纳泉能源科技(01597) - 2024 - 中期财报

Corporate Information The company's Board of Directors comprises executive, non-executive, and independent non-executive directors, with Mr. Cheng Liquan as Chairman and Mr. Cheng Lifu as CEO Board of Directors The company's Board of Directors comprises executive, non-executive, and independent non-executive directors, with Mr. Cheng Liquan as Chairman and Mr. Cheng Lifu as CEO - The Board of Directors includes executive directors Cheng Liquan (Chairman) and Cheng Lifu (CEO), non-executive directors Li Hao and Cheng Liqin, and independent non-executive directors Hong Peiyu, Kang Jian, and Li Shusheng[2] Committee Composition The company has established Audit, Nomination, and Remuneration Committees to ensure effective corporate governance, with independent non-executive directors participating in each - Ms. Hong Peiyu chairs the Audit Committee, Mr. Cheng Liquan chairs the Nomination Committee, and Mr. Li Shusheng chairs the Remuneration Committee[2] Key Contacts and Office Locations The company maintains principal places of business in China and Hong Kong, with details on its share registrar and independent auditor, stock code 1597, and listing date of October 20, 2020 - The company's principal place of business in China is Wuxi, Jiangsu Province, and in Hong Kong is Wong Chuk Hang[3] - The independent auditor is KPMG, with stock code 1597 and listing date of October 20, 2020[3] Financial Highlights For the six months ended June 30, 2024, the company experienced significant declines in revenue and gross profit, leading to a substantial increase in loss attributable to shareholders, alongside reduced cash and cash equivalents, and a decrease in total liabilities, net debt, and total equity Financial Highlights for the Six Months Ended June 30, 2024 (RMB thousands) | Indicator | 2024 | 2023 | Change % | | :--- | :--- | :--- | :--- | | Revenue | 49,241 | 123,806 | -60% | | Gross profit | 43 | 9,608 | -100% | | Gross profit margin | 0.09% | 8% | -99% | | Loss attributable to shareholders | -15,070 | -5,467 | -176% | | Loss per share (RMB) | -0.053 | -0.018 | -194% | Balance Sheet Highlights as of June 30, 2024 (RMB thousands) | Indicator | June 30, 2024 | December 31, 2023 | Change % | | :--- | :--- | :--- | :--- | | Cash and cash equivalents and pledged deposits | 47,375 | 75,921 | -38% | | Total debt | 218,130 | 256,785 | -15% | | Net debt | 170,755 | 180,864 | -6% | | Total equity | 246,466 | 261,554 | -6% | Management Discussion and Analysis This section provides an in-depth analysis of the company's performance in core business areas such as wind power and energy storage, outlining future development strategies and financial position Business Review The company, a wind power and pitch control system solution provider, also invests in and operates electrochemical energy storage systems, maintaining cooperation with key clients in pitch control, stable wind power operations, and securing two energy storage orders during the period - The company's main businesses include wind power and pitch control system solutions, along with the R&D, production, and integration of electrochemical energy storage system products[5][8] - The pitch control system business serves five of China's top ten wind turbine manufacturers, delivering 187 sets of products covering 2MW to 7MW models in the first half[11][13] - The Duolun Wind Farm operated for 1,160 hours and generated 22.64 million kWh in the first half[12][14] - In the first half, the energy storage business established a core team, commenced plant operations, secured 2 orders, and gained customer recognition[17][19] Industry Overview The global energy system is decarbonizing, with wind and solar power gradually replacing fossil fuels; China targets 25% non-fossil energy consumption and over 1.2 billion kW of wind and solar capacity by 2030, driving rapid growth in wind power and electrochemical energy storage, which saw a 61.87% CAGR from 2018-2022 - The global energy system is moving towards decarbonization, with wind and solar power gradually replacing fossil fuels[6][9] - China aims for 25% non-fossil energy consumption and over 1.2 billion kW of wind and solar installed capacity by 2030[6][9] - Global newly installed electrochemical energy storage capacity achieved a 61.87% compound annual growth rate between 2018 and 2022[7][9] Pitch Control System Integration, Manufacturing and Sales The company develops, manufactures, and sells customized pitch control systems and core components, expanding its client base from Envision Energy to include leading wind turbine manufacturers like Goldwind and Sany Heavy Energy, delivering 187 sets of 2MW to 7MW products in the first half - The company's clients include leading wind turbine manufacturers such as Goldwind, Sany Heavy Energy, CRRC Group, Sinovel Wind, and Shanghai Electric[10][13] - For the six months ended June 30, 2024, a total of 187 sets of pitch control system products were delivered, covering 2MW to 7MW models[11][13] Wind Power Generation Since 2015, the company has operated the Duolun Wind Farm in Inner Mongolia with a total installed capacity of 19.5 MW, which generated 22.64 million kWh over 1,160 operating hours for the six months ended June 30, 2024 - The Duolun Wind Farm has a total installed capacity of 19.5 MW, equipped with 13 wind turbines[12][14] - In the first half, the Duolun Wind Farm operated for 1,160 hours, generating 22.64 million kWh[12][14] Wind Farm Operation and Maintenance The company provides aftermarket wind farm operation and maintenance services, including routine O&M, pitch