EIT(SZ:300815)2021-03-29 16:00Yuhua Tian-Macrolink Environment Development Group Co., Ltd. 2020 Annual Report Important Notes, Table of Contents, and Definitions This section contains important notices, a directory, and definitions, affirming the report's integrity and detailing the proposed profit distribution plan - The Board of Directors, Board of Supervisors, and all directors, supervisors, and senior management guarantee the authenticity, accuracy, and completeness of the annual report's content5 - The company's 2020 profit distribution plan proposes a cash dividend of RMB 11.20 (tax included) for every 10 shares and a transfer of 10 shares for every 10 shares from capital reserves, based on a total of 138,400,000 shares5 Company Profile and Key Financial Indicators This section provides company information and key financial data, highlighting strong 2020 performance with significant growth in revenue and net profit Key Financial Data | Indicator | 2020 | 2019 | YoY Change | | :--- | :--- | :--- | :--- | | Operating Revenue (Yuan) | 4,315,219,469.31 | 3,594,582,012.69 | 20.05% | | Net Profit Attributable to Shareholders (Yuan) | 631,042,009.37 | 312,790,640.31 | 101.75% | | Net Profit Attributable to Shareholders (Non-recurring Items Excluded) (Yuan) | 627,974,190.81 | 301,771,150.03 | 108.10% | | Net Cash Flow from Operating Activities (Yuan) | 521,753,417.33 | 565,008,824.77 | -7.66% | | Basic Earnings Per Share (Yuan/Share) | 4.66 | 3.01 | 54.82% | | Weighted Average Return on Equity | 28.98% | 37.30% | -8.32% | | Total Assets (Yuan) | 4,547,848,286.89 | 2,655,693,851.23 | 71.25% | | Net Assets Attributable to Shareholders (Yuan) | 2,558,655,860.90 | 995,018,621.59 | 157.15% | Quarterly Financial Data | Quarter | Operating Revenue (Yuan) | Net Profit Attributable to Shareholders (Yuan) | | :--- | :--- | :--- | | First Quarter | 983,331,451.33 | 145,158,975.05 | | Second Quarter | 1,073,282,624.73 | 202,657,129.03 | | Third Quarter | 1,093,422,993.30 | 179,998,147.70 | | Fourth Quarter | 1,165,182,399.95 | 103,227,757.59 | - During the reporting period, non-recurring gains and losses totaled RMB 3.07 million, primarily from government subsidies, investment income, and external donation expenses3336 Business Overview The company specializes in environmental sanitation, with core operations in municipal sanitation and property cleaning across 89 cities nationwide Principal Activities The company's main businesses are municipal sanitation, its primary revenue driver, and property cleaning, a traditional area of strength - Municipal sanitation is the company's core business, providing one-stop, customized urban and rural environmental management services across 22 provincial-level regions through various models like PPP and government concessions4143 - Property cleaning is the company's traditional strength, serving over 1,200 brand clients including Guangzhou Metro, Vanke Property, and landmark projects like the Tencent Binhai Towers3950 - Performance growth is driven by national environmental strategies, industry policies like market-oriented reforms, and the company's own competitive advantages in market leadership, scale, and operational experience56575860 Significant Changes in Major Assets The company's major assets changed significantly, driven by a substantial increase in equity assets from a mixed-ownership reform investment | Major Asset | Description of Significant Change | | :--- | :--- | | Equity Assets | Increased by 1,162.08% year-over-year, mainly due to a RMB 290 million investment in the mixed-ownership reform of Shandong Hi-Speed (Shenzhen) Investment Co., Ltd. | | Cash and Cash Equivalents | Increased significantly due to proceeds from the initial public offering | | Fixed Assets | Increased by 26.21% year-over-year, mainly from property acquisitions and purchasing new vehicles and equipment for new projects | | Other Receivables | Increased mainly due to a RMB 60 million rise in project deposits and a RMB 21.72 million rise in bid bonds | | Contract Assets | Increased due to the adoption of the new revenue standard, which requires recognizing rights to consideration as contract assets | | Other Non-current Assets | Increased mainly due to a RMB 78.33 million rise in project asset acquisition payments and a RMB 46.22 million rise in contract acquisition costs for concession projects | Core Competitiveness Analysis The company's core strengths lie in its market leadership, standardized management, operational experience, integrated industry chain, and brand reputation - With 24 years of industry experience, the