联邦制药(03933) - 2023 - 中期业绩

Financial Highlights The company reported significant financial growth for the six months ended June 30, 2023, with revenue increasing by 33.3% and profit attributable to owners of the Company surging by 104.0% Key Financial Highlights for the Six Months Ended June 30, 2023 | Metric | 2023 (Thousand RMB) | 2022 (Thousand RMB) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 6,906,524 | 5,181,925 | 33.3% | | EBITDA | 1,953,790 | 1,140,996 | 71.2% | | Profit before tax | 1,612,155 | 826,954 | 95.0% | | Profit for the period attributable to owners of the Company | 1,284,496 | 629,517 | 104.0% | | Basic EPS (RMB cents) | 70.69 | 34.55 | 104.6% | | Interim Dividend per Share (RMB cents) | 12.0 | 5.0 | 140.0% | Condensed Consolidated Financial Statements This section presents the condensed consolidated financial performance and position, highlighting significant growth in revenue and profit, alongside a strengthened balance sheet Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended June 30, 2023, the Group's revenue increased by 33.3% to RMB 6.91 billion, gross profit rose by 42.5% to RMB 3.21 billion, and profit for the period attributable to owners of the Company surged by 104.0% to RMB 1.28 billion, with basic EPS at RMB 70.69 cents Key Data from Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income | Metric | 2023 (Thousand RMB) | 2022 (Thousand RMB) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 6,906,524 | 5,181,925 | 33.3% | | Cost of sales | (3,693,226) | (2,927,960) | 26.1% | | Gross profit | 3,213,298 | 2,253,965 | 42.5% | | Other income | 92,491 | 72,641 | 27.3% | | Net other gains and losses | 52,472 | (71,251) | Significant improvement | | Selling and distribution expenses | (974,906) | (805,744) | 21.0% | | Administrative expenses | (380,688) | (344,847) | 10.4% | | Research and development expenses | (338,678) | (242,607) | 39.6% | | Finance costs | (38,736) | (21,802) | 77.7% | | Profit before tax | 1,612,155 | 826,954 | 95.0% | | Income tax expense | (327,915) | (197,437) | 66.1% | | Profit for the period | 1,284,240 | 629,517 | 104.0% | | Profit for the period attributable to owners of the Company | 1,284,496 | 629,517 | 104.0% | | Basic EPS (RMB cents) | 70.69 | 34.55 | 104.6% | Condensed Consolidated Statement of Financial Position As of June 30, 2023, the Group's total assets increased to RMB 19.77 billion, total liabilities slightly decreased to RMB 8.24 billion, and equity attributable to owners of the Company grew to RMB 11.53 billion, indicating a robust financial position with improved net current assets and current ratio Key Data from Condensed Consolidated Statement of Financial Position | Metric | June 30, 2023 (Thousand RMB) | December 31, 2022 (Thousand RMB) | Change (%) | | :--- | :--- | :--- | :--- | | Assets | | | | | Non-current assets | 6,557,875 | 6,464,679 | 1.4% | | Current assets | 13,212,085 | 12,514,946 | 5.6% | | Total assets | 19,769,960 | 18,979,625 | 4.2% | | Liabilities | | | | | Current liabilities | 7,063,733 | 7,033,027 | 0.4% | | Non-current liabilities | 1,174,610 | 1,337,167 | -12.1% | | Total liabilities | 8,238,343 | 8,370,194 | -1.6% | | Equity | | | | | Equity attributable to owners of the Company | 11,530,528 | 10,608,086 | 8.7% | | Non-controlling interests | 1,089 | 1,345 | -19.0% | | Total equity | 11,531,617 | 10,609,431 | 8.7% | | Net current assets | 6,148,352 | 5,481,919 | 12.1% | | Current ratio | 1.87 | 1.78 | 5.1% | Notes to the Financial Statements This section provides detailed explanations and disclosures regarding the accounting policies, financial performance, and position of the Group 1. Basis of Presentation The condensed consolidated financial statements are prepared in accordance with HKAS 34 'Interim Financial Reporting' and the disclosure requirements of Appendix 16 to the HKEX Listing Rules - The financial statements comply with HKAS 34 and the disclosure requirements of Appendix 16 to the HKEX Listing Rules[8] 2. Significant Accounting Policies The condensed consolidated financial statements are prepared on a historical cost basis, with certain financial instruments measured at fair value, and accounting policies remain consistent with 2022, except for new HKFRS amendments - The financial statements are primarily prepared on a historical cost basis, with certain financial instruments measured at fair value[9] - Accounting policies are largely consistent with the 