TONGYU(SZ:002792)2020-04-28 16:00Important Notice, Table of Contents, and Definitions Important Notice This section emphasizes the truthfulness, accuracy, and completeness of the annual report content, guaranteed by the company's Board of Directors, Supervisory Board, and senior management, also highlighting key operational risks including mobile communication policy changes, high customer concentration, overseas market fluctuations, technical personnel loss, actual controller influence, and potential negative impacts from the COVID-19 pandemic - Company advises investors to pay attention to several operational risks, specifically: - Mobile Communication Policy Change Risk: The company's main customers are mobile communication operators and equipment integrators, whose procurement is significantly affected by global industrial policies4 - Customer Concentration Risk: Due to industry characteristics, major customers (e.g., Ericsson, ZTE, Nokia, Huawei) have highly concentrated market shares, leading to high customer concentration in the company's sales4 - Overseas Market and Exchange Rate Risk: The company has a high proportion of export sales, facing dual risks of reduced global mobile communication investment and exchange rate fluctuations4 - Technology Risk: Loss of core R&D personnel or technological development lagging behind industry progress may weaken the company's competitiveness8 - Actual Controller Influence Risk: Wu Zhonglin and Shi Guiqing, as a couple, jointly hold 64.17% of the company's shares, potentially influencing company decisions through their controlling position8 - COVID-19 Pandemic Impact: The global spread of the pandemic may slow down overseas 4G/5G construction, reducing customer orders and thus adversely affecting the company's profitability9 Profit Distribution Plan | Profit Distribution Plan | Details | | :--- | :--- | | Base | 337,840,200 shares | | Cash Dividend | $0.02 per 10 shares (tax inclusive) | | Bonus Shares/Capitalization | No bonus shares, no capitalization from capital reserves | Table of Contents The report's table of contents clearly lists all thirteen chapters, covering statutory disclosure content from the company's basic information, business overview, and operational analysis to financial reports and corporate governance, providing clear guidance for investors Definitions This section defines specific terms and abbreviations used in the report, including the company and its subsidiaries, major customers (e.g., China Mobile, Ericsson), key terms (e.g., General Meeting of Shareholders, Board of Directors), and the reporting period, ensuring accuracy of information conveyed Company Profile and Key Financial Indicators Company Information and Contact Details This section provides the company's basic industrial and commercial information, listing details, contact methods, and information disclosure channels. The company's full name is Guangdong Tongyu Communication Inc., stock code 002792, listed on the Shenzhen Stock Exchange. The company's main business has not significantly changed since its listing Company Information | Item | Information | | :--- | :--- | | Stock Abbreviation | Tongyu Communication | | Stock Code | 002792 | | Listing Exchange | Shenzhen Stock Exchange | | Legal Representative | Wu Zhonglin | | Main Business Change | No change | | Controlling Shareholder Change | No change | Key Accounting Data and Financial Indicators During the reporting period, the company's operating revenue achieved significant growth, increasing by 29.50% year-on-year, but net profit attributable to shareholders and non-recurring net profit both saw substantial declines, falling by 43.24% and 82.98% respectively. Net cash flow from operating activities significantly improved, increasing by 664.87% year-on-year. The company's total assets maintained stable growth Key Financial Indicators | Main Financial Indicators | 2019 | 2018 | YoY Change | | :--- | :--- | :--- | :--- | | Operating Revenue ($) | 1,637,984,252.50 | 1,264,853,046.52 | 29.50% | | Net Profit Attributable to Parent ($) | 25,214,174.44 | 44,424,493.27 | -43.24% | | Net Profit Attributable to Parent (Excl. Non-recurring) ($) | 2,776,333.95 | 16,308,291.01 | -82.98% | | Net Cash Flow from Operating Activities ($) | 163,015,406.99 | 21,312,731.54 | 664.87% | | Basic Earnings Per Share ($/share) | 0.07 | 0.13 | -46.15% | | Total Assets ($) | 3,142,025,386.45 | 2,855,551,982.70 | 10.03% | | Net Assets Attributable to Parent ($) | 1,957,456,897.23 | 1,942,691,068.06 | 0.76% | Key Quarterly Financial Indicators The company's 2019 performance showed significant quarterly fluctuations, with a loss in the first quarter, profitability in the second and third quarters, but a substantial loss again in the fourth quarter. Operating revenue peaked in the third