company serves nearly 200 government clients and over 1,200 brand clients, demonstrating significant first-mover and scale advantages66 - The company has established standardized service processes and a replicable management system, supported by the "Yuhua Tian-Macrolink University" to cultivate professional talent, ensuring service quality and scalability6768 - The company has developed a "one-stop" integrated industry chain from road sweeping to waste sorting and is enhancing operational efficiency through its "Smart Sanitation System"7075 Management Discussion and Analysis In 2020, the company achieved significant growth in revenue and net profit, driven by municipal sanitation business expansion and improved margins Business Review The company achieved total revenue of RMB 4.32 billion and net profit of RMB 631 million, with strong growth driven by the municipal sanitation segment | Indicator | 2020 | YoY Growth | | :--- | :--- | :--- | | Operating Revenue | RMB 4.315 billion | 20.05% | | Net Profit Attributable to Parent | RMB 631 million | 101.75% | | Total Assets | RMB 4.548 billion | 71.25% | | Equity Attributable to Parent | RMB 2.559 billion | 157.15% | | Business Segment | Operating Revenue (RMB 10,000) | YoY Growth | Gross Margin | Gross Margin Change | | :--- | :--- | :--- | :--- | :--- | | Municipal Sanitation | 337,074.28 | 23.61% | 34.75% | +10.17 pct | | Property Cleaning | 93,110.84 | 7.80% | 11.59% | -0.36 pct | - In 2020, newly signed contracts totaled RMB 10.37 billion; by year-end, total contracts on hand for municipal sanitation reached RMB 33.63 billion, with RMB 25.80 billion yet to be executed808385 - The company participated in the equity transfer of Shandong Hi-Speed (Shenzhen) Investment Co., Ltd. and formed a joint venture with Shandong Hi-Speed Co., Ltd. to integrate resources and enhance core competitiveness93 - The company independently developed the "Urban Environmental Operation Cloud System" to improve management efficiency and reduce costs through IoT, cloud computing, AI, and big data technologies94 Analysis of Main Business Operations The municipal sanitation segment's revenue share grew to 78.11%, driving overall performance with a high gross margin of 34.75% | Category | Operating Revenue (Yuan) | % of Total | YoY Change | Operating Cost (Yuan) | Gross Margin | Gross Margin YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Municipal Sanitation | 3,370,742,777.08 | 78.11% | 23.61% | 2,199,388,740.87 | 34.75% | +10.17% | | Property Cleaning | 931,108,446.11 | 21.58% | 7.80% | 823,174,245.18 | 11.59% | -0.36% | | Region | Operating Revenue (Yuan) | % of Total | | :--- | :--- | :--- | | East China | 1,501,776,599.67 | 34.80% | | South China | 1,496,379,631.54 | 34.68% | | Northeast China | 581,175,584.95 | 13.47% | | Expense Item | 2020 Amount (Yuan) | YoY Change | Reason for Change | | :--- | :--- | :--- | :--- | | Selling Expenses | 45,762,844.15 | 114.51% | Increased incentives for sales personnel | | Administrative Expenses | 300,382,647.27 | 17.68% | Increased due to the establishment of new subsidiaries | | Financial Expenses | 47,898,847.24 | -21.02% | Increased bank interest income from IPO proceeds | | R&D Expenses | 4,489,047.98 | - | A new independent R&D department was established in April 2020 | | Cash Flow Item | 2020 Net Amount (Yuan) | 2019 Net Amount (Yuan) | YoY Change | Main Reason | | :--- | :--- | :--- | :--- | :--- | | Operating Activities | 521,753,417.33 | 565,008,824.77 | -7.66% | - | | Investing Activities | -742,077,032.08 | -411,922,077.34 | 80.15% | Purchase of wealth management products and investment in Shandong Hi-Speed mixed-ownership reform | | Financing Activities | 991,640,993.15 | 13,123,227.99 | 7,456.38% | Proceeds from initial public offering | Analysis of Assets and Liabilities Total assets grew to RMB 4.55 billion, with a debt-to-asset ratio of 40.54%, while restricted assets totaled RMB 282 million | Item | Year-end 2020 Amount (Yuan) | % of Total Assets | Change from Beginning of Year | | :--- | :--- | :--- | :--- | | Cash and Cash Equivalents | 1,320,716,030.60 | 29.04% | +6.92% | | Accounts Receivable | 1,021,162,366.29 | 22.45% | -4.67% | | Long-term Equity Investments | 318,385,443.02 | 7.00% | +6.06% | | Fixed Assets | 730,014,196.79 | 16.05% | -5.73% | | Short-term Borrowings | 617,460,445.55 | 13.58% | -7.76% | - As of the end of the reporting period, RMB 282 million in assets were restricted, including RMB 28.34 million in cash for guarantee deposits, RMB 165 million in pledged accounts receivable, and RMB 88.24 million in fixed assets