control system upgrades, and consumables supply; the Lingqiu project's transaction has not yet closed due to pending administrative procedures and forest land use approvals - Services include routine wind farm operation and maintenance, pitch control system upgrades, and consumables supply[15][18] - The sale of the Lingqiu distributed wind farm project remained uncompleted as of June 30, 2024, primarily due to unfulfilled closing conditions related to administrative procedures and forest land use approvals[16][18] Energy Storage Energy storage is a core business, offering products, solutions, modules, system equipment, and smart platforms; in the first half of 2024, the company focused on R&D, production, and integration of energy storage systems, forming a core team, commissioning a plant, and securing 2 orders - The energy storage business offers energy storage products and solutions, modules, packs and system equipment, EMS, and smart energy cloud platforms[17][19] - In the first half of 2024, the energy storage business established a core team, completed plant renovation and production line commissioning, and secured 2 orders[17][19] Group Outlook The Group will continue to focus on new energy, maintaining its market share and leadership in pitch control systems, stabilizing wind power generation and O&M, while strengthening its energy storage team, R&D, client development, and supply chain to establish energy storage as a core business - The Group will continue to focus on the new energy power sector, maintaining its market share and leading position in pitch control systems[20][23] - It will strengthen its energy storage team and product R&D, deeply develop energy storage clients, and establish extensive energy storage industry supply chain resources[20][23] - The goal is to rapidly develop energy storage into a core business for the Group[20][23] Financial Position and Operating Results In the first half of 2024, the Group's total revenue decreased by 60% year-on-year to RMB 49 million, primarily due to reduced orders in the pitch control system business; while cost of sales declined with fewer orders, gross profit and margin fell sharply, leading to a significant loss of RMB 15 million for the period, mainly impacted by reduced sales volume and fixed costs - In the first half of 2024, the Group's total revenue was RMB 49 million, a 60% year-on-year decrease, primarily due to reduced sales orders in the pitch control system business[22][25] - The loss for the period was approximately RMB 15 million, an increase of approximately RMB 10 million compared to the loss of approximately RMB 5 million in the first half of 2023[43][49] Revenue Total revenue for the first half of 2024 was RMB 49 million, a 60% year-on-year decrease, with pitch control system revenue down 81%, wind power and O&M revenues down 19% and 32% respectively, while energy storage revenue significantly increased to RMB 14 million Revenue Breakdown by Business Segment for the First Half of 2024 (RMB thousands) | Business | 2024 | 2023 | Change % | | :--- | :--- | :--- | :--- | | Sales of pitch control systems and related components | 19,921 | 103,021 | -81% | | Sales of wind power | 7,704 | 9,523 | -19% | | Wind farm operation and maintenance business | 7,319 | 10,711 | -32% | | Energy storage business | 14,297 | 551 | +2494% | | Total | 49,241 | 123,806 | -60% | - The decrease in pitch control system business revenue was primarily due to delays in wind power project approvals and commencement, temporary insufficient market demand, and reduced orders[27][29] - The decrease in wind power generation revenue was mainly due to reduced national electricity consumption, limiting grid-connected power[27][29] - Energy storage business revenue significantly increased and is currently in an expansion phase[30][33] Cost of Sales Cost of sales for the first half of 2024 was RMB 49 million, a 57% year-on-year decrease, primarily due to fewer pitch control system orders; pitch control system cost of sales fell 75%, wind farm O&M costs decreased, wind power generation costs remained stable, and energy storage cost of sales was RMB 15 million - Cost of sales for the first half of 2024 was approximately RMB 49 million, a 57% year-on-year decrease, mainly due to reduced pitch system orders[31][34] - Pitch control system business cost of sales was approximately RMB 25 million, a 75% year-on-year decrease[31][34] - Energy storage business cost of sales was approximately RMB 15 million[32][34] Gross Profit and Gross Profit Margin In the first half of 2024, the Group's gross profit was nearly zero (RMB 0 million), a 100% year-on-year decrease, with the overall gross margin falling to 0%; the pitch control system business reported a negative gross profit, with its margin dropping from 3% to -24% due to reduced sales volume and stable fixed costs, while wind power gross profit declined and energy storage gross margin was -3% - The Group's gross profit for the first half of 2024 was approximately RMB 0 million, a 100% year-on-year decrease, with an overall gross margin of 0%, a decrease of approximately 8% year-on-year[35][37] - The pitch control system business gross profit was approximately RMB -5 million, with its gross margin decreasing from 3% in the first half of 2023 to -24% in the first half of 2024, primarily due to reduced sales volume while fixed costs remained stable[35][37] - The energy storage business gross margin was approximately -3%, mainly due to insufficient business volume leading to higher unit fixed costs[36][37] Other Income Other income for the first half of 2024 