2022 annual financial statements, with changes only due to the application of newly amended HKFRS[9] Application of Amended Hong Kong Financial Reporting Standards The Group first applied HKFRS amendments effective January 1, 2023, during this interim period, which had no material impact on its financial performance, position, or disclosures - Amendments to HKFRS 17 and HKAS 8, 12 were applied during the period[11] - These amendments had no material impact on the Group's financial performance, position, or disclosures for the current and prior periods[11] 2.1 Impact of Application of Amendments to HKAS 12 Income Taxes (International Tax Reform – Pillar Two Model Rules) The Group has not yet applied the temporary exception in HKAS 12 regarding Pillar Two legislation, as its entities are not in relevant jurisdictions, and will disclose information when the legislation becomes effective - The Group has not yet applied the temporary exception in HKAS 12 regarding Pillar Two legislation[12] - The Group's entities are not currently in jurisdictions where Pillar Two legislation has been enacted or substantively enacted[12] - Relevant qualitative and quantitative information will be disclosed when Pillar Two legislation is enacted or becomes effective[12] 3. Revenue and Segment Information The Group's revenue primarily stems from three business segments: intermediates, APIs, and finished products, categorized by customer geographical markets, all showing significant growth in H1 2023, with China being the largest contributor - The Group has three main business revenue streams: intermediates, APIs, and finished products[14] (a) Segment Revenue and Results For the six months ended June 30, 2023, segment revenue (including inter-segment sales) for intermediates, APIs, and finished products grew by 37.2%, 34.6%, and 29.1% respectively, with intermediates and APIs showing strong profit growth while finished products slightly declined Segment Revenue and Results (For the six months ended June 30, 2023) | Segment | External Sales (Thousand RMB) | Inter-segment Sales (Thousand RMB) | Segment Revenue (Thousand RMB) | Segment Profit (Thousand RMB) | | :--- | :--- | :--- | :--- | :--- | | Intermediates | 1,047,439 | 1,644,676 | 2,692,115 | 814,405 | | APIs | 3,422,975 | 426,141 | 3,849,116 | 427,956 | | Finished Products | 2,436,110 | - | 2,436,110 | 303,767 | | Consolidated | 6,906,524 | - | 6,906,524 | 1,546,128 | Year-on-Year Change in Segment Revenue and Results (For the six months ended June 30, 2023) | Segment | Segment Revenue YoY Growth (%) | Segment Profit YoY Growth (%) | | :--- | :--- | :--- | | Intermediates | 37.2% | 89.8% | | APIs | 34.6% | 133.4% | | Finished Products | 29.1% | -1.2% | (b) Geographical Information China (including Hong Kong) remained the Group's largest revenue source in H1 2023, contributing RMB 5.54 billion, a 34.3% increase year-on-year, with other markets like Europe, India, and South America also showing significant growth Revenue by Customer Geographical Market (Thousand RMB) | Region | 2023 | 2022 | | :--- | :--- | :--- | | PRC (including Hong Kong) | 5,544,083 | 4,129,014 | | Europe | 431,526 | 308,533 | | India | 331,769 | 204,031 | | Middle East | 26,046 | 32,208 | | South America | 170,335 | 124,404 | | Other Asia | 308,142 | 263,667 | | Other Regions | 94,623 | 120,068 | | Total | 6,906,524 | 5,181,925 | 4. Other Income The Group's other income totaled RMB 92.49 million in H1 2023, a 27.3% year-on-year increase, primarily driven by bank interest income, scrap sales, and government grants, with bank interest showing significant growth Other Income Details (Thousand RMB) | Item | 2023 | 2022 | | :--- | :--- | :--- | | Bank interest income | 51,432 | 29,512 | | Scrap sales | 2,576 | 2,191 | | Subsidy income | 34,809 | 33,778 | | Miscellaneous income | 3,674 | 7,160 | | Total | 92,491 | 72,641 | - Subsidy income includes grants from PRC government authorities for capital expenditure, R&D activities, and unconditional awards[17] - RMB 0.529 million (2022: RMB 0.65 million) in Covid-19 related subsidies from the Hong Kong government were recognized during the period[18] 5. Net Other Gains and Losses The Group recorded net other gains of RMB 52.47 million in H1 2023, a significant improvement from a loss of RMB 71.25 million in the prior year, mainly due to net foreign exchange gains and fair value gains from derivative financial instruments Net Other Gains and Losses