奥星生命科技(06118) - 2024 - 中期财报

Company Information This chapter provides an overview of Austar Life Sciences Technology Co., Ltd. (Stock Code: 6118), including its listing location, board members, committee structures, company secretary, authorized representatives, principal bankers, registered office, and principal places of business, offering investors a summary of its governance structure and basic contact details - The company is incorporated in the Cayman Islands, listed on The Stock Exchange of Hong Kong Limited with stock code 6118[3][5] - The Board of Directors comprises executive, non-executive, and independent non-executive directors, with established committees for audit, remuneration, nomination, corporate governance, and risk management[5] - Principal places of business are located in Shanghai, People's Republic of China, with a key operational presence in Hong Kong[5][6] Financial Highlights The Group's financial performance in the first half of 2024 shows a 23.8% year-on-year decrease in revenue, but successfully turned losses into profits, recording a pre-tax profit of RMB 9,186 thousand and basic earnings per share of RMB 0.01, with a slight improvement in gross profit margin and debt-to-asset ratio Financial Highlights for H1 2024 (RMB thousand) | Metric | H1 2024 | H1 2023 (Restated) | Change | | :--- | :--- | :--- | :--- | | Revenue | 700,919 | 919,457 | -23.8% | | Gross Profit | 145,417 | 186,933 | -22.2% | | Profit/(Loss) Before Income Tax | 9,186 | (6,394) | Turnaround to profit | | Profit/(Loss) Attributable to Owners of the Company from Continuing Operations | 5,877 | (7,379) | Turnaround to profit | | Gross Profit Margin | 20.75% | 20.33% | +0.42pp | | Basic Earnings/(Loss) Per Share from Continuing Operations | RMB 0.01 | (RMB 0.01) | Turnaround to profit | | Total Assets (at period-end) | 2,136,820 | 2,158,972 (Dec 31, 2023) | -1.02% | | Net Assets (at period-end) | 780,630 | 775,473 (Dec 31, 2023) | +0.67% | | Debt-to-Asset Ratio (at period-end) | 37.0% | 39.2% (Dec 31, 2023) | -2.2pp | - Basic earnings/(loss) per share is calculated based on the profit/(loss) attributable to owners of the Company and the weighted average number of shares outstanding for the six months ended June 30, 2024 and 2023, with no dilution of ordinary shares by the Company[7] Management Discussion and Analysis This chapter provides an in-depth analysis of the Group's operating environment, business performance, strategic adjustments, and future outlook for the first half of 2024, highlighting order growth and a return to profitability despite a slow recovery in biopharmaceutical capital expenditure, achieved through business restructuring, focus on high-margin services, international expansion, and continuous R&D investment, detailing segment performance, financial position, human resources, and risk management Market Review In the first half of 2024, the biopharmaceutical industry saw an unclear recovery in capital expenditure and geopolitical tensions affecting global supply chains, leading Chinese pharmaceutical companies to adopt cautious strategies and reduce new high-end projects; however, technological advancements in new drug R&D, production process optimization, digitalization, and personalized precision medicine continue to drive industry development, with rapid growth in the Antibody-Drug Conjugate (ADC) sector, policy benefits for traditional Chinese medicine, strong demand for GLP-1 agonists, and new opportunities from upgraded regulations in the blood product industry - The recovery of capital expenditure investment in the biopharmaceutical industry is unclear, with a significant decrease in the number of new high-end projects in China[9] - The Antibody-Drug Conjugate (ADC) industry continues to grow rapidly, with Chinese enterprises becoming core global players through fast-follower strategies[9] - The new EU GMP Annex 1 and China's anticipated accession to PIC/S are expected to drive a new round of industrial upgrades in China's sterile preparation industry, creating more business opportunities[9] - The application of artificial intelligence technology in the pharmaceutical industry is growing, capable of shortening new drug R&D cycles, saving costs, and improving efficiency[9] - The traditional Chinese medicine industry shows immense development potential, influenced by favorable policies such as the update of the medical insurance catalog and the National Medical Products Administration's active promotion of traditional Chinese medicine injections[9] - GLP-1 agonists (e.g., Semaglutide and Tirzepatide) for controlling type 2 diabetes and obesity are experiencing rapid market demand, with China's complete peptide drug industry chain entering a favorable period for generic drug research[10] - The National Medical Products