was approximately RMB 1 million, remaining largely consistent with the same period last year - Other income for the first half of 2024 was approximately RMB 1 million, largely consistent with the first half of 2023[38][44] Selling and Distribution Expenses Selling and distribution expenses for the first half of 2024 were approximately RMB 4 million, a year-on-year increase of RMB 1 million, primarily due to increased business promotion fees and personnel during the energy storage business expansion phase - Selling and distribution expenses for the first half of 2024 were approximately RMB 4 million, a year-on-year increase of RMB 1 million[39][45] - The increase was primarily due to increased business promotion fees and personnel during the energy storage business expansion phase[39][45] Administrative and Other Operating Expenses Administrative and other operating expenses for the first half of 2024 were approximately RMB 12 million, remaining largely consistent with the same period last year - Administrative and other operating expenses for the first half of 2024 were approximately RMB 12 million, largely consistent with the first half of 2023[40][46] Finance Costs Finance costs for the first half of 2024 were approximately RMB 2 million, a year-on-year increase of RMB 1 million, primarily due to increased borrowings for energy storage projects - Finance costs for the first half of 2024 were approximately RMB 2 million, a year-on-year increase of RMB 1 million[41][47] - The increase was primarily due to increased borrowings for energy storage projects[41][47] Gearing Ratio As of June 30, 2024, the Group's gearing ratio was 47%, consistent with December 31, 2023 - As of June 30, 2024, the Group's gearing ratio was 47%, consistent with December 31, 2023[42][48] Loss for the Reporting Period As of June 30, 2024, the Group's loss for the period was approximately RMB 15 million, an increase of approximately RMB 10 million compared to the RMB 5 million loss in the first half of 2023; loss attributable to owners of the Company was approximately RMB 13 million, a year-on-year increase of approximately RMB 9 million - As of June 30, 2024, the Group's loss for the period was approximately RMB 15 million, a year-on-year increase of approximately RMB 10 million[43][49] - Loss attributable to owners of the Company was approximately RMB 13 million, a year-on-year increase of approximately RMB 9 million[50][54] Liquidity and Capital Resources The Group's working capital primarily stems from operating cash flow, existing cash and cash equivalents, bank loans, and net proceeds from listing; directors believe the Group has sufficient working capital, with pledged bank deposits and cash equivalents at approximately RMB 47 million (down RMB 29 million year-on-year) and interest-bearing bank and other borrowings at approximately RMB 94 million (up RMB 25 million year-on-year) as of June 30, 2024 - The Group's working capital sources include cash flow from operating activities, existing cash and cash equivalents, bank loans, and net proceeds from listing[51][55] - As of June 30, 2024, pledged bank deposits and cash equivalents amounted to approximately RMB 47 million, a decrease of approximately RMB 29 million from December 31, 2023[52][55] - As of June 30, 2024, interest-bearing bank and other borrowings were approximately RMB 94 million, an increase of approximately RMB 25 million from December 31, 2023[52][55] Cash Flows As of June 30, 2024, the Group's cash and cash equivalents were approximately RMB 37 million, a decrease of approximately RMB 19 million from December 31, 2023, primarily due to the settlement of payables for pitch control system raw materials - As of June 30, 2024, the Group's cash and cash equivalents were approximately RMB 37 million, a decrease of approximately RMB 19 million from December 31, 2023[53][56] - The decrease was primarily due to the settlement of payables for pitch control system raw materials[53][56] Capital Expenditures Capital expenditures for the first half of 2024 were approximately RMB 3 million, a year-on-year decrease of RMB 17 million, mainly due to payments for energy storage project construction and new plant renovation in the prior year - Capital expenditures for the first half of 2024 were approximately RMB 3 million, a year-on-year decrease of approximately RMB 17 million[57][62] - The decrease was primarily due to payments for energy storage project construction and new plant renovation in the prior year[57][62] Contingent Liabilities As of June 30, 2024, the Group had no significant contingent liabilities - As of June 30, 2024, the Group had no significant contingent liabilities[58][63] Pledge of Group Assets As of June 30, 2024, bank loans of approximately RMB 10 million were secured by intellectual property of the Group's subsidiaries, and these loans remain outstanding - Bank loan balances of approximately RMB 10 million are secured by intellectual property of the Group's subsidiaries[59][64] - As of June 30, 2024, these bank loans remained outstanding[59][64] Human Resources As of June 30, 2024, the Group employed 174 staff, an increase from 151 as of December 31, 2023, with all employees having signed labor contracts - As of June 30, 2024, the Group employed a total of 174 staff (December 31, 2023: 151 staff)[60][65] - All employees have signed labor contracts clearly stipulating their positions, responsibilities, remuneration, benefits, training, confidentiality obligations, and other matters[60][65] Significant Investments Held, Material Acquisitions and Disposals of Subsidiaries, Associates