Details (Thousand RMB) | Item | 2023 | 2022 | | :--- | :--- | :--- | | Net foreign exchange gains (losses) | 50,682 | (48,568) | | Net fair value gains from derivative financial instruments | 24,231 | 308 | | Gains on disposal of financial assets at fair value through profit or loss | 36,690 | - | | Fair value gains on financial assets at fair value through profit or loss | 54 | - | | Net loss on disposal of property, plant and equipment | (2,330) | (2,803) | | Write-off of property, plant and equipment | (56,087) | (19,263) | | Others | (768) | (925) | | Total | 52,472 | (71,251) | - The Group manages foreign exchange risk through cross currency interest rate swap contracts and foreign currency forward contracts, which are not accounted for as hedging instruments[19] 6. Finance Costs The Group's finance costs for H1 2023 increased by 77.7% to RMB 38.74 million, primarily due to interest on borrowings, with a portion capitalized into property, plant and equipment Finance Costs Details (Thousand RMB) | Item | 2023 | 2022 | | :--- | :--- | :--- | | Interest on borrowings | 44,288 | 23,752 | | Interest on lease liabilities | 260 | 293 | | Less: Amount capitalized into property, plant and equipment | (5,812) | (2,243) | | Total | 38,736 | 21,802 | - The average capitalization rate for borrowing costs was 4.28% (2022: 2.42%)[20] 7. Income Tax Expense The Group's income tax expense for H1 2023 increased by 66.1% to RMB 327.92 million, mainly comprising PRC corporate income tax, withholding tax on interest income and distributed profits, and deferred tax expense, with certain PRC entities benefiting from a 15% high-tech enterprise tax rate Income Tax Expense Details (Thousand RMB) | Item | 2023 | 2022 | | :--- | :--- | :--- | | PRC corporate income tax | 256,986 | 148,635 | | PRC withholding tax on interest income | 3,594 | 2,294 | | PRC withholding tax on distributed profits of PRC subsidiaries | 9,785 | 16,500 | | Deferred tax expense | 57,550 | 30,008 | | Income tax expense | 327,915 | 197,437 | - Certain PRC Group entities, as high-tech enterprises, enjoy a 15% preferential tax rate[22] - The Group applies a 5% withholding tax rate for dividends distributed by PRC entities to non-PRC tax residents[22] 8. Profit for the Period Profit for the period was derived after deducting employee costs of RMB 769.77 million, depreciation of RMB 294.13 million, amortization of intangible assets of RMB 8.77 million, and net inventory provision of RMB 5.29 million Items Deducted from Profit for the Period (Thousand RMB) | Item | 2023 | 2022 | | :--- | :--- | :--- | | Employee costs (including directors' emoluments) | 769,768 | 642,765 | | Depreciation of right-of-use assets | 5,468 | 5,198 | | Depreciation of property, plant and equipment | 288,665 | 278,560 | | Amortization of intangible assets | 8,766 | 8,482 | | Net provision for (reversal of provision for) inventories | 5,292 | 432 | | Cost of inventories recognized as expense | 3,693,226 | 2,927,960 | 9. Earnings Per Share Basic earnings per share attributable to owners of the Company for the six months ended June 30, 2023, significantly increased to RMB 70.69 cents from RMB 34.55 cents in the prior year, with no diluted EPS presented due to the absence of potential ordinary shares EPS Calculation (Thousand RMB) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Profit for the period attributable to owners of the Company for basic EPS calculation | 1,284,496 | 629,517 | | Weighted average number of ordinary shares (thousands) | 1,817,027 | 1,822,167 | | Basic EPS (RMB cents) | 70.69 | 34.55 | - No diluted EPS is presented as there were no potential ordinary shares in issue for both periods[24] 10. Dividends The Group recognized total dividends of RMB 363.41 million in H1 2023, including final and special dividends for 2022, and the Board declared an interim dividend of RMB 12 cents per share, totaling RMB 218.04 million, a 140% increase year-on-year Dividends Recognized and Declared (Thousand RMB) | Item | 2023 | 2022 | | :--- | :--- | :--- | | 2022 final dividend (RMB 14 cents per share) | 254,384 | 145,406 | | 2022 special dividend (RMB 6 cents per share) | 109,021 | 36,351 | | Total dividends recognized as distribution during the year | 363,405 | 181,757 | | Interim dividend declared (RMB 12 cents per share) | 218,043 | 90,879 | 11. Movements in Property, Plant and Equipment The Group incurred capital expenditure of approximately RMB 395 million