under finance leases127 Analysis of Investment Total investment reached RMB 410 million, highlighted by a major equity acquisition and the use of RMB 436 million in IPO proceeds - Total investment for the reporting period was RMB 410 million, a significant increase of 353.68% from RMB 90 million in the previous year128 | Investee Company Name | Investment Method | Investment Amount (Yuan) | Shareholding Ratio | Partner | | :--- | :--- | :--- | :--- | :--- | | Shandong Hi-Speed (Shenzhen) Investment Co., Ltd. | Acquisition | 290,313,900.00 | 45.00% | Shandong Hi-Speed Investment Development Co., Ltd. | | Taihu Yuhua Tian-Macrolink Environment Development Co., Ltd. | New Establishment | 38,000,000.00 | 95.00% | Taihu County Fuqiang Urban Management Service Co., Ltd. | | Zibo Linzi Yuhua Tian-Macrolink Environmental Engineering Co., Ltd. | New Establishment | 22,500,000.00 | 75.00% | Zibo Qide Urban Construction Investment Co., Ltd. | | Daqing Qingherun Technology Development Co., Ltd. | New Establishment | 20,000,000.00 | 100.00% | None | | Use of IPO Proceeds | Committed Investment (RMB 10,000) | Cumulative Investment at Period-End (RMB 10,000) | Investment Progress | | :--- | :--- | :--- | :--- | | Sanitation Service Operation Center Project | 67,858.39 | 23,209.00 | 34.20% | | Smart Sanitation Platform Construction | 8,182.31 | 414.88 | 5.07% | | Supplement Working Capital | 20,000.00 | 20,005.70 | 100.00% | | Total | 96,040.70 | 43,629.58 | - | Future Outlook The company anticipates industry growth from policy support and technology, focusing on its core business and managing key operational risks - Industry Trends: The sanitation service market is expected to become more intelligent, integrated, and mechanized, with the marketization rate projected to increase from 47.3% in 2019 to 74.9% in 2024159162167169 - Company Strategy: The company will focus on its core business, advance its national layout, and leverage modern technology to strengthen its market position and core competitiveness171 - 2021 Business Plan: Key initiatives include strengthening the talent pool, optimizing management systems, enhancing brand and market share, and advancing mechanization and smart technology174175176177178 - Key Risks and Countermeasures: The company faces risks from market competition, management challenges, rising labor costs, and contract renewals, which it plans to mitigate through refined management and technological upgrades180182183184185186 Significant Events This section details major events, including a generous dividend plan, adoption of new revenue standards, and strategic investments and divestments Profit Distribution and Capitalization of Capital Reserves The company proposed a dividend of RMB 11.20 and a 10-for-10 stock split from capital reserves for every 10 shares held | Distribution Item | Per 10 Shares | | :--- | :--- | | Cash Dividend (Yuan) (Tax Incl.) | 11.20 | | Bonus Shares (from Capital Reserve) | 10 | | Bonus Shares (from Retained Earnings) | 0 | | Dividend Year | Cash Dividend Amount (Yuan) | As a % of Net Profit Attributable to Parent | | :--- | :--- | :--- | | 2020 | 155,008,000.00 | 24.56% | | 2019 | 31,416,800.00 | 10.04% | | 2018 | 0.00 | 0.00% | Material Contracts and Their Performance The company had no major custody or lease contracts but provided guarantees totaling RMB 706 million to subsidiaries for business development | Guarantee Status | Amount (RMB 10,000) | | :--- | :--- | | Total approved guarantee limit for subsidiaries during the period | 128,320 | | Total actual guarantees provided to subsidiaries during the period | 100,850 | | Total approved guarantee limit for subsidiaries at period-end | 234,625.75 | | Outstanding guarantee balance for subsidiaries at period-end | 59,105.41 | - During the reporting period, the company invested RMB 700 million of its IPO proceeds in bank wealth management products, all of which have been fully redeemed with no outstanding balance272 Social Responsibility The company actively fulfilled its social responsibilities, donating RMB 25.97 million for COVID-19 relief and creating numerous employment opportunities - The company strictly adheres to labor laws, protects employee rights, and provides comprehensive training and development platforms, ensuring no employee infections during the pandemic278 - In response to the COVID-19 pandemic, the company and its subsidiaries donated a total of RMB 25.97 million and created numerous job opportunities for disadvantaged groups282 Changes in Share Capital and Shareholders This section details changes in the company's