and Joint Ventures, and Future Plans for Significant Investments and Capital Assets Except as disclosed in this interim report, for the six months ended June 30, 2024, the Group had no significant investments or material acquisitions or disposals of subsidiaries, associates, and joint ventures - For the six months ended June 30, 2024, the Group had no significant investments or material acquisitions or disposals of subsidiaries, associates, and joint ventures[61][65] Potential Risk Exposures The Group faces policy uncertainty, financial risks, and foreign exchange risks; the new energy sector is policy-driven, and policy changes may impact business; accounts receivable and bill collection face uncertainty, prompting strengthened management; foreign exchange risk primarily arises from non-RMB assets, which management will continuously monitor and prudently manage - The new energy sector is highly policy-driven, and policy changes may lead to decreased demand or investment in areas such as pitch control systems, new energy investments, and energy storage[66][69] - Financial risks are mainly reflected in insufficient cash flow and uncertainty in the collection of accounts receivable and bills receivable; the Group will strictly implement accounts receivable management and credit policies[67][70] - Foreign exchange risk primarily arises from cash and cash equivalents denominated in HKD or USD, which management will continuously monitor and prudently manage[68][71] Corporate Governance and Other Information This section covers the company's corporate governance practices, director securities trading compliance, share movements, share option scheme, interests of directors and substantial shareholders, audit committee review of interim results, and dividend policy Corporate Governance The Board is committed to achieving high corporate governance standards, emphasizing accountability and transparency; the company has adopted and complied with all applicable code provisions of the Corporate Governance Code in Appendix C1 of the HKEX Listing Rules for the six months ended June 30, 2024 - The Board is committed to achieving high corporate governance standards, emphasizing accountability and transparency[72][76] - The company has adopted the Corporate Governance Code set out in Appendix C1 of the HKEX Listing Rules and complied with all applicable code provisions for the six months ended June 30, 2024[73][76] Compliance with the Model Code for Securities Transactions by Directors of Listed Issuers The company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers in Appendix C3 of the Listing Rules, and all directors confirmed compliance for the six months ended June 30, 2024 - The company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers set out in Appendix C3 of the Listing Rules[74][77] - All directors have confirmed compliance with the Model Code for the six months ended June 30, 2024[74][77] Purchase, Sale or Redemption of the Company's Listed Securities For the six months ended June 30, 2024, 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, 2024, neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's listed securities[75][78] Changes in Information of Directors, Chief Executive and Senior Management of the Company Mr. Chen Xi resigned as the company's Deputy General Manager of Technology on April 30, 2024; since the publication of the 2023 annual report, there have been no changes in the information of directors and chief executive requiring disclosure under Listing Rule 13.51B(1) - Mr. Chen Xi resigned as the company's Deputy General Manager of Technology on April 30, 2024[79][82] - Since the publication of the 2023 annual report, there have been no changes in the information of directors and chief executive requiring disclosure under Listing Rule 13.51B(1)[79][82] Share Option Scheme The company adopted a share option scheme on July 16, 2021, to incentivize eligible participants, with exercise prices no less than the higher of the closing price or par value, and a total not exceeding 10% of the issued share capital on the adoption date; no share options were granted as of June 30, 2024 - The company adopted a share option scheme on July 16, 2021, to provide incentives or rewards to eligible participants[80][83] - The exercise price of share options shall not be less than the higher of the closing price or par value of the shares, with the total number not exceeding 10% of the issued share capital on the adoption date (i.e., 25,000,000 shares)[85][86][89] - As of June 30, 2024, no share options had been granted under the share option scheme[88][90] Directors' and Chief Executive's Interests and Short Positions in Shares, Underlying Shares and Debentures of the Company and its Associated Corporations As of June 30, 2024, Mr. Cheng Liquan held 187,500,000 shares, representing 75% of the company's share capital, through his controlled corporation, Hongyuan BVI, of which he also beneficially owns 100% Directors' Interests in the Company (as of June 30, 2024) | Director Name | Capacity | Number of Shares Held/Interested | Percentage of Shareholding | | :--- | :--- | :--- | :--- | | Mr. Cheng Liquan | Interest in controlled corporation | 187,500,000 (L) | 75% | Directors' Interests in Associated Corporations of the Company (as of June 30, 2024) | Director Name | Name of Associated Corporation | Capacity | Number of Shares Held/Interested | Percentage of Shareholding | | :--- | :--- | :--- | :--- | | Mr. Cheng Liquan | Hongyuan Limited (Hongyuan BVI) | Beneficial owner | 1 | 100% | - Mr. Cheng Liquan is deemed to be interested