正通汽车(01728) - 2025 - 中期业绩

Executive Summary The company focuses on high-end brands, drives new energy transformation, and optimizes management, supported by a HKD 1 billion capital injection from Guomao Holdings, which became the controlling shareholder Company Strategy and Transformation Amid intense competition, the company focuses on high-end brands, optimizes management, promotes new energy vehicles, closes inefficient stores, and enhances digital management, supported by a HKD 1 billion capital injection from Guomao Holdings - Facing overcapacity and price wars in the automotive industry, the group focuses on operating high-end and mid-range brands, enhancing core competitiveness and operational quality through optimized management, new energy transformation, closure of inefficient stores, and strengthened centralized procurement and digital management[3] - The company completed a share issuance to a Guomao Holdings subsidiary, raising approximately HKD 1 billion, making Guomao Holdings the controlling shareholder and providing strong capital and resource support. The management headquarters relocated to Xiamen to integrate local resources[3] Financial Highlights For the six months ended June 30, 2025, revenue decreased by 10.0% to RMB 8,891.0 million, but gross profit significantly increased by 67.9% to RMB 297.5 million due to reclassification of mortgage loan support service income, while loss for the period widened to RMB 887.5 million Key Financial Data for the Six Months Ended June 30, 2025 | Indicator | June 30, 2025 (RMB million) | Same Period 2024 (RMB million) | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Revenue | 8,891.0 | 9,875.6 | -10.0% | | Overall Gross Profit | 297.5 | 177.1 | +67.9% | | Gross Profit Margin | 3.3% | 1.8% | +1.5 percentage points | | Loss for the Period | (887.5) | (634.8) | Loss widened | | Basic Loss Per Share | (0.228) | (0.250) | Loss narrowed | | Net Cash from Operating Activities | 77.9 | 147.1 | -47.1% | - Revenue decrease was primarily due to lower new car selling prices; gross profit increase was mainly due to income from mortgage loan support services being reclassified as revenue starting April 1, 2024[4] - The widening loss for the period was primarily due to lower new car selling prices, impairment losses on goodwill and intangible assets, and impairment losses on property, plant, and equipment[4] Consolidated Financial Statements This section presents the company's consolidated financial performance and position, including income, comprehensive income, and balance sheets Consolidated Statement of Profit or Loss For the six months ended June 30, 2025, the company reported a decrease in revenue, a significant increase in gross profit, but a wider loss for the period due to impairment losses and increased operating loss Consolidated Statement of Profit or Loss for the Six Months Ended June 30, 2025 (RMB thousand) | Indicator | 2025 | 2024 | | :--- | :--- | :--- | | Revenue | 8,891,028 | 9,875,622 | | Cost of Sales | (8,593,504) | (9,698,464) | | Gross Profit | 297,524 | 177,158 | | Other Income | 249,959 | 564,592 | | Selling and Distribution Expenses | (459,658) | (470,564) | | Administrative Expenses | (516,545) | (504,360) | | Impairment Loss on Goodwill and Intangible Assets | (115,000) | — | | Operating Loss | (543,720) | (233,174) | | Finance Costs | (439,912) | (492,060) | | Loss Before Tax | (982,742) | (723,118) | | Income Tax | 95,205 | 88,278 | | Loss for the Period | (887,537) | (634,840) | | Loss for the Period Attributable to Ordinary Equity Holders of the Company | (993,826) | (711,734) | | Basic and Diluted Loss Per Share (RMB cents) | (22.8) | (25.0) | Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended June 30, 2025, the company reported a loss for the period of RMB 887.5 million, with total comprehensive income slightly lower due to foreign exchange differences Consolidated Statement of Profit or Loss and Other Comprehensive Income for the Six Months Ended June 30, 2025 (RMB thousand) | Indicator | 2025 | 2024 | | :--- | :--- | :--- | | Loss for the Period | (887,537) | (634,840) | | Other Comprehensive Income for the Period (After Tax): | | | | Exchange Differences on Translation of Financial Statements of Overseas Operations in Mainland China | 2,007 | (7,010) | | Other Comprehensive Income for the Period | 2,007 | (7,010) | | Total Comprehensive Income for the Period | (885,530) | (641,850) | | Total Comprehensive Income for the Period Attributable to Ordinary Equity Holders of the Company | (991,819) | (718,744) | Consolidated Statement of Financial Position As of June 30, 2025, the company's non-current and current assets decreased, but net current liabilities improved, while net assets and total equity increased due to capital structure changes Consolidated Statement of Financial Position as of June 30, 2025 (RMB thousand) | Indicator | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Non-Current Assets | | | | Property, Plant and Equipment | 5,641,808 | 5,855,395 | | Intangible Assets | 2,159,073 | 2,302,546 | | Goodwill | 494,851 | 534,641 | | Total Non-Current Assets | 13,470,802 | 13,896,931 | | Current Assets | | | | Inventories | 3,599,258 | 3,306,990 | | Trade and Bills Receivables | 980,337 | 1,145,086 | | Cash and Cash Equivalents | 872,939 | 573,088 | | Total Current Assets | 13,644,453 | 15,321,305 | | Current Liabilities | | | | Loans and Borrowings | 14,631,705 | 17,550,020 | | Total Current Liabilities | 20,212,460 | 23,654,203 | | Net Current Liabilities | (6,568,007) | (8,332,898) | | Non-Current Liabilities | | | | Loans and Borrowings | 3,315,440 | 2,419,911 | | Total Non-Current Liabilities | 5,256,752 | 4,494,295 | | Net Assets | 1,646,043 | 1,069,738 | | Total Equity | 1,646,043 | 1,069,738 | Notes to the Unaudited Interim Financial Statements This section provides detailed explanations and disclosures for the unaudited interim financial