | | Liu Rong | Settlor of a discretionary trust | 150,750,000 | 50.25% | | Dongsheng Venture Capital Limited | Beneficial owner | 49,500,000 | 16.50% | | Wang Yaqing | Interest in controlled corporation | 49,500,000 | 16.50% | | Liche International Holdings Limited | Beneficial owner | 24,750,000 | 8.25% | | Li Wei | Interest in controlled corporation | 24,750,000 | 8.25% | - Shares of Bright Global Limited are held by entities related to The Wei Family Trust, with Mr. Wei Jiakun, Ms. Lin Weishan, and Ms. Liu Rong deemed to have interests[113] - Dongsheng Venture Capital Limited is beneficially owned by Ms. Wang Yaqing, and Liche International Holdings Limited is 50% beneficially owned by Mr. Li Wei[113] Related Party Transactions For the three months ended March 31, 2020, the Group did not enter into any related party transactions - For the three months ended March 31, 2020, the Group did not enter into any related party transactions[116] Directors' Interests in Competing Businesses The Directors are not aware of any business or interest of any Director, controlling shareholder, or their close associates that competes or may compete, directly or indirectly, with the Group's business - The Directors are not aware of any business or interest of any Director or controlling shareholder of the Company or any of their respective close associates that competes or may compete, directly or indirectly, with the Group's business[117] Material Events After Reporting Period Between March 31, 2020, and the date of this report, the Board of Directors is not aware of any material events concerning the Group that require disclosure - Between March 31, 2020, and the date of this report, the Board of Directors is not aware of any material events concerning the Group that require disclosure[118] Purchase, Sale or Redemption of the Company's Listed Securities For the three months ended March 31, 2020, neither the Company nor any of its subsidiaries purchased, redeemed, or sold any of the Company's listed securities - For the three months ended March 31, 2020, neither the Company nor any of its subsidiaries purchased, redeemed, or sold any of the Company's listed securities[119] Share Option Scheme As of March 31, 2020, the Company did not have a share option scheme - As of March 31, 2020, the Company did not have a share option scheme[120] Directors' Securities Transactions The Company has adopted a code of conduct for directors' securities transactions, and all directors have confirmed compliance with this code for the three months ended March 31, 2020, following specific inquiries - The Company has adopted a code of conduct for directors' securities transactions, the terms of which are no less exacting than the required standard of dealings set out in Rules 5.48 to 5.67 of the GEM Listing Rules[122] - All Directors have confirmed their compliance with the standards required by the Model Code for the three months ended March 31, 2020[122] Compliance with Corporate Governance Code The Company is committed to high standards of corporate governance and has adopted the Corporate Governance Code set out in Appendix 15 of the GEM Listing Rules; the Board believes the Company has complied with all applicable code provisions throughout the three months ended March 31, 2020 - The Company has adopted the Corporate Governance Code set out in Appendix 15 of the GEM Listing Rules as its own corporate governance code[123] - The Directors believe that the Company has adopted the relevant principles and complied with all applicable code provisions set out in the Corporate Governance Code throughout the three months ended March 31, 2020[123] Audit Committee The Group's unaudited condensed consolidated financial statements for the three months ended March 31, 2020, have been reviewed by the Audit Committee, which deemed them prepared in compliance with applicable accounting standards and GEM Listing Rules, with sufficient disclosures - The Group's unaudited condensed consolidated financial statements for the three months ended March 31, 2020, have been reviewed by the Audit Committee[124] - The Audit Committee is of the opinion that the financial statements were prepared in accordance with applicable accounting standards and the GEM Listing Rules, and that adequate disclosures have been made[124] Dividends The Board of Directors does not recommend the payment of any dividends for the three months ended March 31, 2020 - The Directors do not recommend the payment of any dividends for the three months ended March 31, 2020[127] Material Acquisitions and Disposals For the three months ended March 31, 2020, the Group did not make any material acquisitions or disposals of subsidiaries, associated companies, or joint ventures - For the three months ended March 31, 2020, the Group did not make any material acquisitions or disposals of any subsidiaries, associated companies, and joint ventures[128] Compliance Advisor's Interests The Company's compliance advisor, Dongxing Securities (Hong Kong) Company Limited, confirms that as of the date of this report, neither it nor any of its directors, employees, or close associates hold any interest in the Company's share capital or any member of the Group, or have any relationship with the Company requiring disclosure, other than compliance advisory services - Dongxing Securities (Hong Kong) Company Limited or any of its directors or employees or close associates do not have any interest in the share capital of the Company or any member of the Group, or any relationship with the Company that is notifiable to the Company under Rule 6A.32 of the GEM Listing Rules, save for the compliance advisory services provided by Dongxing Securities (Hong Kong) Company Limited[129] Sufficiency of Public Float Based on publicly available information and to the best of the Directors' knowledge, the Company has maintained the public float required by the GEM Listing Rules - Based on publicly available information of the Company and to the best of the Directors' knowledge as of the date of this report, the Company has maintained the public float required by the GEM Listing Rules[130]