quarter, while both revenue and profit declined sharply in the fourth quarter Quarterly Financial Indicators ($) | Indicator ($) | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | | :--- | :--- | :--- | :--- | :--- | | Operating Revenue | 389,801,585.73 | 415,805,572.70 | 526,406,024.32 | 305,971,069.75 | | Net Profit Attributable to Parent | -18,150,126.74 | 69,221,000.33 | 39,973,460.57 | -65,830,159.72 | | Net Profit Attributable to Parent (Excl. Non-recurring) | -20,126,604.57 | 58,472,416.59 | 34,880,247.55 | -70,449,725.62 | | Net Cash Flow from Operating Activities | -70,662,861.77 | -26,689,611.79 | 263,193,685.72 | -2,825,805.17 | Non-recurring Gains and Losses and Amounts In 2019, the company's total non-recurring gains and losses amounted to $22.44 million, primarily from government subsidies ($26.58 million) and fair value changes and investment income from financial assets ($5.76 million), which constituted a significant portion of the company's net profit for the period Non-recurring Gains and Losses ($) | Item | 2019 Amount ($) | 2018 Amount ($) | | :--- | :--- | :--- | | Non-current Asset Disposal Gains/Losses | -2,004,086.89 | -573,543.76 | | Government Subsidies Included in Current P&L | 26,581,310.36 | 36,882,839.24 | | Gains/Losses from Trading Financial Assets, etc. | 5,756,423.06 | 2,347,333.53 | | Other Non-operating Income/Expenses | -2,829,683.32 | 435,801.89 | | Total | 22,437,840.49 | 28,116,202.26 | Company Business Overview Main Business, Operating Model, and Industry Characteristics The company's core business involves R&D, production, and sales of communication antennas and RF devices, with base station antennas as its leading product, and has entered the optical communication field through the acquisition of Shenzhen Guangwei. The company adopts a "production-to-order" combined with "stock-production" model, with direct sales in the domestic market and a combination of direct sales and distributors in overseas markets. With the advent of 5G construction, the industry the company operates in is embracing new development opportunities - Company's main product lines include: - Base Station Antennas: The company's leading product, applied in 2G to 5G mobile communication network wireless coverage - RF Devices: Including combiners, tower-mounted amplifiers, filters, etc., applied in communication, national defense, and other fields - Microwave Antennas: Used for point-to-point or point-to-multipoint microwave communication systems - Optical Module Products: Produced by subsidiary Shenzhen Guangwei, applied in metropolitan area networks, data centers, etc., covering 1G to 100G series products40 - The company adopts a mature operating model: - Procurement Model: Establishes a qualified supplier system and manages information through the SAP system - Production Model: Primarily production-to-order, combined with stock production for some conventional products, with some processes outsourced - Sales Model: Domestic market mainly through operators and equipment vendors' centralized procurement tenders for direct sales; overseas markets adopt a combination of direct sales and distributors4144 Significant Changes in Major Assets During the reporting period, among the company's major asset categories, notes receivable and prepayments significantly increased by 95.00% and 57.96% respectively due to increased sales. Construction in progress substantially decreased by 54.86% due to project capitalization. Overseas assets, primarily the wholly-owned subsidiary Tongyu (Hong Kong), accounted for 24.80% of the company's net assets, operating steadily with no significant impairment risks Major Asset Changes | Major Assets | Significant Change Explanation | | :--- | :--- | | Construction in Progress | Decreased by 54.86% year-on-year, mainly due to some construction in progress being transferred to fixed assets | | Notes Receivable | Increased by 95.00% year-on-year, mainly due to increased sales and a higher proportion of customers settling with notes | | Prepayments | Increased by 57.96% year-on-year, mainly due to increased material procurement driven by sales, with some suppliers requiring prepayments | | Other Current Assets | Decreased by 48.61% year-on-year, mainly due to receipt of VAT refund for input tax credits | - The company's main overseas asset is its wholly-owned subsidiary Tongyu (Hong Kong) Co., Ltd., with an asset scale of approximately $486 million, accounting for 24.80% of the company's net assets. During the reporting period, the company incurred a loss of $14.63 million, but the company believes its assets are safe and controllable, with no significant impairment risks48 Core Competitiveness Analysis The company's core competitiveness is reflected in six aspects: strong technical R&D capabilities (with 519 authorized