Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2022
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Annual Report 2022
【Date of Disclosure】28 March 2023
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2022
Part I Important Notes, Table of Contents and DefinitionsThe Board of Directors (or the “Board”), the Supervisory Committee as well as thedirectors, supervisors and senior management of Guangdong Dongfang Precision Science &Technology Co., Ltd. (hereinafter referred to as the “Company”) hereby guarantee that thecontents of this Report are true, accurate and complete and free of any misrepresentations,misleading statements or material omissions, and collectively and individually accept legalresponsibility for such contents.
Tang Zhuolin, the Company’s legal representative, Shao Yongfeng, the Company’s ChiefFinancial Officer, and Yao Bin, the Head of the Company’s Accounting Department(equivalent to Financial Manager) hereby guarantee that the financial statements carried inthis Report are truthful, accurate and complete.All directors of the Company attended in person the board meeting for the approval ofthis Report.The future development strategies, business plans and other forward-looking statementsmentioned in this Report shall be deemed as uncertain plans instead of promises to investors.Therefore, investors are reminded to exercise caution when making investment decisions.For possible risks with respect to the Company, please refer to “(III) Possible Risks andCountermeasures” in “XI Prospects” of “Part III Management Discussion and Analysis”herein. And investors are kindly advised to read through the aforesaid contents.The Company planed not to distribute cash dividends, neither give away bonus shares,nor capitalize from public reserve.
This Report has been prepared in Chinese and translated into English. Should there beany discrepancies or misunderstandings between the two versions, the Chinese version shallprevail.
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2022
Table of Contents
Part I Important Notes, Table of Contents and Definitions ...... 2
Part II Corporate Information and Key Financial Information ...... 8
Part III Management Discussion and Analysis ...... 13
Part IV Corporate Governance ...... 92
Part V Environmental and Social Responsibilities ...... 124
Part VI Significant Events ...... 126
Part VII Share Changes and Shareholder Information ...... 139
Part VIII Preference Shares ...... 149
Part IX Corporate Bonds ...... 150
Part X Corporate Financial Statement ...... 152
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2022
Documents Available for Reference
1. The financial statements signed and sealed by the Company’s legal representative, Chief Financial Officer,and the person-in-charge of the financial organ.
2. The original of the Auditor’s Report sealed by the CPA firm as well as signed and sealed by the certifiedpublic accounts.
3. All the originals of the Company’s announcements and documents that were disclosed to the public duringthe Reporting Period on the media designated by the CSRC for information disclosure.
4. The 2022 Annual Report carrying the signature of the legal representative.
5. The documents above are lodged in the Securities Department of the Company, 18A, China MerchantsPlaza, 1166 Wanghai Road, Shekou, Shuiwan Community, Zhaoshang Street, Nanshan District, Shenzhen City,Guangdong Province, China.
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2022
Definitions
| Term | Definition |
| Dongfang Precision, or the “Company” | Guangdong Dongfang Precision Science & Technology Co., Ltd., and its consolidated subsidiaries, except where the context otherwise requires |
| Dongfang Precision (China) | The corrugated box packaging machinery division of Guangdong Dongfang Precision Science & Technology Co., Ltd. |
| Fosber Italy | Fosber S.p.A. |
| Fosber Asia | Guangdong Fosber Intelligent Equipment Co., Ltd. |
| Fosber America | Fosber America, Inc. |
| Fosber Tianjin | Fosber Machinery (Tianjin) Co., Ltd. |
| Fosber Group | The business group including subsidiaries Fosber Italy, Fosber America, Qcorr, Tiru?a Group, etc. |
| Tiru?a Group | Tiru?a Grupo Industrial S.L. |
| Tiru?a America | Tiru?a America Inc. |
| Tiru?a China | Tiru?a (Guangdong) Intelligent Equipment Manufacturing Co., Ltd. |
| QCorr | QuantumCorrugated S.r.l. |
| Dongfang Precision (Europe)/EDF | EDF Europe S.r.l. |
| Dongfang Precision (Netherland) | Dong Fang Precision (Netherland) Cooperatief U.A. |
| Dongfang Precision (HK) | Dong Fang Precision (HK) Limited |
| Wonder Digital | Shenzhen Wonder Digital Technology Co., Ltd. (formerly known as “Shenzhen Wonder Printing System Co., Ltd.”) |
| Parsun Power | Suzhou Parsun Power Machine Co., Ltd. |
| Suzhou Jinquan | Suzhou High-Tech Zone Jinquan Business Management Partnership (Limited Partnership) |
| Shunyi Investment | Suzhou Shunyi Investment Co., Ltd. |
| Yinglian Digital | Foshan Yinglian Digital Printing Equipment Co., Ltd. |
| Jaten Robot | Guangdong Jaten Robot & Automation Co., Ltd. |
| Yineng Investment | Hainan Yineng Investment Co., Ltd. |
| Yineng International | Dongfang Yineng International Holding Co., Ltd. |
| Dongfang Digicom | Dongfang Digicom Technology Co., Ltd. |
| Dongfang Digicom (Guangdong) | Dongfang Digicom Technology (Guangdong) Co., Ltd. |
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2022
| Corrugated cardboard | Corrugated cardboard is a multi-layer paper-bonding object composed of at least one sandwich layer of wavy medium (commonly known as "corrugated paper", "corrugated medium paper", "corrugated paper medium" and "corrugated base paper") and one layer of cardboard (also known as "liner board"). |
| Corrugated box | Corrugated box is a rigid paper container made of corrugated boards through die cutting, indenting, nailing, or gluing. Corrugated box is one of the most widely used packaging containers in modern business and trade. |
| Corrugated box printing and packaging production line equipment | Corrugated box printing and packaging production line equipment include corrugated box printing and packaging line and stand-alone products that integrates pre-feeding, printing, grooving, die cutting, forming and packaging functions in whole or in part, which is highly functionally integrated, highly automated and highly technical, can save the capital and manpower investment, reduce workers' workload and improve the production efficiency of box manufacturers, and requires equipment manufacturers to be highly competent in design, technological innovation, assembly and finishing of parts. |
| Corrugated cardboard production lines | Corrugated cardboard production lines are assembly lines comprising corrugating, gluing, agglutinating, bundle breaking, dimension board cutting and output processes, which are used to produce and process corrugated boards. A corrugated cardboard production line has two independent process sections as the wet section and the dry section. The wet section, composed of the base paper stand, auto splicer, preheat pre-regulator, single-face corrugator, feeding bridge, glue machine and double facer, is used to make corrugated based paper into three-layer, five-layer, and seven-layer corrugated boards of different corrugated combinations. The dry section, composed of the rotary shear, slitter indenter, cut-off knife and stacker, is used to slit, indent, cut off and stack corrugated boards as ordered. Corrugated cardboard production lines are key production equipment for corrugated board and box manufacturers. |
| Pre-printing and post-printing intelligent automatic packaging machinery | Pre-printing and post-printing intelligent automatic packaging machinery refers to equipment that is compatible with the corrugated box printing line or stand-alone products and can provide functions related to pre-printing and post-printing processes of corrugated box printing and packaging. It includes the pre-feeder, stripper conveyor, intelligent stacker, and folder gluer. |
| Outboard motors | Outboard motors are a kind of detachable power units that are mounted on the stern plate of a boat to drive the boat to sail. |
| General utility small gasoline motors | General utility small gasoline motors are a kind of thermo-dynamic machinery of 20kW power or less with a wide range of applicability. It is characterized by small size, light weight, and easy operation, and is usually used as a power engine for a variety of terminal products. By the structure of engine and principle of work, general utility small gasoline motors can be divided into two-stroke general utility small gasoline motors and four-stroke general utility small gasoline motors. |
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2022
| CSRC | China Securities Regulatory Commission |
| SZSE, or the “Stock Exchange” | Shenzhen Stock Exchange |
| RMB yuan, RMB’0,000 | Expressed in the Chinese currency of Renminbi, expressed in tens of thousands of Renminbi |
| The “Reporting Period” or “Current Period” | The period from 1 January 2022 to 31 December 2022 |
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2022
Part II Corporate Information and Key Financial Information
I Corporate Information
| Stock name | Dongfang Precision | Stock code | 002611 |
| Stock exchange | Shenzhen Stock Exchange | ||
| Company name in Chinese | 广东东方精工科技股份有限公司 | ||
| Abbr. | 东方精工 | ||
| Company name in English (if any) | Guangdong Dongfang Precision Science & Technology Co., Ltd | ||
| Abbr. (if any) | Dongfang Precision | ||
| Legal representative | Tang Zhuolin | ||
| Registered address | (Office Building, Plant A, Plant B) 2 Qiangshi Road, Shishan Town, Nanhai District, Foshan City, Guangdong Province, China | ||
| Previous registered address | N/A | ||
| Zip code | 528225 | ||
| Office address | 18A, China Merchants Plaza, 1166 Wanghai Road, Shekou, Shuiwan Community, Zhaoshang Street, Nanshan District, Shenzhen City, Guangdong Province, China | ||
| Zip code | 518000 | ||
| Company website | http://www.df-global.cn/ | ||
| Email address | ir@vmtdf.com | ||
II Contact Information
| Board Secretary | Securities Representative | |
| Name | Feng Jia | Zhu Hongyu |
| Office address | 18A, China Merchants Plaza, 1166 Wanghai Road, Shekou, Shuiwan Community, Zhaoshang Street, Nanshan District, Shenzhen City, Guangdong Province, China | 18A, China Merchants Plaza, 1166 Wanghai Road, Shekou, Shuiwan Community, Zhaoshang Street, Nanshan District, Shenzhen City, Guangdong Province, China |
| Tel. | 0755-36889712 | 0755-36889712 |
| Fax | 0755-36889822 | 0755-36889822 |
| Email address | ir@vmtdf.com | ir@vmtdf.com |
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2022
III Media for Information Disclosure and Place where this Report Is Lodged
| Newspapers designated by the Company for information disclosure | China Securities Journal, Shanghai Securities News, and Securities Times |
| Website designated by the CSRC for publication of this Report | http://www.cninfo.com.cn |
| Place where this Report is lodged | Securities Department of the Company, 18A, China Merchants Plaza, 1166 Wanghai Road, Shekou, Shuiwan Community, Zhaoshang Street, Nanshan District, Shenzhen City, Guangdong Province, China |
IV Change to Company Registered Information
| Unified social credit code | 914406002318313119 |
| Change to the principal activities of the Company since its listing (if any) | Unchanged |
| Every change of controlling shareholder since incorporation (if any) | Unchanged |
V Other InformationThe independent auditor hired by the Company:
| Name of independent auditor | Ernst & Young Hua Ming LLP |
| Office address | 18/F, Ernst & Young Tower, 13 Pearl River East Road, Tianhe District, Guangzhou City, China (the Headquarters: Rooms 01-12, 17/F, Ernst & Young Tower, Oriental Plaza, 1 East Chang An Avenue, Dongcheng District, Beijing, China) |
| Accountants writing signatures | Feng Xingzhi and Hu Chuan |
The independent sponsor hired by the Company to exercise constant supervision over the Company in the Reporting Period:
□ Applicable √ Not applicable
The independent financial advisor hired by the Company to exercise constant supervision over the Company in the Reporting Period:
□ Applicable √ Not applicable
VI Key Financial InformationIndicate whether there is any retrospectively restated datum in the table below.
□ Yes √ No
| 2022 | 2021 | 2022-over-2021 change (%) | 2020 | |
| Operating revenue (RMB) | 3,892,708,509.64 | 3,524,734,783.94 | 10.44% | 2,916,270,143.13 |
| Net profit attributable to the listed | 447,177,897.38 | 467,333,661.79 | -4.31% | 389,180,624.08 |
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2022
| company’s shareholders (RMB) | ||||
| Net profit attributable to the listed company’s shareholders before exceptional gains and losses (RMB) | 398,376,648.08 | 380,806,233.00 | 4.61% | 263,426,429.87 |
| Net cash generated from/used in operating activities (RMB) | 506,294,460.95 | 306,659,276.02 | 65.10% | 550,996,031.75 |
| Basic earnings per share (RMB/share) | 0.37 | 0.35 | 5.71% | 0.26 |
| Diluted earnings per share (RMB/share) | 0.37 | 0.35 | 5.71% | 0.26 |
| Weighted average return on equity (%) | 11.72% | 11.72% | 0.00% | 6.20% |
| 31 December 2022 | 31 December 2021 | Change of 31 December 2022 over 31 December 2021 (%) | 31 December 2020 | |
| Total assets (RMB) | 6,928,577,115.10 | 6,357,168,835.19 | 8.99% | 6,323,236,687.05 |
| Equity attributable to the listed company’s shareholders (RMB) | 4,063,966,310.23 | 3,681,970,298.39 | 10.37% | 4,158,538,499.75 |
Indicate whether the lower of the net profit attributable to the listed company’s shareholders before and after exceptional gains andlosses was negative for the last three accounting years, and the latest independent auditor’s report indicated that there was uncertaintyabout the Company’s ability to continue as a going concern.
□ Yes √ No
Indicate whether the lower of the net profit attributable to the listed company’s shareholders before and after exceptional gains andlosses was negative.
□ Yes √ No
VII Accounting Data Differences under China’s Accounting Standards for BusinessEnterprises (CAS) and International Financial Reporting Standards (IFRS) and ForeignAccounting Standards
1. Net Profit and Equity under CAS and IFRS
□ Applicable √ Not applicable
No difference for the Reporting Period.
2. Net Profit and Equity under CAS and Foreign Accounting Standards
□ Applicable √ Not applicable
No difference for the Reporting Period.
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2022
VIII Key Financial Information by Quarter
Unit: RMB
| Q1 | Q2 | Q3 | Q4 | |
| Operating revenue | 636,006,580.11 | 899,609,054.15 | 895,261,467.25 | 1,461,831,408.13 |
| Net profit attributable to the listed company’s shareholders | 37,109,411.15 | 111,090,506.68 | 24,117,374.49 | 274,860,605.06 |
| Net profit attributable to the listed company’s shareholders before exceptional gains and losses | 45,662,017.31 | 74,234,007.98 | 51,027,976.21 | 227,452,646.58 |
| Net cash generated from/used in operating activities | 85,523,348.92 | 66,727,357.81 | 16,185,021.02 | 337,858,733.20 |
Indicate whether any of the quarterly financial data in the table above or their summations differs materially from what have beendisclosed in the Company’s quarterly or interim reports.
□ Yes √ No
IX Exceptional Gains and Losses
√ Applicable □ Not applicable
Unit: RMB
| Item | 2022 | 2021 | 2020 | Note |
| Gain or loss on disposal of non-current assets (inclusive of impairment allowance write-offs) | -351,386.78 | -65,995.13 | -52,742.69 | |
| Government grants through profit or loss (exclusive of government grants given in the Company’s ordinary course of business at fixed quotas or amounts as per the government’s uniform standards) | 20,933,377.44 | 14,700,007.84 | 10,749,683.55 | |
| Gain equal to the amount by which investment costs for the Company to acquire subsidiaries, associates and joint ventures are lower than the Company’s enjoyable fair value of identifiable net assets of investees when making investments | 866,489.40 | |||
| Gain or loss on fair-value changes on held-for-trading and derivative financial assets and liabilities & income from disposal of held-for-trading and derivative financial assets and liabilities and other debt investments (exclusive of the effective | 35,196,327.83 | 73,435,063.51 | 96,118,955.74 |
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2022
| portion of hedges that arise in the Company’s ordinary course of business) | ||||
| Non-operating income and expenses other than the above | 1,761,273.49 | 4,779,490.65 | 33,173,454.66 | |
| Other gains and losses that meet the definition of exceptional gain/loss | 1,229,987.66 | |||
| Less: Income tax effects | 7,277,576.78 | 6,017,410.70 | 15,906,631.40 | |
| Non-controlling interests effects (net of tax) | 1,460,765.90 | 303,727.38 | 425,002.71 | |
| Total | 48,801,249.30 | 86,527,428.79 | 125,754,194.21 | -- |
Details of other profit and loss items that meet the definition of non-recurring profit or loss.
□ Applicable √ Not applicable
No such cases in the Reporting Period.Explanation of why the Company reclassifies as recurrent an exceptional gain/loss item defined or listed in the ExplanatoryAnnouncement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Exceptional Gain/LossItems:
□ Applicable √ Not applicable
No such cases in the Reporting Period.
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2022
Part III Management Discussion and AnalysisI Industry Overview for the Reporting Period(I) Industries in which the Company principally operatesThe principal operations of Dongfang Precision include four major business divisions: smart corrugatedpackaging equipment, industrial Internet industry solutions, digital printing solutions, and water powersportsproducts.Among them, the smart corrugated packaging equipment business and the industrial Internet industrysolutions business are positioned as the core business divisions of Dongfang Precision. The digital printingsolutions business is operated by the majority-owned subsidiary Wonder Digital, while the water powersportsproducts business is run by the majority-owned subsidiary Parsun Power.According to the Classification of Strategic Emerging Industries (2018) and the Industrial Classification forNational Economic Activities (GB/T 4754-2017), the industries in which the Company principally operates areshown below:
The Company’s Principal Business Divisions and Their Industries
| Strategic emerging industry | Industry | Principal business division | Primary products and their applications |
| Intelligent manufacturing equipment | Specialised equipment manufacturing | Smart corrugated packaging equipment | 1. Corrugated cardboard production lines: The corrugated cardboard production lines are used for the production of corrugated cardboards of different specifications, are the core machinery for corrugated packaging production, and are widely used by medium and large enterprises (cardboard plants) that produce corrugated cardboards in the corrugated packaging industry. 2. Corrugated box printing and packaging production line equipment: The corrugated box printing and packaging production line equipment is used to produce and process corrugated cardboards into corrugated boxes of different specifications and is the back-end machinery of the corrugated cardboard production lines. Of the machinery, the printing unit is the core machinery, of which the peripheral equipment units includes the paper feeder unit, slotting and die cutter unit, stripper transfer unit, FFG and stitching unit, and the counting and palletizer unit. The corrugated box printing and packaging production line equipment is widely used by various enterprises (box plants) that produce corrugated boxes in the corrugated packaging industry. |
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2022
| Strategic emerging industry | Industry | Principal business division | Primary products and their applications |
| Digital printing solutions | Wonder Digital, one of the subsidiaries controlled by Dongfang Precision, is an industry-leading and professional supplier of digital printing solutions. It is committed to providing digital printing solutions for customers from industries such as corrugated packaging, advertising, and home building materials. | ||
| Industrial Internet and supporting services | Software and information services | Industrial Internet industry solutions | Build the Industrial Internet Platform for industry, provide end-to-end solutions and operational services that range from intelligent machinery, integrated management of production and operations of enterprises, intelligent business decision-making, to agile corporate reforms and innovation for corporate customers from more than the paper packaging industry, and promote the step-by-step digital transformation of the business with a focus on essentials such as “connecting + data processing and modeling + data intelligence applications”. |
| Manufacturing of ship auxiliary equipment | Railway, shipping, aviation and other transport equipment manufacturing industries | Water powersports products | Outboard motors are a kind of detachable power units that are mounted on the stern plate of a boat to drive the boat to sail and can be applied to boats shorter than 24m in inland rivers, lakes, and coastal waters. They are widely used in water recreation, fishing, water traffic, emergency rescue, shore landing and maritime patrol. |
(II) Industry overview
1. Industry of the smart corrugated packaging equipment and digital printing solutions business
(1) Demand side:
The downstream industry of the Company’s core business, “smart corrugated packaging equipment”, is thecorrugated packaging industry, and the main customers include cardboard plants, box plants, and other business-end (B-end) customers. As a machinery supplier, the Company provides various single machine and completeproduction line products for cardboard and box production and manufacturing, which is relevant to the
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2022
development of the downstream paper packaging industry.The corrugated box field is one of the major fields of the paper packaging industry, of which the terminaldemand is relevant to the prosperity of consumption and business activities. Corrugated packaging products areused in a vast number of fields, including food and beverage, household chemicals, e-commerce, and express, andare inelastically demanded by consumers. Concerning the growth rate of demand in these fields for corrugatedpackaging, the express and logistics field has grown rapidly, with its share in the total downstream corrugated boxshare continuously increasing between 2017 and 2021.Between 2017 and 2021, the domestic express business recorded rapid growth, with a compound annualgrowth rate (CAGR) of approximately 28%. Despite a slight drop in growth in 2022, the volume of expressbusiness across China still maintained growth. By estimation, with the recovery of GDP growth in 2023, thegrowth of the volume of express business is expected to get back onto the rapid growth track. This will boost thedevelopment of the corrugated packaging industry.
Movements in the Business Volume of Express Enterprises above the Designated Size in China between 2016 and 2022
According to the monitoring data released by the State Post Bureau of the People’s Republic of China, as at 8March 2023, the volume of Chinese express business has reached 20.09 billion pieces, which is achieved 72 daysearlier than the volume of 20 billion in 2019 and six days earlier than the volume in 2022. This year, it takes 39days to achieve the first 10 billion pieces in the express business volume in China and 28 days to achieve thesecond 10 billion pieces, shortened by 10 days. This has displayed the vitality and momentum of the expressindustry and vividly indicates that China maintains strong resilience and sufficient potential in the consumermarket as well as the long-term upward fundamental of consumption development.The terminal market demand is constantly unleashed, increasing the demand for the expansion of theindustry’s capacity: Over the past few years, the scale of China’s express corrugated packaging market has been
1,083
1,106
1,0001,200
2016201720182019202020212022
2016年-2022年中国快递业务量
(单位：件）
(单位：件）Volume of Chinese Express Business between 2016 and 2022 (Unit: Piece)
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2022
on the rise. According to the data released by the China Paper Association, the express corrugated packagingmarket is continuously scaled up in China. By the forecast of Qianzhan Industry Research Institute, the scale ofChina’s express corrugated packaging market will continue to rise in the upcoming years and is estimated to reachRMB86.4 billion by 2025 (CAGR for 2019 to 2025: Approximately 15%). Terminal markets, including theexpress, electronics, and household chemicals terminal markets, show an increasing demand for corrugated boxand board packaging, which will drive the expansion of the capacity of corrugated packaging enterprises and thusincrease the demand for corrugated packaging machinery, benefiting the machinery manufacturers.Phase and clear out machinery with backward capacity and continue to upgrade machinery: China’spaper packaging industry market shows a low concentration degree. In 2021, the CR5 of paper packagingenterprises above the designated size was only 14%. Additionally, the industry has a number of low-end small andmedium box plants, presenting a highly decentralized competitive landscape. With the brand-based developmentand upgrading of the downstream terminal consumer industry, the requirements of corporate customers forcorrugated boxes gradually increase. Concurrently, the supply-side upgrading of the industry is an inevitable trend,and the industry will boost its concentration through market competition, capacity upgrading, and M&A. Thistrend will boost the upgrading and iteration of technologies and machinery and accelerate industry integration.Additionally, it is estimated that the line machinery that is more intelligent and productive will replace the existingcorrugated cardboard production lines and corrugated box printing and packaging production line equipment inthe upcoming five to ten years. By statistics, there are over 6,000 existing corrugated cardboard production linesin the domestic market, and more corrugated box printing and packaging machinery, which will be replaced bymore intelligent ones with higher production efficiency in the next five to ten years.Digital and intelligent upgrading of the paper packaging and printing industry bring new developmentopportunities: The traditional production mode has caused domestic paper packaging and printing enterprises tobe overly dependent on skilled technicians at critical positions and slow to identify the outdated managementmode. The “strategy of robot assembling line” and “smart factory” are increasingly recognized by the industry.Amid intelligent manufacturing, the paper packaging and printing industry will usher in industrial upgrading andtransformation. Additionally, leading packaging enterprises, including Xiamen Hexing Packaging Printing Co.,Ltd. (HXPP), MYS Group Co. Ltd. (MYS), Shenzhen YUTO Packaging Technology Co., Ltd., and ShenzhenJinjia Group Co., Ltd., have pushed ahead with Internet-based development in recent years by entering intointelligent manufacturing, cloud printing, or other markets, expected to launch a revolution in the Internet-baseddevelopment of the paper packaging and printing industry and injecting new impetus into industry integration.Concurrently, amid intelligent manufacturing and Internet-based packaging, leading enterprises engaged incorrugated packaging machinery are also expected to embrace new development opportunities.By estimate, the scale of the global corrugated packaging machinery market is approximately RMB30 to 40billion.
(2) Supply side:
A. World-leading comprehensive strengthCorrugated cardboard production lines: Major manufacturers of corrugated cardboard production lines
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2022
around the world include Fosber Group, BHS (Germany), Marquip (a wholly-owned subsidiary of the AmericanBarry-Wehmiller), and J.S. Machine. Among them, Fosber Group and its major rival from Germany, BHS, leadthe others and are leaders in the global middle- and high-end corrugated cardboard production line field. FosberGroup holds approximately 30% of the global middle- and high-end corrugated cardboard production line marketand more than 50% of the North American market.Corrugated rollers, key components of corrugated cardboard production lines: The subsidiary Tiru?a Groupis a time-honoured and prestigious corrugated roller supplier, specializing in the production of corrugated rollersand pressure rollers for industrial corrugated cardboards. It leads the global market.Corrugated box printing and packaging production line equipment: Major manufacturers in this field includeDongfang Precision, Bobst (Switzerland), Gopfert (Germany), Ward (a wholly-owned subsidiary of the AmericanBarry-Wehmiller), Ding Long (Shanghai), and Guangzhou Keshenglong. Dongfang Precision is an industry leaderin China and is competitive with the global industry leader, Bobst, from Switzerland. With an advantage in globalresource coordination, leading design concept, excellent overall R&D strength, and a product system featuringcomplete categories and rich specifications, the Company can produce products that meet dozens of specificationsand different market positioning, covering fixed/open-close type, top printing/bottom printing, and completeproduction line (inline) products/single machine, and has the completest product lines and richest product base ofthe corrugated box printing and packaging production line equipment worldwide.
Digital printing: Major manufacturers include Wonder Digital, Hanway (China), Atexco, HP (the US), andEFI (the US). The subsidiary, Wonder Digital, takes the lead among global suppliers of digital printing solutions inapplying high-speed inkjet printing technology to corrugated packaging and is committed to extending digitalprinting technology to such fields as home building materials, label printing, and advertising. Digital printersunder the brand Wonder has been sold at home and abroad since Wonder Digital was established in 2011.Statistically, more than 1,400 pieces of machinery have been sold to over 80 countries around the world.In conclusion, Dongfang Precision leads the world in terms of its comprehensive strength in smart corrugatedpackaging equipment business and can provide downstream customers such as cardboard plants and box plantswith “one-stop” machinery and service support that covers each production process, including corrugatedcardboard production, corrugated box production, and pre-printing and post-printing production processes, anddifferent technology roadmaps, including flexographic printing and digital printing. In terms of the size of revenue,Dongfang Precision’s corrugated packaging machinery business accounts for approximately 10% of theglobal industry market, ranking first among domestic enterprises of the same type and second in the globalmarket.B. The rapid development of digital printing technology brings more development opportunities forthe industry.According to the report The Future of Inkjet Printing to 2023 released by the research institution, SmithersPira, in the global presswork and packaging field, the market scale of inkjet printing technology between 2013 and2018 increased from USD43.4 billion to USD69.6 billion and is expected to reach USD109 billion in 2023, with aCAGR of nearly 10%. The percentage of inkjet printing in the entire printing market is expected to increase to
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2022
13.0% in 2023.
Scale of the Inkjet Printing Market in the Global Presswork and Packaging Field
Other fields where digital printing technology is applied: Home decoration, textile printing, ceramics,electronics, glass, automobiles, biomedicine, and 3D printing. According to the report released by Smithers Pira,the overall scale of markets of other application fields is expected to increase from USD25.691 billion in 2018 toUSD41.076 billion in 2023, with a CAGR of approximately 9.8%.
| 43463469677310905.7%8.1%8.8%9.7%13.0%0%5%10%15%20%02004006008001000120020132017201820192023E | ||||
| The scale of the global inkjet printing market/USD’00 million | Percentage of the inkjet printing market % | |||
| 全球喷墨印刷市场规模/亿美元喷墨印刷市场占比% | ||||
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2022
Market Scales in the Global Digital Inkjet Printing Application Fields
Wonder Digital is committed to dealing with small batches of online shopping and FMCG orders of differentcategories. Specifically, end customers could transmit documents for printing and commands to the digitalmachinery through remote control via computers/mobile phones, enabling PDF patterns to be printed on thepackaging materials. Concurrently, the seamless exchange between orders provides flexible and personalizedpackaging solutions for end brand customers. Concerning the explosive stock keeping unit (SKU) as a result oftraditional e-commerce and live-streaming e-commerce and the drastic order fluctuation faced by end brandcustomers, to remove the pressure and pain points regarding the management of the supply chain of end-brandpackaging supplies, Wonder Digital provides a complete set of solutions to the management of packaging suppliesfeaturing high turnover, zero stock, low cost, and super high flexibility. In the subsequent development, Wonderwill constantly strengthen the driving force of innovation and refine its R&D mechanism to expand digitalprinting technology into more fields.Wonder Digital’s digital printing technology enables the documents on the computer/mobile phone to bedirectly printed on corrugated cardboards, offset cartons, and other packaging materials. The technology allowsone-sheet printing and can present the effects of the finished products without platemaking, imposition, and colourcalibration. Additionally, the technology enables immediate problem remediation, variable printing, and printingon demand. The major advantages of the technology are shown as follows:
(1) Convenient and fast
Digital printing enjoys an absolute advantage in small and medium batches of printing and urgent printingneeds as it saves tedious processes, such as platemaking, imposition, and colour calibration. It enables electronicdocuments generated via typesetting software, design software, and office applications to be directly output todigital printers.
| 20132017201820192023EHome decoration5.3613.6516.4118.4827.46Promotion and otherdecorations13.6620.2022.3824.4731.16Ceramics12.2822.9724.3026.6933.36Miscellaneous (electronics,glass, automobiles, andbiomedicine)6.6845.0752.3359.7982.323D printing (application inother aspects, including inkjet)41.99121.96141.49160.35236.47050100150200250300350400450 | ||
| Unit: USD’00 million | ||
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2022
(2) Cost-saving
Digital printers require no platemaking, so no platemaking fees will be incurred. Additionally, there aremulti-pass and single-pass digital printers, and the volume of waste ink every month is only 1 L to 20 L.
(3) Flexible and efficient
The full digitization of digital printing enables a more flexible printing method that is, modifying whileprinting, and vice versa, enabling zero stock. Such a flexible and quick printing method has strengthened thecompetitiveness of customers in a competitive environment where every minute counts. With regard to patterndesign, platemaking in traditional printing is not required in digital printing, allowing more freedom for designand enabling designers to give full play to their professionalism and tailor products to customers’ needs.
(4) One-sheet printing
Although it does not take long to complete small batches of printing orders, such orders still share the samecomplex and time-consuming printing commissioning process with large batches of printing orders. Therefore,box printing and colour printing usually have standards for the base number of sheets for printing. If the basenumber cannot be met, the printing cost of a single sheet will be increased. Digital printing enables one-sheetprinting and immediate availability. Additionally, it can flexibly perform small and medium batches of production.Moreover, one piece of neutral machinery can be fully operated by one person and covers less production space.
(5) Product quality
Digital printing adopts inkjet printing technology. It can be divided into water-based ink printing and UVprinting in terms of the ink type and printing effects. As digital printing technology constantly improves, WonderDigital’s WD200 series can rival traditional HD water-based ink printing in terms of printing effects, whileWonder Digital’s WDUV series achieves the spot colour effects of traditional offset printing.
(6) Production efficiency
Inkjet printing technology enables immediate availability in just three steps, substantially boostingproduction efficiency.
Wonder Digital has introduced special digital printers in advertising, home decoration, and other fields,including flatbed printing and roll to roll printing technologies. The flatbed models can be used for digital printingon materials such as aluminum panels, glass, ceramic tiles, metal plates, acrylic sheets, and alucobond panels,while the roll-to-roll models are applicable for digital printing on materials such as corrugated cardboard, vehiclepaste paper, lamp box fabric, PVC film, decorated paper, and metal coils.
2. Industry of the industrial Internet industry solutions business
According to the Classification of Strategic Emerging Industries (2018), Dongfang Precision’s “industrialInternet industry solutions” business division falls under the “industrial Internet and supporting services” industry.
Policy side: The Guiding Opinions of the State Council on Deepening the “Internet plus AdvancedManufacturing” and Developing the Industrial Internet released by the State Council in 2017 marked China’sofficial entry into digital development from information-based development in terms of industries. “Accelerate thedevelopment of the industrial Internet” was proposed for the first time in the report on government work in 2018and became a frequent visitor in the reports on government work for the next five years. In 2020, the National
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2022
Development and Reform Commission stated that, as one of the new network infrastructure types, the industrialInternet is a part of the new infrastructure. Under the guidance of a range of policies, the industrial Internet andsmart factory have become the strategic development orientation of the transformation and upgrading of China’smanufacturing.
Checklist of Supportive Policies on the Industrial Internet Introduced by the Government between 2020 and 2022
| Time | Agency | Policy | Description |
| October 2022 | Standardization Administration | Official release of the national standard for Industrial Internet-General Network Architecture | With a focus on the industrial Internet network planning, design, construction, upgrading, and transformation, the Industrial Internet-General Network Architecture national standard standardized the target architecture and function requirements for the internal and external network architecture of plants in the industrial Internet field and put forward the implementation framework and safety requirements for the industrial Internet network. This can facilitate the construction of high-quality industrial Internet network infrastructure and the improvement of the digital, network-based, and intelligent development of all industries and expedite the digital transformation of the industry. |
| August 2022 | Ministry of Industry and Information Technology and Ministry of Finance | Notification on Launching the Pilot Digital Transformation of Small and Medium Enterprises with Financial Support | Financial support will be channelled by the central government in three batches between 2022 and 2025 to support local small and medium enterprises in launching digital transformation, which will improve the capability of digital public service platforms (including digital transformation service platforms and industrial Internet platforms) in serving small and medium enterprises and give rise to a range of small, rapid, light, and precise digital system solutions. |
| June 2022 | Five ministries, including the Ministry of Industry and Information Technology | Guidelines on Advancing High-quality Development of Light Industries | Give full play to the role of the industrial Internet platforms and identity resolution systems to boost the cooperation between upstream and downstream enterprises along the industrial chain. Support leading enterprises in developing intelligent manufacturing platforms and compete for national industrial Internet and integrated information technology and industrialization projects. |
| January 2022 | State Council | Plan for the Development of a Digital Economy during the “14th Five-Year Plan” Period | Develop reliable, flexible, and safe industrial Internet infrastructure and support the wide connection, flexible supply, and efficient configuration of manufacturing resources. Strengthen technological integration and production innovation in diversified application scenarios, improve the competitiveness of critical processes of the industrial chain, and refine the supply chain systems in key industries, such as the industrial Internet. |
| 2022 | State Council | Report on Government Work for 2022 | Accelerate the development of the industrial Internet, develop and expand digital industries such as integrated circuits and artificial intelligence, and improve technological innovation and supply capability in critical software and hardware; refine the governance of the digital economy, cultivate the market for data elements, unleash the potential of data elements, and improve application capabilities, in order to empower economic growth and enrich people’s lives. |
| December 2021 | Eight ministries, including the Ministry of Industry and Information Technology | Plan for the Development of Intelligent Manufacturing during the “14th Five-Year Plan” Period | A two-step plan was proposed. Specifically, by 2025 most manufacturing enterprises above the designated size will achieve digital and network-based development, and critical enterprises in key industries will achieve the preliminary intelligent application. By 2035, digital and network-based development will be fully popularized among manufacturing enterprises above the designated size, and critical enterprises in key industries will basically achieve intelligent development. |
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2022
| Time | Agency | Policy | Description |
| November 2021 | Ministry of Industry and Information Technology | Plan for In-depth and Integrated Development of Information Technology and Industrialization during the “14th Five-Year Plan” Period | By 2025, the application penetration rate of the industrial Internet platforms will reach 45%, and the service capability of system solutions will be obviously strengthened, forming a new development pattern featuring empowerment by platform enterprises and integration of small, medium, and large enterprises. |
| 2021 | State Council | Report on Government Work for 2021 | Strengthen the self-supporting capability and controllability of industrial and supply chains, implement projects for upgrading foundational industrial infrastructure, and give full play to large enterprises’ capacity to provide leadership and support and to the collaborative and supporting role of micro, small, and medium enterprises; develop the industrial Internet, promote the integration of industrial and innovation chains, and build additional platforms for generic technology R&D to enhance the capacity of micro, small, and medium enterprises for making innovations and engaging in specialized production. |
| November 2021 | Ministry of Industry and Information Technology and Standardization Administration | 2020 Work Plan of the Special Industrial Internet Group | The plan proposed constantly refining the industrial Internet standard system until 2023. Specifically, the special industrial Internet group would formulate more than 15 basic and generic standards would be formulated, involving term definition, generic demand, supply chain/industrial chain, and talent, over 40 standards for critical technologies, such as “5G + industrial Internet”, information model, big data on industries, and safe protection, and more than 25 application standards for critical industries and fields, including automobiles, electronic information, and iron and steel. It intended to encourage enterprises to comply with standards in processes such as R&D, production, and management by promoting the application of standards in critical industries and fields. Additionally, the Group planned to formulate more than 100 standards for critical technologies, products, management, and applications regarding the industrial Internet and developed a unified, integrated, and open industrial Internet standard system, thereby forming a sound momentum where standards are widely applied and in alignment with world-leading ones, by 2025. |
| June 2021 | Six ministries, including the Ministry of Industry and Information Technology | Guidelines on Expediting the Cultivation and Development of High-quality Enterprises in the Manufacturing Industry | Launch intelligent manufacturing projects, the campaign of digital transformation of the manufacturing industry, and the campaign of 5G application innovation, organize and implement the plan for the campaign of the digital transformation of state-owned enterprises, develop a range of benchmark enterprises in the manufacturing industry in terms of digital transformation, cultivate a range of highly comprehensive and widely influential demonstrative scenarios, build and promote industrial Internet platforms, initiate the campaign of developing one million industrial apps, carry out classified and hierarchical network safety management, and vigorously develop a new model and business form of service-oriented manufacturing. |
| May 2021 | Ministry of Industry and Information Technology | 2021 Work Plan of the Special Industrial Internet Working Group | The plan proposed cultivating 15 comprehensive industrial Internet platforms that cover different industries and fields, selecting approximately 40 featured industrial Internet platforms oriented toward key industries, such as power devices, energy, food, and textile, and developing three to five demonstrative plant benchmarks with a full 5G connection in 2021, thereby boosting the development of the industrial Internet. Everything in a digital era is interconnected. Applying information technology in the industrial field not only can improve production and management efficiency but also can create a new mode and unleash new impetus. |
| April 2021 | Ministry of Industry and Information Technology | Plan for the Development of Intelligent Manufacturing during the “14th Five-Year Plan” Period (Exposure Draft) | Build a number of international-level industrial Internet platforms and digital transformation promotion centres in key industries and regions, deepen the digitalized application of R&D and design, manufacturing, operations management, market services, and other processes, cultivate and develop new models such as personalized customization and flexible manufacturing, and accelerate the digital transformation of industrial parks. |
| March 2021 | State Council | “14th Five-Year” Plan | Implement “Migrating to the Cloud, Using Digital Tools, and Enabling Intelligence” actions and promote data-enabled coordinated transformations of entire production chains; build a number of international-level industrial Internet platforms and digital transformation |
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2022
| Time | Agency | Policy | Description |
| promotion centres in key industries and regions, deepen the digitalized application of R&D and design, manufacturing, operations management, market services, and other processes, cultivate and develop new models such as personalized customization and flexible manufacturing, and accelerate the digital transformation of industrial parks. | |||
| 2020 | State Council | Report on Government Work for 2020 | Develop the industrial Internet, advance intelligent manufacturing, and cultivate clusters of emerging industries. |
| December 2020 | Ministry of Industry and Information Technology | Action Plan for the Innovative Development of the Industrial Internet (2021-2023) | The plan proposed continuing to refine and cover the industrial Internet infrastructure in each region and industry and developing 30 plants with a full 5G connection in ten key industries. It also put forward the basic completion of the national big data centre system on industrial Internet and the development of 20 regional sub-centres and ten industrial sub-centres. |
| October 2020 | Ministry of Industry and Information Technology | Action Plan for “Industrial Internet + Safe Production” (2021-2023) | The plan proposed basically forming a pattern of coordinated promotion and development of the industrial Internet and safe production and substantially boosting the intrinsic safety level of industrial enterprises by the end of 2023, in order to raise awareness of safe industrial production and thoroughly implement the innovative development strategy for the industrial Internet. |
| June 2020 | Ministry of Industry and Information Technology | 2020 Work Plan of the Special Industrial Internet Working Group | The key tasks for 2020 include supporting industrial enterprises in developing and transforming their industrial intranets, encouraging industrial enterprises to upgrade and transform industrial intranets, and transforming industrial intranets using 5G in cooperation with basic-telecom enterprises. |
| April 2020 | Ministry of Industry and Information Technology | Guidelines of the Ministry of Industry and Information Technology on the Development of Industrial Data | The guidelines proposed following the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era and implementing the guiding principles of the 19th National Congress of the Communist Party of China and the second, third, and fourth plenary sessions of the 19th CPC Central Committee. Additionally, according to the guidelines, the new development concept and the high-quality development requirement must be upheld in order to promote the gathering and sharing of industrial data, deepen data integration and innovation, improve data governance capabilities, and strengthen data security management, thereby by gathering momentum to build an industrial data ecosystem featuring abundant and centralized resources, booming application, progressive industries, and orderly governance. |
| March 2020 | Ministry of Industry and Information Technology | Notification on Accelerating the Development of the Industrial Internet | The notification proposed 20 initiatives in six aspects, including accelerating the construction of new infrastructure, the expansion of integrated and innovative applications, the refinement of safety and security systems, the increase of impetus of innovative development, improvement of the ecological layout of industries, and the increase of policy support. |
Market side: China is the only country in the world whose industries cover all industrial categories in theUnited Nations’ industrial classification. Concurrently, it is expected to grow into the world’s largest industrialdigitalization market. For the current manufacturing industry of China, digital transformation is no longer an“option” but a “compulsory course” that is critical to its survival and long-term development.As the manufacturing industry enters the “Industry 4.0” era, an increasing number of manufacturingenterprises have realized that buying production equipment, enterprise resource planning (ERP) systems, ormanufacturing executive systems (MES) cannot meet the systematic requirements of intelligent manufacturing.By contrast, industrial Internet platforms can systematically resolve all critical issues that cannot be handledthrough traditional means. According to the Bluebook on the Digital Transformation of Enterprises--Empoweringthe Low-carbon and Green Transformation of the Real Economy with New IT released by the China Academy ofInformation and Communications Technology, after relevant manufacturing enterprises complete digitaltransformation, on average, their production efficiency will be boosted by 37.6%, their operating expenses will belowered by 21.2%, and their energy utilisation rate will be improved by 16.1%. Concurrently, with the rapid
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2022
development and continuous iteration of the new-generation information technology, the cost of digitaltransformation of enterprises is gradually decreasing, and more and more industrial enterprises will implementindustrial Internet-based digital transformation.
According to the data released by Frost & Sullivan, the scale of the market of industrial Internet platformsand relevant solutions in China by 2025 is estimated to reach RMB193.12 billion. Between 2021 and 2025, theCAGR of the market of industrial Internet platforms and relevant solutions in China is approximately 45.3%.
The Scale of the Market of Industrial Internet Platforms and Relevant Solutions and Forecast between 2020 and 2025
Supply side: According to the White Paper on the Economic Development of the Industrial Internet Industryin China (2022), participants in the construction of industrial Internet platforms in China are diversified. Leadingmanufacturing enterprises, information and communications enterprises, and Internet-based enterprises buildindustrial Internet platforms in different dimensions and from different perspectives based on their owncomparative advantages, enabling China’s industrial Internet industry to enjoy industrial enterprises, ICTenterprises, and Internet enterprises at the same time.
The key technologies and industries that the industrial Internet involves are extensive and complex and canhardly be fully covered by enterprises. Thus, developing the industrial Internet by relying on industrialmanufacturing enterprises becomes a typical development path of industrial Internet enterprises, such as RootCloud, Midea Cloud, and Baosight. In the packaging field, major manufacturers that provide industrial Internet-related products and solutions services include Yunyin, Dongfang Digicom, and wantit.
The subsidiary Dongfang Digicom, carrying Dongfang Precision’s missions of expanding into the industrialInternet industry and implementing “digital and intelligent transformation strategies”, was established in 2020.With the vision “to become a world-leading provider of industrial Internet industry solutions”, Dongfang Digicom
| RMB'00 million |
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2022
is engaged in building industrial Internet platforms for industries using new-generation information technologies,such as the IoT, cloud computing, big data, and artificial intelligence and becoming a leader in the domesticmanufacturing industry in digital and intelligent upgrading.
3. Industry of the water powersports products business
According to the Classification of Strategic Emerging Industries (2018), the water powersports products ofthe subsidiary, Parsun Power, fall under the “manufacturing of marine equipment” industry. The outboard motorsare Parsun Power’s main water powersports products. Outboard motors are the key auxiliary equipment for small-and medium-sized ships and are characterized by their compact structures, light weights, convenient installationand maintenance, easy operations, and low noise. They are widely used in water recreation and sports, fishing,water traffic, emergency rescue, shore landing, and maritime patrol.
Applications of Parsun Power’s Outboard Motors
| Field | Scenario | Example |
| Recreational | Recreational fishing, sailing and water sports | |
| Commercial | Fishing, water traffic and waterway maintenance |
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2022
| Official and military | Emergency rescue and maritime patrol Beach landing and water reconnaissance |
With global economic growth, personal income increase, and the change in personal consumption habits, theglobal outboard motor market trends toward stable growth. Considering the development of China’s water tourismand recreational industry and the emphasis of the government on maritime rights, the Chinese governmentagencies at all levels have granted vigorous policy support to ship-related industries. For example, the NationalDevelopment and Reform Commission has included high-performance ships, such as superyachts, luxury cruiseships, marine surveillance vessels, and small-waterplane-area twin hulls, among items for encouragement. TheMinistry of Industry and Information Technology has proposed developing brand products, such as luxurysuperyachts, sightseeing boats, and official boats. The State Council has also proposed vigorously developingmarine tourism, manufacturing localised tourism equipment such as cruises and cruise yachts, and vigorouslydeveloping cruise yacht tourism. Under the guidance of policies, China’s yacht industry will usher in rapiddevelopment.According to the report released by Global Market Insights Research Private Limited, an international marketresearch institution, in terms of sale volume, the sale volume of the global outboard motors in 2022 reached888,600 and is expected to reach 1.171 million by 2030, with a CAGR of 3.50% from 2022 to 2030. In terms ofrevenue, the size of the global outboard motor market in 2022 was USD10.572 billion and is expected to reachUSD15.975 billion by 2030, with a CAGR of 5.30% from 2022 to 2030. With global economic growth, personalincome increase, and the change in personal consumption habits, the global outboard motor market trends towardstable growth.
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2022
Global Sales and Market Size of Outboard Motors between 2022 and 2030 (Units: ’0,000 Pieces; USD’00 Million)
According to the GMI report, the sizes of the global low-horsepower and medium- and high-horsepoweroutboard motor markets in 2022 were USD2.145 billion and USD8.426 billion, representing 20.29% and 79.71%of the total, respectively. Among the two types of markets, the medium- and high-horsepower outboard motormarket had a larger size. Between 2022 and 2030, the CAGRs of the global low-horsepower and medium- andhigh-horsepower outboard motor markets are 5.40% and 5.27%, respectively, indicating that the global outboardmotor market is driving the development recreational and luxury yachts and obviously trending toward high-horsepower outboard motors.
The Sizes of Markets of Outboard Motors with Different Horsepowers between 2022 and 2030 and Estimations
(USD’00 Million)
In terms of Chinese market, by the GMI report, the sale volume of outboard motors in the Chinese market in2022 reached 43,000 and is expected to reach 75,800 by 2030, with a CAGR of 7.34% from 2022 to 2030,
| 020406080100120140160180020406080100120202220232024202520262027202820292030数量金额（右轴） | |||
| Amount (right axis) | |||
202220232024202520262027202820292030
小马力中大马力
| 020406080100120140202220232024202520262027202820292030小马力中大马力 | ||
| Medium-and high-hp | ||
Guangdong Dongfang Precision Science & Technology Co., Ltd. Annual Report 2022
substantially larger than the 3.50% of the global market. In terms of sales, the size of the Chinese outboard motormarket in 2022 was USD282 million and is expected to reach USD588 million by 2030, with a CAGR of 9.62%from 2022 to 2030, also substantially larger than the 5.30% of the global market.Size of the Chinese Outboard Motor Market and Estimation between 2022 and 2030 (Units: ’0,000 Pieces; USD’00
Million)
Worldwide, the outboard motor industry is dominated by Japanese and American brands, including Yamaha,Japan (an outboard motor brand under Yamaha Motor) and Mercury, USA (an outboard motor brand underBentfield Group). China has become one of the world’s fastest-growing outboard motor markets owing to its rapideconomic growth and changing recreational habits. With the rise of domestic brands represented by Parsun Power,domestic substitution has gradually become one of the mainstream trends in the development of the outboardmotor industry in China, and there is the huge market potential for domestic substitution.II Principal Activities of the Company in the Reporting Period(I) OverviewThe principal operations of Dongfang Precision include four major business divisions: smart corrugatedpackaging equipment, industrial Internet industry solutions, digital printing solutions, and water powersportsproducts.Among them, the smart corrugated packaging equipment business and the industrial Internet industrysolutions business are positioned as the core business divisions of Dongfang Precision. The digital printingsolutions business is operated by the majority-owned subsidiary Wonder Digital, while the water powersportsproducts business is run by the majority-owned subsidiary Parsun Power.(II) The smart corrugated packaging equipment businessDongfang Precision’s smart corrugated packaging equipment business includes corrugated cardboardproduction lines and corrugated box printing and packaging production line equipment.
| NumberAmount (right axis) |
Relationship between Corrugated Packaging Manufacturing Value Chain and the Company's Smart Corrugated Packaging Equipment
Raw paperKraft paper
Kraft paperCorrugated boxes
Corrugated boxesIntelligent high-speed corrugated cardboard production line
Intelligent high-speed corrugated cardboard production lineHigh-precision corrugated cardboard production line
High-precision corrugated cardboard production lineCorrugated box printing and packaging production line (top printing fixed type)
Corrugated box printing and packaging production line (top printing fixed type)Corrugated box printing and packaging production line (bottom printing open-close type)
Corrugated box printing and packaging production line (bottom printing open-close type)Corrugated cardboard
1. Corrugated cardboard production lines
Dongfang Precision’s corrugated cardboard production line business primarily consists of Fosber Group andthe majority-owned subsidiaries Fosber Asia and Tiru?a China. Fosber Group includes Fosber Italy, FosberAmerica, QCorr, Tiru?a Group, etc.
(1) Fosber Italy
Fosber Italy, a subsidiary, specializes in manufacturing mid-to-high-end corrugated cardboard productionlines under the Fosber brand. The product line includes two major series, namely S-Line and C-Line, which caterto widths ranging from 2.5 meters to 2.8 meters and speeds ranging from 250 meters/minute to 470 meters/minute.These corrugated lines are applicable for producing corrugated cardboard with a thickness of 2mm to 13mm,known for their high load-bearing capacity, excellent shock resistance, plasticity, and environmental performance.The resulting corrugated cardboard is extensively used in fields such as logistics and express delivery, furnitureand household appliances, and electronic product packaging, serving as the outer packaging for various types ofcorrugated boxes.
The primary markets for Fosber Italy’s mid-to-high-end corrugated cardboard production line products areEurope, North America, and Latin America. The company’s primary research and production base is situated inLucca, Italy.
(2) Fosber America
Fosber America, a subsidiary, is a top-notch provider of equipment and services for corrugated cardboardproduction lines in the North American market. The company is renowned for its world-class installation, training,service, spare parts, and upgrade support. Fosber America’s production base is located in Green Bay, Wisconsin,and it has a market share of over 50% in the mid-to-high-end corrugated cardboard production line industry in theUnited States, making it the top-ranked company in the market.
(3) Fosber Asia
Fosber Asia, a subsidiary, specializes in producing the Pro-Line series, specifically tailored for the Chineseand Asian markets. These production lines cover widths ranging from 2.2 meters to 2.8 meters and speeds rangingfrom 180 meters/minute to 320 meters/minute, catering to markets in China, Southeast Asia, South Asia, andRussia, among others. Fosber Asia also introduces high-end corrugated lines, such as the S-Line and QuantumLine, to China, customizing them to meet the requirements of Chinese and Asian industry customers, andproducing them in domestic factories to create locally-made high-end corrugated line products.
(4) QCorr
QCorr, a subsidiary, specializes in manufacturing Quantum Line, Wavy Line, and other related products. TheQuantum Line production line is primarily used for creating solid fiberboard below 2mm and micro flutecorrugated board, covering widths ranging from 1.8 meters to 2.5 meters. With innovative designs and newproduction process concepts, the Quantum Line boasts unique technical features and compact dimensions. Solidfiberboard and micro flute corrugated board are known for being lightweight, strong, moisture-resistant, andenvironmentally friendly. As such, they are widely used in offset carton packaging, high-end products, electronicproducts, and cultural and artistic product packaging.
QCorr and Fosber’s corrugated cardboard production lines have excellent complementarity from thestandpoint of the end-use application fields of the manufactured cardboard products. The diverse range ofproducts offered by both brands covers the entire spectrum of end-use application requirements, ensuringcomprehensive coverage.
(5) Tiru?a Group
Tiru?a Group, a subsidiary, is a specialist in the production of corrugated rollers and pressure rollers for thecorrugated cardboard industry. Leveraging years of experience in the field, Tiru?a is well-versed in all types ofcorrugated cardboard production lines and can manufacture a diverse range of corrugated rollers and pressurerollers. Additionally, the company can design and produce customized rollers to meet the specific needs ofcustomers, taking into account their machine types, special coating requirements, and paper characteristics. Tiru?apossesses state-of-the-art coating roll equipment and patented polishing equipment, and is highly specialized in re-cutting, re-casting, and coating techniques.
Dongfang Precision aims to further strengthen synergy across its various business divisions within the Groupand capitalize on China’s competitive advantage in global manufacturing. To better support the domestic high-endcorrugated cardboard production line business, the company plans to introduce Tiru?a’s corrugated roller andpressure roller business to China in 2023. This will involve the establishment of the Tiru?a China team and thecreation of a new subsidiary, Tiru?a China, located in the Nanhai District of Foshan City. This strategic move willenable the localization of corrugated roller and pressure roller business, catering to the needs of DongfangPrecision’s corrugated cardboard production line business. At the same time, it will expand the Tiru?a brand’scorrugated roller and pressure roller into new markets in China and Asia.
Primary Product Portfolio of Dongfang Precision’s Smart Corrugated Packaging Equipment Business - Corrugated Cardboard Production Lines
| Product category | Brand | Product pictures | Key features |
| Corrugated cardboard production lines | Width: 2.5 -2.8 meters Speed：250~ 470 mpm Pro/Care, Pro/Quality, etc. Industry 4.0 Production Information System | ||
| Width: 1.8 -2.5 meters Innovative design Compact body and high flexibility More suitable for producing lightweight corrugated cardboard | |||
| Width: 2.2 - 2.8 meters Speed: 180~ 320 mpm | |||
| A leading global supplier of corrugated rollers and pressure rollers, with industry-leading precision machining and tungsten carbide treatment technology |
2. Corrugated box printing and packaging production line equipment
In this regard, the primary business entities are Dongfang Precision (China) and Dongfang Precision(Europe). Dongfang Precision (China) specializes in offering a diverse range of corrugated box printing andpackaging complete lines, including fixed/open-close type, top printing/bottom printing corrugated convertinglines. The “Dongfang Star” series consists of top printing fixed type and top printing open-close type FFG inlines,while the “Super Star” series comprises bottom printing die cutter stripper vacuum stacker converting lines,bottom printing open-close type FFG inlines, bottom printing open-close type/FFG & stitchers, and other products.Furthermore, Dongfang Precision (China) provides a wide range of market-oriented corrugated box printing andpackaging production line equipment in different specifications to meet customer demands. The products arehighly popular not only in the domestic market but also exported to over 30 countries and regions worldwide,including Europe, America, Asia, Africa, Latin America, and Oceania.Dongfang Precision (Europe), a subsidiary, specializes in high-end corrugated converting line products. Thecompany offers a range of products, including FD series quickset top printing FFG, HGL series quickset bottomprinting FFG, and quickset bottom printing/die cutter stripper vacuum lines. These products are designed withnon-crush feeder design, full servo control, and fully automatic control features, making them suitable for high-definition printing. Dongfang Precision (Europe) also provides various pre-printing and post-printing equipmentcompatible with the complete line products, such as feeder unit, stripper transfer, intelligent palletizer, and foldergluer, to enhance the efficiency and quality of the entire production process. Dongfang Precision (Europe)primarily targets the European and American markets.
Primary Product Portfolio of Dongfang Precision’s Smart Corrugated Packaging Equipment Business - Corrugated Box Printing and Packaging Production Line Equipment
| Product category | Brand | Product pictures | Key features | |||||
| Corrugated converting machine | Top printing fixed type Full servo control Quick set 2 minutes order set up Integrated with energy saving, high efficiency and intelligence | |||||||
| DONGFANG STAR I QUICKSET TOP PRINTING FFG | ||||||||
| Top printing open-close type Servo motor control Labour efficiency by only 2-3 workers | ||||||||
| DONGFANG STAR II TOP PRINTING OPEN-CLOSE TYPE FFG INLINE | ||||||||
| High efficiency and stability Excellent waste cleaning Count accurately Automatic palletizing Suitable for complex irregular boxes, auto-pack boxes, pre-printed boxes, and etc. | ||||||||
| SUPER STAR I BOTTOM PRINTING DIE CUTTER STRIPPER VACUUM STACKER CONVERTING LINE | ||||||||
| Product category | Brand | Product pictures | Key features | |||
| Corrugated converting machine | Solved the headache of the industry by achieving the multi-out die cut cardboard with nips 2-3 operators for the entire line | |||||
| Professional die cutter FFG inline Suitable for RSC or RDC box Servo motor control Labour efficiency by only 2-3 workers | ||||||
| SUPER STAR II BOTTOM PRINTING OPEN-CLOSE TYPE FFG INLINE | ||||||
| Well-established design philosophy for bottom printing machine inline with folder gluer & stitcher Integration control, easy operation Multiple use to satisfy the different order change Shorten the process and reduce the human cost | ||||||
| SUPER STAR III BOTTOM PRINTING OPEN-CLOSED TYPE/FFG & STITCHER | ||||||
| Product category | Brand | Product pictures | Key features | ||
| High-end bottom fixed printing FFG Spindle servo drive Switch orders quickly Complete peripheral equipment unit | |||||
| HGL RDC 1628，HIGH BOARD LINE BOTTOM PRINTING MACHINE | |||||
3. Business model of the Company’s smart corrugated packaging equipment businessR&D model: The Company has industry-leading independent design and R&D capabilities, continuallyestablishing high-level R&D innovation management mechanisms. The R&D team, spearheaded by industryexperts, employs a blend of long and short-term product R&D planning, supported by a market-oriented R&Dmechanism. Additionally, a robust R&D talent incentive mechanism enhances the Company’s overall technicalproficiency, cementing its leadership position in the industry.Procurement and production model: The Company procures raw materials, such as steel plates, metalcomponents, and electrical parts (such as motors and PLCs), from external suppliers, while producing some corecomponents and corrugated rollers in-house.
The majority of the Company’s equipment products adhere to a “made-to-order production” model. Uponreceiving orders and partial deposits from customers, the Company purchases raw materials from suppliers basedon specific customer requirements and inventory levels, and develops production plans and schedules. TheCompany advocates a “lean production” model for production and operational management, ensuring precisecontrol over BOM costs and manufacturing expenses, while continuously enhancing operational efficiency.Typically, the delivery time for corrugated cardboard production line orders ranges between 4 to 6 months, whilethe delivery time for corrugated box printing and packaging production line equipment orders is approximately 2to 3 months.Marketing Model: The Company employs a “direct selling + distribution” marketing model. It utilizes adirect sales approach for the domestic market and a combination of direct sales and agent distribution for overseasmarkets, tailoring the strategy to suit the unique needs of different countries and regions. This approach not onlywidens the scope of sales channels and increases sales volume but also reduces market expansion and sales costs.The Company’s complete production line and single machine products are typically one-time sales, withmore significant transaction amounts. However, accessories, software, and services can be sold multiple timesthroughout the lifecycle of complete production line or single machine products. The growing number of existingequipment sold in the downstream industry market presents a steady stream of sales opportunities for accessories,software, and services. Additionally, providing high-quality technical support and services helps to promote thesales of complete production line products.In terms of the settlement of orders, the Company enjoys a high brand awareness and superior bargain powerin the industry, so it collects down payment in advance and payment by stages for the sales of corrugatedcardboard production lines and corrugated box printing and packaging equipment. Generally, 80% to 90% of thesales payment can be collected upon the delivery of products.(III) The industrial Internet industry solutions businessDongfang Digicom, a subsidiary of Dongfang Precision, serves as the primary business entity for “industrialInternet industry solutions”. The company’s business comprises two main divisions: the “Industrial InternetPlatform for Industry” and the “Factory-wide Intelligent Logistics System”.