in all shares held by Hongyuan BVI[91] Substantial Shareholders' Interests and Short Positions in Shares and Underlying Shares As of June 30, 2024, substantial shareholder Hongyuan BVI held 187,500,000 shares, representing 75% of the company's share capital; Ms. Zhou Xuan, spouse of Mr. Cheng Liquan, is also deemed to have the same interest Substantial Shareholders' Interests in the Company (as of June 30, 2024) | Shareholder Name/Name | Number of Shares Held/Interested | Percentage of Shareholding | | :--- | :--- | :--- | | Hongyuan BVI | 187,500,000 (L) | 75% | | Ms. Zhou Xuan | 187,500,000 (L) | 75% | - Hongyuan BVI is wholly owned by Mr. Cheng Liquan, and Ms. Zhou Xuan, as Mr. Cheng Liquan's spouse, is deemed to have the same interest[93] Audit Committee and Review of Interim Results The company has established an Audit Committee in accordance with the Corporate Governance Code, comprising three independent non-executive directors with Ms. Hong Peiyu as Chair; the committee has discussed accounting principles and policies with management and reviewed the unaudited interim condensed consolidated financial statements and interim report for the six months ended June 30, 2024 - The Audit Committee comprises three independent non-executive directors, with Ms. Hong Peiyu serving as Chair[95][98] - The Audit Committee has discussed accounting principles and policies with management and reviewed the unaudited interim condensed consolidated financial statements and interim report for the six months ended June 30, 2024[95][98] Interim Dividend The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2024 - The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2024[96][99] Consolidated Statement of Profit or Loss For the six months ended June 30, 2024, the company's revenue significantly decreased by 60% year-on-year to RMB 49,241 thousand, resulting in near-zero gross profit; operating loss and loss before tax expanded considerably, with a loss for the period of RMB 15,070 thousand and loss attributable to equity holders of the company at RMB 13,343 thousand Consolidated Statement of Profit or Loss Summary (for the six months ended June 30, 2024, RMB thousands) | Indicator | 2024 | 2023 | | :--- | :--- | :--- | | Revenue | 49,241 | 123,806 | | Cost of sales | (49,198) | (114,198) | | Gross profit | 43 | 9,608 | | Other income | 830 | 925 | | Other net (losses)/gains | (10) | 41 | | Selling and distribution expenses | (4,338) | (3,441) | | Administrative and other operating expenses | (11,513) | (10,848) | | Loss from operations | (14,988) | (3,715) | | Net finance costs | (1,714) | (1,277) | | Loss before taxation | (16,702) | (4,992) | | Income tax | 1,632 | (475) | | Loss for the period | (15,070) | (5,467) | | Loss attributable to equity holders of the Company | (13,343) | (4,417) | | Loss attributable to non-controlling interests | (1,727) | (1,050) | | Basic and diluted loss per share (RMB) | (0.053) | (0.018) | Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended June 30, 2024, the company reported a loss for the period of RMB 15,070 thousand; net other comprehensive income was a negative RMB 18 thousand, primarily due to exchange differences on translation of financial statements of entities with non-RMB functional currencies, resulting in a total comprehensive loss of RMB 15,088 thousand for the period Consolidated Statement of Profit or Loss and Other Comprehensive Income Summary (for the six months ended June 30, 2024, RMB thousands) | Indicator | 2024 | 2023 | | :--- | :--- | :--- | | Loss for the period | (15,070) | (5,467) | | Other comprehensive income (after tax): | | | | Exchange differences on translation of financial statements at company level | 205 | 768 | | Exchange differences on translation of financial statements of entities with non-RMB functional currencies | (223) | (779) | | Other comprehensive income for the period | (18) | (11) | | Total comprehensive income for the period | (15,088) | (5,478) | | Attributable to equity holders of the Company | (13,361) | (4,428) | | Attributable to non-controlling interests | (1,727) | (1,050) | Consolidated Statement of Financial Position As of June 30, 2024, the company's total assets less current liabilities were RMB 256,270 thousand, a decrease from the end of 2023; non-current assets slightly decreased, while inventories within current assets significantly increased, and trade and other receivables substantially decreased; current liabilities saw an increase in bank and other borrowings and a decrease in trade and other payables Consolidated Statement of Financial Position Summary (as of June 30, 2024, RMB thousands) | Indicator | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Non-current assets | | | | Property, plant and equipment | 120,520 | 125,672 | | Contract assets | 13,955 | 13,831 | | Other receivables | 300 | 600 | | Deferred tax assets | 3,161 | 1,123 | | Total non-current assets | 137,936 | 141,226 | | Current assets | | | | Assets held for sale | 7,048 | 7,048 | | Inventories | 49,555 | 12,989 | | Contract assets | 42,465 | 36,874 | | Trade and other receivables | 154,778 | 218,922 | | Loans to related parties and a third party | 25,439 | 25,359 | | Cash and cash equivalents | 36,701 | 55,824 | | Pledged deposits | 10,674 | 20,097 | | Total current assets | 326,660 | 377,113 | | Current liabilities | | | | Bank loans and other borrowings | 93,606 | 68,561 | | Trade and other payables | 110,754 | 169,749 | | Lease liabilities | 2,954 | 4,310 | | Contract liabilities | 806 | 995 | | Current taxation | 206 | 463 | | Total current liabilities | 