Administration's release of revised blood product annexes and a three-year smart supervision action plan is expected to drive demand for compliance consulting, informatization construction, and renovation[10] Business Review The Group's revenue for the first half of 2024 was approximately RMB 700.9 million, a 23.8% year-on-year decrease, primarily due to fewer uncompleted contracts at the beginning of the period; however, the Group achieved a turnaround to net profit after tax and a 25.9% year-on-year increase in order intake by enhancing service business penetration, restructuring international business teams, continuously upgrading technical solutions, and consolidating six business segments into three (Integrated Process & Packaging Systems; Consulting, Digitalization & Construction; Life Science Equipment & Consumables) to address market challenges and improve competitiveness - The Group's revenue for the first half of 2024 was approximately RMB 700.9 million, a decrease of approximately RMB 218.5 million compared to the first half of 2023, primarily due to a reduction in uncompleted contracts at the beginning of the period caused by a roughly 32.7% decline in full-year orders in 2023[11] - In the first half of 2024, the Group achieved a turnaround to net profit after tax, compared to a loss recorded in the first half of 2023[11] - Order intake for the first half of 2024 increased by 25.9% compared to the same period in 2023[11] - The Group's strategy is to increase the share of service business to achieve higher profit margins and reduce reliance on fluctuations in client capital expenditure investments[11] - The international business team was restructured to secure more projects, with a significant increase in order acquisition expected from markets such as East Asia, Southeast Asia, India, the Middle East, North Africa, and South America[11] - The Group consolidated its six major business segments into three: (1) Integrated Process & Packaging Systems; (2) Consulting, Digitalization & Construction; and (3) Life Science Equipment & Consumables, to enhance its ability to adapt to the competitive environment[12] Order Intake from Continuing Operations The Group's total order intake from continuing operations for the first half of 2024 was approximately RMB 906.1 million, a year-on-year increase of 25.9%, with the Consulting, Digitalization & Construction business segment showing the most significant growth at 49.3% Order Intake by Business Segment for H1 2024 (RMB thousand) | Order Intake by Business Segment | H1 2024 | Share | H1 2023 | Share | Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Integrated Process & Packaging Systems | 430,657 | 47.5% | 357,021 | 49.6% | 20.6% | | Consulting, Digitalization & Construction | 290,495 | 32.1% | 194,631 | 27.0% | 49.3% | | Life Science Equipment & Consumables | 184,947 | 20.4% | 168,096 | 23.4% | 10.0% | | Total | 906,099 | 100.0% | 719,748 | 100.0% | 25.9% | - Total order intake increased by approximately RMB 186.4 million or 25.9% compared to the same period last year[14] Integrated Process & Packaging Systems The Integrated Process & Packaging Systems business segment saw a 20.6% year-on-year increase in order intake to RMB 430.7 million, primarily driven by significant growth in filling line systems and freeze-drying systems across chemical, healthcare, and biopharmaceutical sectors, expanding into markets outside China, with powder and solid systems also increasing, despite a decline in fluid and bioprocess systems - Order intake was approximately RMB 430.7 million, an increase of approximately RMB 73.6 million or 20.6% compared to the same period last year[15] - Filling line systems and freeze-drying systems recorded significant growth, expanding their coverage to chemical, healthcare, and biopharmaceutical sectors, and extending to regions outside China[15] - The effective date of EU Good Manufacturing Practice (GMP) Annex 1 created more business opportunities for plant renovation projects[15] Consulting, Digitalization & Construction The Consulting, Digitalization & Construction business segment experienced a substantial 49.3% increase in order intake to RMB 290.5 million, mainly due to increased opportunities for automation control and monitoring systems in the chemical pharmaceutical sector and new business categories introduced by EU GMP Annex 1, driving growth in sterile pharmaceutical production equipment orders, despite a reduction in GMP compliance consulting service orders due to slower domestic biopharmaceutical investment, with future international regulatory inspections expected to generate more sales opportunities - Order intake was approximately RMB 290.5 million, an increase of approximately RMB 95.9 million or 49.3% compared to the same period last