patents, 83 of which are 5G-related), rapid market response capability, stable high-quality domestic and international customer resources, a vertically integrated precision manufacturing and quality control system, the ability to participate in setting industry technical standards, and a diversified product line covering antennas, RF, and optical modules - Technical R&D Advantage: Possesses a postdoctoral research workstation, is a National Torch Program key high-tech enterprise, and became China Mobile's 5G Joint Innovation Center's first antenna R&D enterprise partner. As of the end of the reporting period, it held 519 authorized patents, including 63 invention patents, with 83 5G-related patents authorized49 - Market Response Speed Advantage: Capable of rapid response from R&D, mold design to mass production, effectively shortening product R&D and manufacturing cycles50 - Customer Resource Advantage: Established stable cooperative relationships with mainstream domestic and international operators (China Mobile, Vodafone, etc.) and equipment integrators (Huawei, ZTE, Nokia, etc.), with products sold to over 60 countries and regions worldwide53 - Manufacturing and Quality Control Advantage: Possesses independent R&D and design capabilities for core components and a strict product quality control system54 - Industry Standard Setting Advantage: Participated in the formulation of multiple national and industry standards for mobile communication55 - Product Diversification Advantage: Has a complete product line of communication antennas, RF devices, and optical transmission modules56 Management Discussion and Analysis Overview In 2019, as the first year of 5G commercialization, the company seized development opportunities, achieving operating revenue of $1.638 billion, a year-on-year increase of 29.50%. However, due to being in a transitional period between the end of 4G construction and the start of large-scale 5G construction, total profit and net profit attributable to shareholders declined by 30.03% and 43.24% respectively. The company made breakthroughs in both domestic and international markets, with overseas revenue increasing by 14.80% year-on-year, and expanded into new product areas such as new energy Key Indicators | Indicator | 2019 Amount | YoY Growth Rate | | :--- | :--- | :--- | | Operating Revenue | $1.638 billion | +29.50% | | Total Profit | $44.63 million | -30.03% | | Net Profit Attributable to Parent | $25.21 million | -43.24% | | Overseas Revenue | $620 million | +14.80% | - In terms of market expansion, the company's FDD+TDD 5G antennas were first applied in European operator networks, and significant breakthroughs were also made in the African market. Domestic market cooperation with China Unicom achieved substantial progress61 Main Business Analysis The company's main business revenue showed strong growth, with communication antenna and RF device business increasing by 34.39% year-on-year, particularly prominent growth in base station antennas and microwave antennas. Both mainland China and overseas region revenues achieved double-digit growth. However, gross margins for base station antennas and overseas business declined. Regarding expenses, various expenses increased to different extents, with financial expenses significantly improving due to increased wealth management and exchange gains. R&D investment continued to increase, up 15.88% year-on-year. Operating cash flow significantly improved, mainly due to increased sales collections and bill settlements with suppliers Revenue Composition ($) | Revenue Composition | 2019 Revenue ($) | YoY Growth | | :--- | :--- | :--- | | By Industry | | | | Communication Antennas & RF Devices | 1,429,755,080.69 | 34.39% | | Optical Communication | 201,980,094.36 | 11.29% | | By Product | | | | Base Station Antennas | 1,143,661,990.02 | 33.93% | | Microwave Antennas | 104,985,288.35 | 54.13% | | By Region | | | | Mainland China | 1,018,009,333.76 | 40.45% | | Overseas Regions | 619,974,918.74 | 14.80% | Expense Items ($) | Expense Item | 2019 Amount ($) | YoY Change | Main Change Explanation | | :--- | :--- | :--- | :--- | | Selling Expenses | 134,970,414.79 | 16.71% | - | | Administrative Expenses | 111,044,562.64 | 9.02% | - | | Financial Expenses | -40,040,600.29 | 36.06% | Increased wealth management income and exchange gains | | R&D Expenses | 133,912,593.09 | 15.88% | - | - Net cash flow from operating activities significantly increased by 664.87% year-on-year, primarily due to increased sales leading to higher collections, while also settling with suppliers mainly through bank acceptance bills, delaying cash outflow88 Asset and Liability Status Analysis As of the end of the reporting period, the company's total assets reached $3.142 billion, a year-on-year increase of 10.03%. The asset