1. Industrial Internet Platform for Industry
Leveraging the extensive industry experience of Dongfang Precision spanning over three decades in the field
of corrugated packaging equipment, Dongfang Digicom employs cutting-edge technologies such as the Internet ofThings (IoT), cloud computing, big data, 5G, and artificial intelligence (AI) to develop an advanced industrialInternet platform for the industry. This platform comprises three levels:
(1) Equipment digital acquisition (IoT platform): By leveraging IoT, 5G, and edge computing technologies,the focus is on the core hardware of equipment to establish connections between different equipment and integrateequipment data with enterprise-specific system data. This approach enables the equipment layer to becomedigitized and networked.
(2) Data processing and modeling (middle platform): By utilizing data modeling, data mining, algorithmanalysis, cloud computing, and other cutting-edge technologies, the collected data is integrated and analyzed tobuild an enterprise data hub. Based on this foundation, a business integration hub is created to offer industrialmodels and algorithms, which aid enterprises in transforming their operational experience into data models. Thisapproach assists enterprises in achieving comprehensive business trend analysis and prediction while providingvisual BI tools that present key data and analysis results in an intuitive manner.
(3) Data intelligence application solutions (application platform): The use of big data, artificial intelligence,and other cutting-edge technologies can facilitate the development of intelligent applications. These applications,including equipment maps, fault prediction, remote operation and maintenance, digital twins, and full lifecyclemanagement, can cover all value chain segments from procurement, production operations, sales, and after-salesservices. By adopting these tools, enterprises can achieve data-based management and decision-making,ultimately promoting their digital transformation.
Dongfang Digicom released the Industrial Internet Platform v1.0 in 2022, which features independentintellectual property rights. The product is comprised of three key components: an IoT platform, a middle platform,and an intelligent application platform. It effectively facilitates data collection, processing, and analysis, providingintelligent applications based on data insights. The platform supports integrated applications across multipleterminals and can be deployed in various ways, including public cloud, private cloud, or hybrid cloud.Additionally, customers have the ability to independently develop secondary applications using the platform.
Dongfang Digicom distinguishes itself from other information service providers in the paper packagingindustry by offering an Industrial Internet Platform specifically designed for this sector. As a result, DongfangDigicom is currently the leading provider of Industrial Internet Platform solutions for the paper packagingindustry.
DFDIGICOM Industrial Internet Platform offers end-to-end services, including equipment connectivity fordata collection, data integration and analysis, and intelligent applications. By utilizing these services, customerscan achieve intelligent manufacturing capabilities.
Architecture of DFDIGICOM Industrial Internet Platform
2. Intelligent Logistics
As the manufacturing industry undergoes an intelligent upgrade, the “factory-wide intelligent logisticssystem” has emerged as a crucial area of focus for packaging enterprises seeking to transition towards “intelligentmanufacturing.” This system utilizes digital technology to transform production lines, warehouses, and logisticsdistribution within the factory into digitally intelligent entities. By doing so, it facilitates comprehensiveautomation control and management of production, warehousing, and distribution processes, reducing humanintervention and management costs, improving production efficiency, and enhancing product and logistics servicequality.
The “factory-wide intelligent logistics system” can be integrated with the industrial Internet platform toenable real-time monitoring and control of production and logistics data. Through the analysis and mining oflogistics data, it can provide accurate decision-making support for enterprises, facilitating their digitaltransformation and intelligent upgrading.
To address the challenges faced by domestic corrugated packaging enterprises, such as poor productionresource integration capabilities, labor recruitment/employment difficulties, unreasonable workshop layouts, andlow production efficiency, Dongfang Digicom’s intelligent logistics business team is utilizing DongfangPrecision’s extensive industry experience, advanced international technical concepts, and unique understanding ofthe Chinese paper packaging market. They are customizing factory-wide intelligent logistics systems specificallyfor Chinese paper packaging enterprises.
Application Model of Industrial Internet Platform + Factory-wide Intelligent Logistics System
| Data cleansing | Data processing |
DFDSplatform(dataapplication)
DFDSplatform
(dataapplication)Corrugated packaging enterprises
Corrugated packaging enterprises
APP
| APP | Large screen dashboard | Data report |
Bog dataplatform
Bog dataplatformData storage
| Data storage | Data analysis |
Equipment access
| IOT | Equipment access | Data collection | Data storage | Rules Engine | |||
Border gateway (edge acquisition terminal + intelligent sensing terminal)
| Border gateway (edge acquisition terminal + intelligent sensing terminal) | |||||||||||||||||||
| Internet of Machines | Internet of Things | Internet of Persons | |||||||||||||||||
| Equipment | |||||||||||||||||||
| Printer | Flat-pressing flat die cutter | FFG & stitcher | Corrugator lines | Visual inspection | Smart electric meter | Smart water meter | |||||||||||||
Intelligentsensor forenvironmentalmonitoring
| Intelligent sensor for environmental monitoring | RFID/bar code tag | Field operators | |
Industrial Internet Platform
Industrial Internet PlatformFactory-wide Intelligent Logistics System
Factory-wide Intelligent Logistics SystemFast moving consumer goods
| Fast moving consumer goods | Electronics industry | Appliance industry | Pharmaceuticals industry | Light industry | Other industries |
End-market application
(IV) The digital printing solutions businessThe business is primarily led by the subsidiary Shenzhen Wonder Digital Technology Co., Ltd. WonderDigital provides digital printing solutions for industry customers, including digital printers, ink, accessories, andprofessional services. Wonder Digital has introduced a variety of digital printer products to meet the diverse needsof different market segments and customer levels, including:
● Multi Pass digital printer series applicable for small-batch paper packaging printing
● Single Pass digital printer series applicable for large/medium/small batch paper packaging printing
● Single Pass digital series applicable for pre-printing on raw paper
● Hybrid printer series that combines Multi Pass high-precision printing and Single Pass high speedprinting into one, supporting both scanning mode printing for large size, high precision, and full color orders, andinstantly switching to Single Pass mode for printing large volumes of small size orders, meeting a wider range ofcorrugated digital printing needs.
The Multi Pass series targets small and medium-sized customers and delivers high cost-performance value,significantly reducing overall packaging costs for e-commerce and export OEM models such as “one-piece dropshipping” and “transit warehouse” sales. The Single Pass models retain all the features of the Multi Pass series andare primarily designed for fast printing of medium-sized orders. In contrast, the Single Pass digital series for rawpaper pre-printing primarily caters to large-volume order printing, providing comprehensive costs similar totraditional printing and superior printing effects.
Wonder Digital offers a diverse range of products that cover various types and specifications, from post-printing to pre-printing, from water-based dye/pigment ink to spot color UV ink, from corrugated box to offsetcarton. The products also support a range of application modes and scenarios, from single-sheet printing toexchange orders seamlessly with variable data printing, and from single machine printing to integration with ERPsystems. Wonder Digital’s large format roll to roll high speed digital printer outperforms domestic competitors interms of width and resolution. Additionally, it offers a compact size, low energy consumption, and high cost-performance ratio compared to similar machines from both domestic and foreign competitors.
With a comprehensive digital printer product matrix, Wonder Digital provides corrugated packaging digitalprinter products that meet the diverse needs of industry customers with different market positions and levels.Since its establishment in 2011, Wonder Digital’s digital printer products have been exported to countries andregions such as Europe, America, the Middle East, Latin America, and Southeast Asia, with over 1,400 units ofequipment installed in more than 80 countries worldwide.
Apart from digital printers, Wonder Digital also sells supporting units after printing section including slottingand varnish coating units, as well as special ink products that are compatible with its own-brand equipment. Thesespecial ink products, including water-based dye ink, water-based pigment ink, and UV ink. Wonder Digital’s highcost-performance digital printing solution provides customers with cost-effective configuration plans for digitalinkjet printing equipment and ink formulation plans. The cost-performance ratio of the ink is a crucial factor forcustomers to consider when evaluating the overall solution.
Based on accumulated know-how and experience, Wonder Digital has introduced digital printing solutions
for advertising, home decoration, and other fields, including flatbed printing and roll to roll printing technologies.The flatbed models can be used for digital printing on materials such as aluminum panels, glass, ceramic tiles,metal plates, acrylic sheets, and alucobond panels, while the roll-to-roll models are applicable for digital printingon materials such as corrugated cardboard, vehicle paste paper, lamp box fabric, PVC film, decorated paper, andmetal coils.Wonder Digital aims to offer its customers more than just individual products or services. It strives to provideassistance in producing high-quality printed products that are convenient, efficient, and cost-effective, whileensuring profitability. Achieving this goal requires more than just providing isolated printing equipment, ink, oraccessories; a complete solution is necessary. Different application areas and customer requirements requiretailored solutions. Hence, Wonder Digital equips the most suitable printheads and inks, develops exclusive inkjetcontrol systems, optimizes pre-printing, printing, and post-printing processes, and matches correspondingequipment and consumables to help customers improve production efficiency, reduce inventory, and lower costsbased on their specific needs.
Primary Product Portfolio of Dongfang Precision’s Smart Corrugated Packaging Equipment Business——Digital Printers
| Digital printers | Industrial printing, basic resolution 1200DPI Printing speed 150m/min 8 color printing optional Customizable printing width | ||||||
| WD200++SINGLE-PASS Industrial High Speed Corrugated Board Digital Printer | |||||||
| Roll to roll printing, applicable on paper, vehicle paste paper, Lamp box fabric, PVC film, decorated paper, aluminum sheets, etc 24h continuous operation, centralized printing and scattered folding and gluing, saving costs | |||||||
| Industrial SINGLE PASS Roll to Roll High Speed Digital Printer | |||||||
| Reduce investment on equipment, save room, labor, maintenance and other costs, and significantly improve production efficiency |
(V) The water powersports products businessThe subsidiary, Parsun Power, is the main business entity for the Company’s water powersports products(outboard motors) and is a leading enterprise in the domestic outboard motor industry. It ranked first in theindustry’s market share in China from 2018 to 2020. Parsun Power’s main products are outboard motors ofvarious specifications and different series, with horsepower ranging from 2 to 115. The outboard motor productsare exported to hundreds of countries and regions, including Europe, Africa, Oceania, South America, NorthAmerica, the Middle East, and Southeast Asia.
1. Outboard Motor Products
By the source of power, outboard motor products of Parsun Power are divided into gasoline outboard motors,electric outboard motors, and diesel outboard motors.
Gasoline outboard motors enjoy the most abundant specifications and varieties. Parsun Power hasaccumulated years of industry experience in the field and has had several proprietary technologies and appliedthem to products. It has achieved mass production of the maximum 115hp gasoline outboard motors, and hassuccessfully broken the long-term monopoly by international well-known brands in the 115hp sector. With stableand reliable quality of its 115hp gasoline outboard motors, Parsun Power has won more and more product ordersin Europe and China, contributing to domestic substitution of medium- and high-horsepower outboard motors andthe improvement of the global market share of domestic brands. After successfully conquering the 115hp gasolinemodel, Parsun Power's R&D team marches toward higher-horsepower models and strives the make domestic-brand high-horsepower outboard motors take a place in the global competition of the high-horsepower outboardmotor market.
Electric outboard motors are powered by batteries. They convert electric power into kinetic power throughmotors, and are characterized by zero emissions, low noise, and easy operation, and are mainly used in scenicspots and other sectors requiring stricter environmental protection. Parsun Power's electric outboard motors aredivided into 7hp motors and 9.9hp motors, which are being sold in developed countries such as the United States.
Diesel outboard motors not only retain the characteristics of easy assembly, easy maintenance and easyoperation of gasoline outboard motors but also enjoy the advantages of fuel saving, lower emissions, greatertorque and being safer, more reliable, and easier for maintenance, which are mainly used in commercialtransportation and public law enforcement. Parsun Power now has diesel outboard motors and is selling the high-horsepower outboard motors of 150hp to 300hp of OXE Marine (a Swedish brand) in the domestic market.
Parsun Power has achieved a complete product line layout of “gasoline-diesel-electric” outboard motors, andwill rely on its years of technical expertise and leading market share in the gasoline outboard motor field toexpand into high-horsepower diesel outboard motors and electric outboard motors.
Parsun Power's outboard motor products have stable quality and reliable performance, and some of themenjoy the comprehensive performance comparable to that of internationally well-known brands and emissionsreaching European and American standards. In the future, Parsun Power will focus on medium- and high-horsepower outboard motors, enrich electric outboard motor production lines, continuously optimize the productstructure of outboard motors, and consolidate its leading position among domestic outboard motor manufacturers.
2. Sales Model
Parsun Power follows an industry-standard sales model that primarily relies on distribution, supplemented bydirect selling. The demand for outboard motors, which are the company’s main product, is mainly distributedoverseas, with end customers scattered throughout the world. Adopting a distribution-centric sales model enablesParsun Power to reach end customers to the fullest extent possible.
3. Production Model
Parsun Power produces outboard motor products independently, utilizing sales demand forecasts, customerorders, product inventory status, material delivery progress, and product production cycles to formulateproduction plans. The company then organizes the production of components in accordance with specializedprocesses and procedures.
4. Procurement Model
Following the principle of “sales determine production, production determines procurement,” Parsun Powerdetermines the procurement requirements for its outboard motor business, while also taking into accountreasonable safety stock.
III Core Competitiveness Analysis
The analysis of the Company’s core competitiveness in the Reporting Period is as follows:
(I) Complete layout in the corrugated packaging machinery industry chain and the most complete andrichest product portfolio in the industry
Among enterprises of the same type in the domestic corrugated packaging machinery industry, DongfangPrecision has the most complete and comprehensive industry chain layout, with its business covering almost allkey processes in the corrugated packaging production and processing business chain. Meanwhile, the Companyhas the most complete and richest corrugated packaging production line equipment in the industry, making itcapable of meeting the demands for complete production line and single machine products of different marketpositioning, different customer types and dozens of specifications and models, second to none in China.
Corrugated cardboard production lines: Business entities, such as Fosber Italy, Fosber America, FosberAsia, and QCorr, provide corrugated cardboard production lines of different specifications and types that meetvaried market levels and positioning to multiple countries and regions worldwide. Fosber is one of the twocompanies with the strongest comprehensive technical strength in middle- and high-end corrugated cardboardproduction lines worldwide. The extensive application of software systems based on Industry 4.0 to its corrugatedlines results in industry-leading digitalization. Featuring unique technological characteristics and compact size, thehigh-speed corrugated cardboard production line, Quantum Line, launched by the subsidiary QCorr can producesingle-layer corrugated cardboards in line with any standards and allow the embedding and matching of digitalprinting technology. The corrugated cardboard production lines of Fosber and QCorr are highly complementary,and multiple product series of the two brands fully cover terminal application needs.
Corrugated rollers (key components in a corrugated cardboard production line): Tiru?a Group, asubsidiary, is a time-honored, prestigious, and world-leading corrugated roller supplier in Europe, specializing in
the production of corrugated rollers and pressure rollers for corrugated cardboards.Corrugated box printing and packaging production lines: Business units, such as Dongfang Precision(China) and Dongfang Precision (Europe), serve domestic and overseas markets by supplying high-qualitycorrugated converting line and single machine products covering multiple specifications. They can produceproducts that meet dozens of specifications and different market positioning, covering fixed type/open-close type,top printing/bottom printing, and converting line (inline)/single machine products, and has the most completeproduct lines and riches product portfolio of the corrugated box printing and packaging production line equipmentworldwide.Digital printers: In terms of digital printing, Wonder Digital is one of the earliest enterprises worldwide thathave taken the lead in applying the high-speed inkjet printing technology to corrugated packaging and homebuilding materials, and service provider that can provide customers with a full set of digital printing solutions.Industrial Internet industry solutions: Dongfang Digicom, a subsidiary, is the only industrial Internetplatform enterprise in the paper packaging industry. Based on its “Industrial Internet Platform for Industry” and“Factory-wide Intelligent Logistics System” with independent property rights, it is committed to becoming aservice provider and ecosystem operator that provides customers with one-stop overall solutions for intelligentplants.
Business Divisions and Entities of Dongfang Precision
(II) Industry-leading technology level and strong capabilities of R&D and innovationThe Company’s overall R&D strength and technology level are at the forefront among domestic enterprisesof the same type. As of the end of 2022, the Company had 327 R&D and technical employees, and held 371patents at home and abroad and 33 software copyrights.
● The smart corrugated packaging equipment business:
The middle- and high-end corrugated cardboard production lines under the Fosber brand are industry-leadingin speed, width, precision, stability, reliability, failure rate, and intelligence, characterized by high efficiency,energy saving, stability, reliability, intelligent control, and easy operation and maintenance. The corrugatedcardboard production lines under the Fosber brand boast machinery with high technology, quality, and reliability,advanced intelligent software systems, and technical support services and have won the praise of customersworldwide.Fosber Asia has launched the “Instant Set” unit and applied it to corrugated cardboard production lines. Eachcutting blade and indentor are independently controlled by the servo motor, thus significantly improving the speedof the order change of the dry section of corrugated lines and shortening the average time of order change from 8-15 seconds to around 3 seconds. Moreover, it can better support the quick order switch of downstream customersand meet the characteristics of multiple types and small batches of paper packaging orders in China.Fosber Group has developed special software systems based on Industry 4.0 for its middle- and high-endcorrugated cardboard production lines, including Syncro4, PCS, Pro/Care, and Pro/Quality, to achieve highly
digital and intelligent management and control of the machine status, production process, routine maintenance,technical support, and quality inspection of corrugated cardboard production lines. Advanced technologies, suchas sensors, Advanced Reality (AR), algorithm analysis, big data, and cloud computing, are adopted to realize thefull automation and intelligence of the whole process of production and processing of corrugated cardboards,monitor the temperature, humidity, heat, folds, and other data of corrugated cardboard production lines in realtime, and monitor the dashboard dynamically in the production process. Through data-based productionperformance analysis and cost analysis, it helps customers improve production efficiency. Through the “self-diagnosis system”, it identifies abnormal operations and sends alerts, and identifies solutions in an intelligentmanner. Through the “big data analysis system” module, it collects real-time data in the corrugator productionprocess through sensors, outputs recommended configuration parameters and improvements through algorithmanalysis, and helps customers improve the effectiveness of production process control.With respect to technical support and service, Fosber Group offers technical services, such as Pro/Visionairand Remote Control. Through online remote diagnosis, it allows customers to achieve real-time synchronizationwith its technicians so as to complete technical diagnosis or machine maintenance and remove the barriers causedby geographical distance and language differences. Meanwhile, the time for technical support, machinemaintenance, and customer training is greatly shortened to help customers cut costs and raise efficiency.
How Fosber Group’s PRO Series Intelligent Production Management Information Technology System Works
● The industrial Internet industry solutions business:
The “DFDIGICOM Industrial Internet Platform”, independently developed by Dongfang Digicom, asubsidiary, enables digital, visual, and transparent equipment connection, and facilitates intelligent plants tobecome self-adaptive, systematic, and end-to-end. Big data, algorithm analysis, and artificial intelligence (AI) areemployed to achieve low coupling, high availability, high performance, independence, safety, and controllability.
Moreover, the platform can be used at multiple terminals, deployed on public, private, and hybrid cloud, andindependently and secondarily developed by customers.
The architecture of the industrial Internet platform products independently developed by Dongfang Digicomconsists of an Internet of Things (IoT) platform, a middle platform, and an intelligent application platform,covering multiple functional modules, such as EMS, MES, QMS, WMS, and PMS. The basic architecture of thisindustrial Internet platform includes the sensing layer (the IoT platform), the network layer (the IoT platform/themiddle platform), the platform layer (middle platform), and the application layer (the intelligent applicationplatform).
Dongfang Digicom is currently the only enterprise in the paper packaging industry that can provide all-roundindustrial Internet platform products and overall solutions. It can provide the industry with end-to-end solutionsand operating services, such as intelligent equipment, integrated management of production and operations ofenterprises, intelligent business decision-making, agile corporate reforms and innovation. Most core members ofthe Dongfang Digicom team come from famous manufacturers in the Internet, industrial Internet, and ERPindustries at home and abroad. Of IT manufacturers in the paper packaging industry, Dongfang Digicom boastshigh professionalism and strong R&D strength. Dongfang Digicom, in the past two years since its establishment,has cumulatively submitted 37 software copyright applications and 49 patent applications. As of March 2023, ithas been cumulatively granted 37 software copyrights and 21 patents, including 12 invention patents.
● The outboard power products business:
The subsidiary Parsun Power is committed to independent R&D and innovation of China-made outboardmotors, and is a state-level "Little Giant" enterprise with specialties, refined management, unique technologiesand innovation, a national high-tech enterprise, the Provincial Outboard Motor Engineering and TechnologyResearch Institute of Jiangsu, a technology center recognized by Jiangsu Province, a leading enterprise in China'sinternal combustion engine industry and a council member of the Small Gasoline Motor Branch of China InternalCombustion Engine Industry Association. Its outboard motor products have won the Certificate forIndustrialization Demonstration Program under the National Torch Plan and honors including Innovative Productsin Chinese Machinery Industry, Products of Well-known Brands in Jiangsu, and Products of Well-known Brandsin Suzhou.
Parsun Power has been developing in the outboard motor industry for over ten years and has had severalChina-leading core technologies and accumulated rich scientifically innovative achievements after long-termR&D input and technical accumulation. As at the end of the Reporting Period, it has been cumulatively granted 57patents (inclusive of 11 invention patents) and won two second prizes of the China Machinery Industry Scienceand Technology Award and is one of the main drafters of two industry standards including Outboard GasolineEngines- General Requirements (JB/T 11875-2014) and General Technical Specification of Outboard Engine(CB/T 4505-2020). In 2021, Parsun Power successfully realized the mass production of 115hp outboard motors,breaking the long-standing monopoly of internationally well-known brands in the 115hp sector.
(III) Profound Know-How experience and experienced team in the industry
Dongfang Precision has an experienced team with profound Know-How experience in the industry, whichhas 20 years of experience in both global and domestic industry markets and has an in-depth understanding of the
Company's industrial layout, development planning, R&D approach, production operation, marketing, and teammanagement. The core management team has a broad vision, can promptly keep up with the general developmenttrend of the smart corrugated packaging equipment manufacturing industry, and can enable the Company toachieve steady and sustainable development through forward-looking strategic planning and layout.As an enterprise that practices the management model of professional manager team and attaches greatimportance to authorization management, Dongfang Precision takes "a wealth of talent" and "cultural guidance"as the basis of its corporate strategy and corporate culture, and develops its organizational capacity, improves theGroup's control over all business units and subsidiaries and integration of resources and assistance and aid,improves the Group's overall operational efficiency and reduces the Group's operation cost and promotes theCompany's healthy and sustainable development by optimizing the organizational structure design, standardizingthe authorization and control system, implementing medium- and long-term incentives and further developing thecorporate culture.(IV) High brand popularity and customer recognition worldwideDongfang Precision-branded corrugated box printing and packaging production line equipment, Fosber-branded corrugated cardboard production lines, Wonder Digital-branded digital printers, Quantum-brandedcorrugated cardboard production lines, Tiru?a-branded corrugated rollers and Parsun-branded outboard motors ofthe Company are enjoying considerable brand recognition and industry influence at home and abroad.
The Company has become an influential enterprise in the industry, as evidenced by its honors like the "Top500 Private Manufacturers of China", the "Champion in Single Aspect", and the "Leader in Industry Segment".In the business division of "corrugated packaging equipment", the Company has established goodpartnerships with domestically leading enterprises in the corrugated packaging industry including Nine DragonsPaper, Shanying Intl, Yuen Foong Yu, HXPP, MYS, XTL, Great Shengda, Forest Packing Co., Ltd., UCPS andZhengye International, and large international groups in the corrugated packaging industry including InternationalPaper, Smurfit Kappa, DS Smith, APP Sinar Mas and Mpact.
With the constant growth in concentration and the continuous upgrading of capacity in the downstreamindustry, large- and medium-sized packaging enterprises will need more middle- and high-end production lineequipment, digital printing solutions, and industrial Internet industry solutions. The Company has seizedopportunities and formed a better competitive edge by virtue of its stable business partnership during the industrychanges.
(V) Global layout of business assets
The Company mainly serves customers in the corrugated packaging industry worldwide, and has realized theglobal layout of its business assets:
In Asia, the Company has three domestic R&D and production bases in Foshan, Suzhou, and Shenzhen, inEurope, it has R&D and production bases in Lucca, Bologna and Milan, Italy, and Pamplona, Spain, and in NorthAmerica, it has a production base in Green Bay, Wisconsin, USA. With such a layout in the three continents, theCompany has formed a global marketing and service network.
An internationalized marketing and service network enables the Company to seize all opportunities in the
global industry market and to provide product machinery and technical services for customers in the industry inover 100 countries and regions worldwide.
An internationalized product R&D, production and supply chain layout enables the Company to makeprompt responses worldwide and meet customer demands and is conducive to the Company's integration of globalresources, improvement of resource allocation efficiency, complement of advantages, reduction of the total costand improvement of the allocation efficiency, so that the Company can be increasingly competitive in the worldwhen it is operated as a group.
Global Layout of the Company’s Business Assets and Marketing Network
(VI) Strong capabilities of strategic control and integration
Since listing, the Company has kept expanding its presence in the upstream and downstream of the industrychain of its core business. After years of practice, the Company has developed strong strategic control and deepintegration of its business divisions and accumulated rich experience and practice, through the deep perception ofthe industry, forecast of industry trends, and a clear understanding of its own strategic development objectives.
Strategic control is the core capability that the Company relies on to manage its various business entities. Inpractice, the Company adjusted the strategic development plans, business models, product portfolios, marketstrategies, and core management teams of the companies acquired with its in-depth understanding of the industry,forward-looking foresight to the development trend of the industry, clear awareness of its strategic developmentobjectives, and well-established understanding of the capabilities and resources of all its business entities, so thatthese companies can be energized for new growth and step on a new development stage.
In terms of post-investment integration, the Company has formulated a set of effective controls for post-investment integration, including the corporate governance standardization policy, the “Board of Directors-Supervisory Committee-General Meeting” operation mechanism, the strategic and financial control system,decentralized authorization management, complete audits, and management incentives, forming a set of measuresfor effective controls for post-investment integration with the Company’s own characteristics to secure theeffective implementation of the strategic plan.
● Corrugated cardboard production lines: Fosber Group recorded a compound annual growth rate (CAGR)of net profit of 25%After acquiring the controlling stake of Fosber Italy in 2014, the Company and its management took severaleffective measures for integration, helped Fosber Group adjust its strategic planning and business strategies andstandardize the authorization management system, implemented the performance incentive policy for the coremanagement, and strengthened financial control. Such measures have successfully stimulated Fosber Group’sbusiness vitality. From 2015 to 2022, the CAGR of the operating revenue of Fosber Group was approximately16%, and that of its net profit was 25%.
● Water powersports products: Parsun Power’s CAGRs of operating revenue and net profit exceeded 20%
After acquiring the controlling stake of Parsun Power in 2015, the Company helped Parsun Power streamlineand adjust its strategies, develop the new development roadmap, increase inputs in technology, products, andR&D, strengthen the marketing force, and improve the efficiency of the supply chain and production. It alsosupported Parsun Power to introduce excellent talent for a more powerful core team. These measures enabledParsun Power to realize continuous and stable growth. From 2017 to 2022, both CAGRs of the operating revenueand net profit of Parsun Power surpassed 20%.
● Tiru?a Group and, the manufacturing pioneer, Agnati, were expanded to effectively stimulate newmomentum of established enterprises
In 2019 and 2020, the Company acquired the relevant business assets of Tiru?a Group, a nearly century-oldcorrugated roller manufacturer, and merged Agnati, an Italian corrugated cardboard production line manufacturerenjoying a high reputation for more than eight decades, into QCorr, a subsidiary of Dongfang Precision. TheCompany and its management fully streamlined and standardized the development strategies, R&D planning,product positioning, marketing, team building, and authorization management of these two established enterprises,based on which optimization and adjustment were performed. These measures effectively stimulated the vitalityof the two old European companies and the enthusiasm of their manager teams. In 2022, the operating revenues ofTiru?a Group and QCorr exceeded 10%. Particularly, Tiru?a Group’s orders of corrugated rollers hit a record high.
Relying on its strong strategic control and integration of business divisions, based on “mutual respect andmutual trust” and with an open mind seeking common grounds while putting aside differences, the Companyeffectively integrated all its business entities continuously released the synergy with the industry chain. Moreover,it conducted active practice and accumulated precious experience in helping domestic private enterprises goglobal and perform overseas industrial M&As and overseas companies carry out post-investment integration andmanagement optimization. Concurrently, such practice and experience facilitated the Company to lay a solidfoundation and provided strong support for the Company to promote the implementation of the five-year strategicplanning and realize long-term, sustainable, and steady development.
IV Analysis of Principal Operations(I) Overview
In 2022, the Company faced a rapidly changing and complex external environment both at home and abroad.
Under the strong leadership of the Board of Directors and the management team, everyone in the Companydevoted themselves to hard work. As a result, the Company achieved impressive growth in the core businessagainst headwinds, representing solid growth in the principal business for 12 consecutive years since its listing.In the Reporting Period, the Company recorded operating revenue of approximately RMB3,893 million,+10.44% YoY; a net profit attributable to its shareholders of approximately RMB447 million, -4.31% YoY; a netprofit attributable to its shareholders before exceptional gains and losses of approximately RMB398 million,+4.61% YoY; and net cash generated from operating activities of approximately RMB506 million, +65.10% YoY.In 2022, the Company’s domestic and international business entities received orders amounting toapproximately RMB5,404 million, an increase of 31% YoY, which is the largest amount of orders received by theCompany in many years. 2023 is expected to see the alleviation of unfavourable factors in 2022 such as overseasinflation, rising energy prices and significant fluctuations in the euro exchange rate, and the Company’s strongorder book has laid a solid foundation for growth in the year.
(II) Business division operations during the Reporting Period
1. The smart corrugated packaging equipment business
(1) The corrugated cardboard production line business
Fosber Group, which caters mainly to the European and American markets, has achieved rapid growth,benefiting from the rapid growth of the e-commerce market in the US and Europe since 2020, increased capitalexpenditure by medium and large manufacturers in the paper packaging industry, and a combination of factorssuch as sustainability and the green economy. 2022 saw Fosber Group’s main business units, Fosber Italy andFosber America, achieving record sales orders and revenue, with orders for 2023 already fully booked and someorders already scheduled for 2024; Fosber Asia’s sales orders increased by about 41% YoY, and the sales area inoverseas markets was further expanded; the total sales orders of Tiru?a Group’s corrugated rollers increased by 27%YoY, and the orders also hit a record high.
Fosber Italy and Fosber America have established stable partnerships with major manufacturers in thecorrugated packaging industry in Europe and the US, such as Smurfit Kappa, International Paper, DS Smith,SAICA and others, and have continued to consolidate their leading positions in the market. The business, assetsand staff of the two subsidiaries are located in Europe and North America. They and their subsidiaries adopt alocal management and operation model, with product design, development and manufacturing in Europe and theUS. The end use of their products is to produce and process various types of corrugated packaging products whichare rigid consumer products in European and American countries. According to Statista data, the US e-commercemarket is expected to grow at a compound annual growth rate of 12.7% from 2017 to 2027. The trend of“sustainability” is gaining ground in Europe and the US, which continues to drive the trend of "replacing plasticswith paper" in the packaging industry. Demand for corrugated packaging products in the end-consumer marketcontinues to grow, helping to drive demand for corrugated packaging production line equipment.
A. Fosber Italy
In 2022, Fosber Italy achieved an order intake of approximately EUR278 million, an increase of 53% YoYand a compound annual growth rate of approximately 15% from 2018 to 2022, and sales revenue ofapproximately EUR201 million, an increase of 10% YoY and a compound annual growth rate of approximately 8%
from 2018 to 2022.
B. Fosber AmericaThe main business unit, Fosber America, achieved an order intake of approximately USD212 million, anincrease of 52% YoY and a compound annual growth rate of approximately 17% from 2018 to 2022, and salesrevenue of approximately USD158 million, an increase of 40% YoY and a compound annual growth rate ofapproximately 14% from 2018 to 2022. Fosber Group outperformed its key competitors in terms of sales volumeand value in North America in 2022, leveraging the competitive advantage of the Fosber brand of corrugatedcardboard production lines in the North American market. With the support of Fosber America, QCorrsuccessfully sold its first 2.5m wide Quantum Line in the US, achieving a sales breakthrough in the NorthAmerican market.C. Fosber AsiaFosber Asia, a subsidiary, focuses on the Chinese and Southeast Asian markets. The Pro-Line seriescorrugated cardboard production lines are tailor-made for corrugated packaging customers in the Chinese market,with a component localisation rate of around 90%, and fully relies on the advantages of China’s supply chain,which has the most complete range of industrial categories and the most complete support in the world, andcompletes the design and manufacturing in China to provide industry customers with high-quality high-enddomestic corrugated cardboard production lines.
Fosber Asia achieved an order intake of approximately RMB320 million in 2022, an increase ofapproximately 41% YoY. It entered the Russian market for the first time, filling the gap of overseas markets.Fosber Asia’s internationally leading high-end corrugated cardboard production line localisation project andQuantum Line localisation project are both progressing steadily.In early 2023, a groundbreaking ceremony was held for Fosber Asia’s new corrugated cardboard productionline intelligent plant construction project, which is located in Songxia Industrial Park, Foshan City, GuangdongProvince, covering an area of approximately 80 mu. It is expected that upon completion of the new plant, FosberAsia’s production capacity will be significantly increased, allowing it to respond to customer demand and servecustomers faster and better, and to drive the industry towards high-end, green and intelligent development.D. Tiru?a GroupIn 2022, member company Tiru?a Group recorded a record order intake for corrugated rollers with a totalorder intake of approximately EUR28.9 million in 2022, an increase of 27% YoY; it achieved sales revenue ofapproximately EUR28 million throughout the year, an increase of 11% YoY. Following the acquisition byDongfang Precision, the Tiru?a Group’s sales orders grew at a compound annual growth rate of approximately 15%between 2020 and 2022.In July 2022, Fosber Group completed the acquisition of 30% of the shares of Tiru?a Group. Uponcompletion of the transaction, Fosber Group held 100% of the shares in Tiru?a Group, and Tiru?a Group becamea wholly-owned subsidiary of Dongfang Precision. The transaction is conducive to the further integration ofbusiness divisions within Dongfang Precision and the further release of synergies in the industrial chain; with thecompletion of the transaction, the integration measures for the Tiru?a Group will be further deepened, which isconducive to further stimulating the operational vitality and development potential of the Tiru?a Group and
improving its operating results.In order to further strengthen synergies among the business divisions within the Dongfang Precision,leverage the competitive advantages of Chinese manufacturing on a global scale, and better support thedevelopment of the high-end domestic corrugated cardboard production line business, in 2023, the Company willintroduce the Tiru?a corrugated roller & pressure roller business to China, establish a new subsidiary, Tiru?aChina, in Nanhai District, Foshan City, and build up the Tiru?a China team for localisation of corrugated roller &pressure roller business and expansion of new markets of Tiru?a corrugated roller & pressure roller in China andentire Asia while satisfying the needs of the corrugated cardboard production line business of Dongfang Precision.
(2) The corrugated box printing and packaging production line business
In 2022, Dongfang Precision (China) achieved annual sales revenue of approximately RMB475 million, anincrease of approximately 14% YoY, and a net profit of approximately RMB120 million, an increase ofapproximately 60% YoY. Export business for overseas markets achieved rapid growth; benefiting from therelease of market demand in overseas industries and increased efforts in direct sales and channel building ininternational markets, orders for machines from overseas markets increased by 28% YoY, and the promotion ofinline products in international markets was effective, strengthening the leading position of Dongfang Precisionprinters in overseas markets. In terms of research and development, a number of products were optimised andimproved to enhance performance, speed and stability while further improving the price/performance level.Dongfang Precision (Europe) continued to improve its operating performance results in 2022 whilemaintaining stable sales revenue, with significant improvements in both profit and operating cash flow. In termsof market development, we entered the North and South American markets for the first time and continued todevelop new customers.
2. The industrial Internet industry solutions business
(1) Product development
In 2022, Dongfang Digicom made positive progress in the development of industrial Internet platformproducts: it successfully completed the development of DFDIGICOM Industrial Internet Platform v1.0, includingthe development of an IoT platform, a middle platform and an intelligent application platform, which has passedtwo safety tests by third-party authoritative institutions during the year, with the testing standards conforming tonational and industry standards. In addition, the Company has also completed the development of an intelligentproduction execution system for supporting printing and packaging equipment. In terms of fully automatedfactory-wide logistics systems, Dongfang Digicom has completed the design and development of a full range ofhardware and sample production.
(2) R&D/IP
Dongfang Digicom, in the past two years since its establishment, has cumulatively submitted 37 softwarecopyright applications and 49 patent applications. As of March 2023, it has cumulatively obtained 37 softwarecopyrights and 21 patents, including 12 invention patents.
(3) Sales and delivery
In terms of sales and delivery, in 2022, Dongfang Digicom has signed contracts with a number of domestic
and overseas industrial customers and completed delivery of some of its products. Using such technologies as 5Gand artificial intelligence, Dongfang Digicom achieved the first remote delivery of an overseas project during theyear and successfully passed the initial inspection.Up to now, more than 10 domestic or overseas projects are being delivered or pending delivery in DongfangDigicom, and strategic cooperation agreements have been signed with some of the leading customers in thedomestic paper packaging industry to jointly create a model benchmark for smart factories in the industry.
(4) Industry impact
In 2022, Dongfang Digicom joined the China Alliance of Industrial Internet to assist the Alliance andnational authorities in promoting the in-depth implementation of the Industrial Internet in the packaging industry.
3. The digital printing solutions business
In June 2022, the Company completed the settlement of the acquisition of equity interest in Wonder Digital,through a combination of equity transfer and capital increase, by which the Company acquired 51% of its sharesand obtained a controlling stake in it. Through this acquisition, Dongfang Precision’s comprehensive strength indigital printing solutions has been significantly enhanced; Wonder Digital has been included in the scope of theCompany’s consolidated financial statements since June 2022, becoming a new growth curve for the Company’sperformance.
In 2022, Wonder Digital achieved an order intake of approximately RMB130 million, an increase of 10%YoY, with the order intake in overseas markets growing at a rate of over 60%. It also achieved operating revenueof RMB132 million, an increase of approximately 12% YoY; and a net profit of approximately RMB17.61 million,an increase of 50% YoY.
Good brand image and customer recognition, good product stability, cost performance and after-sales serviceare the main competitive advantages of Wonder Digital in digital printing solutions. In terms of research anddevelopment, by the end of 2022, Wonder Digital had accumulated 43 patents; the newly developed large formatroll to roll single-pass digital printer model is at the leading level in the domestic industry in terms of width,resolution and other indicators, and has been significantly improved in machinery stability and productionefficiency, with the advantages of compact size, low energy consumption and high cost performance compared tosimilar machines in the market. In August 2022, Wonder Digital moved into a new facility, which is nearly threetimes the size of the previous one. This relocation enabled Wonder Digital to better meet the delivery of itscontinuously growing orders and provided strong support to achieve continued growth in business performance.
4. The water powersports products business
In 2022, Parsun Power achieved operating revenue of approximately RMB572 million, an increase of 22.03%YoY, of which revenue from outboard motor sales increased by 29% YoY; and its net profit was RMB73 million,an increase of 27% YoY.
In terms of sales, benefiting from the continuous growth in demand for outboard motor products in overseasmarkets and the trend of domestic substitution in the domestic market, during the Reporting Period, Parsun Powercontinued to maintain rapid growth in outward sales revenue. From 2020 to 2022, the proportion of revenue ofmedium and high horsepower increased from 8.29% to 31.77%, with a compound annual growth rate of 171.33%;
benefiting from the steady growth of downstream market demand, the need for domestic replacement of mediumand high horsepower and the gradual maturity of the domestic industry chain, the Company has gradually realizedthe transformation from medium and low horsepower to medium and high horsepower outboard motor products.
In terms of research and development, Parsun Power continued to increase investment in R&D: a brand newR&D centre was put into operation during the year, 20 intellectual property applications were submitted in 2022,and by the end of 2022, the cumulative number of patents granted was 57; the research and development of highhorsepower gasoline motors above 200 horsepower and electric outboard motors progressed steadily.In terms of production, Parsun Power continued to tap the existing capacity potential, and outboard motoroutput value hit a new high; in March 2023, the construction of a new green digital and intelligence factory withan annual production capacity of 76,400 units of high-end water powersports products and the construction of anew R&D centre was officially started, which will lay a solid foundation for the further development of ParsunPower.In January 2023, the application for Parsun Power’s IPO on the ChiNext board of the Shenzhen StockExchange was approved at the second meeting in 2023 of the ChiNext Board Listing Committee of the ShenzhenStock Exchange.
5. The equity investment business
During the Reporting Period, the Company’s equity investments were as follows:
(1) Equity investment in Beijing Sinoscience Fullcryo Technology Co., Ltd.
During the Reporting Period, the subsidiary Yineng Investment indirectly invested in Beijing SinoscienceFullcryo Technology Co., Ltd. (referred to as "Fullcryo" in this Report) and Sinoscience Fullcryo (Zhongshan)Equipment Manufacturing Co., Ltd. by making a capital contribution to a limited partnership and obtained non-controlling interests of the two companies.
Fullcryo is a high-tech enterprise founded by the Technical Institute of Physics and Chemistry, CAS. Itfocuses on the strategic guarantee of national big science research projects, the independent and comprehensivedevelopment and utilization of strategic helium resources and the development needs of the green hydrogenenergy industry. Based on the decades of the large-scale cryogenic R&D led by two generations of academiciansof the Technical Institute of Physics and Chemistry, CAS, and with the research achievements of the two phasesof national projects for key scientific machinery at the core, Fullcryo has attracted famous experts and scholarsand marketing teams at home and abroad and used the core technologies with a working temperature of 20K to 2K(-253°C to -271°C) to provide large-scale cryogenic refrigeration machinery with liquid helium and liquid heliumtemperature zones, hydrogen liquefaction machinery, LNG-BOG helium extraction machinery, advancedcryogenic machinery for the separation and purification of rare gases (such as neon, helium, krypton and xenon),solutions for hydrogen energy application systems, engineering of highly pure rare gases and industrial gases, andother services. Fullcryo is a national supplier in China with independent intellectual property rights, whoseservices cover the design and manufacturing of large-scale cryogenic refrigeration machinery, cryogenic systemengineering, and industrial gas provision. Being a subsidiary controlled by Fullcryo, Sinoscience Fullcryo(Zhongshan) Equipment Manufacturing Co., Ltd. is the only advanced machinery manufacturer in china that ownsindependent intellectual property and technologies for large-scale cryogenic machinery with a working
temperature of below 20K (-253°C to -271°C). It is also the only manufacturer and service provider worldwidethat can simultaneously provide the non-standard customization, leasing, and entrusted operation of large-scalecryogenic machinery with working temperatures of 4.2K (-269°C) and 20K (-253°C).As one of the limited partners of the partnership, Yineng Investment accounts for 94.86% of the total capitalcontributions. Considering the partnership's agreements on investment orientation, investment decisions, operationand management, income apportionment, and loss bearing, and the fact that Yineng Investment accounts for themajority of the capital contributions to the partnership, the partnership is included in the consolidated statementsof Dongfang Precision as a "structured body controlled by the Company" from the perspective of commercialsubstance and after complying with the Accounting Standard for Business Enterprises and referring to theprofessional opinions of the independent auditor.
(2) Equity investment in Yunnan Yuze Semiconductor Co., Ltd.
During the Reporting Period, the subsidiary Yineng Investment indirectly invested in Yunnan YuzeSemiconductor Co., Ltd. (referred to as "Yunnan Yuze" in this Report) by making a capital contribution to alimited partnership. Yunnan Yuze mainly engages in the manufacturing of photovoltaic silicon wafers. It is aleading manufacturer of N-type photovoltaic silicon wafers and silicon rods. It has been exploring the R&D andmanufacturing of N-type single-crystal silicon wafers since 2019. With significant first-mover advantages intechnology and talent reserves as well as customer expansion, Yunnan Yuze has created a good image in theindustry as a professional supplier of N-type single-crystal silicon wafers.As one of the limited partners of the partnership, Yineng Investment accounts for 39.37% of the total capitalcontributions. By the agreement on the fund investment decisions in the partnership agreement, the limited partnerYineng Investment does not participate in the operation of the Fund Investment Decision Committee and does nothave veto power over fund investment decisions. Considering the partnership's agreements on investmentorientation, investment decisions, operation and management, income apportionment, and loss bearing, and by therelated regulations in the Accounting Standard for Business Enterprises, the Company does not control funds, sofunds are not included in the consolidated statements of the Company. They will be presented under the "Othernon-current financial assets--Financial assets at fair value through profit or loss" item in the consolidated financialstatements.
(3) Equity investment in Yunyin Technology (Shenzhen) Co., Ltd.
During the Reporting Period, the Company participated in the equity financing of Yunyin Technology(Shenzhen) Co., Ltd. by way of direct investment and held a 4.55% equity interest in it. Yunyin Technology(Shenzhen) Co., Ltd. is dedicated to the exploration of the digital business value of the packaging industry,combining new technologies such as cloud computing, big data and machine intelligence with the production ofthe packaging industry, “commanding the 20th-century machineries with the wisdom of the 21st century”, andhelping corporate customers in the printing and packaging industry to achieve “efficiency improvement in singleplants and multi-plant collaboration”, so as to facilitate industry transformation and upgrading, achieve productionand sales synergy across the supply chain of paper packaging, and improve the efficiency of enterprise services. Interms of factory capacity specialization, around the digital transformation of packaging enterprises, Yunyin hasdeveloped four digital products, namely Yunyin Juhaodan, Yunyin Baoyintong, Yunyin Zhikongbao and Yunyin
Xiangyitong, which are aimed at “production and sales matching”, “workflow collaboration”, “intelligent control”,“terminal services” and other scenarios to open up the connection between workers, machineries, factories and themarket, so as to better coordinate and allocate resources within the industry. In terms of industry chaincollaboration, Yunyin has built a customer-centric collaborative supply chain system, relying on its productservices and Yunyin Magic Cube’s packaging industry big data technology to achieve transactional connectivity,data connectivity and machinery connectivity between upstream and downstream enterprises in the supply chain.
(4) Capital increase to Chengdu Dajin Aero-Tech Co., Ltd.
In 2021, the Company indirectly invested in Chengdu Dajin Aero-Tech Co., Ltd. ("Dajin Aero-Tech")through Tianjin Hangchuang Zhijin Investment Partnership (Limited Partnership). Dajin Aero-Tech is specializedin the precision machining and manufacturing of critical parts for aircraft engines, and has the qualification for theR&D of national defense equipment. Its core products are the critical parts for aircraft engines, which arecharacterized by complex structures, great difficulties in testing and high tolerance. Dajin Aero-Tech enjoys aleading position in its segmentation, and is one of the private enterprises with strong comprehensive strength inthe aviation engine parts industry in China. It is not only an important supplier of China's major aero-enginemodels but also the core supplier for the main maintenance plants of the aero-engines of air forces, and has beenshouldering the great mission of acting as strong support for Aero Engine Corporation of China, the main force inthe whole-machine manufacturing of China's aero-engine industry. While enjoying a firm position in the aviationfield, Dajin Aero-Tech has been gradually using the advanced manufacturing technologies it has accumulated inthe fields of aerospace, missiles, rail transportation and petroleum machinery manufacturing.
In 2022, based on the continued optimism in the future development space and the development trend of themain business of Chengdu Dajin Aero-Tech Co., Ltd., the subsidiary Yineng Investment participated in its newround of equity financing by way of direct investment. After the completion of this investment, DongfangPrecision indirectly holds approximately 2.87% of the equity interest of Chengdu Dajin Aero-Tech Co., Ltd.
The business objective of the subsidiary, Yineng Investment, is to take the principal businesses as the coreand extended investment as the support, follow the guidance of the Company's strategic plan, focus on industriesrelated to the Company’s principal businesses and carry out M&As, while seeking investment opportunities inindustries encouraged by the National 14th Five-Year Plan, such as high-end equipment manufacturing, so as toexplore emerging business opportunities for the Company, and share the benefits in the process of growth anddevelopment of the investees, and help improve the overall profitability of the Company.
The aforesaid equity investments do not constitute related-party transactions or major assets restructuring andexert no significant impacts on the Company's operating results or financial condition in the Reporting Period.
(III) Capital operation
1. The spin-off listing of the subsidiary Parsun Power
During the Reporting Period, the preliminary plan for the spin-off listing of the subsidiary Parsun Power onthe ChiNext board of the Shenzhen Stock Exchange was approved by the Company’s Board of Directors andgeneral meetings of shareholders. The plan was accepted by the Shenzhen Stock Exchange in June 2022, passedin two rounds of review inquiries during July~December 2022, and approved at the second meeting in 2023 of theChiNext Board Listing Committee of the Shenzhen Stock Exchange in January 2023. Currently, Parsun Power is
proceeding with the application for its initial public offering on the ChiNext board.
2. The share repurchase has been completed as scheduled.
During the Reporting Period, the Company carried on with the 2021 share repurchase plan. During theimplementation period of the share repurchase (23 September 2021 ~ 22 September 2022), the Companyrepurchased a total of 106,652,136 shares (or 8.04% of the Company’s total share capital) through centralizedbidding. With the highest trading price being RMB6.30/share and the lowest being RMB3.59/share, the totalamount paid was approximately RMB551 million (exclusive of transaction costs).
According to the share repurchase plan, no lower than 80% of the repurchased shares will be retired toreduce the Company's registered capital while no more than 20% will be used for equity incentives or employeestock ownership plans. On 10 October 2022, the Company completed the retirement of 85,321,704 shares (80% ofthe total shares repurchased) with the Shenzhen branch of China Securities Depository and Clearing CorporationLimited.
3. Equity incentives were steadily promoted to stimulate the internal power
During the Reporting Period, the Company launched the 2022 Restricted Share Incentive Plan. In April 2022,the first grant was completed, where 2,650,000 restricted shares were granted to seven key managerial,technological, and business personnel. In June 2022, as the unlocking conditions were met for the secondunlocking period of the first grant under the 2022 Restricted Share Incentive Plan, a total of 8,620,000 restrictedshares of 37 awardees were unlocked for public trading.
Steady promotion of equity incentives is beneficial to the Company's sustainable and healthy developmentand gathering of internal power, to "stabilize the team, boost the morale, gather talents and improve performance".By closely binding the interests of the Company's key personnel with the Company's future performance and theimprovement of the capability to seek returns for shareholders, the Company will see continuous improvement inits business performance and the ability to create value.(IV) Analysis of key financial indicators
1. Revenue and Cost Analysis
(1) Breakdown of Operating Revenue
Unit: RMB
| 2022 | 2021 | Change (%) | |||
| Operating revenue | As a % of total operating revenue (%) | Operating revenue | As a % of total operating revenue (%) | ||
| Total | 3,892,708,509.64 | 100% | 3,524,734,783.94 | 100% | 10.44% |
| By operating division | |||||
| Intelligent manufacturing | 3,892,708,509.64 | 100.00% | 3,524,734,783.94 | 100.00% | 10.44% |
| By product category | |||||
| Corrugated cardboard production lines | 2,603,549,326.99 | 66.89% | 2,451,607,852.79 | 69.55% | 6.20% |
| Corrugated box printing and packaging production line equipment | 717,169,922.31 | 18.42% | 604,395,295.49 | 17.15% | 18.66% |
| Water powersports products and general machines | 571,989,260.34 | 14.69% | 468,731,635.66 | 13.30% | 22.03% |
| By operating segment | |||||
| Mainland China | 441,664,388.05 | 11.35% | 528,007,403.05 | 14.98% | -16.35% |
| Other countries and regions | 3,451,044,121.59 | 88.65% | 2,996,727,380.89 | 85.02% | 15.16% |
| By sales mode | |||||
| Direct selling | 3,229,852,665.56 | 82.97% | 3,096,762,855.79 | 87.86% | 4.30% |
| Distribution selling + reselling | 662,855,844.08 | 17.03% | 427,971,928.15 | 12.14% | 54.88% |
(2) Operating Division, Product Category or Operating Segment Contributing over 10% of OperatingRevenue or Operating Profit
√ Applicable □ Not applicable
Unit: RMB
| Operating revenue | Cost of sales | Gross profit margin | YoY change in operating revenue (%) | YoY change in cost of sales (%) | YoY change in gross profit margin (%) | |
| By operating division | ||||||
| Intelligent manufacturing | 3,892,708,509.64 | 2,833,305,748.54 | 27.22% | 10.44% | 10.89% | -0.30% |
| By product category | ||||||
| Corrugated cardboard production lines | 2,603,549,326.99 | 1,941,758,020.93 | 25.42% | 6.20% | 10.26% | -2.75% |
| Corrugated box printing and packaging production line equipment | 717,169,922.31 | 458,727,210.78 | 36.04% | 18.66% | 5.98% | 7.65% |
| Water powersports | 571,989,260.34 | 432,820,516.83 | 24.33% | 22.03% | 19.85% | 1.38% |
| Operating revenue | Cost of sales | Gross profit margin | YoY change in operating revenue (%) | YoY change in cost of sales (%) | YoY change in gross profit margin (%) | |
| products and general machines | ||||||
| By operating segment | ||||||
| Mainland China | 441,664,388.05 | 327,373,818.37 | 25.88% | -16.35% | -7.29% | -7.25% |
| Other countries and regions | 3,451,044,121.59 | 2,505,931,930.17 | 27.39% | 15.16% | 13.80% | 0.87% |
| By sales mode | ||||||
| Direct selling | 3,229,852,665.56 | 2,352,642,921.94 | 27.16% | 4.30% | 4.64% | -0.24% |
| Distribution selling + reselling | 662,855,844.08 | 480,662,826.60 | 27.49% | 54.88% | 56.69% | -0.84% |
Under the circumstances that the statistical caliber of the Company's main business data is adjusted in the Reporting Period, theCompany's main business data that adjusted according to the caliber at the end of the Reporting Period
□ Applicable √ Not applicable
(3) Whether Revenue from Physical Sales Is Higher than Service Revenue
√ Yes □ No
| Operating division | Item | Unit | 2022 | 2021 | Change (%) |
| Corrugated cardboard production lines | Unit sales | Unit | 160 | 144 | 11.11% |
| Output | Unit | 162 | 144 | 12.50% | |
| Inventory | Unit | 3 | 1 | 200.00% | |
| Corrugated box printing and packaging production line equipment | Unit sales | Unit | 233 | 177 | 31.64% |
| Output | Unit | 229 | 168 | 36.31% | |
| Inventory | Unit | 51 | 35 | 45.71% | |
| Water powersports products and general machines | Unit sales | Unit | 32.05 | 32.73 | -2.08% |
| Output | Unit | 30.10 | 34.80 | -13.51% | |
| Inventory | Unit | 0.94 | 2.89 | -67.47% |
Any over 30% YoY movements in the data above and why:
√ Applicable □ Not applicable
The over 30% YoY movements in the unit sales, output and inventory of corrugated box printing and packaging production lineequipment are primarily driven by the acquisition of Wonder Digital in 2022.The over 30% YoY movement in the inventory of water powersports products and general machines is primarily driven by theincreased output and unit sales of high-horsepower outboard motors in 2022.
(4) Execution Progress of Major Signed Sales Contracts in the Reporting Period
□ Applicable √ Not applicable
(5) Breakdown of Cost of Sales
Unit: RMB
| Product category | Item | 2022 | 2021 | Change (%) | ||
| Cost of sales | As a % of total cost of sales (%) | Cost of sales | As a % of total cost of sales (%) | |||
| Corrugated cardboard production lines | Raw materials | 1,132,363,095.01 | 39.98% | 1,170,044,178.76 | 45.80% | -3.22% |
| Labor cost | 335,242,775.36 | 11.83% | 304,463,892.98 | 11.92% | 10.11% | |
| Other | 474,152,150.56 | 16.73% | 286,585,807.36 | 11.22% | 65.45% | |
| Corrugated box printing and packaging production line equipment | Raw materials | 345,662,621.86 | 12.20% | 338,673,324.30 | 13.25% | 2.06% |
| Labor cost | 53,218,657.90 | 1.88% | 46,616,621.84 | 1.82% | 14.16% | |
| Other | 59,845,931.02 | 2.11% | 47,550,069.99 | 1.86% | 25.86% | |
| Water powersports products and general machines | Raw materials | 384,529,146.81 | 13.57% | 320,751,829.30 | 12.55% | 19.88% |
| Labor cost | 24,165,439.52 | 0.85% | 23,219,196.74 | 0.91% | 4.08% | |
| Other | 24,125,930.50 | 0.85% | 17,167,138.52 | 0.67% | 40.54% | |
(6) Changes in the Scope of Consolidated Financial Statements for the Reporting Period
√ Yes □ No
In February 2022, the Company established Dongfang Yineng International Holding Co., Ltd. ("Yineng International") with aregistered capital of RMB50 million and 100% ownership.
In February 2022, Yineng Investment, a subsidiary of the Company, established Changzhou Xinchen Venture CapitalPartnership (Limited Partnership) (“Changzhou Xinchen”) with a capital contribution of RMB48 million and a 94.86% ownership.
In February 2022, Parsun Power, a subsidiary of the Company, established Suzhou Baisheng International Trade Co., Ltd.(“Baisheng International”) with a registered capital of RMB3 million and a 69.62% ownership.
In 2022, the Company acquired a 51% ownership in Shenzhen Wonder Digital Technology Co., Ltd. (formerly known as“Shenzhen Wonder Printing System Co., Ltd.”) at RMB173,800,000.00 in cash, including a capital increase of RMB50,000,000.00and a consideration of RMB123,800,000 for equity acquisition. The Group completed the ownership change formalities with theindustrial and commercial administration in relation to the equity acquisition on 7 June 2022, with the date of acquisition on 7 June2022.
(7) Major Changes to the Business Scope or Product or Service Range in the Reporting Period
□ Applicable √Not applicable
(8) Major Customers and Suppliers
Major customers:
| Total sales to top five customers (RMB) | 813,510,490.50 |
| Total sales to top five customers as a % of total sales of the Reporting Period (%) | 20.90% |
| Total sales to related parties among top five customers as a % of total sales of the Reporting Period (%) | 0.00% |
Top five customers:
| No. | Customer | Sales revenue contributed for the Reporting Period (RMB) | As a % of total sales revenue (%) |
| 1 | Customer A | 266,564,036.76 | 6.85% |
| 2 | Customer B | 223,281,418.70 | 5.74% |
| 3 | Customer C | 158,486,940.33 | 4.07% |
| 4 | Customer D | 91,618,525.93 | 2.35% |
| 5 | Customer E | 73,559,568.78 | 1.89% |
| Total | -- | 813,510,490.50 | 20.90% |
Other information about major customers:
□ Applicable √ Not applicable
Major suppliers:
| Total purchases from top five suppliers (RMB) | 254,595,256.42 |
| Total purchases from top five suppliers as a % of total purchases of the Reporting Period (%) | 12.21% |
| Total purchases from related parties among top five suppliers as a % of total purchases of the Reporting Period (%) | 0.00% |
Top five suppliers:
| No. | Supplier | Purchase in the Reporting Period (RMB) | As a % of total purchases (%) |
| 1 | Supplier A | 103,183,961.45 | 4.95% |
| 2 | Supplier B | 46,527,416.82 | 2.23% |
| 3 | Supplier C | 37,489,093.26 | 1.80% |
| 4 | Supplier D | 37,384,345.23 | 1.79% |
| 5 | Supplier E | 30,010,439.66 | 1.44% |
| Total | -- | 254,595,256.42 | 12.21% |
Other information about major suppliers:
□ Applicable √ Not applicable
2. Expenses
Unit: RMB
| 2022 | 2021 | Change (%) | Reason for any significant change | |
| Selling expenses | 182,555,875.71 | 185,327,678.18 | -1.50% | No significant change |
| Administrative expenses | 311,463,613.16 | 272,090,728.08 | 14.47% | Increased labor cost in the current period |
| Finance costs | -8,970,693.69 | -5,996,474.46 | 49.60% | Increased exchange gains in the current period |
| R&D expenses | 97,954,453.40 | 99,557,565.46 | -1.61% | No significant change |
3. R&D Investments
√ Applicable □ Not applicable
| Main R&D projects | Purpose | Project progress | Objectives to be achieved | Expected impact on the Company |
| Industrial Internet Platform for Industry | To provide one-stop smart factory solutions for corporate customers including but not limited to the paper packaging industry | V1.0 completed | The project includes IoT platform, data middle platform and intelligent application platform products to help customers achieve intelligent transformation of equipment, integrated production, operation and management, intelligent decision-making and agile innovation. | Become a profit growth point for the Company's industrial Internet platform business |
| Localization of a world-leading high-end corrugated cardboard production line | To introduce the world-leading high-end corrugated cardboard production line and make it localized to meet the needs of Chinese customers for the highest-end and highest-speed corrugated cardboard production line. | Promote as planned | Mass production for sales in the domestic market | Further enrich the Company's product portfolio which can become a new profit growth point for the Company's corrugated box printing and packaging production line machinery. |
| High-horsepower outboard motors | To make up the blank market of high-horsepower outboard motors, and further enhance the competitiveness of products. | Promote as planned | Mass production for sales in the world | Meet the demand for high-horsepower outboard motors in domestic and international markets, becoming a new profit growth point for the Company. |
| Electric outboard motors | To develop a battery-powered outboard motor to further enhance product competitiveness in the new energy outboard motor market. | Promote as planned | Mass production for sales in the world | Meet market demand and become a new profit growth point for the Company. |
Details about R&D personnel:
| 2022 | 2021 | Change (%) | |
| Number of R&D personnel | 327 | 284 | 15.14% |
| R&D personnel as a % of total employees | 15.49% | 15.33% | 0.16% |
| Educational background of R&D personnel | |||
| Bachelor’s degree | 146 | 133 | 9.77% |
| Master’s degree | 25 | 18 | 38.89% |
| Other | 156 | 133 | 17.29% |
| Age structure of R&D personnel | |||
| Under 30 | 80 | 68 | 17.65% |
| 30-40 | 140 | 113 | 23.89% |
| Other | 107 | 103 | 3.88% |
Details about R&D investments:
| 2022 | 2021 | Change (%) | |
| R&D investments (RMB) | 101,656,683.16 | 99,557,565.46 | 2.11% |
| R&D investments as a % of operating revenue | 2.61% | 2.82% | -0.21% |
| Capitalized R&D investments (RMB) | 3,702,229.76 | 0.00 | 0.00% |
| Capitalized R&D investments as a % of total R&D investments | 3.64% | 0.00% | 3.64% |
Reasons for any significant change to the composition of R&D personnel and the impact:
□ Applicable √ Not applicable
Reasons for any significant YoY change in the percentage of R&D investments in operating revenue:
□ Applicable √ Not applicable
Reason for any sharp variation in the percentage of capitalized R&D investments and rationale:
√ Applicable □ Not applicable
Independent research and development was carried out on Industrial Internet Platform for Industry during the year.
