中天科技(600522) - 2019 Q2 - 季度财报

Definitions Company Profile and Key Financial Indicators Company Information This section provides the company's basic registration details, contact information, stock overview, and information disclosure channels, with the company's Chinese abbreviation being "Zhongtian Technology," stock code 600522, listed on the Shanghai Stock Exchange - The company's legal representative is Xue Jiping, with its office located at No. 6 Zhongtian Road, Nantong Economic and Technological Development Zone, Jiangsu Province[5][8] - The company's designated information disclosure media include China Securities Journal, Shanghai Securities News, Securities Times, and the Shanghai Stock Exchange website (www.sse.com.cn)[9](index=9&type=chunk) Key Accounting Data and Financial Indicators During the reporting period, the company's operating revenue increased by 18.34% year-over-year, and net profit attributable to shareholders increased by 2.16%, while net profit excluding non-recurring gains and losses decreased by 6.96%, total assets grew by 15.90%, and net cash flow from operating activities remained negative with increased outflow Key Accounting Data for H1 2019 | Key Accounting Data | Current Period (Jan-Jun) | Prior Period | YoY Change (%) | | :--- | :--- | :--- | :--- | | Operating Revenue | CNY 18.58 billion | CNY 15.70 billion | 18.34% | | Net Profit Attributable to Shareholders of Listed Company | CNY 1.09 billion | CNY 1.06 billion | 2.16% | | Net Profit Attributable to Shareholders of Listed Company (Excluding Non-recurring Gains and Losses) | CNY 884.62 million | CNY 950.83 million | -6.96% | | Net Cash Flow from Operating Activities | -CNY 1.31 billion | -CNY 1.16 billion | N/A | | Indicator | As of End of Current Period | As of End of Prior Year | Change from End of Prior Year (%) | | Net Assets Attributable to Shareholders of Listed Company | CNY 20.14 billion | CNY 19.27 billion | 4.48% | | Total Assets | CNY 37.09 billion | CNY 32.01 billion | 15.90% | Key Financial Indicators for H1 2019 | Key Financial Indicators | Current Period (Jan-Jun) | Prior Period | Change | | :--- | :--- | :--- | :--- | | Basic Earnings Per Share (CNY/share) | 0.3589 | 0.3466 | Increased by 3.55% | | Basic EPS Excluding Non-recurring Gains and Losses (CNY/share) | 0.2925 | 0.3101 | Decreased by 5.68% | | Weighted Average Return on Net Assets (%) | 5.50% | 5.94% | Decreased by 0.44 percentage points | | Weighted Average Return on Net Assets Excluding Non-recurring Gains and Losses (%) | 4.48% | 5.32% | Decreased by 0.84 percentage points | - During the reporting period, total non-recurring gains and losses amounted to CNY 200.97 million, primarily from government subsidies totaling CNY 233.56 million[13] Business Overview Principal Businesses, Operating Model, and Industry Overview The company primarily operates in four core businesses: optical communication, power transmission, new energy, and marine equipment, adhering to integrated industrial chain and specialized product line strategies, with an operating model centered on centralized procurement and production based on sales orders, benefiting from national policies and industry trends like 5G construction, UHV projects, new energy, and offshore wind power - The company's four major business segments include: - Optical Communication: Provides system solutions from optical fiber preforms to network equipment, serving 5G and high-frequency broadband communication construction - Power Transmission: Forms an "integrated transmission and distribution" industrial chain, with products widely used in domestic and international high-voltage transmission projects, benefiting from UHV and distribution network construction - New Energy: Features distributed photovoltaics and large-scale energy storage systems, offering green energy solutions - Marine Equipment: Based on submarine optical and power cables, forms a comprehensive operating system for marine communication, power transmission, observation systems, and marine engineering EPC contracting[14][15][16] - The core of the company's operating model involves: - Procurement: Centralized procurement for raw materials - Production: Monthly production plans based on sales orders and production capacity - Sales: Primarily achieved through participation in customer procurement tenders by business units of its industrial groups[17] - Industry development benefits from multiple national policies, including the "Broadband China" strategy driving optical communication demand, UHV and ubiquitous power IoT