share structure following its IPO, increasing total shares to 138.4 million Changes in Share Capital The company's total share capital increased from 103.8 million to 138.4 million shares due to the issuance of 34.6 million new shares in its IPO | Share Class | Shares Before Change (Shares) | Change (+/-) (Shares) | Shares After Change (Shares) | Post-Change Ratio | | :--- | :--- | :--- | :--- | :--- | | I. Restricted Shares | 103,800,000 | +400 | 103,800,400 | 75.00% | | II. Unrestricted Shares | 0 | +34,599,600 | 34,599,600 | 25.00% | | III. Total Shares | 103,800,000 | +34,600,000 | 138,400,000 | 100.00% | - The change in share capital was primarily due to the company's initial public offering of 34.6 million new shares on January 23, 2020297 Shareholders and Ultimate Controllers The company's controlling shareholder is Tibet Tianzhirun Investment, with ultimate control held by Mr. Zhou Ping and Mr. Zhou Mengchen | Shareholder Name | Shareholder Type | Shareholding Ratio | Shares Held at Period-End (Shares) | | :--- | :--- | :--- | :--- | | Tibet Tianzhirun Investment Management Co., Ltd. | Domestic Non-State-owned Legal Entity | 47.92% | 66,314,792 | | Shenzhen Xinzhuotai Investment Management Co., Ltd. | Domestic Non-State-owned Legal Entity | 14.45% | 20,000,000 | | Shenzhen Xinhongtai Investment Management Co., Ltd. | Domestic Non-State-owned Legal Entity | 6.36% | 8,800,000 | | Wang Dongyan | Domestic Natural Person | 2.89% | 4,000,000 | | Tianjin Hailifangzhou Investment Management Co., Ltd. | Domestic Non-State-owned Legal Entity | 1.33% | 1,842,604 | - The company's controlling shareholder is Tibet Tianzhirun Investment Management Co., Ltd., and the ultimate controllers are Mr. Zhou Ping and Mr. Zhou Mengchen, who are father and son312322324 Directors, Supervisors, Senior Management, and Employees This section outlines the holdings, remuneration, and structure of the company's management and its 66,855 employees Changes in Shareholdings and Remuneration of Directors, Supervisors, and Senior Management Shareholdings of directors, supervisors, and senior management remained stable, with total pre-tax remuneration amounting to RMB 5.23 million | Name | Position | Shares at Start of Period (Shares) | Shares at End of Period (Shares) | | :--- | :--- | :--- | :--- | | Wang Dongyan | Director, CFO, Board Secretary | 4,000,000 | 4,000,000 | | Zhou Ming | Director | 500,000 | 500,000 | | Zhou Cong | Director | 500,000 | 500,000 | | Wang Qi | Supervisor | 0 | 400 | - In 2020, the total pre-tax remuneration paid to 15 directors, supervisors, and senior management members was RMB 5.23 million359360 Employee Information The company employed 66,855 staff, with production personnel comprising 97.7% of the workforce, supported by a comprehensive training system | By Function | Number of Employees | By Education Level | Number of Employees | | :--- | :--- | :--- | :--- | | Production Staff | 65,335 | Postgraduate & Above | 58 | | Sales Staff | 92 | Bachelor's Degree | 618 | | Technical Staff | 30 | Associate Degree | 1,042 | | Finance Staff | 178 | High School | 3,492 | | Administrative Staff | 1,220 | Junior High & Below | 61,645 | | Total | 66,855 | Total | 66,855 | - The company has established the "Yuhua Tian-Macrolink University" and a three-tier training system to provide comprehensive training for employees at all levels367 Corporate Governance The company maintained a sound corporate governance structure in compliance with regulatory requirements, ensuring operational independence - The company's actual corporate governance practices are in material compliance with the relevant regulatory requirements for listed companies issued by the CSRC376 - The company is independent from its controlling shareholder and ultimate controllers in terms of business, personnel, assets, organization, and finance, possessing the ability to operate autonomously379380 - The four specialized committees of the Board of Directors—Audit, Remuneration and Appraisal, Strategy, and Nomination—all convened meetings and effectively fulfilled their duties during the reporting period391392 - According to the internal control self-assessment report and the auditor's assurance report, the company maintained effective internal controls related to financial reporting in all material aspects as of December 31, 2020, with no material weaknesses identified397400 Information on Preferred Shares The company had no preferred shares during the reporting period - The company had no preferred shares during the reporting period332 Information on Convertible Corporate Bonds