4. Cash Flows
Unit: RMB
| Item | 2022 | 2021 | Change (%) |
| Subtotal of cash generated from operating activities | 4,083,606,350.48 | 3,506,294,160.56 | 16.47% |
| Subtotal of cash used in operating activities | 3,577,311,889.53 | 3,199,634,884.54 | 11.80% |
| Net cash generated from/used in operating activities | 506,294,460.95 | 306,659,276.02 | 65.10% |
| Subtotal of cash generated from investing activities | 5,502,146,075.67 | 7,120,320,577.02 | -22.73% |
| Subtotal of cash used in investing activities | 5,939,677,869.61 | 5,814,962,692.72 | 2.14% |
| Net cash generated from/used in investing activities | -437,531,793.94 | 1,305,357,884.30 | -133.52% |
| Subtotal of cash generated from financing activities | 998,366,302.50 | 598,858,984.67 | 66.71% |
| Subtotal of cash used in financing activities | 1,133,800,124.92 | 1,757,363,205.25 | -35.48% |
| Net cash generated from/used in financing activities | -135,433,822.42 | -1,158,504,220.58 | -88.31% |
| Net increase in cash and cash equivalents | -25,583,078.47 | 398,702,538.96 | -106.42% |
Explanation of why any of the data above varies significantly on a year-on-year basis:
√ Applicable □ Not applicable
(1) Net cash generated from operating activities was RMB506.2945 million, primarily because the Company's revenue growthduring the Reporting Period.
(2) Net cash used in investing activities was RMB437.5318 million, primarily driven by the Company’s acquisition of WonderDigital and purchase of long-term assets during the Reporting Period.
(3) Net cash used in financing activities was RMB135.4338 million, primarily driven by the Company’s repayment of debtduring the Reporting Period.
(4) Net decrease in cash and cash equivalents was RMB25.5831 million, primarily driven by net cash used in investing andfinancing activities during the Reporting Period.
Explanation of why the net cash generated from/used in operating activities varies significantly from the net profit of the ReportingPeriod:
□ Applicable √ Not applicable
V Analysis of Non-Core Businesses
√ Applicable □ Not applicable
Unit: RMB
| Amount | As a % of gross profit | Primary source/reason | Recurrent or not | |
| Return on investment | 19,131,077.82 | 3.78% | Gains on wealth management product investments and share of profits of associates recognized using the equity method | Yes |
| Gain/loss on changes in fair value | 17,917,046.61 | 3.54% | Fair value changes of securities investments and financial investments | Yes |
| Asset impairment loss | -12,796,323.56 | -2.53% | No significant impact. | No |
| Non-operating income | 2,459,567.33 | 0.49% | No significant impact. | No |
| Non-operating expenses | 880,845.25 | 0.17% | No significant impact. | No |
VI Analysis of Assets and Liabilities
1. Significant Changes in Asset Composition
Unit: RMB
| 31 December 2022 | 1 January 2022 | Change in percentage (%) | Reason for any significant change | |||
| Amount | As a % of total assets | Amount | As a % of total assets | |||
| Cash and bank balances | 1,274,447,199.74 | 18.39% | 1,664,336,339.35 | 26.18% | -7.79% | The share repurchase and the payment for the acquisition of equity interests in Wonder Digital in the current period |
| Accounts receivable | 837,305,757.46 | 12.08% | 741,135,648.09 | 11.66% | 0.42% | Increased sales |
| Contract assets | 65,089,851.21 | 0.94% | 24,414,117.64 | 0.38% | 0.56% | Increased sales |
| Inventories | 1,092,981,884.51 | 15.77% | 867,280,013.47 | 13.64% | 2.13% | Increased stocks as a result of more orders |
| Investment property | 0.00% | |||||
| Long-term equity investments | 95,352,681.52 | 1.38% | 84,777,596.67 | 1.33% | 0.05% | No significant change |
| Fixed assets | 570,200,113.79 | 8.23% | 544,180,159.09 | 8.56% | -0.33% | No significant change |
| Construction in progress | 38,904,537.85 | 0.56% | 12,298,259.58 | 0.19% | 0.37% | No significant change |
| Right-of-use assets | 86,448,978.02 | 1.25% | 80,386,832.91 | 1.26% | -0.01% | No significant change |
| Short-term borrowings | 41,815,129.24 | 0.60% | 228,312,880.73 | 3.59% | -2.99% | Repayment of short-term borrowings in the current period |
| Contract liability | 692,567,968.60 | 10.00% | 405,842,932.51 | 6.38% | 3.62% | Increased advances from customers as a result of more orders in the current period |
| Long-term borrowings | 57,884,494.89 | 0.84% | 325,026,188.49 | 5.11% | -4.27% | Reclassification of the current portion of borrowings in the current period |
| Lease liabilities | 68,989,111.33 | 1.00% | 65,213,555.87 | 1.03% | -0.03% | No significant change |
| Current portion of non-current assets | 311,763,750.00 | 4.50% | 108,385,000.00 | 1.70% | 2.80% | Reclassification of the current portion of security deposits for borrowings |
| Goodwill | 430,916,848.74 | 6.22% | 306,969,147.76 | 4.83% | 1.39% | Acquisition of Wonder Digital in the current period |
| Current portion of non-current liabilities | 315,767,431.26 | 4.56% | 38,495,724.83 | 0.61% | 3.95% | Reclassification of the current portion of borrowings in the current period |
Overseas assets that take up a large percentage of the Company’s net asset value:
√ Applicable □ Not applicable
| Asset | Source | Asset value (RMB) | Location | Management model | Control measures to protect asset safety | Return | As a % of the Company’s net asset value | Any material impairment risk or not |
| 100% interest of Fosber S.p.A. | M&A | 852,412,893.39 | Italy | Producing and marketing by | Operation management | Good | 19.98% | Not |
| Asset | Source | Asset value (RMB) | Location | Management model | Control measures to protect asset safety | Return | As a % of the Company’s net asset value | Any material impairment risk or not |
| itself | ||||||||
| 100% interest of EDF S.R. L | M&A | 31,879,023.60 | Italy | Producing and marketing by itself | Operation management | Good | 0.75% | Not |
2. Assets and Liabilities at Fair Value
√ Applicable □ Not applicable
Unit: RMB
| Item | Opening amount | Gain/loss on fair-value changes in the period | Cumulative fair-value changes recognized in equity | Impairment allowance for the period | Purchased in the period | Sold in the period | Other changes | Closing amount |
| Financial assets | ||||||||
| 1. Financial assets held for trading (exclusive of derivative financial assets) | 775,249,020.94 | -19,374,879.84 | 0.00 | 0.00 | 5,457,711,892.97 | 5,353,536,475.48 | 0.00 | 860,049,558.59 |
| 2. Derivative financial assets | 12,936,500.63 | -8,534,136.34 | 0.00 | 0.00 | 16,195.63 | 3,635,839.63 | 0.00 | 782,720.29 |
| Subtotal of financial assets | 788,185,521.57 | -27,909,016.18 | 0.00 | 0.00 | 5,457,728,088.60 | 5,357,172,315.11 | 0.00 | 860,832,278.88 |
| Other non-current financial | 162,523,519.41 | 38,701,083.92 | 0.00 | 0.00 | 133,225,000.00 | 0.00 | 0.00 | 334,449,603.33 |
| assets | ||||||||
| Total of the above | 950,709,040.98 | 10,792,067.74 | 0.00 | 0.00 | 5,590,953,088.60 | 5,357,172,315.11 | 0.00 | 1,195,281,882.21 |
| Financial liabilities | 246,925,243.48 | -3,858,646.25 | 0.00 | 0.00 | 3,474,476.39 | 53,559,838.64 | 437,613.15 | 193,418,848.13 |
Particulars about other changes:
Other changes in financial liabilities are mainly resulted from being recorded in other comprehensive income.Indicate whether any significant change occurred to the measurement attributes of the major assets in the Reporting Period.
□ Yes √ No
3. Assets to which the Company’s Rights Were Restricted as at the Period-End
Unit: RMB
| Item | Closing carrying amount | Reason for restriction |
| Cash and bank balances | 40,726,502.47 | Used as deposits to obtain bank acceptance bills and letters of guarantee. |
| Fixed assets | 4,409,110.42 | Used to obtain bank loans for subsidiaries. |
| Current portion of other non-current assets | 310,300,000.00 | Used as deposits for loans for subsidiaries. |
Total
| Total | 355,435,612.89 |
VII Investments Made
1. Total Investment Amount
√ Applicable □ Not applicable
| Total investment amount in 2022 (RMB) | Total investment amount in 2021 (RMB) | Change (%) |
| 1,227,440,484.73 | 1,608,856,907.68 | -23.71% |
2. Significant Equity Investments Acquired in the Reporting Period
√Applicable □ Not applicable
Unit: RMB
| Name of investee company | Main business | Investment mode | Investment amount | Shareholding ratio | Source of funds | Cooperating party | Investment period | Type of product | Progress as of the balance sheet date | Expected return | Gain or loss of investment for the period | Whether involved in litigation | Date of disclosure (if any) | Index of disclosure (if any) |
| Wonder Digital | Production, sales, R&D and technical services of environmentally friendly packaging and printing equipment and accessories | M&A | 148,300,000.00 | 51.00% | Self-funded | Shenzhen Wonder Business Service Partnership (Limited Partnership) and three persons, including Zhao Jiang, Li Yajun and Luo | Indefinite | Shares | Completion of transfer | 0.00 | 18,633,830.83 | None | 7 June 2022 | Published on www.cninfo.com.cn, Announcement No. 2022-049 |
| Sanliang | ||||||||||||||
| Total | -- | -- | 148,300,000.00 | -- | -- | -- | -- | -- | -- | 0.00 | 18,633,830.83 | -- | -- | -- |
Note: The consideration of RMB148.3 million for the acquisition of Wonder Digital consists of (1) a cash payment of RMB123,800,000.00 for the equity interests acquired and (2) a portion of the capitalincrease of RMB24,500,000.00 that is attributable to the minority shareholders in proportion to their shareholdings.
3. Significant Non-Equity Investments of which the Acquisition Was Uncompleted in the Reporting Period
□ Applicable √ Not applicable
4. Financial Investments
(1) Securities Investments
√ Applicable □ Not applicable
Unit: RMB
| Security type | Security code | Security name | Initial investment cost | Measurement method | Opening carrying amount | Gain/loss on fair-value changes in the period | Cumulative fair-value changes recognized in equity | Purchased in the period | Sold in the period | Gain/loss in the period | Closing carrying amount | Accounting title | Funding source |
| Domestically/ | 002407 | Do- | 87,330,118.45 | Fair value | -8,686,340.08 | 87,330,118.45 | 38,385,381.75 | -15,624,736.70 | 33,320,000.00 | Financial | Self- |
| overseas listed stocks | Fluoride | assets held for trading | funded | ||||||||||
| Domestically/ overseas listed stocks | 000547 | ADDSINO | 48,396,183.60 | Fair value | -8,236,547.26 | 48,396,183.60 | 14,491,809.83 | -5,896,107.13 | 28,008,266.64 | Financial assets held for trading | Self-funded | ||
| Domestically/ overseas listed stocks | 300567 | Jingce Electronic | 74,055,562.31 | Fair value | -3,940,856.10 | 74,055,562.31 | 5,990,685.06 | -2,804,877.25 | 65,260,000.00 | Financial assets held for trading | Self-funded | ||
| Domestically/ overseas listed stocks | 600760 | Avic Sac | 71,584,544.20 | Fair value | 2,456,199.12 | 71,584,544.20 | 46,886,362.44 | -10,040,681.76 | 14,657,500.00 | Financial assets held for trading | Self-funded | ||
| Domestically/ overseas listed stocks | 688567 | Farasis Energy | 30,265,333.10 | Fair value | -5,690,571.80 | 30,265,333.10 | 271,773.32 | -5,685,805.14 | 24,307,754.64 | Financial assets held for trading | Self-funded | ||
| Domestically/ overseas listed stocks | - | Other stocks | 1,458,371,373.34 | Fair value | 1,458,371,373.34 | 1,487,480,778.65 | 29,109,405.31 | Financial assets held for trading | Self-funded | ||||
| Trust products | - | - | 6,631,573.01 | Fair value | 6,631,573.01 | -2,868,965.53 | 3,196,419.88 | -2,717,911.75 | 717,241.38 | Financial assets held for trading | Self-funded | ||
| Funds | - | - | 628,007,924.74 | Fair value | 628,007,924.74 | 4,349,496.99 | 160,000,000.00 | 448,610,484.41 | 3,199,039.86 | 342,596,480.19 | Financial assets held for trading | Self-funded |
| Others | - | - | 140,609,523.19 | Fair value | 140,609,523.19 | 3,242,704.82 | 3,527,708,777.97 | 3,325,526,063.38 | 8,390,077.96 | 351,182,315.74 | Financial assets held for trading | Self-funded | |
| Total | 2,545,252,135.94 | -- | 775,249,020.94 | -19,374,879.84 | 0.00 | 5,457,711,892.97 | 5,370,839,758.72 | -2,071,596.60 | 860,049,558.59 | -- | -- | ||
| Disclosure date of the board announcement approving the securities investments | 15 March 2022 | ||||||||||||
| Disclosure date of the general meeting announcement approving the securities investments (if any) | N/A | ||||||||||||
(2) Investments in Derivative Financial Instruments
√ Applicable □Not applicable
1) Derivative Investments for Hedging Purposes in the Reporting Period
√ Applicable □Not applicable
Unit: RMB'0,000
| Type of derivative | Initial investment amount | Gain/loss on fair-value changes in the period | Return on investment in the current period | Cumulative fair-value changes recognized in equity | Purchased in the Reporting Period | Sold in the Reporting Period | Closing amount | Closing amount as % of the Company’s closing equity |
| Aluminum futures | 0 | 0 | -5.83 | 0.00 | 114.65 | 108.83 | 0 | 0.00% |
| Forward forex settlement and sale contract | 3,312.03 | -35.42 | -151.92 | 0.00 | 3,422.21 | 5,599.94 | 1,134.30 | 0.28% |
| Total | 3,312.03 | -35.42 | -157.75 | 0.00 | 3,536.86 | 5,708.77 | 1,134.30 | 0.28% |
| Description of significant changes in accounting policies and specific financial accounting principles in respect of the Company's hedges for the Reporting Period as compared to the prior reporting period | No significant change | |||||||
| Actual gains/losses in the Reporting Period | During the Reporting Period, the actual loss on derivative contracts for hedging purposes stood at RMB-1.9317 million. | |||||||
| Results of hedges | Currently not available | |||||||
| Funding source | Self-funded | |||||||
| Risk analysis of positions held in derivatives during the Reporting Period and description of control measures (Including but not limited to market risk, liquidity risk, credit risk, operational risk, legal risk, etc.) | The Company's financial derivative transaction business is mainly intended to avert and prevent risks arising from fluctuations in exchange rates and commodity prices. In the Rules on the Management of Financial Derivative Transaction Business formulated by the Company, the operating rules, review and approval authority, routine management, and risk control mechanisms on the financial derivative transaction business have been prescribed to standardize business operation as well as prevent and control related risks. Chinese futures exchanges have established well-improved risk control mechanisms. As future exchanges assume the performance responsibility, there is a low probability of credit risk. The Company will strengthen the understanding and mastering of national policies and requirements of relevant governing bodies to avoid related credit and legal risks. | |||||||
| Changes in market prices or fair value of derivative products during the Reporting Period, specific methods used, and relevant assumption and parameter settings shall be disclosed for analysis of fair value of derivatives | Undue forward forex settlement and sale contracts are measured at fair value, i.e., the difference between the signing price of an undue forward forex settlement and sale contract held at the period-end and the bank’s forward forex rates at the period-end. | |||||||
| Legal matter (if applicable) | N/A | |||||||
| Disclosure date of the announcement about the board’s consent for the derivative investment (if any) | 20 April 2022 | |||||||
| Disclosure date of the | 7 May 2022 | |||||||
2) Derivative Investments for Speculative Purposes in the Reporting Period
□ Applicable √ Not applicable
No such cases in the Reporting Period.
5. Use of Raised Funds
□ Applicable √ Not applicable
No such cases in the Reporting Period.
| announcement about the general meeting’s consent for the derivative investment (if any) | |
| Special opinions expressed by independent directors concerning the Company's derivatives investment and risk control | 1. Based on the realities and normal needs of routine operation, the Company and its subsidiaries intend to conduct the financial derivative transaction business, for the purposes of reducing the risks arising from fluctuations in exchange rates and prices of related commodities to the principal business of the Company and decreasing the impacts of market fluctuations on the principal business of the Company and its subsidiaries. By giving full play to the hedging function of financial derivative instruments, the operating results and finance of the Company and its subsidiaries are increasingly robust. 2. The Company has prepared the rules on the internal control management of the financial derivate transaction business by relevant regulatory prescriptions, which is conducive to standardizing and strengthening the risk control management of financial derivative transactions. The Board of Directors of the Company has performed the necessary review and approval procedures for this matter in a legal and rule-compliant manner. No illegalities or violations of regulations and Articles of Association have occurred. 3. In strict compliance with the Stock Listing Rules of the Shenzhen Stock Exchange, the Guideline No. 7 of the Shenzhen Stock Exchange for the Self-regulation of Listed Companies--Transactions and Related-party Transactions, and other relevant laws and regulatory guidelines, the Company shall make prudent decisions and conduct prudent management, inspections and monitoring of the financial derivative transactions of the Company and its subsidiaries, strictly control risks, and promptly discharge the information disclosure duty. 4. We hold that the financial derivative transaction business of the Company and its subsidiaries does not prejudice the interests of the Company and all shareholders, particularly not impair the interests of non-controlling shareholders. Therefore, we approve this matter and suggest submitting it to the General Meeting of Shareholders of the Company for deliberation. |
VIII Sale of Major Assets and Equity Investments
1. Sale of Major Assets
□ Applicable √ Not applicable
No such cases in the Reporting Period.
2. Sale of Major Equity Investments
□ Applicable √ Not applicable
No such cases in the Reporting Period.
IX Principal Subsidiaries and Joint Stock Companies
√ Applicable □ Not applicable
Principal subsidiaries and joint stock companies with an over 10% effect on the consolidated net profit:
Unit: RMB
| Name | Relationship with the Company | Principal activities | Registered capital | Total assets | Net assets | Operating revenue | Operating profit | Net profit |
| Fosber Group | Subsidiary | R&D, processing, manufacturing, and marketing of corrugated cardboard production lines and parts, as well as provision of after-sales services | EUR1.56 million | 2,300,923,976.55 | 852,412,893.39 | 2,508,932,597.17 | 278,452,681.36 | 208,479,656.14 |
| Shunyi Investment | Subsidiary | Shunyi Investment is principally engaged in business entity and project investments, etc. It is the direct controlling shareholder of Parsun Power. | RMB10 million | 518,905,385.25 | 321,848,677.65 | 571,989,260.34 | 78,427,280.91 | 71,596,963.32 |
Subsidiaries acquired or disposed of in the Reporting Period:
√ Applicable □Not applicable
| Name of subsidiary | How the subsidiary was acquired or disposed of in the Reporting Period | Impact on the Company’s operations and financial performance |
| Wonder Digital | The Company acquired 51% equity interests in Wonder Digital through a cash consideration for the equity interests and a capital increase. | Wonder Digital has been included in the Company’s consolidated financial statements since June 2022. It recorded operating revenue and a net profit of RMB81,875,354.35 and RMB18,633,830.83, respectively, for June-December 2022. The consolidation of Wonder Digital has strengthened the Company’s financial performance for the Reporting Period. |
X Structured Bodies Controlled by the Company
√ Applicable □ Not applicable
1. In March 2021, the Company established Tianjin Hangchuang Zhijin Investment Partnership (LimitedPartnership) (the "Tianjin Hangchuang Fund" or the "Partnership") with AVIC Innovation Capital ManagementCo., Ltd. The Company, as the sole LP of the Fund, subscribed for the Partnership's contribution share ofRMB20,000,000. The Fund is a special fund which is to invest in the equity of Sichuan Dajin Stainless Steel Co.,Ltd. (now renamed as Chengdu Dajin Aero-Tech Co., Ltd.).This investment is in line with the Company’s development strategy considering the Fund’s investmentdirection, decision-making, management, income distribution, loss allocation, etc. From the perspective ofbusiness nature, the Company provides the absolute majority of the capital of the Tianjin Hangchuang Fund, so itis reasonable to include the Fund in the Company’s consolidated financial statements of the Reporting Period.
2. In March 2022, the wholly owned subsidiary Yineng Investment indirectly invested in Beijing SinoscienceFullcryo Technology Co., Ltd. (referred to as "Fullcryo" in this Report) and Sinoscience Fullcryo (Zhongshan)Equipment Manufacturing Co., Ltd. by making a capital contribution to a limited partnership and obtained non-controlling interests of the two companies.
As one of the limited partners of the partnership, Yineng Investment accounts for 94.86% of the total capitalcontributions. Considering the partnership's agreements on investment orientation, investment decisions, operationand management, income apportionment, and loss bearing, and the fact that Yineng Investment accounts for themajority of the capital contributions to the partnership, the partnership is included in the consolidated statementsof Dongfang Precision as a "structured body controlled by the Company" from the perspective of commercialsubstance and after complying with the Accounting Standard for Business Enterprises and referring to theprofessional opinions of the independent auditor.
XI Prospects
(I) The Company's development strategy
1. Company vision
Business purposes of the Company: To become an industrial group with high influence in its areas, trust fromcustomers and shareholders, and respect from employees; uphold the business philosophies of "Integrity,Innovation and Excellence", and achieve mutual benefits with customers, shareholders, employees and the society.
2. Corporate strategy
In 2022, the Company completed its strategic plan for the third five-year period (2018-2022). Looking backat the past five years, the Company achieved 100.1% of its strategic objectives of operating revenue and 96.9% ofits strategic objectives of net profit. To be specific, the Company's annual operating revenue (excluding the impactof Pride) has expanded from RMB2,377 million in 2018 to RMB3,893 million in 2022, representing a compoundannual growth rate of approximately 13.13%, and its annual net profit (excluding the impact of Pride) hasincreased from RMB209 million in 2018 to RMB484 million in 2022, with a compound annual growth rate ofapproximately 23.24%. These results demonstrate the strong capabilities of the Company’s management team inscientific decision-making and strategic planning, as well as the competence of efficient strategic execution andrealization of all staff of the Company. These capabilities are a solid foundation for the Company's sound andsustainable growth in the future.
Currently, the Company has formulated its strategic plan for the fourth five-year period (2023-2027). In theperiod, the Company will adhere to the strategic idea of "1+N", with the strategy of "a wealth of talent" and"cultural guidance" as the solid support, and promote the five strategies of "business concentration", "extendedinvestment", "globalization", "digitalization" and "collaboration" to achieve the goal of "to become an industrialgroup with high influence in its areas, trust from customers and shareholders, and respect from employees".
The Company's strategic plan for the fourth five-year period (2023-2027)
| To become an industrial group with | ||
| high influence in its areas, trust from customers and shareholders, and respect from employees | ||
"1+N" development model
"1+N" development modelBusinessconcentrationstrategy
Businessconcentrationstrategy
Focus on
"integrated
corrugated
packagingsolutions", carry on
with the spin-offlisting of thebusiness of "water
powersportsequipment", and
continuouslyoptimize capital
operation
Focus on
"integrated
corrugatedpackagingsolutions", carry on
with the spin-off
listing of thebusiness of "water
powersportsequipment", and
continuouslyoptimize capital
operation
Extended
investment
strategy
Extended
investment
strategy
Follow the guidance
of the Group'sstrategic plan, seekbusiness synergies,
explore newbusinessopportunities, and
facilitate the
Group's robustdevelopment with
the principalbusinesses as thecore and extendedinvestment as the
support
Follow the guidance
of the Group'sstrategic plan, seekbusiness synergies,
explore newbusinessopportunities, and
facilitate the
Group's robustdevelopment with
the principalbusinesses as thecore and extendedinvestment as the
supportGlobalization
Globalization
Global marketing,global operation,and a globalbusiness portfolio
Global marketing,global operation,and a globalbusiness portfolioDigitalization
| Digitalization | |
| Improve the internal IT system, build digitalized factories, increase management effectiveness, and support better production efficiency | |
Collaboration
| Collaboration |
| Realize close collaboration among all business divisions by giving play to the Group Headquarters’ functions |
"A wealth of Talent" × Cultural Guidance
Details are as follows:
? Business concentration strategy: Focus on the core business of “integrated corrugated packaging
solutions” and strengthen the endogenous growth constantly, as well as complete the spin-off listing ofthe subsidiary Parsun Power with its business of "water powersports products", and continuouslyoptimize capital operation.
? Extended investment strategy: Follow the guidance of the Group's strategic plan, seek businesssynergies, explore new business opportunities, and facilitate the Group's robust development with theprincipal businesses as the core and extended investment as the support, as well as use such means asM&A, financial investment and the spin-off listing of subsidiary to accumulate momentum for highergrowth.
? Globalization strategy: Committed to the globalization of the marketing network, management andoperation and the business portfolio, including assets, business, talent and operation and management.
? Digitalization strategy: Internally, continue to enhance the IT system to improve management
effectiveness and support the improvement of operational efficiency; externally, provide modular digitalsolutions for upstream and downstream enterprises through the subsidiary Dongfang Digicom, build adigital platform for the whole chain, and promote the digital transformation of the whole industrialchain.
? Collaboration strategy: Build the organizing ability for group operation, strengthen collaboration among
internal business entities, optimize the internal collaboration mechanism, put in place a three-tier groupoperation structure of "Group Headquarters + Business Divisions + Profit Generating Units", andrealize close collaboration among all business divisions by giving play to the Group Headquarters’functions.
? A wealth of talent strategy: Enhance cross-culture leadership, build an excellent talent team, optimize
the talent management system, etc.
? Cultural guidance strategy: Establish common goals and values for the Group, build the Group as aninternational family, and lead subsidiaries towards common growth.(II) The Company's main business plan for 2023
1. Promote capacity expansion and support growth in operating performance
In 2022, the Company’s domestic and international business entities achieved a total order intake ofapproximately RMB5,404 million, an increase of 31% YoY, which is the biggest annual order intake by theCompany for years. To actively seize market opportunities and meet order delivery needs, relevant business unitsof the Company will vigorously promote capacity expansion in 2023. In early 2023, a groundbreaking ceremonywas held for the subsidiary Fosber Asia’s new corrugated cardboard production line intelligent plant constructionproject, covering an area of approximately 80 mu. It is expected that upon completion of the new plant, FosberAsia’s production capacity will be increased by more than twice. In August 2022, the subsidiary Wonder Digitalmoved into a new facility, which is nearly three times the size of the previous one. This relocation enabled
Wonder Digital to better meet the delivery of its continuously growing orders and provided strong support toachieve continued growth in business performance. Meanwhile, Fosber Italy, another subsidiary of the Company,will also promote the construction of its new plant in 2023. In addition, in March 2023, the construction of a newgreen digital and intelligence factory with an annual production capacity of 76,400 units of high-end waterpowersports products and the construction of a new R&D centre was officially started by Parsun Power, whichwill lay a solid foundation for the further development of Parsun Power.
2. Corrugated packaging equipment business: Improve business synergy and release growth potentialThe smart corrugated packaging equipment business, as the Company’s core business, covers all the keyprocesses in the value chain of corrugated packaging production and processing. The industrial chain is wellarranged, and the products, technologies, sales networks and supply chains of different business entities havemany similarities and commonalities, so that they can learn and complement each other, which can promote theintegration of various business entities within the Group, and thus achieve business synergy.In 2023, the Company will further improve the synergy between the medium- and high-end corrugatedcardboard production lines business of Fosber Italy and QCorr and the domestic corrugated cardboard productionlines business of Fosber Asia in such aspects as R&D design, production and manufacturing, and supply chain;further deepen the collaboration between the corrugated box printing and packaging production line equipmentbusiness of Dongfang Precision (China) and that of Dongfang Precision (Europe) in such aspects as R&D design,production and manufacturing, and supply chain; promote the in-depth integration and adjustment of Tiru?aGroup to stimulate the latter’s operating vitality and development potential, and introduce the corrugated rollerand pressure roller products of Tiru?a into China to achieve the localized production of the corrugated roller andpressure roller business, thus expanding new market for Tiru?a products in China and Asia while supporting thedevelopment of the domestically high-end corrugated cardboard production lines business. The Company willpromote domestic business entities to introduce leading high-end equipment products from Europe into China,redesign, modify and localize such products in combination with the needs of customers in China and Asiamarkets, and launch appropriate domestically produced high-end equipment products to customers in bothdomestic and Asia markets; promote the Group’s business entities at home and abroad to share resources in suchaspects as supply chain, production capacity and sales network to achieve advantage complementation and jointresource utilization, thus improving the overall operating efficiency of core business, reducing the overall cost,strengthening the overall market competitiveness, and exploring new markets on this basis; promote the collisionand integration between the corrugated packaging equipment business and the industrial Internet industrysolutions and digital printing solutions businesses, explore new business models, and create new product mixes, soas to further expand the development space of and inject new development vitality into the Company’s corebusiness.
3. Digital printing solutions business: Expand new fields to achieve continuous growthIn 2023, Wonder Digital will continuously expand business with a focus on product R&D and sales. In termsof R&D, Wonder Digital will, on the premise of consolidating the basic order of digital printing solution in thefield of corrugated packaging, develop new digital printing solution products in such fields as offset cartonprinting, label and home building materials, to meet industry and market needs and further expand thedevelopment space of Wonder Digital, thus achieving continuous growth of the industrial digital business and
improving the comprehensive competitiveness. In terms of sales, Wonder Digital will actively grasp marketopportunities, adjust dales strategies, expand sales areas, strengthen the building and layout of sales and after-salesnetworks at home and abroad, enhance the professional training of dealers and after-sales personnel to improvetheir professional skills and service level, thus providing better after-sales services for customers. Wonder Digitalwill also increase its presence in exhibitions at home and abroad to further improve its market influence andawareness. Wonder Digital strives to, through the efforts above, achieve new breakthroughs and development in2023. In the future, with the promotion and application of its digital printing solutions in multiple fields, WonderDigital will have a broader development space.
4. Industrial Internet industry solutions business: Achieve rapid development and expansionWith the development of digital and intelligent technologies, the industrial Internet and intelligent plant havebecome important approaches and means for digital transformation and intelligent upgrade of the manufacturingindustry. Dongfang Precision actively responds to national policies, fully seize the opportunities of the times,continuously invest resources into industrial Internet and intelligent plant, and take the initiative to explore theapplication of digital and intelligent technologies in the manufacturing industry, in an effort to inject new vitalityinto industry development.In 2023, the Company will unswervingly invest resources to promote the development of the industrialInternet industry solutions business and help customers achieve digital transformation and intelligent upgrade.
In terms of R&D, Dongfang Digicom will continuously improve, rapidly iterate and upgrade independently-developed industrial Internet platform products and intelligent production information management, andconstantly improve product performance and enrich product functions to provide solid support for the promotionand application of the aforesaid products in the field of large packaging.In terms of market expansion, the team of Dongfang Digicom will intensify efforts to promote theapplication of the Industrial Internet Platform products of DFDIGICOM in the field of large packaging, andexpand the application scope of such products to the packaging fields beyond corrugated packaging. In addition,the team of Dongfang Digicom will also actively conduct online and offline promotion activities, participate in theannual industry exhibition in 2023, and establish and improve online product promotion and marketing channels.
In terms of industrial ecosystem, in 2023, Dongfang Digicom will join hands with more organizations andenterprises in the field of industrial Internet in creating a win-win ecosystem and producing greater impacts in thedevelopment wave of industrial Internet in the new era.
5. The extended investment business: Seek business synergies and explore new developmentopportunities
The Company will adhere to the "1+N" strategic model with the co-development and mutual promotion of"Core Business + Extended Investments" business. "1" represents the Company's main business of corrugatedpackaging equipment and the cornerstone, the Company is making great efforts in developing it, and striving toobtain a higher market share in the era of high-end, digital and intelligent trends; "N" represents the incubationand cultivation of subsidiaries and joint-stock companies.
In 2023, the subsidiary, Yineng Investment, the main entity of the extended investment business, willcontinue to take advantage of industries related to the principal operations of Dongfang Precision, focus on high-quality companies in the industrial chain of China and the world. It will also carry out M&A around the industrial
chain according to the business needs and the actual situation of the Company, strengthen the horizontal andvertical integration of the industrial chain, and seek for business synergies.During M&As, Yineng Investment will fully participate in the industries supported by China's "14th Five-Year Plan", focusing its equity investment on high-end equipment manufacturing, intelligent manufacturing andother strategic emerging high-tech industries, and will aim at enterprises with extensive industrial developmentopportunities and favorable industrial advantages. It will obtain good investment returns and at the same timecreate new business development opportunities for the Group.
(III) Possible risks and countermeasures
1. Risks arising from fluctuations in exchange rates
The main settlement currency and recording currency of Fosber Italy, the principal overseas business entityof the Company, are EUR, while the main settlement currency and recording currency of Fosber America and themain settlement currency of the export business of domestic business entities are USD. Fluctuations in USD andEUR exchange rates may exert certain impacts on the presentation of the assets and operating results of overseasbusiness entities in the Company’s consolidated financial statements. EUR declined sharply declined againstRMB in mid-2022, while USD significantly increased against RMB in 2022, even hitting a record high since 2020.The decline of EUR against RMB exceeded the increase of USD against RMB, exerting certain negative impactson the presentation of the operating results of the Company in its consolidated financial statements in 2022.Looking ahead to 2023, considering the uncertainty in the pace and path of interest rate hike by the USFederal Reserve uncertain under the comprehensive influence of various factors and the inflation level anddevelopment trend of the real economy in the US and the EU, USD and EUR exchange rates may fluctuatebeyond expectations in 2023.Countermeasures:
The Company can closely track the global financial market and national exchange rate policies, make timelydecisions to select proper exchange rate management tools to manage exchange rate risks actively. It can alsoreduce risk exposure and increase exchange gains by increasing debts of foreign currency and rely on Groupmanagement to strengthen the level of capital coordination in different countries and regions, balance, and offsetfluctuation risks at the Group level.
2. Risk of inflation in overseas markets
All the business, assets and staff of Fosber Group are located in Europe and North America. They and theirsubsidiaries adopt a localized management and operation model, with product design, development andmanufacturing being completed locally in Europe and the US. The raw materials required for the Company’scorrugated packaging equipment products mainly include a variety of steel plates, steel parts. etc. In 2022, thecombination of high inflation in the US and Europe, complex geopolitics and insufficient supply of some rawmaterials exerted certain impacts on the operating costs of overseas business entities. Looking ahead to 2023, thechange trend of inflation status remains unclear in the US and Europe. It is forecast that the inflation level in theEUR area is expected to remain high, but that in the US is still uncertain somehow.
Countermeasures:
The Company will pay attention to the market prices of important raw materials and components constantly,and conduct dynamic analysis and judgment; it will strengthen proactive management and collaboration by
adopting countermeasures such as proper adjustment of payment settlement and entering into long-term purchaseagreements for important raw materials to control the fluctuation of procurement prices; it will continuouslyincrease the operational efficiency of overseas business entities; it will give full play to the Group's strongcapability of cross-continent-and-country asset allocation brought about by the globalization of business assets,and optimize asset allocation within the Group and reduce overall costs through rational planning andmanagement of internal transactions and sharing of resources.
3. Potential risks of financial investment business
In recent years, the Company has arranged some of its idle owned funds to carry out financial investmentbusiness such as securities investment and entrusted wealth management in an appropriate manner, based on theactual and development needs. There are certain risks of carrying out the above business due to fluctuations in thefinancial market and uncertainty of income; and the risk that the Company may suffer certain investment losses incase of risk events in the process of wealth management activities in terms of investment strategies and use offunds.Countermeasures:
On the premise that the funds required for the daily operation of the main business will not be affected, theCompany reasonably controls the capital scale for financial investment; it establishes and improves the internalcontrol system and mechanism standards for securities investment and entrusted financial management, andstrengthens the risk control management of securities investment business, safeguard the safety of investmentfunds, and strictly control the risk exposure. In accordance with the economic situation and changes in thefinancial market, it continuously tracks and analyses the progress of securities investment and the investment offunds, the progress of project investment and the performance of the capital market, and timely takescorresponding preservation measures to control investment risks.
XII Communications with the Investment Community such as Researches, Inquiries and Interviews
√ Applicable □ Not applicable
| Date | Place | Way of communication | Type of the communication party | Communication party | Main discussions and materials provided by the Company | Index to the relevant information |
| 16 March 2022 | Conference Room of the Company | By phone | Institution | China Universal Asset Management, Zheshang Securities | Introduced the Company's operation, competitive advantages, industry direction and future strategic planning, and answered investors' questions | 002611 Dongfang Precision-- Record on Investor Relation Activities on 16 March 2022 on http://www.cninfo.com.cn |
| 24 March 2022 | Conference Room of the Company | By phone | Institution | ABC-CA Fund Management, AEGON-INDUSTRIAL Fund, CIB Fund, China International Fund, China Southern Asset Management, HFT Investment Management, Western Leadbank FMC, Essence Fund, Rongtong Fund, Boyuan Fund Management, Nuode Asset Management, Baoying Fund, Hwabao WP Fund, Shangzheng Fund, JT Asset Management, Xinyuan Asset Management, Goldstate Capital Fund, Hunan Qingyan Venture Capital, Perseverance Asset Management, Picea Investment Management, New China Asset Management, China Great Wall Asset Management, Shanghai Heju Investment Management, Qian He Capital Management, Guotai Junan Securities Asset Management, Tongben Investment, Shanghai Panjing Investment, Shanghai Jiuge Investment Management, Financial Holding Asset Management, Xizang Hezhong Yisheng Investment Management, Yuancheng Investment Management, | Introduced the Company's operation, competitive advantages, industry direction and future strategic planning, and answered investors' questions | 002611 Dongfang Precision-- Record on Investor Relation Activities on 24 March 2022 on http://www.cninfo.com.cn |
| Dongkai Investment Management, Shanghai Million Tons Asset Management, Taishi Investment Management, CQ Capital Management, Shanghai Jingjing Investment Management, Royel Investment Management, Shanghai Patio Investment Management, Yuancheng Investment Management, Pinpoint Asset Management, Shanghai Licheng Asset Management, Wellspring Capital, Essence Securities, Chasing Securities, Orient Securities, Donghai Securities, Shenwan Hongyuan Securities, Sealand Securities, Haitong Securities, Jiantou Investment Co., Ltd., Fujian Haixia Bank Co., Ltd., Yuanxin (Zhuhai) Private Equity Fund Management Co., Ltd., Peking University Founder Life Insurance Co., Ltd., King Tower Asset Management Company Ltd., PICC Asset Management Co., Ltd., Sinatay Life Insurance Co., Ltd., Beijing Qijihechuang Investment Co., Ltd., Wealth Success Assess Management, etc. | ||||||
| 25 March 2022 | Conference Room of the Company | By phone | Institution | Pacific Assets, East Asia Qianhai Securities, Caida Securities, etc. | Introduced the Company's operation, competitive advantages, industry direction and future strategic planning, and answered investors' questions | 002611 Dongfang Precision-- Record on Investor Relation Activities on 25 March 2022 on http://www.cninfo.com.cn |
| 15 August 2022 | Conference Room of the Company | By phone | Institution | Jiantou Investment Co., Ltd. | Introduced the Company's operation, competitive advantages, industry direction and future strategic planning, and answered investors' questions | 002611 Dongfang Precision-- Record on Investor Relation Activities on 15 August 2022 on http://www.cninfo.com.cn |
| 23 August 2022 | Conference Room of the Company | By phone | Institution | Huarong Securities | Introduced the Company's operation, competitive advantages, industry direction and future strategic planning, and answered investors' questions | 002611 Dongfang Precision-- Record on Investor Relation Activities on 23 August 2022 on http://www.cninfo.com.cn |
| 10 November 2022 | Conference Room of the Company | By phone | Institution | Orient Securities | Introduced the Company's operation, competitive advantages, industry direction and future strategic planning, and answered investors' questions | 002611 Dongfang Precision-- Record on Investor Relation Activities on 10 November 2022 on http://www.cninfo.com.cn |
| 28 November 2022 | Conference Room of the Company | By phone | Institution | Orient Securities Asset Management Co., Ltd. | Introduced the Company's operation, competitive advantages, industry direction and future strategic planning, and answered investors' questions | 002611 Dongfang Precision-- Record on Investor Relation Activities on 28 November 2022 on http://www.cninfo.com.cn |
| 1 December 2022 | Conference Room of the Company | By phone | Institution | Tianfeng Securities | Introduced the Company's operation, competitive advantages, industry direction and future strategic planning, and answered investors' questions | 002611 Dongfang Precision-- Record on Investor Relation Activities on 1 December 2022 on http://www.cninfo.com.cn |
| 2 December 2022 | Conference Room of the Company | One-on-one meeting | Institution | BOCOM Schroders, Northeast Securities, Essence Securities | Introduced the Company's operation, competitive advantages, industry direction and future strategic planning, and answered investors' questions | 002611 Dongfang Precision-- Record on Investor Relation Activities on 2 December 2022 on http://www.cninfo.com.cn |
Part IV Corporate GovernanceI General Information of Corporate GovernanceDuring the Reporting Period, the Company strictly abided by laws and regulations and rules and normative documents ofregulatory authorities, including the Company Law, the Securities Law, the Code of Corporate Governance for Listed Companies,the Rules for Stock Listing of Shenzhen Stock Exchange and the Shenzhen Stock Exchange Guideline No. 1 for the Self-regulationof Listed Companies - Standardized Operation of Listed Companies on the Main Board, continued to improve the Company'scorporate governance structure, refine internal management and control policies, and further strengthen the Company's capability ofgovernance.(I) Shareholders and general meetingDuring the Reporting Period, the Company convened and held general meetings in a standard manner in strict accordance withlaws and regulations. The convening and holding procedures of general meetings, the qualifications of attendants to the meetings andthe voting procedures of the meetings met the provisions of the Company Law, Rules for the Shareholders' Meetings of ListedCompanies, Articles of Associations and Rules of Procedure for General Meeting. Lawyers were engaged to witness the generalmeetings of shareholders and issued legal opinions on their legitimacy to ensure fair treatment toward and fully execution of rights ofall shareholders, especially minority shareholders.(II) The Company and controlling shareholdersDuring the Reporting Period, the Company properly handled the relationship between it and the controlling shareholders inaccordance with the Company Law, Securities Law, Articles of Association and relevant provisions of the securities regulatoryauthority. The controlling shareholders of the Company acted in a normative manner, could exercise their rights and assume theirobligations according to law, did not directly or indirectly interfere with the decision-making and business activities of the Companybeyond the general meeting of shareholders. The Company was independent of the controlling shareholders in terms of business,staffing, assets, organization and finance, and had an independent and complete business system and capability to operateindependently. The Board of Directors, Supervisory Committee and internal organs of the Company operated independently.(III) Directors and the Board of DirectorsDuring the Reporting Period, directors of the Company were elected in strict accordance with the director election procedurespecified in the Articles of Association. The Board of Directors of the Company was composed of seven directors, including threeindependent directors, and the number of members and composition of it met legal and regulatory requirements. During theReporting Period, all directors of the Company actively and strictly complied with the Company Law, Articles of Association andRules of Procedure for the Board of Directors, earnestly attended meetings of the Board of Directors and general meetings ofshareholders, and took an active part in relevant training to improve their business skill, and were diligent and responsible. Theconvening, holding and voting procedure and daily operation of the meetings of the Board of Directors of the Company compliedwith relevant regulations.(IV) Supervisors and the Supervisory CommitteeDuring the Reporting Period, supervisors of the Company were elected in strict accordance with the supervisor electionprocedure specified in the Articles of Association. The Supervisory Committee of the Company was composed of three supervisors,
including one supervising employee representative, and the number of members and composition of it met legal and regulatoryrequirements. The supervisors conscientiously performed their duties and, in line with the attitude of being responsible toshareholders, supervised the financial affairs of the Company as well as the legality and compliance of the performance of duties bydirectors and senior managers of the Company, and safeguarded the legitimate rights and interests of the Company and shareholders.The convening, holding and voting procedures of the meetings of the Supervisory Committee of the Company complied with theCompany Law, Articles of Association and Rules of Procedure for the Supervisory Committee.(V) Independent directors and special committees of the Board of DirectorsDuring the Reporting Period, independent directors of the Company honestly, diligently and independently performed theirduties in accordance with the Company Law and regulations, normative documents and implementation rules of other departments,actively attended relevant meetings, earnestly deliberated the proposals of the Board of Directors, gave independent advice about themajor issues of the Company, effectively protected the interests of the Company and shareholders, especially small and mediumshareholders, and well played their role to supervise as independent directors. Special committees of the Board of Directors of theCompany also performed their duties in a standard manner according to their respective implementation rules.(VI) Information disclosure and transparencyDuring the Reporting Period, the Company performed its obligation of information disclosure in strict accordance with laws andregulations and the Management Measures for Information Disclosure, and disclosed information in a true, accurate, complete andtimely manner and made no false records, misleading statements or major omissions, by which it ensured that all investors andstakeholders had equal opportunities to obtain the Company's information, increased the Company's information transparency, andeffectively played its role in protecting the right to know of small and medium investors.
Were there any significant differences between the actual situation of the corporate governance and the applicable laws andregulations, as well as rules published by China Securities Regulatory Commission on the governance of listed companies?
□ Yes √ No
There were not significant differences between the actual situation of the corporate governance and the applicable laws andregulations, as well as rules published by China Securities Regulatory Commission on the governance of listed companies.
II The Independence of the Company from Controlling Shareholders and Actual Controlleron Assets, Personnel, Finance, Structure, and Business
Since establishment, the Company has been operating in strict accordance with the Company Law, Securities Law and Articlesof Association, and has established and improved its corporate governance structure. The Company is completely independent of itscontrolling shareholders and actual controller in terms of business, staffing, assets, organization and finance, and has an independentand complete business system and capability to operate independently in the market. All production operations and major issues ofthe Company were discussed and determined by the Management, the Board of Directors and the general meetings of shareholders inaccordance with the Articles of Association and relevant policies, and none of them was controlled by any controlling shareholder orthe actual controller.
1. Asset independence
The Company was founded on the overall change of a limited liability company. All its assets and personnel before the sharerestructuring joined the joint stock company. The Company has independent and complete operating assets. After the overall change,the Company owns all the production and operational assets needed for production and operation, and there is no dispute over
property rights. The Company owns production systems, auxiliary production systems and supporting facilities related to itsproduction and operation, and has independent raw material procurement and product selling systems. Assets of the Company arestrictly separated from those of shareholders and the actual controller, and no assets of the Company are being occupied byshareholders or the actual controller.
2. Personnel independence
The Company has completely independent labour, personnel and salary management systems and independent staff teams, andhas signed labour contracts with its employees in accordance with the Labour Law and the Company's policies on labourmanagement. Directors, supervisors and senior managers of the Company were elected in strict accordance with the Company Lawand Articles of Association, and senior managers, including general managers, deputy general managers, financial directors, andsecretaries to the Board of Directors are working full time in the Company and getting paid by the Company. Mr Tang Zhuolin, theactual controller of the Company, is serving as the Chairman of the Board of Directors, and has been legally exercising its functionsand powers according to the Company Law and Articles of Association in engaging in the Company's management.
3. Finance independence
The Company has an independent financial department and full-time financial personnel, and has established an independentand fine financial accounting system and standardized financial policies. It has implemented an effective financial supervision andmanagement system and an internal control system, and it is capable of making independent financial decisions, carrying outindependent accounting and assuming sole responsibility for its profits and losses according to the Articles of Association and itsown situation. The Company has an independent bank account and is not sharing any account of controlling shareholders or theactual controller and, as an independent taxpayer, declares taxes and fulfils tax payment obligations independently according to law,and has never paid taxes together with shareholders' companies.
4. Organization independence
The Company, in accordance with the Company Law and Articles of Association, has set up the General Meeting ofShareholders as the highest authority, the Board of Directors as the decision-making body, and the Supervisory Committee as thesupervisory body, and has a complete corporate governance structure. The Company has a complete internal management system andcorresponding offices and operating departments. The functional departments work according to respective duties and cooperate witheach other, making the Company an organic and independent operating entity free from the intervention of controlling shareholdersand the actual controller.
5. Business independence
The Company has its business independent of controlling shareholders, has independent and complete supply, production andsales systems, and is capable of independent decision-making on business policies and business plans, independent allocation and useof personnel, money and materials, and successful organization and implementation of production and business activities. TheCompany is completely independent in business and is not relying on the first majority shareholder and the actual controller. Thecontrolling shareholders are not conducting business of horizontal competition with that of the Company, and have undertaken not toconduct any business that may be of horizontal competition with that of the Company.III Horizontal Competition
□ Applicable √ Not applicable
IV Annual and Extraordinary General Meetings Convened during the Reporting Period
1. General Meeting Convened during the Reporting Period
| Meeting | Type | Investor participation ratio | Date of the meeting | Disclosure date | Resolution |
| The First Extraordinary General Meeting of 2022 | Extraordinary General Meeting | 33.10% | 14 March 2022 | 15 March 2022 | 1. The Proposal on the 2022 Restricted Share Incentive Plan (Draft) and Its Summary was approved; 2. The Proposal on the Appraisal Management Methods for the 2022 Restricted Share Incentive Plan was approved; 3. The Proposal on the Request for the General Meeting to Authorize the Board of Directors to Handle Matters in Relation to the 2022 Restricted Share Incentive Plan was approved. |
| The 2021 Annual General Meeting | Annual General Meeting | 32.52% | 8 April 2022 | 9 April 2022 | 1. The Proposal on the 2021 Work Report of the Board of Directors (including the 2021 Work Report of Independent Directors) was approved; 2. The Proposal on the 2021 Work Report of the Supervisory Committee was approved; 3. The Proposal on the 2021 Annual Report and Its Summary was approved; 4. The Proposal on the 2021 Final Financial Accounts was approved; 5. The Proposal on the 2022 Budget was approved; 6. The Proposal on the 2021 Final Dividend Plan was approved; 7. The Proposal on the 2021 Internal Control Assessment Report was approved; 8. The Proposal on Intention to Appoint the Independent Auditor for 2022 was approved; 9. The Proposal on the Use of Own Funds for Entrusted Wealth Management in 2022 was approved; 10. The Proposal on the Compliance with Applicable Laws and Regulations of the Spin-off Listing of the Subsidiary Suzhou Parsun Power Machine Co., Ltd. on the ChiNext Board was approved; 11. The Proposal |
| on the Plan for the Spin-off Listing of the Subsidiary Suzhou Parsun Power Machine Co., Ltd. on the ChiNext Board was approved; 12. The Proposal on the Preliminary Plan for the Spin-off Listing of the Subsidiary Suzhou Parsun Power Machine Co., Ltd. on the ChiNext Board was approved; 13. The Proposal on the Compliance with the Spin-off Rules for Listed Companies (Trial) of the Spin-off Listing of the Subsidiary Suzhou Parsun Power Machine Co., Ltd. on the ChiNext Board was approved; 14. The Proposal on the Benefit of the Spin-off Listing of the Subsidiary Suzhou Parsun Power Machine Co., Ltd. on the ChiNext Board in Protecting the Legitimate Interests of Shareholders and Creditors was approved; 15. The Proposal on the Company Maintaining Independence and Going Concern Capability was approved; 16. The Proposal on Suzhou Parsun Power Machine Co., Ltd. Possessing Due Capability of Operation Compliance was approved; 17. The Proposal on the Statement Regarding the Completeness and Compliance of the Statutory Procedures in the Spin-off and the Validity of the Legal Documents Filed was approved; 18. The Proposal on the Purpose, Commercial Rationality, Necessity and Feasibility Analysis of the Spin-off was approved; 19. The Proposal on the Request for the General Meeting to Authorize the Board of Directors and Its Authorized Personnel to Handle Matters in Relation to the Spin-off Listing was approved. | |||||
| The Second Extraordinary General Meeting of | Extraordinary General Meeting | 32.57% | 6 May 2022 | 7 May 2022 | 1. The Proposal on the Conducting of Financial Derivatives Trading was approved; 2. The Proposal on the Revision of the Articles of Association |
| 2022 | was approved; 3. The Proposal on the Revision of the Rules of Procedure for General Meeting was approved; 4. The Proposal on the Revision of the Rules of Procedure for the Board of Directors was approved; 5. The Proposal on the Revision of the Rules of Procedure for the Supervisory Committee was approved; 6. The Proposal on the Revision of the Management Rules for Securities Investment was approved; 7. The Proposal on the Formulation of the Management Rules for Financial Derivatives Trading was approved. | ||||
| The Third Extraordinary General Meeting of 2022 | Extraordinary General Meeting | 33.02% | 12 August 2022 | 13 August 2022 | 1. The Proposal on the Election of Independent Directors for the Fourth Board of Directors was approved by cumulative voting; 2. The Proposal on the Election of Non-Independent Directors for the Fourth Board of Directors was approved by cumulative voting; 3. The Proposal on the Write-off of Certain Repurchased Shares and Reduction of Registered Capital and Amendment of the Articles of Association was approved. |
2. Extraordinary General Meetings Convened at the Request of Preference Shareholders with ResumedVoting Rights
□ Applicable √ Not applicable
V Directors, Supervisors and Senior Management
1. General Information
| Name | Office title | Incumbent/Former | Gender | Age | Start of tenure | End of tenure | Opening shareholding (share) | Increase in the period (share) | Decrease in the period (share) | Other increase/decrease (share) | Closing shareholding (share) | Reason for share change |
| Tang Zhuolin | Chairman of the Board | Incumbent | Male | 60 | 22 July 2010 | 22 September 2023 | 270,737,568 | 270,737,568 | ||||
| Qiu Yezhi | Director and General Manager | Incumbent | Female | 51 | 22 July 2010 | 22 September 2023 | 23,382,388 | 23,382,388 | ||||
| Xie Weiwei | Director and Deputy General Manager | Incumbent | Male | 49 | 16 June 2016 | 22 September 2023 | 1,000,000 | 1,000,000 | ||||
| Zhou Wenhui | Director, Board Secretary and Vice President | Incumbent Vice President and former Director and Board Secretary | Male | 50 | 29 January 2019 | 26 July 2022 | 1,200,000 | 1,200,000 | ||||
| Feng Jia | Director and Board Secretary | Incumbent | Female | 37 | 12 August 2022 | 22 September 2023 | 0 | 700,000 | 700,000 | |||
| Shao | Chief Financial Officer and Vice | Incumbent | Male | 48 | 29 December | 22 September | 800,000 | 800,000 |
| Yongfeng | President | 2020 | 2023 | |||||||||
| Mai Zhirong | Independent Director | Former | Male | 52 | 16 June 2016 | 12 August 2022 | ||||||
| Peng Xiaowei | Independent Director | Former | Male | 52 | 16 June 2016 | 12 August 2022 | ||||||
| He Weifeng | Independent Director | Former | Male | 62 | 16 June 2016 | 12 August 2022 | ||||||
| Li Ketian | Independent Director | Incumbent | Male | 66 | 12 August 2022 | 22 September 2023 | ||||||
| Liu Da | Independent Director | Incumbent | Male | 48 | 12 August 2022 | 22 September 2023 | ||||||
| Tu Haichuan | Independent Director | Incumbent | Male | 43 | 12 August 2022 | 22 September 2023 | ||||||
| Chen Huiyi | Chairman of the Supervisory Committee | Incumbent | Female | 38 | 19 May 2017 | 22 September 2023 | 480 | 480 | ||||
| Zhao Xiuhe | Employee Supervisor | Incumbent | Male | 52 | 16 June 2016 | 22 September 2023 | ||||||
| He Baohua | Supervisor | Incumbent | Male | 41 | 22 September 2020 | 22 September 2023 | 614,088 | 614,088 | ||||
| Total | -- | -- | -- | -- | -- | -- | 297,734,524 | 700,000 | 0 | 0 | 298,434,524 | -- |
Indicate whether any director, supervisor or senior management resigned or was dismissed before the end of their tenure during theReporting Period.