construction boosting power product demand, energy structure transformation favoring new energy and energy storage industries, and the marine power strategy promoting offshore wind power and marine observation network construction[17][19][20][22] Analysis of Core Competencies The company's core competencies include brand advantages forged by refined manufacturing, industry-leading capabilities from technological innovation, strong talent and technology reserves, and a global marketing network, possessing core technologies and independent intellectual property rights in optical fiber preforms, special conductors, and submarine cables, while enhancing efficiency through intelligent manufacturing - Brand Advantage: Adhering to the core value of "refined manufacturing," the company has established well-known domestic and international brands in optical fiber and cable, special conductors, submarine cables, and distributed photovoltaics[24] - Technological Innovation: Possesses independent intellectual property rights for all-synthetic optical fiber preforms, leads the industry in high-voltage flexible DC cable technology, and undertakes multiple national key scientific research projects, such as the National 863 Program[25] - Talent and Patents: Holds over 1,600 valid domestic patents (including 402 invention patents) and has established close cooperative relationships with multiple universities and research institutions[26] - Global Presence: Products are sold to nearly 150 countries worldwide, with 6 overseas marketing centers and 6 overseas production bases, actively participating in infrastructure construction in "Belt and Road" countries[26] Discussion and Analysis of Operations Discussion and Analysis of Operations In H1 2019, the company achieved operating revenue of CNY 18.58 billion, a 18.34% year-over-year increase, and net profit attributable to parent of CNY 1.09 billion, up 2.16%, demonstrating significant progress in 5G communication, marine industry, overseas business, power industry, and industrial internet, leading to optimized industrial structure and enhanced overall profitability - In the 5G communication sector, the company provides multi-dimensional infrastructure and services from cloud to edge, and has signed a strategic cooperation agreement with China Tower for a joint laboratory to advance 5G indoor coverage technology[28] - The marine industry is transforming from a system supplier to a comprehensive solution EPC contractor, developing offshore wind power engineering EPC capabilities, and winning the CGN Shanwei Offshore Wind Farm project valued at approximately CNY 2.48 billion[29] - Overseas business has entered a harvest period, with rapid growth in international market revenue, doubling of optical fiber and cable product overseas revenue, and successive delivery of multiple power transmission and transformation and submarine cable EPC projects[30] - The power industry benefits from UHV projects and distribution network construction, leading to rapid increases in sales volumes of high-voltage cables and special conductors, thereby improving the gross profit margin of the power industry chain[31] Analysis of Principal Businesses During the reporting period, the company's operating revenue and operating costs increased by 18.34% and 21.49% year-over-year, respectively, while financial expenses surged by 115.18% primarily due to increased interest accruals on convertible bonds, and net cash flow from operating activities was -CNY 1.31 billion, with increased net outflow mainly due to higher cash payments for goods purchased Analysis of Changes in Financial Statement Items | Item | Current Period Amount (CNY) | Prior Period Amount (CNY) | Change (%) | | :--- | :--- | :--- | :--- | | Operating Revenue | 18.58 billion | 15.70 billion | 18.34 | | Operating Cost | 16.06 billion | 13.22 billion | 21.49 | | Financial Expenses | 89.49 million | 41.59 million | 115.18 | | Net Cash Flow from Operating Activities | -1.31 billion | -1.16 billion | N/A | | Net Cash Flow from Financing Activities | 2.59 billion | 1.00 billion | 157.63 | Analysis of Assets and Liabilities As of the end of the reporting period, the company's total assets reached CNY 37.09 billion, a 15.90% increase from the beginning of the period, with significant changes in the asset and liability structure primarily due to a substantial increase in bonds payable from convertible bond issuance, alongside considerable increases in prepayments, long-term borrowings, and treasury stock Changes in Key Balance Sheet Items | Item | Amount as of End of Current Period (CNY) | Change from End of Prior Period (%) | Primary Reason | | :--- | :--- | :--- | :--- | | Prepayments | 1.89 billion | 546.82% | Primarily due to increased prepayments for bulk commodity purchases and engineering equipment | | Short-term Borrowings | 1.48 billion | -40.14% | Primarily due to decreased bank borrowings in the current period | | Advances from Customers | 1.29 billion | 126.13% | Primarily due to increased advances from bulk commodity sales and overseas sales | | Long-term Borrowings | 1.68 billion | 202.45% | Primarily due to project loans in the current period | | Bonds Payable | 3.44 billion | N/A | Primarily due to the issuance of convertible corporate bonds in the current period | | Treasury Stock | 412.31 million | 7,193.80% | Primarily due to increased share repurchases in the current period | Potential Risks The company faces primary risks including market, competitive, overseas, and policy risks, with market risk stemming from potential supply-demand shifts due to industry capacity expansion, competitive risk from strong rivals and technological breakthroughs, overseas risk involving geopolitical instability, economic fluctuations, and exchange rate changes, and policy risk closely tied to investment plans of major clients like telecom and power grid operators - Market Risk: Optical communication, power transmission and distribution, and power battery sectors may face risks of overcapacity and market demand growth falling short of expectations[43] - Competitive Risk: As industry technology matures and market demand expands, the company will face stronger competitors and pressure, potentially challenging traditional competitive advantages[43] - Overseas Risk: Countries along the "Belt and Road" initiative may present uncertainties such as political instability, economic fluctuations, and significant exchange rate volatility[44] - Policy Risk: The company's high dependence on major clients like the three major telecom operators and State Grid means changes in their investment progress will directly impact industry demand[45] Significant Matters Convertible Corporate Bonds On February 28, 2019, the company successfully issued CNY 3.97 billion in convertible corporate bonds ("Zhongtian Convertible Bonds") with a 6-year term, which began trading on the SSE on March 22, and during the reporting period, the bonds had not yet entered the conversion period, with no conversions occurring, and the conversion price was adjusted from CNY 10.29/share to CNY 10.19/share due to the 2018 profit distribution, maintaining an "AA+" corporate credit rating with a stable outlook - On February 28, 2019, the company publicly issued convertible corporate bonds with a total face value of CNY 3.97 billion, abbreviated as "Zhongtian Convertible Bonds" with code "110051"[58] - During the reporting period, no conversions occurred, with unconverted bonds accounting for 100% of the total issuance[61] - Due to the implementation of the 2018 profit distribution, the conversion price was adjusted from CNY 10.29/share to CNY 10.19/share on July 16, 2019[62] - New Century Rating maintained the company's corporate credit rating at "AA+" with a stable outlook, and maintained the "Zhongtian Convertible Bonds" credit rating at "AA+"[63] Changes in Accounting Policies During the reporting period, the company adopted new financial instrument standards and revised general enterprise financial statement formats as required by the Ministry of Finance, with key changes including reclassifying financial assets into three categories, shifting from "incurred loss" to "expected loss" for financial asset impairment, and splitting/adding financial statement items such as "Notes and Accounts Receivable" and "Credit Impairment Loss" - Effective January 1, 2019, the company adopted new financial instrument standards, revising the classification, impairment, and presentation of financial assets[66] - Financial statement formats were revised, primarily including: - Balance Sheet: "Notes and Accounts Receivable" split into "Notes Receivable" and "Accounts Receivable"; "Notes and Accounts Payable" split into "Notes Payable" and "Accounts Payable" - Income Statement: Added "Credit Impairment Loss" item[67] Share Repurchase The company initiated a share repurchase plan via centralized bidding at the end of 2018, and as of July 31, 2019, it had cumulatively repurchased 49,505,125 shares, representing 1.61% of total share capital, with a total payment of CNY 412 million, indicating the repurchase