structure remained stable, with monetary funds, accounts receivable, and inventories being the main components. On the liability side, notes payable significantly increased, leading to a rise in current liabilities. The company began implementing new financial instrument standards in 2019 - The company began implementing new financial instrument standards, new revenue standards, or new lease standards from 2019, and adjusted relevant items in the opening financial statements accordingly90 - As of the end of the reporting period, the company had $193 million in restricted assets, mainly comprising margin deposits for bank acceptance bills and guarantees, and judicially frozen funds95 Investment Status Analysis During the reporting period, the company's investment amount decreased by 66.76% year-on-year. Core investment activities revolved around the use of raised funds. To adapt to 5G technology development and market changes, the company terminated some original fundraising projects, reallocating funds to the "5G Mobile Communication Base Station Antenna Feeder System Product R&D and Industrialization Project" to improve fund utilization efficiency and seize market opportunities - The investment amount during the reporting period was $1.763 million, a significant decrease of 66.76% compared to $5.305 million in the same period last year96 - The company changed the use of some IPO raised funds from 2016, terminating the "Base Station Antenna Product Expansion Project," "RF Device Product Construction Project," and "International Marketing and Service Network Construction Project," reallocating the remaining $196 million to the new "5G Mobile Communication Base Station Antenna Feeder System Product R&D and Industrialization Project"106110 Analysis of Major Holding and Participating Companies Shenzhen Guangwei Optical Communication Technology Co., Ltd., the company's main holding subsidiary, performed well during the reporting period, achieving operating revenue of $202 million and net profit of $21.29 million, serving as the core of the company's optical communication business. Concurrently, the company sold all equity in its wholly-owned subsidiary Xi'an Xinghengtong Communication Technology Co., Ltd., which resulted in a significant asset impairment loss for the 2019 fiscal year Subsidiary Performance | Subsidiary Name | Business Type | 2019 Operating Revenue ($) | 2019 Net Profit ($) | | :--- | :--- | :--- | :--- | | Shenzhen Guangwei Optical Communication Technology Co., Ltd. | Optical Module Business | 201,980,094.36 | 21,292,532.79 | - During the reporting period, the company sold all equity in its wholly-owned subsidiary Xi'an Xinghengtong Communication Technology Co., Ltd., resulting in a significant asset impairment loss for the 2019 fiscal year115 Outlook on the Company's Future Development Looking ahead, the company will seize the development opportunities brought by 5G construction. Strategically, the company will focus on technological innovation, increase R&D investment in 5G antenna feeder systems, consolidate its core business of base station antennas and RF devices, and actively expand into new product areas such as energy, CPE, and WiFi6. Operational plans include strengthening production control, capturing the 5G market, deepening industry layout, and improving internal governance - Development Strategy: In the next 2-3 years, the company will focus on R&D investment in new-generation 5G communication antenna feeder systems to maintain its industry-leading position. While strengthening its core business, it will integrate key component resources and expand into new product areas such as energy, CPE, and WiFi6121 - Operating Plan: - Production: Strengthen process control, improve product craftsmanship and quality, reduce costs, and increase efficiency - Market: Seize the existing 4G market and fully cooperate with core customers to capture the global high ground in 5G antenna feeder terminals - Business: Increase innovation in the 5G field, expand business growth space, and achieve diversified development - Governance: Improve internal control systems and enhance awareness of standardized operations122123124125 - Risks Faced: The company reiterates potential risks including mobile communication policy changes, customer concentration, overseas market fluctuations, technology, actual controller influence, declining revenue and profit, insufficient capacity, and the COVID-19 pandemic128129130131132136 Significant Matters Profit Distribution and Capital Reserve Capitalization During the reporting period, the company implemented its 2018 profit distribution plan, distributing $0.04 cash per 10 shares and capitalizing 5 shares per 10 shares from capital reserves. The 2019 profit distribution proposal is a cash dividend of $0.02 per 10 shares, with