on property, plant and equipment in H1 2023, primarily for expansion and upgrades in Zhuhai and Inner Mongolia, while also incurring total losses of RMB 58.42 million from asset disposals and write-offs - Capital expenditure on property, plant and equipment in H1 2023 was approximately RMB 395 million, a 40.2% year-on-year increase[27] - Primarily for the expansion and upgrade of production plants and office buildings in Zhuhai and Inner Mongolia, China[27] - Disposal and write-off of assets resulted in total losses of approximately RMB 58.417 million[27] 12. Trade and Bills Receivables, Other Receivables, Deposits and Prepayments As of June 30, 2023, the Group's total trade and bills receivables, other receivables, deposits, and prepayments amounted to RMB 5.58 billion, a 13.6% increase from year-end 2022, with typical credit terms of 60 to 120 days for trade customers Trade and Other Receivables Details (Thousand RMB) | Item | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Trade receivables (net of provision) | 2,468,584 | 2,103,912 | | Bills receivable - bank acceptance (net of provision) | 2,563,480 | 2,359,376 | | Bills receivable - commercial (net of provision) | 1,351 | 12,534 | | Consideration receivable (net of provision) | 339,574 | 339,574 | | VAT recoverable | 114,862 | 115,866 | | Other receivables, deposits and prepayments (net of provision) | 429,696 | 320,016 | | Total | 5,577,973 | 4,911,704 | - Trade customers are generally granted credit terms of 60 to 120 days, while bank and commercial bills receivable have maturity periods of 90 days to 1 year[28] 13. Trade and Other Payables As of June 30, 2023, the Group's total trade and other payables increased by 7.9% to RMB 5.79 billion, with a significant rise in trade payables under supplier financing arrangements, reflecting the Group's financing strategy Trade and Other Payables Details (Thousand RMB) | Item | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Trade payables | 1,634,607 | 1,970,355 | | Trade payables under supplier financing arrangements | 2,318,473 | 1,588,069 | | Other payables and accrued expenses | 482,330 | 485,992 | | Other tax payables | 181,924 | 158,654 | | Price concession liabilities | 39,284 | - | | Accrued freight charges | 78,323 | 76,441 | | Accrued salaries, staff welfare and untaken annual leave | 196,927 | 191,578 | | Accrued water, electricity and steam charges | 364,186 | 370,618 | | Deferred income from government grants | 88,036 | 95,859 | | Payables for acquisition of property, plant and equipment | 400,941 | 423,723 | | Total | 5,785,031 | 5,361,289 | - The Group is generally granted credit terms of 120 to 180 days by its suppliers[32] - Price concession liabilities represent amounts expected to be refunded to customers due to price reductions from the 8th round of China's centralized drug procurement[34] 14. Capital Commitments As of June 30, 2023, the Group's contracted but unprovided capital expenditure commitments for property, plant and equipment amounted to RMB 497.21 million, a 39.8% increase from year-end 2022 - Capital expenditure commitments amounted to RMB 497.212 million (December 31, 2022: RMB 355.691 million), a 39.8% year-on-year increase[35] 15. Pledged or Restricted Assets As of June 30, 2023, the Group had pledged property, plant and equipment, right-of-use assets, bills receivable, and pledged bank deposits to banks as collateral for credit facilities, with certain right-of-use assets restricted Pledged Assets (Thousand RMB) | Item | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Property, plant and equipment | 384,621 | 416,896 | | Right-of-use assets | 165,226 | 167,837 | | Bills receivable - bank acceptance | 1,074,187 | 764,422 | | Pledged bank deposits | 674,355 | 694,704 | - Right-of-use assets related to lease liabilities cannot be used as collateral for borrowings[36] 16. Related Party Transactions Total emoluments for the Company's directors amounted to RMB 9.63 million during the period, a slight increase from the prior year, primarily comprising fees, salaries, other benefits, and retirement benefit scheme contributions Directors' Emoluments (Thousand RMB) | Item | 2023 | 2022 | | :--- | :--- | :--- | | Fees | 286 | 329 | | Salaries and other benefits | 9,300 | 8,869 | | Retirement benefit scheme contributions | 44 | 44 | | Total | 9,630 | 9,242 | Management Discussion and Analysis This section provides an overview of the Group's business