progress aligns with the established plan - As of July 31, 2019, the company had cumulatively repurchased 49,505,125 shares, accounting for 1.61% of its total share capital[71] - The total amount paid for share repurchases was CNY 412.24 million (excluding transaction fees), with the highest purchase price at CNY 8.56/share and the lowest at CNY 7.86/share[71] Changes in Ordinary Share Capital and Shareholder Information Shareholder Information As of the end of the reporting period, the company had 187,914 ordinary shareholders, with controlling shareholder Zhongtian Technology Group Co., Ltd. holding 25.05% of shares, and the company's dedicated share repurchase securities account holding 1.61% of shares, ranking as the fourth largest shareholder - As of the end of the reporting period, the company had a total of 187,914 ordinary shareholders[73] Top Ten Shareholders' Holdings | Shareholder Name | Shares Held as of Period End | Percentage (%) | | :--- | :--- | :--- | | Zhongtian Technology Group Co., Ltd. | 768,007,883 | 25.05 | | China Securities Finance Corporation Limited | 92,396,397 | 3.01 | | Central Huijin Asset Management Co., Ltd. | 72,476,250 | 2.36 | | Jiangsu Zhongtian Technology Co., Ltd. Share Repurchase Special Securities Account | 49,505,125 | 1.61 | Preferred Shares Preferred Shares During the reporting period, the company had no preferred shares Directors, Supervisors, and Senior Management Changes in Directors, Supervisors, and Senior Management During the reporting period, due to the expiration of the sixth term of the Board of Directors and Supervisory Board, the company completed its re-election on June 13, 2019, forming the seventh Board of Directors and Supervisory Board members, and appointing a new term of senior management - The company held its 2018 Annual General Meeting on June 13, 2019, completing the re-election of the Board of Directors and Supervisory Board[78] - Mr. Xue Chi was elected as Vice Chairman, Messrs. Lu Wei, Shen Yichun, and He Jinliang were elected as Directors, and Messrs. Wu Dawei and Zheng Hangbin were elected as Independent Directors; concurrently, the company appointed Messrs. Xiao Fangyin, Teng Yi, and Jie Shuiping as Deputy General Managers[78] Corporate Bonds Corporate Bonds During the reporting period, the company had no ordinary corporate bonds, with convertible corporate bond information disclosed in "Section V Significant Matters" Financial Report Financial Statements This section presents the company's consolidated and parent company balance sheets, income statements, cash flow statements, and statements of changes in owners' equity for H1 2019, with the report unaudited Company Basic Information The company, formerly Rudong County Hekou Brick and Tile Factory established in 1976, was listed on the Shanghai Stock Exchange in October 2002, primarily engaging in the production and sales of products in communication, power, marine systems, new energy, and non-ferrous metal trading - The company was listed and traded on the Shanghai Stock Exchange on October 24, 2002[108] - As of December 31, 2018, the company's total share capital was 3,066,072,521 shares, with controlling shareholder Zhongtian Technology Group Co., Ltd. holding 25.048%[112][113] Significant Accounting Policies and Estimates This section details the enterprise accounting standards, accounting period, functional currency, and significant accounting policies and estimates followed by the company in preparing financial statements, including business combinations, financial instruments, inventories, fixed assets, intangible assets, revenue recognition, and government grants, with the company adopting new financial instrument standards and revised financial statement formats during the reporting period - Effective January 1, 2019, the company adopted new financial instrument standards, classifying financial assets into three categories based on business model and contractual cash flow characteristics, and recognizing loss provisions based on expected credit losses[132][133] - Revenue recognition policy: Sales of goods are recognized when the significant risks and rewards of ownership are transferred; provision of services and construction contracts are recognized using the percentage-of-completion method when the outcome can be reliably estimated[172] - Due to the adoption of new financial instrument standards, the company retrospectively adjusted the opening balances of financial statements, impacting items such as other comprehensive income, surplus reserves, and undistributed