no bonus shares or capitalization. In the past three years, the company has consistently paid cash dividends, with the 2019 cash dividend accounting for 26.80% of net profit attributable to shareholders Cash Dividend and Ratio to Net Profit Attributable to Parent | Dividend Year | Cash Dividend Amount (Tax Incl., $) | Ratio to Net Profit Attributable to Parent | | :--- | :--- | :--- | | 2019 | 6,756,804.00 | 26.80% | | 2018 | 9,009,072.00 | 20.28% | | 2017 | 11,287,800.00 | 10.21% | Fulfillment of Commitments During the reporting period, the company and related parties normally fulfilled or completed all commitments. Specifically, the performance commitment made by the original shareholders during the acquisition of Shenzhen Guangwei Optical Communication Technology Co., Ltd. for 2017-2019 is being normally fulfilled. Commitments regarding share lock-up and share increase by the company's actual controllers and directors, supervisors, and senior management are also within their fulfillment periods - The original shareholders of Shenzhen Guangwei Optical Communication committed that its non-recurring net profit for 2017, 2018, and 2019 would not be less than $16 million, $21 million, and $26 million respectively. This performance guarantee commitment is being normally fulfilled during the reporting period145 Changes in Accounting Policies The company adopted new financial instrument accounting standards from January 1, 2019, in accordance with the latest regulations from the Ministry of Finance, and revised its accounting policies accordingly. This change will not impact the company's total assets, liabilities, net assets, or net profit for the current period or prior periods - The company, approved by the Board of Directors on April 24, 2019, began implementing new financial instrument accounting standards from January 1, 2019, and revised its accounting policies accordingly165 Changes in Consolidation Scope During the reporting period, the company's consolidation scope changed. A new entity, Jingdezhen Jingtongyu Technology Co., Ltd. (60% owned), was added; the wholly-owned subsidiary Xi'an Xinghengtong Communication Technology Co., Ltd. was removed due to the sale of its 100% equity - New Consolidated Entity: Jingdezhen Jingtongyu Technology Co., Ltd. (60% stake), included in the consolidation scope from July 2019 - Removed Consolidated Entity: Xi'an Xinghengtong Communication Technology Co., Ltd., no longer consolidated due to 100% equity transfer169 Appointment and Dismissal of Accounting Firms During the reporting period, the company changed its accounting firm from Ruihua Certified Public Accountants (Special General Partnership) to Rongcheng Certified Public Accountants (Special General Partnership), with the change having undergone the necessary approval procedures - The company, approved by the Board of Directors on December 25, 2019, changed its accounting firm from Ruihua to Rongcheng for the 2019 annual audit work170 Implementation of Equity Incentive Plan The company launched a stock option incentive plan draft in April 2019, proposing to grant 1.063 million restricted shares. However, due to significant changes in the context of formulating the incentive plan, the company decided to terminate this incentive plan on April 28, 2020, to protect investors' interests - The company approved the "2019 Stock Option Incentive Plan (Draft)" in April 2019, but later decided to terminate the plan in April 2020, as continuing it would not achieve the expected results176178 Significant Contracts and Their Fulfillment During the reporting period, the company had no significant guarantees, entrusted loans, or other major contracts. The company leased part of its properties to Zhongshan Taikun Industrial Investment Co., Ltd. for a 10-year term, generating $3.46 million in rental income. Additionally, the company used idle raised funds and its own funds totaling $986 million to purchase wealth management products - The company leased part of its production base in Zhongshan for a 10-year term, recognizing $3.46 million in rental income in 2019, which positively impacted profit188189 Entrusted Wealth Management | Entrusted Wealth Management Type | Fund Source | Amount Incurred ($10,000) | Outstanding Balance ($10,000) | | :--- | :--- | :--- | :--- | | Other | Raised Funds + Own Funds | 98,600 | 49,600 | Explanation of Other Significant Matters This section explains the significant discrepancy between the company's full-year 2019 net profit and its performance in the first three quarters. The fourth-quarter loss was primarily due to five factors: 1) a disposal loss of $17.78 million from selling subsidiary Xi'an Xinghengtong; 2) a 31.09% quarter-on-quarter decline in fourth-quarter sales revenue; 3) lower gross margins on products sold in the fourth