Hengtong(SH:600226)2020-07-27 16:00Financial Performance - The company reported a net profit attributable to shareholders of the parent company of -672,992,723.05 yuan for the year 2019, with a net profit of -542,994,243.33 yuan for the parent company[6]. - The company's operating revenue for 2019 was RMB 805,256,358.25, a decrease of 18.00% compared to RMB 982,064,939.24 in 2018[27]. - The net profit attributable to shareholders for 2019 was a loss of RMB 672,992,723.05, a decline of 574.88% from a profit of RMB 141,719,552.61 in 2018[27]. - The basic earnings per share for 2019 was -0.22 RMB, down 540.00% from 0.05 RMB in 2018[28]. - The total assets at the end of 2019 were RMB 4,159,059,189.32, a decrease of 17.95% from RMB 5,068,902,850.12 at the end of 2018[27]. - The net assets attributable to shareholders at the end of 2019 were RMB 3,546,130,674.44, down 18.24% from RMB 4,337,402,756.71 at the end of 2018[27]. - The net cash flow from operating activities for 2019 was -102,419,843.91 RMB, an improvement from -176,120,333.71 RMB in 2018[27]. - The weighted average return on equity for 2019 was -17.10%, a decrease of 20.42 percentage points from 3.32% in 2018[28]. Audit and Compliance - The company has received a non-standard audit opinion from Tianjian Accounting Firm regarding its 2019 financial statements, indicating issues with the effectiveness of internal controls[11]. - The company has acknowledged the risk of potential violations regarding guarantees provided without following proper decision-making procedures[11]. Shareholder and Profit Distribution - The company plans not to distribute profits or increase capital reserves for the year 2019, pending approval at the annual general meeting[6]. - The company maintains a cash dividend policy, ensuring that at least 10% of distributable profits are allocated for cash dividends annually, with a cumulative distribution of no less than 30% over the last three years[198]. - The company prioritizes cash dividends, aiming for a minimum of 80% distribution in mature stages without major capital expenditures, and 40% if such expenditures are present[198]. - The company has implemented a profit distribution plan for 2018, with the distribution date set for July 11, 2019[198]. Debt and Financing - The company borrowed 1,200,000 yuan from Deqing Shenghua Microfinance Co., Ltd. in June 2019, with a monthly interest rate of 2%[10]. - The company confirmed that 2,400,000 yuan in borrowings were directly paid to third parties as requested by the controlling shareholder, resulting in related party fund occupation[10]. - The company has not fully recovered related party funds amounting to 2,712,460 yuan as of the report date[10]. - The company has provided collateral for a special loan of 130 million CNY from Shenghua Microfinance using real estate assets with a net value of 24.54 million CNY as of December 31, 2019[98]. - The company has pledged 30% of its equity in Caitong Fund to supplement working capital, with 9% of the equity already released from pledge by the end of the reporting period[1]. Market and Industry Trends - The company’s revenue from the gaming sector is a significant contributor, with the Chinese gaming market reaching ¥230.88 billion in 2019, a year-on-year growth of 7.7%[40]. - The mobile gaming market accounted for 68.5% of the total market revenue in 2019, with actual revenue of ¥158.11 billion, reflecting an 18.0% increase year-on-year[40]. - In 2019, the number of game users in China reached 640 million, with a year-on-year growth of 2.5%, indicating a significant slowdown in growth[42]. - The actual sales of independently developed games in overseas markets reached 82.52 billion yuan in 2019, representing a year-on-year increase of 21.0%[42]. - The Chinese film and television industry is expected to enhance its overall strength and competitiveness, with a focus on "cultural + internet +" strategies to optimize and upgrade the industry structure[43]. Environmental and Regulatory Challenges - Environmental pressures have increased, leading to rising production costs and stricter regulations, which will accelerate the elimination of outdated production capacity[48]. - By 2020, all fixed pollution sources must obtain discharge permits, impacting the supply structure of the Chinese pesticide industry[48]. - The new environmental protection law imposes stricter pollution fees, increasing the environmental costs for pesticide companies[108]. - The Ministry of Agriculture has set maximum residue limits for pesticides and veterinary drugs, establishing 1,000 new pesticide residue standards and 100 veterinary drug standards in 2018[108]. Research and Development - The company has established a comprehensive R&D system in biopharmaceuticals, with multiple advanced laboratories supporting its product development[57]. - The company has collaborated with external research institutions to optimize fermentation processes, enhancing production levels for key products[120]. - The company is focusing on enhancing its innovation capabilities and reducing environmental pollution in response to industry challenges[105]. Strategic Initiatives - The company aims to enhance its IP licensing and development capabilities, focusing on a full industry chain model from IP authorization to sales[40]. - The company plans to continue expanding its market presence and product offerings in the gaming and entertainment sectors, leveraging its established partnerships and technological advancements[40]. - The company plans to reduce investments in its variety show business due to a lack of competitive advantage and profitability[178]. - The company will adopt a cautious investment strategy in the film and television sector, focusing on projects with strong financial security and controllable returns[181].