statements, covering general information, accounting policies, and specific financial items General Information This section outlines the registration details and primary business scope of China ZhengTong Auto Services Holdings Limited - The company was incorporated in the Cayman Islands on July 9, 2010, primarily engaging in 4S dealership business, automotive supply chain business, and integrated property business in China[9] Basis of Preparation This section details the accounting standards and review process for the interim financial statements, affirming the company's going concern despite losses, supported by the controlling shareholder - These interim financial statements are prepared in accordance with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and Hong Kong Accounting Standard 34 "Interim Financial Reporting" issued by the Hong Kong Institute of Certified Public Accountants[10] - As of June 30, 2025, the group incurred a net loss of RMB 888 million and recorded net current liabilities of RMB 6,568 million, but the directors, based on cash flow forecasts for the next 12 months and financial support from controlling shareholder Guomao Holdings, believe the group has the ability to continue as a going concern[12] Changes in Accounting Policies This section describes the changes in accounting policies applied to the interim financial statements for the current period and their impact - The amendments to Hong Kong Accounting Standard 21 "The Effects of Changes in Foreign Exchange Rates—Lack of Exchangeability" were applied in the current accounting period but had no significant impact on the interim financial statements[13] Revenue This section details the company's main revenue sources and amounts, explaining the impact of reclassifying mortgage loan support service income - The group's primary revenue sources include passenger car sales, mortgage loan support services, after-sales services, logistics services, and sales of integrated properties[15] Revenue Breakdown for the Six Months Ended June 30, 2025 (RMB thousand) | Revenue Category | 2025 | 2024 | | :--- | :--- | :--- | | Passenger Car Sales | 6,552,047 | 7,657,625 | | Provision of Mortgage Loan Support Services | 693,024 | 325,635 | | Provision of After-Sales Services | 1,486,857 | 1,698,980 | | Provision of Logistics Services | 155,438 | 180,775 | | Sales of Integrated Properties | 3,662 | 12,597 | | Total Revenue | 8,891,028 | 9,875,612 | - Income from providing mortgage loan support services has been reclassified as revenue since April 1, 2024, leading to a significant increase in this revenue item[16] Loss Before Tax This section details the major expenses impacting the company's loss before tax, including finance costs, staff costs, and other operating items, explaining property, plant, and equipment impairment - Loss before tax is arrived at after deducting/(crediting) finance costs, staff costs, and other items[18][21] Finance Costs This section presents a breakdown of the company's finance costs for the six months ended June 30, 2025 and 2024 Finance Costs for the Six Months Ended June 30, 2025 (RMB thousand) | Item | 2025 | 2024 | | :--- | :--- | :--- | | Interest on Loans and Borrowings | 403,701 | 461,936 | | Interest on Lease Liabilities | 36,180 | 36,091 | | Other Finance Costs | 11,369 | 16,577 | | Less: Capitalized Interest | (11,338) | (22,544) | | Total Finance Costs | 439,912 | 492,060 | Staff Costs This section presents a breakdown of the company's staff costs for the six months ended June 30, 2025 and 2024 Staff Costs for the Six Months Ended June 30, 2025 (RMB thousand) | Item | 2025 | 2024 | | :--- | :--- | :--- | | Salaries, Wages and Other Benefits | 329,455 | 367,388 | | Defined Contribution Retirement Plan Contributions | 30,704 | 28,136 | | Equity-Settled Share-Based Payment Expenses | — | 196 | | Total Staff Costs | 360,159 | 395,720 | Other Items This section details other significant items affecting the company's financial performance, including impairment losses on property, plant, and equipment - For the six months ended June 30, 2025, in view of intense market competition in the automotive industry and evolving customer demand, the group decided to transform or close some 4S stores, recognizing an impairment loss on property, plant and equipment of RMB 126,376,000[21] Income Tax This section outlines the company's income tax credit for the reporting period, including corporate income tax rates and preferential policies for its Chinese subsidiaries Income Tax for the Six Months Ended June 30, 2025 (RMB thousand) | Item | 2025 | 2024 | | :--- | :--- | :--- | | Current Tax: Provision for China Income Tax for the Period | 5,045 | 50,446 | | Deferred Tax: Origination and Reversal of Temporary Differences | (100,250) | (138,724) | | Total Income Tax | (95,205) | (88,278) | - The corporate income tax rate for the group's Chinese subsidiaries is 25%, while Shengze Jietong Supply Chain Co., Ltd., a Chinese automotive logistics provider, enjoys a preferential tax rate of 15% as a high-tech enterprise[26] Loss Per Share This section provides the company's basic and diluted loss per share for the six months ended June 30, 2025, and the weighted average number of ordinary shares used in the calculation Loss Per Share for the Six Months Ended June 30, 2025 (RMB cents) | Indicator | 2025 | 2024 | | :--- | :--- | :--- | | Basic Loss Per Share | (22.8) | (25.0) | | Diluted Loss Per Share | (22.8) | (25.0) | - For the six months ended June 30, 2025, the weighted average number of ordinary shares outstanding was 4,367,979,834 shares, a significant increase from 2,850,682,420 shares in the same period of 2024[25] Intangible Assets This section details the composition, cost, accumulated amortization, and impairment losses of the company's intangible assets, explaining the impairment due to market changes Carrying Value of Intangible Assets as of June 30, 2025 (RMB thousand) | Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Automobile Dealership Rights and Dealership Operating Rights | 1,941,138 | 2,084,689 | | Trademarks | 208,659 | 208,659 | | Software and Others | 9,276 | 9,198 | | Total | 2,159,073 | 2,302,546 | - For the six months ended June 30, 2025, an impairment loss on intangible assets of RMB 75,210,000 was recognized due to changes in the macroeconomic environment, intense competition in the automotive dealership industry, and evolving customer demand[30] Goodwill This section presents the cost, accumulated impairment losses, and carrying value of the company's goodwill, explaining impairment due to market competition and underperforming stores Carrying Value of Goodwill as of June 30, 2025 (RMB thousand) | Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cost | 2,006,335 | 2,006,335 | | Accumulated Impairment Losses | 1,511,484 | 1,471,694 | | Carrying Value | 494,851 | 534,641 | - For the six months ended June 30, 2025, an impairment loss on goodwill of RMB 39,790,000 was recognized due to intense competition in the automotive dealership industry and certain stores performing below expectations[30][32] Other Financial Assets / (Liabilities) This section details the composition of the company's other financial assets and liabilities, including wealth management products, option contracts, swap contracts, and investments Other Financial Assets / (Liabilities) as of June 30, 2025 (RMB thousand) | Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Other Financial Assets at Fair Value Through Profit or Loss (Current) | 57,039 | 65,119 | | Other Financial Assets at Fair Value Through Profit or Loss (Non-Current) | 514,406 | 511,829 | | Other Financial Liabilities at Fair Value Through Profit or Loss (Current) | (13,772) | (296) | | Other Financial Liabilities at Fair Value Through Profit or Loss (Non-Current) | (6,040) | (6,320) | - The investment in Dongfeng Logistics (8.66% equity interest) had a fair value of RMB 501,715,000 as of June 30, 2025, consistent with December 31, 2024[35] Inventories This section details the composition of the company's inventories, including vehicles and spare parts for 4S dealership business and properties under development for sale, and analyzes inventory recognized as expense Inventory Composition as of June 30, 2025 (RMB thousand) | Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | 4S Dealership Business — Automobiles | 2,863,745 | 2,655,612 | | 4S Dealership Business — Automobile Spare Parts | 266,930 | 258,865 | | Integrated Property Business — Properties Under Development for Sale | 415,935 | 339,822 | | Total Inventories | 3,599,258 | 3,306,990 | Amount of Inventories Recognized as Expense for the Six Months Ended June 30, 2025 (RMB thousand) | Item | 2025 | 2024 | | :--- | :--- | :--- | | Carrying Amount of Inventories Sold | 8,462,197 | 9,369,900 | | Write-down of Inventories | 42,939 | 106,288 | | Reversal of Write-down of Inventories | (5,809) | (3,235) | | Total | 8,499,327 | 9,472,953 | Trade and Bills Receivables This section provides an aging analysis of the company's trade and bills receivables and outlines its credit risk management policy Aging Analysis of Trade and Bills Receivables as of June 30, 2025 (RMB thousand) | Aging | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Within 3 Months | 975,952 | 1,139,432 | | Over 3 Months but Within 1 Year | 2,344 | 2,159 | | Over 1 Year | 2,041 | 3,495 | | Total | 980,337 | 1,145,086 | - Trade receivables primarily refer to amounts due from individual customers and warranty deposits from automobile manufacturers, with limited credit risk, and management has implemented credit policies for continuous monitoring[39] Prepayments, Deposits and Other Receivables This section lists the components of the company's prepayments, deposits, and other receivables, noting that other receivables primarily include supplier rebates from auto manufacturers Prepayments, Deposits and Other Receivables as of June 30, 2025 (RMB thousand) | Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Prepayments | 296,848 | 272,164 | | Deposits | 292,065 | 239,213 | | Other Receivables | 4,132,282 | 4,326,730 | | Amounts Due from Related Parties | 112 | — | | Total | 4,721,307 | 4,838,107 | - Other receivables primarily include supplier rebates receivable from automobile manufacturers totaling RMB 3,603,323,000[40] Trade and Other Payables This section provides an aging analysis and composition of the company's trade and other payables, including trade payables, contract liabilities, and other payables Trade and Other Payables as of June 30, 2025 (RMB thousand) | Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Current | | | | Within 3 Months | 2,764,944 | 3,256,258 | | Over 3 Months but Within 6 Months | 518,431 | 634,230 | | Over 6 Months but Within 12 Months | 5,936 | 5,253 | | Trade and Bills Payables | 3,289,311 | 3,895,741 | | Contract Liabilities | 1,215,294 | 948,918 | | Other Payables and Accruals | 458,945 | 572,251 | | Amounts Due to Related Parties | 38,584 | 54,030 | | Total Current | 5,002,134 | 5,470,940 | | Non-Current | | | | Long-Term Payables | 85,731 | 108,697 | | Total | 5,087,865 | 5,579,637 | Capital, Reserves and Dividends This section details changes in the company's share capital, including new share issuance for fundraising, and confirms the board's decision not to recommend an interim dividend - The Board of Directors does not recommend the payment of any interim dividend for the reporting periods ended June 30, 2025, and June 30, 2024[46] Share Capital This section details the changes in the company's issued and fully paid ordinary share capital, including new share issuance from a subscription agreement Changes in Issued and Fully Paid Ordinary Shares as of June 30, 2025 (thousand shares/HKD thousand) | Item | 2025 (Number of Shares) | 2025 (Amount) | 2024 (Number of Shares) | 2024 (Amount) | | :--- | :--- | :--- | :--- | :--- | | As of January 1 | 3,346,990 | 334,699 | 2,867,102 | 286,710 | | Issuance of Ordinary Shares | 6,669,061 | 666,906 | 479,888 | 47,989 | | As of June 30 / December 31 | 10,016,051 | 1,001,605 | 3,346,990 | 334,699 | | RMB Equivalent (thousand) | | 901,394 | | 290,228 | - On January 25, 2025, the company entered into a subscription agreement with Cinda Auto (Hong Kong) Limited to issue 6,669,060,524 subscription shares, raising approximately HKD 1 billion, with net proceeds of RMB 913,544,000[44][45] Perpetual Bonds This section describes the company's perpetual bonds, their terms, interest rates, redemption rights, and accounting classification as equity - Perpetual bonds 1 to 9 are classified as equity because they impose contractual obligations only in certain circumstances at the group's discretion, essentially granting the group an unconditional right to avoid delivering cash or other financial assets[63] - For the six months ended June 30, 2025, profit attributable to holders of perpetual bonds 3, 5, and 9 was RMB 63,414,000, with RMB 107,127,000 distributed to relevant bondholders[63] - Excluding perpetual bonds 3, 5, and 9, profit attributable to holders of other perpetual bonds issued by subsidiaries to external third parties was RMB 43,250,000, with RMB 44,582,000 distributed[64] Contingent Liabilities This section discloses two major contingent liabilities, including a dispute with Beijing Guangze and a loan guarantee, with directors assessing low probability of payment - A dispute with Beijing Guangze involves a contractor's payment notice of RMB 6 million, but the company's directors believe the likelihood of being sued or required to pay is low, thus no provision has been made[65][66] - Wuhan Zhengtong provided a guarantee for a fixed asset loan contract between Hubei Bank, Beijing Guangze, and Inner Mongolia Shengze, with an outstanding debt of approximately RMB 553 million, but the estimated realizable value of the collateral is RMB 627 million, leading directors to assess a low probability of payment[67][68] Management Discussion and Analysis This section provides an in-depth review of the company's operational and financial performance, market conditions, and strategic initiatives for the reporting period Market Review In the first half of 2025, China's automotive market saw strong growth, particularly in new energy vehicles, driven by policy support and increasing market penetration - In H1 2025, China's passenger car market achieved total retail sales of 10.901 million units, a year-on-year increase of approximately 10.8%, driven by policies for vehicle scrapping and replacement[70] - New energy vehicle sales reached approximately 5.468 million units, a year-on-year increase of approximately 33.3%, with market penetration rising to 50.2%, dominating China's new car sales market[70] - As of the end of June 2025, the national vehicle parc was approximately 360 million units, with new energy vehicles accounting for over 10% at 10.3%, generating significant new demand for the automotive after-sales market[71] Business Review In H1 2025, the group focused on high-end brands, new energy transformation, and management optimization, supported by a HKD 1 billion capital injection from Guomao Holdings, with headquarters relocating to Xiamen - The group continues to focus on operating high-end and mid-range automotive brands, comprehensively enhancing its core competitiveness and operational quality through optimized management structure, promotion of new energy brand transformation, closure and consolidation of inefficient stores, strengthened centralized procurement, and improved digital management capabilities[72][73] - The company completed a share issuance to a Guomao Holdings subsidiary, raising approximately HKD 1 billion, making Guomao Holdings the controlling shareholder, and officially relocating its management headquarters to Xiamen to deeply integrate local resources[73] - The group ranked 21st in the 2025 China Automobile Dealer Group Top 100 list and 66th in the 2025 China Top 100 Automobile Dealer Groups—New Energy Sub-list[73] Automobile Dealership The group restructured its automobile dealership business in H1 2025, accelerating the transition to new energy brands, which now account for approximately 8.6% of total new car sales, operating 92 outlets - The group implemented a business architecture restructuring for its automobile dealership brands, combining regional coordination with vertical brand management, vigorously promoting the transformation of stores towards new energy brands, with new energy new car sales accounting for approximately 8.6% of the group's total sales[74] - As of June 30, 2025, the group operated 92 outlets across 36 cities in 15 provinces and municipalities nationwide, having also established dealership and after-sales operations for mainstream new energy brands such as AITO Wenjie, Tesla, and NIO[82] New Car Sales Business The group actively adjusted brand strategies, optimized inventory, and implemented a "online lead generation, offline conversion, private domain retention" marketing approach, resulting in a 0.8% increase in new car sales - The group actively adjusted existing brand operating strategies and marketing methods, focusing on "structural optimization and efficiency improvement," dynamically allocating inventory, and building a regional inventory allocation platform to enhance inventory turnover efficiency[75] - Marketing adhered to a "online lead generation, offline conversion, private domain retention" strategy, increasing lead acquisition and transaction volume through new media operations, cross-industry traffic import, and community fission[76] - For the six months ended June 30, 2025, new car sales totaled 26,840 units, a year-on-year increase of approximately 0.8%, with 23,747 units being high-end and mid-range vehicles, an increase