□ Yes √ No
Changes of directors, supervisors and senior management:
√ Applicable □ Not applicable
| Name | Office title | Type of change | Date | Reason |
| Zhou Wenhui | Board Secretary | Removed | 14 March 2022 | Due to internal adjustments, Mr. Zhou Wenhui ceased to be Board Secretary of the Company but continued to be Director and Vice President of the Company. |
| Feng Jia | Board Secretary | Appointed | 14 March 2022 | The Proposal on the Change of Board Secretary was approved at the 14th Meeting of the Fourth Board of Directors on 14 March 2022. As such, Ms. Feng Jia has been appointed as Board Secretary of the Company. |
| Zhou Wenhui | Director | Resigned | 26 July 2022 | Due to internal adjustments, Mr. Zhou Wenhui ceased to be Director of the Fourth Board of Directors of the Company but continued to be Vice President of the Company. He is also General Manager of the subsidiary Yineng Investment. |
| Feng Jia | Director | Elected | 12 August 2022 | The Proposal on the Election of Non-independent Director for the Fourth Board of Directors was approved at the Third Extraordinary General Meeting in 2022 on 12 August 2022. As such, Ms. Feng Jia has elected as Non-independent Director of the Fourth Board of Directors of the Company. |
| Mai Zhirong | Independent Director | Resigned upon the expiry of his tenure | 12 August 2022 | Mr. Mai Zhirong resigned as Independent Director of the Fourth Board of Directors upon the expiry of his tenure. |
| Peng Xiaowei | Independent Director | Resigned upon the expiry of his tenure | 12 August 2022 | Mr. Peng Xiaowei resigned as Independent Director of the Fourth Board of Directors upon the expiry of his tenure. |
| He Weifeng | Independent Director | Resigned upon the expiry of his tenure | 12 August 2022 | Mr. He Weifeng resigned as Independent Director of the Fourth Board of Directors upon the expiry of his tenure. |
| Li Ketian | Independent Director | Elected | 12 August 2022 | The Proposal on the Election of Independent Directors for the Fourth Board of Directors was approved at the Third Extraordinary General Meeting in 2022 on 12 August 2022. As such, Mr. Li Ketian has been elected as Independent Director of the Fourth Board of Directors of the Company. |
| Liu Da | Independent Director | Elected | 12 August 2022 | The Proposal on the Election of Independent Directors for the Fourth Board of Directors was approved at the Third Extraordinary General Meeting in 2022 on 12 August 2022. As such, Mr. Liu Da has been elected as Independent Director of the Fourth Board of Directors of the Company. |
| Tu Haichuan | Independent Director | Elected | 12 August 2022 | The Proposal on the Election of Independent Directors for the Fourth Board of Directors was approved at the Third Extraordinary General Meeting in 2022 on 12 August 2022. As such, Mr. Tu Haichuan has been elected as Independent Director of the Fourth Board of Directors of the Company. |
2. Biographical Information
Professional backgrounds, major work experience and current posts in the Company of the incumbent directors, supervisors andsenior management:
1. Members of the Board of Directors
Mr. Tang Zhuolin, born in August 1963, Chinese, has no right of permanent residence abroad. He is a member of the 12
th
People'sPolitical Consultative Conference of Nanhai District, Foshan City, Guangdong Province, Managing Director of the 9th Council ofChina Packaging Federation, Managing Director of Guangdong Food and Packaging Machinery Association, Vice President ofFoshan Machinery Equipment Industry Association, Honorary President of Foshan Nanhai District Machinery Equipment TradeAssociation, Vice President of Foshan High-tech Zone Chamber of Commerce, and Vice President of Foshan Nanhai District ListedCompany Association. He once was Head of Nanhai Guichengdong Plastic and Textile Factory No. 2, Head of NanhaiGuichengdong Printing Machinery Factory No. 2, and Supervisor of Shenzhen Zhiquan Venture Capital Co., Ltd. He used to serve asthe Company's General Manager and Chief Engineer since 1996, and is currently Chairman of the Board of the Company. He is alsoDirector of Dong Fang Precision (HK) Limited, Director of Dong Fang Precision (Netherland) Cooperatief U.A., Chairman of theBoard of EDF Europe S.r.l., Director of Fosber S.p.A., Director of Guangdong Fosber Intelligent Equipment Co., Ltd., ExecutiveDirector and General Manager of Suzhou Shunyi Investment Co., Ltd., Executive Director and General Manager of Hainan YinengInvestment Co., Ltd., Supervisor of Dongfang Digicom Technology Co., Ltd., Supervisor of Dongfang Digicom Technology(Guangdong) Co., Ltd., Executive Director and Manager of Dongfang Yineng International Holding Co., Ltd., Chairman of the Boardof Shenzhen Wonder Digital Technology Co., Ltd., Director of Fosber America, Inc., Director of Tiru?a Grupo Industrial, S.L.,Director of Tiru?a S.L.U., Director of Parsun Power, Executive Director and General Manager of Shenzhen Xianglin Venture CapitalCo., Ltd., Supervisor of Shenzhen Shenghui Venture Capital Co., Ltd., etc.Ms. Qiu Yezhi, born in July 1972, Chinese, has no right of permanent residence abroad, MBA, National Model Worker, Member ofthe 12
th
People's Political Consultative Conference of Foshan City, Guangdong Province, and Deputy to the 17
th
People’s Congressof Nanhai District, Foshan City, Guangdong Province. Served successively as the Company's Director of the General Manager'sOffice, General Manager of Operations and General Manager since 1996, and as the Company's General Manager and BoardSecretary from July 2010 to October 2013. She served as the General Manager and Director of Foshan Yinglian Digital PrintingEquipment Co., Ltd. from May 2017 to September 2020. Currently the Company's Director and General Manager, ExecutiveDirector and General Manager of Dongfang Digicom Technology Co., Ltd., Supervisor of Hainan Yineng Investment Co., Ltd.,
Chairman of the Board of Guangdong Fosber Intelligent Equipment Co., Ltd., Executive Director of Dongfang Digicom Technology(Guangdong) Co., Ltd., Vice Chairman of the Board of Fosber S.p.A., Director of Fosber America, Inc., Director of Tiru?a GrupoIndustrial, S.L., Director of Tiru?a S.L.U., Director of QuantumCorrugated S.r.l., Director of EDF Europe S.r.l., Supervisor ofDongfang Yineng International Holding Co., Ltd., Director of Tiru?a America inc., Director of Suzhou Parsun Power Machine Co.,Ltd., Executive Director and General Manager of Shenzhen Shenghui Venture Capital Co., Ltd., and Supervisor of ShenzhenXianglin Venture Capital Co., Ltd., etc.Mr. Xie Weiwei, Chinese, born in 1974, has no right of permanent residence abroad, MBA, Member of the 14
thPeople's PoliticalConsultative Conference of Nanhai District, Foshan City, Guangdong Province, graduated from Huazhong University of Science andTechnology in 2008. Once served as the Standing Deputy General Manager of Foshan Multimodal Transport Corp., Chairman of theBoard of Foshan Donghuochang Railway Logistics Co., Ltd., Deputy Chief of the Reform and Development Division of FoshanSASAC, and Deputy Head of the Investment Department and Head of the Asset Management Department of Foshan FinancialInvestment Holdings Co., Ltd. Currently the Company's Director and Deputy General Manager, and Director of the joint-stockcompany Guangdong Jaten Robot & Automation Co., Ltd.Ms. Feng Jia, Chinese, born in 1986, has no right of permanent residence abroad. She is Doctor of Engineering of ZhejiangUniversity, Postdoctoral Fellow of Guangzhou Institute of Energy Conversion of Chinese Academy of Sciences, and IntermediateEngineer. She used to work as Associate Researcher at Guangzhou Institute of Energy Conversion of Chinese Academy of Sciencesfrom 2014 to 2018, Senior Manager in the Research and Development Department of China Securities Co., Ltd. from 2018 to 2019,and Assistant to President & Board Secretary of Tianjin LVYIN Landscape and Ecology Construction Co., Ltd. from 2019 to 2021.Joining the Company in September 2021, she is now Director, Vice President and Board Secretary of the Company.Mr. Li Ketian, Chinese, born in 1957, has no right of permanent residence abroad. Graduated from South China University ofTechnology with a doctoral degree and a professional title of professor of mechanical engineering. Once served as a worker,technician and engineer at the Wuhan Camera Factory from 1974 to 1989 and as a lecturer, associate professor and professor atGuangdong University of Technology from 1992 to 2020. Currently the Leader of the China Technical Guidance Expert Group forthe Plastic Mold Engineering Project of the World Skills Competition, and the Independent Director of Dongfang Precision.Mr. Liu Da, Chinese, born in 1975, has no right of permanent residence abroad. Graduated from University of International Businessand Economics with bachelor of economics. A certified public accountant. Once served as the Senior Audit Manager ofPricewaterhouseCoopers from 1998 to 2009, Chief Internal Auditor of Prudential Life Insurance Co., Ltd. from 2009 to 2010.Currently the Director and General Manager of Guangzhou Kaihua Investment Consulting Co., Ltd. In the last five years, he has beenthe Independent Director of Zensun Enterprises Limited (Stock Code: 185) and the Independent Director of Kimou EnvironmentalHolding Limited (Stock Code: 6805), both are listed companies on the main board of the Hong Kong Stock Exchange. He has alsobeen the Supervisor of Guangzhou Longyi Kaihua Enterprise Management Consulting Co., Ltd, Supervisor of One Tutor EducationConsulting (Guangzhou) Co., Ltd., and Independent Director of Dongfang Precision.Mr. Tu Haichuan, Chinese, born in 1980, has no right of permanent residence abroad. Graduated from Shanghai University ofFinance and Economics with a major in asset evaluation and accounting. A certified public accountant. Once served as the AuditManager of Guangdong Dahua Delv Certified Public Accountants from 2004 to 2009, Investment Director of Guangxi SaifuInvestment Co., Ltd. in 2010, Financial Manager, Chief Financial Officer and Assistant to the Chairman of Guangdong DongfangPrecision Science & Technology Co., Ltd. from December 2010 to September 2016. Currently the Executive Director and GeneralManager of Shenzhen Changhe Capital Management Co., Ltd. In the last five years, he has been the Director of Guangzhou ShoulianEnvironment Group Co., Ltd. and Shenzhen Aiwen Culture Development Co., Ltd., and Independent Director of Dongfang Precision.
2. Members of the Supervisory Committee
Ms. Chen Huiyi, Chinese, born in 1985, with a university degree, has no right of permanent residence abroad. Once served as theassistant of the Quality Control Department of Dongfang Plastic Products Co., Ltd. Joined Dongfang Precision in 2010, and currentlythe Chairman of the Company's Supervisory Committee and Secretary to the Company's General Manager, as well as Supervisor ofthe subsidiary Suzhou Parsun Power Machine Co., Ltd.Mr. He Baohua, Chinese, born in 1982, with a university degree, has no right of permanent residence abroad. Joined GuangdongDongfang Precision Science & Technology Co., Ltd. in 2002, engaged in after-sales management and project management, currentlythe Company's supervisor and Senior Project Manager of the Project Management Department.Mr. Zhao Xiuhe, Chinese, born in 1971, with a technical secondary school degree, has no right of permanent residence abroad.Joined Dongfang Precision in February 2006, currently the Company's Director of the Administration Department. Served as theCompany's Employee Supervisor since June 2016.
3. Senior management
Ms. Qiu Yezhi, currently the Company's General Manager. Her resume is detailed in "1. Members of the Board of Directors".Mr. Xie Weiwei, currently the Company's Deputy General Manager. His resume is detailed in "1. Members of the Board ofDirectors".Ms. Feng Jia, currently the Company’s Board Secretary. Her resume is detailed in "1. Members of the Board of Directors".Mr. Shao Yongfeng, Chinese, born in 1975, has no right of permanent residence abroad. Graduated with a bachelor's degree fromZhongnan University of Economics and Law, a PRC certified public accountant and PRC certified public assets estimator. Served asFinancial Manager and Financial Director of TCL Multimedia Technology Holdings Limited from 2001 to 2010, joined HaierEurope in 2015 and served successively as the company's Financial Director and CFO of Europe, joined Shenzhen SmooreTechnology Limited and served as Financial Director from 2016 to 2017, served as Vice President Finance in Shenzhen CIMCTianda from 2017 to 2020, and joined Guangdong Dongfang Precision Science & Technology Co., Ltd. in April 2020 and currentlythe Company's Chief Financial Officer and Vice President.Offices held concurrently in shareholding entities:
□ Applicable √ Not applicable
Offices held concurrently in other entities:
√ Applicable □ Not applicable
| Name | Other entity | Office held in the entity | Start of tenure | End of tenure | Remuneration or allowance from the entity or not |
| Tang Zhuolin | Dongfang Precision (HK) | Director | 5 February 2013 | No | |
| Tang Zhuolin | Dongfang Precision (Netherland) | Director | 29 October 2013 | No | |
| Tang Zhuolin | Fosber Italy | Director | 26 March 2014 | Yes | |
| Tang Zhuolin | Dongfang Precision (Europe) | Chairman of the Board | 15 June 2016 | Yes | |
| Tang Zhuolin | Fosber Asia | Director | 30 September 2014 | Yes | |
| Tang Zhuolin | Parsun Power | Director | 24 May 2015 | No |
| Tang Zhuolin | Shunyi Investment | Executive Director and General Manager | 2 July 2015 | No | |
| Tang Zhuolin | Yineng Investment | Executive Director and General Manager | 10 October 2020 | Yes | |
| Tang Zhuolin | Dongfang Digicom | Supervisor | 26 October 2020 | Yes | |
| Tang Zhuolin | Dongfang Digicom (Guangdong) | Supervisor | 26 February 2021 | No | |
| Tang Zhuolin | Wonder Digital | Chairman of the Board | 7 June 2022 | Yes | |
| Tang Zhuolin | Dongfang Yineng International Holding Co., Ltd. | Executive Director and Manager | 15 February 2022 | No | |
| Tang Zhuolin | Shenzhen Xianglin Venture Capital Co., Ltd. | Executive Director and General Manager | 26 May 2016 | No | |
| Tang Zhuolin | Shenzhen Shenghui Venture Capital Co., Ltd. | Supervisor | 16 May 2016 | No | |
| Tang Zhuolin | Fosber America | Director | 26 July 2022 | Yes | |
| Tang Zhuolin | Tiru?a Group | Director | 3 August 2022 | Yes | |
| Tang Zhuolin | Tiru?a S.L.U. | Director | 3 August 2022 | No | |
| Qiu Yezhi | Fosber Italy | Vice Chairman of the Board | 26 March 2014 | Yes | |
| Qiu Yezhi | Fosber America | Director | 26 July 2022 | Yes | |
| Qiu Yezhi | Tiru?a Group | Director | 30 May 2019 | Yes | |
| Qiu Yezhi | Tiru?a America | Director | 26 July 2022 | Yes | |
| Qiu Yezhi | Tiru?a S.L.U. | Director | 30 May 2019 | No | |
| Qiu Yezhi | QCorr | Director | 3 February 2020 | Yes | |
| Qiu Yezhi | Fosber Asia | Chairman of the Board | 15 July 2020 | Yes | |
| Qiu Yezhi | Dongfang Precision (Europe) | Director | 15 June 2016 | Yes | |
| Qiu Yezhi | Parsun Power | Director | 24 May 2015 | No | |
| Qiu Yezhi | Yineng Investment | Supervisor | 10 October 2020 | No | |
| Qiu Yezhi | Dongfang Digicom | Executive Director and General Manager | 26 October 2020 | No | |
| Qiu Yezhi | Dongfang Digicom (Guangdong) | Executive Director | 26 February 2021 | No |
| Qiu Yezhi | Dongfang Yineng International Holding Co., Ltd. | Supervisor | 15 February 2022 | No | |
| Qiu Yezhi | Shenzhen Xianglin Venture Capital Co., Ltd. | Supervisor | 26 May 2016 | No | |
| Qiu Yezhi | Shenzhen Shenghui Venture Capital Co., Ltd. | Executive Director and General Manager | 18 May 2015 | No | |
| Xie Weiwei | Shunyi Investment | Supervisor | 2 July 2015 | No | |
| Xie Weiwei | Jaten Robot | Director | 23 March 2016 | Yes | |
| Xie Weiwei | Foshan Nanhai District Machinery Equipment Trade Association | Branch Secretary | 23 November 2020 | Yes | |
| Liu Da | Guangzhou Kaihua Investment Consulting Co., Ltd. | Director and General Manager | April 2010 | Yes | |
| Liu Da | Zensun Enterprises Limited | Independent Director | 27 July 2015 | Yes | |
| Liu Da | Kimou Environmental Holding Limited | Independent Director | 1 March 2023 | Yes | |
| Tu Haichuan | Shenzhen Longriver Capital Management Co., Ltd. | Executive Director | October 2016 | Yes | |
| Tu Haichuan | Shenzhen Ivan Culture Development Co., Ltd. | Director | March 2018 | No | |
| Shao Yongfeng | Dongfang Digicom | Chief Financial Officer | 1 January 2021 | Yes | |
| Shao Yongfeng | Yineng Investment | Chief Financial Officer | 1 January 2021 | Yes | |
| Chen Huiyi | Parsun Power | Supervisor | 10 October 2022 | No | |
| He Baohua | Shenzhen Zhiquan Venture Capital Co., Ltd. | Supervisor | 10 August 2021 | No | |
| Note | Not applicable | ||||
Punishments imposed in the recent three years by the securities regulator on the incumbent directors, supervisors and seniormanagement as well as those who left in the Reporting Period:
□ Applicable √ Not applicable
3. Remuneration of Directors, Supervisors and Senior Management
Following the approval of the Remuneration and Appraisal Committee, the remunerations for directors, supervisors and seniormanagement are submitted to the Board of Directors and the Supervisory Committee for further approval. The remunerations ofdirectors and supervisors are subject to final approval by the general meeting, and those of senior management are subject to theBoard of Directors. The decision-making procedures are in compliance with the Company Law, the Company’s Articles ofAssociation, and the Company’s Specific Implementation Rules for the Remuneration and Appraisal Committee under the Board ofDirectors. In the Reporting Period, the actual payments of remuneration for directors, supervisors and senior management wereconsistent with the resolutions of the general meeting and the Board of Directors.
Remuneration of directors, supervisors and senior management for the Reporting Period
Unit: RMB'0,000
| Name | Office title | Gender | Age | Incumbent/Former | Total before-tax remuneration from the Company | Remuneration from any related party or not |
| Tang Zhuolin | Chairman of the Board | Male | 60 | Incumbent | 393.06 | Yes |
| Qiu Yezhi | Director and General Manager | Female | 51 | Incumbent | 397.98 | Yes |
| Xie Weiwei | Director and Deputy General Manager | Male | 49 | Incumbent | 79.33 | Yes |
| Zhou Wenhui | Director, Board Secretary and Vice President | Male | 50 | Former | 50.89 | No |
| Feng Jia | Director, Board Secretary and Vice President | Female | 37 | Incumbent | 68.83 | No |
| Shao Yongfeng | Chief Financial Officer and Vice President | Male | 48 | Incumbent | 130.76 | No |
| Mai Zhirong | Independent Director | Male | 52 | Former | 13.98 | No |
| Peng Xiaowei | Independent Director | Male | 52 | Former | 13.98 | No |
| He Weifeng | Independent Director | Male | 62 | Former | 13.98 | No |
| Li Ketian | Independent Director | Male | 66 | Incumbent | 6.02 | No |
| Liu Da | Independent Director | Male | 48 | Incumbent | 6.02 | No |
| Tu Haichuan | Independent Director | Male | 43 | Incumbent | 6.02 | No |
| Chen Huiyi | Chairman of the Supervisory Committee | Female | 38 | Incumbent | 28.79 | No |
| Zhao Xiuhe | Employee Supervisor | Male | 52 | Incumbent | 22.64 | No |
| He Baohua | Supervisor | Male | 41 | Incumbent | 54.54 | No |
| Total | -- | -- | -- | -- | 1,286.82 | -- |
VI Performance of Duty by Directors in the Reporting Period
1. Board Meetings Convened during the Reporting Period
| Meeting | Date of the meeting | Disclosure date | Resolution |
| The 13th (Extraordinary) Meeting of the 4th Board of Directors | 25 February 2022 | 26 February 2022 | 2. The Proposal on the Appraisal Management Methods for the 2022 Restricted Share Incentive Plan was approved. 3. The Proposal on the Request for the General Meeting to Authorize the Board of Directors to Handle Matters in Relation to the 2022 Restricted Share Incentive Plan was approved. 4. The Proposal on the Satisfaction of the Unlocking Conditions for the First Unlocking Period for the Reserved Restricted Shares under the 2020 Restricted Share Incentive Plan was approved. 5. The Proposal on the Satisfaction of the Unlocking Conditions for the First Unlocking Period for the Reserved Restricted Shares under the 2020 Restricted Share Incentive Plan was approved. |
| The 14th Meeting of the 4th Board of Directors | 14 March 2022 | 15 March 2022 | 1. The Proposal on the 2021 Work Report of the Board of Directors (including the 2021 Work Report of Independent Directors) was approved. 2. The Proposal on the 2021 Work Report of the General Manager was approved. 3. The Proposal on the 2021 Annual Report and Its Summary was approved. 4. The Proposal on the 2021 Final Financial Accounts was approved. 5. The Proposal on the 2022 Budget was approved. 6. The Proposal on the 2021 Final Dividend Plan was approved. 7. The Proposal on the 2021 Internal Control Assessment Report was approved. 8. The Proposal on the Summary Report of the Audit Committee of the Board of Directors on the 2021 Audit Service Provided by Ernst & Young Hua Ming LLP (Special General Partnership) and the Renewal of Ernst & Young as the Company's 2022 Audit |
| Institution was approved. 9. The Proposal on the Use of Own Funds for Entrusted Wealth Management in 2022 was approved. 10. The Proposal on the Use of Own Funds for Investment Securities in 2022 was approved. 11. The Proposal on the Application for Comprehensive Credit Line from Banks in 2022 was approved. 12. The Proposal on the Trundling Revision of the 2018-2022 Five Year Strategic Plan was approved. 13. The Proposal on the Change of the Board Secretary was approved. 14. The Proposal on the Convening of the 2021 Annual General Meeting was approved. 15. The Proposal on the Compliance with Applicable Laws and Regulations of the Spin-off Listing of the Subsidiary Suzhou Parsun Power Machine Co., Ltd. on the ChiNext Board was approved. 16. The Proposal on the Plan for the Spin-off Listing of the Subsidiary Suzhou Parsun Power Machine Co., Ltd. on the ChiNext Board was approved. 17. The Proposal on the Preliminary Plan for the Spin-off Listing of the Subsidiary Suzhou Parsun Power Machine Co., Ltd. on the ChiNext Board was approved. 18. The Proposal on the Compliance with the Spin-off Rules for Listed Companies (Trial) of the Spin-off Listing of the Subsidiary Suzhou Parsun Power Machine Co., Ltd. on the ChiNext Board was approved. 19. The Proposal on the Benefit of the Spin-off Listing of the Subsidiary Suzhou Parsun Power Machine Co., Ltd. on the ChiNext Board in Protecting the Legitimate Interests of Shareholders and Creditors was approved. 20. The Proposal on the Company Maintaining Independence and Going Concern Capability was approved. 21. The Proposal on Suzhou Parsun Power Machine Co., Ltd. Possessing Due Capability of Operation Compliance was approved. 22. The Proposal on the Statement Regarding the Completeness and Compliance of the Statutory Procedures in the Spin-off and the Validity of the Legal Documents Filed was approved. 23. The Proposal on the Purpose, Commercial Rationality, Necessity and Feasibility Analysis of the Spin-off was approved. 24. The Proposal on the Request for the General Meeting to Authorize the Board of Directors and Its Authorized Personnel to Handle Matters in Relation to the Spin-off Listing was approved. | |||
| The 15th (Extraordinary) Meeting of the 4th Board of Directors | 21 March 2022 | 22 March 2022 | 1. The Proposal on the First Grant of Restricted Shares to Awardees under the 2022 Restricted Share Incentive Plan was approved. |
| The 16th (Extraordinary) Meeting of the | 19 April 2022 | 20 April 2022 | 1. The Proposal on the 2021 First Quarter Report was approved. 2. The Proposal on the Conducting of Financial Derivatives Trading was approved. |
| 4th Board of Directors | 3. The Proposal on the Revision of the Articles of Association was approved. 4. The Proposal on the Revision of the Rules of Procedure for General Meeting was approved. 5. The Proposal on the Revision of the Rules of Procedure for the Board of Directors was approved. 6. The Proposal on the Revision of the Work Rules for General Manager was approved. 7. The Proposal on the Revision of the Management Rules for Related Transactions was approved. 8. The Proposal on the Revision of the Management Rules for External Guarantees was approved. 9. The Proposal on the Revision of the Management Systems for Major Investments was approved. 10. The Proposal on the Revision of the Management Systems of Securities Investments was approved. 11. The Proposal on the Formulation of the Management Systems for Financial Derivatives Trading was approved. 12. The Proposal on the Convening of the Second Extraordinary General Meeting for 2022 was approved. | ||
| The 17th (Extraordinary) Meeting of the 4th Board of Directors | 17 June 2022 | 18 June 2022 | 1. The Proposal on the Satisfaction of the Unlocking Conditions for the Second Unlocking Period for the First Grant under the 2020 Restricted Share Incentive Plan was approved (the related directors, Qiu Yezhi, Zhou Wenhui, and Xie Weiwei avoided voting). |
| The 18th (Extraordinary) Meeting of the 4th Board of Directors | 18 July 2022 | 19 July 2022 | 1. The Proposal on the Write-off of Certain Repurchased Shares and Reduction of Registered Capital was approved. |
| The 19th Meeting of the 4th Board of Directors | 26 July 2022 | 27 July 2022 | 1. The Proposal on the 2021 Semi-Annual Report and Its Summary was approved. 2. The Proposal on Re-election of Independent Directors and Nomination of Candidates for Independent Directors of the Fourth Board of Directors was approved. 3. The Proposal on Re-election of Non-independent Directors and Nomination of Candidates for Non-independent Directors of the Fourth Board of Directors was approved. 4. The Proposal on the Convening of the Third Extraordinary General Meeting for 2022 was approved. |
| The 20th (Extraordinary) Meeting of the 4th Board of Directors | 23 September 2022 | 24 September 2022 | 1. The Proposal on the Further Determination of the Purpose of Repurchased Shares and Write-off of Certain Repurchased Shares was approved. |
| The 21st (Extraordinary) Meeting of the | 25 October 2022 | No announcement required according to the rules of the | 1. The Proposal on the 2022 Third Quarter Report was approved. |
| 4th Board of Directors | Shenzhen Stock Exchange |
2. Attendance of Directors at Board Meetings and General Meetings
| Attendance of directors at board meetings and general meetings | |||||||
| Director | Total number of board meetings the director was eligible to attend | Board meetings attended on site | Board meetings attended by way of telecommunication | Board meetings attended through a proxy | Board meetings the director failed to attend | The director failed to attend two consecutive board meetings or not | General meetings attended |
| Tang Zhuolin | 9 | 2 | 7 | 0 | 0 | Not | 4 |
| Qiu Yezhi | 9 | 2 | 7 | 0 | 0 | Not | 4 |
| Xie Weiwei | 9 | 2 | 7 | 0 | 0 | Not | 4 |
| Zhou Wenhui | 7 | 2 | 5 | 0 | 0 | Not | 3 |
| Mai Zhirong | 7 | 2 | 5 | 0 | 0 | Not | 3 |
| Peng Xiaowei | 7 | 1 | 5 | 1 | 0 | Not | 3 |
| He Weifeng | 7 | 2 | 5 | 0 | 0 | Not | 3 |
| Feng Jia | 2 | 0 | 2 | 0 | 0 | Not | 1 |
| Li Ketian | 2 | 0 | 2 | 0 | 0 | Not | 1 |
| Liu Da | 2 | 0 | 2 | 0 | 0 | Not | 1 |
| Tu Haichuan | 2 | 0 | 2 | 0 | 0 | Not | 1 |
Why any director failed to attend two consecutive board meetings: N/A
3. Objections Raised by Directors on Matters of the Company
Indicate whether any directors raised any objections on any matter of the Company.
□ Yes √ No
No such cases in the Reporting Period.
4. Other Information about the Performance of Duty by Directors
Indicate whether any suggestions from directors were adopted by the Company.
√ Yes □ No
Suggestions from directors adopted or not adopted by the Company:
During the Reporting Period, the directors and independent directors of the Company worked in strict accordance with the
requirements of the Company Law, the Securities Law, the Guidelines for the Standardized Operation of Listed Companies on theShenzhen Stock Exchange, the Articles of Association, the Rules of Procedure for the Board of Directors and other relevant laws andregulations, earnestly attended the Board meetings and the General Meetings, and were diligent and responsible. They have maderelevant suggestions on the major governance and operation decisions of the Company. The independent directors actively got toknow the operation of the Company and delivered different opinions on major matters of the Company, giving better play to theirsupervisory role and effectively maintaining the interests of the Company and its shareholders.
VII Performance of Duty by Special Committees under the Board in the Reporting Period
| Committee | Members | Number of meetings convened | Date of meeting | Contents | Important opinion and suggestions | Other performance of duties | Particulars about objections (if any) |
| Remuneration and Appraisal Committee | Peng Xiaowei, Qiu Yezhi, and He Weifeng | 1 | 25 February 2022 | 2. The Proposal on the Management Methods for the Implementation and Appraisal of the 2022 Restricted Share Incentive Plan was approved. 3. The Proposal on the Awardee List for the First Grant under the 2022 Restricted Share Incentive Plan was approved. 4. The Proposal on the 2020 Annual Performance Appraisal Results for the Awardees of the 2020 Restricted Share Incentive Plan was approved. 5. The Proposal on the Satisfaction of the Unlocking Conditions for the First Unlocking Period for the Reserved Shares under the 2020 Restricted Share Incentive Plan was approved. | N/A | N/A | N/A |
| Audit Committee | Mai Zhirong, Qiu Yezhi, and He Weifeng | 1 | 11 March 2022 | 2. The Proposal on the 2021 Internal Control Self-Assessment Report was approved. 3. The Proposal on the Summary Report of the Audit Committee of the Board of Directors on the 2021 Annual Audit of Ernst & Young Hua Ming LLP was approved. 4. The Proposal on the Proposed Appointment of an Audit Institution for 2022 was approved. | N/A | N/A | N/A |
| Nomination Committee | Peng Xiaowei, Mai Zhirong, and Tang Zhuolin | 1 | 11 March 2022 | 1. The Proposal on the Nomination of Board Secretary Candidate was approved. | N/A | N/A | N/A |
| Remuneration and Appraisal | Peng Xiaowei, Qiu Yezhi, and | 1 | 17 June 2022 | 2. The Proposal on the Satisfaction of the Unlocking Conditions for the Second | N/A | N/A | N/A |
| Committee | He Weifeng | Unlocking Period for the First Grant under the 2020 Restricted Share Incentive Plan was approved. | |||||
| Nomination Committee | Peng Xiaowei, Mai Zhirong, and Tang Zhuolin | 1 | 22 July 2022 | 2. The Proposal on the Nomination of Independent Director Candidate for the Fourth Board of Directors was approved. | N/A | N/A | N/A |
VIII Performance of Duty by the Supervisory Committee
Indicate whether the Supervisory Committee found any risk to the Company during its supervision in the Reporting Period.
□ Yes √ No
No such cases in the Reporting Period.IX Employees
1. Number, Functions and Educational Backgrounds of Employees
| Number of in-service employees of the Company as the parent at the period-end | 512 |
| Number of in-service employees of principal subsidiaries at the period-end | 1,599 |
| Total number of in-service employees at the period-end | 2,111 |
| Total number of paid employees in the Reporting Period | 2,446 |
| Number of retirees to whom the Company as the parent or its major subsidiaries need to pay retirement pensions | 23 |
| Functions | |
| Function | Employees |
| Production&Operation | 1,163 |
| Marketing | 288 |
| R&D and technical | 327 |
| Financial | 81 |
| Comprehensive | 252 |
| Total | 2,111 |
| Educational backgrounds | |
| Educational background | Employees |
| Below junior college | 1,067 |
| Junior college | 541 |
| Bachelor’s degree | 421 |
| Master’s degree and above | 82 |
| Total | 2,111 |
2. Employee Remuneration Policy
Domestic business entities:
The remuneration policy in 2022 continued to be based on posts and performance and subject to total control.
A comprehensive remuneration system was established and further improved to retain and attract talents neededfor the Company's sustainable development.
1. Paid remuneration based on posts: The relative value of a post was determined based on its duties, and theremuneration rage of the post was determined based on the relative value and according to the Company's valueorientation.
2. Paid remuneration based on performance: The Company determined the basic remuneration based on therelative value of a post and personal competence, determined the performance bonus in an employee'sremuneration based on his/her performance, and adjusted the remuneration based on his/her personal competenceand overall performance.
3. Changed remuneration with the change in post: The remuneration was strictly fitted to the post, and if thepost changed, the remuneration changed, so that the remuneration system can support the career development ofemployees.
4. Total control: The total amount of remuneration was controlled within the scope recognized by theCompany, and the growth rate of remuneration should be lower than that of sales revenue and profit. TheCompany's affordability was taken into account so that the Company's business performance can support thegrowth of the total labour cost.
5. The remuneration system of payment by piece is applied to first-line workers of domestic business entities,so that they could be paid more by being more profession and working harder, so as to reflect an internally fairremuneration policy based on differential skill scoring.Overseas business entities:
The remuneration system for each overseas business entity is put in place in accordance with the local laborlaw and other applicable laws.
3. Training Plan
1. Overall status: 192 training sessions were carried out at the Group headquarters and domestic branches andsubsidiaries in 2022. The number of training hours per capita was about 18.33 hours, totaling 6,575 trainingattendees. There were eight leadership empowerment training sessions, 104 hours of teaching, covering 127people; 155 professional competence training sessions, 678 hours of teaching, covering 5,382 people; 16 generalcapability training sessions, 99 hours of teaching, covering 1,796 people; 2 main business training sessions,covering 137 people; 11 training sessions for new recruits, 55 hours of teaching, covering 213 people. Onlinetraining resources enable a total of 211 hours of empowerment across six major courses.
2. The Company actively introduced external online and offline training resources, implemented the trainingmore effectively and conveniently, empowered core employees and shared training resources in the Group.
3. The Company empowered the team of internal trainers, improved their curriculum development andteaching skills, preparing instructors and curriculum database for internal training and talent team construction.
4. Initiate the implementation of training management integration rules to encourage knowledge learning andknowledge contribution. Hold a seminar to promote the implementation of the "a wealth of talent" strategy toclarify the main objectives and key initiatives of the Group's key talent cultivation and provide solid talent supportfor the Group's high-quality development.
4. Labor Outsourcing
√ Applicable □ Not applicable
| Total hours of labor outsourced | 54,352.5 |
| Total payment for labor outsourcing (RMB yuan) | 1,634,415 |
X Profit Distributions to Ordinary Shareholders (in the Form of Cash and/or Stock)
The profit distribution policy for shareholders, especially the formulation, implementation and amendments to the cash dividendpolicy, in the Reporting Period:
√ Applicable □ Not applicable
Article 183 of the Articles of Association of Guangdong Dongfang Precision Science & Technology Co., Ltd. Has specified themethod of profit distribution and the conditions, schedule and proportion of cash dividend, as well as the procedures to decide andadjust or change profit distribution, in order to fully protect the legitimate rights and interests of investors.The profit distribution policy of the Company remained unchanged in the Reporting Period.
| Special statement about the cash dividend policy | |
| In compliance with the Company’s Articles of Association and resolution of general meeting | Yes |
| Specific and clear dividend standard and ratio | Yes |
| Complete decision-making procedure and mechanism | Yes |
| Independent directors faithfully performed their duties and played their due role | Yes |
| Non-controlling shareholders are able to fully express their opinion and desire and their legal rights and interests are fully protected | Yes |
| In case of adjusting or changing the cash dividend policy, the conditions and procedures involved are in compliance with applicable regulations and transparent | Not applicable |
Indicate whether the Company fails to put forward a cash dividend proposal for shareholders despite the facts that the Company hasmade profits in the Reporting Period and the profits of the Company as the parent distributable to shareholders are positive.
□ Applicable √ Not applicable
Final dividend plan for the Reporting Period:
□ Applicable √ Not applicable
The Company planed not to distribute cash dividends, neither give away bonus shares, nor capitalize from public reserve
XI Equity Incentive Plans, Employee Stock Ownership Plans or Other Incentive Measures forEmployees
√ Applicable □ Not applicable
1. Equity Incentives
To refine its long-term incentive mechanism, boost the enthusiasm of management personnel and key employees of all levels,effectively promote long-term development, and achieve the objective of “Promoting Team Stability and Morale, Attract Talent andImprove Operating Performance”, the Company launched the 2020 Restricted Share Incentive Plan in the first quarter of 2020. Theplan was approved at the First Extraordinary General Meeting of 2020 on 27 March 2020. For details, see the Summary of the 2020Restricted Share Incentive Plan disclosed by the Company on www.cninfo.com.cn dated 12 March 2020.
To further build and improve its long-term incentive mechanism, attract, and retain talent, fully motivate its key managerial,technological, and business personnel, effectively align the Company’s and shareholders’ interests with the personal interests of thecore team, and make all the parties concerned to focus on the long-term development of the Company, the Company launched the2022 Restricted Share Incentive Plan in the first quarter of 2022. The plan was approved at the First Extraordinary General Meetingof 2022 on 14 March 2022. For details, see the 2022 Restricted Share Incentive Plan disclosed by the Company onwww.cninfo.com.cn dated 15 March 2022.
1. On 25 February 2022, the Proposal on the Satisfaction of the Unlocking Conditions for the First Unlocking Period for theReserved Restricted Shares under the 2020 Restricted Share Incentive Plan was approved at the 13th (Extraordinary) Meeting of the4th Board of Directors and the 10th (Extraordinary) Meeting of the 4th Supervisory Committee. On 9 March 2022, 848,000 sharesheld by 18 awardees were unlocked for public trading in the first unlocking period for the reserved restricted shares under the 2020Restricted Share Incentive Plan.
2. On 21 March 2022, the Proposal on the First Grant of Restricted Shares to Awardees under the 2022 Restricted ShareIncentive Plan was approved at the 15th (Extraordinary) Meeting of the 4th Board of Directors. The date for the first grant was 21March 2022. In April 2022, the Company completed the ownership transfer of the 2.65 million restricted shares to 7 awardees atRMB1.00/share, the listing date of which is 28 April 2022. For details, see the Announcement on the Completion of the OwnershipTransfer of the First Grant under the 2022 Restricted Share Incentive Plan disclosed by the Company on www.cninfo.com.cn dated29 April 2022.
3. On 17 June 2022, the Proposal on the Satisfaction of the Unlocking Conditions for the Second Unlocking Period for the FirstGrant under the 2020 Restricted Share Incentive Plan was approved at the 17th (Extraordinary) Meeting of the 4th Board of Directorsand the 14th (Extraordinary) Meeting of the 4th Supervisory Committee. On 24 June 2022, 8,620,000 shares held by 37 awardeeswere unlocked for public trading in the second unlocking period for the first grant under the 2020 Restricted Share Incentive Plan.
Equity incentives received by directors and senior management:
√ Applicable □ Not applicable
Unit: share
| Name | Office title | Opening share options | Share options newly granted in the Repor | Exercisable shares in the Reporting Period | Exercised shares in the Reporting Period | Exercise price for exercised shares in the Reporti | Closing share options | Market price at the period-end (RMB yuan/sh | Opening restricted shares | Unlocked shares in the Reporting Period | Restricted shares newly granted in the | Grant price (RMB yuan/share) | Closing restricted shares |
| ting Period | ng Period (RMB yuan/share) | are) | Reporting Period | ||||||||||
| Qiu Yezhi | Director and General Manager | 7,200,000 | 3,600,000 | 0 | 1 | 3,600,000 | |||||||
| Xie Weiwei | Director and Deputy General Manager | 800,000 | 400,000 | 0 | 1 | 400,000 | |||||||
| Feng Jia | Director, Board Secretary and Vice President | 0 | 0 | 700,000 | 1 | 700,000 | |||||||
| Shao Yongfeng | Chief Financial Officer and Vice President | 800,000 | 160,000 | 0 | 1 | 640,000 | |||||||
| Total | -- | -- | -- | 8,800,000 | 4,160,000 | 700,000 | -- | 5,340,000 |
Appraisal of and incentive for senior management:
The Company has established a sound performance appraisal and remuneration policy for senior managers, and determined keyperformance indicators (KPIs) matching different posts, which linked the income of the Company's managers and employees at
different levels to their work performance. During the Reporting Period, the Company assessed and appraised the work ability, dutyperformance and completion of responsibility goals of senior managers based on the KPIs, and closely linked their remunerationlevels with the Company's business performance.
2. Implementation of Employee Stock Ownership Plans
□ Applicable √ Not applicable
3. Other Incentive Measures for Employees
□ Applicable √ Not applicable
XII Formulation and Implementation of Internal Control System during the ReportingPeriod
1. Internal Control Formulation and Implementation
In accordance with the provisions of the Basic Code for Internal Control of Enterprises and its supporting guidelines and otherregulatory requirements for internal control, the Company has set up a relatively complete corporate governance structure andinternal control management system in line with its actual operation, which is in line with the needs of the Company's operation andmanagement. The Company has established internal control over the businesses and matters included in the scope of evaluation foreffective implementation. The objective of internal control has been basically achieved with no material weakness.The Board of Directors of the Company is responsible for establishing sound and effective internal controls and evaluating theireffectiveness in accordance with the provisions of the standard system for enterprise internal control. The Supervisory Committeesupervised the establishment and implementation of internal controls by the Board of Directors.
The Company would ensure legal compliance in operation and management, assets safety, truthfulness and integrity of financialreports and related information through the sound and effective implementation of internal controls to improve operational efficiencyand effect, and promote the development strategy.
2. Significant Defects in Internal Control Identified during the Reporting Period
□ Yes √ No
XIII Subsidiary Management during the Reporting Period
| Subsidiary | Management plan | Progress | Problems | Solutions | Solution progress | Subsequent plan |
| Shenzhen Wonder Digital Technology Co., Ltd. | 1. Organizational structure and | The integration plan has been largely completed and the corresponding integration goals have been | Currently not available | Currently not available | Currently not available | Currently not available |
| 2. Set up and issue authorization forms for each position based on business conditions. 3. Establish corresponding management systems for each functional department and improve systematic management processes. 4. Improve the financial management informationization and compliance and establish a set of financial accounting and settlement processes and systems that meet the requirements of listed companies. 5. Assist Wonder Digital to complete the overall relocation of the plant within the year, further expand production capacity, and meet development needs. | achieved. |
XIV Self-Assessment Report and Independent Auditor’s Report on Internal Control
1. Internal Control Self-Assessment Report
| Date of disclosure of the full internal control assessment report | 28 March 2023 |
| Index to the full internal control assessment report disclosed | Published on www.cninfo.com.cn |
| Ratio of the total assets of the organizations included in the assessment to the total assets in the Company's consolidated financial report | 100.00% |
| Ratio of the revenue of | 100.00% |
| the organizations included in the assessment to the revenue in the Company's consolidated financial report | ||
| Defect identification criteria | ||
| Category | Financial report | Non-financial report |
| Qualitative criteria | 1) Indications of significant defects in financial reports include: a. Fraudulent conduct by directors, supervisors and senior management of the Company; b. Correction of a published financial report by the Company; c. Significant misstatement in the current financial report identified by a certified public account but not identified during the Company's internal control audit; d. Invalid supervision of the Audit Committee and audit department over the Company's external financial reports and internal control of financial reports. 2) Indications of important defects in financial reports included: a. Failure to select or apply accounting policies in accordance with GAAP; b. Failure to implement anti-fraud procedures and take control measures; c. Lack of corresponding control mechanism for accounting treatment of unconventional or special transactions or lack of corresponding compensatory control; d. One or more defects in the control of the period-end financial reporting process and failure to reasonably ensure true and complete financial reports. 3) General defects refer to the control defects other than significant and important defects mentioned above. | The identification of defects in non-financial reports is mainly based on the degree of impact of the defects on the effectiveness of business procedures and the possibility of their occurrence. 1) Significant defect If the possibility of the defect is high, it will seriously reduce the work efficiency or effectiveness, seriously increase the uncertainty of the effectiveness, or make the work result seriously deviate from the expected goal, the defect is a significant defect. The following usually indicates a significant defect in the internal control of non-financial reports: a. Violation of national laws and regulations; b. Outflow of managers or key technicians; c. Frequent negative news from media; d. Failure to correct the results, especially significant or important defects, in internal control assessment; e. Lack of system control or systematic failure of system in important business. 2) Important defect If the possibility of the defect is relatively high, it will significantly reduce the work efficiency or effectiveness, significantly increase the uncertainty of the effectiveness, or make the work result significantly deviate from the expected goal, the defect is an important defect. The following usually indicates an important defect in the internal control of non-financial reports: a. Defects in important business policies or systems; b. Important mistakes in the decision-making process; c. Serious outflow of business personnel in key posts; d. Failure to timely remedy the important defects identified in internal supervision of internal control; e. Other circumstances that have a negative impact on the Company. 3) General defects referred |
| to the control defects other than significant and important defects mentioned above. | ||
| Quantitative criteria | A quantitative judgment was made based on the pretax profit of the Company. The misstatement exceeding 5% of the total pretax profit was determined as a significant misstatement, that exceeding 3% of the total pretax profit was determined as an important misstatement, and others were determined as general misstatements. | The revenue and total assets were the measuring indicators for the quantitative criteria. If the loss that may result from or results from an internal control defect is related to the profit report, it was measured by the revenue indicator. If the amount of misstatement in the financial report that may result from the defect alone or it together with other defects is less than 0.5% of the revenue, the defect was determined as a general defect. If it exceeds 0.5% and is less than 1% of the revenue, it was determined as an important defect. If it exceeds 1% of the revenue, it was determined as a significant defect. If the loss that may result from or results from an internal control defect is related to asset management, it was measured by the total asset indicator. If the amount of misstatement in the financial report that may result from the defect alone or it together with other defects is less than 0.5% of the total assets, the defect was determined as a general defect. If it exceeds 0.5% and is less than 1% of the total assets, it was determined as an important defect. If it exceeds 1% of the total assets, it was determined as a significant defect. |
| Number of significant defects in financial reports | 0 | |
| Number of significant defects in non-financial reports | 0 | |
| Number of important defects in financial reports | 0 | |
| Number of important defects in non-financial reports | 0 | |
2. Independent Auditor’s Report on Internal Control
√ Applicable □ Not applicable
| In the opinion of Ernst & Young Hua Ming LLP, Guangdong Dongfang Precision Science & Technology Co., Ltd. maintained, in all material respects, effective internal control over financial reporting as at 31 December 2022, based on the Basic Rules on Enterprise Internal Control and other applicable rules. | |
| Independent auditor’s report on internal control disclosed or not | Yes |
| Disclosure date | 28 March 2023 |
| Index to such report disclosed | www.cninfo.com.cn |
| Type of the auditor’s opinion | Unmodified unqualified opinion |
| Material weaknesses in internal control not related to financial reporting | None |
Indicate whether any modified opinion is expressed in the independent auditor’s report on the Company’s internal control.
□ Yes √ No
Indicate whether the independent auditor’s report on the Company’s internal control is consistent with the internal control self-evaluation report issued by the Company’s Board of Directors.
√ Yes □ No
XV Rectifications of Problems Identified by Self-inspection in the Special Action for ListedCompany GovernanceDuring the Reporting Period, the Company carried out special self-inspection activities on governance according tothe unified deployment of regulatory authorities, and the results of the self-inspection are as follows:
(I) Overview of corporate governanceIn strict accordance with the requirements of the Company Law, the Securities Law, the Code of CorporateGovernance for Listed Companies, the Listing Rules of Shenzhen Stock Exchange and other relevant laws andregulations, the Company has continuously improved its corporate governance structure, established and improved itsinternal control system to standardize its operations and enhance information disclosure. It also actively developedinvestor relations management, and complied with the requirements of laws and regulations in all aspects of corporategovernance.
(II) Problems in corporate governance and rectification
1. Due to other arrangements, there were circumstances where some directors or senior management did not attend(preside) the General Meeting as required.
Rectification: The Company strengthened training, educated the requirements of relevant laws and regulations tofacilitate the participation of directors, supervisors and senior management in General Meetings via video, telephoneand Internet.
2. There were circumstances where independent directors were unable to attend the board meeting in person
Rectification: The Company strengthened training, educated the requirements of relevant laws and regulations tofacilitate the participation of independent directors in board meeting via video, telephone and Internet.
Part V Environmental and Social ResponsibilitiesI Significant Environmental IssuesWhether the listed company and its subsidiaries fell into major pollutant-discharge enterprises and institutions published by nationalenvironmental protection authorities.
□ Yes √ No
The Company and its subsidiaries did not fall into major pollutant-discharge enterprises and institutions published by nationalenvironmental protection authorities, and the Company was not administratively punished for environmental issues in the ReportingPeriod. For other environmental information, please refer to “II Social Responsibilities” below.Measures taken to reduce carbon emissions in the Reporting Period and the impact:
□ Applicable √ Not applicable
II Social ResponsibilitiesThe Company attached importance to fulfil social responsibility in daily operations, intending to promote the harmony and co-prosperity between it and parties related to its interests. The Company also took active measures in the protection of the rights andinterests of shareholders, creditors, employees, suppliers, customers and consumers, environmental protection, sustainabledevelopment, public relations and social public welfare undertakings, and strived to maximize comprehensive social benefitsincluding the sustainable development of itself.
(1) Corporate governance: During the Reporting Period, the Company strictly abided by the Company Law, the Securities Lawand Code of Corporate Governance for Listed Companies, continued to refine the corporate governance structure, improve theinternal control system, formed the decision-making system comprising the Shareholders' General Meeting, the Board of Directors,the Supervisory Committee and the Management, and timely fulfilled its obligation of information disclosure according to laws andregulations and effectively safeguarded the rights and interests of all shareholders.
(2) Rights and interests of employees: The Company provided employees with welfare and care by providing holiday gifts andholding employee birthday parties, annual meetings and team building activities, improved employees' professional competence byoffering regular or irregular training to employees in the headquarters and domestic and foreign branches and subsidiaries, andcontinued to improve the competitive comprehensive remuneration system to retain and attract talents needed for the Company'ssustainable development.
(3) Relationship with customers and suppliers: Long adhering to the principle of "honest business" and "mutual benefit andwin-win", the Company took the initiative to construct and develop strategic partnership with suppliers and customers and jointlybuilt a platform of trust and cooperation, and earnestly fulfilled its social responsibilities to suppliers, customers and consumers. TheCompany has been well performing contracts with suppliers and customers and ensuring that the rights and interests of all parties arehighly valued and duly protected.
(4) Production safety: The Company strictly abided by the Labour Law and the Labour Contract Law, adhered to the "people-oriented" principle, attached importance to the needs of employees, strived to improve the working and living environments ofemployees, and has set up a labour union to effectively protect the interests of employees. It also provided labour protection suppliesaccording to the risk factors of different posts, organized occupational health examinations for employees (before taking the post, onthe post and before leaving the post), and bought safety liability insurance for employees on highly risky posts. In 2020, DongfangPrecision extended its Grade II Production Safety Standardization Certificate for Machinery Enterprises, and Parsun Power and
Fosber Asia were granted the Grade III Production Safety Standardization Certificate for Machinery Enterprises.
(5) Environmental protection: First, Dongfang Precision was granted the National Pollutant Discharge Permit and met post-licensing regulatory requirements as required. Second, Dongfang Precision commissioned the qualified third-party environmentalprotection agencies to compile the Contingency Plans for Environmental Emergencies, and commission a third-party testing agencyto take samples every quarter to monitor and issue third-party test reports, and transfer hazardous waste in strict accordance withnational requirements. Third, the Company’s environmental protection facilities passed the qualification re-examination onOHSAS18001:2007 Occupational Health and Safety Management Systems and ISO14001:2005 Environmental Management System.Parsun Power, which is a subsidiary of the Company, is not in the heavy pollution industry, its production process has less impact onthe environment, and it has purchased complete environmental protection equipment, which are in normal operation and can meet thedaily pollutant treatment requirements, that leads no violation of environmental protection related laws and administrative regulationsand receive administrative penalties.
(6) Anti-fraud: The Group complied a thorough internal authorization manual that detailed provisions on internalauthorization process of major matters to ensure appropriate internal control and reduce the risk of fraud. In order to create a fair, just,honest and non-corrupt internal business environment and strengthen internal monitoring, the Company also established andlaunched the anti-fraud reporting platform to encourage employees to report fraud findings.
(7) Social honour: Dongfang Precision won honorary titles including "Top 500 Private Manufacturing Enterprises in China","Leading Enterprises in Subdivided Industries in Foshan", and "Guangdong Provincial Industrial Design Center "; Fosber Asia wonhonorary titles including "Guangdong Demonstration Enterprise of Intellectual Property". Parsun Power is a national "small giant"enterprise, a national high-tech enterprise, an engineering technology research center for outboard engines in Jiangsu Province, anenterprise technology centre recognized by Jiangsu Province, a leading enterprise in China's internal combustion engine industry anda director unit of the Small Gasoline Engine Branch of China Internal Combustion Engine Industry Association. The outboard engineof BPS has also won many honors such as the certificate of industrialization demonstration project of national torch plan, innovativeproduct of China machinery industry, famous brand product of Jiangsu province and famous brand product of Suzhou city.III Efforts in Poverty Alleviation and Rural RevitalizationThe Company did not conduct activities related to targeted poverty alleviation in the Reporting Year, nor did it develop anysubsequent plan for targeted poverty alleviation.
Part VI Significant Events
I Fulfillment of Undertakings
1. Undertakings of the Company’s Actual Controller, Shareholders, Related Parties and Acquirers, as well as the Company Itself and other Entities Fulfilledin the Reporting Period or Ongoing at the Period-end
√ Applicable □ Not applicable
| Cause of undertakings | Parties of undertakings | Types of undertakings | Contents of undertakings | Date of undertakings | Term of undertakings | Fulfilment of undertakings |
| Undertakings related to reform of shareholder structure | ||||||
| Undertakings made in acquisition report of change of equity report | ||||||
| Undertakings made in asset reorganization | Tang Zhuolin, Tang Zhuomian | Undertaking on horizontal competition, related-party transactions and capital occupation | 1. I will conduct all related-party transactions, unavoidable or arising from a reasonable reason, between me and companies controlled by me and Dongfang Precision and its controlling subsidiaries in a fair and reasonable manner and on an equal, mutually beneficial, equivalent and compensable basis in strict accordance with market principles. For all related-party transactions between me and companies controlled by me and Dongfang Precision and its controlling subsidiaries, I will sign agreements and go through procedures according to law and fulfil the obligation of information disclosure in accordance with relevant laws, regulations, normative documents, Articles of Association of Dongfang Precision | 25 April 2017 | Long-term effective | In normal progress of fulfilment |
| Cause of undertakings | Parties of undertakings | Types of undertakings | Contents of undertakings | Date of undertakings | Term of undertakings | Fulfilment of undertakings |
| and other corporate governance provisions, and undertakes not to damage the legitimate rights or interests of the listed company and small and medium shareholders. 2. When any related-party transaction involving me and companies controlled by me is being deliberated by the authority of Dongfang Precision, I will proactively perform the obligation of evading according to law and conduct the transaction only with the approval of the competent authority. 3. I undertake not to obtain any improper benefits or cause Dongfang Precision and its controlling subsidiaries to assume any improper obligations through related-party transactions. In case of any losses to Dongfang Precision or its controlling subsidiaries as a result of any breach of the above undertakings, I will be liable for such losses. | ||||||
| Pulead; BAIC Capital; Foton; CATL; Qinghai Puren | Other undertakings | When the Company is conducting major asset reorganization by acquiring 100% of Beijing Pride's equity, former shareholders of Beijing Pride, namely Pulead, Qinghai Puren, BAIC Capital, Foton and CATL, undertake that: 1. None of them has signed any agreement on concerted action as of the date of signature of the Agreement to Purchase Assets by Issuing Shares and Paying Cash, nor will them do so in the future, although BAIC Capital and Foton are subject to a concerted action relation and so as Pulead and Qinghai Puren. 2. They will not attempt to change any member of the Board of Directors of Dongfang Precision through a general meeting of shareholders. | July 28, 2016 | Long-term effective | In normal progress of fulfilment | |
| Tang Zhuolin, Tang Zhuomian | Undertaking on horizontal competition, related-party transactions and capital occupation | 1. The undertaker and companies controlled by it are not engaging in any business the same as, similar to or competing with the business of the listed company and companies controlled by it, and they will neither, in any way, engage in or assist others in engaging in any business that competes or may compete with the business of the listed company and companies controlled by it, nor merge or substantially invest in (or jointly hold), directly or indirectly, other companies engaging in any business that competes or may compete with the business of the listed company and companies controlled by it. 2. If the listed company engages in a new business sector, the undertaker will not engage in any business that competes with such a new business of the listed company, except with the prior written consent of the listed company. 3. If any business opportunity obtained by the undertaker from any third party completes or may compete with the business of the listed company and companies controlled by | 25 November 2019 | Long-term effective | In normal progress of fulfilment |
| Cause of undertakings | Parties of undertakings | Types of undertakings | Contents of undertakings | Date of undertakings | Term of undertakings | Fulfilment of undertakings |
| it, the undertaker will immediately inform and make every effort to deliver the business opportunity to the listed company. 4. The undertaker will not, in any way, use the information or other resources obtained from the listed company to conduct any act that harms the interests of the listed company. 5. In case of any losses to the listed company as a result of breach of these undertakings by the undertaker, the undertaker will make thorough, timely and full compensation for all such losses and take active measures to eliminate the adverse effects caused thereby. | ||||||
| Tang Zhuolin, Tang Zhuomian | Undertaking on horizontal competition, related-party transactions and capital occupation | 1. The undertaker will refrain from any illegal occupation of the funds and assets of the listed company, and will never require the listed company to provide any form of guarantee to it or companies controlled by it under any circumstances. 2. The undertaker will, to the extent possible, avoid and minimize related-party transactions with the listed company, and for all related-party transactions unavoidable or arising from a reasonable reason, it will conduct following the principle of voluntary, fair and reasonable market pricing and according to normal market trading conditions, sign agreements and go through procedures according to law, abide by relevant laws, regulations, normative documents and articles of association of the listed company, perform internal decision-making and approval procedures according to law, and timely perform the obligation of information disclosure, so as to ensure that the related-party transactions are fairly and reasonably priced and conducted under fair trading conditions and that it will not damage the legitimate rights or interests of the listed company and its shareholders through related-party transactions. 3. In case of any losses to the listed company as a result of breach of these undertakings by the undertaker, the undertaker will make thorough, timely and full compensation for all such losses and take active measures to eliminate the adverse effects caused thereby. | 25 November 2019 | Long-term effective | In normal progress of fulfilment | |
| Tang Zhuolin, Tang Zhuomian | Other undertakings | 1. I will not overstep my authority to intervene in the operation and management of Dongfang Precision, will not occupy the interests of Dongfang Precision, and will earnestly take corresponding measures to fill up the diluted spot returns of Dongfang Precision. 2. After the CSRC and Shenzhen Stock Exchange otherwise release the measures to fill up diluted spot returns and opinions and implementation rules for its undertakings, if Dongfang Precision's corresponding policies and | 25 November 2019 | Long-term effective | In normal progress of fulfilment |
| Cause of undertakings | Parties of undertakings | Types of undertakings | Contents of undertakings | Date of undertakings | Term of undertakings | Fulfilment of undertakings |
| undertakings fail to meet such provisions, I will immediately submit a supplementary undertaking to the CSRC and Shenzhen Stock Exchange as required in order to be compliant. 3. I undertake to earnestly take the corresponding measures formulated by the listed company to fill up diluted spot returns and to earnestly fulfil my undertakings. If I violate such undertaking(s) and cause losses to the Company or investors, I am willing to bear the corresponding liability for compensation according to law. | ||||||
| Tang Zhuolin, Tang Zhuomian | Other undertakings | 1. After the relevant transaction, the undertaker will continue to maintain the independence of the listed company in terms of staffing, asset, business, organization and finance in accordance with relevant laws, regulations and normative documents, and will not conduct any act that affects such independence or damages the interests of the listed company and other shareholders, and will effectively safeguard the independence of the listed company in terms of staffing, asset, business, organization and finance. 2. This letter of undertaking shall be effective and irrevocable as of the date when it is officially signed by the undertaker. The undertaker warrants to fulfil the undertaking(s) in good faith, and the listed company has the right to supervise its fulfilment. Where the undertaker fails to fulfil the undertaking(s) in good faith of undertaking and thus cause actual losses to the listed company, the undertaker shall compensate the listed company for all director or indirect losses caused thereby. | 25 November 2019 | Long-term effective | In normal progress of fulfilment | |
| He Weifeng, Mai Zhirong, Peng Xiaowei, Qiu Yezhi, Tang Zhuolin, Xie Weiwei, Zhou Wenhui | Other undertakings | 1. I will not transfer benefits to other organizations or individuals for free or under unfair conditions, nor will I damage the interests of the Company in other ways. 2. I will constrain my consumption behaviour on the position. 3. I will not use the Company's assets to engage in any investment or consumption activities unrelated to my performance of duties. 4. I will link the remuneration system formulated by the Board of Directors or the Remuneration Committee to the implementation of the | 25 November 2019 | Long-term effective | In normal progress of fulfilment |
| Cause of undertakings | Parties of undertakings | Types of undertakings | Contents of undertakings | Date of undertakings | Term of undertakings | Fulfilment of undertakings |
| Company's measures to fill up returns. 5. If the Company has an equity incentive program, I will link the exercise conditions of the equity incentive program to be announced to the implementation of the Company's measures to fill up returns. 6. After this undertaking is given, if the regulator puts forward other requirements for the measures to fill up returns and the undertaking and the undertaking fails to meet such requirements, I will give a supplementary undertaking according to the latest requirements of the regulator. 7. I will effectively implement the Company's measures to fill up returns and fully fulfil my corresponding undertakings, and I am willing to bear the corresponding liability for compensation according to law if I violate such undertaking(s) and cause losses to the Company or investors. | ||||||
| Undertakings made in IPO or refinancing | Tang Zhuolin, Tang Zhuomian | Undertaking on horizontal competition, related-party transactions and capital occupation | Before the fact that I am (or the Company is) a major shareholder of the issuer is changed, I (or the Company) will not, directly or indirectly, in any way (including but not limited to sole proprietorship, joint venture and holding stocks or interests in other companies or enterprises), engage in any business or activity that competes or may compete with the business of the issuer. I (The Company) shall compensate the issuer for any loss caused to it as a result of the failure to fulfil the undertaking to avoid horizontal competition. | 18 August 2010 | Long-term effective | In normal progress of fulfilment |
| Tang Zhuolin, Tang Zhuomian | Other undertakings | If relevant government or judicial authorities decide that Dongfang Precision or Weike Dongmeng need to make a supplementary payment for employees' public housing provision, or Dongfang Precision or Weike Dongmeng is subject to any late fee, fine or loses for failing to pay the public housing provision for some employees, I will unconditionally and in full bear such supplementary payment, late fees and fines. | 14 August 2011 | Long-term effective | In normal progress of fulfilment | |
| Undertakings related to equity incentives | ||||||
| Undertakings made to |
| Cause of undertakings | Parties of undertakings | Types of undertakings | Contents of undertakings | Date of undertakings | Term of undertakings | Fulfilment of undertakings |
| minority shareholders of the Company | ||||||
| Whether the undertakings were timely performed | Yes | |||||
| Where the Company failed to fulfill an undertaking on time, it shall explain in detail the reasons for failing to do so and the subsequent plan | Not applicable | |||||
2. Where there had been an earnings forecast for an asset or project and the Reporting Period was stillwithin the forecast period, explain why the forecast has been reached for the Reporting Period.
□ Applicable √ Not applicable
II Occupation of the Company’s Capital by the Controlling Shareholder or Its Related Partiesfor Non-Operating Purposes
□ Applicable √ Not applicable
No such cases in the Reporting Period.III Irregularities in Provision of Guarantees
□ Applicable √ Not applicable
No such cases in the Reporting Period.
IV Explanations Given by the Board of Directors Regarding the Last “Modified Opinion” onFinancial Statements
□ Applicable √ Not applicable
V Explanations Given by the Board of Directors, the Supervisory Committee and theIndependent Directors (if any) Regarding the Independent Auditor's “Modified Opinion” onthe Financial Statements of the Reporting Period
□ Applicable √ Not applicable
VI YoY Changes to Accounting Policies and Estimates and Correction of MaterialAccounting Errors
□ Applicable √ Not applicable
VII YoY Changes to the Scope of the Consolidated Financial Statements
√ Applicable □ Not applicable
In February 2022, the Company established Dongfang Yineng International Holding Co., Ltd. ("Yineng International") with aregistered capital of RMB50 million and 100% ownership.In February 2022, Yineng Investment, a subsidiary of the Company, established Changzhou Xinchen Venture CapitalPartnership (Limited Partnership) (“Changzhou Xinchen”) with a capital contribution of RMB48 million and a 94.86% ownership.In February 2022, Parsun Power, a subsidiary of the Company, established Suzhou Baisheng International Trade Co., Ltd.(“Baisheng International”) with a registered capital of RMB3 million and a 69.62% ownership.In 2022, the Company acquired a 51% ownership in Shenzhen Wonder Digital Technology Co., Ltd. (formerly known as
“Shenzhen Wonder Printing System Co., Ltd.”) at RMB173,800,000.00 in cash, including a capital increase of RMB50,000,000.00and a consideration of RMB123,800,000 for equity acquisition. The Group completed the ownership change formalities with theindustrial and commercial administration in relation to the equity acquisition on 7 June 2022, with the date of acquisition on 7 June2022.VIII Engagement and Disengagement of Independent AuditorCurrent independent auditor:
| Name of the domestic independent auditor | Ernst & Young Hua Ming LLP |
| The Company’s payment to the domestic independent auditor | RMB4.31 million |
| How many consecutive years the domestic independent auditor has provided audit service for the Company | 3 years |
| Names of the certified public accountants from the domestic independent auditor writing signatures on the auditor’s report | Feng Xingzhi and Hu Chuan |
| How many consecutive years the certified public accountants have provided audit service for the Company | Feng Xingzhi: 3 years; Hu Chuan: 1 year |
Indicate whether the independent auditor was changed for the Reporting Period.