year[16] - Automation control and monitoring systems gained more opportunities in the chemical pharmaceutical segment[16] - The impact of EU GMP Annex 1 significantly improved cross-team collaboration by introducing new business categories, increasing orders for sterile pharmaceutical production equipment[16] - Order intake for GMP compliance consulting services decreased, but the National Medical Products Administration's accelerated application for PIC/S membership and increased international inspections are expected to bring more sales opportunities[16] Life Science Equipment & Consumables The Life Science Equipment & Consumables business segment's order intake grew by 10.0% to RMB 184.9 million, primarily by strengthening sales team management, reorganizing the sales structure, and exploring sales opportunities in sterile chemical and complex pharmaceutical preparations, while also establishing a highly integrated sterile assurance consumables supply system and committing to enhancing R&D and production capabilities for its own-brand products - Order intake increased by approximately RMB 16.9 million or 10.0% to approximately RMB 184.9 million[18] - Sales team management and organizational structure were strengthened to secure more orders, and sales opportunities in sterile chemical and complex pharmaceutical preparations were explored[18] - Established a highly integrated sterile assurance consumables supply system and committed to enhancing the core competitiveness of its own-brand products in domestic and international markets[18] Uncompleted Contracts As of June 30, 2024, the Group's total value of uncompleted contracts was RMB 1,127,273 thousand, with the Consulting, Digitalization & Construction business segment accounting for the largest share at 50.5% Uncompleted Contracts by Business Segment as of June 30, 2024 | Business Segment | Number of Contracts | Share (Number of Contracts) | Period-end Value (RMB thousand) | Share (Period-end Value) | | :--- | :--- | :--- | :--- | :--- | | Integrated Process & Packaging Systems | 672 | 41.2% | 489,384 | 43.4% | | Consulting, Digitalization & Construction | 784 | 48.0% | 568,839 | 50.5% | | Life Science Equipment & Consumables | 177 | 10.8% | 69,050 | 6.1% | | Total | 1,633 | 100.0% | 1,127,273 | 100.0% | Production, Execution and Organization The Group's AUSTAR UK factory achieved ISO 9001 and 14001 certifications, while Shanghai and Shijiazhuang manufacturing centers matured, and the Nanjing production team relocated to Shanghai to enhance production quality and efficiency, with continuous improvements to the Austar Production System, introduction of Toyota-style business practices, and Total Productive Maintenance, alongside the Shijiazhuang new production base focusing on contamination control and sterile transfer consumables, and the Project Execution Center delivering over 450 projects and establishing an after-sales service center in Nanjing for faster client response - The AUSTAR UK factory successfully passed ISO 9001 and 14001 certifications and obtained Alcumus SafeContractor accreditation[20] - The Shanghai and Shijiazhuang manufacturing centers have reached maturity, and the Nanjing production team has relocated to Shanghai, aiming to enhance the completeness, quality, technology, and effectiveness of the production system[21] - The Austar Production System continues to improve, incorporating Toyota-style business practices and Total Productive Maintenance, and offering Manufacturing Execution System (MES) QR code tracking services to clients[21] - The new Shijiazhuang production base focuses on contamination control consumables and sterile transfer consumables, having initially established R&D, R&D outcome commercialization, and commercial production capabilities[21] - The Project Execution Center executed over 450 projects in the first half of the year and delivered 118 projects across various sub-industries in mainland China, Taiwan, and Southeast Asia[21] - An after-sales service center was established in Nanjing to respond more quickly to service demands from clients in Southern China, with plans to establish more service centers in various regions across China[22] Sales & Marketing The Group employs an internal sales collaboration model and utilizes a business intelligence information system for customer relationship management, with a relatively mature sales process in China covering multiple areas; globally, European and Southeast Asian teams are being established, with significant order increases in India and Southeast Asia, while the Group actively participates in global exhibitions and industry conferences, and enhances brand awareness and customer inquiries through digital marketing efforts such as new brochures, social media, and videos - The internal sales collaboration