of approximately 4.7% year-on-year[77] After-Sales Service Business The group continuously optimized customer service experience, implemented tiered customer operations, and accelerated digital service channel development, achieving approximately RMB 1,486.9 million in after-sales service revenue - The group continuously optimized customer service experience, refined customer segmentation operations, launched exclusive service packages for high-value customers, and accelerated the construction of digital service channels to improve service efficiency and transparency[78] - For the six months ended June 30, 2025, cumulative after-sales service instances reached 504,250, generating after-sales service revenue of approximately RMB 1,486.9 million[78] Automobile Derivative Business The group made positive progress in used car, auto finance, and insurance agency businesses, enhancing efficiency through platform optimization, financial institution partnerships, and product innovation - The group deepened its used car business layout, promoted the transformation and upgrade of used car centers, optimized the auction platform cooperation system, and piloted its self-operated auction platform to improve turnover efficiency and gross profit margins[79][80] - The group continued extensive and in-depth cooperation with various financial institutions to expand auto retail mortgage loan solutions, effectively increasing the total volume and terms of financial products offered[80] - Dingze Insurance Agency continued to optimize its business structure, implement intensive operations, and piloted a renewal center in Wuhan, with plans to expand to other core cities[81] Used Car Business The group's used car sales increased by approximately 7.2% year-on-year for the six months ended June 30, 2025, driven by enhanced efficiency and platform optimization - For the six months ended June 30, 2025, the group's used car sales increased by approximately 7.2% year-on-year[80] Auto Finance Business For the six months ended June 30, 2025, income from mortgage loan support services increased by approximately 112.8% to RMB 693.0 million, primarily due to reclassification as revenue - For the six months ended June 30, 2025, income from providing mortgage loan support services was approximately RMB 693.0 million, a year-on-year increase of approximately 112.8%, mainly due to its income being reclassified as revenue starting April 1, 2024[80] Insurance Agency Business For the six months ended June 30, 2025, the group's insurance agency income increased by approximately 68.6% to RMB 55.6 million, driven by business structure optimization and centralized operations - For the six months ended June 30, 2025, the group's cumulative insurance agency income reached approximately RMB 55.6 million, a year-on-year increase of approximately 68.6%[81] Accelerated New Energy Transformation The group rapidly expanded its new energy vehicle dealership network by converting existing assets, opening new stores, and securing pre-authorizations for mainstream new energy brands - The group achieved rapid deployment of its new energy vehicle dealership network through the conversion of existing assets, with the Beijing AITO Wenjie User Center and Zhanjiang Jetour store successfully opening in the first half of the year, and new Geely Galaxy authorization in Guangzhou[82] - As of mid-August 2025, the group has successfully obtained pre-authorizations for 7 mainstream new energy brands in Beijing, Zhuhai, Jieyang, Shantou, and other locations, with related preparatory work fully underway[83] Supply Chain Business The group's supply chain subsidiary, Shengze Jietong Supply Chain Co., Ltd., generated approximately RMB 155.4 million in revenue, actively expanding and optimizing vehicle and spare parts warehousing services - Shengze Jietong Supply Chain Co., Ltd. generated operating revenue of approximately RMB 155.4 million in the first half of the year, affected by national new energy vehicle subsidy policies and changes in business routes[84] - In terms of complete vehicle business, the company continued to carry out commercial vehicle road transport and coastal multimodal transport projects, actively promoted the normalization of new energy passenger vehicle shipping, and expanded new complete vehicle transport businesses for FAW Group and Geely Auto brands in multiple regions[84] - For spare parts warehousing business, the focus was on optimizing spare parts inventory and warehousing costs, improving the inbound and outbound capabilities for automotive spare parts, and continuously expanding warehousing leasing business[84] Emerging Businesses The group is actively pursuing international business expansion and closely monitoring the transformative impact of intelligent connected vehicles to strategically position for future growth - The group is accelerating its international business strategic layout, vigorously expanding its global business footprint, actively striving for domestic main airport export authorizations, overseas local dealership authorizations, and seeking overseas localized joint ventures and cooperation[85][86] - The company closely monitors the transformative impact of intelligent connected vehicles on the future mobility market, aiming to strategically position for development during the industry's transformation period[86] Management Enhancement In H1 2025, the group continuously improved management across organizational structure, cost reduction, governance, internal supervision, risk prevention, and digital transformation to optimize operational efficiency - In terms of organizational structure, the group adjusted and optimized the headquarters' departmental structure, streamlined management levels in the automotive dealership segment, and established a flatter business control model[87] - Regarding cost reduction and efficiency improvement, the group strictly controlled various