□ Yes √ No
Independent auditor, financial advisor or sponsor hired for the audit of internal control:
√ Applicable □ Not applicable
Ernst & Young Hua Ming LLP was appointed as the independent auditor of internal control for the Company for 2022.IX Possibility of Delisting after the Disclosure of this Report
□ Applicable √ Not applicable
X Insolvency and Reorganization
□ Applicable √ Not applicable
No such cases in the Reporting Period.XI Significant Legal Matters
□ Applicable √ Not applicable
No such cases in the Reporting Period.XII Punishments and Rectifications
□ Applicable √ Not applicable
No such cases in the Reporting Period.
XIII Credit Quality of the Company as well as Its Controlling Shareholder and ActualController
□ Applicable √ Not applicable
XIV Significant Related-Party Transactions
1. Continuing Related-Party Transactions
□ Applicable √ Not applicable
No such cases in the Reporting Period.
2. Related-Party Transactions Regarding Purchase or Sales of Assets or Equity Investments
□ Applicable √ Not applicable
No such cases in the Reporting Period.
3. Related-Party Transactions Regarding Joint Investments in Third Parties
□ Applicable √ Not applicable
No such cases in the Reporting Period.
4. Amounts Due to and from Related Parties
□ Applicable √ Not applicable
No such cases in the Reporting Period.
5. Transactions between the Company and Related Financial Companies
□ Applicable √ Not applicable
No such cases in the Reporting Period.
6. Transactions between Financial Companies Controlled by the Company and Related Parties
□ Applicable √ Not applicable
No such cases in the Reporting Period.
7. Other Significant Related-Party Transactions
□ Applicable √ Not applicable
No such cases in the Reporting Period.
XV Significant Contracts and Execution thereof
1. Entrustment, Contracting and Leases
(1) Entrustment
□ Applicable √ Not applicable
No such cases in the Reporting Period.
(2) Contracting
□ Applicable √ Not applicable
No such cases in the Reporting Period.
(3) Leases
□ Applicable √ Not applicable
No such cases in the Reporting Period.
2. Significant Guarantees
√ Applicable □ Not applicable
Unit: RMB'0,000
| Guarantees provided by the Company as the parent and its subsidiaries for external parties (exclusive of those for subsidiaries) | ||||||||||
| Obligor | Disclosure date of the guarantee line announcement | Line of guarantee | Actual occurrence date | Actual guarantee amount | Type of guarantee | Security (if any) | Counter-guarantees (if any) | Term of guarantee | Having expired or not | Guarantee for a related party or not |
| Guarantees provided by the Company as the parent for its subsidiaries | ||||||||||
| Obligor | Disclosure date of the guarantee line announcement | Line of guarantee | Actual occurrence date | Actual guarantee amount | Type of guarantee | Security (if any) | Counter-guarantees (if any) | Term of guarantee | Having expired or not | Guarantee for a related party or not |
| Dongfang Precision (Netherland) | 30 December 2020 | No more than EUR24.6 million | 4 February 2021 | 18,260.33 | Joint liability; Pledge | Security deposits | -- | From the date when the guarantee took effect to | Yes | No |
| 21 April | |||||||||||
| Dongfang Precision (Netherland) | 5 June 2020 | No more than EUR35 million | 30 June 2020 | 24,866.72 | Pledge | Security deposits | -- | From the date when the guarantee took effect to 29 June 2023 | No | No | |
| Total approved line for such guarantees in the Reporting Period (B1) | 0 | Total actual amount of such guarantees in the Reporting Period (B2) | 0 | ||||||||
| Total approved line for such guarantees at the end of the Reporting Period (B3) | No more than EUR35 million | Total actual balance of such guarantees at the end of the Reporting Period (B4) | 24,866.72 | ||||||||
| Guarantees provided between subsidiaries | |||||||||||
| Obligor | Disclosure date of the guarantee line announcement | Line of guarantee | Actual occurrence date | Actual guarantee amount | Type of guarantee | Security (if any) | Counter-guarantees (if any) | Term of guarantee | Having expired or not | Guarantee for a related party or not | |
| QCorr | 15 May 2020 | EUR3 million | 30 April 2020 | 909.79 | Joint liability | - | - | From the date when the guarantee took effect to 30 June 2024 | No | No | |
| Total approved line for such guarantees in the Reporting Period (C1) | 0 | Total actual amount of such guarantees in the Reporting Period (C2) | 0 | ||||||||
| Total approved line for such guarantees at the end of the Reporting Period (C3) | EUR3 million | Total actual balance of such guarantees at the end of the Reporting Period (C4) | 909.79 | ||||||||
| Total guarantee amount (total of the three kinds of guarantees above) | |||||||||||
| Total guarantee line approved in the Reporting Period | 0 | Total actual guarantee amount in the Reporting | 0 | ||||||||
| (A1+B1+C1) | Period (A2+B2+C2) | |||
| Total approved guarantee line at the end of the Reporting Period (A3+B3+C3) | No more than EUR38 million | Total actual guarantee balance at the end of the Reporting Period (A4+B4+C4) | 25,776.51 | |
| Total actual guarantee amount (A4+B4+C4) as % of the Company’s net assets | 6.34% | |||
| Of which: | ||||
| Balance of guarantees provided for shareholders, the actual controller and their related parties (D) | 0 | |||
| Balance of debt guarantees provided directly or indirectly for obligors with an over 70% debt/asset ratio (E) | 909.79 | |||
| Amount by which the total guarantee amount exceeds 50% of the Company’s net assets (F) | 0 | |||
| Total of the three amounts above (D+E+F) | 909.79 | |||
| Joint liability possibly borne or already borne in the Reporting Period for outstanding guarantees (if any) | N/A | |||
| Guarantees provided in breach of prescribed procedures (if any) | N/A | |||
3. Cash Entrusted to Other Entities for Management
(1) Cash Entrusted for Wealth Management
√ Applicable □ Not applicable
Overview of wealth management entrustments in the Reporting Period:
Unit: RMB’0,000
| Type | Funding source | Amount | Undue amount | Unrecovered overdue amount | Impairment provision for unrecovered overdue amount |
| Bank’s wealth management product | Self-funded | 67,200.00 | 9,600.00 | 0 | 0 |
| Securities firm’s wealth management product | Self-funded | 60,000.00 | 44,000.00 | 0 | 0 |
| Trust product | Self-funded | 662.07 | 0 | 358.62 | 286.90 |
| Total | 127,862.07 | 53,600.00 | 358.62 | 286.90 |
High-risk wealth management transactions with a significant single amount or with low security and low liquidity:
□ Applicable √ Not applicable
Wealth management transactions where the principal is expectedly irrecoverable or an impairment may be incurred:
√ Applicable □ Not applicable
As of the end of the Reporting Period, the unrecovered amount of trust products was RMB3.5862 million, for which an impairmentallowance of RMB2.8690 million was established.
(2) Entrusted Loans
□ Applicable √ Not applicable
No such cases in the Reporting Period.
4. Other Significant Contracts
□ Applicable √ Not applicable
No such cases in the Reporting Period.XVI Other Significant Events
□ Applicable √ Not applicable
XVII Significant Events of Subsidiaries
□ Applicable √ Not applicable
Part VII Share Changes and Shareholder Information
I Share Changes
1. Share Changes
Unit: share
| Before | Increase/decrease in the period (+/-) | After | |||||||
| Shares | Percentage (%) | New issues | Shares as dividend converted from profit | Shares as dividend converted from capital reserves | Other | Subtotal | Shares | Percentage (%) | |
| 1. Restricted shares | 241,176,130 | 18.10% | 0 | 0 | 0 | -7,993,597 | -7,993,597 | 233,182,533 | 18.79% |
| 1.1 Shares held by the government | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| 1.2 Shares held by state-owned corporations | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| 1.3 Shares held by other domestic investors | 239,736,130 | 17.99% | 0 | 0 | 0 | -7,393,597 | -7,393,597 | 232,342,533 | 18.72% |
| Including: Shares held by domestic corporations | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| Shares held by domestic individuals | 239,736,130 | 17.99% | 0 | 0 | 0 | -7,393,597 | -7,393,597 | 232,342,533 | 18.72% |
| 1.4 Shares held by overseas investors | 1,440,000 | 0.11% | 0 | 0 | 0 | -600,000 | -600,000 | 840,000 | 0.07% |
| Including: Shares held by overseas corporations | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| Shares held by overseas individuals | 1,440,000 | 0.11% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| 2. Unrestricted shares | 1,090,762,037 | 81.89% | 0 | 0 | 0 | -82,838,170 | -82,838,170 | 1,007,923,867 | 81.21% |
| 2.1 RMB-denominated ordinary shares | 1,090,762,037 | 81.89% | 0 | 0 | 0 | -82,838,170 | -82,838,170 | 1,007,923,867 | 81.21% |
| 2.2 Domestically listed foreign shares | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| 2.3 Overseas listed foreign shares | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| 2.4 Others | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| 3. Total shares | 1,331,938,167 | 100.00% | 0 | 0 | 0 | -90,831,767 | -90,831,767 | 1,241,106,400 | 100.00% |
Reasons for share changes:
√ Applicable □ Not applicable
1. Part of the shares held by Ms. Qiu Yezhi, the director, and CEO of the Company, was unlocked as allowed by the applicablelaws and regulations
In December 2021, Ms. Qiu Yezhi, the director, and CEO of the Company, completed a shareholding reduction. Upon thereduction, she held 23,382,388 shares in the Company. In January 2022, 5,845,597 shares of hers were unlocked according to thestatutory quota of 25% transferable shares in the year.
2. Unlocking for public trading of shares in the first unlocking period for the reserved restricted shares under the RestrictedShare Incentive Plan
In March 2022, the shares were unlocked for public trading in the first unlocking period for the reserved restricted shares underthe 2020 Restricted Share Incentive Plan, which involved 848,000 shares held by 18 awardees.
3. Completion of the ownership transfer of the first grant under the 2022 Restricted Share Incentive Plan
In April 2022, the Company completed the ownership transfer of the 2.65 million restricted shares in the first grant under the2022 Restricted Share Incentive Plan to 7 awardees.
4. Unlocking for public trading of shares in the second unlocking period for the first grant under the Restricted Share IncentivePlan
In June 2022, the shares were unlocked for public trading in the second unlocking period for the first grant under the 2020Restricted Share Incentive Plan, which involved 8,620,000 shares held by 37 awardees.
5. Retirement of part of the repurchased shares
The Company repurchased shares in 2018 to 2019 by way of centralized bidding, and the number of repurchased shares thatwere not used for the designated purpose, 5,510,063 shares, was retired in July 2022 due to the expiry of the three-year period.
The Company launched the 2021 Share Repurchase Plan in September 2021, with 106,652,136 shares cumulatively repurchasedunder the Plan. The number of repurchased shares to be retired to reduce the registered capital of the Company was 85,321,704shares, representing 80% of the total number of shares repurchased, and the retirement of the aforesaid shares was completed inOctober 2022.
6. Lockup of shares held by an outgoing director for six months
In July 2022, as Mr. Zhou Wenhui stepped down as director, his statutory quota of 25% of shares transferable for the year(300,000 shares) was re-locked and cannot be transferred for six months.Approval of share changes:
√ Applicable □ Not applicable
In the Reporting Period, with respect to share changes involved in the “unlocking for public trading of shares in the firstunlocking period for the reserved restricted shares under the 2020 Restricted Share Incentive Plan”, the “ownership transfer of thefirst grant under the 2022 Restricted Share Incentive Plan” and the “unlocking for public trading of shares in the second unlocking
period for the first grant under the 2020 Restricted Share Incentive Plan”, the Company followed the applicable laws and regulationsand its Articles of Association, executed the approval procedures with the general meeting and the Board of Directors, and obtainedapproval from the Shenzhen Stock Exchange.Transfer of share ownership:
√ Applicable □ Not applicable
In the Reporting Period, with respect to the transfers of share ownership involved in the “ownership transfer of the first grantunder the 2022 Restricted Share Incentive Plan”, the Company completed the transfers with the Shenzhen branch of China SecuritiesDepository and Clearing Co., Ltd. after they were approved by the Shenzhen Stock Exchange.Effects of share changes on the basic earnings per share, diluted earnings per share, equity per share attributable to theCompany’s ordinary shareholders and other financial indicators of the prior year and the prior accounting period,respectively:
□ Applicable √ Not applicable
Other information that the Company considers necessary or is required by the securities regulator to be disclosed:
□ Applicable √ Not applicable
2. Changes in Restricted Shares
√ Applicable □ Not applicable
Unit: share
| Shareholder | Opening restricted shares | Increase in restricted shares in the period | Unlocked in the period | Closing restricted shares | Reason for restriction | Date of unlocking |
| Qiu Yezhi | 23,382,388 | 3,600,000 | 9,445,597 | 17,536,791 | Participated in the Restricted Share Incentive Plan of the Company/restricted shares of senior management | 2022-1-4 |
| Xie Weiwei | 800,000 | 350,000 | 400,000 | 750,000 | Participated in the Restricted Share Incentive Plan of the Company/restricted shares of senior management | 2022-6-24 |
| Zhou Wenhui | 960,000 | 720,000 | 480,000 | 1,200,000 | Participated in the Restricted | 2022-6-24 |
| Share Incentive Plan of the Company/restricted shares of senior management | ||||||
| The other 34 awardees of the first grant of the 2020 Restricted Share Incentive Plan | 8,280,000 | 0 | 4,140,000 | 4,140,000 | Participated in the Restricted Share Incentive Plan of the Company | 2022-6-24 |
| Feng Jia | 0 | 700,000 | 0 | 700,000 | Participated in the Restricted Share Incentive Plan of the Company | 2023-4-28 |
| The other 6 awardees of the first grant of the 2022 Restricted Share Incentive Plan | 0 | 1,950,000 | 0 | 1,950,000 | Participated in the Restricted Share Incentive Plan of the Company | 2023-4-28 |
| Shao Yongfeng | 800,000 | 0 | 160,000 | 640,000 | Participated in the Restricted Share Incentive Plan of the Company | 2022-3-9 |
| The other 17 awardees of the reserved grant of the 2020 Restricted Share Incentive Plan | 3,440,000 | 0 | 688,000 | 2,752,000 | Participated in the Restricted Share Incentive Plan of the Company | 2022-3-9 |
| Total | 37,662,388 | 7,320,000 | 15,313,597 | 29,668,791 | -- | -- |
II Issuance and Listing of Securities
1. Securities (Exclusive of Preference Shares) Issued in the Reporting Period
□ Applicable √ Not applicable
2. Changes to Total Shares, Shareholder Structure and Asset and Liability Structures
√ Applicable □ Not applicable
Following the repurchase and retirement of 90,831,767 public shares in the Reporting Period, the total share capital of theCompany decreased from 1,331,938,167 shares to 1,241,106,400 shares, which had no significant impact on the asset and liabilitystructure of the Company.
3. Existing Staff-Held Shares
□ Applicable √ Not applicable
III Shareholders and Actual Controller
1. Shareholders and Their Shareholdings at the Period-End
Unit: share
| Number of ordinary shareholders at the period-end | 53,233 | Number of ordinary shareholders at the month-end prior to the disclosure of this Report | 50,670 | Number of preference shareholders with resumed voting rights at the period-end (if any) | 0 | Number of preference shareholders with resumed voting rights at the month-end prior to the disclosure of this Report (if any) | 0 | |
| 5% or greater shareholders or top 10 shareholders | ||||||||
| Name of shareholder | Nature of shareholder | Shareholding percentage | Total shares held at the period-end | Increase/decrease in the Reporting Period | Restricted shares held | Unrestricted shares held | Shares in pledge, marked or frozen | |
| Status | Shares | |||||||
| Tang Zhuolin | Domestic individual | 21.81% | 270,737,568 | 0.00 | 203,053,176 | 67,684,392 | In pledge | 135,360,000 |
| Tang Zhuomian | Domestic individual | 7.81% | 96,885,134 | 0.00 | 0 | 96,885,134 | In pledge | 10,000,000 |
| Pulead Technology Industry | State-owned corporation | 3.88% | 48,149,787 | -4,599,771 | 0 | 48,149,787 | ||
| Co., Ltd. | ||||||||
| Luzhou Industrial Development Investment Group Co., Ltd. | State-owned corporation | 2.56% | 31,770,010 | 0.00 | 0 | 31,770,010 | ||
| Qinghai Puren Intelligent Technology R & D Center (Limited Partnership) | Domestic non-state-owned corporation | 2.15% | 26,628,340 | 0.00 | 0 | 26,628,340 | ||
| Qiu Yezhi | Domestic individual | 1.88% | 23,382,388 | 0.00 | 17,536,791 | 5,845,597 | ||
| Shengji Equity Investment Fund (Shanghai) Co., Ltd. | State-owned corporation | 1.58% | 19,607,843 | 0.00 | 0 | 19,607,843 | In pledge | 6,700,000 |
| JIC Investment Co., Ltd. | State-owned corporation | 1.05% | 12,984,216 | 0.00 | 0 | 12,984,216 | ||
| Beixin Ruifeng Fund－SPD Bank－Beijing International Trust－Beijing Trust·Qingyan Fengshou Wealth Management Collective Capital Trust Plan No. 2015015 | Other | 0.87% | 10,818,183 | 0.00 | 0 | 10,818,183 | ||
| Hong | Overseas | 0.77% | 9,516,214 | -18,850,322 | 0 | 9,516,214 |
| Kong Securities Clearing Company Limited | corporation | |||
| Strategic investor or general corporation becoming a top-10 shareholder in a rights issue (if any) | None | |||
| Related or acting-in-concert parties among the shareholders above | Mr. Tang Zhuolin and Mr. Tang Zhuomian are brothers. On 18 August 2010, they signed the Agreement on Acting in Concert. Pulead Technology Industry Co., Ltd. (Chinese name has changed from “北大先行科技产业有限公司” to “东圣先行科技产业有限公司” during the reporting period.) and Qinghai Puren Intelligent Technology R & D Center (Limited Partnership) are acting-in-concert parties. Apart from that, the Company is not aware of any related or acting-in-concert parties among the other shareholders above. | |||
| Above shareholders entrusting or entrusted with voting rights, or waiving voting rights | None | |||
| Top 10 shareholders including the special account of repurchased shares (if any) | As of the end of the Reporting Period, there were 21,330,432 shares in the Company’s special account for repurchase, accounting for 1.72% of its total share capital. As per the Shenzhen Stock Exchange Guideline No. 1 for the Self-regulation of Listed Companies—Business Handling, the existence of a special account of repurchased shares among the top 10 shareholders should be specifically stated but not included in the presentation of the top 10 shareholders. | |||
| Top 10 unrestricted shareholders | ||||
| Name of shareholder | Unrestricted shares held at the period-end | Shares by type | ||
| Type | Shares | |||
| Tang Zhuomian | 96,885,134 | RMB-denominated ordinary stock | 96,885,134 | |
| Tang Zhuolin | 67,684,392 | RMB-denominated ordinary stock | 67,684,392 | |
| Pulead Technology Industry Co., Ltd. | 48,149,787 | RMB-denominated ordinary stock | 48,149,787 | |
| Luzhou Industrial Development Investment Group Co., Ltd. | 31,770,010 | RMB-denominated ordinary stock | 31,770,010 | |
| Qinghai Puren Intelligent Technology R & D Center (Limited Partnership) | 26,628,340 | RMB-denominated ordinary stock | 26,628,340 | |
| Shengji Equity Investment Fund | 19,607,843 | RMB-denominated ordinary stock | 19,607,843 | |
| (Shanghai) Co., Ltd. | |||
| JIC Investment Co., Ltd. | 12,984,216 | RMB-denominated ordinary stock | 12,984,216 |
| Beixin Ruifeng Fund－SPD Bank－Beijing International Trust－Beijing Trust·Qingyan Fengshou Wealth Management Collective Capital Trust Plan No. 2015015 | 10,818,183 | RMB-denominated ordinary stock | 10,818,183 |
| Hong Kong Securities Clearing Company Limited | 9,516,214 | RMB-denominated ordinary stock | 9,516,214 |
| Liu Wucai | 6,597,688 | RMB-denominated ordinary stock | 6,597,688 |
| Related or acting-in-concert parties among top 10 unrestricted ordinary shareholders, as well as between top 10 unrestricted ordinary shareholders and top 10 ordinary shareholders | Mr. Tang Zhuolin and Mr. Tang Zhuomian are brothers. On 18 August 2010, they signed the Agreement on Acting in Concert. Pulead Technology Industry Co., Ltd. (Chinese name changed from “北大先行科技产业有限公司” to “东圣先行科技产业有限公司”, and English name unchanged) and Qinghai Puren Intelligent Technology R & D Center (Limited Partnership) are acting-in-concert parties. Apart from that, the Company is not aware of any related or acting-in-concert parties among the other shareholders above. | ||
Indicate whether any of the top 10 ordinary shareholders or the top 10 unrestricted ordinary shareholders of the Company conductedany promissory repo during the Reporting Period.
□ Yes √ No
No such cases in the Reporting Period.
2. Controlling Shareholder
Nature of the controlling shareholder: controlled by an individualType of the controlling shareholder: individual
| Name of the controlling shareholder | Nationality | Residency in other countries or regions or not |
| Tang Zhuolin | Chinese | Not |
| Main occupation and position | Chairman of the Board of Dongfang Precision | |
| Interests held in other domestically and overseas listed companies in the Reporting Period | Not applicable | |
Change of the controlling shareholder in the Reporting Period:
□ Applicable √ Not applicable
No such cases in the Reporting Period.
3. Actual Controller and Acting-in-Concert Parties
Nature of the actual controller: domestic individualType of the actual controller: individual
| Name of the actual controller | Relationship with the actual controller | Nationality | Residency in other countries or regions or not |
| Tang Zhuolin | Actual controller himself | Chinese | Not |
| Tang Zhuomian | Acting-in-concert party (contractual, kinship-based, and common control-based) | Chinese | Not |
| Main occupation and position | Mr. Tang Zhuolin serves as the Chairman of the Board of Dongfang Precision as his main occupation. | ||
| Controlling interests in other domestically and overseas listed companies in the past 10 years | Not applicable | ||
Change of the actual controller in the Reporting Period:
□ Applicable √ Not applicable
No such cases in the Reporting Period.Ownership and control relationship between the actual controller and the Company:
Indicate whether the actual controller controls the Company via trust or other ways of asset management.
□ Applicable √ Not applicable
| Tang Zhuolin | Tang Zhuomian |
Guangdong Dongfang Precision Science & Technology Co., Ltd.
4. Shares Cumulatively Put in Pledge by the Company’s Controlling Shareholder or Biggest Shareholderand Its Acting-in-Concert Parties Accounting for 80% of Their Shareholdings in the Company
□ Applicable √ Not applicable
5. Other 10% or Greater Corporate Shareholders
□ Applicable √ Not applicable
6. Limitations on Shareholding Decrease by the Company’s Controlling Shareholder, Actual Controller,Reorganizer and Other Commitment Makers
□ Applicable √ Not applicable
IV Share Repurchase in the Reporting Period
Progress on any share repurchase:
√ Applicable □ Not applicable
| Disclosure date of the repurchase plan | Number of shares to be repurchased | As % of total share capital | Amount to be used | Repurchase period | Purpose | Shares repurchased (share) | Shares repurchased as % of total shares under the equity incentive plan (if any) |
| 1 September 2021 | Not lower than RMB500 million (inclusive) and no more than RMB1 billion (inclusive) | 23 September 2021-22 September 2022 | Shares of not lower than 80% of the repurchased number are to be retired, which will reduce the Company’s registered capital accordingly; and shares of no more than 20% of the repurchased number are to be used for equity incentives or employee stock ownership plans. | 106,652,136 | N/A |
Progress on reducing the repurchased shares by way of centralized bidding:
□ Applicable √ Not applicable
Part VIII Preference Shares
□ Applicable √ Not applicable
No preference shares in the Reporting Period.
Part IX Corporate Bonds
□ Applicable √ Not applicable
Part X Corporate Financial StatementI. Auditor’s Report
| Type of Audit Opinion | Standard Unreserved opinion |
| Signing date of the Auditor’s Report | 24 March 2023 |
| Name of the Audit Institution | Ernst & Young Hua Ming LLP |
| Document number of the Auditor’s report | Ernst & Young Hua Ming (2023) Auditor’s Report No. 61276890_G01 |
| Name of the Chinese Certified Public Accountant | Feng Xingzhi, Hu Chuan |
Auditor’s Report
Ernst & Young Hua Ming (2023) Auditor’s Report No. 61276890_G01
Guangdong Dongfang Precision Science & Technology Co., Ltd.
To the Shareholders of Guangdong Dongfang Precision Science & Technology Co., Ltd.:
I. OpinionWe have audited the financial statements of Guangdong Dongfang Precision Science & Technology Co., Ltd. (hereinafter referred toas the “Company”), which comprise the consolidated and the Company’s balance sheets as at 31 December 2022, the consolidatedand the Company’s income statements, the consolidated and the Company’s statements of changes in equity and the consolidated andthe Company’s statements of cash flows for the year then ended, and notes to the financial statements.In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated and the Company’sfinancial position as at 31 December 2022, and the consolidated and the Company’s financial performance and cash flows for theyear then ended in accordance with Accounting Standards for Business Enterprises (“ASBEs”).II. Basis for OpinionWe conducted our audit in accordance with China’s Standards on Auditing“CSAs”. Our responsibilities under those standards arefurther described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independentof the Company in accordance with China Code of Ethics for Certified Public Accountants(the “Code”), and we have fulfilled ourother ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our opinion.III. Key Audit MatterKey audit matter is the matter that, in our professional judgment, was of most significance in our audit of the financial statements ofthe Current Period. This matter was addressed in the context of our audit of the financial statements as a whole, and in forming ouropinion thereon, and we do not provide a separate opinion on this matter. For the matter below, our description of how our auditaddressed the matter is provided in that context.We have fulfilled our responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Statements section ofour report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respondto our assessment of the risks of material misstatements of the financial statements. The results of our audit procedures, includingprocedures performed to address the matter below, provide the basis for our opinion on the accompanying financial statements.
| Key audit matter: | How our audit addressed the key audit matter: |
| Impairment of goodwill | |
| The carrying amount of goodwill amounted to RMB557,939,051.93 as at 31 December 2022 and the impairment allowance for goodwill was RMB127,022,203.19. The Group's management performs goodwill impairment testing at the end of each year. The assessment of goodwill impairment testing | The procedures performed to address this matter are as follows: (1) Performing internal control workthrough and executing control tests on identified critical control points (2) Assessing the identification of asset groups by the |
| The accounting policies on and disclosures of goodwill were set out in Item 16 of Note III, Item 33 of Note III, and Item 20 of Note V to the financial statements. | (3) Obtaining reports on the assessment of goodwill impairment issued by the independent third-party asset appraisal institution engaged by the management with securities and futures-related business qualification; (4) Inviting a internal expert team to assess the rationality of the major assumptions and assessment methods used by the Group's management when forecasting the recoverable amount of asset groups, including the discount rate and long-term growth rate by inviting a team of internal experts; (5) Assessing the forecast sales revenue and operating performance for future years and comparing them with historical operating performance; and (6) Checking the adequacy of the Group's disclosures in the notes to the financial statements. |
IV. Other Information
The management of the Company is responsible for the other information. The other information comprises all of the informationincluded in the annual report, other than the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusionthereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, considerwhether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit orotherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are requiredto report that fact. We have nothing to report in this regard.
V. Responsibilities of Management and Those Charged with Governance for the Financial Statements
The management is responsible for the preparation and fair presentation of the financial statements in accordance with ASBEs, andfor designing, implementing and maintaining such internal control as the management determines is necessary to ensure thepreparation of financial statements to be free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the management is responsible for assessing the Company’s ability to continue as a goingconcern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting, unless themanagement either intends to liquidate or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
VI. Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from materialmisstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a highlevel of assurance, but is not a guarantee that an audit conducted in accordance with CSAs will always detect a material misstatementwhen it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they couldreasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with CSAs, we exercise professional judgment and maintain professional skepticism throughout theaudit. We also:
(1) Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design andperform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, asfraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
(2) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in thecircumstances.
(3) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and relateddisclosures made by the management.
(4) Conclude on the appropriateness of the management’s use of the going concern basis of accounting and, based on the auditevidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on theCompany’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attentionin our auditor’s report to the related disclosures in the financial statements or, and if such disclosures are inadequate, to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events orconditions may cause the Company to cease to continue as a going concern.
(5) Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether thefinancial statements represent the underlying transactions and events in a manner that achieves fair presentation.As part of an audit in accordance with CSAs, we exercise professional judgment and maintain professional skepticism throughout theaudit. We also: (cont’d)
(6) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within theCompany to express an audit opinion on the financial statements. We are responsible for the direction, supervision and performanceof the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit andsignificant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regardingindependence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on ourindependence, and where applicable, related safeguards (if applicable).
From the matters communicated with those charged with governance, we determine the matter that was of most significance in theaudit of the financial statements of the Current Period and is therefore the key audit matter. We describe this matter in our auditor’sreport unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determinethat a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expectedto outweigh the public interest benefits of such communication.
(End of the Report)
| Ernst & Young Hua Ming LLP | Chinese Certified Public Accountant: Feng Xingzhi (Engagement Partner) |
| Chinese Certified Public Accountant: Hu Chuan | |
| Beijing, China | 24 March 2023 |
Important Notice
This auditor’s report is an English translation of the auditor’s report for the audit engagements which adopt CSAs.In case the English version does not conform to the Chinese version, the Chinese version prevails.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Consolidated Balance Sheet (Cont’d)As at 31 December 2022 Expressed in Renminbi Yuan
II. Financial Statements
| Assets | Note V | 31 December 2022 | 31 December 2021 | ||||
| Current assets | |||||||
| Cash and bank balances | 1 | 1,274,447,199.74 | 1,664,336,339.35 | ||||
| Financial assets held for trading | 2 | 860,832,278.88 | 788,185,521.57 | ||||
| Notes receivable | 3 | 24,566,100.12 | 13,272,025.04 | ||||
| Accounts receivable | 4 | 837,305,757.46 | 741,135,648.09 | ||||
| Receivables financing | 5 | 15,305,668.26 | 30,692,449.25 | ||||
| Prepayments | 6 | 64,946,901.26 | 34,177,802.36 | ||||
| Other receivables | 7 | 83,996,902.82 | 71,363,166.84 | ||||
| Inventories | 8 | 1,092,981,884.51 | 867,280,013.47 | ||||
| Contract assets | 9 | 65,089,851.21 | 24,414,117.64 | ||||
| Current portion of non-current assets | 10 | 311,763,750.00 | 108,385,000.00 | ||||
| Other current assets | 11 | 61,370,451.31 | 32,124,006.99 | ||||
| Total current assets | 4,692,606,745.57 | 4,375,366,090.60 | |||||
| Non-current assets | |||||||
| Long-term receivables | 12 | 1,294,299.00 | 143,750.00 | ||||
| Long-term equity investments | 13 | 95,352,681.52 | 84,777,596.67 | ||||
| Other non-current financial assets | 14 | 334,449,603.33 | 162,523,519.41 | ||||
| Fixed assets | 15 | 570,200,113.79 | 544,180,159.09 | ||||
| Construction in progress | 16 | 38,904,537.85 | 12,298,259.58 | ||||
| Right-of-use assets | 17 | 86,448,978.02 | 80,386,832.91 | ||||
| Intangible assets | 18 | 368,103,395.11 | 293,718,987.62 | ||||
| Research and development expenditures | 19 | 3,702,229.76 | - | ||||
| Goodwill | 20 | 430,916,848.74 | 306,969,147.76 | ||||
| Long-term prepaid expenses | 21 | 16,735,552.98 | 11,962,127.07 | ||||
| Deferred tax assets | 22 | 244,542,124.61 | 180,245,522.94 | ||||
| Other non-current assets | 23 | 45,320,004.82 | 304,596,841.54 | ||||
| Total non-current assets | 2,235,970,369.53 | 1,981,802,744.59 | |||||
| Total assets | 6,928,577,115.10 | 6,357,168,835.19 | |||||
Guangdong Dongfang Precision Science & Technology Co., Ltd.Consolidated Balance Sheet (Cont’d)As at 31 December 2022 Expressed in Renminbi Yuan
| Liabilities and equity | Note V | 31 December 2022 | 31 December 2021 | ||||
| Current liabilities | |||||||
| Short-term borrowings | 24 | 41,815,129.24 | 228,312,880.73 | ||||
| Financial liabilities held for trading | 25 | 57,022,555.58 | 110,746,939.04 | ||||
| Notes payable | 26 | 149,918,253.31 | 149,191,690.00 | ||||
| Accounts payable | 27 | 748,319,561.21 | 619,265,856.18 | ||||
| Contract liabilities | 28 | 692,567,968.60 | 405,842,932.51 | ||||
| Employee benefits payable | 29 | 123,695,328.31 | 103,809,783.58 | ||||
| Tax payable | 30 | 24,111,703.70 | 60,701,346.24 | ||||
| Other payables | 31 | 90,080,142.50 | 100,018,273.09 | ||||
| Current portion of non-current liabilities | 32 | 315,767,431.26 | 38,495,724.83 | ||||
| Other current liabilities | 33 | 5,988,879.29 | 12,836,473.00 | ||||
| Total current liabilities | 2,249,286,953.00 | 1,829,221,899.20 | |||||
| Non-current liabilities | |||||||
| Long-term borrowings | 34 | 57,884,494.89 | 325,026,188.49 | ||||
| Lease liabilities | 35 | 68,989,111.33 | 65,213,555.87 | ||||
| Long-term employee benefits payable | 36 | 13,179,944.17 | 16,083,170.32 | ||||
| Provisions | 37 | 118,945,953.78 | 117,932,721.59 | ||||
| Deferred income | 38 | 11,073,651.66 | 12,190,311.66 | ||||
| Deferred tax liabilities | 22 | 6,825,450.77 | 1,747,137.95 | ||||
| Other non-current liabilities | 39 | 136,396,292.55 | 136,178,304.44 | ||||
| Total non-current liabilities | 413,294,899.15 | 674,371,390.32 | |||||
| Total liabilities | 2,662,581,852.15 | 2,503,593,289.52 | |||||
Guangdong Dongfang Precision Science & Technology Co., Ltd.Consolidated Balance Sheet (Cont’d)As at 31 December 2022 Expressed in Renminbi Yuan
| Liabilities and equity | Note V | 31 December 2022 | 31 December 2021 | ||||
| Equity | |||||||
| Share capital | 40 | 1,241,106,400.00 | 1,331,938,167.00 | ||||
| Capital surplus | 41 | 2,947,263,843.53 | 3,238,765,859.94 | ||||
| Less: Treasury stock | 42 | 240,255,502.45 | 494,335,503.94 | ||||
| Other comprehensive income | 43 | 26,512,917.07 | (33,322,662.98 | ||||
| Special reserve | 44 | 14,488,955.52 | 11,252,639.19 | ||||
| Surplus reserves | 45 | 51,830,974.45 | 51,830,974.45 | ||||
| Retained earnings | 46 | 23,018,722.11 | (424,159,175.27 | ) | |||
| Total equity attributable to owners of the parent | 4,063,966,310.23 | 3,681,970,298.39 | |||||
| Non-controlling interests | 202,028,952.72 | 171,605,247.28 | |||||
| Total equity | 4,265,995,262.95 | 3,853,575,545.67 | |||||
| Total liabilities and equity | 6,928,577,115.10 | 6,357,168,835.19 | |||||
The financial statements have been signed by:
Legal representative: Chief Financial Officer: Head of Accounting
Department:
The accompanying notes to the financial statements form an integral part of the financial statements.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Consolidated Income Statement2022 Expressed in Renminbi Yuan
| Note V | 2022 | 2021 | |||||
| Operating revenue | 47 | 3,892,708,509.64 | 3,524,734,783.94 | ||||
| Less: Cost of sales | 47 | 2,833,305,748.54 | 2,555,072,059.79 | ||||
| Taxes and surcharges | 48 | 11,956,289.95 | 11,496,506.72 | ||||
| Selling expenses | 49 | 182,555,875.71 | 185,327,678.18 | ||||
| Administrative expenses | 50 | 311,463,613.16 | 272,090,728.08 | ||||
| R&D expenses | 51 | 97,954,453.40 | 99,557,565.46 | ||||
| Finance costs | 52 | (8,970,693.69 | ) | (5,996,474.46 | ) | ||
| Including: Interest expenses | 13,839,292.38 | 13,182,088.01 | |||||
| Interest income | 19,042,851.72 | 24,674,196.61 | |||||
| Add: Other income | 53 | 20,933,377.44 | 14,892,566.89 | ||||
| Investment income | 54 | 19,131,077.82 | 98,673,106.02 | ||||
| Including: Share of profit of joint ventures and associates | 1,851,796.60 | 3,880,256.70 | |||||
| Gain/loss on changes in fair value | 55 | 17,917,046.61 | (21,357,785.81 | ||||
| Credit impairment loss | 56 | (5,109,974.87 | ) | (12,726,636.46 | ) | ||
| Asset impairment loss | 57 | (12,796,323.56 | ) | (10,936,754.10 | ) | ||
| Gain/loss on disposal of assets | 58 | (168,835.37 | ) | 424,968.29 | |||
| Operating profit | 504,349,590.64 | 476,156,185.00 | |||||
| Add: Non-operating income | 59 | 2,459,567.33 | 5,750,547.04 | ||||
| Less: Non-operating expenses | 60 | 880,845.25 | 1,462,018.81 | ||||
| Gross profit | 505,928,312.72 | 480,444,713.23 | |||||
| Less: Income tax expenses | 62 | 22,187,291.43 | (11,946,472.42 | ||||
| Net profit | 483,741,021.29 | 492,391,185.65 | |||||
| Net profit classified by continuing operations | |||||||
| Net profit from continuing operations | 483,741,021.29 | 492,391,185.65 | |||||
| Net profit classified by attribution of ownership | |||||||
| Net profit attributable to owners of the parent | 447,177,897.38 | 467,333,661.79 | |||||
| Net profit attributable to non-controlling interests | 36,563,123.91 | 25,057,523.86 | |||||
The accompanying notes to the financial statements form an integral part of the financial statements.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Consolidated Income Statement (Cont’d)2022 Expressed in Renminbi Yuan
| Note V | 2022 | 2021 | |||||
| Other comprehensive income, net of tax | 56,936,768.65 | (58,062,617.01 | ) | ||||
| Other comprehensive income attributable to owners of the parent, net of tax | 43 | 59,835,580.05 | (53,348,752.68 | ) | |||
| Other comprehensive income that will not be reclassified to profit or loss | 1,856,564.02 | (368,435.04 | ) | ||||
| Changes caused by remeasurements on defined benefit schemes | 1,856,564.02 | (368,435.04 | ) | ||||
| Other comprehensive income that will be reclassified to profit or loss | 57,979,016.03 | (52,980,317.64 | ) | ||||
| Differences arising from the translation of foreign currency-denominated financial statements | 57,979,016.03 | (52,980,317.64 | ) | ||||
| Other comprehensive income attributable to non-controlling interests, net of tax | 43 | (2,898,811.40 | ) | (4,713,864.33 | ) | ||
| Total comprehensive income | 540,677,789.94 | 434,328,568.64 | |||||
| Including: | |||||||
| Total comprehensive income attributable to owners of the parent | 507,013,477.43 | 413,984,909.11 | |||||
| Total comprehensive income attributable to non-controlling interests | 33,664,312.51 | 20,343,659.53 | |||||
| Earnings per share | 63 | ||||||
| Basic earnings per share | 0.37 | 0.35 | |||||
| Diluted earnings per share | 0.37 | 0.35 |
The accompanying notes to the financial statements form an integral part of the financial statements.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Consolidated Statements of Changes in Equity2022 Expressed in Renminbi Yuan
2022
| Equity attributable to owners of the parent | Non-controlling | Total equity | |||||||||||||||||||||||||||
| Share capital | Capital surplus | Less: Treasury stock | Other comprehensive income | Special reserve | Surplus reserves | Retained earnings | Subtotal | interests | |||||||||||||||||||||
| I. | At 31 December 2021 and 1 January 2022 | 1,331,938,167.00 | 3,238,765,859.94 | 494,335,503.94 | (33,322,662.98 | ) | 11,252,639.19 | 51,830,974.45 | (424,159,175.27 | ) | 3,681,970,298.39 | 171,605,247.28 | 3,853,575,545.67 | ||||||||||||||||
| II. | Changes for the year | ||||||||||||||||||||||||||||
| （I） | Total comprehensive income | - | - | - | 59,835,580.05 | - | - | 447,177,897.38 | 507,013,477.43 | 33,664,312.51 | 540,677,789.94 | ||||||||||||||||||
| （II） | Owner’s contributions and reduction in capital | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||
| 1. | Share-based payments included in equity | - | 29,628,076.98 | - | - | - | - | - | 29,628,076.98 | - | 29,628,076.98 | ||||||||||||||||||
| 2. | Others | (90,831,767.00 | ) | (321,130,093.39 | ) | (254,080,001.49 | ) | - | - | - | - | (157,881,858.90 | ) | (3,240,607.07 | ) | (161,122,465.97 | ) | ||||||||||||
| （III） | Special reserve | - | - | ||||||||||||||||||||||||||
| 1. | Provision in the period | - | - | - | - | 6,161,824.10 | - | - | 6,161,824.10 | - | 6,161,824.10 | ||||||||||||||||||
| 2. | Utilisation in the period | - | - | - | - | (2,925,507.77 | ) | - | - | (2,925,507.77 | ) | - | (2,925,507.77 | ) | |||||||||||||||
| III. | At 31 December 2022 | 1,241,106,400.00 | 2,947,263,843.53 | 240,255,502.45 | 26,512,917.07 | 14,488,955.52 | 51,830,974.45 | 23,018,722.11 | 4,063,966,310.23 | 202,028,952.72 | 4,265,995,262.95 | ||||||||||||||||||
The accompanying notes to the financial statements form an integral part of the financial statements.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Consolidated Statements of Changes in Equity (Cont’d)2022 Expressed in Renminbi Yuan
2021
| Equity attributable to owners of the parent | Non-controlling | Total equity | |||||||||||||||||||||||||||
| Share capital | Capital surplus | Less: Treasury stock | Other comprehensive income | Special reserve | Surplus reserves | Retained earnings | Subtotal | interests | |||||||||||||||||||||
| I. | At 31 December 2020 and 1 January 2021 | 1,545,126,957.00 | 4,002,393,061.81 | 579,403,185.12 | 20,026,089.70 | 10,057,438.97 | 51,830,974.45 | (891,492,837.06 | ) | 4,158,538,499.75 | 72,989,978.55 | 4,231,528,478.30 | |||||||||||||||||
| II. | Changes for the year | ||||||||||||||||||||||||||||
| （I） | Total comprehensive income | - | - | - | (53,348,752.68 | ) | - | - | 467,333,661.79 | 413,984,909.11 | 20,343,659.53 | 434,328,568.64 | |||||||||||||||||
| （II） | Owner’s contributions and reduction in capital | ||||||||||||||||||||||||||||
| 1. | Share-based payments included in equity | - | 15,243,506.90 | - | - | - | - | 15,243,506.90 | - | 15,243,506.90 | |||||||||||||||||||
| 2. | Others | (213,188,790.00 | ) | (778,870,708.77 | ) | (85,067,681.18 | ) | - | - | - | - | (906,991,817.59 | ) | 78,271,609.20 | (828,720,208.39 | ) | |||||||||||||
| （III） | Special reserve | ||||||||||||||||||||||||||||
| 1. | Provision in the period | - | - | - | - | 4,513,399.49 | - | - | 4,513,399.49 | - | 4,513,399.49 | ||||||||||||||||||
| 2. | Utilisation in the period | - | - | - | - | (3,318,199.27 | ) | - | - | (3,318,199.27 | ) | - | (3,318,199.27 | ) | |||||||||||||||
| III. | At 31 December 2021 | 1,331,938,167.00 | 3,238,765,859.94 | 494,335,503.94 | (33,322,662.98 | ) | 11,252,639.19 | 51,830,974.45 | (424,159,175.27 | ) | 3,681,970,298.39 | 171,605,247.28 | 3,853,575,545.67 | ||||||||||||||||
The accompanying notes to the financial statements form an integral part of the financial statements.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Consolidated Statement of Cash Flows2022 Expressed in Renminbi Yuan
| Note V | 2022 | 2021 | ||||||
| I. | Cash flows from operating activities | |||||||
| Proceeds from sale of goods and rendering of services | 3,980,777,143.75 | 3,421,895,227.97 | ||||||
| Receipts of taxes and surcharges refunds | 65,415,784.48 | 45,064,378.48 | ||||||
| Cash generated from other operating activities | 64 | 37,413,422.25 | 39,334,554.11 | |||||
| Subtotal of cash generated from operating activities | 4,083,606,350.48 | 3,506,294,160.56 | ||||||
| Payments for goods and services | 2,469,141,272.41 | 2,241,460,975.24 | ||||||
| Cash payments to and on behalf of employees1 | 672,362,139.67 | 602,036,898.56 | ||||||
| Payments of all types of taxes and surcharges | 155,555,899.95 | 135,039,721.24 | ||||||
| Cash used in other operating activities | 64 | 280,252,577.50 | 221,097,289.50 | |||||
| Subtotal of cash used in operating activities | 3,577,311,889.53 | 3,199,634,884.54 | ||||||
| Net cash generated from/used in operating activities | 65 | 506,294,460.95 | 306,659,276.02 | |||||
| II. | Cash flows from investing activities | |||||||
| Proceeds from disinvestment | 5,461,128,307.85 | 7,023,027,591.06 | ||||||
| Investment income | 19,977,080.02 | 93,945,208.58 | ||||||
| Net proceeds from the disposal of fixed assets, intangible assets and other long-lived assets | 299,284.95 | 928,029.29 | ||||||
| Cash generated from other investing activities | 64 | 20,741,402.85 | 2,419,748.09 | |||||
| Subtotal of cash generated from investing activities | 5,502,146,075.67 | 7,120,320,577.02 | ||||||
| Payments for the acquisition of fixed assets, intangible assets and other long-lived assets | 217,707,161.02 | 66,321,945.54 | ||||||
| Payments for investments | 5,586,038,692.54 | 5,718,640,747.18 | ||||||
| Net payments for the acquisition of subsidiaries and other business units | 65 | 115,932,016.05 | 30,000,000.00 | |||||
| Cash used in other investing activities | 64 | 20,000,000.00 | - | |||||
| Subtotal of cash used in investing activities | 5,939,677,869.61 | 5,814,962,692.72 | ||||||
| Net cash generated from/used in investing activities | (437,531,793.94 | ) | 1,305,357,884.30 | ) |
The accompanying notes to the financial statements form an integral part of the financial statements.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Consolidated Statement of Cash Flows2022 Expressed in Renminbi Yuan
| Note V | 2022 | 2021 | |||||
| III. | Cash flows from financing activities | ||||||
| Cash proceeds from investments by others | 2,600,000.00 | - | |||||
| Including: Cash receipts from minority investment | 2,600,000.00 | - | |||||
| Borrowings raised | 255,640,726.89 | 405,333,187.33 | |||||
| Cash generated from other financing activities | 64 | 740,125,575.61 | 193,525,797.34 | ||||
| Subtotal of cash generated from financing activities | 998,366,302.50 | 598,858,984.67 | |||||
| Repayment of borrowings | 452,030,374.54 | 390,598,473.42 | |||||
| Interest and dividends paid | 8,391,200.32 | 9,707,118.35 | |||||
| Cash used in other financing activities | 64 | 673,378,550.06 | 1,357,057,613.48 | ||||
| Subtotal of cash used in financing activities | 1,133,800,124.92 | 1,757,363,205.25 | |||||
| Net cash generated from/used in financing activities | (135,433,822.42 | ) | (1,158,504,220.58 | ) | |||
| IV. | Effect of foreign exchange rates changes on cash and cash equivalents | 41,088,076.94 | (54,810,400.78 | ) | |||
| V. | Net increase/(decrease) in cash and cash equivalents | (25,583,078.47 | ) | 398,702,538.96 | ) | ||
| Add: Cash and cash equivalents, beginning of the period | 1,259,303,775.74 | 860,601,236.78 | |||||
| VI. | Cash and cash equivalents, end of the period | 65 | 1,233,720,697.27 | 1,259,303,775.74 |
The accompanying notes to the financial statements form an integral part of the financial statements
Guangdong Dongfang Precision Science & Technology Co., Ltd.Company Balance SheetAs at 31 December 2022 Expressed in Renminbi Yuan
| Assets | Note XV | 31 December 2022 | 31 December 2021 | ||||
| Current assets | |||||||
| Cash and bank balances | 150,462,307.50 | 526,602,901.98 | |||||
| Financial assets held for trading | 544,644,172.35 | 652,931,497.75 | |||||
| Accounts receivable | 1 | 252,845,901.89 | 154,703,065.67 | ||||
| Receivables financing | 8,665,919.20 | 14,939,923.99 | |||||
| Prepayments | 5,599,366.14 | 8,893,984.77 | |||||
| Other receivables | 2 | 595,201,759.62 | 444,140,266.79 | ||||
| Inventories | 144,657,557.06 | 145,283,359.74 | |||||
| Contract assets | 28,301,152.72 | 17,681,315.64 | |||||
| Current portion of non-current assets | 311,763,750.00 | 108,385,000.00 | |||||
| Other current assets | 620,238.68 | 713,296.22 | |||||
| Total current assets | 2,042,762,125.16 | 2,074,274,612.55 | |||||
| Non-current assets | |||||||
| Long-term receivables | 1,294,299.00 | 143,750.00 | |||||
| Long-term equity investments | 3 | 760,833,667.45 | 566,779,845.04 | ||||
| Other non-current financial assets | 134,097,590.81 | 110,672,495.38 | |||||
| Fixed assets | 311,637,453.98 | 316,780,357.65 | |||||
| Construction in progress | 4,716.98 | 2,040,059.06 | |||||
| Right-of-use assets | 8,298,157.57 | 17,226,122.41 | |||||
| Intangible assets | 56,644,698.03 | 58,297,372.40 | |||||
| Long-term prepaid expenses | 6,215,303.00 | 4,449,274.82 | |||||
| Deferred tax assets | 173,968,753.31 | 109,447,418.03 | |||||
| Other non-current assets | 34,520,000.00 | 300,150,000.00 | |||||
| Total non-current assets | 1,487,514,640.13 | 1,485,986,694.79 | |||||
| Total assets | 3,530,276,765.29 | 3,560,261,307.34 | |||||
The accompanying notes to the financial statements form an integral part of the financial statements.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Company Balance Sheet (Cont’d)As at 31 December 2022 Expressed in Renminbi Yuan
| Liabilities and equity | 31 December 2022 | 31 December 2021 | |||||
| Current liabilities | |||||||
| Trading financial liabilities | 7,230,000.00 | 5,861,200.00 | |||||
| Notes payable | 47,602,955.27 | 45,445,513.50 | |||||
| Accounts payable | 46,036,442.22 | 61,109,554.88 | |||||
| Contract liabilities | 29,803,024.37 | 21,697,782.14 | |||||
| Employee benefits payable | 14,571,839.42 | 13,205,296.64 | |||||
| Tax payable | 430,234.63 | 2,850,207.94 | |||||
| Other payables | 125,142,268.32 | 195,636,226.94 | |||||
| Current portion of non-current liabilities | 1,703,312.89 | 4,875,266.03 | |||||
| Other current liabilities | 1,481,251.36 | 1,275,327.99 | |||||
| Total current liabilities | 274,001,328.48 | 351,956,376.06 | |||||
| Non-current liabilities | |||||||
| Lease liabilities | 6,781,238.89 | 13,331,936.29 | |||||
| Provisions | 1,283,500.00 | 1,635,363.75 | |||||
| Deferred income | 11,073,651.66 | 12,190,311.66 | |||||
| Other non-current liabilities | 470,437.92 | 12,262,010.40 | |||||
| Total non-current liabilities | 19,608,828.47 | 39,419,622.10 | |||||
| Total liabilities | 293,610,156.95 | 391,375,998.16 | |||||
The accompanying notes to the financial statements form an integral part of the financial statements.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Company Balance Sheet (Cont’d)As at 31 December 2022 Expressed in Renminbi Yuan
| Liabilities and equity | 31 December 2022 | 31 December 2021 | |||||
| Equity | |||||||
| Share capital | 1,241,106,400.00 | 1,331,938,167.00 | |||||
| Capital surplus | 2,820,661,243.26 | 3,162,960,902.13 | |||||
| Less: Treasury stock | 240,255,502.45 | 494,335,503.94 | |||||
| Special reserve | 7,200,502.88 | 5,067,104.62 | |||||
| Surplus reserves | 51,830,974.45 | 51,830,974.45 | |||||
| Retained earnings | (643,877,009.80 | ) | (888,576,335.08 | ) | |||
| Total Equity | 3,236,666,608.34 | 3,168,885,309.18 | |||||
| Total liabilities and Equity | 3,530,276,765.29 | 3,560,261,307.34 | |||||
The accompanying notes to the financial statements form an integral part of the financial statements.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Company Income Statement2022 Expressed in Renminbi Yuan
| Note XV | 2022 | 2021 | |||||
| Operating revenue | 4 | 521,042,097.24 | 486,757,300.91 | ||||
| Less: Cost of sales | 4 | 272,827,724.91 | 256,366,100.99 | ||||
| Taxes and surcharges | 5,683,155.26 | 5,401,743.28 | |||||
| Selling expenses | 17,209,290.59 | 19,942,732.31 | |||||
| Administrative expenses | 97,805,978.92 | 84,898,110.60 | |||||
| R&D expenses | 18,858,241.84 | 21,950,643.65 | |||||
| Finance costs | (30,772,961.40 | ) | (11,086,061.90 | ) | |||
| Including: Interest expenses | 2,212,567.00 | 2,969,649.37 | |||||
| Interest income | 12,296,701.61 | 17,285,245.87 | |||||
| Add: Other income | 6,635,795.27 | 4,618,346.17 | |||||
| Investment income | 5 | 24,811,647.21 | 58,085,312.56 | ||||
| Including: Share of profit or loss of joint ventures and associates | 3,143,695.45 | 3,880,256.70 | |||||
| Gain on changes in fair value | 8,365,325.57 | 34,139,842.44 | |||||
| Credit impairment loss | 206,054.50 | 613,952.31 | |||||
| Asset impairment loss | (1,117,287.51 | ) | 43,279.19 | ||||
| Gain/loss on disposal of assets | 1,379,510.93 | 275,491.34 | |||||
| Operating profit | 179,711,713.09 | 207,060,255.99 | |||||
| Add: Non-operating income | 613,023.15 | 4,248,968.31 | |||||
| Less: Non-operating expenses | 146,746.24 | 188,495.98 | |||||
| Gross profit | 180,177,990.00 | 211,120,728.32 | |||||
| Less: Income tax expenses | (64,521,335.28 | ) | (83,421,375.16 | ) | |||
| Net profit | 244,699,325.28 | 294,542,103.48 | |||||
| Including: Net profit from continuing operations | 244,699,325.28 | 294,542,103.48 | |||||
| Total comprehensive income | 244,699,325.28 | 294,542,103.48 | |||||
The accompanying notes to the financial statements form an integral part of the financial statements.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Consolidated Statements of Changes in Equity2022 Expressed in Renminbi Yuan
2022
| Share capital | Capital surplus | Less: Treasury stock | Special reserve | Surplus reserves | Retained earnings | Total equity | ||||||||||
| I. | At 31 December 2021 and 1 January 2022 | 1,331,938,167.00 | 3,162,960,902.13 | 494,335,503.94 | 5,067,104.62 | 51,830,974.45 | (888,576,335.08 | ) | 3,168,885,309.18 | |||||||
| II. | Changes for the year | |||||||||||||||
| （I） | Total comprehensive income | - | - | - | - | - | 244,699,325.28 | 244,699,325.28 | ||||||||
| （II） | Owner’s contributions and reduction in capital | |||||||||||||||
| 1. | Share-based payments included in equity | - | 27,945,791.19 | - | - | - | - | 27,945,791.19 | ||||||||
| 2. | Others | (90,831,767.00 | ) | (370,245,450.06 | ) | (254,080,001.49 | ) | - | - | - | (206,997,215.57 | ) | ||||
| （III） | Special reserve | |||||||||||||||
| 1. | Provision in the period | - - | - - | - | 2,326,893.29 (193,495.03 | - - | - - | 2,326,893.29 (193,495.03 | ||||||||
| 2. | Amount utilised in the period | - | ) | ) | ||||||||||||
| III. | At 31 December 2022 | 1,241,106,400.00 | 2,820,661,243.26 | 240,255,502.45 | 7,200,502.88 | 51,830,974.45 | (643,877,009.80 | ) | 3,236,666,608.34 |
The accompanying notes to the financial statements form an integral part of the financial statements.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Consolidated Statements of Changes in Equity2022 Expressed in Renminbi Yuan
2021
| Share capital | Capital surplus | Less: Treasury stock | Special reserve | Surplus reserves | Retained earnings | Total equity | ||||||||||
| I. | At 31 December 2020 and 1 January 2021 | 1,545,126,957.00 | 3,846,323,477.68 | 579,403,185.12 | 3,835,986.08 | 51,830,974.45 | (1,183,118,438.56 | ) | 3,684,595,771.53 | |||||||
| II. | Changes for the year | |||||||||||||||
| （I） | Total comprehensive income | - | - | - | - | - | 294,542,103.48 | 294,542,103.48 | ||||||||
| （II） | Owner’s contributions and reduction in capital | |||||||||||||||
| 1. | Share-based payments included in equity | - | 14,068,075.26 | - | - | - | - | 14,068,075.26 | ||||||||
| 2. | Others | (213,188,790.00 | ) | (697,430,650.81 | ) | (85,067,681.18 | ) | - | - | - | (825,551,759.63 | ) | ||||
| （III） | Special reserve | |||||||||||||||
| 1. | Provision in the period | - | - | - | 1,615,641.49 | - | - | 1,615,641.49 | ||||||||
| 2. | Amount utilised in the period | - | - | - | (384,522.95 | ) | - | - | (384,522.95 | ) | ||||||
| III. | At 31 December 2021 | 1,331,938,167.00 | 3,162,960,902.13 | 494,335,503.94 | 5,067,104.62 | 51,830,974.45 | (888,576,335.08 | ) | 3,168,885,309.18 |
The accompanying notes to the financial statements form an integral part of the financial statements.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Company Statement of Cash Flows2022 Expressed in Renminbi Yuan
| 2022 | 2021 | ||||||
| I. | Cash flows from operating activities | ||||||
| Proceeds from sale of goods and rendering of services | 355,422,382.54 | 535,230,797.30 | |||||
| Receipts of taxes and surcharges refunds | 20,405,793.81 | 13,605,552.69 | |||||
| Cash generated from other operating activities | 33,411,792.89 | 31,866,204.03 | |||||
| Subtotal of cash generated from operating activities | 409,239,969.24 | 580,702,554.02 | |||||
| Payments for goods and services | 238,655,533.97 | 293,904,947.16 | |||||
| Cash payments to and on behalf of employees | 90,655,013.90 | 84,307,393.88 | |||||
| Payments of all types of taxes and surcharges | 9,877,155.70 | 11,302,053.75 | |||||
| Cash used in other operating activities | 35,938,085.85 | 15,808,751.20 | |||||
| Subtotal of cash used in operating activities | 375,125,789.42 | 405,323,145.99 | |||||
| Net cash generated from/used in operating activities | 34,114,179.82 | 175,379,408.03 | |||||
| II. | Cash flows from investing activities | ||||||
| Proceeds from disinvestment | 2,957,634,482.77 | 2,866,282,671.15 | |||||
| Investment income | 3,788,252.05 | 63,507,216.86 | |||||
| Net proceeds from the disposal of fixed assets, intangible assets and other long-lived assets | 23,000.00 | 449,580.00 | |||||
| Other cash receipts relating to investing activities | 20,903,000.00 | - | |||||
| Subtotal of cash generated from investing activities | 2,982,348,734.82 | 2,930,239,468.01 | |||||
| Payments for the acquisition of fixed assets, intangible assets and other long-lived assets | 47,508,537.31 | 6,558,484.63 | |||||
| Payments for investments | 2,834,602,224.34 | 1,888,592,448.78 | |||||
| Net payments for the acquisition of subsidiaries and other business units | 173,800,000.00 | 120,000,001.00 | |||||
| Other cash payments relating to other investing activities | 20,000,000.00 | - | |||||
| Subtotal of cash used in investing activities | 3,075,910,761.65 | 2,015,150,934.41 | |||||
| Net cash generated from/used in investing activities | (93,562,026.83 | ) | 915,088,533.60 |
The accompanying notes to the financial statements form an integral part of the financial statements.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Company Statement of Cash Flows2022 Expressed in Renminbi Yuan
| 2022 | 2021 | ||||||
| III. | Cash flows from financing activities | ||||||
| Borrowings raised | 33,431,500.00 | 129,418,000.00 | |||||
| Cash generated from other financing activities | 585,791,128.23 | 254,961,825.36 | |||||
| Subtotal of cash generated from financing activities | 619,222,628.23 | 384,379,825.36 | |||||
| Repayment of borrowings | 33,431,500.00 | 129,418,000.00 | |||||
| Interest and dividends paid | 1,438,732.23 | 2,005,101.64 | |||||
| Cash used in other financing activities | 539,194,859.08 | 1,313,154,399.85 | |||||
| Subtotal of cash used in financing activities | 574,065,091.31 | 1,444,577,501.49 | |||||
| Net cash generated from/used in financing activities | 45,157,536.92 | (1,060,197,676.13 | ) | ||||
| IV. | Net increase/(decrease) in cash and cash equivalents | (14,290,310.09 | ) | 30,270,265.50 | |||
| Add: Cash and cash equivalents, beginning of the period | 156,610,136.21 | 126,339,870.71 | |||||
| V. | Cash and cash equivalents, end of the period | 142,319,826.12 | 156,610,136.21 | ||||
The accompanying notes to the financial statements form an integral part of the financial statements.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
III. Corporate Background
Guangdong Dongfang Precision Science & Technology Co., Ltd. (the "Company"), a joint stockcompany with limited liability registered in Guangdong Province of the People's Republic of Chinaand established on 9 December 1996, obtained a Business License for Enterprise Legal Person witha registration number of 440682000040868.