model aims to encourage sales teams across different industries and product lines to support each other, providing more tailored solutions[23] - In terms of global expansion, teams have been recruited in Europe and Southeast Asia, leading to a significant increase in orders from India and Southeast Asia[24] - In the first half of 2024, the Group participated in four global exhibitions (e.g., Asia Pharma Expo, FEC Pharma, ACHEMA, CPHI & PMEC China) and organized 15 industry conferences, enhancing brand awareness[24] - Digital marketing has been highly effective, with 24 new brochures produced, 219 shared on the website, 250 company news items released, and 42 videos created, generating over 190,000 clicks[25] Research & Development As of June 30, 2024, the Group holds 414 patents, with 21 new registered patents in the first half of the year, focusing R&D on biopharmaceutical core process equipment, high/low-pressure chromatography systems and synthesizers for peptides/small molecules/ADCs, optimization of online nitrogen filling systems for sterile APIs, small-batch production R&D for wet granulation and pellet coating systems, and cleanroom-specific cleaning robots; significant progress has also been made in localizing rapid transfer interface products, with stainless steel beta valves completed and alpha valves entering the sample manufacturing stage - As of June 30, 2024, the Group holds 414 patents, with 21 new registered patents obtained during the review period and 62 additional patents currently under application[26] - Core biopharmaceutical process equipment has been developed, including upstream standard culture systems for yeast and E. coli, and downstream equipment[26] - Actively seeking collaboration and independently developing core process equipment such as high and low-pressure chromatography systems and peptide synthesizers for peptides, small molecules, and Antibody-Drug Conjugates[26] - The sterile API product line completed optimization and secondary development of its online nitrogen filling system, applied in scenarios such as sterile API aluminum container filling, featuring full automation, no laminar flow interference, and real-time oxygen content detection[26] - For R&D clients, small-batch production R&D for wet granulation and pellet coating systems was conducted, and R&D data analysis and process system enablement software were completed[26] - The freeze-drying product line completed optimization and secondary development of its guide-less robotic pusher system, which has been successfully commercialized and applied in client projects[27] - Performance testing for the newly developed cleanroom-specific cleaning robot has been largely completed, making it the industry's first intelligent device for such applications[27] - Significant progress has been made in localizing rapid transfer interface products, with stainless steel beta valves completed and redesigned, and alpha valves entering the sample manufacturing stage[28] Outlook Starting in 2024, the Group has consolidated its business segments into three categories: Integrated Process & Packaging Systems, Consulting, Digitalization & Construction, and Life Science Equipment & Consumables, with a future focus on continuous manufacturing, ultra-large-scale digital production facilities, freeze-drying/filling/inspection technologies, global expansion, complex drugs, and advanced therapy medicinal products, while continuously investing in technological capabilities and service business development to address market challenges and seize growth opportunities - Starting from 2024, the Group has consolidated its six major business segments into three: (1) Integrated Process & Packaging Systems; (2) Consulting, Digitalization & Construction; and (3) Life Science Equipment & Consumables[29] - Continuous manufacturing is considered a disruptive technology in the pharmaceutical industry, expected to bring significant business opportunities in services and equipment in the medium to long term[31] - Austar will assist clients in achieving ultra-large-scale digital production facilities with an annual output of 10 billion solid dosage forms/capsules by providing digital consulting and key equipment and systems[31] - In freeze-drying, filling, and inspection technologies, the Group will focus on product R&D and system integration across different product lines, aiming to become a comprehensive solution provider for liquid injectables[31] - The C-true visual inspection machine, utilizing unique "camera non-tracking" visual detection technology and AI deep learning, is expected to secure satisfactory orders in 2024[33] - The Group will explore global expansion opportunities, particularly in providing turnkey solutions such as cleanroom engineering in regions like the Middle