208,326 | 244,078 | | Net current assets | 118,334 | 133,035 | | Total assets less current liabilities | 256,270 | 274,261 | | Non-current liabilities | | | | Trade and other payables | 835 | 2,093 | | Lease liabilities | 8,969 | 10,614 | | Total non-current liabilities | 9,804 | 12,707 | | Net assets | 246,466 | 261,554 | | Total equity | 246,466 | 261,554 | Consolidated Statement of Changes in Equity For the six months ended June 30, 2024, the company's total equity decreased from RMB 261,554 thousand at the end of 2023 to RMB 246,466 thousand, primarily due to a loss for the period of RMB 15,070 thousand, with RMB 13,343 thousand attributable to equity holders of the Company Consolidated Statement of Changes in Equity Summary (for the six months ended June 30, 2024, RMB thousands) | Indicator | Share capital | Share premium | Other reserves | PRC statutory reserve | Exchange reserve | Retained profits | Total | Non-controlling interests | Total equity | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Balance at December 31, 2023 | 2,168 | 95,992 | 31,646 | 9,490 | (1,278) | 129,985 | 268,003 | 3,662 | 261,554 | | Loss for the period | — | — | — | — | — | (13,343) | (13,343) | (1,727) | (15,070) | | Other comprehensive income | — | — | — | — | (18) | — | (18) | — | (18) | | Total comprehensive income | — | — | — | — | (18) | (13,343) | (13,361) | (1,727) | (15,088) | | Balance at June 30, 2024 | 2,168 | 95,992 | 31,646 | 9,490 | (1,296) | 116,642 | 244,531 | 1,935 | 246,466 | Condensed Consolidated Cash Flow Statement For the six months ended June 30, 2024, net cash outflow from operating activities was RMB 37,620 thousand, net cash outflow from investing activities was RMB 2,953 thousand, and net cash inflow from financing activities was RMB 21,284 thousand; cash and cash equivalents at period-end totaled RMB 36,701 thousand, a decrease of RMB 19,289 thousand from the beginning of the period Condensed Consolidated Cash Flow Statement Summary (for the six months ended June 30, 2024, RMB thousands) | Cash flow category | 2024 | 2023 | | :--- | :--- | :--- | | Net cash (used in)/generated from operating activities | (37,620) | 107 | | Net cash used in investing activities | (2,953) | (19,637) | | Net cash generated from financing activities | 21,284 | 5,468 | | Net decrease in cash | (19,289) | (14,062) | | Cash at January 1 | 55,824 | 43,911 | | Effect of exchange rate changes | 166 | 554 | | Cash at June 30 | 36,701 | 30,403 | Notes to the Unaudited Interim Financial Report This section provides notes to the unaudited interim financial report, covering general information, basis of preparation, changes in accounting policies, revenue and segment reporting, other income, loss before taxation, income tax, loss per share, property, plant and equipment, inventories, trade and other receivables, related party loans, cash and cash equivalents, bank loans, trade and other payables, dividends, capital commitments, and material related party transactions General Information China Naoquan Energy Technology Holdings Limited was incorporated in the Cayman Islands on November 28, 2019, and listed on the Main Board of HKEX on October 20, 2020; the Group primarily engages in R&D, integration, manufacturing, and sales of pitch control systems and related components, wind power generation, wind farm operation and maintenance, and energy storage businesses in China - The company was incorporated in the Cayman Islands on November 28, 2019, and listed on the Main Board of the HKEX on October 20, 2020[111][114] - The Group's main businesses include R&D, integration, manufacturing, and sales of pitch control systems and related components, wind power generation, wind farm operation and maintenance, and energy storage businesses[111][114] Basis of Preparation This interim financial report is prepared in accordance with applicable disclosure provisions of the HKEX Listing Rules and IAS 34, approved for issue on August 28, 2024; it adopts the same accounting policies as the 2023 annual financial statements but does not include full financial statement information required by IFRS - The interim financial report is prepared in accordance with the HKEX Listing Rules and IAS 34, and was approved for issue on August 28, 2024[112][114] - The report adopts the same accounting policies as the 2023 annual financial statements but does not include the complete financial statement information required by IFRS[112][115] - The interim financial report is unaudited; the 2023 comparative financial information is extracted from the audited annual financial statements, for which the auditor's report was unqualified[117] Changes in Accounting Policies Revisions issued by the IASB, including amendments to IAS 1 and IFRS 16, have no significant impact on the Group's performance or financial position for the current or prior periods; the Group has not early adopted any new standards or interpretations not yet effective - Revisions issued by the IASB, including amendments to IAS 1 and IFRS 16, have no significant impact on the Group's performance or financial position for the current or prior periods[118][120] - The Group has not early adopted any new standards or interpretations not yet effective[118][120] Revenue and Segment Reporting The Group's main businesses include pitch control systems, wind power generation, wind farm operation and maintenance, and energy storage; total revenue for the first half of 2024 was RMB 49,241 thousand, a 60% year-on-year decrease, with pitch control system revenue sharply down 81% and energy storage revenue significantly up; all Group