expense expenditures, expanded diversified financing channels, replaced high-interest debt, and improved operational management and economic efficiency[87] - In terms of standardized governance, internal supervision, risk prevention, and digital transformation, the group continuously improved its systems and internal control framework, reconstructed its risk and compliance system, and launched the "Cangqiong" digital platform for implementation and promotion[87][89] Financial Review This section reviews the company's H1 2025 financial performance, including revenue, costs, gross profit, expenses, loss, assets, liabilities, cash flow, capital expenditure, inventory, and leverage - The group will actively enhance its operating efficiency and consider various methods to improve its current financial position and reduce its leverage level[103] Operating Revenue Total operating revenue decreased by 10.0% to RMB 8,891.0 million, primarily due to lower new car selling prices, with new car sales and mortgage loan services contributing 81.5% of total revenue Operating Revenue for the Six Months Ended June 30, 2025 (RMB million) | Item | 2025 | 2024 | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Total Revenue | 8,891.0 | 9,875.6 | -10.0% | | New Car Sales and Mortgage Loan Services Revenue | 7,245.1 | 7,983.3 | -9.2% | | After-Sales Service Revenue | 1,486.9 | 1,699.0 | -12.5% | - The decrease in revenue was primarily due to lower new car selling prices during the period. New car sales and mortgage loan services revenue accounted for 81.5% of total revenue, with high-end and mid-range automotive sales revenue accounting for approximately 94.3% of new car sales revenue[88] Cost of Sales Total cost of sales decreased by 11.4% to RMB 8,593.5 million, primarily due to lower average new car procurement prices and reduced new car and after-sales service revenue Cost of Sales for the Six Months Ended June 30, 2025 (RMB million) | Item | 2025 | 2024 | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Total Cost of Sales | 8,593.5 | 9,698.5 | -11.4% | | New Car Sales Cost | 7,496.5 | 8,497.8 | -11.8% | | After-Sales Service Cost | 981.1 | 1,019.1 | -3.7% | - The decrease in cost of sales was primarily due to lower average new car procurement prices and a corresponding reduction in new car and after-sales service revenue[90] Gross Profit and Gross Profit Margin Gross profit increased by 67.9% to RMB 297.5 million, and gross profit margin rose by 1.5 percentage points to 3.3%, mainly due to the reclassification of mortgage loan support service income Gross Profit and Gross Profit Margin for the Six Months Ended June 30, 2025 (RMB million) | Indicator | 2025 | 2024 | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Gross Profit | 297.5 | 177.2 | +67.9% | | Gross Profit Margin | 3.3% | 1.8% | +1.5 percentage points | - The increase in gross profit and gross profit margin was primarily due to income from providing mortgage loan support services being reclassified as revenue starting April 1, 2024[91] Selling and Distribution Expenses Selling and distribution expenses decreased by approximately 2.3% to RMB 459.7 million, primarily attributable to a reduction in staff costs Selling and Distribution Expenses for the Six Months Ended June 30, 2025 (RMB million) | Item | 2025 | 2024 | | :--- | :--- | :--- | | Selling and Distribution Expenses | 459.7 | 470.6 | - Selling and distribution expenses decreased by approximately 2.3%, primarily due to a decrease in staff costs[92] Administrative Expenses Administrative expenses increased by approximately 2.4% to RMB 516.5 million, primarily due to impairment losses on property, plant, and equipment Administrative Expenses for the Six Months Ended June 30, 2025 (RMB million) | Item | 2025 | 2024 | | :--- | :--- | :--- | | Administrative Expenses | 516.5 | 504.4 | - Administrative expenses increased by approximately 2.4%, primarily due to impairment losses on property, plant, and equipment[93] Operating Loss Operating loss widened to RMB 543.7 million, primarily due to lower new car selling prices, impairment losses on goodwill, intangible assets, and property, plant, and equipment Operating Loss for the Six Months Ended June 30, 2025 (RMB million) | Item | 2025 | 2024 | | :--- | :--- | :--- | | Operating Loss | (543.7) | (233.2) | - The increase in operating loss was primarily due to lower new car selling prices, impairment losses on goodwill and intangible assets, and impairment losses on property, plant, and equipment[94] Income Tax The company recorded an income tax credit of RMB 95.2 million for the six months ended June 30, 2025 Income Tax Credit for the Six Months Ended June 30, 2025 (RMB million) | Item | 2025 | 2024 | | :--- | :--- | :--- | | Income Tax Credit | 95.2 | 88.3 | Contingent Liabilities As of June 30, 2025, the group had no significant contingent liabilities other than those disclosed in note 18 to the interim financial statements - As of June 30, 2025, the group had no significant contingent liabilities other than those disclosed in note 18 to the interim financial statements[96] Loss for the Period Loss for the period widened to RMB 887.5 million, primarily due to lower new car selling prices, impairment losses on goodwill, intangible assets, and property, plant, and equipment Loss for the Period for the Six Months Ended June 30, 2025 (RMB million) | Item | 2025 | 2024 | | :--- | :--- | :--- | | Loss for the Period | (887.5) | (634.8) | - The increase in loss for the period was primarily due to lower new car selling prices, impairment losses on goodwill and intangible assets, and impairment losses on property, plant, and equipment[97] Current Assets and Current Liabilities Current assets decreased by RMB 1,676.9 million, while current liabilities decreased by RMB 3,441.7 million, primarily due to a reduction in short-term borrowings Current Assets and Current Liabilities as of June 30, 2025 (RMB