East and Southeast Asia[35] - In Pharma 4.0, the Group has created a Research & Manufacturing Operations Information Integration System (REMOIIS) platform to facilitate digital transformation[36] - The Life Science Equipment & Consumables business segment will focus on contamination control strategy consulting and plans to develop five integrated application portfolios[39] - The Group has established 12 technology application teams, aiming to better integrate single product line technical capabilities into comprehensive technical solutions[42] - The service business is considered a significant growth driver for the Group due to its low working capital requirements, reliance on fixed human capital and streamlined processes, and difficulty for competitors to replicate, offering reasonable profit margin contributions[43] - The Group acquired a 40% stake in Nozzle, a company producing core equipment for micron and nanoparticle homogenization, with revenue expected to increase significantly after clients successfully obtain new drug approvals[47] - The Advanced Therapy Medicinal Products (ATMP) sector is one of the main business growth drivers, and the Group actively assists clients in establishing compliant, lean, and flexible cell therapy equipment[48] Integrated Process & Packaging Systems The Integrated Process & Packaging Systems business segment will focus on advanced manufacturing and processes in the life sciences industry, providing turnkey solutions for liquid and solid systems, chemical synthesis and bioprocesses, and sterile and non-sterile processes, particularly for peptide and oligonucleotide drugs, while promoting continuous manufacturing technology, assisting clients in building ultra-large-scale digital production facilities, and conducting product R&D and system integration in freeze-drying, filling, and inspection technologies, aiming to become a comprehensive solution provider for liquid injectables - This segment aims to be a turnkey supplier with both technical and knowledge capabilities, providing services for liquid and solid systems, chemical synthesis and bioprocesses, and sterile and non-sterile processes[30] - Continuous manufacturing is a disruptive technology in the pharmaceutical industry, expected to bring significant business opportunities in services and equipment in the medium to long term[31] - Austar assists clients in achieving ultra-large-scale digital production facilities with an annual output of 10 billion solid dosage forms/capsules by providing digital consulting and key equipment and systems[31] - In freeze-drying, filling, and inspection technologies, the Group will focus on product R&D and system integration across different product lines, including pre-filled syringe systems, high-speed liposome filling lines, ampoule product lines, liquid nitrogen freeze dryers, and fully automatic sterile filling systems[31] - The C-true visual inspection machine, utilizing unique "camera non-tracking" visual detection technology and AI deep learning, is expected to secure satisfactory orders in 2024[33] Consulting, Digitalization & Construction The Consulting, Digitalization & Construction business segment offers front-end engineering consulting, design, digitalization, automation and information systems, GMP compliance, facility construction project management, and turnkey solutions, leveraging its advanced project execution processes, pharmaceutical process knowledge, and information integration system platform; the Group will explore global expansion opportunities, particularly in the Middle East and Southeast Asia, to provide competitive "design-to-build" projects, with hospital high-end cell and gene therapy (CGT) translation platform facility design and construction as a growth driver, while its expertise in digitalization and regulatory compliance enables it to undertake challenging projects and promote digital transformation through the REMOIIS platform, also addressing increasing market demand for facility and equipment maintenance services, and applying its highly recognized GMP compliance and pharmaceutical quality management services to other life science industries, having successfully signed multiple integrated consulting service projects and anticipating digital transformation and energy-saving renovations as future trends to reduce costs and enhance efficiency - Services include front-end engineering consulting, conceptual and detailed design, digitalization, automation and information systems, GMP compliance and quality systems, facility construction project management, and facility turnkey solutions[35] - The Group's skills and knowledge gained in China enable it to handle various complex projects in other regions, offering highly competitive and cost-effective "design-to-build" projects, and