In August 2011, upon the approval by the China Securities Regulatory Commission (CSRC) in theReply on Approving the Initial Public Offering of Shares by Guangdong Dongfang PrecisionScience & Technology Co., Ltd. (ZH.J.X.K. [2011] No. 1237), the Company issued Renminbi-denominated ordinary shares to the public, and was listed on the Shenzhen Stock Exchange in thesame month. The Company started to use the unified social credit code (914406002318313119) in2016. The Company is headquartered in 2 Qiangshi Road, Shishan Town, Nanhai District, FoshanCity, Guangdong Province, China.
Business scope of the Company:
General items: Network and information security software development; manufacturing of specialprinting equipment; computer system services; information system integration services; informationconsulting services (excluding licensing information consulting services); manufacturing ofmaterial handling equipment; manufacturing of special equipment for pulping and papermaking;manufacturing of industrial robots; manufacturing of special-purpose equipment (excludingmanufacturing of special licensing equipment); manufacturing of industrial control computers andsystems; sales of intelligent material handling equipment; software sales; intelligent control systemintegration; AI universal application system; domestic freight forwarding; information technologyconsulting services; socio-economic consulting services; environmental protection consultingservices; technology intermediary services. (Except for items subject to approval according to law,business activities shall be conducted independently in accordance with the business license)Licensed items: import and export agency; import and export of goods; import and export oftechnologies. (Business activities that require approval according to law shall be subject to theapproval by relevant authorities. Specific business items are indicated in the approval documents orpermit documents of relevant authorities.) The Company belongs to the special-purpose equipmentmanufacturing industry.
The actual controllers of the Company are Tang Zhuolin and Tang Zhuomian.
These financial statements were authorized for issue by the Board of Directors of the Company on24 March 2023.
The consolidation scope for consolidated financial statements is determined based on the concept ofcontrol. For details of changes during the period, please refer to Note VI.
IV. Basis of Preparation of the Financial Statements
These financial statements have been prepared in accordance with China’s “Accounting Standardsfor Business Enterprises — Basic Standards” promulgated by the Ministry of Finance and thespecific accounting standards, application guidance, interpretations and other relevant regulationsissued or amended thereafter (hereafter collectively referred to as “Accounting Standards forBusiness Enterprises” or “CAS”).
The financial statements are prepared on a going concern basis.In the preparation of the financial statements, all items are recorded by using historical cost as thebasis of measurement except for some financial instruments. Impairment allowance is madeaccording to relevant regulations if the assets are impaired.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
V. Principal Accounting Policies and Accounting Estimates
1. Statement of compliance
The financial statements present truly and completely the financial positions of the Group and theCompany as at 31 December 2021, and the financial performance and the cash flows for the yearthen ended in accordance with Accounting Standards for Business Enterprises.
2. Accounting year
The accounting year of the Group is from 1 January to 31 December of each calendar year.
3. Functional currency
The Group’s functional currency and the currency used in preparing the financial statements wereRenminbi. The amounts in the financial statements were denominated in Renminbi yuan, unlessotherwise stated.
4. Business combination
Business combinations are classified into business combinations involving entities under commoncontrol and business combinations not involving entities under common control.
Business combinations involving entities under common control
A business combination involving entities under common control is a business combination inwhich all of the combining entities are ultimately controlled by the same party or parties bothbefore and after the business combination, and that control is not transitory. The acquirer is theentity that obtains control of the other entities participating in the combination at the combinationdate, and the other entities participating in the combination are the acquirees. The combination dateis the date on which the combining party effectively obtains control of the parties being combined.
Assets and liabilities obtained by combining party in the business combination involving entitiesunder common control (including goodwill arising from the acquisition of the merged party by theultimate controller) are recognized on the basis of their carrying amounts at the combination daterecorded on the financial statements of the ultimate controlling party. The difference between thecarrying amount of the consideration paid for the combination (or aggregate face values of theshares issued) and the carrying amount of the net assets obtained is adjusted to capital surplus. Ifthe capital surplus are not sufficient to absorb the difference, any excess is adjusted to retainedearnings.
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements2022 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
4. Business combination (cont’d)
Business combinations not involving entities under common control
A business combination not involving entities under common control is a business combination inwhich all of the combining entities are not ultimately controlled by the same party or parties bothbefore and after the business combination. The acquirer is the entity that obtains control of the otherentities participating in the combination at the acquisition date, and the other entities participatingin the combination are the acquirees. The acquisition date is the date on which the acquirereffectively obtains control of the acquiree.
The acquiree’s identifiable assets, liabilities and contingent liabilities are recognized at their fairvalues at the acquisition date.
The excess of the sum of the consideration paid (or equities issued) for business combination andequity interests in the acquiree held prior to the date of acquisition over the share of the attributablenet identifiable assets of the acquiree, measured at fair value, was recognized as goodwill, which issubsequently measured at cost less cumulative impairment loss. In case the fair value of the sum ofthe consideration paid (or equities issued) and equity interests in the acquire held prior to the dateof acquisition is less than the fair value of the share of the attributable net identifiable assets of theacquiree, a review of the measurement of the fair values of the identifiable assets, liabilities andcontingent liabilities, the consideration paid for the combination (or equity issued) and the equityinterests in the acquiree held prior to the date of acquisition is conducted. If the review indicatesthat the fair value of the sum of the consideration paid (or equities issued) and equity interests inthe acquiree held prior to the date of acquisition is indeed less than the fair value of the share of theattributable net identifiable assets of the acquiree, the difference is recognized in profit or loss.
Where a business combination not involving entities under common control realized step by stepthrough multiple transactions, the long-term equity investments held by the acquiree prior to thepurchase date shall be remeasured at the fair value of the long-term equity investments on thepurchase date, and the difference between the fair value and their carrying value shall be recognizedin profit or loss. For other comprehensive income of the long-term equity investments under theequity method held by the acquiree prior to the purchase date, accounting treatment shall beperformed on the same basis as the direct disposal of relevant assets or liabilities by the investedentity, and other changes in equity than net profit and loss, other comprehensive income and thedistribution of profits shall be converted into current profits and losses on the purchase date. Thechanges in the fair value of the equity instrument investments held by the acquiree prior to thepurchase date and accumulated in other comprehensive income prior to the purchase date shall betransferred to retained profits and losses.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
5. Consolidated financial statements
The consolidation scope for consolidated financial statements is determined based on the concept ofcontrol, including the Company and all subsidiaries’ financial statements. Subsidiaries are thoseenterprises or entities which the Company has control over (including enterprises, separablecomponents of investee units and structured entities controlled by the Company).
The financial statements of the subsidiaries are prepared for the same reporting period as theCompany, using consistent accounting policies. Any inconsistent accounting policies have beenadjusted to become consistent with the Company’s accounting policies. All assets, liabilities,equities, revenues, costs and cash flows arising from intercompany transactions are eliminated onconsolidation.
The excess of current loss attributable to non-controlling shareholders of a subsidiary over theirentitlements to the opening balance of equity shall be charged to non-controlling interests.
For subsidiaries obtained through a business combination not involving entities under commoncontrol, the operating results and cash flows of the acquirees will be recognized in consolidatedfinancial statements from the date the Group effectively obtains the control until the date thatcontrol is terminated. When consolidated financial statement is prepared, the subsidiaries’ financialstatements will be adjusted based on the fair values of the identifiable assets, liabilities andcontingent liabilities at the acquisition date.
For subsidiaries acquired through combination of entities under common control, the businessresults and cash flows of the combined entities are included in the consolidated financial statementsfrom the beginning of the period in which the combination occurred. When preparing andcomparing the consolidated financial statements, the Group makes adjustments to relevant items ofthe financial statements of the previous period, deeming the reporting entity formed throughcombination as existing since initial implementation of control by the ultimate controlling party.
In the event of the change in one or more elements of control as a result of changes in relevant factsand conditions, the Group reassesses whether it has control over the investee.
6. Cash and cash equivalents
Cash comprises cash on hand and deposits readily available for payments. Cash equivalentsrepresent short-term highly liquid investments which are readily convertible to known amounts ofcash, and subject to an insignificant risk of changes in value.
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements2022 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
7. Foreign currency translation
For foreign currency transactions, the Group translates the foreign currency into its functionalcurrency.
Upon initial recognition, foreign currency transactions are translated into the functional currencyusing the spot exchange rate of the dates on which transactions occur. At the balance sheet date,foreign currency monetary items are translated using the spot exchange rate at the balance sheetdate. The translation differences arising from the settlement and foreign currency monetary itemsare recognized in profit or loss. Also at the balance sheet date, foreign currency non-monetary itemsmeasured at historical cost continue to be translated using the spot exchange rate at the dates of thetransactions and it does not change its carrying amount in functional currency. Foreign currencynon-monetary items measured at fair value are translated using the spot exchange rate. Thedifferences arising from the above translations are recognized in current profit or loss or othercomprehensive income according to the nature of foreign currency non-monetary items.
The Group translates the functional currencies of foreign operations into Renminbi when preparingthe financial statements. Asset and liability items in the balance sheet are translated at the spotexchange rate prevailing at the balance sheet date. Equity items, except for retained earnings, aretranslated at the spot exchange rates at the date when such items arose. Revenue and expense itemsin the income statement are translated using the average exchange rate for the periods whentransactions occur. Translation differences arising from the aforesaid translation of financialstatements denominated in foreign currency shall be recognized as other comprehensive income.When foreign operations are disposed, other comprehensive income relating to the foreignoperation is transferred to current profit or loss. Partial disposal shall be recognized on a pro-ratabasis.
Cash flows denominated in foreign currencies and foreign subsidiaries’ cash flows are translatedusing the average exchange rate for the period when cash flows occur. The impact on cash by thefluctuation of exchange rates is presented as a separate line item of reconciliation in the statementof cash flows.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
8. Financial instruments
Financial instruments refer to the contracts which give rise to a financial asset in one entity and afinancial liability or equity instrument in another entity.
Recognition and derecognition of financial instruments
The Group recognizes a financial asset or a financial liability when it becomes a party to thecontractual provisions of the financial instrument.
A financial asset (or part of it, or a part of a group of similar financial asset) is derecognized whenone of the following criteria is met, that is, when a financial asset is written off from its account andbalance sheet:
（1） The right of receiving the cash flow generated from the financial asset has expired;
（2） The right of receiving cash flow generated by the financial assets is transferred, or an
obligation of paying the full amount of cash flow received to third parties in a timelymanner has been undertaken under “pass-through” agreements, where (a) substantially allrisks and rewards of the ownership of such type of financial assets have been transferred,or (b) control over such type of financial assets has not been retained even thoughsubstantially all risks and rewards of the ownership of such type of financial assets havebeen neither transferred nor retained.
If the obligation of financial liability has been fulfilled, cancelled or expired, the financial liabilityis derecognized. If the present financial liability is substituted by the same debtee with anotherliability differing in substance, or the terms of the present liability have been substantiallymodified, this substitution or modification is treated as derecognition of a present liability andrecognition of a new liability with any arising differences recognized in profit or loss.
Conventional dealings in financial assets are recognized or derecognized under the trade dayaccounting method. Conventional dealings refer to the receipt or delivery of financial assets withinperiods stipulated by the law and according to usual practices. The trade day is the date on whichthe Group undertakes to buy or sell a financial asset.
Classification and measurement of financial assets
At initial recognition, the Group classifies its financial assets into: financial assets at fair valuethrough profit or loss, financial assets at amortized cost, or financial assets at fair value throughother comprehensive income, according to the Group’s business model for managing financialassets and the contract cash flow characteristics of the financial assets. When and only when theGroup changes its business model of managing financial assets, all relevant financial assets affectedwill be re-classified.
Financial assets are measured at fair value on initial recognition, but if the accounts receivable ornotes receivable generated from the sales of goods or provision of services do not containsignificant financing components or do not consider financing components of no longer than oneyear, the initial measurement will be based on the transaction price.
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
8. Financial instruments (cont’d)
Classification and measurement of financial assets (cont’d)
For financial assets at fair value through profit or loss, the relevant transaction costs are directlyrecognized in profit or loss; for other financial assets, the relevant transaction costs are recognizedin their initial recognition amount.
The subsequent measurement of financial assets is dependent on its classification:
Debt instruments measured at amortized costFinancial assets fulfilling all of the following conditions are classified as financial assets atamortized cost: the objective of the Group’s business management model in respect of such type offinancial assets is to generate contract cash flow; the contract terms of such type of financial assetsprovide that cash flow generated on specific dates represents interest payment in relation toprincipal amounts based on outstanding principal amounts only. Interest income from such type offinancial assets are recognized using the effective interest rate method, and any profit or loss arisingfrom derecognition, amendments or impairment shall be charged to current profit or loss.
Debt instruments at fair value through other comprehensive incomeFinancial assets fulfilling all of the following conditions are classified as financial assets at fairvalue through other comprehensive income: the objective of the Group’s business managementmodel in respect of such type of financial assets is both to generate contract cash flow and to sellsuch type of financial assets; the contract terms of such type of financial assets provide that cashflow generated on specific dates represents interest payment in relation to principal amounts basedon outstanding principal amounts only. Interest income from this type of financial assets isrecognized using the effective interest rate method. Other than interest income, impairment loss andexchange differences which shall be recognized as current profit or loss, other fair value changesshall be included in other comprehensive income. Upon derecognition of the financial assets, thecumulative gains or losses previously included in other comprehensive income shall be transferredfrom other comprehensive income to current profit or loss.
Financial assets at fair value through profit or lossOther than financial assets measured at amortized cost and financial assets at fair value throughother comprehensive income as aforementioned, all financial assets are classified as financial assetsat fair value through profit or loss, which are subsequently measured at fair value, any changes ofwhich are recognized in current profit or loss.
Classification and measurement of financial liabilitiesThe Group classifies its financial liabilities at initial recognition: financial liabilities at fair valuethrough profit or loss, and other financial liabilities. For financial liabilities at fair value throughprofit or loss, the relevant transaction costs are directly recognized in profit or loss; for otherfinancial liabilities, the relevant transaction costs are recognized in their initial recognition amount.
The subsequent measurement of financial liabilities is dependent on its classification:
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
8. Financial instruments (cont’d)
Classification and measurement of financial liabilities (cont’d)
Financial liabilities at fair value through profit or lossFinancial liabilities at fair value through profit or loss include mainly financial liabilities held fortrading(comprising derivatives classified as financial liabilities). Financial liabilities held fortrading (comprising derivatives classified as financial liabilities) are subsequently measured at fairvalue and all changes are recognized in current profit or loss.
Other financial liabilitiesSubsequent to initial recognition, these financial liabilities are carried at amortized cost using theeffective interest method.
Impairment of financial instruments
The Group performs impairment treatment on financial assets at amortized cost, debt instruments atfair value through other comprehensive income and contract assets based on expected credit losses(ECL) and recognizes allowances for losses.
For receivables and contract assets that do not contain significant financing components, the Groupadopts a simplified measurement method to measure allowances for losses based on an amountequivalent to the lifetime expected credit losses.
Financial assets other than those measured with simplified valuation methods, the Group evaluatesat each balance sheet date whether its credit risk has significantly increased since initialrecognition. The period during which credit risk has not significantly increased since initialrecognition is considered the first stage, at which the Group shall measure loss allowance based onthe amount of expected credit loss for the next 12 months and shall compute interest incomeaccording to the book balance and effective interest rate; the period during which credit risk hassignificantly increased since initial recognition although no credit impairment has occurred isconsidered the second stage, at which the Group shall measure loss allowance based on the amountof expected credit loss for the entire valid period and shall compute interest income according to thebook balance and effective interest rate; The period during which credit impairment has occurredafter initial recognition is considered the third stage, at which the Group shall measure lossallowance based on the amount of the lifetime expected credit loss and shall compute interestincome according to the amortized cost and effective interest rate.
The Group estimates the expected credit loss of financial instruments individually and on a groupbasis. The Group considers the credit risk features of different customers and estimates theexpected credit losses of financial instruments based on aging portfolio.
For the Group’s criteria for judging whether credit risks have significantly increased, the definitionof assets subjected to credit impairment, and assumptions underlying the measurement of expectedcredit losses, please refer to Note VIII.3.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
8. Financial instruments (cont’d)
Impairment of financial instruments (cont’d)
When the Group no longer reasonably expects to be able to fully or partially recover the contractcash flow of financial assets, the Group directly writes down the book balance of such financialassets.
Derivative financial instruments
The Group uses derivative financial instruments. Derivative financial instruments are initiallyrecognized at fair value on the date on which a derivative contract is entered into and aresubsequently re-measured at fair value. Derivatives are carried as assets when the fair value ispositive and as liabilities when the fair value is negative.
Gains or losses arising from changes in the fair value of derivative instruments shall be directlyrecognized in current profit or loss.
Transfer of financial assets
If the Group has transferred substantially all the risks and rewards associated with the ownership ofa financial asset to the transferee, the asset should be derecognized. If the Group retainssubstantially all the risks and rewards of ownership of a financial asset, the asset should not bederecognized.
When the Group has neither transferred nor retained substantially all the risks and rewards ofownership of the financial asset, it may either derecognize the financial asset and recognize anyassociated assets and liabilities if control of the financial asset has not been retained; or recognizesthe financial asset to the extent of its continuing involvement in the transferred financial asset andrecognizes an associated liability if control has been retained.
Assets formed by the continuing involvement by way of the provision of financial guarantee inrespect of the transferred financial assets shall be recognized as the lower of the carrying value ofthe financial asset and the amount of financial guarantee. The amount of financial guarantee meansthe maximum amount among considerations received to be required for repayment.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
9. Inventories
Inventories include raw materials, work-in-progress, finished goods, product deliveries, semi-finished goods, materials consigned for processing, etc.
Inventories are initially recorded at costs. Inventories’ costs include purchasing costs, processingcosts and other costs. Actual costs of product deliveries are recognized using the weighted averagemethod. Turnover materials include low-value consumables, packaging materials, etc., which areexpensed in full.
The Group adopts the perpetual inventory system.
Inventories on the balance sheet date are stated at the lower of cost or net realisable value.Inventory valuation allowance is made and recognized in profit or loss when the net realisablevalue is lower than cost. Net realizable value is determined based on the estimated selling price inthe ordinary course of business, less the estimated costs to completion and estimated costsnecessary to make the sale and related taxes. Valuation allowances for raw materials are establishedby category, and those for finished goods by individual item. For inventories that relate to productsproduced and sold in the same region, have the same or similar ultimate purpose, and are difficultto separate in measurement, valuation allowances are established on a combined basis.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
10. Long-term equity investments
Long-term equity investments include equity investments in subsidiaries, joint ventures andassociates.
Long-term equity investments were recorded at initial investment cost on acquisition. For long-termequity investments acquired through the business combination of entities under common control,the initial investment cost shall be the share of carrying value of the equity of the merged party atthe date of combination as stated in the consolidated financial statements of the ultimate controllingparty. Any difference between the initial investment cost and the carrying value of theconsideration for the combination shall be dealt with by adjusting the capital surplus(if the capitalsurplus are insufficient for setting off the difference, such difference shall be further set off againstretained earnings). Upon disposal of the investment, other comprehensive income prior to the dateof combination shall be dealt with on the same basis as if the relevant assets or liabilities weredisposed of directly by the investee. Equity recognized as a result of changes in equity other thanthe set-off of profit and loss, other comprehensive income and profit allocation of the investee shallbe transferred to current profit and loss upon disposal of the investment. Items which remain long-term equity investments after the disposal shall be accounted for on a pro-rata basis, while itemsreclassified as financial instruments following the disposal shall be accounted for in full. For long-term equity investments acquired through the business combination of entities not under commoncontrol, the initial investment cost shall be the cost of combination (for business combinations ofentities not under common control achieved in stages through multiple transactions, the initialinvestment cost shall be the sum of the carrying value of the equity investment in the acquired partyheld at the date of acquisition and new investment cost incurred as at the date of acquisition). Thecost of combination shall be the sum of assets contributed by the acquiring party, liabilities incurredor assumed by the acquiring party and the fair value of equity securities issued. Upon disposal ofthe investment, other comprehensive income recognized under the equity method held prior to thedate of acquisition shall be dealt with on the same basis as if the relevant assets or liabilities weredisposed of directly by the investee. Equity recognized as a result of changes in equity other thanthe set-off of profit and loss, other comprehensive income and profit allocation of the investee shallbe transferred to current profit and loss upon disposal of the investment. Items which remain long-term equity investments after the disposal shall be accounted for on a pro-rata basis, while itemsreclassified as financial instruments following the disposal shall be accounted for in full. The initialinvestment cost of long-term equity investments other than those acquired through businesscombination shall be recognized in accordance with the following: for those acquired by way ofcash payments, the initial investment cost shall be the consideration actually paid plus expenses, taxamounts and other necessary outgoings directly related to the acquisition of the long-term equityinvestments. For long-term equity investments acquired by way of debt restructuring, the initialinvestment cost shall be determined in accordance with “CAS No. 12 — Debt Restructuring.”
In the financial statements of the Company, the cost method is used for long term equityinvestments in investees over which the Company exercises control. Control is defined as thepower exercisable over the investee, the entitlement to variable return through involvement in theactivities of the investee and the ability to influence the amount of return using the power over theinvestee.
When the cost method is used, long-term equity investments are measured at initial cost onacquisition. When additional investments are made or investments are recouped, the cost oflongterm equity investments shall be adjusted. Cash dividend or profit distribution declared by theinvestee shall be recognized as investment income for the period.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
10. Long-term equity investments (cont’d)
The equity method is used to account for long-term equity investments when the Group can jointlycontrol or has significant influence over the invested entity. Joint control is the contractually agreedsharing of control of an arrangement, which exists only when decisions about the relevant activitiesrequire the unanimous consent of the parties sharing control. Significant influence means havingthe authority to take part in the decision over the financial and operational policies but not theauthority to control or jointly control with other parties the formulation of such policies.
Under the equity method, any excess of the initial investment cost over the Company’s share of thenet fair value of the investment’s identifiable assets and liabilities is included in the initialinvestment cost of the long-term equity investment. When the carrying amount of the investment isless than the Company’s share of the fair value of the investment’s identifiable net assets, thedifference is recognized in profit or loss of the current period and debited to long-term equityinvestments.
Under the equity method, after the long-term equity investments are acquired, investment gains orlosses and other comprehensive income are recognized according to the entitled share of net profitor loss and other comprehensive income of the investee and the carrying amount of the long-termequity investment is adjusted accordingly. When recognising the Group’s share of the net profit orloss of the invested entity, the Group makes adjustments based on fair values of the investees’identifiable assets and liabilities at the acquisition date in accordance with the Group’s accountingpolicy and accounting period to investee’s net profits, eliminating pro-rata profit or loss frominternal transactions with associates and joint ventures attributed to investor (except that loss frominter-group transactions deemed as asset impairment loss shall be fully recognized), provided thatinvested or sold assets constituting businesses shall be excluded. When the invested enterprisedeclares profit distribution or cash dividends, the carrying amount of investment is adjusted downby the Group’s share of the profit distribution and dividends. The Group shall derecognize its shareof the losses of the investee after the long-term equity investment together with any long-terminterests that in substance forms part of the Group’s net investment in the investee are reduced tozero, except to the extent that the Group has incurred obligations to assume additional losses. TheGroup also adjusts the carrying amount of long-term equity investments for other changes inowner’s equity of the investees (other than the net-off of net profits or losses, other comprehensiveincome and profit distribution of the investee), and includes the corresponding adjustment in equity.
On disposal of the long-term equity investments, the difference between carrying value and marketprice is recognized in profit or loss for the current period. For long-term equity investments underequity method, when the use of the equity method is discontinued, other comprehensive incomepreviously accounted for under the equity method shall be dealt with on the same basis as if therelevant assets or liabilities were disposed of directly by the investee. Equity recognized as a resultof changes in equity other than the net-off of profit and loss, other comprehensive income andprofit distribution of the investee shall be transferred in full to current profit and loss. If the equitymethod remains in use, other comprehensive income previously accounted for under the equitymethod shall be dealt with on the same basis as if the relevant assets or liabilities were disposed ofdirectly by the investee and transferred to current profit and loss on a pro-rata basis. Equityrecognized as a result of changes in shareholders’ equity other than the net-off of profit and loss,other comprehensive income and profit distribution of the investee shall be transferred to currentprofit and loss on a pro-rata basis.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
11. Fixed assets
A fixed asset is recognized when, and only when, it is probable that future economic benefits thatare associated with the fixed asset will flow to the Group and the cost can be measured reliably.Subsequent expenditures related to a fixed asset are recognized in the carrying amount of the fixedasset if the above recognition criteria are met, and the carrying value of the replaced part isderecognized; otherwise, those expenditures are recognized in profit or loss as incurred.
Fixed assets are initially recognized at cost. Cost of purchased fixed assets includes purchasingprice, relevant taxes, and any directly attributable expenditure for bringing the asset to workingconditions for its intended use.
Except for those incurred by using the accrued expenses for safety production, fixed assets aredepreciated on a straight-line basis, and the respective estimated useful lives, estimated residualvalue ratios and annual depreciation rates are as follows:
| Useful life | Estimated residual value ratio | Annual depreciation rate | |||||||
| Buildings and constructions | 20-40 years | 5.00% | 2.38%-4.75% | ||||||
| Machinery | 5-18 years | 5.00% | 5.28%-19.00% | ||||||
| Transportation equipment | 5-10 years | 5.00% | 9.5%-19.00% | ||||||
| Electronic equipment | 3-10 years | 5.00% | 9.5%-31.67% | ||||||
| Office equipment | 3-10 years | 5.00% | 9.5%-31.67% | ||||||
| Other equipment | 5-10 years | 5.00% | 9.5%-19.00% | ||||||
The Group reviews, at least at each year end, useful lives, estimated residual values, anddepreciation methods of fixed assets and makes adjustments if necessary.
12. Construction in progress
Construction in progress is measured at the actual construction expenditures, including necessaryproject work expenses incurred during the period while construction is in progress, and otherrelated fees.
Construction in progress is transferred into fixed assets when it is ready for its intended use.
13. Borrowing costs
The borrowing costs that are directly attributable to the acquisition, construction or production of aqualifying asset are capitalized. The amounts of other borrowing costs incurred are recognised as anexpense in the period in which they are incurred. The Group has no borrowing costs eligible forcapitalization in the current year.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
14. Right-of-use assets
At the commencement date of the lease, the Group recognizes a right-of-use asset. The cost of theright-of-use asset comprises: (1) the amount of the initial measurement of the lease liability; (2) anylease payments made at or before the commencement date less any lease incentives received; (3)any initial direct cost incurred; (4) an estimate of costs incurred by the lessee in dismantling andremoving the underlying asset, restoring the site on which it is located or restoring the underlyingasset to the condition required by the terms and conditions of the lease. The right-of-use assets aredepreciated on a straight-line basis subsequently by the Group. If ownership of the leased assettransfers to the Group at the end of the lease term, depreciation is calculated using the estimateduseful life of the asset. Otherwise, the right-of-use assets are depreciated over the shorter of thelease term and the estimated useful lives of the assets.
15. Intangible assets
Intangible assets are recognized only when it is probable that economic benefits relating to suchintangible assets would flow into the Group and that their cost can be reliably measured. Intangibleassets are initially measured at cost, provided that intangible assets which are acquired in a businesscombination not under common control and whose fair value can be reliably measured shall beseparately recognized as intangible assets at fair value.
Useful life of an intangible asset is determined by the period over which it is expected to bringeconomic benefits to the Group. For an intangible asset with no foreseeable limit to the period overwhich it is expected to bring economic benefits to the Group, it is treated as an intangible asset withindefinite useful life.
Useful life of respective intangible assets is as follows:
| Useful life | |||||
| Land use rights | 40-50 years | ||||
| Land ownership (overseas) | Indefinite | ||||
| Trademarks | 5-10 years | ||||
| Trademarks (overseas) | Uncertain | ||||
| Patents | 5-10 years |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
15. Intangible assets (cont’d)
Property in land acquired by the Group is normally accounted for as intangible assets. Property inland and buildings relating to plants constructed by the Group are accounted for as intangible assetsand fixed assets, respectively. The costs for acquiring land and buildings are apportioned betweenthe property in land and buildings, or accounted for as fixed assets if they cannot be apportioned.
The straight-line amortisation method is used during the useful life period for intangible assets withdefinite useful lives. The Group reviews, at least at each year end, useful lives and amortizationmethod for intangible assets with definite lives and makes adjustment when necessary.
For intangible assets with indefinite useful life, impairment tests shall be conducted annuallyregardless of whether there are indications of impairment. Such intangible assets shall not beamortized and their useful life shall be reviewed during each accounting period. If there is evidencesuggesting that their useful life is limited, accounting treatment will be performed according to theabove policy on intangible assets with definite useful life.
The land ownership of Fosber S.p.A. ("Fosber Group"), a subsidiary of the Company, in Italy has apermanent term, and the Company believes that the land ownership will be used and will bringexpected inflows of economic benefits to the Company in the foreseeable future, so its useful life isregarded as indefinite. The trademarks registered by subsidiaries Fosber Group and FosberAmerica, Inc. ("Fosber America") have a useful life in accordance with the law, but at theexpiration of the protection period, Fosber Group and Fosber America can apply for an extension atlow service charges, so the Company will benefit from the above trademarks in the long term.Thus, the Company recognized the trademark use right as intangible assets with indefinite usefullife. The useful life of intangible assets with indefinite useful life will be reviewed at the end ofeach year. After review, the useful life of the above intangible assets is still uncertain.
The Group classifies the expenses for internal research and development as research costs anddevelopment costs. All research costs are charged to the current profit or loss as incurred.Expenditure incurred on projects to develop new products is capitalized and deferred only when theGroup can demonstrate the technical feasibility of completing the intangible asset so that it will beavailable for use or sale, its intention to complete and its ability to use or sell the asset, how theasset will generate future economic benefits (including demonstration that the product derived fromthe intangible asset or the intangible asset itself will be marketable or, in the case of internal use,the usefulness of the intangible asset as such), the availability of technical and financial resources tocomplete the project and procure the use or sale of the intangible asset, and the ability to measurereliably the expenditure during the development. Development costs which do not meet thesecriteria is recognized in profit or loss when incurred.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
16. Impairment
The Group assesses impairment of assets other than inventories, contract assets and assets related tocontract costs, deferred tax assets and financial assets, using the methods described below:
Impairment of assets (other than the impairment of inventories, contract assets and contract costassets, investment properties measured using the fair value model, deferred tax assets, and financialassets ) is determined in the following way: the Group assesses at the balance sheet date whetherthere is any indication that an asset may be impaired; if any indication exists that an asset may beimpaired, the Group estimates the recoverable amount of the asset and performs impairmenttesting; goodwill arising from a business combination, intangible assets with indefinite useful livesand intangible assets not yet available for use are tested for impairment at least at each year end,irrespective of whether there is any indication that the asset may be impaired.
The recoverable amount is the higher of the asset’s fair value less costs to sell and its present valueof estimated future cash flows. The Group estimates recoverable value for individual assets. Whenit is difficult to estimate individually, the recoverable value of the cash generating units which theasset belongs to will be estimated. The definition of cash generating units is determined on the basisof whether the cash generating units generate cash flows which are largely independent of thosefrom other cash generating units.
Where the carrying amount of an asset or a cash generating unit exceeds its recoverable amount, theasset or cash generating unit is considered impaired and is written down to its recoverable amount.The difference between the carrying amount and recoverable amount is recognized in profit or lossand allowance for impairment is made accordingly.
In connection with impairment tests for goodwill, the carrying value of goodwill arising frombusiness combination is allocated to relevant cash generating units (“CGU”) from the date ofacquisition on a reasonable basis. If it is difficult to allocate such goodwill to a relevant CGU, itshould be allocated to a relevant CGU group. A relevant CGU or CGU group is defined as onewhich can benefit from the synergies of the business combination and is not larger than thereporting segments determined by the Group.
In connection with impairment tests for CGUs or CGU groups that comprise goodwill, whereindications of impairment exists in a CGU or CGU group related to goodwill, impairment testsshould be performed first on CGUs or CGU groups that do not comprise goodwill and recognizeimpairment loss after estimating the recoverable amount. Then impairment tests on CGUs or CGUgroups that comprise goodwill should be performed and the carrying value and recoverable amountshould be compared. Where the recoverable amount is lower than the carrying value, theimpairment loss should first be offset against the carrying value of the goodwill allocated to CGUsor CGU groups and then against assets in the CGUs or CGU groups other than goodwill inproportion to the weighting of these assets.
Previously recognized impairment losses are not reversed in subsequent periods.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
17. Long-term prepaid expenses
Long-term prepaid expenses are amortized using the straight-line method, with the amortizationperiods as follows:
| Amortization period | |||||
| Decoration expenditures | 3-5 years | ||||
| Amortization of moulds | 3 years | ||||
| Other expenditures | 3-5 years |
18. Employee benefits
Employee benefits include all kinds of rewards or compensation incurred by the Group in exchangefor service rendered by employees or in the termination of employment, other than share-basedpayment. Employee benefits include short-term benefits, retirement benefits, dismission benefitsand other long-term employees’ benefits. Benefits provided by the Group to the spouses, childrenand dependents of employees and families of deceased employees are also a part of employeebenefits.
Short-term benefits
For accounting periods during which services are rendered by employees, short-term benefits thatwill incur is recognized as liability and included in profit and loss or related capital costs.
Retirement benefits (defined contribution schemes)
Employees of the Group participated in pension insurance and unemployment insurance schemesmanaged by the local government. The contribution costs are charged as asset cost or to profit orloss when incurred.
Retirement benefits (defined benefit schemes)
The Group operates a defined benefit pension scheme, which requires payments to anindependently operated fund. No funds have been injected into the scheme. The cost of benefitsprovided under the defined benefit scheme is calculated using the expected benefit accrual unitapproach.
Remeasurement arising from defined benefit pension schemes, including actuarial gains or losses,changes in the asset cap effect (deducting amounts included in net interest on net liabilities of thedefined benefit schemes) and return on scheme assets (deducting amounts included in net intereston net liabilities of the defined benefit schemes) are instantly recognized in the balance sheet andcharged to equity through other comprehensive income for the period during which it is incurred. Itwill not be reversed to profit and loss in subsequent periods.
Previous service costs are recognized as current expenses when: the defined benefit scheme isrevised, or relevant restructuring costs or dismission benefits are recognized by the Group,whichever earlier.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
18. Employee benefits (cont’d)
Retirement benefits (defined benefit schemes) (cont’d)recognizerecognizeNet interest is arrived at by multiplying net liabilities or net assets of defined benefits with adiscount rate. Changes in net obligations of defined benefits are recognized as cost of sales,administrative expenses, R&D expenses, selling expenses and finance costs in the incomestatement. Service costs included current services costs, past service costs and settlement of profitor loss. Net interest included interest income from scheme assets, interest expenses for schemeobligations and interest of the asset cap effect.
19. Lease liabilities
At the commencement date, the Group measures the lease liability at the present value of the leasepayments that are not paid at that date, except for short-term leases and low-value asset leases.
Lease payments include constant payments and the substantial constant payments net of leaseincentives, variable lease payments that depend on an index or ratio, the estimated payables ofguaranteed residual value, and also include the exercise price of the purchase option or the amountto be paid upon vest of the termination option, provided that the Group is reasonably certain thatthe option will be vested or that the lease term reflects that the Group will exercise the terminationoption.
In calculating the present value of the lease payments, the Group uses the interest rate implicit inthe lease as the discount rate. If that rate cannot be readily determined, the Group uses the lessee’sincremental borrowing rate. The Group calculates the interest expenses of the lease liability in eachperiod during the lease term using the constant periodic rate of interest, and recognizes such interestexpenses in profit or loss, except those that in the related asset costs as required. Variable leasepayments that are not included in the measurement of the lease assets are recognized in profit orloss as incurred, except those that shall be included in the related asset costs as required.
After the commencement date, the Group increases the book value of the lease liability wheninterest is recognized and decreases the book value of the lease liability when lease payments aremade. In the event of any change to the substantial constant payments, the estimated payables ofguaranteed residual value, the index or ratio used to determine lease payments, the assessmentresults or actual vesting of the purchase option, the renewal option or the termination option, theGroup remeasures the lease liability at the present value of the modified lease payments.
20. Provisions
Other than contingent consideration and assumed contingent liabilities in a business combinationnot involving entities under common control, the Group recognizes as provision an obligation thatis related to contingent matters when all of the following criteria are fulfilled:
（1） the obligation is a present obligation of the Group;
（2） the obligation would probably result in an outflow of economic benefits from the Group;
（3） the obligation could be reliably measured.
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
20. Provisions (cont’d)
Provisions are initially measured according to the best estimate of expenses on fulfilling the currentliabilities, in connection with the risk, uncertainty and timing value of the currency. The carryingvalue of the provisions would be reassessed on every balance sheet date. The carrying value will beadjusted to the best estimated value if there is certain evidence that the current carrying value is notthe best estimate.
The contingent liabilities obtained from a business combination not involving entities undercommon control shall be measured at fair value at the time of initial recognition. After the initialrecognition, according to the amount confirmed by provisions and the balance of the initialrecognition amount after deducting the accumulated amortization determined by the revenuerecognition principle, the higher of the two shall prevail for subsequent measurements.
21. Share-based payments
Share-based payments can be distinguished into equity-settled share-based payments and cash-settled share-based payments. Equity-settled share-based payments are transactions of the Groupsettled through the payment of shares or other equity instruments in consideration for receivingservices.
Equity-settled share-based payments made in exchange for services rendered by employees aremeasured at the fair value of equity instruments granted to employees. Instruments which arevested immediately upon the grant are charged to relevant costs or expenses at the fair value on thedate of grant and the capital surplus are credited accordingly. Instruments of which vesting isconditional upon completion of services or fulfillment of performance conditions are measured byrecognising services rendered during the period in relevant costs or expenses and crediting thecapital surplus accordingly at the fair value on the date of grant according to the best estimates ofthe number of exercisable equity instruments conducted by the Group at each balance sheet dateduring the pending period. The fair value of equity instruments is determined using the closingprice of the Company’s stock on the date of grant.
No expenses are recognized for awards that do not ultimately vest due to non-fulfillment ofnonmarket conditions and/or vesting conditions. For the market or non-vesting condition under theshare-based payments agreement, it should be treated as vesting irrespective of whether or not themarket or non-vesting condition is satisfied, provided that other performance condition and/orvesting conditions are satisfied.
22. Revenue generating from contracts with customers
The Group recognizes its revenue upon the fulfilment of contractual performance obligations undera contract, namely, when the customer obtains control over the relevant products or services. Theacquisition control over relevant products or services shall mean the ability to direct the use of theproducts or the provision of the services and receive substantially all economic benefits derivedtherefrom.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
22. Revenue generating from contracts with customers (cont’d)
Contract for the sales of productsThe product sales contract between the Group and its customers typically includes differentcontractual performance obligations for the transfer of products and the rendering of services. Withrespect to the sales of products, the Group typically recognizes its revenue at the time when thecustomer takes control over the products, taking into account the following factors: the acquisitionof the current right to receive payments for the products, the transfer of major risks and rewards ofownership, the transfer of the legal title of the products, the transfer of the physical assets of theproducts, and customers’ acceptance of the products.
Contract for the rendering of installation servicesThe service contract between the Group and its customers includes contractual performanceobligations for installation services. As the customer is able to forthwith obtain and consume theeconomic benefits brought by the Group’s contractual performance when the Group performs acontract, the Group considers such contractual performance obligations to be obligations performedover a period of time, and revenue shall be recognized on each balance sheet date according to theprogress of installation.
Significant financing componentWhere a contract contains a significant financing component, the Group determines transactionprices based on amounts payable assumed to be settled in cash by customers immediately upon theacquisition of control over the products or services. The difference between such transaction priceand contract consideration is amortized over the contract period using the effective interest methodbased on a ratio that discounts the nominal contractual consideration to the current selling price ofthe products or services. The Group shall not give consideration to any significant financingcomponent in a contract if the gap between the customer’s acquisition of control over the productsor services and payment of consideration is expected to be less than 1 year.
Warranty clausesThe Group provides quality assurance for products sold in accordance with contract terms and lawsand regulations. The accounting treatment of quality assurance in the form of warranty assuringcustomers products sold are in compliance with required standards is set out in Note III.20. Wherethe Group provides a service warranty for a standalone service in addition to the assurance ofcompliance of products with required standards, such warranty is treated as a standalone contractualperformance obligation, and a portion of the transaction price shall be allocated to the servicewarranty based on a percentage of the standalone price for the provision of product and servicewarranty. When assessing whether a warranty is rendering a standalone service in addition toproviding guarantee to customers that all sold goods are in compliance with required standards, theGroup will consider whether or not such warranty is a statutory requirement, the term of thewarranty and the nature of the Group’s undertaking to perform its obligations.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
22. Revenue generating from contracts with customers (cont’d)
Principal/agent
When the Group obtains control of trade goods or services from a third party and then transfers it toa customer, or has the ability to direct the third party to provide the service to the customer on theGroup’s behalf, the Group is entitled to determine the transaction price of the goods or services byitself, i.e., the Group controls the trade goods or services before they are transferred to thecustomer. Thus, the Group is a principal and recognizes revenue in the gross amount ofconsideration received or receivable. Otherwise, the Group is an agent and recognizes revenue inthe amount of any fee or commission to which it expects to be entitled from the customer. Theamount is the net amount of the gross consideration received or receivable after paying the otherparty the consideration received in exchange for the goods or services to be provided by that party.
23. Contract assets and contract liabilities
The Group presents contract assets or contract liabilities on the balance sheet according to therelationship between contractual performance obligations and customer payments.
Contract assetsContract assets are the right to receive consideration following the transfer of products or servicesto customers which is dependent on factors other than the passage of time.
For details of the Group’s determination and accounting treatment of expected credit losses fromcontract assets, please refer to Note III.8.
Contract liabilitiesContract liabilities are the obligation to pass products or services to customers in connection withcustomer consideration received or receivable, for example, amounts received prior to the transferof the promised products or services.
24. Assets relating to contract cost
The Group’s assets relating to contract costs include the contract acquisition costs and contractperformance costs. The costs are presented in inventory, other current assets or other non-currentassets based on liquidity of the assets.
Where the Group expects the incremental costs for acquiring a contract to be recoverable, suchcontract acquisition costs are recognized as an asset (unless the amortisation period of the asset isnot more than 1 year).
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
24. Assets relating to contract cost (cont’d)
Costs incurred by the Group for the performance of a contract are recognized as an asset as contractperformance costs if they do not fall under the scope of the relevant standards for inventories, fixedassets or intangible assets but meet all the following conditions:
（1） they are directly related to a current or anticipated contract, including direct labour, direct
materials, manufacturing expenses (or similar expenses), to be borne by customers asspecifically stipulated, and otherwise incurred solely in connection with the contract;
（2） they will increase the resources to be utilized in the Company’s future performance of its
contractual obligations;
（3） they are expected to be recoverable.
25 Government grants
Government grants are recognized when there is reasonable assurance that the grant will bereceived and all attaching conditions will be complied with. The grant is measured as the amountreceived or receivable where it takes the form of a cash asset, or at fair value where it is not a cashasset. Where the fair value cannot be reliably obtained, it should be measured at the nominal value.
In accordance with the stipulations of the government instruments, government grants appliedtowards acquisition or the formation of long-term assets in other manners are asset-relatedgovernment grants; the instruments unspecifically refer to the exercise of judgement based on thebasic conditions for receiving the asset-related grant applied towards or the formation of long-termassets in other manners. All other grants are recognized as income-related government grants.
Government grants relating to income and applied to make up for related costs or losses in futureperiods shall be recognized as deferred income, and shall be recognized in profit or loss of theperiod for which related costs or loss are recognized. Government grants specifically applied for thereimbursement of incurred related costs and expenses shall be directly recognized in profit or loss.
Government grants relating to assets shall offset the carrying amount of related assets, or berecognized as deferred income and credited to profit or loss over the useful life of the assetconcerned by reasonable and systematic instalments (provided that government grants measured atnominal value shall be directly recognized in profit or loss). Where the asset concerned is disposedof, transferred, retired or damaged prior to the end of its useful life, the balance of the deferredincome yet to be allocated shall be transferred to “asset disposal” under current profit or loss.
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
26. Deferred tax assets
The Group recognizes deferred tax assets and liabilities based on temporary differences using thebalance sheet liability method. Temporary differences are differences between the carrying amountof assets or liabilities in the balance sheet and their tax base on the balance sheet date. Temporarydifferences also include the differences between the carrying values and tax bases of items notrecognized as assets or liabilities where the tax base can be calculated according to the relevant taxregulations.
Deferred tax liabilities are recognized for all taxable temporary differences, except:
（1） where the taxable temporary difference arises from goodwill or the initial recognition of an
asset or liability in a transaction that is not a business combination and, at the time of thetransaction, affects neither the accounting profit nor taxable profit or loss;
（2） in respect of taxable temporary differences associated with investments in subsidiaries,
associates and interests in joint ventures, where the timing of the reversal of the temporarydifferences can be controlled and it is probable that the temporary differences will notreverse in the foreseeable future.
Deferred tax assets are recognized for all deductible temporary differences, carryforward of unusedtax credits and unused tax losses, to the extent that it is probable that taxable profit will be availableagainst which the deductible temporary differences, and the carryforward of unused tax credits andunused tax losses can be utilized except:
（1） where the deductible temporary difference arises from transaction that is not a business
combination and, at the time of the transaction, affects neither the accounting profit nortaxable profit or loss;
（2） deductible temporary differences associated with investments in subsidiaries, associates and
interests in joint ventures are recognized when all following conditions are met: it isprobable that the temporary differences will reverse in the foreseeable future, it is probablethat taxable profit against the deductible temporary differences will be available.
As at balance sheet date, deferred tax assets and liabilities are measured in accordance with relevanttax laws at the tax rates that are expected to apply to the period when the asset is realized or theliability is settled, and reflects the tax consequences that would follow the manner in which theGroup expects, at the balance sheet date, to recover the assets or settle the carrying amount of itsassets and liabilities.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period andreduced to the extent that it is no longer probable that sufficient taxable profit will be available toallow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets arereassessed at the end of each reporting period and are recognized to the extent that it has becomeprobable that sufficient taxable profit will be available to allow all or part of the deferred tax assetto be recovered.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
26. Deferred tax assets (cont’d)
Deferred tax assets and liabilities are offset and presented as a net amount if all of the followingconditions are met: the Group has the legal right to set off the current income tax assets andliabilities and the deferred tax assets and liabilities relate to income taxes levied by the sametaxation authority on either the same taxable entity or different taxable entities, provided that thetaxable entity concerned intends either to settle current income tax liabilities and assets on a netbasis, or to realize the assets and settle the liabilities simultaneously, in each future period in whichsignificant amounts of deferred tax liabilities or assets are expected to be settled or recovered.
27. Leases
At inception of a contract, the Group assesses whether the contract is, or contains, a lease. Acontract is, or contains, a lease if the contract conveys the right to control the use of an identifiedasset for a period of time in exchange for consideration.
As lessee
The Group recognizes leases as the right-of-use asset and lease liabilities, except for short-termleases and leases of low-value assets. For general accounting practice, please see Items 14 and 19 ofNote III.
Short-term leases and leases of low-value assetsA short-term lease is a lease that, at the commencement date, has a lease term of 12 months or less,and does not contains any purchase option. The Group does not recognize the right-of-use assetsand lease liabilities for buildings short-term leases. The Group recognizes lease payments on short-term leases and leases of low-value assets in the related asset costs or profit or loss on a straight-line basis over the lease term.
As a lessor
A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidentalto ownership of an underlying asset, except that a lease is classified as an operating lease at theinception date.
As a lessor of operating leases
Rental income of operating leases is recognized in current profit or loss over the respective periodsduring the lease term on a straight-line basis, while variable lease payment not included in leasereceipts is charged to profit or loss as and when incurred.
Initial direct costs are capitalised and recognised over the lease term on the same basis as rentalincome, through profit or loss.
28. Share repurchase
The consideration and transaction costs paid to repurchase equity instruments are charged againstowner’s equity. Except for share-based payments, the issue (including refinancing), repurchase,disposal or retirement of the Company’s own equity instruments are accounted for as changes inequity.
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
29. Profit distribution
The Company’s cash dividends are recognized as liabilities upon the approval by the generalmeeting.
30. Expenses for safety production
The expenses for safety production set side as stipulated shall be included in the cost of relevantproducts or current profits and losses, and included in the special reserve at the same time. Whensuch expenses are used, accounting treatment will be performed according to whether fixed assetsare formed. If identified as expense expenditures, the special reserve will be written down directly;if fixed assets are formed, the expenses incurred will be collected, fixed assets will be recognizedwhen they reach a predetermined usable state, and the equivalent amount of special reserve will bewritten down and the equivalent accumulated depreciation will be recognized.
31. Put option related to non-controlling interests
In the process of acquiring majority equity of subsidiaries, the Group grants to minorityshareholders the option to sell the shares of subsidiaries held by them to the Group (put option).The Group recognizes the shares of subsidiaries held by minority shareholders as non-controllinginterests in its consolidated financial statements; for the put option, the Group undertakes theobligation to redeem the shares of the subsidiaries held by minority shareholders in cash. TheGroup removes the present value of the amount payable to redeem the put option from its equity(excluding non-controlling interests) and classifies it as financial liability, which is remeasured insubsequent periods at the present value of the the amount payable to redeem the put option andrecognized in profit or loss.
32. Fair value measurement
At each balance sheet date, the Group measures the fair value of derivative financial instrumentsand equity instrument investments. Fair value means the price receivable from the disposal of anasset or required to be paid for the transfer of a liability in an orderly transaction incurred by marketparticipants on the measurement date.
The fair value hierarchy to which an asset or liability measured or disclosed in the financialstatements at fair value will be determined on the basis of the lowest level of input which issignificant for the fair value measurement as a whole. Input at the first level represents unadjustedquoted prices in an active market for the acquisition of the same asset or liability on themeasurement date. Input at the second level represents directly or indirectly observable assets orliabilities apart from input at the first level. Input at the third level represents unobservable input forthe asset or liability.
At each balance sheet date, the Group reassesses assets and liabilities measured at fair value on anongoing basis recognized in the financial statements to determine whether the level of fair valuemeasurement should be changed.
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
33. Significant accounting judgements and estimates
The preparation of financial statements requires judgement and estimation of the management.Such judgement and estimation will affect the reported amounts of revenue, expenses, assets andliabilities and the disclosure of contingent liabilities as at the balance sheet date. However, theconsequence arising from the uncertain nature of such estimation may result in significantadjustment to the carrying value of the asset or liability affected in the future.
Judgement
In the process of applying the Group’s accounting policies, management has made the followingjudgements, which have the most significant effect on the amounts recognized in the financialstatements:
Determination of standalone contractual performance obligationsThe intelligent packaging equipment (printers and corrugators) business of the Group includes fourkinds of product or service commitments, i.e. the sale, installation, transportation and insuranceservices of machinery. As the customer can benefit from the individual use of the four kinds ofproducts or services or their use together with other readily available resources and such product orservice commitments are distinctly separable from other products or service commitments, theaforesaid product or service commitments constitute standalone contractual performanceobligations respectively.
Business modelThe classification of financial assets at initial recognition is dependent on the Group’s businessmodel for managing the assets. Factors considered by the Group in judging the business modelinclude enterprise valuation, the method of reporting the results of financial assets to keymanagement members, risks affecting the results of financial assets and the method for managingsuch risks, as well as the form of remuneration received by the management personnel of thebusinesses concerned. In assessing whether the business model is aimed at receiving contract cashflow, the Group is required to analyse and exercise judgment in respect of the reasons, timing,frequency and values of any disposals prior to maturity.
Characteristics of contract cash flowThe classification of financial assets at initial recognition is dependent on the characteristics of thecontract cash flow of such type of financial assets. Judgement is required to determine whether thecontract cash flow represents interest payment in relation to principal amounts based on outstandingprincipal amounts only, including judgement of whether it is significantly different from thebenchmark cash flow when assessing modifications to the time value of currencies, and judgementof whether the fair value of early repayment features is minimal where the financial assets includesuch early repayment features.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
33. Significant accounting judgements and estimates (cont’d)
Estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at thebalance sheet date, that have a significant risk of causing a material adjustment to the carryingamounts of assets and liabilities within subsequent financial years, are discussed below.
Impairment of financial instruments and contract assetsThe Group has adopted the expected credit loss model to evaluate the impairment of financialinstruments and contract assets. The application of the expected credit loss model requiressignificant judgement and estimates and the consideration of all reasonable and soundly basedinformation, including forward-looking information. In making such judgement and estimates, theGroup estimates the projected movements of the debtor’s credit risk according to past repaymentrecords, economic policies, macro-economic indicators and industry risks. Different estimates mayaffect impairment allowances, and established impairment allowances may not equal the actualimpairment loss amount in the future.
Impairment of non-current assets other than financial assets (exclusive of goodwill)The Group assesses at each balance sheet date whether there is an indication that a non-currentasset other than financial assets may be impaired. For an intangible asset with an indefinite usefullife, in addition to the annual impairment test, it is also tested when there is an indication that it maybe impaired. Non-current assets other than financial assets are tested for impairment when there isan indication that the carrying amount is irrecoverable. Where the carrying amount of an asset or anasset group exceeds its recoverable amount—the higher of the asset or asset group’s fair value lesscosts to sell and its present value of estimated future cash flows, it is considered impaired. The netamount of the fair value less costs to sell is determined based on the price of a similar asset’s salescontract in a fair transaction or the observable market price less the incremental cost directlyattributable to the disposal of the asset. When estimating the present value of future cash flows, themanagement must choose a proper discount rate.
Impairment of goodwillGoodwill must be tested for impairment at least annually. It requires estimating the present value offuture cash flows of an asset group or asset group portfolio allocated with goodwill. Whenestimating the present value of future cash flows, the Group needs to estimate future cash flowsgenerating from the asset group or asset group portfolio, and at the same time choose a properdiscount rate to determine the present value of future cash flows. For details, see Note V.20.
Fair value of unlisted equity investmentsThe unlisted equity investments have been valued based on the expected cash flows discounted atcurrent rates applicable for items with similar terms and risk characteristics. This valuationrequires the Group to make estimates about expected future cash flows, credit risk, volatility anddiscount rates, and hence they are subject to uncertainty.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
III. Principal Accounting Policies and Accounting Estimates (Cont’d)
33. Significant accounting judgements and estimates (cont’d)
Estimation uncertainty (cont’d)
Deferred tax assetsDeferred tax assets are recognized for all unused tax losses, to the extent that it is likely that taxableprofit will be available to utilize these unused tax losses. Significant judgments are needed frommanagement to estimate the timing and amount of taxable profit in the future, with tax planningstrategies, to determine the amount of the deferred tax assets that should be recognized.
Lessee’s incremental borrowing rateIf the interest rate implicit in the lease cannot be readily determined, the Group measures the leaseliability at the present value of the lease payments that are not paid at that date. The Groupdiscounted the lease payments using the lessee’s incremental borrowing rate. The Group determinesthe incremental borrowing rate based on the economic environment by reference to the observableinterest rate. Then the Group adjusts the reference interest rate based on its own circumstances,underlying assets, lease terms and amounts of lease liabilities to determine the applicableincremental borrowing rate.
ProvisionsThe Group estimates and makes corresponding provision for product quality guaranty according tocontract terms, existing knowledge and past experience. When such contingencies have formed apresent obligation and it is probable that an outflow of economic benefits from the Group will berequired to settle the obligation, the Group recognizes the contingencies as provisions based on thebest estimate of the expenditure required to settle the related present obligation. The recognitionand measurement of provisions largely depend on the judgment of management. In the process ofmaking judgment, the Group is required to assess the risks, uncertainties, time value of money andother factors related to such contingencies.
The Group will undertake the provisions for post-sale quality maintenance provided to customersfor the sale, maintenance and renovation of the sold goods. The provisions have been made takinginto account the Group’s recent data of maintenance experience, and taking into account the risks,uncertainties and other factors related to maintenance matters. Any increase or decrease in thisprovision may affect the profit and loss in future years.
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements2022 Expressed in Renminbi Yuan
VI. Taxation
1. Principal tax items and tax rates
Value-added tax (VAT) – The output tax of the taxable income is calculated at the rate of 13%
and 6% and VAT is levied according to the difference afterdeducting the input tax which is allowed to be deducted in thecurrent period.
City maintenanceand construction tax – Levied at 7% of the turnover tax actually paid
Education surcharge – Levied at 3% of the turnover tax actually paid
Local educationSurcharge – Levied at 2% of the turnover tax actually paid
Corporate income tax – Corporate income tax of the Group’s subsidiaries located in
Mainland China shall be levied at 25% of the taxable income(except for the preferential taxation as described in Note IV 2).Subsidiaries located in Hong Kong shall calculate and pay thecorporate income tax at 16.5% of the taxable income, andsubsidiaries registered overseas shall apply the corporate income taxrate as required by the local tax law. The details are as follows:
1. Principal tax items and tax rates (Cont’d)
| Name of subsidiaries | Income tax rate | |
| Dong Fang Precision (Netherland) Cooperatief U.A.（“Dongfang Precision (Netherland)”） | 20% | |
| Fosber S.p.A.（“Fosber Group”） | 24% | |
| Fosber America, Inc.（“Fosber America”） | 21% | |
| EDF Europe s.r.l.（“Italy EDF”） | 24% | |
| Tiru?a Group Industrial, S.L.（“Tiru?a Group”） | 28% | |
| Tiru?a America inc. (“Tiru?a America”) Quantum Corrugated S.r.l. (Italy QCorr) Tiru?a S.L.U. | 21% 24% 28% | |
| Tratatamientos Industriales Tiru?a S.A.U. | 28% | |
| Tiru?a France SARL | 15% | |
| SCI Candan | 15% |
Property tax – Ad valorem tax: levied at 1.2% of the remaining value after deducting 30%from the original value of the property; Tax levied from rent: levied at 12% of the rental income.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
IV. Taxation (Cont’d)
2. Tax concessions
On 9 December 2020, the Company passed the high-tech enterprise review by the Department ofScience and Technology of Guangdong Province, Department of Finance of Guangdong Province,Guangdong Provincial Tax Service of State Taxation Administration and Guangdong ProvincialLocal Taxation Bureau and obtained a High-tech Enterprise Certificate (certificate no.:
GR202044007667) jointly issued by the above authorities, with a validity of three years, duringwhich the Company paid the corporate income tax at a reduced rate of 15%, so the preferential taxrate of 15% was applicable to the Company's corporate income tax as at 31 December 2022.
Suzhou Parsun Power Machine Co., Ltd. ("Parsun Power"), a subsidiary of the Company, passedthe high-tech enterprise review by the Department of Science and Technology of Jiangsu Province,Department of Finance of Jiangsu Province and Jiangsu Provincial Tax Service of State TaxationAdministration on 18 November 2022 and obtained a High-tech Enterprise Certificate (certificateno.: GR201932000339) jointly issued by the above authorities, with a validity of three years, duringwhich the subsidiary paid the corporate income tax at a reduced rate of 15%, so the preferential taxrate of 15% was applicable to the corporate income tax of Parsun Power as at 31 December 2022.
Guangdong Fosber Intelligent Equipment Co., Ltd. ("Fosber Asia"), a subsidiary of the Company,passed the high-tech enterprise review by the Department of Science and Technology ofGuangdong Province, Department of Finance of Guangdong Province and Guangdong ProvincialTax Service of State Taxation Administration on 20 December 2021 and obtained a High-techEnterprise Certificate (certificate no.: GR202144003984) jointly issued by the above authorities,with a validity of three years, during which the subsidiary paid the corporate income tax at areduced rate of 15%, so the preferential tax rate of 15% was applicable to the corporate income taxof Fosber Asia as at 31 December 2022.
Shenzhen Wonder Printing System Co.,Ltd. ("Wonder Printing"), a subsidiary of the Company,passed the high-tech enterprise review by the Department of Science and Technology ofGuangdong Province, Department of Finance of Guangdong Province and Guangdong ProvincialTax Service of State Taxation Administration on 19 December 2022 and obtained a High-techEnterprise Certificate (certificate no.: GR202244206125) jointly issued by the above authorities,with a validity of three years, during which the subsidiary paid the corporate income tax at areduced rate of 15%, so the preferential tax rate of 15% was applicable to the corporate income taxof Wonder Printing as at 31 December 2022.