million) | Item | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Current Assets | 13,644.5 | 15,321.3 | -1,676.9 | | Current Liabilities | 20,212.5 | 23,654.2 | -3,441.7 | - Current liabilities decreased by approximately RMB 3,441.7 million, primarily due to a reduction in short-term borrowings[98] Cash Flow Net cash generated from operating activities was RMB 77.9 million, with cash and cash equivalents increasing by RMB 299.9 million to RMB 872.9 million as of June 30, 2025 Net Cash from Operating Activities for the Six Months Ended June 30, 2025 (RMB million) | Item | 2025 | 2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities | 77.9 | 147.1 | - As of June 30, 2025, cash and cash equivalents were approximately RMB 872.9 million, an increase of approximately RMB 299.9 million compared to December 31, 2024[99] Capital Expenditure and Investments Capital expenditure and investments decreased by approximately RMB 189.1 million, primarily due to the completion of construction in progress Capital Expenditure and Investments for the Six Months Ended June 30, 2025 (RMB million) | Item | 2025 | 2024 | | :--- | :--- | :--- | | Capital Expenditure and Investments | 275.5 | 464.6 | - Capital expenditure and investments decreased by approximately RMB 189.1 million, primarily due to the completion of construction in progress, leading to reduced investment[101] Inventories Inventories increased by RMB 292.3 million, mainly due to higher year-end vehicle inventory, while average inventory turnover days decreased by 2.4 days, indicating improved efficiency Inventories and Average Inventory Turnover Days as of June 30, 2025 (RMB million/days) | Item | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Inventories | 3,599.3 | 3,307.0 | +292.3 | | Average Inventory Turnover Days | 48.0 days | 50.4 days | -2.4 days | - The increase in inventories was primarily due to higher year-end vehicle inventory, while average inventory turnover days decreased by 2.4 days, indicating improved inventory management efficiency[102] Exchange Rate Risk The group primarily conducts business in RMB and uses swap and option foreign exchange instruments to hedge a portion of its future USD-denominated loan repayments - The group primarily conducts business in RMB and uses swap instruments and option foreign exchange instruments to hedge a portion of its future USD-denominated loan repayments[102] Sources of Funds and Net Gearing Ratio The net gearing ratio significantly decreased by 513.1 percentage points, indicating an improvement in the group's leverage level Funding Status and Net Gearing Ratio as of June 30, 2025 (RMB million) | Item | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Cash and Cash Equivalents, Time Deposits and Pledged Bank Deposits | 4,794.0 | 6,468.4 | -1,674.5 | | Loans and Borrowings, Lease Liabilities | 19,192.5 | 21,314.0 | -2,121.5 | | Net Gearing Ratio | 874.7% | 1,387.8% | -513.1 percentage points | - The net gearing ratio significantly decreased by 513.1 percentage points, indicating an improvement in the group's leverage level[103] Pledged Assets Pledged assets, totaling RMB 7,342.4 million, serve as collateral for loans and borrowings used for daily business operations Pledged Assets as of June 30, 2025 (RMB million) | Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Pledged Assets | 7,342.4 | 9,447.0 | - Pledged assets serve as collateral for loans and borrowings, used as working capital for daily business operations[104] Foreign Currency Investments As of June 30, 2025, the group held no foreign currency investments - As of June 30, 2025, the group held no foreign currency investments[105] Employees and Remuneration Policy As of June 30, 2025, the company had 5,523 employees with staff costs of RMB 360.2 million, emphasizing talent development, incentive programs, and corporate culture Number of Employees and Staff Costs as of June 30, 2025 (RMB million) | Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Number of Employees | 5,523 | 5,672 | | Staff Costs (Six Months) | 360.2 | 395.7 | - The group is dedicated to creating an open, inclusive, and vibrant workplace, focusing on value creation, strengthening performance assessment and incentives, and continuously developing the professional depth and innovation capabilities of management and business personnel through a four-tier training system and specialized training mechanisms[106][107] Future Outlook and Strategies This section outlines the group's future strategic direction, focusing on electrification, internationalization, digitalization, marketization, and refinement, supported by its controlling shareholder Future Outlook and Strategies The group plans to accelerate new energy transformation, expand international business, enhance digitalization, and deepen market-oriented reforms to become a leading integrated automotive service provider - The group will accelerate its new energy transformation and upgrade, using cooperation with relevant mainstream new energy brands as a breakthrough to comprehensively promote the new energy upgrade of its stores; simultaneously, it will actively explore service models such as intelligent connected vehicles based on the achievements of the automotive industry research institute[108] - In terms of internationalization, the group will use automotive export trade as an entry point, actively strive for domestic main airport export authorizations, overseas local dealership authorizations, and seek overseas localized joint ventures and cooperation to form a comprehensive international business layout[108] - The group will strengthen digital transformation, promote the construction of an integrated business and finance system, vigorously promote digital intelligence platforms, and launch AI customer service to enhance data analysis and refined customer operations capabilities[109] - The group will deepen market-oriented reforms, optimize organizational