will explore global expansion opportunities[35] - The design and construction of high-end Cell and Gene Therapy (CGT) translation platform facilities for hospitals is one of the growth drivers for this business segment[35] - In Pharma 4.0, the Group has created a complex Research & Manufacturing Operations Information Integration System (REMOIIS) platform to facilitate digital transformation[36] - Market demand for facility and equipment maintenance services is continuously increasing, and the Group possesses a strong and experienced service team to provide relevant services[36] - The GMP compliance and pharmaceutical quality management services provided by the Group are highly recognized in the biopharmaceutical industry in China and other Asian regions, and will be applied to other life science industries[36] - Successfully signed multiple integrated consulting service projects in consulting, digitalization, and construction, including with CSPC Pharmaceutical Group and Novo Nordisk, solidifying its leading position in the mid-to-high-end market[36] - Digital transformation and energy-saving renovations will be recent development trends, helping to improve production efficiency and reduce operating costs[37] Life Science Equipment & Consumables The Life Science Equipment & Consumables business segment dominates China's biopollution control and sterile assurance market and has launched its own-brand products, with a future focus over the next 3 to 5 years on contamination control strategy consulting and developing five integrated application portfolios covering cleaning and disinfection, personnel contamination control, environmental contamination monitoring, sterile protection and transfer solutions, and critical process system cleaning and corrosion protection; the Group will adopt strategies of agency distribution, own-brand products, and independent R&D to expand market share, particularly in cell therapy consumables and the integration of contamination control processes with advanced therapy medicinal product processes - This business segment holds a dominant position in China's biopollution control and sterile assurance market and has launched its own-brand products[39] - Over the next 3 to 5 years, the focus will be on contamination control strategy consulting, with plans to develop five integrated application portfolios, including comprehensive cleaning and disinfection, personnel contamination control, environmental contamination monitoring, sterile protection and transfer solutions, and critical process system cleaning and corrosion protection[39] - Established a sales and technical cooperation relationship with CAPE Europe France, and will launch more rapid transfer interface products[40] - The strategic direction of this business segment lies in advanced therapies and advanced bioprocess technologies, focusing on consumables and containment control-related businesses[40] - Will adopt strategies of agency distribution, own-brand products, and independent R&D to expand market share, particularly in cell therapy consumables and the integration of contamination control processes with advanced therapy medicinal product processes[41] Strong Technical Capabilities and Knowledge The Group has developed and established 12 technology application teams covering pharmaceutical automation and digitalization, cleaning and sterilization, biopharmaceutical processes, containment technology, cleanroom/HVAC/EMS/BMS, freeze-drying/filling/inspection, biosafety technology, laboratory technology, pharmaceutical formulation technology, compliance and operational excellence, and analytical measurement technology, aiming to integrate single product line technical capabilities into comprehensive technical solutions to provide clients with the latest technological solutions - The Group has developed and established 12 technology applications and is progressively building specific technology application teams, holding regular workshops to integrate technical capabilities[42] Service Business Opportunities The Group is enthusiastic about the development of its service business, as it requires less working capital compared to equipment and engineering systems, relies on fixed human capital and streamlined processes, is difficult for competitors to replicate, and can contribute reasonable profit margins; a growth acceleration team was established to actively increase service business revenue, with a more significant contribution to gross profit margin expected as the service business share increases - The service business requires less working capital, relies on fixed human capital and streamlined processes, is difficult for competitors to replicate, and can provide reasonable profit margin contributions[43] - Approximately two years ago, the Group