profits[182][186] Notes to Consolidated Financial Statement Items This section provides detailed notes and explanations for major items in the consolidated financial statements, including assets, liabilities, owners' equity, income, expenses, and cash flows, with a focus on disclosing key information such as accounts receivable aging and bad debt provisions, inventory composition, changes in fixed assets and construction in progress, goodwill composition, related party transactions, and financial instrument risks - As of period-end, the book balance of accounts receivable was CNY 8.12 billion, with approximately 84.4% aged within one year, and the top five accounts receivable by debtor collectively accounted for 33.63% of the total[204][211] - As of period-end, the book value of inventory was CNY 5.47 billion, a 6.4% increase from the beginning of the period, primarily comprising finished goods, goods in transit, and raw materials[222] - As of period-end, the book value of construction in progress was CNY 1.37 billion, with major projects including preform and expansion, photovoltaic power station projects, and electronic materials projects[239][240] - Due to the acquisition of Shenzhen Shenda Weitong Technology Co., Ltd., CNY 19.25 million in goodwill was added this period, bringing the total book original value of goodwill to CNY 33.95 million as of period-end[246] - As of period-end, the balance of bonds payable was CNY 3.44 billion, entirely consisting of convertible corporate bonds issued this period[280] Changes in Consolidation Scope During the reporting period, the company's consolidation scope changed, as it acquired 52.08% equity in Shenzhen Shenda Weitong Technology Co., Ltd. for CNY 18.75 million through a non-common control business combination, bringing it into the consolidation scope, and also newly established Jiangsu Zhongtian Internet Technology Co., Ltd - This period saw a non-common control business combination, with the acquisition of 52.08% equity in Shenzhen Shenda Weitong Technology Co., Ltd. for CNY 18.75 million, resulting in the recognition of CNY 19.25 million in goodwill[336][337] - During this reporting period, a new subsidiary, "Jiangsu Zhongtian Internet Technology Co., Ltd.," was established and included in the consolidation scope[340] Interests in Other Entities This section details the company's enterprise group structure, including dozens of domestic and overseas subsidiaries within the consolidation scope and their shareholding percentages, while also disclosing key financial information for significant non-wholly owned subsidiaries (e.g., Zhongtian Photovoltaic Materials, Zhongtian Technology Brazil) and important joint ventures and associates (e.g., Sichuan Tianfu Jiangdong Technology Co., Ltd.) - The company's enterprise group structure is extensive, encompassing subsidiaries in various fields such as optical fiber, submarine cables, new materials, new energy, equipment cables, and overseas trade[341][342][343] - Significant non-wholly owned subsidiaries include Zhongtian Photovoltaic Materials Co., Ltd. (minority interest 10%) and Zhongtian Technology Brazil Co., Ltd. (minority interest 12.5%)[344] - A significant associate is Sichuan Tianfu Jiangdong Technology Co., Ltd., in which the company holds a 39% stake, accounted for using the equity method, with a book value of investment of CNY 172 million as of period-end[349][350] Risks Related to Financial Instruments The company's financial instrument risks primarily include market risk (foreign exchange, interest rate, and price risks), credit risk, and liquidity risk, which are managed and monitored through hedging, credit approval, limit policies, and maintaining sufficient cash reserves - Market Risk: Primarily arises from USD-related foreign exchange risk and price risk from holding equity in listed companies (Wuhan FiberHome, Bank of Jiangsu)[355][356] - Credit Risk: Primarily stems from monetary funds and accounts receivable, managed by depositing funds in highly reputable banks, establishing credit approval policies, and monitoring collection status[357] - Liquidity Risk: Managed by monitoring cash flow, maintaining sufficient cash reserves, and securing bank standby facilities to ensure the ability to repay maturing debts[358] Documents Available for Inspection Documents Available for Inspection This section lists documents available for inspection, including the resolutions of the second meeting of the company's seventh Board of Directors and the second meeting of the seventh Supervisory Board