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements2022 Expressed in Renminbi Yuan
VII. Notes to the Consolidated Financial Statements
1. Cash and bank balances
| 2022 | 2021 | |||||
| Cash on hand | 589,575.75 | 233,281.32 | ||||
| Cash at banks | 1,011,562,524.44 | 999,389,151.51 | ||||
| Other cash balances | 262,295,099.55 | 664,713,906.52 | ||||
| 1,274,447,199.74 | 1,664,336,339.35 | |||||
| Of which: total restricted amount as collateral, pledge or frozen | 40,726,502.47 | 405,032,563.61 |
As at 31 December 2022, cash and bank balances of the Group amounting toRMB752,430,975.78 (31 December 2021：RMB456,521,434.93) were depositedoutside Mainland China. The fund deposited abroad with restrictions on repatriationwas equivalent to RMB17,937,703.00 (31 December 2021: RMB16,374,076.37).
Current bank deposits earn interest income based on interest rates for current deposits.
2. Financial assets held for trading
| 2022 | 2021 | |||||
| Financial assets at fair value through profit or loss | ||||||
| Asset management plans | 307,794,620.13 | 628,007,924.74 | ||||
| Investments in bank’s wealth management products | 351,182,315.74 | 140,609,523.19 | ||||
| Stocks and Funds | 200,355,381.34 | - | ||||
| Investments in trust products | 717,241.38 | 6,631,573.01 | ||||
| Derivative financial assets | 782,720.29 | 12,936,500.63 | ||||
| 860,832,278.88 | 788,185,521.57 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
3. Notes receivable
| 2022 | 2021 | |||||
| Bank acceptance notes | 24,566,100.12 | 13,272,025.04 |
Notes receivable that were endorsed or discounted but undue at the balance sheet date
are as follows:
| 2022 | 2021 | |||||||||||
| Derecognized | Un-derecognized | Derecognized | Un-derecognized | |||||||||
| Bank acceptance notes | - | 1,449,810.18 | - | 9,391,823.29 | ||||||||
As at 31 December 2022, there’s no need to establish impairment allowances for notesreceivable in the management’s opinion.
4. Accounts receivable
Accounts receivable are interest-free. The aging of accounts receivable is analyzed asfollows:
| 2022 | 2021 | |||||
| Within 1 year | 759,915,056.92 | 688,188,131.13 | ||||
| 1-2 years | 74,419,438.55 | 51,234,902.10 | ||||
| 2-3 years | 13,000,155.24 | 12,623,284.90 | ||||
| 3-4 years | 7,711,547.63 | 8,127,517.87 | ||||
| 4-5 years | 7,653,168.93 | 2,115,679.86 | ||||
| Over 5 years | 7,018,540.90 | 5,074,242.03 | ||||
| 869,717,908.17 | 767,363,757.89 | |||||
| Less: allowances for doubtful accounts receivable | 32,412,150.71 | 26,228,109.80 | ||||
| 837,305,757.46 | 741,135,648.09 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
4. Accounts receivable (cont’d)
| 2022 | ||||||||||
| Gross amount | Allowance | Carrying amount | ||||||||
| Amount | Percentage | Amount | Percentage | |||||||
| （%） | （%） | |||||||||
| Accounts receivable for which allowances are established individually | 3,004,100.00 | 0.35 | 3,004,100.00 | 100.00 | - | |||||
| Accounts receivable for which allowances are established by group with similar credit risk characteristics | 866,713,808.17 | 99.65 | 29,408,050.71 | 3.39 | 837,305,757.46 | |||||
| 869,717,908.17 | 100.00 | 32,412,150.71 | 837,305,757.46 | |||||||
| 2021 | ||||||||||
| Gross amount | Allowance | Carrying amount | ||||||||
| Amount | Percentage | Amount | Percentage | |||||||
| （%） | （%） | |||||||||
| Accounts receivable for which allowances are established individually | 7,038,180.40 | 0.92 | 7,038,180.40 | 100.00 | - | |||||
| Accounts receivable for which allowances are established by group with similar credit risk characteristics | 760,325,577.49 | 99.08 | 19,189,929.40 | 2.52 | 741,135,648.09 | |||||
| 767,363,757.89 | 100.00 | 26,228,109.80 | 741,135,648.09 | |||||||
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
4. Accounts receivable (cont’d)
As at 31 December 2022, accounts receivable for which allowances are establishedindividually are as follows:
| Gross amount | Allowance | ECL （%） | Reason for allowance | ||||||||
| Customer 1 | 939,000.00 | 939,000.00 | 100.00 | Customer’s inability to settle the amount due | |||||||
| Customer 2 | 641,600.00 | 641,600.00 | 100.00 | Customer’s inability to settle the amount due | |||||||
| Customer 3 | 608,800.00 | 608,800.00 | 100.00 | Customer’s inability to settle the amount due | |||||||
| Customer 4 | 516,000.00 | 516,000.00 | 100.00 | Customer’s inability to settle the amount due | |||||||
| Customer 5 | 283,000.00 | 283,000.00 | 100.00 | Customer’s inability to settle the amount due | |||||||
| Customer 6 | 15,700.00 | 15,700.00 | 100.00 | Customer’s inability to settle the amount due | |||||||
| 3,004,100.00 | 3,004,100.00 |
As at 31 December 2021, accounts receivable for which allowances are establishedindividually are as follows:
| Gross amount | Allowance | ECL （%） | Reason for allowance | ||||||||
| Customer 14 | 4,027,086.20 | 4,027,086.20 | 100.00 | Customer’s inability to settle the amount due | |||||||
| Customer 1 | 939,000.00 | 939,000.00 | 100.00 | Customer’s inability to settle the amount due | |||||||
| Customer 2 | 641,600.00 | 641,600.00 | 100.00 | Customer’s inability to settle the amount due | |||||||
| Customer 3 | 608,800.00 | 608,800.00 | 100.00 | Customer’s inability to settle the amount due | |||||||
| Customer 4 | 515,595.00 | 515,595.00 | 100.00 | Customer’s inability to settle the amount due | |||||||
| Other companies | 306,099.20 | 306,099.20 | 100.00 | Customer’s inability to settle the amount due | |||||||
| 7,038,180.40 | 7,038,180.40 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
4. Accounts receivable (cont’d)
Accounts receivable for which allowances are established by group with similar creditrisk characteristics are as follows:
| 2022 | 2021 | |||||||||||||||||
| Gross amount estimated to be in default | ECL (%) | Lifetime ECL | Gross amount estimated to be in default | ECL (%) | Lifetime ECL | |||||||||||||
| Within 1 year | 759,915,056.92 | 1.09 | 8,301,269.30 | 688,188,131.13 | 1.02 | 7,024,121.70 | ||||||||||||
| 1-2 years | 74,419,438.55 | 4.62 | 3,436,770.55 | 51,234,902.10 | 3.93 | 2,011,112.67 | ||||||||||||
| 2-3 years | 13,000,155.24 | 9.17 | 1,191,919.75 | 8,596,198.70 | 4.90 | 421,019.36 | ||||||||||||
| 3-4 years | 7,711,547.63 | 74.72 | 5,762,337.52 | 8,127,517.87 | 69.96 | 5,686,380.04 | ||||||||||||
| 4-5 years | 7,653,168.93 | 87.56 | 6,701,312.69 | 661,084.86 | 80.10 | 529,552.80 | ||||||||||||
| Over 5 years | 4,014,440.90 | 100.00 | 4,014,440.90 | 3,517,742.83 | 100.00 | 3,517,742.83 | ||||||||||||
| 866,713,808.17 | 29,408,050.71 | 760,325,577.49 | 19,189,929.40 | |||||||||||||||
Movements in allowances for doubtful accounts receivable are as follows:
| Opening balance | Established in the period | Reversed in the period | Written off in the period | Effect of exchange rate movements | Changes resulting from entity consolidation | Closing balance | |||||||||
| 2022 | 26,228,109.80 | 8,768,582.83 | (4,351,182.11 | ) | (828,752.82 | ) | 912,607.14 | 1,682,785.87 | 32,412,150.71 | ||||||
| 2021 | 23,792,330.92 | 10,210,960.55 | (1,713,874.29 | ) | (5,062,385.81 | ) | (998,921.57 | ) | - | 26,228,109.80 |
In 2022, provision for bad debts of RMB8,768,582.83 (2021: RMB10,210,960.55), andwrite-off of bad debts of RMB828,752.82 (2021: RMB5,062,385.81). The reason forthe write-off was that the receivables were recognized as uncollectible.
Top 5 of accounts receivable are as follows:
| 2022 | As a % of the closing balance of total accounts receivable | Allowance | ||||
| Customer 7 | 120,390,518.83 | 13.84 | 1,664,169.32 | |||
| Customer 8 | 99,399,466.68 | 11.43 | 932,623.82 | |||
| Customer 9 | 38,672,142.34 | 4.45 | 305,278.49 | |||
| Customer 10 | 37,323,902.38 | 4.29 | 256,866.20 | |||
| Customer 11 | 34,022,800.00 | 3.91 | 1,701,140.00 | |||
| 329,808,830.23 | 37.92 | 4,860,077.83 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
4. Accounts receivable (cont’d)
Top 5 of accounts receivable are as follows:
| 2021 | As a % of the closing balance of total accounts receivable | Allowance | ||||
| Customer 7 | 71,357,633.89 | 9.30 | 632,103.65 | |||
| Customer 15 | 57,526,895.71 | 7.50 | 393,080.22 | |||
| Customer 9 | 45,503,030.02 | 5.93 | 423,960.57 | |||
| Customer 16 | 18,669,670.80 | 2.43 | 295,183.15 | |||
| Customer 17 | 18,391,174.99 | 2.40 | 187,589.98 | |||
| 211,448,405.41 | 27.56 | 1,931,917.57 |
5. Receivables financing
| 2022 | 2021 | |||||
| Bank acceptance notes | 15,305,668.26 | 30,692,449.25 |
Notes receivable that were endorsed or discounted but undue at the balance sheet dateare as follows:
| 2022 | 2021 | |||||||||||
| Derecognized | Un-derecognized | Derecognized | Un-derecognized | |||||||||
| Bank acceptance notes | 37,725,855.84 | - | 24,598,786.91 | - | ||||||||
6. Prepayments
The aging of prepayments is analyzed as follows:
| 2022 | 2021 | |||||||||||
| Carrying amount | Percentage (%) | Carrying amount | Percentage (%) | |||||||||
| Within 1 year | 64,413,090.83 | 99.18 | 33,901,158.84 | 99.19 | ||||||||
| 1-2 years | 275,315.22 | 0.42 | 38,710.83 | 0.11 | ||||||||
| 2-3 years | 31,175.83 | 0.05 | 144,972.14 | 0.43 | ||||||||
| Over 3 years | 227,319.38 | 0.35 | 92,960.55 | 0.27 | ||||||||
| 64,946,901.26 | 100.00 | 34,177,802.36 | 100.00 | |||||||||
V. Notes to the Consolidated Financial Statements (cont’d)
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
6 Prepayments (cont’d)
Top 5 of prepayments are as follows:
| 2022 | As a % of total prepayments | ||||
| Supplier 1 | 5,315,462.75 | 8.18 | |||
| Supplier 2 | 5,159,254.99 | 7.94 | |||
| Supplier 3 | 5,112,443.69 | 7.87 | |||
| Supplier 4 | 3,505,084.66 | 5.40 | |||
| Supplier 5 | 3,497,331.75 | 5.38 | |||
| 22,589,577.84 | 34.77? |
| 2021 | As a % of total prepayments | ||||
| Supplier 6 | 6,146,589.78 | 17.98 | |||
| Supplier 7 | 5,383,577.05 | 15.75 | |||
| Supplier 4 | 5,297,682.90 | 15.50 | |||
| Supplier 1 | 3,702,992.69 | 10.83 | |||
| Supplier 8 | 1,859,780.28 | 5.44 | |||
| 22,390,622.70 | 65.50 |
7. Other receivables
| 2022 | 2021 | |||||
| Other receivable | 83,996,902.82 | 71,363,166.84 |
V. Notes to the Consolidated Financial Statements (cont’d)
7. Other receivables (cont’d)
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
Other receivables
The aging of other receivables is analyzed as follows:
| 2022 | 2021 | |||||
| Within 1 year | 39,240,181.70 | 29,975,763.18 | ||||
| 1-2 years | 5,772,952.90 | 6,571,130.64 | ||||
| 2-3 years | 3,174,795.18 | 178,398.25 | ||||
| 3-4 years | 176,147.32 | 38,260,742.08 | ||||
| 4-5 years | 38,260,742.08 | 1,495,285.41 | ||||
| Over 5 years | 1,260,558.08 | 168,531.88 | ||||
| 87,885,377.26 | 76,649,851.44 | |||||
| Less: allowances for doubtful other receivables | 3,888,474.44 | 5,286,684.60 | ||||
| 83,996,902.82 | 71,363,166.84 |
Other receivables are classified by nature as follows:
| 2022 | 2021 | |||||
| Amount for transfer of equity investments | 39,461,356.50 | 37,903,425.00 | ||||
| Prepaid service charges | 12,446,401.37 | 10,386,867.47 | ||||
| Security deposits | 8,340,341.53 | 5,452,788.82 | ||||
| Export tax refunds | 1,294,466.80 | 912,287.93 | ||||
| Employee loans and petty cash | 3,388,217.50 | 4,537,207.00 | ||||
| Others | 22,954,593.56 | 17,457,275.22 | ||||
| 87,885,377.26 | 76,649,851.44 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
7 Other receivables (cont’d)
Movements in allowances for doubtful other receivables that are established based onthe 12-month ECL and the lifetime ECL are as follows:
2022
| Stage 1 | Stage 2 | Stage 3 | Total | ||||||||
| 12-month ECL | Lifetime ECL | Financial assets with credit impairment (lifetime ECL) | |||||||||
| Opening balance | 4,786,684.60 | 500,000.00 | - | 5,286,684.60 | |||||||
| Established in the period | 2,542,321.14 | - | - | 2,542,321.14 | |||||||
| Reversed in the period | (1,860,447.99 | ) | - | (1,860,447.99 | ) | ||||||
| Written off in the period | (2,301,163.14 | ) | - | - | (2,301,163.14 | ) | |||||
| Changes resulting from entity consolidation | 91,820.12 | - | 91,820.12 | ||||||||
| Other changes | 129,259.71 | - | - | 129,259.71 | |||||||
| Closing balance | 3,388,474.44 | 500,000.00 | - | 3,888,474.44 | |||||||
2021
| Stage 1 | Stage 2 | Stage 3 | Total | ||||||||
| 12-month ECL | Lifetime ECL | Financial assets with credit impairment (lifetime ECL) | |||||||||
| Opening balance | 2,861,774.13 | 500,000.00 | - | 3,361,774.13 | |||||||
| Established in the period | 4,229,550.20 | - | - | 4,229,550.20 | |||||||
| Reversed in the period | (1,969,247.27 | ) | - | - | (1,969,247.27 | ) | |||||
| Other changes | (335,392.46 | ) | - | - | (335,392.46 | ||||||
| Closing balance | 4,786,684.60 | 500,000.00 | - | 5,286,684.60 | |||||||
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
7 Other receivables (cont’d)
Movements in allowances for doubtful other receivables are as follows:
| Opening balance | Established in the period | Reversed in the period | Decrease due to disposal of subsidiaries | Effect of exchange rate movements | Changes resulting from entity consolidation | Closing balance | ||||||||
| 2021 | 5,286,684.60 | 2,542,321.14 | (1,860,447.99 | ) | (2,301,163.14 | ) | 129,259.71 | 91,820.12 | 3,888,474.44 | |||||
| 2020 | 3,361,774.13 | 4,229,550.20 | - | (1,969,247.27 | ) | (335,392.46 | ) | - | 5,286,684.60 |
In 2022, the Group accrued RMB2,542,321.14 of provision (2021: RMB4,229,550.20),reversed RMB1,860,447.99 (2021: RMB0), wrote off RMB2,301,163.14 of provision(2020: RMB1,969,247.27) because other receivables were confirmed uncollectable.
As at 31 December 2022, top 5 of other receivables are as follows:
| 2022 | As a % of total other receivables | Nature | Age | Closing balance of allowance | |||||||||||
| Entity 1 | 39,461,356.50 | 44.90 | Amount for transfer of equity investments | 4-5 years | - | ||||||||||
| Entity 2 | 4,908,932.81 | 5.59 | Insurance | Within 1 year | - | ||||||||||
| Entity 3 | 3,000,000.00 | 3.41 | Government grants | Within 1 year | - | ||||||||||
| Entity 4 | 1,743,064.05 | 1.98 | Prepaid service charges | Within 1 year | - | ||||||||||
| Entity 5 | 1,630,000.00 | 1.85 | Warranty deposits | 2-3 years | - | ||||||||||
| 50,743,353.36 | 57.73 | - |
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
7 Other receivables (cont’d)
As at 31 December 2021, top 5 of other receivables are as follows:
| 2021 | As a % of total other receivables | Nature | Age | Closing balance of allowance | |||||||||||
| Entity 1 | 37,903,425.00 | 49.45 | Amount for transfer of equity investments | 3-4 years | 1,899,115.81 | ||||||||||
| Entity 5 | 1,630,000.00 | 2.13 | Warranty deposits | 1-2 years | - | ||||||||||
| Entity 6 | 1,500,000.00 | 1.96 | Prepaidservice charges | Within 1 year | - | ||||||||||
| Entity 7 | 1,000,020.00 | 1.30 | Prepaidservice charges | Within 1 year | - | ||||||||||
| Entity 8 | 919,717.58 | 1.20 | Security deposits | Within 1 year | - | ||||||||||
| 42,953,162.58 | 56.04 | 1,899,115.81 |
As at December 31, 2022, the amounts due from government grants are as follows:
| Program | Amount | Age | Expected collection time, amount and basis | |||||||
| Bureau of industry and information technology of Foshan city | Digital Intelligent Manufacturing Workshop for Corrugated Paper Packaging Equipment | 2,000,000.00 | Within 1 year | 2023;2,000,000.00; publicized in November 2022 | ||||||
| Bureau of industry and information technology of Foshan city | Industrial Design Center and Industrial Design Institute Construction Project | 1,000,000.00 | Within 1 year | 2023;2,000,000.00; publicized in November 2022 | ||||||
| 3,000,000.00 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
8. Inventories
| 2022 | |||||||
| Gross amount | Valuation allowance | Carrying amount | |||||
| Work-in-progress | 368,570,631.39 | 19,879,129.16 | 348,691,502.23 | ||||
| Raw materials | 582,372,253.76 | 18,010,104.87 | 564,362,148.89 | ||||
| Finished goods | 108,150,704.87 | 4,681,895.11 | 103,468,809.76 | ||||
| Product deliveries | 35,190,253.35 | - | 35,190,253.35 | ||||
| Semi-finished goods | 28,847,199.70 | 787,613.38 | 28,059,586.32 | ||||
| Materials consigned for processing | 13,209,583.96 | - | 13,209,583.96 | ||||
| 1,136,340,627.03 | 43,358,742.52 | 1,092,981,884.51 | |||||
| 2021 | |||||||
| Gross amount | Valuation allowance | Carrying amount | |||||
| Work-in-progress | 332,359,371.92 | 16,467,899.02 | 315,891,472.90 | ||||
| Raw materials | 365,907,967.74 | 9,445,201.52 | 356,462,766.22 | ||||
| Finished goods | 80,356,852.12 | 7,117,802.59 | 73,239,049.53 | ||||
| Product deliveries | 48,592,282.34 | - | 48,592,282.34 | ||||
| Semi-finished goods | 72,050,412.10 | 1,004,893.76 | 71,045,518.34 | ||||
| Materials consigned for processing | 2,048,924.14 | - | 2,048,924.14 | ||||
| 901,315,810.36 | 34,035,796.89 | 867,280,013.47 | |||||
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
8 Inventories (cont’d)
Movements in inventory valuation allowances are as follows:
2022
| Opening balance | Established in the period | Decrease in the period | Closing balance | |||||||
| Reversed or written off | Others | |||||||||
| Raw materials | 9,445,201.52 | 5,629,235.50 | (877,805.24) | 3,813,473.09 | 18,010,104.87 | |||||
| Work-in-progress | 16,467,899.02 | 3,223,893.24 | - | 187,336.90 | 19,879,129.16 | |||||
| Finished goods | 7,117,802.59 | 2,231,773.91 | (4,667,681.39) | - | 4,681,895.11 | |||||
| Semi-finished goods | 1,004,893.76 | - | (217,280.38) | - | 787,613.38 | |||||
| 34,035,796.89 | 11,084,902.65 | (5,762,767.01) | 4,000,809.99 | 43,358,742.52 | ||||||
2021
| Opening balance | Established in the period | Decrease in the period | Closing balance | ||||||
| Reversed or written off | Others | ||||||||
| Raw materials | 8,477,773.27 | 4,613,526.07 | (3,923,240.80) | 277,142.98 | 9,445,201.52 | ||||
| Work-in-progress | 27,512,393.21 | 467,938.75 | (11,312,154.94) | (200,278.00) | 16,467,899.02 | ||||
| Finished goods | 2,209,825.73 | 5,107,721.38 | (199,744.52) | - | 7,117,802.59 | ||||
| Semi-finished goods | 114,428.27 | 1,004,893.76 | (114,428.27) | - | 1,004,893.76 | ||||
| 38,314,420.48 | 11,194,079.96 | (15,549,568.53) | 76,864.98 | 34,035,796.89 | |||||
| 31 December 2022 | Basis for determining the net realizable value | Basis for provision for write-down of inventories | Reasons for reversal of provision for write-down of inventories in the period | |||
| Market prices of raw materials | Scrapped, defective and unpopular materials | |||||
| Raw materials | Market prices of related finished goods | Market prices of related finished goods declined | Market prices of related finished goods rebounded | |||
| Work-in-progress | Market prices of related finished goods | Market prices of related finished goods declined | Market prices of related finished goods rebounded | |||
| Finished goods | Market price/contract price | Market price declined | Market price rebounded |
As at 31 December 2022, the Group has no inventories with restricted ownership (31 December2021: Nil).
V. Notes to the Consolidated Financial Statements (cont’d)
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
9. Contract assets
| 2022 | 2021 | ||||||||||||
| Gross amount | Impairment allowance | Carrying amount | Gross amount | Impairment allowance | Carrying amount | ||||||||
| Contract assets | 67,018,545.44 | 1,928,694.23 | 65,089,851.21 | 25,144,462.49 | 730,344.85 | 24,414,117.64 | |||||||
When the Group hands over equipment to customers, the control over the equipment isconsidered transferredand the final payment for the equipment is recorded in contractassets.
Movements in impairment allowances for contract assets are as follows:
| Opening balance | Established in the period | Reversed in the period | Written off in the period | Other decreases | Closing balance | ||||||||
| 2022 | 730,344.85 | 1,928,694.23 | - | (715,474.33) | (14,870.52) | 1,928,694.23 | |||||||
| 2021 | 1,061,524.05 | - | (257,325.86) | (73,853.34) | 730,344.85 |
Contract assets for which impairment allowances are established by aging analysis areas follows:
| 2022 | 2021 | |||||||||||||
| Gross amount estimated to be in default | ECL (%) | Lifetime ECL | Gross amount estimated to be in default | ECL (%) | Lifetime ECL | |||||||||
| Within 1 year | 48,267,281.45 | 0.58 | 277,699.73 | 24,414,117.64 | - | - | ||||||||
| 1-2 years | 18,751,263.99 | 8.80 | 1,650,994.50 | 730,344.85 | 100 | 730,344.85 | ||||||||
| 67,018,545.44 | 1,928,694.23 | 25,144,462.49 | 730,344.85 | |||||||||||
10. Current portion of non-current assets
| 2022 | 2021 | |||||
| Current portion of long-term receivables | 1,463,750.00 | 4,595,000.00 | ||||
| Current portion of security deposits for loans | 310,300,000.00 | - | ||||
| Current portion of large-amount deposit certificates | - | 103,790,000.00 | ||||
| 311,763,750.00 | 108,385,000.00 |
As at 31 December 2022, there’s no need to establish impairment allowances for thecurrent portion of non-current assets in the management’s opinion.
V. Notes to the Consolidated Financial Statements (cont’d)
11. Other current assets
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
| 2022 | 2021 | |||||
| Overpaid value-added tax (VAT) | 23,483,390.49 | 18,681,339.03 | ||||
| Input VAT to be deducted | 15,469,529.33 | 3,358,040.70 | ||||
| Tax repayments | 13,582,808.39 | 8,202,256.30 | ||||
| Others | 8,834,723.10 | 1,882,370.96 | ||||
| 61,370,451.31 | 32,124,006.99 |
12. Long-term receivables
| 2022 | 2021 | |||||||||||
| Gross amount | Provision for bad debts | Carrying amount | Gross amount | Provision for bad debts | Carrying amount | |||||||
| Amounts receivable by installment for selling goods | 1,305,000.00 | (10,701.00 | ) | 1,294,299.00 | 143,750.00 | - | 143,750.00 | |||||
| 2022 | |||||||||
| Gross amount | Allowance | Carrying amount | |||||||
| Amount | Percentage | Amount | Percentage | ||||||
| （%） | （%） | ||||||||
| Long-term receivables for which allowances are established by group with similar credit risk characteristics | 1,305,000.00 | 100.00 | 10,701.00 | 0.82 | 1,294,299.00 | ||||
Movements in allowances for doubtful long-term receivables are as follows:
| Opening balance | Established in the period | Reversed in the period | Written off in the period | Closing balance | ||||||||
| 2022 | - | 10,701.00 | - | - | 10,701.00 |
V. Notes to the Consolidated Financial Statements (cont’d)
13. Long-term equity investments
2022
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
| Opening | Change in the period | ||||||||||
| balance | Additional investment | Return on investment under the equity method | Other equity changes | Closing balance | |||||||
| Associates | |||||||||||
| Jaten Robot | 74,780,345.62 | - | 3,143,695.45 | 8,609,443.05 | 86,533,484.12 | ||||||
| Talleres Tapre | 1,593,382.09 | - | - | 113,845.20 | 1,707,227.29 | ||||||
| Profeta | 8,403,868.96 | - | (1,291,898.85 | - | 7,111,970.11 | ||||||
| 84,777,596.67 | - | 1,851,796.60 | 8,723,288.25 | 95,352,681.52 | |||||||
2021
| Opening | Change in the period | ||||||||||
| balance | Additional investment | Return on investment under the equity method | Other equity changes | Closing balance | |||||||
| Associates | |||||||||||
| Jaten Robot | 70,900,088.92 | - | 3,880,256.70 | - | 74,780,345.62 | ||||||
| Talleres Tapre | 1,771,115.81 | - | - | (177,733.72 | ) | 1,593,382.09 | |||||
| Profeta (Note) | - | 8,403,868.96 | - | - | 8,403,868.96 | ||||||
| 72,671,204.73 | 8,403,868.96 | 3,880,256.70 | (177,733.72 | ) | 84,777,596.67 | ||||||
Note: The Group invested in Nanjing Profeta Intelligent Technology Co., Ltd.(“Profeta”) in September 2021, and the Group has appointed one of the five membersin Profeta’s Board of Directors, and owned a substantive participation right of 20%,having a significant impact on accounting as a joint venture.
As at 31 December 2022, there’s no need to establish impairment allowances for long-term equity investments in the management’s opinion.
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
14. Other non-current financial assets
| 2022 | 2021 | |||||
| Financial assets at fair value | ||||||
| through profit or loss | 334,449,603.33 | 162,523,519.41 |
Other non-current financial assets mainly refer to the Group’s investment in equityinstrument investments, long-term wealth management product investments and long-term derivative financial assets.
15. Fixed assets
2022
| Buildings and constructions | Machinery | Transportation facility | Other equipment | Total | ||||||
| Gross amount | ||||||||||
| Opening balance | 574,983,938.89 | 448,050,277.32 | 30,835,181.82 | 57,871,455.89 | 1,111,740,853.92 | |||||
| Purchases | 4,438,680.16 | 14,741,893.02 | 5,395,971.41 | 8,253,872.61 | 32,830,417.20 | |||||
| Transfers from construction in progress | 7,900,064.51 | 19,746,680.51 | - | - | 27,646,745.02 | |||||
| Business combinations not involving entities under common control | - | 4,131,189.29 | 1,307,079.90 | 66,669.99 | 5,504,939.18 | |||||
| Disposal or retirement | (1,107,098.85 | ) | (1,372,524.49) | (3,405,813.09 | ) | (1,811,094.46 | ) | (7,696,530.89) | ||
| Effect of exchange rate movements | 9,551,580.06 | 10,644,185.12 | 1,049,356.32 | 1,059,404.93 | 22,304,526.43 | |||||
| Closing balance | 595,767,164.77 | 495,941,700.77 | 35,181,776.36 | 65,440,308.96 | 1,192,330,950.86 | |||||
| Accumulated depreciation | ||||||||||
| Opening balance | 179,915,645.47 | 336,782,386.13 | 19,027,736.61 | 31,834,926.62 | 567,560,694.83 | |||||
| Provision | 15,869,048.97 | 20,385,725.76 | 3,057,404.05 | 7,452,453.75 | 46,764,632.53 | |||||
| Disposal or retirement | (83,595.00 | ) | (1,888,997.03) | (2,703,431.52 | ) | (1,608,613.30 | ) | (6,284,636.85) | ||
| Effect of exchange rate movements | 4,121,091.13 | 9,043,490.37 | 914,044.79 | 11,520.27 | 14,090,146.56 | |||||
| Closing balance | 199,822,190.57 | 364,322,605.23 | 20,295,753.93 | 37,690,287.34 | 622,130,837.07 | |||||
| Carrying amount | ||||||||||
| Closing | 395,944,974.20 | 131,619,095.54 | 14,886,022.43 | 27,750,021.62 | 570,200,113.79 | |||||
| Opening | 395,068,293.42 | 111,267,891.19 | 11,807,445.21 | 26,036,529.27 | 544,180,159.09 |
As at 31 December 2022, the Group has no fixed assets subject to operating lease
As at 31 December 2022, the Group has no fixed assets without certificates of title.
V. Notes to the Consolidated Financial Statements (cont’d)
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
15. Fixed assets (cont’d)
2021
| Buildings and constructions | Machinery | Transportation facility | Other equipment | Total | ||||||
| Gross amount | ||||||||||
| Opening balance | 589,751,776.97 | 450,190,483.35 | 29,625,946.16 | 54,535,783.13 | 1,124,103,989.61 | |||||
| Purchases | 1,189,374.97 | 14,276,894.12 | 5,288,470.83 | 6,120,000.21 | 26,874,740.13 | |||||
| Transfers from construction in progress | - | 8,331,019.81 | - | - | 8,331,019.81 | |||||
| Disposal or retirement | (901,617.54) | (2,788,942.24) | (3,467,463.79) | (2,680,584.25) | (9,838,607.82) | |||||
| Effect of exchange rate movements | (15,055,595.51) | (21,959,177.72) | (611,771.38) | (103,743.20) | (37,730,287.81) | |||||
| Closing balance | 574,983,938.89 | 448,050,277.32 | 30,835,181.82 | 57,871,455.89 | 1,111,740,853.92 | |||||
| Accumulated depreciation | ||||||||||
| Opening balance | 170,382,986.59 | 335,115,748.64 | 19,447,337.09 | 27,744,437.15 | 552,690,509.47 | |||||
| Provision | 17,854,660.74 | 21,711,968.56 | 2,982,429.17 | 6,792,822.21 | 49,341,880.68 | |||||
| Disposal or retirement | (901,613.73) | (2,321,838.53) | (3,216,478.16) | (2,410,169.00) | (8,850,099.42) | |||||
| Effect of exchange rate movements | (7,420,388.13) | (17,723,492.54) | (185,551.49) | (292,163.74) | (25,621,595.90) | |||||
| Closing balance | 179,915,645.47 | 336,782,386.13 | 19,027,736.61 | 31,834,926.62 | 567,560,694.83 | |||||
| Carrying amount | ||||||||||
| Closing | 395,068,293.42 | 111,267,891.19 | 11,807,445.21 | 26,036,529.27 | 544,180,159.09 | |||||
| Opening | 419,368,790.38 | 115,074,734.71 | 10,178,609.07 | 26,791,345.98 | 571,413,480.14 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
16. Construction in progress
| 2022 | 2021 | ||||||||||||
| Gross amount | Impairment allowance | amount | Gross amount | Impairment allowance | amount | ||||||||
| Plants and buildings | 36,216,546.63 | - | 36,216,546.63 | 11,582,347.78 | - | 11,582,347.78 | |||||||
| Equipment installation | 2,687,991.22 | - | 2,687,991.22 | 715,911.80 | - | 715,911.80 | |||||||
| 38,904,537.85 | - | 38,904,537.85 | 12,298,259.58 | - | 12,298,259.58 | ||||||||
Movements in substantial construction in progress in 2022 are as follows:
| Budget | Opening balance | Increase in the period | Transferred to fixed assets in the period | Other decrease | Closing balance | Funding source | Input as a % of budget | |||||||
| Equipment installation of Fosber Group | 12,808,069.56 | - | 1,012,034.04 | - | - | 1,012,034.04 | Self-funded | 94.50 | ||||||
| Equipment installation of Parsun Power | 54,800,000.00 | 1,504,855.28 | 19,717,299.66 | 19,546,197.76 | - | 1,675,957.18 | Self-funded | 38.73 | ||||||
| Dongfang Precision - Plant Construction Project | 7,759,142.53 | 2,035,342.08 | 5,864,722.43 | 7,900,064.51 | - | - | Self-funded | - | ||||||
| Yinglian - Plant Construction Project | 50,000,000.00 | 8,548,699.09 | 24,302,832.96 | - | - | 32,851,532.05 | Self-funded | 65.70 | ||||||
| Parsun Power - Plant Construction Project | 348,500,000.00 | - | 1,570,900.95 | - | - | 1,570,900.95 | Self-funded | 0.45 | ||||||
| Fosber Asian – Fosber Songgang Plant Construction Project | 171,547,000.00 | - | 1,673,461.65 | - | - | 1,673,461.65 | Self-funded | 0.98 | ||||||
| Others | - | 209,363.13 | 115,935.00 | 200,482.75 | 4,163.40 | 120,651.98 | Self-funded | - | ||||||
| 645,414,212.09 | 12,298,259.58 | 54,257,186.69 | 27,646,745.02 | 4,163.40 | 38,904,537.85 |
Movements in substantial construction in progress in 2021 are as follows:
| Budget | Opening balance | Increase in the period | Transferred to fixed assets in the period | Other decrease | Closing balance | Funding source | Input as a % of budget | |||||
| Equipment installation of Fosber Group | 12,021,450.00 | 8,426,602.70 | - | 8,087,962.73 | 338,639.97 | - | Self-funded | - | ||||
| Dongfang Precision - Plant Construction Project | 7,759,142.53 | - | 2,035,342.08 | - | - | 2,035,342.08 | Self-funded | 26.23 | ||||
| Yinglian - Plant Construction Project | 50,000,000.00 | - | 8,548,699.09 | - | - | 8,548,699.09 | Self-funded | 17.10 | ||||
| Others | - | 635,435.82 | 1,324,587.30 | 243,057.08 | 2,747.63 | 1,714,218.41 | Self-funded | - | ||||
| - | ||||||||||||
| 69,780,592.53 | 9,062,038.52 | 11,908,628.47 | 8,331,019.81 | 341,387.60 | 12,298,259.58 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
17. Right-of-use assets
2022
| Buildings | Vehicles | Total | |||||||
| Cost | |||||||||
| Opening balance | 86,255,355.01 | 10,568,691.42 | 96,824,046.43 | ||||||
| Increase | 31,633,928.78 | 5,362,634.47 | 36,996,563.25 | ||||||
| Business combinations not involving entities under common control | 6,080,817.77 | - | 6,080,817.77 | ||||||
| Disposal | (17,770,118.19 | ) | - | (17,770,118.19 | ) | ||||
| Effect of exchange rate movements | 1,681,942.65 | 297,458.08 | 1,979,400.73 | ||||||
| Closing balance | 107,881,926.02 | 16,228,783.97 | 124,110,709.99 |
| Accumulated depreciation | |||||||||
| Opening balance | 12,444,892.40 | 3,992,321.12 | 16,437,213.52 | ||||||
| Provision | 18,185,749.81 | 4,473,198.09 | 22,658,947.90 | ||||||
| Disposal | (1,737,505.11 | ) | - | (1,737,505.11 | ) | ||||
| Effect of exchange rate movements | 190,710.93 | 112,364.73 | 303,075.66 | ||||||
| Closing balance | 29,083,848.03 | 8,577,883.94 | 37,661,731.97 | ||||||
| Carrying amount | |||||||||
| Closing | 78,798,077.99 | 7,650,900.03 | 86,448,978.02 |
| Opening | 73,810,462.61 | 6,576,370.30 | 80,386,832.91 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
17. Right-of-use assets (cont’d)
2021
| Buildings | Vehicles | Total | |||||||
| Cost | |||||||||
| Opening balance | - | - | - | ||||||
| Change in accounting policy | 92,921,046.07 | 5,765,803.21 | 98,686,849.28 | ||||||
| Increase | - | 5,381,480.29 | 5,381,480.29 | ||||||
| Effect of exchange rate movements | (6,665,691.06 | ) | (578,592.08 | ) | (7,244,283.14 | ) | |||
| Closing balance | 86,255,355.01 | 10,568,691.42 | 96,824,046.43 | ||||||
| Accumulated depreciation | |||||||||
| Opening balance | - | - | - | ||||||
| Provision | 12,822,890.19 | 4,219,704.87 | 17,042,595.06 | ||||||
| Effect of exchange rate movements | (377,997.79 | ) | (227,383.75 | ) | (605,381.54 | ) | |||
| Closing balance | 12,444,892.40 | 3,992,321.12 | 16,437,213.52 | ||||||
| Carrying amount | |||||||||
| Closing | 73,810,462.61 | 6,576,370.30 | 80,386,832.91 | ||||||
| Opening | - | - | - |
Note: The Group has initially implemented the new lease standard since January 1, 2021.
V. Notes to the Consolidated Financial Statements (cont’d)
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
18. Intangible assets
2022
| Land use rights | Land ownership | Patented technologies | Trademarks and software | Total | ||||||||||
| Gross amount | ||||||||||||||
| Opening balance | 114,739,730.08 | 15,446,573.78 | 83,813,525.48 | 179,201,859.84 | 393,201,689.18 | |||||||||
| Purchases | 63,043,498.41 | - | 4,266,553.14 | 3,335,452.73 | 70,645,504.28 | |||||||||
| Business combination not involving entities under common control | - | - | 21,858,600.00 | - | 21,858,600.00 | |||||||||
| Effect of exchange rate movements | - | 434,747.12 | 2,572,442.99 | 4,526,733.54 | 7,533,923.65 | |||||||||
| Closing balance | 177,783,228.49 | 15,881,320.90 | 112,511,121.61 | 187,064,046.11 | 493,239,717.11 | |||||||||
| Accumulated depreciation | ||||||||||||||
| Opening balance | 22,218,954.91 | - | 52,413,720.96 | 24,850,025.69 | 99,482,701.56 | |||||||||
| Provision | 2,539,310.94 | - | 12,018,177.53 | 8,373,997.32 | 22,931,485.79 | |||||||||
| Effect of exchange rate movements | - | - | 1,989,032.28 | 733,102.37 | 2,722,134.65 | |||||||||
| Closing balance | 24,758,265.85 | - | 66,420,930.77 | 33,957,125.38 | 125,136,322.00 |
| Carrying amount | ||||||||||||||
| Closing | 153,024,962.64 | 15,881,320.90 | 46,090,190.84 | 153,106,920.73 | 368,103,395.11 | |||||||||
| Opening | 92,520,775.17 | 15,446,573.78 | 31,399,804.52 | 154,351,834.15 | 293,718,987.62 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
18. Intangible assets (cont’d)
2021
| Land use rights | Land ownership | Patented technologies | Trademarks and software | Total | ||||||||||
| Gross amount | ||||||||||||||
| Opening balance | 114,739,730.08 | 17,169,515.99 | 94,087,773.87 | 188,146,579.45 | 414,143,599.39 | |||||||||
| Purchases | - | - | 270,088.07 | 7,126,949.32 | 7,397,037.39 | |||||||||
| Effect of exchange rate movements | - | (1,722,942.21 | ) | (10,544,336.46 | ) | (16,071,668.93 | ) | (28,338,947.60 | ) | |||||
| Closing balance | 114,739,730.08 | 15,446,573.78 | 83,813,525.48 | 179,201,859.84 | 393,201,689.18 | |||||||||
| Accumulated depreciation | ||||||||||||||
| Opening balance | 19,772,711.70 | - | 44,892,936.80 | 17,090,768.20 | 81,756,416.70 | |||||||||
| Provision | 2,446,243.21 | - | 12,676,060.37 | 8,714,845.76 | 23,837,149.34 | |||||||||
| Effect of exchange rate movements | - | - | (5,155,276.21 | ) | (955,588.27) | (6,110,864.48 | ) | |||||||
| Closing balance | 22,218,954.91 | - | 52,413,720.96 | 24,850,025.69 | 99,482,701.56 | |||||||||
| Carrying amount | ||||||||||||||
| Closing | 92,520,775.17 | 15,446,573.78 | 31,399,804.52 | 154,351,834.15 | 293,718,987.62 | |||||||||
| Opening | 94,967,018.38 | 17,169,515.99 | 49,194,837.07 | 171,055,811.25 | 332,387,182.69 |
As at 31 December 2022, intangible assets arising from internal R&D accounted for
3.07% of the carrying amount of total intangible assets (31 December 2021: 5.15%).
As at 31 December 2022, the Group has no intangible assets without certificates oftitle.
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
19. Research and development costs
2022
| Increase in the period | Decrease in the period | ||||||
| Opening balance | Internal research and development | Recognition of intangible assets | Current profit or loss | Closing balance | |||
| Data Platform Project | - | 108,069.78 | - | - | 108,069.78 | ||
| Business Platform Project | - | 2,874,316.59 | - | - | 2,874,316.59 | ||
| IoT Platform Project | - | 719,843.39 | - | - | 719,843.39 | ||
| - | 3,702,229.76 | - | - | 3,702,229.76 | |||
The Group uses the time when a product development project is established as thestarting point for capitalization, and the research and development projects areprogressing normally based on the milestones.
20. Goodwill
| 2022 | 2021 | ||||
| Gross amount of goodwill | 557,939,051.93 | 432,207,416.82 | |||
| Less: impairment allowances | 127,022,203.19 | 125,238,269.06 | |||
| 430,916,848.74 | 306,969,147.76 |
2022
| Opening balance | Increase in the period | Decrease in the period | Closing balance | |||||
| Business acquisition | Exchange rate movements | |||||||
| Fosber Group | 148,224,623.58 | - | 4,171,813.73 | 152,396,437.31 | ||||
| Parsun Power | 208,031,946.10 | - | - | 208,031,946.10 | ||||
| Italy EDF | 63,383,214.71 | - | 1,783,934.13 | 65,167,148.84 | ||||
| Italy QCorr | 12,567,632.43 | - | 353,718.69 | 12,921,351.12 | ||||
| Wonder Printing | - | 119,422,168.56 | - | 119,422,168.56 | ||||
| 432,207,416.82 | 119,422,168.56 | 6,309,466.55 | 557,939,051.93 |
V. Notes to the Consolidated Financial Statements (cont’d)
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
19. Goodwill (cont’d)
2021
| Opening balance | Increase in the period | Increase in the period | Closing balance | |||||
| Business acquisition | Exchange rate movements | |||||||
| Fosber Group | 164,757,896.55 | - | (16,533,272.97 | ) | 148,224,623.58 | |||
| Parsun Power | 208,031,946.10 | - | - | 208,031,946.10 | ||||
| Italy EDF | 70,453,107.20 | - | (7,069,892.49 | ) | 63,383,214.71 | |||
| Italy QCorr | 13,969,451.67 | - | (1,401,819.24 | ) | 12,567,632.43 | |||
| 457,212,401.52 | - | (25,004,984.70 | ) | 432,207,416.82 |
Movements in impairment allowances for goodwill are as follows:
2022
| Opening balance | Decrease in the period | Closing balance | |||||||
| Exchange rate movements | |||||||||
| Parsun Power | 61,855,054.35 | - | 61,855,054.35 | ||||||
| Italy EDF | 63,383,214.71 | 1,783,934.13 | 65,167,148.84 | ||||||
| 125,238,269.06 | 1,783,934.13 | 127,022,203.19 |
2021
| Opening balance | Increase in the period | Closing balance | |||||||
| Exchange rate movements | |||||||||
| Parsun Power | 61,855,054.35 | - | 61,855,054.35 | ||||||
| Italy EDF | 70,453,107.20 | (7,069,892.49 | ) | 63,383,214.71 | |||||
| 132,308,161.55 | (7,069,892.49 | ) | 125,238,269.06 |
Goodwill acquired in business combinations is allocated to the following asset groupsor asset group portfolios for impairment testing:
? Corrugator line business asset group of Fosber Group? Power machine business asset group of Parsun Power? Corrugator line business asset group of Italy QCorr? Corrugated carton printer business asset group of Italy EDF? Corrugated digital printer business asset group of Wonder Printing
According to the impairment test results of goodwill, the Group did not need toestablish impairment allowances for goodwill for the period under review.
V. Notes to the Consolidated Financial Statements (cont’d)
19. Goodwill (cont’d)
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements2022 Expressed in Renminbi Yuan
Corrugator line business asset group of Fosber GroupThe corrugator line business asset group is an asset group owned by Fosber Group, consistent withthe asset group combination determined on the purchase date and during impairment tests of theprevious years. The carrying amount of the corrugator line business asset group was RMB 475.71million. The recoverable amount is determined using the present value of the projected future cashflows of the asset group combination according to the cash flow forecasting based on the financialbudget over a five-year period approved by the management. The perpetual cash flows aredetermined at the level of the last year of the detailed forecast period and based on the industrydevelopment trend and other factors. The discount rate used in cash flow forecasting was 19.85%(17.68% in 2021).
Power machine business asset group of Parsun PowerThe power machine business asset group is the asset group owned by Parsun Power, consistent withthe asset group combination determined on the purchase date and during impairment tests of theprevious years. The carrying amount of the power machine business asset group was RMB 303.42million. The recoverable amount is determined using the present value of the projected future cashflows of the asset group combination according to the cash flow forecasting based on the financialbudget over a five-year period approved by the management. The perpetual cash flows will bedetermined at the level of the last year of the detailed forecast period and based on the industrydevelopment trend and other factors. The discount rate used in cash flow forecasting was 12.22%(14.35% in 2021).
Corrugator line business asset group of Italy QCorrThe corrugator line business asset group of Italy QCorr is the only asset group owned by ItalyQCorr, consistent with the asset group combination determined on the purchase date. The carryingamount of the corrugator line asset group was RMB 66.44 million. The recoverable amount isdetermined using the present value of the projected future cash flows of the asset groupcombination according to the cash flow forecasting based on the financial budget over a five-yearperiod approved by the management. The perpetual cash flows will be determined at the level ofthe last year of the detailed forecast period and based on the industry development trend and otherfactors. The discount rate used in cash flow forecasting was 18.61% (17.02% in 2021).
Corrugated carton printer business asset group of Italy EDFFor the corrugated carton printer business asset group of Italy EDF, impairment allowances forgoodwill were established in full amount in 2019.
Corrugated digital printer business asset group of Wonder PrintingThe digital printer business asset group is the only asset group owned by Wonder Printing,consistent with the asset group combination determined on the purchase date. The carrying amountof the digital printer business asset group was RMB 268.05 million. The recoverable amount isdetermined using the present value of the projected future cash flows of the asset groupcombination according to the cash flow forecasting based on the financial budget over a five-yearperiod approved by the management and the industry development trend and other factors. Thediscount rate used in cash flow forecasting was 13.27%.
The following describes the key assumptions made by the management in determining cash flowforecasting for goodwill impairment testing:
V. Notes to the Consolidated Financial Statements (cont’d)
19. Goodwill (cont’d)
Budget gross margin — Developed based on the average gross margin of historical
operating results and expectations for market development.
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements2022 Expressed in Renminbi Yuan
Discount rate — The discount rate used is the pre-tax discount rate that reflects the
specific risks of the relevant asset group or asset groupcombination.
The amount of the key assumptions allocated to the above asset group or asset group portfolio isconsistent with the Group's historical experience and external information.
21. Long-term prepaid expenses
2022
| Opening balance | Increase in the period | Amortization in the period | Other decreases | Closing balance | |||||||||||
| Plant decoration expenditures | 3,070,959.67 | 1,803,202.54 | 1,487,022.48 | - | 3,387,139.73 | ||||||||||
| Office decoration expenditures | 2,463,148.78 | 3,460,523.61 | 598,398.01 | 497.90 | 5,324,776.48 | ||||||||||
| Amortization of moulds | 4,213,276.71 | 1,406,425.56 | 3,314,658.92 | - | 2,305,043.35 | ||||||||||
| Amortization of lease assets | 57,918.55 | 2,114,285.71 | - | - | 2,172,204.26 | ||||||||||
| Internet access for offices | 968,696.77 | 18,584.91 | 176,067.54 | - | 811,214.14 | ||||||||||
| CE certification fee | 94,009.22 | 651,518.90 | 127,965.83 | - | 617,562.29 | ||||||||||
| Expenditures on supporting engineering for plants | 1,094,117.37 | 1,311,602.19 | 288,106.83 | - | 2,117,612.73 | ||||||||||
| 11,962,127.07 | 10,766,143.42 | 5,992,219.61 | 497.90 | 16,735,552.98 |
2021
| Opening balance | Increase in the period | Amortization in the period | Other decreases | Closing balance | |||||||||||
| Plant decoration expenditures | 3,502,191.47 | 1,304,963.59 | (1,190,005.86) | (546,189.53 | ) | 3,070,959.67 | |||||||||
| Office decoration expenditures | 2,796,808.88 | 28,712.87 | (359,199.20) | (3,173.77 | ) | 2,463,148.78 | |||||||||
| Amortization of moulds | 5,513,088.39 | 2,733,991.28 | (4,033,802.96) | - | 4,213,276.71 | ||||||||||
| Amortization of lease assets | 144,783.00 | 17,326.73 | (104,191.18) | - | 57,918.55 | ||||||||||
| Internet access for offices | 73,997.11 | 1,153,953.03 | (259,253.37) | - | 968,696.77 | ||||||||||
| CE certification fee | 66,112.93 | 88,453.76 | (60,557.47) | - | 94,009.22 | ||||||||||
| Expenditures on supporting engineering for plants | - | 1,291,609.07 | (197,491.70) | - | 1,094,117.37 | ||||||||||
| 12,096,981.78 | 6,619,010.33 | (6,204,501.74) | (549,363.30 | ) | 11,962,127.07 |
V. Notes to the Consolidated Financial Statements (cont’d)
22. Deferred tax assets/liabilities
Deferred tax assets and liabilities before offsetting:
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
| 2022 | 2021 | |||||||||||
| Deductible temporary differences | Deferred tax assets | Deductible temporary differences | Deferred tax assets | |||||||||
| Deferred tax assets | ||||||||||||
| Deductible loss | 1,115,356,405.03 | 170,790,680.98 | 487,263,663.55 | 110,651,029.11 | ||||||||
| Provisions—after-sales maintenance service charges | 110,904,039.46 | 27,965,656.80 | 110,759,543.46 | 27,917,753.88 | ||||||||
| Deferred income | 63,619,447.75 | 14,092,864.85 | 50,391,274.95 | 10,996,777.94 | ||||||||
| Accrued expenses | 29,263,236.96 | 4,659,406.75 | 25,860,319.66 | 3,911,857.71 | ||||||||
| Asset impairment allowances | 39,530,769.25 | 7,299,859.61 | 27,487,561.72 | 6,769,391.56 | ||||||||
| Equity incentive expenses | 59,507,278.84 | 9,165,630.00 | 40,413,913.40 | 5,628,337.80 | ||||||||
| Credit impairment loss | 38,382,165.54 | 8,119,663.58 | 29,574,977.76 | 7,004,793.92 | ||||||||
| Internal unrealized profit | 29,017,229.54 | 6,964,135.09 | 11,859,951.60 | 2,846,388.38 | ||||||||
| Others | 121,057,339.07 | 22,623,110.51 | 85,830,557.42 | 26,021,520.06 | ||||||||
| 1,606,637,911.44 | 271,681,008.17 | 869,441,763.52 | 201,747,850.36 | |||||||||
| 2022 | 2021 | |||||||||||
| temporary differences | tax liabilities | temporary differences | tax liabilities | |||||||||
| Deferred tax liabilities | ||||||||||||
| Financial assets at fair value through profit or loss | 21,098,870.19 | 3,750,525.42 | 35,395,813.71 | 5,204,143.87 | ||||||||
| Increase in value in asset valuation | 49,738,790.86 | 8,867,879.18 | 31,042,086.34 | 6,347,331.46 | ||||||||
| Depreciation difference of fixed assets | 26,455,083.92 | 5,468,413.09 | 14,439,128.26 | 3,888,612.02 | ||||||||
| Others | 79,681,187.34 | 15,877,516.64 | 46,011,729.25 | 7,809,378.02 | ||||||||
| 176,973,932.31 | 33,964,334.33 | 126,888,757.56 | 23,249,465.37 | |||||||||
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
21. Deferred tax assets/liabilities (cont’d)
Deferred tax assets and liabilities are offset and presented as a net amount:
| 2022 | ||||||
| Offset amount | Offset balance | |||||
| Deferred tax assets | 27,138,883.56 | 244,542,124.61 | ||||
| Deferred tax liabilities | 27,138,883.56 | 6,825,450.77 | ||||
Deductible temporary differences and deductible losses not recognized as deferred taxassets are as follows:
| 2022 | 2021 | |||||
| Deductible temporary differences | 9,196,588.97 | 8,615,142.53 | ||||
| Deductible losses | 90,723,784.03 | 869,889,774.71 | ||||
| 99,920,373.00 | 878,504,917.24 |
Deductible temporary differences and tax losses not recognized as deferred tax assetswill expire as follows:
| 2022 | 2021 | ||||
| 2022 | - | 8,615,142.53 | |||
| 2023 | 11,447,032.87 | - | |||
| 2024 | 493,437.20 | 834,076,473.87 | |||
| 2025 | 13,984,168.64 | - | |||
| 2026 | 12,841,957.31 | 35,813,300.84 | |||
| 2027 | 61,153,776.98 | - | |||
| 99,920,373.00 | 878,504,917.24 |
The Company has accrued deferred tax assets of RMB164,436,231.16 (2021:
RMB103,248,656.87) for the accumulated deductible losses of RMB1,096,241,541.07 basedon the forecast of its profits in the next five years.
V. Notes to the Consolidated Financial Statements (cont’d)
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
23. Other non-current assets
| 2022 | 2021 | ||||
| Security deposits for loans | - | 300,150,000.00 | |||
| Prepayment for acquisition of long-term assets | 45,320,004.82 | - | |||
| Others | - | 4,446,841.54 | |||
| 45,320,004.82 | 304,596,841.54 |
24. Short-term borrowings
| 2022 | 2021 | |||||
| Guaranteed loan | 2,800,000.00 | 176,738,256.00 | ||||
| Credit loan | 39,015,129.24 | 51,574,624.73 | ||||
| 41,815,129.24 | 228,312,880.73 |
As at 31 December 2022, the annual interest rates of the above borrowings rangedfrom 1.4% to 4.4% (31 December 2021: 0.4%-3.61%).
As at 31 December 2022 and 31 December 2021, the Group has no borrowingsoverdue.
25. Financial liabilities held for trading
| 2021 | 2020 | |||||
| Financial liabilities at fair value through profit or loss | ||||||
| Non-controlling interests put options | 57,022,555.58 | 110,746,939.04 |
Non-controlling interests put options related to the non-controlling interests of FosberAsia. As at 31 December 2022, the Group recognized derivative financial liabilities ofRMB 57,022,555.58 (31 December 2021: RMB 110,746,939.04) according to theassessment results.
V. Notes to the Consolidated Financial Statements (cont’d)
26. Notes payable
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
| 2022 | 2021 | |||||
| Bank acceptance notes | 149,918,253.31 | 149,191,690.00 |
As at 31 December 2022, outstanding notes payable upon maturity were nil (31December 2020: nil).
27. Accounts payable
Accounts payable are interest-free.
| 2022 | 2021 | |||||
| Purchases of inventories | 747,704,598.49 | 618,943,392.87 | ||||
| Others | 614,962.72 | 322,463.31 | ||||
| 748,319,561.21 | 619,265,856.18 |
As at 31 December 2022, substantial accounts payable with aging over 1 year were nil.
28. Contract liabilities
| 2022 | 2021 | |||||
| Contract liabilities | 692,567,968.60 | 405,842,932.51 |
Information about contractual performance obligations is as follows:
Corrugator line, corrugated case printing and packaging equipment and outboard engine salesFulfill the contractual performance obligations when relevant products are delivered to thecustomers and the control over the equipment is transferred. For all customers, the contractprice usually expires within 30 to 180 days after relevant products are delivered and the controlover the equipment is transferred.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
29. Employee benefits payable
2022
| Opening balance | Increase in the period | Decrease in the period | Closing balance | ||||||||
| Short-term benefits | 96,387,794.91 | 613,794,118.96 | 596,048,452.85 | 114,133,461.02 | |||||||
| Retirement benefits (defined contribution schemes) | 7,421,988.67 | 80,183,112.26 | 78,043,233.64 | 9,561,867.29 | |||||||
| 103,809,783.58 | 693,977,231.22 | 674,091,686.49 | 123,695,328.31 |
2021
| Opening balance | Increase in the period | Decrease in the period | Closing balance | ||||||||
| Short-term benefits | 84,647,882.17 | 547,373,917.72 | 535,634,004.98 | 96,387,794.91 | |||||||
| Retirement benefits (defined contribution schemes) | 7,975,680.76 | 65,849,201.49 | 66,402,893.58 | 7,421,988.67 | |||||||
| 92,623,562.93 | 613,223,119.21 | 602,036,898.56 | 103,809,783.58 |
Short-term benefits are as follows:
2022
| Opening balance | Increase in the period | Decrease in the period | Closing balance | |||||||||
| Salaries, bonuses, allowances and subsidies | 90,585,519.60 | 546,530,403.53 | 528,701,548.72 | 108,414,374.41 | ||||||||
| Employee welfare | 4,599,852.75 | 27,514,806.27 | 27,398,155.77 | 4,716,503.25 | ||||||||
| Social security contributions | 587,926.96 | 34,487,623.95 | 34,521,450.20 | 554,100.71 | ||||||||
| Including: Medical insurance | 576,923.13 | 23,145,982.96 | 23,193,746.22 | 529,159.87 | ||||||||
| Work injury insurance | 10,914.73 | 10,709,608.71 | 10,697,258.60 | 23,264.84 | ||||||||
| Maternity insurance | 89.10 | 632,032.28 | 630,445.38 | 1,676.00 | ||||||||
| Housing funds | 15,749.64 | 4,338,208.55 | 4,331,610.19 | 22,348.00 | ||||||||
| Labour union funds and employee education funds | 598,745.96 | 923,076.66 | 1,095,687.97 | 426,134.65 | ||||||||
| 96,387,794.91 | 613,794,118.96 | 596,048,452.85 | 114,133,461.02 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
29. Employee benefits payable (cont’d)
2021
| Opening balance | Increase in the period | Decrease in the period | Closing balance | |||||||||
| subsidies | 79,573,190.90 | 489,454,279.60 | 478,441,950.90 | 90,585,519.60 | ||||||||
| Employee welfare | 4,218,192.78 | 24,650,214.29 | 24,268,554.32 | 4,599,852.75 | ||||||||
| Social security contributions | 112,446.62 | 29,193,688.77 | 28,718,208.43 | 587,926.96 | ||||||||
| Including: medical insurance | 120,597.45 | 19,562,582.16 | 19,106,256.48 | 576,923.13 | ||||||||
| Work injury insurance | (8,150.83) | 9,051,922.98 | 9,032,857.42 | 10,914.73 | ||||||||
| Maternity insurance | - | 579,183.63 | 579,094.53 | 89.10 | ||||||||
| Housing funds | - | 3,209,806.66 | 3,194,057.02 | 15,749.64 | ||||||||
| Labour union funds and employee education funds | 744,051.87 | 865,928.40 | 1,011,234.31 | 598,745.96 | ||||||||
| 84,647,882.17 | 547,373,917.72 | 535,634,004.98 | 96,387,794.91 |
Defined contribution schemes are as follows:
2022
| Opening balance | Increase in the period | Decrease in the period | Closing balance | |||||||||
| Basic endowment insurance | 7,421,853.15 | 79,758,414.33 | 77,627,039.00 | 9,553,228.48 | ||||||||
| Unemployment insurance | 135.52 | 424,697.93 | 416,194.64 | 8,638.81 | ||||||||
| 7,421,988.67 | 80,183,112.26 | 78,043,233.64 | 9,561,867.29 |
2021
| Opening balance | Increase in the period | Decrease in the period | Closing balance | |||||||||
| Basic endowment insurance | 7,975,680.76 | 65,468,209.37 | 66,022,036.98 | 7,421,853.15 | ||||||||
| Unemployment insurance | - | 380,992.12 | 380,856.60 | 135.52 | ||||||||
| 7,975,680.76 | 65,849,201.49 | 66,402,893.58 | 7,421,988.67 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
30. Tax payable
| 2022 | 2021 | |||||
| Value-added tax | 2,794,718.85 | 25,459,136.69 | ||||
| Corporate income tax | 9,990,213.17 | 22,054,501.83 | ||||
| Individual income tax | 9,978,972.79 | 11,666,453.95 | ||||
| City maintenance and construction tax | 552,631.31 | 691,680.71 | ||||
| Education surcharge | 411,264.85 | 494,057.61 | ||||
| Property tax | 218,184.92 | 239,225.19 | ||||
| Stamp duties | 109,070.84 | 55,317.40 | ||||
| Land use tax | 47,325.67 | 34,530.60 | ||||
| Others | 9,321.30 | 6,442.26 | ||||
| 24,111,703.70 | 60,701,346.24 |
31. Other payables
| 2022 | 2021 | |||||
| Other payables | 90,080,142.50 | 100,018,273.09 |
Other payables
| 2022 | 2021 | |||||
| Accrued expenses | 36,647,193.30 | 47,435,654.91 | ||||
| Repurchase obligation of restricted shares | 28,440,000.00 | 25,790,000.00 | ||||
| Payables for settled lawsuit | 3,127,963.30 | 3,440,221.96 | ||||
| Security deposits | 4,807,183.50 | 3,583,099.39 | ||||
| Others | 17,057,802.40 | 19,769,296.83 | ||||
| 90,080,142.50 | 100,018,273.09 |
As at 31 December 2022, substantial other payables with aging over 1 year were nil.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
32. Current portion of non-current liabilities
| 2022 | 2021 | |||||
| Current portion of long-term borrowings | 295,113,556.27 | 21,342,646.25 | ||||
| Of which: Pledge loan | 254,610.59 | 240,946.37 | ||||
| Mortgate loan | 7,100,000.00 | - | ||||
| Guaranteed loan | 263,030,910.73 | 10,273,279.33 | ||||
| Credit loan | 24,728,034.95 | 10,828,420.55 | ||||
| Current portion of lease liabilities | 20,653,874.99 | 17,153,078.58 | ||||
| 315,767,431.26 | 38,495,724.83 |
33. Other current liabilities
| 2022 | 2021 | |||||
| Endorsed notes receivable | 1,449,810.18 | 9,391,823.29 | ||||
| Output tax to be written off | 4,539,069.11 | 3,429,923.76 | ||||
| Others | - | 14,725.95 | ||||
| 5,988,879.29 | 12,836,473.00 |
34. Long-term borrowings
| 2022 | 2021 | |||||
| Guaranteed loan | 296,130,679.37 | 298,477,313.32 | ||||
| Credit loan | 47,504,838.39 | 45,450,825.31 | ||||
| Pledge loan | 2,262,533.40 | 2,440,696.11 | ||||
| Mortgage loan | 7,100,000.00 | - | ||||
| 352,998,051.16 | 346,368,834.74 | |||||
| Of which: Current portion of long-term borrowings | (295,113,556.27 | ) | (21,342,646.25 | ) | ||
| 57,884,494.89 | 325,026,188.49 |
As at 31 December 2022, the annual interest rates of the above borrowings rangedfrom 0.0% to 4.55% (31 December 2021: 0.0%-2.4%). The mortgage loans for theperiod have been fully repaid in advance.