quarter; 4) increased asset impairment provisions in the fourth quarter; and 5) a downward trend in 4G product gross margins throughout the year - The company incurred a loss of $65.83 million in Q4 2019, leading to a significant difference between full-year performance and the first three quarters. Key reasons include: - Subsidiary Sale Loss: Disposal loss of $17.78 million from selling Xi'an Xinghengtong equity203 - Q4 Revenue Decline: Fourth-quarter operating revenue decreased by 31.09% quarter-on-quarter204 - Q4 Low Gross Margin: Fourth-quarter sales primarily involved domestic equipment vendor customers with lower gross margins205 - Q4 Impairment Increase: Fourth-quarter asset impairment provisions increased by $17.70 million (excluding goodwill)206 - 4G Product Price Reduction: Domestic 4G construction entered its final phase, leading to a decrease in product unit prices and a decline in gross margins209 Share Changes and Shareholder Information Share Change Status During the reporting period, the company's total share capital changed due to the implementation of the 2018 capital reserve capitalization plan (5 shares per 10 shares), increasing from 225.23 million shares to 337.84 million shares. This change resulted in a decrease in the proportion of restricted shares from 68.61% to 49.61%, with a corresponding increase in unrestricted shares - The company implemented its 2018 profit distribution plan in June 2019, capitalizing 5 shares per 10 shares from capital reserves, increasing total share capital from 225,226,800 shares to 337,840,200 shares220 Share Capital Changes | Share Class | Quantity Before Change | Quantity After Change | Proportion After Change | | :--- | :--- | :--- | :--- | | Restricted Shares | 154,512,503 | 167,594,293 | 49.61% | | Unrestricted Shares | 70,714,297 | 170,245,907 | 50.39% | | Total Share Capital | 225,226,800 | 337,840,200 | 100.00% | Shareholder and Actual Controller Information As of the end of the reporting period, the company had 27,940 common shareholders. The actual controllers, Wu Zhonglin and Shi Guiqing, as a couple, jointly held 64.47% of the company's shares, maintaining a stable controlling position. Among the top ten shareholders, besides the actual controllers, major institutional investors included Hong Kong Securities Clearing Company Limited and E Fund Management Co., Ltd Top Shareholders | Shareholder Name | Shareholder Nature | Shareholding Ratio | Number of Shares Held | | :--- | :--- | :--- | :--- | | Wu Zhonglin | Domestic Natural Person | 38.38% | 129,661,844 | | SHI GUIQING (Shi Guiqing) | Overseas Natural Person | 26.09% | 88,131,258 | | Zhongshan Yuxing Investment Management Co., Ltd. | Domestic Non-state-owned Legal Person | 2.16% | 7,286,041 | | Hong Kong Securities Clearing Company Limited | Overseas Legal Person | 0.75% | 2,548,718 | - The company's controlling shareholders and actual controllers are Wu Zhonglin and Shi Guiqing, a married couple, who jointly hold 64.47% of the company's shares, with no changes during the reporting period225229233 Directors, Supervisors, Senior Management, and Employees Changes in Shareholdings and Remuneration of Directors, Supervisors, and Senior Management During the reporting period, Chairman Mr. Wu Zhonglin reduced his shareholding by 4.7171 million shares, while other changes in shareholdings of directors, supervisors, and senior management primarily resulted from capital reserve capitalization. The total remuneration for directors, supervisors, and senior management was $7.84 million, with Chairman Mr. Wu Zhonglin and General Manager Ms. Shi Guiqing receiving $1.35 million and $1.05 million respectively Shareholding Changes of Directors, Supervisors, and Senior Management (Shares) | Name | Position | Shares Held at Beginning of Period (shares) | Shares Reduced This Period (shares) | Other Increases/Decreases This Period (shares) | Shares Held at End of Period (shares) | | :--- | :--- | :--- | :--- | :--- | :--- | | Wu Zhonglin | Chairman | 89,585,963 | 4,717,100 | 44,792,981 | 129,661,844 | | Shi Guiqing | Director, General Manager | 58,754,172 | 0 | 29,377,086 | 88,131,258 | Remuneration of Directors, Supervisors, and Senior Management ($10,000) | Name | Position | Total Pre-tax Remuneration from Company ($10,000) | | :--- | :--- | :--- | | Wu Zhonglin | Chairman | 135.36 | | Shi Guiqing | Director General Manager | 105.49 | | Total | - | 784.33 | Employee Information As of the end of the reporting period, the company had a total of 2,102 employees. By professional composition, production personnel accounted for the largest proportion at 1,236 people; technical personnel numbered 446, accounting for 21.22%. By education level, employees with college degrees or above accounted for approximately 36%. The company has established a comprehensive