performance, operational highlights, financial position, and strategic initiatives during the reporting period Business Review In H1 2023, despite a weak global recovery, China's economy improved, and pharmaceutical reforms deepened, leading to the Group's turnover increasing by 33.3% to RMB 6.91 billion and profit attributable to owners of the Company surging by 104.0% to RMB 1.285 billion, with all segments showing significant revenue growth - Global economic recovery was weak, while China's economy improved, with the pharmaceutical sector focusing on "health," "innovation," and "cooperation"[38] - The 8th round of national centralized drug procurement proceeded orderly, and the national medical insurance drug catalog adjustment commenced[38] Key Financial Performance H1 2023 | Metric | Amount (RMB) | YoY Growth (%) | | :--- | :--- | :--- | | Turnover | 6,906,500,000 | 33.3% | | EBITDA | 1,953,800,000 | 71.2% | | Profit attributable to owners of the Company | 1,284,500,000 | 104.0% | | EPS | 70.69 cents | - | | Interim Dividend per Share | 12 cents | - | - Revenue from intermediates, APIs, and finished products segments increased by 37.2%, 34.6%, and 29.1% respectively[38] Intermediates and APIs Business In H1 2023, external sales revenue for intermediates and APIs grew by 41.4% and 34.1% respectively, with overseas export sales increasing by 29.4% to RMB 1.362 billion, driven by recovering demand and stable market prices, reinforcing the Group's leading position Intermediates and APIs External Sales Revenue | Segment | H1 2023 External Sales Revenue (RMB) | YoY Growth (%) | | :--- | :--- | :--- | | Intermediates | 1,047,400,000 | 41.4% | | APIs | 3,423,000,000 | 34.1% | - Overseas export sales revenue was RMB 1.362 billion, a 29.4% year-on-year increase, accounting for 19.7% of total turnover[39] - Recovering overseas market demand led to stable price increases for related products[39] Finished Products Business In H1 2023, finished products sales revenue grew by 29.1% to RMB 2.436 billion, with strong growth in insulin analogues and antibiotics, including the successful bid for Piperacillin Sodium and Tazobactam Sodium for Injection in the 8th national centralized procurement, and significant growth in animal health products Finished Products Sales Revenue | Product Category | H1 2023 Sales Revenue (RMB) | YoY Growth (%) | | :--- | :--- | :--- | | Total Finished Products | 2,436,100,000 | 29.1% | | Diabetes Products | 498,000,000 | -19.6% | | - Human Insulin | 230,900,000 | - | | - Insulin Analogues | 267,100,000 | Sales volume grew rapidly | | Antibiotics (including Animal Health Products) | 1,725,000,000 | 50.5% | | - Piperacillin Sodium and Tazobactam Sodium for Injection | 386,600,000 | 22.7% | | - Amoxicillin Capsules | 247,100,000 | 17.7% | | Animal Health Products | 534,300,000 | 158.6% | - Piperacillin Sodium and Tazobactam Sodium for Injection (specification: 4.5g) was selected in the 8th round of national centralized drug procurement[40] - Strategic cooperation with Muyuan Foods Co., Ltd. continues to advance steadily, aiming to build a leading brand in China's animal health industry[40] Progress in Pharmaceutical R&D The Group's pharmaceutical R&D investment in H1 2023 increased by 44.4% to RMB 350.3 million, with 34 new human drug products under development (16 being Class 1 new drugs), achieving multiple clinical trial approvals and registration applications in endocrinology, autoimmune, ophthalmology, and high-end anti-infectives, including the first domestic approvals for insulin degludec liraglutide injection and semaglutide injection for weight management, and the second global application for a long-acting GLP-1/GIP/GCG triple agonist Pharmaceutical R&D Investment | Item | H1 2023 Investment (RMB) | YoY Growth (%) | | :--- | :--- | :--- | | Total R&D Investment | 350,300,000 | 44.4% | | Expensed R&D Investment | 338,700,000 | - | | Capitalized R&D Investment | 11,600,000 | - | - 34 new human drug products are under development, with 16 being Class 1 new drugs[41] - Class 1 new drug TUL12101 eye drops received clinical trial approval, a new generation small molecule RASP inhibitor for dry eye disease[41] - First domestic approvals for biosimilar clinical trials of insulin degludec liraglutide injection and semaglutide injection for weight management indications[41] - Clinical trial registration application for self-developed Class 1 innovative drug UBT251 injection (long-acting GLP-1/GIP/GCG triple agonist) was accepted, making it the first domestic and second global company to prepare it via chemical synthesis of peptides[41] - Amoxicillin Capsules (specification: 0.5g) passed consistency evaluation, becoming the Group's third amoxicillin capsule product to do so[41] Optimization of Financial Structure The Group optimized its financial structure by adjusting domestic and overseas borrowing portfolios to reduce finance costs and enhance liquidity, with finance costs increasing by 77.7% to RMB 38.7 million, while prioritizing domestic RMB borrowings to improve financial flexibility and capital utilization efficiency - Adjusted domestic and overseas borrowing portfolios to reduce finance costs and optimize financial structure for enhanced liquidity[42] - Finance costs for the period were approximately RMB 38.7 million, a 77.7% year-on-year increase[42] - Prioritized domestic RMB as the primary borrowing currency to enhance financial flexibility and capital utilization efficiency[42] Liquidity and Financial Resources As of June 30, 2023, the Group maintained robust liquidity with bank balances and cash of approximately RMB 5.42 billion, interest-bearing borrowings of RMB 1.52 billion (45.4% fixed-rate), net current assets increasing to RMB 6.15 billion, and a current ratio of 1.87 Key Liquidity and Financial Resources Data | Metric | June 30, 2023 (RMB) | December 31, 2022 (RMB) | Change (%) | | :--- | :--- | :--- | :--- | | Pledged bank deposits, bank balances and cash | 5,419,200,000 | 5,437,800,000 | -0.3% | | Interest-bearing borrowings | 1,520,900,000 | 2,455,100,000 | -38.0% | | - Fixed-rate loans | 691,200,000 | 251,400,000 | 175.0% | | - Floating-rate loans | 829,700,000 | 2,203,700,000 | -62.4% | | Current assets | 13,212,100,000 | 12,514,900,000 | 5.6% | | Net current assets | 6,148,400,000 | 5,481,900,000 | 12.1% | | Current ratio | 1.87 | 1.78 | 5.1% | | Total assets | 19,770,000,000 | 18,979,600,000 | 4.2% | | Total liabilities | 8,238,300,000 | 8,370,200,000 | -1.6% | | Equity attributable to owners of the Company | 11,530,500,000 | 10,608,100,000 | 8.7% | | Net cash and bank balances (after deducting borrowings and supplier financing) | 1,579,900,000 | 1,394,600,000 | 13.3% | Contingent Liabilities The Group had no significant contingent liabilities as of June 30, 2023, and December 31, 2022 - The Group had no significant contingent liabilities at the end of the reporting period[45] Foreign Currency Exchange Risk The Group's purchases and sales are primarily settled in RMB, USD, and HKD, with operating expenses mainly in RMB and HKD, and a treasury policy is in place to monitor and manage foreign exchange rate fluctuation risks, using forward contracts for hedging as needed - Purchases and sales are primarily settled in RMB, USD, and HKD, while operating expenses are mainly in RMB and HKD[45] - A treasury policy is established to monitor and manage foreign exchange rate fluctuation risks, with forward contracts used for hedging as needed[45] Employees and Remuneration Policy As of June 30, 2023, the Group employed approximately 14,000 staff in Hong Kong and mainland China, with remuneration determined by basic salary, bonuses, other benefits, industry practice, and individual performance - As of June 30, 2023, the Group employed approximately 14,000 staff[46] - Employee remuneration is determined by basic salary, bonuses, other benefits, industry practice, and individual performance[46] Litigation The Group has filed a lawsuit against Evergrande Real Estate Group Chengdu Co., Ltd. with the Chengdu Intermediate People's Court to recover approximately RMB 340 million in outstanding consideration and related damages, with the case currently awaiting first-instance judgment after two hearings - The Group filed a lawsuit against Evergrande Real Estate Group Chengdu Co., Ltd. to recover approximately RMB 340 million in outstanding consideration and damages[47] - The lawsuit has been transferred to the Chengdu Intermediate People's Court, with two hearings held, and is currently awaiting the first-instance judgment[47] Proposed Adoption of Share Award Scheme The Board proposes adopting a 2023 Share Award Scheme to recognize employee contributions, incentivize and retain talent, provide additional motivation for performance targets, and attract suitable talent to enhance Company value, subject to shareholder and HKEX approval - Proposed