structure, stimulate internal corporate vitality, and steadily advance towards its vision of becoming a "leading integrated service provider in the automotive ecosystem"[109] Interim Dividend The Board of Directors does not recommend the payment of an interim dividend for the six months ended June 30, 2025 - The Board of Directors does not recommend the payment of an interim dividend for the six months ended June 30, 2025[109] Other Information This section covers additional disclosures, including the review of interim results, new share subscription, mandatory general offer, and corporate governance matters Review of Interim Results The company's unaudited condensed consolidated interim financial statements for the six months ended June 30, 2025, have been reviewed by the Audit Committee and KPMG - The company's Audit Committee has reviewed the unaudited condensed consolidated interim financial statements for the six months ended June 30, 2025, which were also reviewed by KPMG in accordance with Hong Kong Standard on Review Engagements 2410[110] Subscription of New Shares Under Specific Mandate and Mandatory General Offer This section details the subscription of new shares by Cinda Auto (Hong Kong) Limited for approximately HKD 1 billion, the use of proceeds, and the subsequent mandatory general offer due to the waiver not being granted - The company entered into a subscription agreement with Cinda Auto (Hong Kong) Limited to allot and issue 6,669,060,524 ordinary shares at a subscription price of HKD 0.15 per share, for a total cash consideration of approximately HKD 1 billion[111] - The subscription was completed on June 2, 2025, raising net proceeds of approximately HKD 997 million (approximately RMB 914 million), planned for increasing working capital, strategic investments or industrial mergers and acquisitions, and repayment of existing debts[112][113] - As of June 30, 2025, RMB 100 million had been used for working capital, RMB 270 million for debt repayment, with the remaining RMB 544 million unutilized[114] Purchase, Sale or Redemption of the Company's Listed Securities Except for the connected subscription, neither the company nor its subsidiaries purchased, sold, or redeemed any of its listed securities during the reporting period - Except for the connected subscription, neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's listed securities during the six months ended June 30, 2025[116] Events After Reporting Period This section discloses significant events after the reporting period, including the suspension of share trading due to insufficient public float and changes in board members - Following the close of the offer, the company's public float decreased to approximately 9.29%, failing to meet the minimum public float requirement of 25% as stipulated in Listing Rule 8.08(1)(a), leading to the suspension of trading in shares on the Stock Exchange starting July 2, 2025[115][118][119] Suspension of Trading in Shares The company's shares were suspended from trading on July 2, 2025, due to the public float falling below 25%, and the company is seeking a waiver and will announce plans to restore it - The company has applied to the Stock Exchange for a temporary waiver from strict compliance with Listing Rule 8.08(1)(a) and has received resumption guidance, and will issue further announcements regarding the restoration of public float in its shares in due course in accordance with the Listing Rules[115][119] Changes in Directors On July 11, 2025, Mr. Chen Hong resigned as Executive Director, and Mr. Zhuang Zhibo and Mr. Wu Xiaoqiang were appointed as Executive Directors - On July 11, 2025, Mr. Chen Hong resigned as an Executive Director due to work reallocation and ceased to be a member of the company's Environmental, Social and Governance Committee. Mr. Zhuang Zhibo and Mr. Wu Xiaoqiang were appointed as Executive Directors on the same day[120] Corporate Governance The group is committed to high standards of corporate governance and confirmed compliance with the Corporate Governance Code during the six months ended June 30, 2025 - The group has always been committed to upholding high standards of corporate governance to protect shareholders' interests and enhance corporate value. For the six months ended June 30, 2025, the company complied with the code provisions set out in Part 2 of the Corporate Governance Code[121] Directors' Securities Transactions The company has adopted a Securities Dealing Code for directors, and all current directors confirmed compliance with both the company's code and the Model Code during the reporting period - The company has adopted a Securities Dealing Code for directors' securities transactions, with standards no less stringent than those set out in the Model Code for Securities Transactions by Directors of Listed Issuers in Appendix C3 of the Listing Rules. All current directors confirmed their compliance with the Securities Dealing Code and the Model Code throughout the six months ended June 30, 2025[123] Publication of Interim Results Announcement The interim results announcement is available on the HKEX and company websites, with the full interim report to be published later - This interim results announcement is available on the websites of Hong Kong Exchanges and Clearing Limited and the company, and the company's interim report for the six months ended June 30, 2025, containing all information required by the Listing Rules, will be published on the aforementioned websites at a later date[124] Acknowledgement The Board of Directors extends its sincere gratitude to the management team, employees, shareholders, and business partners for their dedication and support - The Board of Directors extends its sincere gratitude to the management team and employees of the group for their commitment and diligence, and to the shareholders and business partners for their strong support of the group[125]