established a dedicated growth acceleration team for the service business to more actively increase service business revenue[43] Global Expansion The Group has recruited teams in Europe and Southeast Asia to directly handle sales opportunities, with the global sales team's proportion of sales order intake expected to gradually increase, supported by the development of more standardized core equipment over the past decade, which facilitates sales outside China, and a global project execution team that has achieved high client satisfaction and loyalty in the Middle East, North Africa, and Southeast Asia, demonstrating its professional project management capabilities - Teams have been recruited in Europe and Southeast Asia to directly handle sales opportunities, and the proportion of sales order intake from the global sales team is expected to gradually increase[45] - Over the past 10 years, the Group has gradually developed more standardized core equipment in its product portfolio, which is more convenient for sales in some regions outside China than selling systems[45] - The global project execution team has achieved extremely high client satisfaction and loyalty in the Middle East, North Africa, and Southeast Asia[45] Complex Drugs Complex drugs encompass products with complex active ingredients, formulations, administration routes, or dosage forms, as well as drug-device combination products, with increasing attention on product technologies (e.g., nanoparticles, liposomes) and process challenges (e.g., sterile production, high-potency compound incorporation), despite only a few technologies currently being practical; the Group's 2022 acquisition of a 40% stake in Nozzle, a company producing core equipment for micron and nanoparticle homogenization, is expected to lead to significant revenue growth after clients' new drug approvals - Complex drugs are broadly defined, including products with complex active ingredients, complex formulations, complex administration routes, or complex dosage forms, as well as drug-device combination products[46] - The Group acquired a 40% stake in Nozzle in 2022, a company producing core equipment for micron and nanoparticle homogenization, with revenue expected to increase significantly after clients successfully obtain new drug approvals and transition to larger production scales[47] Advanced Therapy Medicinal Products With the implementation of new EU GMP regulations and cell and gene therapy process requirements, sterile assurance throughout the entire production process has become a critical consideration, and the Group, through collaboration between AUSTAR UK, CAPE Europe, and its Chinese manufacturing factories, aims to provide the most competitive sterile protection and assurance solutions globally; research and commercialization of new therapies, especially in cell and gene therapy, are key business growth drivers for Austar, as the Group actively assists clients in establishing compliant, lean, and flexible cell therapy equipment, offering engineering and process solutions from conceptual design to core process equipment, and building traceable automated and informatized solutions - The issuance and implementation of new EU GMP regulations and cell and gene therapy process requirements make sterile assurance throughout the entire production process a strictly critical consideration for equipment and systems engineering[48] - Through close collaboration between AUSTAR UK, CAPE Europe, and its Chinese manufacturing factories, the Group aims to provide the most competitive sterile protection and assurance solutions globally[48] - Research and commercialization of new therapies are among the main business growth drivers for life science service providers like Austar, especially in the field of cell and gene therapy technologies and processes[48] - The Group actively assists clients in establishing compliant, lean, and flexible cell therapy equipment, providing engineering and process solutions from conceptual design and cleanroom engineering to core cell therapy process equipment[48] Operating Results The Group's revenue for the first half of 2024 decreased by 23.8% year-on-year to RMB 700.9 million, primarily due to reduced revenue from Integrated Process & Packaging Systems and Consulting, Digitalization & Construction businesses; despite the revenue decline, the gross profit margin slightly improved to 20.7%, mainly driven by increased gross profit margins in Integrated Process & Packaging Systems and Life Science Equipment & Consumables, while sales and marketing expenses, administrative expenses, and R&D expenses all decreased, leading to a successful turnaround to a pre-tax profit of RMB 9.2 million - The Group's total revenue for the first half of 2024 was approximately RMB 700.9 million, a