adoption of the 2023 Share Award Scheme aims to recognize contributions, incentivize talent retention, achieve performance targets, and attract talent[48] - The scheme is subject to shareholder approval and HKEX approval to become effective[48] Outlook The Group anticipates China's economy to enter a recovery growth phase with stable medical demand, and plans to consolidate core industry advantages, strengthen supply chain cost control, advance brand strategy, accelerate market development, enhance R&D innovation, upgrade production facilities, and actively pursue external collaborations for long-term sustainable growth and industry leadership - China's economy is gradually entering a recovery growth phase, with normal medical institution visits and steady release of drug demand[49] - The Group will consolidate core industry advantages, strengthen supply chain cost control, advance brand strategy, and accelerate market development and commercialization processes[49] - Continuously enhance scientific research and innovation capabilities, efficiently advance new drug R&D and launch processes, upgrade production line facilities, and comprehensively improve industrialization capabilities[49] - Actively expand external cooperation to add momentum for the Group's long-term sustainable development, confident in consolidating and enhancing its industry position and influence[49] Other Information This section covers disclosures on securities transactions, corporate governance, and administrative matters Purchase, Redemption or Sale of the Company’s Listed Securities Neither the Company nor its subsidiaries purchased, redeemed, or sold any of the Company's listed securities during the six months ended June 30, 2023 - Neither the Company nor its subsidiaries purchased, sold, or redeemed any of the Company's listed securities during the period[50] Code for Securities Transactions by Directors The Company adopted the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the HKEX Listing Rules, and all directors confirmed full compliance during the period - The Company has adopted the Model Code as set out in Appendix 10 to the HKEX Listing Rules[50] - All directors confirmed full compliance with the Model Code during the period[50] Corporate Governance The Board is committed to maintaining high standards of corporate governance and has adopted and complied with the Corporate Governance Code in Appendix 14 to the Listing Rules, with a deviation from Code Provision C.2.1 - The Board is committed to maintaining and ensuring high standards of corporate governance[51] - The Company has adopted and consistently complied with the Corporate Governance Code as set out in Appendix 14 to the Listing Rules[51] Code Provision C.2.1 The Company deviates from Code Provision C.2.1 as the roles of Chairman and Chief Executive are not separate, with the Chief Executive position currently vacant and an appointment to be made at an appropriate time - The Company has no Chief Executive Officer, and the roles of Chairman and Chief Executive are not separated, deviating from Code Provision C.2.1[52] - The Company will make an appointment to fill the vacancy at an appropriate time[52] Audit Committee The Audit Committee, comprising three independent non-executive directors, reviewed the unaudited condensed consolidated financial report for H1 2023, relying on the external auditor's review and management's representations - The Audit Committee comprises three independent non-executive directors: Mr. Zhang Pinwen, Professor Song Min, and Dr. Fu Qiushi[53] - The Audit Committee has reviewed the unaudited condensed consolidated financial report for the period and relied on the external auditor's review results[53] Closure of Register of Members The Company's register of members will be closed on September 18 and 19, 2023, to determine eligibility for the interim dividend, requiring shareholders to register transfers by 4:30 p.m. on September 15, 2023 - The register of members will be closed on September 18 and 19, 2023, to determine eligibility for the interim dividend[54] - Shareholders must register transfers by 4:30 p.m. on September 15, 2023[54] Acknowledgement The Board extends its gratitude to shareholders, partners, and all employees for their trust, support, efforts, and contributions during H1 2023 - The Board thanks shareholders, partners, and all employees for their trust, support, and contributions in H1 2023[55]