remuneration policy and training system, and collaborates with universities to implement a "modern apprenticeship" program for talent development Employee Professional Composition (Persons) | Professional Composition | Number (Persons) | Education Level | Number (Persons) | | :--- | :--- | :--- | :--- | | Production Personnel | 1,236 | Postgraduate/Doctorate | 45 | | Sales Personnel | 181 | Bachelor | 358 | | Technical Personnel | 446 | College | 346 | | Financial Personnel | 32 | Below College | 1,353 | | Administrative Personnel | 49 | Total | 2,102 | | Other (Management) | 158 | | | | Total | 2,102 | | | Corporate Governance Basic Status of Corporate Governance During the reporting period, the company operated in strict accordance with laws and regulations such as the "Company Law" and "Securities Law," and its actual corporate governance status complied with regulatory requirements without significant discrepancies. The company maintained standardization and independence in the operation of its General Meeting of Shareholders, Board of Directors, and Supervisory Board, its relationship with controlling shareholders, and information disclosure - The actual status of corporate governance complies with the normative documents on corporate governance issued by the China Securities Regulatory Commission, with no significant discrepancies283 - The company maintains independence from its controlling shareholders and actual controllers in terms of business, personnel, assets, organization, and finance, possessing complete independent operating capabilities284 Operation of General Meeting of Shareholders, Board of Directors, and Supervisory Board During the reporting period, the company held 3 General Meetings of Shareholders, 6 Board of Directors meetings, and 4 Supervisory Board meetings, with all meeting convocations, proceedings, and voting procedures complying with relevant regulations. Independent directors diligently performed their duties, expressed independent opinions on important company matters, and raised no objections. The specialized committees under the Board of Directors also effectively fulfilled their responsibilities Meeting Types and Frequencies | Meeting Type | Number of Meetings Held | | :--- | :--- | | General Meeting of Shareholders | 3 | | Board of Directors | 6 | | Supervisory Board | 4 | Financial Report Audit Report Rongcheng Certified Public Accountants (Special General Partnership) issued a standard unqualified audit opinion on the company's 2019 financial statements. The auditors believe that the financial statements fairly present the company's financial position and operating results in all material respects. Key audit matters included revenue recognition, provision for doubtful accounts receivable, and provision for inventory impairment - Audit Opinion: Standard unqualified opinion311 - Audit Firm: Rongcheng Certified Public Accountants (Special General Partnership)311 - Key Audit Matters: 1. Revenue Recognition: Due to its significance as a component of the income statement and potential misstatement risks regarding authenticity and cutoff315 2. Provision for Doubtful Accounts Receivable: Because the estimation of expected credit losses involves significant management judgment and subjectivity323324 3. Provision for Inventory Impairment: Because determining the net realizable value of inventory requires significant management estimates and judgments regarding selling prices, costs, etc326 Financial Statements This section provides the company's audited consolidated and parent company financial statements for 2019, including the balance sheet, income statement, cash flow statement, and statement of changes in owners' equity, along with detailed notes to the financial statements Consolidated Balance Sheet Summary (Unit: $) | Item | December 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Total Assets | 3,142,025,386.45 | 2,855,551,982.70 | | Total Liabilities | 1,114,436,971.24 | 845,658,483.92 | | Owners' Equity Attributable to Parent | 1,957,456,897.23 | 1,942,691,068.06 | Consolidated Income Statement Summary (Unit: $) | Item | 2019 | 2018 | | :--- | :--- | :--- | | Total Operating Revenue | 1,637,984,252.50 | 1,264,853,046.52 | | Total Operating Costs | 1,568,465,897.08 | 1,225,696,337.11 | | Total Profit | 44,633,337.16 | 63,790,396.66 | | Net Profit Attributable to Parent | 25,214,174.44 | 44,424,493.27 | Consolidated Cash Flow Statement Summary (Unit: $) | Item | 2019 | 2018 | | :--- | :--- | :--- | | Net Cash Flow from Operating Activities | 163,015,406.99 | 21,312,731.54 | | Net Cash Flow from Investing Activities | -459,703,175.22 | -158,853,056.75 | | Net Cash Flow from Financing Activities | -23,139,508.02 | -15,010,248.73 | | Net Increase in Cash and Cash Equivalents | -318,055,731.64 | -148,878,758.99 |