decrease of approximately 23.8% compared to the same period last year[50] - The gross profit margin increased from approximately 20.3% in the first half of 2023 to approximately 20.7% in the first half of 2024, primarily due to increased gross profit margins in the Integrated Process & Packaging Systems and Life Science Equipment & Consumables business segments[55] - Sales and marketing expenses decreased by 30.6% to RMB 63.9 million, administrative expenses decreased by 36.1% to RMB 51.2 million, and R&D expenses decreased by 14.6% to RMB 23.5 million[61][62][63] - The Group recorded a pre-tax profit of approximately RMB 9.2 million during the review period, compared to a loss of approximately RMB 6.4 million in the same period last year, achieving a turnaround to profitability[66] - Profit from continuing operations for the period was approximately RMB 4.2 million, compared to a loss of approximately RMB 8.3 million in the same period last year[67] Revenue The Group's total revenue for the first half of 2024 was RMB 700.9 million, a 23.8% year-on-year decrease, with Integrated Process & Packaging Systems and Consulting, Digitalization & Construction revenues declining by 32.3% and 28.2% respectively, primarily due to fewer uncompleted contracts at the beginning of the period, while Life Science Equipment & Consumables revenue increased by 8.6%; mainland China remained the primary revenue source, accounting for 93.0% of total revenue, though its share slightly decreased, with other regions' revenue growing by 29.9% Revenue by Business Segment for H1 2024 (RMB thousand) | Business Segment | H1 2024 | Share | H1 2023 (Restated) | Share | Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Integrated Process & Packaging Systems | 309,273 | 44.1% | 456,559 | 49.7% | -32.3% | | Consulting, Digitalization & Construction | 216,586 | 30.9% | 301,693 | 32.8% | -28.2% | | Life Science Equipment & Consumables | 175,060 | 25.0% | 161,205 | 17.5% | 8.6% | | Total | 700,919 | 100% | 919,457 | 100.0% | -23.8% | Revenue by Geographical Region for H1 2024 (RMB thousand) | Region | H1 2024 | Share | H1 2023 (Restated) | Share | Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Mainland China | 652,139 | 93.0% | 881,900 | 95.9% | -26.1% | | Other Regions | 48,780 | 7.0% | 37,557 | 4.1% | 29.9% | | Total | 700,919 | 100.0% | 919,457 | 100% | -23.8% | Integrated Process & Packaging Systems Revenue for the Integrated Process & Packaging Systems business segment decreased by 32.3% from approximately RMB 456.6 million in the first half of 2023 to approximately RMB 309.3 million in the first half of 2024, primarily due to fewer uncompleted contracts at the beginning of the period - Revenue decreased by approximately RMB 147.3 million or 32.3% to approximately RMB 309.3 million, primarily due to a reduction in uncompleted contracts at the beginning of the period[51] Consulting, Digitalization & Construction Revenue for the Consulting, Digitalization & Construction business segment decreased by 28.2% from approximately RMB 301.7 million in the first half of 2023 to approximately RMB 216.6 million in the first half of 2024, primarily due to fewer uncompleted contracts at the beginning of the period - Revenue decreased by approximately RMB 85.1 million or 28.2% to approximately RMB 216.6 million, primarily due to a reduction in uncompleted contracts at the beginning of the period[52] Life Science Equipment & Consumables Revenue for the Life Science Equipment & Consumables business segment increased by 8.6% from approximately RMB 161.2 million in the first half of 2023 to approximately RMB 175.1 million in the first half of 2024, primarily due to increased order intake during the review period - Revenue increased by approximately RMB 13.9 million or 8.6% to approximately RMB 175.1 million, primarily due to increased order intake during the review period[53] Cost of Sales The Group's cost of sales for the first half of 2024 was RMB 555.5 million, a year-on-year decrease of 24.2%, consistent with the decline in revenue - Cost of sales decreased by approximately RMB 177.0 million or 24.2% from approximately RMB 732.5 million in the first half of 2023 to approximately RMB 555.5 million, with the decrease primarily consistent with the decline in revenue[54] Gross Profit and Gross Profit Margin The Group's gross profit for the first half of 2024 was RMB 145.4 million, a year-on-year decrease of 22.2%, but the gross profit margin improved from 20.3% to 20.7%, primarily due to increased gross profit margins in the Integrated Process & Packaging Systems and Life Science Equipment & Consumables business segments, despite a decline in the Consulting, Digitalization & Construction business's gross profit margin due to intensified competition and client cost-reduction strategies