The company had no convertible corporate bonds during the reporting period - The company had no convertible corporate bonds during the reporting period336 Information on Corporate Bonds The company had no publicly issued corporate bonds that were outstanding or not fully redeemed at the date of this report's approval - The company has no publicly issued corporate bonds listed on a stock exchange that were outstanding or not fully redeemed at the date of this annual report's approval404 Financial Report This section presents the audited financial statements for 2020, which received a standard unqualified opinion from the auditor Auditor's Report Lixin Certified Public Accountants issued a standard unqualified opinion, highlighting revenue recognition and PPP project accounting as key audit matters - The auditor was Lixin Certified Public Accountants (Special General Partnership), who issued a standard unqualified audit opinion406407 - Key audit matters included: - Whether operating revenue was recognized in the appropriate accounting period - The completeness of operating costs - The reasonableness of estimated asset renewal and renovation expenditures for PPP projects during the concession period409 Key Financial Statements The financial statements show total assets of RMB 4.55 billion, total liabilities of RMB 1.84 billion, and net profit of RMB 689 million for 2020 | Key Items from Consolidated Balance Sheet (Yuan) | 2020-12-31 | 2019-12-31 | | :--- | :--- | :--- | | Total Current Assets | 2,864,874,869.91 | 1,569,129,288.33 | | Total Non-current Assets | 1,682,973,416.98 | 1,086,564,562.90 | | Total Assets | 4,547,848,286.89 | 2,655,693,851.23 | | Total Current Liabilities | 1,491,791,603.42 | 1,261,251,649.82 | | Total Non-current Liabilities | 352,010,306.62 | 314,894,221.52 | | Total Liabilities | 1,843,801,910.04 | 1,576,145,871.34 | | Total Equity Attributable to Parent | 2,558,655,860.90 | 995,018,621.59 | | Total Equity | 2,704,046,376.85 | 1,079,547,979.89 | | Key Items from Consolidated Income Statement (Yuan) | 2020 | 2019 | | :--- | :--- | :--- | | I. Total Operating Revenue | 4,315,219,469.31 | 3,594,582,012.69 | | Less: Total Operating Costs | 3,441,171,375.00 | 3,173,402,653.30 | | III. Operating Profit | 896,850,960.67 | 426,175,206.29 | | IV. Total Profit | 865,717,172.80 | 420,011,807.24 | | V. Net Profit | 689,082,673.21 | 341,303,110.76 | | Net Profit Attributable to Parent | 631,042,009.37 | 312,790,640.31 | | Key Items from Consolidated Cash Flow Statement (Yuan) | 2020 | 2019 | | :--- | :--- | :--- | | Net Cash Flow from Operating Activities | 521,753,417.33 | 565,008,824.77 | | Net Cash Flow from Investing Activities | -742,077,032.08 | -411,922,077.34 | | Net Cash Flow from Financing Activities | 991,640,993.15 | 13,123,227.99 | | Net Increase in Cash and Cash Equivalents | 771,317,378.40 | 166,209,975.42 | | Cash and Cash Equivalents at End of Period | 1,292,379,077.37 | 521,061,698.97 | Notes to the Financial Statements (Excerpts) The notes detail account balances and changes, with municipal sanitation contributing RMB 3.37 billion in revenue and non-recurring items at RMB 3.07 million | Item | Revenue (Yuan) | Cost (Yuan) | | :--- | :--- | :--- | | Main Business | 4,301,851,223.19 | 3,022,562,986.05 | | Of which: Property Cleaning | 931,108,446.11 | - | | Of which: Municipal Sanitation | 3,370,742,777.08 | - | | Other Business | 13,368,246.12 | 10,051,269.80 | | Total | 4,315,219,469.31 | 3,032,614,255.85 | - The company engaged in a related-party property lease transaction with ultimate controller Mr. Zhou Ping, with a recognized lease expense of RMB 3.56 million in 2020; the ultimate controller and related parties also provided several loan guarantees for the company901902906 | Details of Non-recurring Gains and Losses | Amount (Yuan) | Description | | :--- | :--- | :--- | | Gains/Losses on Disposal of Non-current Assets | -6,775,135.40 | Primarily loss on disposal of fixed assets | | Government Subsidies Included in Current Profit/Loss | 34,889,379.60 | Primarily government rewards | | Gains/Losses from Entrusted Investments | 8,461,139.04 | Primarily income from wealth management products | | Other Non-operating Income and Expenses | -32,026,109.52 | Primarily external donation expenses | | Less: Income Tax Impact | 887,384.70 | - | | Less: Minority Interest Impact | 594,070.46 | - | | Total | 3,067,818.56 | - | List of Documents for Inspection This section lists the reference documents available for investor review, including the signed annual report, financial statements, and auditor's report