revenue and non-current assets originate from China, thus no geographical information is presented Disaggregation of Revenue from Contracts with Customers by Business Segment (for the six months ended June 30, 2024, RMB thousands) | Business | 2024 | 2023 | | :--- | :--- | :--- | | Sales of pitch control systems and related components | 19,921 | 103,021 | | Sales of wind power | 7,704 | 9,523 | | Wind farm operation and maintenance business | 7,319 | 10,711 | | Energy storage business | 14,297 | 551 | | Total | 49,241 | 123,806 | - The Group is managed by business segments, including sales of pitch control systems and related components, sales of wind power, wind farm operation and maintenance business, and energy storage business[125] - All Group revenue and non-current assets are derived from China, thus no geographical information is presented[134][135] Other Income and Other Net Gain/(Loss) Other income for the first half of 2024 was RMB 830 thousand, primarily comprising VAT refunds and government grants; other net loss was RMB 10 thousand, mainly consisting of net exchange gains and other items Other Income (for the six months ended June 30, 2024, RMB thousands) | Item | 2024 | 2023 | | :--- | :--- | :--- | | VAT refunds | 789 | 884 | | Government grants | 6 | 25 | | Others | 35 | 16 | | Total | 830 | 925 | Other Net (Losses)/Gains (for the six months ended June 30, 2024, RMB thousands) | Item | 2024 | 2023 | | :--- | :--- | :--- | | Net exchange gains | 17 | 66 | | Others | (27) | (25) | | Total | (10) | 41 | - VAT refunds include refunds from software product sales (RMB 17 thousand in 2024) and wind power sales (RMB 772 thousand in 2024)[137][138] Loss Before Taxation Loss before taxation for the first half of 2024 was RMB 16,702 thousand, a significant increase from RMB 4,992 thousand in the prior year, primarily impacted by higher net finance costs and cost of sales components such as inventory costs and depreciation expenses Net Finance Costs (for the six months ended June 30, 2024, RMB thousands) | Item | 2024 | 2023 | | :--- | :--- | :--- | | Interest expense on bank loans | 381 | 240 | | Interest expense on loans from third parties | 827 | 826 | | Interest expense on loans from a related party | 500 | — | | Interest expense on lease liabilities | 329 | 348 | | Interest income | (323) | (137) | | Net finance costs | 1,714 | 1,277 | Other Items (for the six months ended June 30, 2024, RMB thousands) | Item | 2024 | 2023 | | :--- | :--- | :--- | | Cost of inventories recognized as an expense | 44,917 | 108,166 | | Depreciation expense — owned property, plant and equipment | 5,305 | 4,135 | | Depreciation expense — right-of-use assets | 2,937 | 2,801 | | (Reversal of)/provision for loss allowance on contract assets and trade and other receivables | (8) | 160 | - The increase in net finance costs was primarily due to increased borrowings for energy storage projects[41][47] Income Tax Income tax for the first half of 2024 was RMB 1,632 thousand (2023: RMB 475 thousand), primarily comprising PRC corporate income tax provision and the origination and reversal of deferred tax Income Tax (for the six months ended June 30, 2024, RMB thousands) | Item | 2024 | 2023 | | :--- | :--- | :--- | | Current tax — Provision for PRC corporate income tax for the year | 406 | 1,200 | | Deferred tax — Origination and reversal of temporary differences | (2,038) | (725) | | Total | (1,632) | 475 | - PRC income tax provision is calculated based on the respective applicable corporate income tax rates of the subsidiaries located in the PRC[150] Loss Per Share For the six months ended June 30, 2024, basic loss per share expanded to RMB 0.053, compared to RMB 0.018 in the prior year; diluted loss per share was the same as basic loss per share due to the absence of potentially dilutive ordinary shares - Basic loss per share is calculated based on the loss attributable to ordinary equity holders of the Company of RMB 13,343 thousand and the weighted average of 250,000,000 ordinary shares in issue[148][151] - Basic loss per share was RMB 0.053 (2023: RMB 0.018)[100] - Diluted loss per share was the same as basic loss per share due to the absence of potentially dilutive ordinary shares[149][151] Property, Plant and Equipment In the first half of 2024, the Group's cost of additions to property, plant and equipment was RMB 3,090 thousand, a significant decrease from RMB 16,988 thousand in the prior year; no items of property, plant and equipment were disposed of during the period - In the first half of 2024, the Group's cost of additions to property, plant and equipment was RMB 3,090 thousand (2023: RMB 16,988 thousand)[152][155] - No items of property, plant and equipment were disposed of during the period[152][155] Inventories For the six months ended June 30, 2024, a decrease in the amount of inventories recognized as an expense in profit or loss of RMB 927 thousand was recognized - For the six months ended June 30, 2024, a decrease in the amount of inventories recognized as an expense in profit or loss of RMB 927 thousand was recognized[153][156] Trade and Other Receivables As of June 30, 2024, total trade and other receivables amounted to RMB 155,078 thousand, a decrease from RMB 219,522 thousand at the end of 2023; net trade receivables and bills receivable were RMB 140,998 thousand, with RMB 82,005 thousand due within one year; electricity price surcharges receivable were RMB 64,134 thousand, which directors believe are fully recoverable Trade and Other Receivables (as of June 30, 2024, RMB thousands) | Item | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Trade receivables and bills receivable, net of loss allowance | 140,998 | 212,660 | | Prepayments | 2,124 | 2,150 | | Other receivables (current) | 11,656 | 4,112 | | Other receivables (non-current) | 300 | 600 | | Total | 155,078 | 219,522 | Ageing Analysis of Trade Receivables and Bills Receivable (as of June 30, 2024, RMB thousands) | Ageing | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Within one year | 82,005 | 165,718 | | Over one year but within two years | 12,051 | 12,376 | | Over two years but within three years | 12,376 | 14,136 | | Over three years but within four years | 14,136 | 20,430 | | Over four years but within five years | 20,430 | — | | Total | 140,998 | 212,660 | - As of June 30, 2024, electricity price surcharges receivable included in trade and other receivables amounted to RMB 64,134 thousand, which the directors consider fully recoverable[162][163] Loans to Related Parties and a Third Party As of June 30, 2024, total loans to related parties and a third party amounted to RMB 25,439 thousand (net of loss allowance), which are interest-free, unsecured, and repayable no later than December 31, 2024 Loans to Related Parties and a Third Party (as of June 30, 2024, RMB thousands) | Item | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Loans to related parties | 24,300 | 24,300 | | Loans to a third party | 1,330 | 1,250 | | Less: Loss allowance | (191) | (191) | | Total | 25,439 | 25,359 | - The loans are interest-free, unsecured, and repayable no later than December 31, 2024[166][168] Cash and Cash Equivalents and Pledged Deposits As of June 30, 2024, bank balances were RMB 36,701 thousand, and pledged deposits were RMB 10,674 thousand; cash and cash equivalents in Mainland China amounted to RMB 28,666 thousand, subject to foreign exchange control rules Cash and Cash Equivalents (as of June 30, 2024, RMB thousands) | Item | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Bank balances | 36,701 | 55,824 | Pledged Deposits (as of June 30, 2024, RMB thousands) | Item | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Pledged deposits for issuance of bills payable | 10,674 | 20,097 | - Cash and cash equivalents in Mainland China amounted to RMB 28,666 thousand, and remittances to outside the PRC are subject to foreign exchange control rules and regulations[169][171] Bank Loans and Other Borrowings As of June 30, 2024, total bank loans and other borrowings increased to RMB 93,606 thousand from RMB 68,561 thousand at the end of 2023, comprising short-term bank loans of RMB 44,695 thousand, loans from third parties of RMB 28,911 thousand, and loans from a related party of RMB 20,000 thousand Bank Loans and Other Borrowings (as of June 30, 2024, RMB thousands) | Item | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Bank loans | 44,695 | 19,700 | | Loans from third parties | 28,911 | 28,861 | | Loans from a related party | 20,000 | 20,000 | | Total | 93,606 | 68,561 | - Short-term bank loans are due within one year or on demand[174] - Loans from third parties bear interest at 3.5% to 7% per annum, are unsecured, and have no fixed repayment terms or are repayable within one year[176][177] - Loans from a related party bear interest at 5% per annum, are unsecured, and have a one-year term[178][180] Trade and Other Payables As of June 30, 2024, total trade and other payables decreased to RMB 111,589 thousand from RMB 171,842 thousand at the end of 2023, comprising trade payables of RMB 59,357 thousand, bills payable of RMB 10,294 thousand, and other payables of RMB 41,103 thousand Trade and Other Payables (as of June 30, 2024, RMB thousands) | Item | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Trade payables (current) | 59,357 | 77,581 | | Bills payable | 10,294 | 45,846 | | Other payables (current) | 41,103 | 46,322 | | Trade payables (non-current) | 835 | 2,093 | | Total | 111,589 | 171,842 | Ageing Analysis of Trade Payables (as of June 30, 2024, RMB thousands) | Ageing | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Within 3 months | 27,297 | 48,946 | | 3 to 6 months | 24,931 | 26,138 | | 6 to 12 months | 6,466 | 1,691 | | Over 12 months | 663 | 806 | | Total | 59,357 | 77,581 | Other Payables (as of June 30, 2024, RMB thousands) | Item | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Interest payable | 29,786 | 28,459 | | Staff related costs payable | 2,215 | 4,853 | | Advances from disposal of a joint venture | 5,133 | 5,133 | | Others | 3,969 | 7,877 | | Total | 41,103 | 46,322 | Dividends For the six months ended June 30, 2024, no dividends were paid or declared by the company - For the six months ended June 30, 2024, no dividends were paid or declared by the company[185][188] Capital Commitments As of June 30, 2024, and December 31, 2023, there were no significant capital commitments outstanding and not provided for - As of June 30, 2024, and December 31, 2023, there were no significant capital commitments outstanding and not provided for[186][189] Material Related Party Transactions For the six months ended June 30, 2024, Mr. Cheng Lifu, an executive director of the company, and his spouse, Ms. Cheng Ning, provided guarantees for bank facilities granted to the Group, totaling RMB 29,562 thousand Material Related Party Transactions (as of June 30, 2024, RMB thousands) | Item | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Guarantees provided to banks for bank facilities granted | 29,562 | 17,900 | - Mr. Cheng Lifu, an executive director of the company, and his spouse, Ms. Cheng Ning, provided guarantees for bank facilities granted to the Group[190][191]