As at 31 December 2022 and 31 December 2021, the Group has no loans overdue.
V. Notes to the Consolidated Financial Statements (cont’d)
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
35. Lease liabilities
| 2022 | 2021 | |||||
| Lease payments | 89,642,986.32 | 82,366,634.45 | ||||
| Less: Current portion of non-current liabilities | 20,653,874.99 | 17,153,078.58 | ||||
| 68,989,111.33 | 65,213,555.87 |
36. Long-term employee benefits payable
| 2022 | 2021 | |||||
| Net liabilities of defined benefit schemes | 13,179,944.17 | 16,083,170.32 |
Defined benefit schemes refer to retirement compensation (Trattamento di FineRapporto, for short, “TFR”) of the Group according to Italian regulations. The latestactuarial valuation of the scheme assets and the present value of the obligationassociated with the defined benefit scheme were determined as at 31 December 2022by Italian actuarial institution Managers & Partners – Actuarial Services S.p.A. usingthe expected accumulated benefit unit method.
Key actuarial assumptions used as at the balance sheet date are as follows:
| 2022 | 2021 | |||
| Separation rate | 2.50% | 2.50% | ||
| Inflation rate | 2.30% | 1.75% | ||
| Discount rate | 3.63% | 0.44% |
The quantitative sensitivity analysis of key assumptions used is as follows:
2022
| Increase % | Increase/(decrease) in obligations of defined benefit scheme | Decrease % | Increase/(decrease) in obligations of defined benefit scheme | |||||||||
| Separation rate | 1.00% | 73,125.51 | 1.00% | (2,644.11) | ||||||||
| Inflation rate | 0.25% | 120,180.83 | 0.25% | (44,483.29) | ||||||||
| Discount rate | 0.25% | (91,077.57) | 0.25% | 169,657.13 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
36. Long-term employee benefits payable (cont’d)
2021
| Increase % | Increase/(decrease) in obligations of defined benefit scheme | Decrease % | Increase/(decrease) in obligations of defined benefit scheme | |||||||||
| Separation rate | 1.00% | (94,653.95) | 1.00% | 106,274.92 | ||||||||
| Inflation rate | 0.25% | 118,117.68 | 0.25% | (115,757.71) | ||||||||
| Discount rate | 0.25% | (187,124.73) | 0.25% | 194,398.22 |
The above sensitivity analysis is based on an inference of the impact of keyassumptions on the defined benefit scheme obligation at a reasonable change on thebalance sheet date. Sensitivity analysis is made according to the changes in majorassumptions on the premise that other assumptions remain unchanged. Since thechanges in assumptions are often not isolated from one another, sensitivity analysismay not represent an actual change in the defined benefit obligation.
37. Provisions
2022
| Opening balance | Increase in the period | Decrease in the period | Closing balance | ||||||
| Product quality warranty | 111,207,164.86 | 57,278,241.47 | 60,079,251.50 | 108,406,154.83 | |||||
| Others | 6,725,556.73 | 8,680,224.46 | 4,865,982.24 | 10,539,798.95 | |||||
| 117,932,721.59 | 65,958,465.93 | 64,945,233.74 | 118,945,953.78 |
2021
| Opening balance | Increase in the period | Decrease in the period | Closing balance | |||||||||
| Product quality warranty | 104,845,110.36 | 50,180,309.14 | 43,818,254.64 | 111,207,164.86 | ||||||||
| Others | 605,147.27 | 6,544,276.17 | 423,866.71 | 6,725,556.73 | ||||||||
| 105,450,257.63 | 56,724,585.31 | 44,242,121.35 | 117,932,721.59 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
38. Deferred income
2022
| Opening balance | Increase in the period | Decrease in the period | Closing balance | |||||||||
| Government grants | 12,190,311.66 | - | 1,116,660.00 | 11,073,651.66 |
2021
| Opening balance | Increase in the period | Decrease in the period | Closing balance | |||||||||
| Government grants | 16,861,488.27 | - | 4,671,176.61 | 12,190,311.66 |
As at 31 December 2022, liabilities in relation to government grants are as follows:
| Opening balance | Recognized in other income of non-operating income in the period | Closing balance | Asset/income-related | |||||||||
| Industrial revitalization and technological renovation funds (4 Mitsubishi machining centers and 3 vertical machining centers) | 12,190,311.66 | 1,116,660.00 | 11,073,651.66 | Asset-related | ||||||||
| 12,190,311.66 | 1,116,660.00 | 11,073,651.66 |
As at 31 December 2021, liabilities in relation to government grants are as follows:
| Opening balance | Recognized in other income of non-operating income in the period | Closing balance | Asset/income-related | |||||||||
| Compensation for demolition of old plant at Jinfeng Road | 3,554,516.61 | 3,554,516.61 | - | Asset-related | ||||||||
| Industrial revitalization and technological renovation funds (4 Mitsubishi machining centers and 3 vertical machining centers) | 13,306,971.66 | 1,116,660.00 | 12,190,311.66 | Asset-related | ||||||||
| 16,861,488.27 | 4,671,176.61 | 12,190,311.66 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
39. Other non-current liabilities
| 2022 | 2021 | |||||
| Non-controlling interests put options | 132,077,339.29 | 136,178,304.44 | ||||
| Other | 4,318,953.26 | - | ||||
| 136,396,292.55 | 136,178,304.44 |
Non-controlling interests put options related to non-controlling interests in Italy QCorrand Parsun Power. As at 31 December 2022, the Group recognized other non-currentliabilities of RMB 132,077,339.29 according to the assessment results (31 December2021: RMB 136,178,304.44).
40. Share capital
2022
| Opening balance | Decrease in the period | Closing balance | |||||||
| Total share capital | 1,331,938,167.00 | 90,831,767.00 | 1,241,106,400.00 |
For the current year, the total number of shares cancelled by the Company was90,831,767 shares, and the total number of shares of the Company changed from1,331,938,167 shares to 1,241,106,400 shares after the cancellation.
2021
| Opening balance | Decrease in the period | Closing balance | |||||||
| Total share capital | 1,545,126,957.00 | 213,188,790.00 | 1,331,938,167.00 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
41. Capital surplus
2022
| Opening balance | Increase in the period (Note 1) | Decrease in the period (Note 2) | Closing balance | ||||||
| Share premium | 3,198,064,392.09 | 29,628,076.98 | 378,854,893.11 | 2,848,837,575.96 | |||||
| Others | 40,701,467.85 | 57,724,799.72 | - | 98,426,267.57 | |||||
| 3,238,765,859.94 | 87,352,876.70 | 378,854,893.11 | 2,947,263,843.53 |
2021
| Opening balance | Increase in the period | Decrease in the period | Closing balance | ||||||
| (Note 1) | (Note 2) | ||||||||
| Share premium | 3,976,935,100.86 | 17,140,596.95 | 796,011,305.72 | 3,198,064,392.09 | |||||
| Others | 25,457,960.95 | 15,243,506.90 | - | 40,701,467.85 | |||||
| 4,002,393,061.81 | 32,384,103.85 | 796,011,305.72 | 3,238,765,859.94 |
Notes:
Note 1: Increases of capital surplus in the period are as follows:
(1) The Company’s share-based payments in the period were included in
shareholder’s equity and increased other capital surplus by RMB29,628,076.98.
(2) The Company acquired 30% non-controlling interests of its subsidiary Tiruna
in the period, increasing other capital surplus by RMB 49,115,356.67.
(3) Other equity of the Company’s associated enterprises changed,
increasing other capital surplus by RMB 8,609,443.05.
Note 2: Decreases of capital surplus in the period are as follows:
(1) The Company retired a total of 90,831,767 shares in the period (as
described in Item 40 of Note V), reducing other capital surplus by RMB378,811,780.27.
(2) The Company repurchsed shares in the period, which resulted in
payment of related commissions and charges, reducing other capital surplusby RMB 43,112.84.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
42. Treasury shares
2022
| Opening balance | Increase in the period (Note) | Decrease in the period (Note) | Closing balance | |||||||
| Share repurchase | 494,335,503.94 | 215,563,545.78 | 469,643,547.27 | 240,255,502.45 |
2021
| Opening balance | Increase in the period | Decrease in the period | Closing balance | |||||
| Share repurchase | 579,403,185.12 | 825,386,681.52 | 910,454,362.70 | 494,335,503.94 |
Note: Changes in the period are as follows:
The increase in treasury shares was driven by the Company’s repurchase of shares inthe period, and the decrease in treasury shares was mainly driven by the Company’sretirement of shares in the period (as described in Item 40 of Note V).
43. Other comprehensive income
Cumulative balance of other comprehensive income attributable to shareholders of theCompany in the consolidated balance sheet:
2022
| 1 January 2022 | Change | 31 December 2022 | |||||||
| Changes due to remeasurement of defined benefit schemes | (647,558.19 | ) | 1,856,564.02 | 1,209,005.83 | |||||
| Differences arising from the translation of foreign currency-denominated financial statements | (32,631,132.72 | ) | 57,979,016.03 | 25,347,883.31 | |||||
| Others | (43,972.07 | ) | - | (43,972.07 | ) | ||||
| (33,322,662.98 | ) | 59,835,580.05 | 26,512,917.07 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
43. Other comprehensive income (cont’d)
Cumulative balance of other comprehensive income attributable to shareholders of theCompany in the consolidated balance sheet: (cont’d)
2021
| 1 January 2021 | Change | 31 December 2021 | |||||||
| Changes due to remeasurement of defined benefit schemes | (279,123.15 | ) | (368,435.04 | ) | (647,558.19 | ) | |||
| Differences arising from the translation of foreign currency-denominated financial statements | 20,349,184.92 | (52,980,317.64 | ) | (32,631,132.72 | ) | ||||
| Others | (43,972.07 | ) | - | (43,972.07 | ) | ||||
| 20,026,089.70 | (53,348,752.68 | ) | (33,322,662.98 | ) |
Other comprehensive income:
2022
| Before tax | Less: Income tax | Attributable to owners of the parent | Attributable to non-controlling interests | ||||||||
| Other comprehensive income that will not be reclassified to profit or loss | |||||||||||
| Changes caused by remeasurements on defined benefit schemes | 1,856,564.02 | - | 1,856,564.02 | - | |||||||
| Other comprehensive income that will be reclassified to profit or loss | |||||||||||
| Differences arising from the translation of foreign currency-denominated financial statements | 55,080,204.63 | - | 57,979,016.03 | (2,898,811.40 | ) | ||||||
| 56,936,768.65 | - | 59,835,580.05 | (2,898,811.40 | ) |
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
43. Other comprehensive income (cont’d)
2021
| Before tax | Less: Income tax | Attributable to owners of the parent | Attributable to non-controlling interests | ||||||||
| Other comprehensive income that will not be reclassified to profit or loss | |||||||||||
| Changes caused by remeasurements on defined benefit schemes | (368,435.04 | ) | - | (368,435.04 | ) | - | |||||
| Other comprehensive income that will be reclassified to profit or loss | |||||||||||
| Differences arising from the translation of foreign currency-denominated financial statements | (57,694,181.97 | ) | - | (52,980,317.64 | ) | (4,713,864.33 | ) | ||||
| (58,062,617.01 | ) | - | (53,348,752.68 | ) | (4,713,864.33 | ) |
44. Special reserve
2022
| Opening balance | Provision in the period | Ultilisation in the period | Closing balance | |||||||
| Expenses for Safety Production | 11,252,639.19 | 6,161,824.10 | (2,925,507.77 | ) | 14,488,955.52 |
2021
| Opening balance | Provision in the period | Ultilisation in the period | Closing balance | |||||||||
| Expenses for Safety Production | 10,057,438.97 | 4,513,399.49 | (3,318,199.27 | ) | 11,252,639.19 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
45. Surplus reserves
2022
| Opening and closing balance | ||||
| Statutory surplus reserves | 51,830,974.45 |
2021
| Opening and closing balance | ||||
| Statutory surplus reserves | 51,830,974.45 |
Pursuant to the Company Law, when the Company allocates after-tax profits of theyear, the Company shall set aside 10% net profit after making up losses in previousyears as its statutory surplus reserves. When the Company’s statutory reserves are notenough to make up losses in previous years, the Company shall first make up the losseswith profits in the year before it withdraws statutory surplus reserves according to theabove-mentioned regutlation. As there is still losses that can be made up in theCompany’s account, statutory surplus reserves are not made in the current year.
46. Retained earnings
| 2022 | 2021 | |||||
| Opening retained earnings | (424,159,175.27 | ) | (891,492,837.06 | ) | ||
| Net profit attributable to owners of the parent | 447,177,897.38 | 467,333,661.79 | ||||
| Closing retained earnings | 23,018,722.11 | (424,159,175.27 | ) |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
47. Operating revenue and costs
| 2022 | 2021 | |||||||||||
| Revenue | Costs | Revenue | Costs | |||||||||
| Principal operations | 3,861,267,826.14 | 2,811,064,346.64 | 3,471,892,485.62 | 2,522,244,108.28 | ||||||||
| Other operations | 31,440,683.50 | 22,241,401.90 | 52,842,298.32 | 32,827,951.51 | ||||||||
| 3,892,708,509.64 | 2,833,305,748.54 | 3,524,734,783.94 | 2,555,072,059.79 | |||||||||
Operating revenue is as follows:
| 2022 | 2021 | |||||
| Revenue arising from contracts with customers | 3,891,406,986.70 | 3,523,514,431.39 | ||||
| Others | 1,301,522.94 | 1,220,352.55 | ||||
| 3,892,708,509.64 | 3,524,734,783.94 |
Breakdown of operating revenue arising from contracts with customers is as follows:
2022
| Total | |||
| Principal operating segment | |||
| Mainland China | 441,664,388.05 | ||
| Other regions | 3,449,742,598.65 | ||
| 3,891,406,986.70 | |||
| Principal product type | |||
| Goods | 3,530,766,862.10 | ||
| Services | 360,640,124.60 | ||
| 3,891,406,986.70 | |||
| By revenue recognition time | |||
| Revenue recognition at a point of time | |||
| Sale of goods | 3,530,766,862.10 | ||
| Revenue recognition for a period of time | |||
| Rendering of services | 360,640,124.60 | ||
| 3,891,406,986.70 |
V. Notes to the Consolidated Financial Statements (cont’d)
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
47. Operating revenue and costs (cont’d)
Breakdown of operating revenue arising from contracts with customers is as follows:
(cont’d)
2021
| Total | |||
| Principal operating segment | |||
| Mainland China | 528,007,403.05 | ||
| Other regions | 2,995,507,028.34 | ||
| 3,523,514,431.39 | |||
| Principal product type | |||
| Goods | 3,224,038,841.57 | ||
| Services | 299,475,589.82 | ||
| Others | |||
| 3,523,514,431.39 | |||
| By revenue recognition time | |||
| Revenue recognition at a point of time | |||
| Sale of goods | 3,224,038,841.57 | ||
| Revenue recognition for a period of time | |||
| Rendering of services | 299,475,589.82 | ||
| 3,523,514,431.39 |
Revenue recognized that was included in contract liabilities at the beginning of theyear:
| 2022 | 2021 | |||||
| Sales payment in advance | 334,296,679.75 | 312,794,330.81 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
47. Operating revenue and costs (cont’d)
Information about contractual performance obligations is as follows:
Sale of goodsContractual performance obligations are fulfilled when delivering manufactured goodsto customers, and normally the payment in advance for some customers are needed.
Rendering of servicesContractual performance obligations are fulfilled during the rendering of services.
The expected time for recognizing in revenue the total transaction price allocated tooutstanding contractual performance obligations as at the period-end is as follows:
| 2022 | 2021 | |||||
| Within 1 year | 692,567,968.60 | 405,842,932.51 |
48. Taxes and surcharges
| 2022 | 2021 | |||||
| Property tax | 4,472,175.71 | 4,612,247.54 | ||||
| City maintenance and construction tax | 3,556,299.02 | 2,928,855.08 | ||||
| Education surcharge | 1,354,323.03 | 1,664,857.56 | ||||
| Stamp tax | 836,666.85 | 780,312.71 | ||||
| Local education surcharge | 892,159.78 | 734,432.96 | ||||
| Land use tax | 518,958.69 | 548,091.99 | ||||
| Vehicle and vessel tax | 11,064.76 | 19,943.53 | ||||
| Environmental protection tax | 16,321.08 | 5,852.88 | ||||
| Others | 298,321.03 | 201,912.47 | ||||
| 11,956,289.95 | 11,496,506.72 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
49. Selling expenses
| 2022 | 2021 | |||||
| Commissions and agency fees | 47,370,007.70 | 59,870,536.49 | ||||
| Employee benefits | 56,966,000.14 | 48,815,734.92 | ||||
| Product quality warranties | 42,349,630.26 | 42,420,792.60 | ||||
| Advertising and exhibition expenses | 7,889,277.47 | 8,916,532.18 | ||||
| Travel expenses | 11,572,146.49 | 8,279,440.26 | ||||
| Office expenses | 2,216,107.13 | 1,816,870.39 | ||||
| Depreciation and amortization expenses | 1,327,867.77 | 1,170,873.85 | ||||
| Other expenses | 12,864,838.75 | 14,036,897.49 | ||||
| 182,555,875.71 | 185,327,678.18 |
50. Administrative expenses
| 2022 | 2021 | |||||
| Employee benefits | 151,890,144.23 | 137,770,894.42 | ||||
| Depreciation and amortization expenses | 30,683,414.09 | 33,075,924.90 | ||||
| Intermediary expenses | 32,748,743.44 | 26,331,269.13 | ||||
| Equity incentives | 28,245,389.68 | 15,243,506.90 | ||||
| Office expenses | 15,241,253.59 | 14,704,181.88 | ||||
| Travel and reception expenses | 9,797,492.56 | 9,799,959.60 | ||||
| Conference expenses | 11,037,605.97 | 4,146,471.59 | ||||
| Property management expenses | 3,168,050.31 | 2,789,669.82 | ||||
| Maintenance expenses | 1,060,687.27 | 1,405,398.19 | ||||
| Car expenses | 814,131.46 | 1,232,050.28 | ||||
| Materials consumption | 1,857,128.89 | 722,185.83 | ||||
| Rental expenses | 4,952,760.91 | 544,034.30 | ||||
| Other expenses | 19,966,810.76 | 24,325,181.24 | ||||
| 311,463,613.16 | 272,090,728.08 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
51. R&D expenses
| 2022 | 2021 | |||||
| Employee benefits | 63,368,875.04 | 51,438,135.36 | ||||
| Depreciation and amortization expenses | 12,327,999.54 | 17,208,658.35 | ||||
| Material expenses | 11,111,028.94 | 22,383,588.65 | ||||
| Utilities | 1,708,605.10 | 1,269,392.10 | ||||
| Assembly testing and debugging expenses | 176,934.19 | 87,859.47 | ||||
| Other expenses | 9,261,010.59 | 7,169,931.53 | ||||
| 97,954,453.40 | 99,557,565.46 |
52. Finance costs
| 2022 | 2021 | |||||
| Interest expenses | 13,839,292.38 | 13,182,088.01 | ||||
| Less: Interest income | 19,042,851.72 | 24,674,196.61 | ||||
| Exchange losses | (6,540,524.94 | ) | 2,528,095.79 | |||
| Discounted interest | - | 7,238.89 | ||||
| Others | 2,773,390.59 | 2,960,299.46 | ||||
| (8,970,693.69 | ) | (5,996,474.46 | ) |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
53. Other income
| 2022 | 2021 | |||||
| Government grants related to routine activities | 20,754,916.28 | 14,700,007.84 | ||||
| Refund of handling charges for individual income tax withheld | 178,461.16 | 192,559.05 | ||||
| 20,933,377.44 | 14,892,566.89 |
Government grants related to routine activities are as follows:
| 2022 | 2021 | Asset/income-related | ||||||
| Immediate VAT refund for embedded software | 7,234,133.62 | Income-related | ||||||
| Foreign government subsidies | 2,727,199.95 | Income-related | ||||||
| Support fund for the development of digital intelligent transformation of manufacturing industry | 2,000,000.00 | Income-related | ||||||
| 4 Mitsubishi gantry processing centres and 3 fixed-beam-type gantry processing centres | 1,116,660.00 | 1,116,660.00 | Asset-related | |||||
| Special awards for high-tech design | 1,000,000.00 | Income-related | ||||||
| Special awards for Big Enterprise | 1,000,000.00 | Income-related | ||||||
| The second batch of project funding for the first major technical equipment Support Plan in 2022 | 790,000.00 | Income-related | ||||||
| Support fund for development of Science and technology in Suzhou | 700,000.00 | Income-related | ||||||
| Subsidies for gazelle companies in 2020 | 681,148.49 | Income-related | ||||||
| The research and development subsidies can be deducted for Manufacturing Champion in 2020 | 500,000.00 | Income-related | ||||||
| One-time training subsidies | 303,425.00 | Income-related | ||||||
| Manufacturing Champion in 2021 | 300,000.00 | Income-related | ||||||
| The 22nd batch of science and technology development Plan appropriated by Suzhou in 2022 | 300,000.00 | Income-related | ||||||
| One-time training subsidies awarded by Administration of Social Insurance Fund of Guangdong Province | 239,715.00 | Income-related | ||||||
| Pro-employment fund | 232,103.09 | Income-related | ||||||
| Special fund for business development in 2022 | 202,900.00 | Income-related | ||||||
| Special fund of Nanhai Administration Bureau of Foshan High tech Industrial Development Zone | 200,000.00 | Income-related | ||||||
| Special Fund of Suzhou National New & Hi-Tech Industrial Development Zone | 200,000.00 | Income-related | ||||||
| Social security insurance refunds | 136,370.00 | Income-related | ||||||
| Funds of Market Supervision Administration of High-tech Zone | 120,000.00 | Income-related | ||||||
| The second batch of R&D incentive Bonuses for science and technology Enterprises in 2021 (Results Section) | 100,000.00 | Income-related | ||||||
| Special funds for business development of Suzhou Bureau of Commerce | 95,900.00 | Income-related | ||||||
| Support funds for 2020 exhibition | 90,000.00 | Income-related | ||||||
| Subsidy funds after R&D expenses for high-tech enterprises in 2022 | 72,267.00 | Income-related | ||||||
| Support funds for Manufacturing Champion policies in 2021 | 60,000.33 | Income-related | ||||||
| 2022 enterprise rewards for highly skilled leading talent | 50,000.00 | Income-related | ||||||
| 2022 annual bank loan premium subsidy for small and micro enterprises | 50,000.00 | Income-related |
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
| Pro-employment fund in 2021 from Foshan Social Insurance Fund Management Bureau | 48,215.23 | Income-related | ||||||
| R&D expenses for high-tech enterprises of Foshan Science and Technology Bureau | 45,732.00 | Income-related | ||||||
| Special fund for science and technology plan in 2022 | 33,000.00 | Income-related | ||||||
| Special funds for export credit insurance of Nanhai District Economic Promotion Bureau in 2021 | 29,741.94 | Income-related | ||||||
| Annual research and development expense award in 2022 of Science and Technology Innovation Bureau | 23,600.00 | Income-related | ||||||
| Special funds for business development of Suzhou High-tech Zone Bureau of Commerce | 20,300.00 | Income-related | ||||||
| Special funds for business development | 20,000.00 | Income-related | ||||||
| Special funds for export credit insurance of Foshan Bureau of Commerce | 10,000.00 | Income-related | ||||||
| Award for trademark registration of “Branded Project” of Administration in high-tech zone in 2022 | 5,000.00 | Income-related | ||||||
| Disinfection subsidies for manufacturing enterprises | 5,000.00 | Income-related | ||||||
| Employment subsidies for key enterprises in Suzhou High-tech Zone | 5,000.00 | Income-related | ||||||
| Job subsidies | 4,500.00 | Income-related | ||||||
| Social security subsidies for small, low-profit manufacturing enterprises | 1,504.63 | Income-related | ||||||
| Award for trademark registration of “Branded Project” of Administration for Market Regulation | 1,500.00 | Income-related | ||||||
| Compensation for demolition of the old plant in Jinfeng Road | 3,554,516.61 | Asset-related | ||||||
| Foreign government subsidies | 2,902,405.18 | Income-related | ||||||
| Immediate VAT refund for embedded software | 1,526,488.01 | Income-related | ||||||
| Project subsidy funds for overseas R&D institutions in 2020 | 1,000,000.00 | Income-related | ||||||
| Special funds for promoting foreign economic cooperation in Foshan City in 2021 | 1,000,000.00 | Income-related | ||||||
| Municipal technology innovation award for key industries in 2017/2018 from the Scientific and Technological Innovation Bureau | 400,000.00 | Income-related | ||||||
| Award for stabilizing employment positions and benefiting enterprises from High-tech Zone Economic and Development Commission | 300,000.00 | Income-related | ||||||
| Manufacturing Champion in 2020 awarded by Nanhai Park Administration | 300,000.00 | Income-related | ||||||
| Subsidy funds after R&D expenses for high-tech enterprises | 259,500.00 | Income-related | ||||||
| Subsidies for gazelle companies | 250,000.00 | Income-related | ||||||
| Special awards for high-tech enterprises in 2020 | 200,000.00 | Income-related | ||||||
| Funds for quality improvement of industrial products in Foshan City in 2021 | 200,000.00 | Income-related | ||||||
| Subsidies for National and Provincial Intellectual Property Demonstration Enterprise | 200,000.00 | Income-related | ||||||
| Special funds for business development of Suzhou High-tech Zone Bureau of Commerce | 182,600.00 | Income-related | ||||||
| Special funds for leading enterprises in 2020 | 150,000.00 | Income-related | ||||||
| Subsidies for leading enterprises identification in Foshan High-tech Zone | 150,000.00 | Income-related | ||||||
| Subsidies from Suzhou High-tech Zone Bureau of Commerce in 2019 | 111,958.59 | Income-related | ||||||
| Subsidies for high-tech enterprises identification in Foshan City in 2020 | 100,000.00 | Income-related | ||||||
| Subsidies for economic development from High-tech Zone Economic Development Committee | 100,000.00 | Income-related | ||||||
| Intellectual property thematic funds of 2019 patent subsidies of Nanhai District Administration for Market Regulation | 100,000.00 | Income-related | ||||||
| R&D expenses for high-tech enterprises of Foshan Science and Technology Bureau | 74,700.00 | Income-related | ||||||
| Award for R&D of enterprises from Technology and Innovation Bureau | 55,000.00 | Income-related | ||||||
| 2020 enterprise rewards for highly skilled leading talent | 50,000.00 | Income-related | ||||||
| 2021 enterprise rewards for highly skilled leading talent | 50,000.00 | Income-related | ||||||
| Patent subsidies for foreign invention of Administration for Market Regulation | 50,000.00 | Income-related | ||||||
| Subsidies for work-based training of Suzhou Labor and Employment Management Service Center | 45,518.59 | Income-related | ||||||
| Government subsidies for the projects with excellent technology staying in Suzhou | 39,300.00 | Income-related | ||||||
| Special funds for environmental protection support and reward of Nanhai Branch of Foshan Ecological Environment Bureau in 2020 | 37,633.00 | Income-related | ||||||
| Funds for invention patent annual fee of Foshan Administration for Market Regulation | 35,630.00 | Income-related | ||||||
| Special funds for intellectual property in 2020 | 31,626.00 | Income-related | ||||||
| Special funds for export credit insurance in Nanhai District, Foshan City in 2021 of Nanhai District Economic Promotion Bureau, Foshan City | 23,992.00 | Income-related | ||||||
| Funds for invention patents in China of Foshan “Fuchitong” | 21,000.00 | Income-related | ||||||
| Special funds for business development | 20,103.00 | Income-related | ||||||
| Special funds for business development of Suzhou High-tech Zone Bureau of Commerce | 20,000.00 | Income-related |
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements2022 Expressed in Renminbi Yuan
| Provincial promotion of high-quality economic development in 2020 of Nanhai District Economic Promotion Bureau, Foshan City Special funds for development, for the purposes of foreign economic and trade development and the development of modern service industry | 16,363.24 | Asset-related | ||||||
| Subsidies for stabilizing employment positions of Foshan Social Insurance Fund Administration in 2020 | 14,274.14 | Income-related | ||||||
| Subsidies for work-based training | 4,000.00 | Income-related |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
53. Other income (cont’d)
| Funds for invention patents in China of Administration for Market Regulation | 3,000.00 | Income-related | ||||||
| Subsidies for stabilizing employment positions | 1,739.48 | Income-related | ||||||
| Award for trademark registration of “Branded Project” of Administration for Market Regulation of Nanhai District, Foshan City | 1,000.00 | Income-related | ||||||
| Pandemic-related subsidies | 1,000.00 | Income-related | ||||||
| 20,745,916.28 | 14,700,007.84 |
54. Investment income
| 2022 | 2021 | ||||
| Income from financial assets held for trading | 17,279,281.22 | 94,792,849.32 | |||
| Income from long-term equity investments measured at equity method | 1,851,796.60 | 3,880,256.70 | |||
| 19,131,077.82 | 98,673,106.02 |
55. Gains and losses on changes in fair value
| 2022 | 2021 | |||||
| Changes in fair value of non-controlling interests call/put options | 5,337,601.98 | (50,864,345.69 | ) | |||
| Financial assets at fair value through profit or loss | 13,423,921.51 | 29,506,559.88 | ||||
| Financial liability at fair value through profit or loss | (844,476.88 | ) | - | |||
| 17,917,046.61 | (21,357,785.81 | ) |
56. Credit impairment loss
| 2022 | 2021 | |||||
| Loss on doubtful accounts receivable | 4,417,400.72 | 8,497,086.26 | ||||
| Allowances losses for other receivables | 681,873.15 | 4,229,550.20 | ||||
| Impairment loss on contract assets | 10,701.00 | - | ||||
| 5,109,974.87 | 12,726,636.46 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
57. Asset impairment loss
| 2022 | 2021 | |||||
| Inventory valuation loss | 10,867,629.33 | 11,194,079.96 | ||||
| Reversed impairment loss on contract assets | 1,928,694.23 | (257,325.86 | ) | |||
| 12,796,323.56 | 10,936,754.10 |
58. Gains and losses on disposal of assets
| 2022 | 2021 | |||||
| Gain/(loss) on disposal of fixed assets | (168,835.37 | ) | 424,968.29 |
59. Non-operating income
| 2022 | 2021 | Recognized in exceptional gains and losses of 2022 | ||||||
| Compensation fee | 283,274.15 | - | 283,274.15 | |||||
| Others | 2,176,293.18 | 5,750,547.04 | 2,176,293.18 | |||||
| 2,459,567.33 | 5,750,547.04 | 2,459,567.33 |
60. Non-operating expenses
| 2022 | 2021 | Recognized in exceptional gains and losses of 2022 | |||||||
| Donations | 224,849.92 | 83,988.03 | 224,849.92 | ||||||
| Loss on disposal of non-current assets | 182,551.41 | 501,064.13 | 182,551.41 | ||||||
| Others | 473,443.92 | 876,966.65 | 473,443.92 | ||||||
| 880,845.25 | 1,462,018.81 | 880,845.25 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
61. Expenses by nature
Supplementary information of the Group’s cost of sales, selling expenses,administrative expenses, and R&D expenses by nature is as follows:
| 2022 | 2021 | |||||
| Raw materials consumed | 1,985,363,537.36 | 1,859,784,815.80 | ||||
| Employee benefits | 684,582,240.74 | 613,223,119.21 | ||||
| Transportation expenses and miscellaneous expenses associated with import and export | 191,131,032.36 | 125,384,252.47 | ||||
| Depreciation and amortization expenses | 96,227,980.90 | 96,426,126.81 | ||||
| Commissions and agency fees | 47,370,007.70 | 59,870,536.49 | ||||
| Product quality warranties | 42,622,459.66 | 42,420,792.60 | ||||
| Intermediary expenses | 35,907,474.82 | 26,331,269.13 | ||||
| Utilities | 26,280,501.27 | 18,322,758.67 | ||||
| Equity incentives | 29,628,076.94 | 15,243,506.90 | ||||
| Travel and business reception expenses | 113,117,355.40 | 85,673,533.80 | ||||
| Technology licensing expenses | 9,543,670.88 | 9,350,533.75 | ||||
| Advertising and exhibition expenses | 8,706,020.81 | 8,916,532.18 | ||||
| Rental expenses | 2,758,021.35 | 544,034.30 | ||||
| Office and other expenses | 152,041,310.62 | 150,556,219.40 | ||||
| 3,425,279,690.81 | 3,112,048,031.51 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
62. Income tax expenses
| 2022 | 2021 | |||||
| Current income tax expenses | 83,948,000.57 | 88,328,101.49 | ||||
| Deferred tax expenses | (61,760,709.14 | ) | (100,274,573.91 | ) | ||
| 22,187,291.43 | (11,946,472.42 | ) |
Reconciliation between income tax expenses and gross profit is as follows:
| 2022 | 2021 | |||||
| Gross profit | 505,928,312.72 | 480,444,713.23 | ||||
| Income tax calculated at applicable tax rates (Note) | 75,889,246.91 | 72,066,706.98 | ||||
| Different tax rates for specific provinces or enacted by local authority | 18,881,060.06 | 38,186,704.25 | ||||
| Adjustment to current income tax in previous periods | (775,371.61 | ) | (8,715,965.71 | ) | ||
| Income not subject to tax | (471,554.32 | ) | (13,811,012.93 | ) | ||
| Over-deduction for R&D | (9,884,156.68 | (5,813,981.03 | ) | |||
| Expenses not deductible for tax | 5,666,686.60 | 995,625.70 | ||||
| Utilization and recognition of deductible losses of previous periods | (82,173,231.29 | ) | (100,238,844.22 | ) | ||
| Effect of unrecognized deductible temporary differences and deductible losses | 15,054,611.76 | 5,384,294.54 | ||||
| Income tax expenses | 22,187,291.43 | (11,946,472.42 | ) |
Note: The provision for income tax of the Group was recognized based on theestimated taxable income to be derived from mainland China and applicable tax rate.Taxable income derived from other jurisdictions shall be taxed based on applicable taxrate in accordance with the current laws, interpretations and conventions in thecountry/jurisdiction where the Group operates.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
63. Earnings per share
| 2022 | 2021 | |||||
| RMB/share | RMB/share | |||||
| Basic earnings per share | ||||||
| Continuing operations | 0.37 | 0.35 |
Diluted earnings per share
| Diluted earnings per share | ||||||
| Continuing operations | 0.37 | 0.35 |
Basic earnings per share is computed by dividing the net profit attributable to ordinaryshareholders of the Company for the period by the weighted average number ofordinary shares in issue.
In the calculation of diluted earnings per share, the numerator shall be determinedbased on the net profit attributable to ordinary shareholders of the Company for theperiod after adjusting the following factors: (1) the interest of diluted potential ordinaryshares that have been recognized as expenses in the period; (2) gains or expenses thatwill be incurred when the diluted potential ordinary shares are converted; and (3) theincome tax impact related to the above adjustments.
In the calculation of diluted earnings per share, the denominator shall be the sum of:
(1) weighted average number of ordinary shares of the Company in issue adopted inthe calculation of basic earnings per share; and (2) weighted average number ofordinary shares created assuming conversion of potentially dilutive ordinary sharesinto ordinary shares.
In calculating the weighted average number of ordinary shares created upon conversionof potentially dilutive ordinary shares into ordinary shares, potentially dilutive ordinaryshares issued in previous periods are assumed to have been converted at the beginningof the current period, whereas potentially dilutive ordinary shares issued in the currentperiod are assumed to have been converted on the date of issue.
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
63. Earnings per share(cont’d)
Calculations of basic and diluted earnings per share are as follows:
| 2022 | 2021 | ||||
| Earnings | |||||
| Net profit attributable to ordinary shareholders of the Company for the period | 447,177,897.38 | 467,333,661.79 | |||
| Shares | |||||
| Weighted average number of ordinary shares in issue of the Company | 1,214,301,810.17 | 1,327,715,640.50 | |||
| Shares | |||||
| Weighted average number of ordinary shares in issue of the Company | 1,214,301,810.17 | 1,327,715,640.50 | |||
| Diluting effect——weighted average number of ordinary shares | |||||
| Restricted shares | 8,044,635.29 | 12,915,588.73 | |||
| Adjusted weighted average number of ordinary shares in issue of the Company | 1,222,346,445.46 | 1,340,631,229.23 | |||
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
64. Notes to cash flow statement line items
| 2022 | 2021 | |||||
| Cash generated from other operating activities | ||||||
| Government grants | 19,804,538.17 | 10,221,390.28 | ||||
| Interest income | 9,167,093.01 | 24,674,196.61 | ||||
| Current accounts and others | 8,441,791.07 | 4,438,967.22 | ||||
| 37,413,422.25 | 39,334,554.11 | |||||
| Cash used in other operating activities | ||||||
| Selling expenses in cash | 130,038,891.90 | 105,107,763.31 | ||||
| Administrative expenses in cash | 105,291,187.76 | 74,613,114.65 | ||||
| R&D expenses in cash | 13,993,627.09 | 17,901,111.33 | ||||
| Security deposits | 2,187,739.39 | 187,068.49 | ||||
| Letter of guarantee paid | 695,566.59 | 2,171,914.25 | ||||
| Current accounts and others | 28,045,564.77 | 21,116,317.47 | ||||
| 280,252,577.50 | 221,097,289.50 |
| Cash generated from other investing activities | ||||||
| Performance compensation | 741,402.85 | 2,419,748.09 | ||||
| Investment deposit | 20,000,000.00 | - | ||||
| 20,741,402.85 | 2,419,748.09 | |||||
| Cash used in other investing activities | ||||||
| Investment deposit | 20,000,000.00 | - |
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
64. Notes to cash flow statement line items (cont’d)
| 2022 | 2021 | |||||
| Cash generated from other financing activities | ||||||
| Disposal of equity to non-controlling interests | - | 100,000,000.00 | ||||
| Security deposits for bank acceptance notes | 177,363,575.61 | 93,525,797.34 | ||||
| Security deposits recovered for internal guarantees for external loans | 420,000,000.00 | - | ||||
| Security deposits for loan | 140,000,000.00 | - | ||||
| Share subscription | 2,762,000.00 | - | ||||
| 740,125,575.61 | 193,525,797.34 | |||||
| Cash used in other financing activities | ||||||
| Share repurchase | 215,606,658.62 | 828,741,759.63 | ||||
| Security deposits paid for loans | 210,000,000.00 | 355,075,000.00 | ||||
| Security deposits for bank acceptance notes | 170,580,626.43 | 120,056,676.70 | ||||
| Purchase of non-controlling interests | 50,866,860.00 | 36,121,968.12 | ||||
| Lease and interest payments | 26,324,405.01 | 17,062,209.03 | ||||
| 673,378,550.06 | 1,357,057,613.48 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
65. Supplemental information on statement of cash flows
(1) Supplemental information on statement of cash flows
Reconciliation of net profit to net cash generated from/used in operating activities:
| 2022 | 2021 | |||||
| Net profit | 483,741,021.29 | 492,391,185.65 | ||||
| Add: Asset impairment allowances | 12,796,323.56 | 10,936,754.10 | ||||
| Depreciation of fixed assets | 46,764,632.53 | 49,341,880.68 | ||||
| Depreciation of right-of-use assets | 22,658,947.90 | 17,042,595.06 | ||||
| Amortization of intangible assets | 22,931,485.79 | 23,837,149.34 | ||||
| Credit impairment loss | 5,109,974.87 | 12,726,636.46 | ||||
| Amortization of long-term prepaid expenses | 5,992,219.61 | 6,204,501.74 | ||||
| Loss and gain on disposal of fixed assets, intangible assets and other long-lived assets | 168,835.37 | (424,968.29 | ) | |||
| Loss on retirement of fixed assets | 182,551.41 | 490,962.41 | ||||
| Loss and gain on changes in fair value | (17,917,046.61 | ) | 21,357,785.81 | |||
| Finance costs | 3,689,292.38 | 13,182,088.01 | ||||
| Investment income | (19,131,077.82 | ) | (98,673,106.02 | ) | ||
| Increase in deferred tax assets | (63,715,107.07 | ) | (81,298,463.69 | ) | ||
| Decrease/(increase) in deferred tax liabilities | 1,377,055.21 | (17,549,248.21 | ) | |||
| Increase in inventories | (181,404,611.30 | ) | (128,880,794.62 | ) | ||
| Increase/(decrease) in operating receivables | (237,029,947.97 | ) | (397,793,709.49 | ) | ||
| Increase in operating payables | 385,587,050.58 | 374,249,103.02 | ||||
| Others | 34,492,861.22 | 9,518,924.06 | ||||
| Net cash generated from/used in operating activities | 506,294,460.95 | 306,659,276.02 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
65. Supplemental information on statement of cash flows (cont’d)
(1) Supplemental information on statement of cash flows (cont’d)
Substantial investing and financing activities not involving cash:
| 2022 | 2021 | |||||
| Transfer of endorsed bank acceptance notes received for selling goods and rendering services | 91,221,566.30 | 53,118,728.50 | ||||
| Acquisition of right-of-use assets by assuming lease liabilities | 36,996,563.25 | 80,386,832.91 | ||||
| 128,218,129.55 | 133,505,561.41 |
Net change in cash and cash equivalents:
| 2022 | 2021 | |||||
| Closing balance of cash | 1,233,720,697.27 | 1,259,303,775.74 | ||||
| Less: Opening balance of cash | 1,259,303,775.74 | 860,601,236.78 | ||||
| Add: Closing balance of cash equivalents | - | - | ||||
| Less: Opening balance of cash equivalents | - | - | ||||
| Net increase/(decrease) in cash and cash equivalents | (25,583,078.47 | ) | 398,702,538.96 |
(2) Information on subsidiaries and other business units acquired or disposed of
Information on subsidiaries and other business units acquired
| 2022 | 2021 | |||||
| Prices for acquiring subsidiaries and other business units | 148,300,000.00 | 30,000,000.00 | ||||
| Cash and cash equivalents paid to acquire subsidiaries and other business units | 173,800,000.00 | 30,000,000.00 | ||||
| Less: cash and cash equivalents held by subsidiaries and other business units acquired | 57,867,983.95 | - | ||||
| Net payments for the acquisition of subsidiaries and other business units | 115,932,016.05 | 30,000,000.00 |
(3) Cash and cash equivalents
| 2022 | 2021 | |||||
| Cash | 1,233,720,697.27 | 1,259,303,775.74 | ||||
| Including: cash on hand | 587,935.98 | 233,281.32 | ||||
| Bank deposits readily available | 1,011,564,164.21 | 999,389,151.51 | ||||
| Other cash and bank balances readily available | 221,568,597.08 | 259,681,342.91 | ||||
| Cash equivalents | - | - | ||||
| Closing balance of cash and cash equivalents | 1,233,720,697.27 | 1,259,303,775.74 |
V. Notes to the Consolidated Financial Statements (cont’d)
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements2022 Expressed in Renminbi Yuan
66. Assets with restricted ownership or right of use
| 2022 | 2021 | ||||||||
| Cash and bank balances | 40,726,502.47 | 405,032,563.61 | Note 1 | ||||||
| Fixed assets | 4,409,110.42 | 4,533,314.25 | Note 2 | ||||||
| Other non-current assets | - | 300,150,000.00 | Note 3 | ||||||
| Current portion of non-current assets | 310,300,000.00 | - | Note 3 | ||||||
| 355,435,612.89 | 709,715,877.86 |
Note 1: As at 31 December 2022, cash and bank balances in the carrying amount
of RMB40,726,502.47 were used as security deposits for bank acceptance notesand letter of guarantee and the like (31 December 2021: RMB405,032,563.61).
Note 2: As at 31 December 2022, the fixed assets in the carrying amount of
RMB4,409,110.42 (31 December 2020: RMB4,533,314.25) was used ascollateral for obtaining bank borrowings for subsidiaries, with the term expiringon 2023
Note 4: As at 31 December 2022, security deposits in the carrying amount of
RMB 310,300,000.00 (31 December 2020: RMB 300,150,000.00) were usedfor loans of subsidiaries. As the subsidiary's loan will expire on June 2023, theamount was transferred from other noncurrent assets to current portion of non-current assets.
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
V. Notes to the Consolidated Financial Statements (cont’d)
67. Monetary items in foreign currencies
| 2022 | 2021 | ||||||||||||
| Original currency | Exchange rate | RMB equivalent | Original currency | Exchange rate | RMB equivalent | ||||||||
| Cash and bank balances | 837,901,528.55 | 685,152,963.98 | |||||||||||
| Including: USD | 51,568,121.01 | 6.9646 | 359,151,335.60 | 56,147,869.58 | 6.3757 | 357,981,972.08 | |||||||
| EUR | 63,332,369.86 | 7.4229 | 470,109,848.24 | 45,306,958.43 | 7.2197 | 327,102,647.78 | |||||||
| HKD | 70,837.93 | 0.8933 | 63,279.52 | 83,591.14 | 0.8176 | 68,344.12 | |||||||
| GBP | 1,021,796.88 | 8.3941 | 8,577,065.19 | - | 8.6081 | - | |||||||
| Accounts receivable | 781,623,990.32 | 714,281,331.38 | |||||||||||
| Including: USD | 6,224,516.08 | 6.9646 | 43,351,264.69 | 8,067,507.42 | 6.3757 | 51,436,007.06 | |||||||
| EUR | 99,458,799.88 | 7.4229 | 738,272,725.63 | 91,810,646.47 | 7.2197 | 662,845,324.32 | |||||||
| Contract assets | 25,889,024.27 | 19,971,462.55 | |||||||||||
| Including: USD | 2,627,445.80 | 6.9646 | 18,299,109.02 | 2,773,235.20 | 6.3757 | 17,681,315.66 | |||||||
| EUR | 1,022,500.00 | 7.4229 | 7,589,915.25 | 317,208.04 | 7.2197 | 2,290,146.89 | |||||||
| Other receivables | 64,322,223.29 | 210,931,472.20 | |||||||||||
| Including: USD | - | 6.9646 | - | 8,856,610.50 | 6.3757 | 56,467,091.56 | |||||||
| EUR | 8,665,376.51 | 7.4229 | 64,322,223.29 | 21,394,847.52 | 7.2197 | 154,464,380.64 | |||||||
| Accounts payable | 579,166,380.90 | 580,255,405.04 | |||||||||||
| Including: USD | 17,933.26 | 6.9646 | 124,897.96 | 20,811,908.90 | 6.3757 | 132,690,487.57 | |||||||
| EUR | 78,007,447.62 | 7.4229 | 579,041,482.94 | 61,992,176.61 | 7.2197 | 447,564,917.47 | |||||||
| Short-term borrowings | 39,015,129.24 | 228,312,880.73 | |||||||||||
| Including: EUR | 5,256,049.42 | 7.4229 | 39,015,129.24 | 31,623,596.65 | 7.2197 | 228,312,880.73 | |||||||
| Current portion of non-current liabilities | 287,544,266.74 | 32,455,649.04 | |||||||||||
| Including: EUR | 38,737,456.62 | 7.4229 | 287,544,266.74 | 4,495,429.04 | 7.2197 | 32,455,649.04 | |||||||
| Long-term borrowings | 57,884,494.89 | 325,026,188.49 | |||||||||||
| Including: EUR | 7,798,097.09 | 7.4229 | 57,884,494.89 | 45,019,348.24 | 7.2197 | 325,026,188.49 | |||||||
| Lease liabilities | 47,237,141.39 | 49,459,973.23 | |||||||||||
| Including: EUR | 6,363,704.40 | 7.4229 | 47,237,141.39 | 6,850,696.46 | 7.2197 | 49,459,973.23 | |||||||
| Other payables | 18,360,654.60 | 18,820,269.40 | |||||||||||
| Including: USD | 419,190.02 | 6.9646 | 2,919,490.81 | 397,040.50 | 6.3757 | 2,531,411.12 | |||||||
| EUR | 2,080,206.36 | 7.4229 | 15,441,163.79 | 2,256,168.30 | 7.2197 | 16,288,858.28 | |||||||
The principal places of business overseas, the functional currencies and theirdetermination basis of the major overseas business entities included in the consolidatedfinancial statements are as follows:
| Major overseas business entities | Principal place of business | Functional currency | Determination basis |
| Fosber Group | Italy | EUR | Settlement currency for local business activities |
| Fosber America | America | USD | Settlement currency for local business activities |
| Italy EDF | Italy | EUR | Settlement currency for local business activities |
| Tiru?a Group | Spain | EUR | Settlement currency for local business activities |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
VIII. Changes to the Scope of Consolidation
1. Business combinations not involving entities under common control
Within the current period, the Company acquired a 50% stake in Shenzhen WonderPrinting System Co.,Ltd at RMB173,800,000.00 in cash, including a capital increase ofRMB50,000,000.00 and a equity transfer payment of RMB123,800,000. The date ofacquisition is determined as 7 June 2022 based on the completion of the businesschange registration procedures and completion of shareholding rights transfer on 7June 2022.
The fair value and carrying amounts of the identifiable assets and liabilities of FoshanYinglian Digital Printing Equipment Co., Ltd. as at the date of acquisition are asfollows:
| 7 Jun. 2022 | 7 Jun. 2022 | |||||
| Fair Value | Book Value | |||||
| Cash and bank balances | 22,867,983.95 | 22,867,983.95 | ||||
| Notes receivable | 740,481.63 | 740,481.63 | ||||
| Accounts receivable | 12,147,478.25 | 12,147,478.25 | ||||
| Prepaid expense | 2,411,228.55 | 2,411,228.55 | ||||
| Other receivables | 2,072,194.20 | 2,072,194.20 | ||||
| Inventories | 44,297,259.74 | 42,548,955.95 | ||||
| Other current assets | 37,841.92 | 37,841.92 | ||||
| Fixed assets | 5,504,939.18 | 4,492,581.48 | ||||
| Intangible assets | 21,858,600.00 | - | ||||
| Deferred tax assets | 581,494.60 | 581,494.60 | ||||
| Right-of-use assets | 6,080,817.77 | 6,080,817.77 | ||||
| Short-term borrowings | 4,200,000.00 | 4,200,000.00 | ||||
| Accounts payable | 10,200,334.69 | 10,200,334.69 | ||||
| Contracts liabilities | 6,448,103.80 | 6,448,103.80 | ||||
| Employee benefit payable | 2,729,488.28 | 2,729,488.28 | ||||
| Tax payable | 4,962,681.84 | 4,962,681.84 | ||||
| Other payable | 15,034,104.80 | 15,034,104.80 | ||||
| Current portion of non-current liabilities | 4,204,477.63 | 4,204,477.63 | ||||
| Current liabilities | 709,454.49 | 709,454.49 | ||||
| Long-term borrowings | 6,600,000.00 | 6,600,000.00 | ||||
| Derferred tax liabilities | 3,701,257.61 | 8,368.38 | ||||
| Lease liabilities | 3,187,217.75 | 3,187,217.75 | ||||
| 56,623,198.90 | 35,696,826.64 | |||||
| Minority stockholder’s interest | (27,745,367.46) | (17,491,445.05) | ||||
| Total | 28,877,831.44 | 18,205,381.59 | ||||
| Goodwill arising from the acquisition | 119,422,168.56 | |||||
| 148,300,000.00 | Note |
Note: The merger consideration consisted of (1) a cash payment of RMB123,800,000.00 forthe equity transfer and (2) RMB24,500,000.00 for the portion of the capital increaseattributable to the minority shareholders in proportion to their shareholdings.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
VI. Changes to the Scope of Consolidation (cont’d)
1. Business combinations not involving entities under common control
(cont’d)
The operating results and cash flows of Shenzhen Wonder Printing System Co.,Ltd for theperiod from the date of acquisition to the period-end are as follows:
| 7 June.-31 Dec. 2022 | ||
| Operating revenue | 81,875,354.35 | |
| Net profit | 18,633,830.83 | |
| Net cash flow | 19,674,096.45 |
2. Changes to the scope of consolidation for other reasons
Information about the newly established subsidiary:
In February 2022, the Company established Dongfang Yineng International Holdings Co., Ltd(hereinafter referred to as “Yineng International”) with a registered capital of RMB50million and a shareholding ratio of 100%.
In February 2022, Hainan Yineng, a subsidiary of the Company, established Changzhou
Xinchen Investment Partnership (Limited Partnership) (hereinafter referred to as “Changzhou
Xinchen”), with a subscribed capital contribution of RMB48 million and a shareholding ratioof 94.86%.
In February 2022, Parsun Power, a subsidiary of the Company, established SuzhouBaisheng International Trade Co., Ltd (hereinafter referred to as “BaishengInternational”) with a registered capital of RMB3 million and a shareholding ratio of
69.62%.
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements2022 Expressed in Renminbi Yuan
IX. Interests in Other Entities
1. Interests in subsidiaries
Particulars of the subsidiaries of the Company are as follows:
| Principal place of business | Place of registration | Business nature | Registered capital | The Company’s interest（%） | |||||||
| Direct | Indirect | ||||||||||
| Subsidiaries acquired by way of incorporation or investment | |||||||||||
| Dongfang Precision (HK) | HK | HK | Trading | USD300,000 | 100.00 | - | |||||
| Dongfang Precision (Netherland) | Netherland | Netherland | Trading | EUR40,000 | 90.00 | 10.00 | |||||
| Fosber Asia | Foshan, Guangdong, China | Foshan, Guangdong, China | Manufactur ing | EUR4 million | 89.20 | - | |||||
| Italy QCorr | Italy | Italy | Manufacturing | EUR375,000 | - | 60.00 | |||||
| Suzhou High-Tech Zone Jinquan Business Management Partnership (Limited Partnership)* | Suzhou, Jiangsu, China | Suzhou, Jiangsu, China | Investment | RMB9.65 million | - | 1.27 | |||||
| Parsun Power Technology | Suzhou, Jiangsu. China | Suzhou, Jiangsu. China | Manufacturing | RMB10 million | - | 69.62 | |||||
| Baisheng International | Suzhou, Jiangsu. China | Suzhou, Jiangsu. China | Trading | RMB3 million | 69.62 | ||||||
| Dongfang Digicom | Haikou, Hainan, China | Haikou, Hainan, China | Industrial Internet | RMB100 million | 100.00 | - | |||||
| Dongfang Digicom (Guangdong) | Foshan, Guangdong, China | Foshan, Guangdong, China | Industrial Internet | RMB8 million | 100.00 | ||||||
| Hainan Yineng | Haikou, Hainan, China | Haikou, Hainan, China | Investment | RMB100 million | 100.00 | - | |||||
| Yineng International | Foshan, Guangdong,China | Foshan, Guangdong,China | Investment | RMB50 million | 100.00 | - | |||||
| Tianjin Hangchuang | Tianjin, China | Tianjin, China | Investment | RMB21 million | 95.24 | - | |||||
| Changzhou Xinchen | Changzhou, Jiangsu. China | Changzhou, Jiangsu. China | Investment | RMB50.6 millin | - | 94.86 | |||||
| Subsidiaries acquired in business combinations not under common control | |||||||||||
| Fosber Group | Italy | Italy | Manufactur ing | EUR1.56 million | - | 100.00 | |||||
| Fosber America | America | America | Manufactur ing | USD1.10 million | - | 100.00 | |||||
| Fosber Tianjin | Tianjin, China | Tianjin, China | Manufactur ing | USD500,000 | - | 100.00 | |||||
| Parsun Power | Suzhou, Jiangsu, China | Suzhou, Jiangsu, China | Manufactur ing | RMB85.3 million | 7.83 | 61.79 | |||||
| Shunyi Investment | Suzhou, Jiangsu, China | Suzhou, Jiangsu, China | Investment | RMB10 million | 100.00 | - | |||||
| Italy EDF | Italy | Italy | Manufactur ing | EUR100,000 | - | 100.00 | |||||
| Tiru?a Group | Spain | Spain | Manufactur ing | EUR10 million | - | 70.00 | |||||
| Tiru?a S.L.U. | Spain | Spain | Manufactur ing | EUR1.44 million | - | 70.00 | |||||
| Tratatamientos Industriales Tiru?a S.A.U. | Spain | Spain | Manufactur ing | EUR270,000 | - | 70.00 | |||||
| Tiru?a France SARL | France | France | Manufactur ing | EUR100,000 | - | 70.00 | |||||
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
| SCI Candan | France | France | Manufactur ing | EUR10,000 | - | 70.00 | |||||
| Tiru?a America | America | America | Manufactur ing | USD3 million | - | 85.00 | |||||
| Tiru?a Guangdong | Foshan, Guangdong, China | Foshan, Guangdong, China | Manufactur | EUR21 million | - | 66.3 | |||||
| Yinglian Digital | Foshan, Guangdong, China | Foshan, Guangdong, China | Manufactur ing | RMB50 million | 100.00 | - | |||||
| Wonder Printing | Shenzhen, Guangdong, China | Shenzhen, Guangdong, China | Manufacturing | RMB117.19 million | 51 | - | |||||
| Wonder Digital | Dongguan, Guangdong, China | Dongguan, Guangdong, China | Mandufacturing | RMB1 million | - | 51 |
*According to the partnership agreement, the general partner of the partnership shallexecute partnership affairs, and other partners shall not execute partnership affairs. Asthe sole general partner, the Company forms control over the partnership, which isincluded in the scope of consolidation of the Group.
2. Interests in associates
| Principal place of business | Place of registration | Business nature | Registered capital | The Company’s interest (%) | Accounting method | |||||||||||
| Direct | Indirect | |||||||||||||||
| Associates | ||||||||||||||||
| Guangdong Jaten Robot & Automation Co., Ltd. | Foshan | Foshan | manufacturing | RMB31.759 million | 19.84 | - | Equity method | |||||||||
| Talleres Tapre,S.L. | Spain | Spain | manufacturing | EUR37,563 | - | 14.00 | Equity method | |||||||||
| Nanjing Profeta (Note) | Nanjing | Nanjing | manufacturing | RMB3.8613 million | - | 6.66 | Equity method | |||||||||
Note: The board of directors of Nanjing Profeta Intelligent Technology Co., Ltd. has 5members. The Group has appointed one of the directors, and he accordingly enjoys 20% of thesubstantive participation rights, forming a significant influence.
The table below presents the aggregate financial information of associates insignificantto the Group:
| 2021 | 2020 | |||||
| Associates | ||||||
| Total carrying amount of investments | 9,997,251.05 | 84,777,596.67 | ||||
| Total amounts based on the Company’s interests: | ||||||
| Net loss | 1,851,796.60 | 3,880,256.70 | ||||
| Total comprehensive loss | 1,851,796.60 | 3,880,256.70 | ||||
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
X. Risks Associated with Financial Instruments
1. Classification of financial instruments
The carrying amounts of various financial instruments as at the balance sheet date are
as follows:
2022
Financial assets
| At fair value through profit or loss | At amortized cost | At fair value through other comprehensive income | Total | |||
| As required by standard | As required by standard | |||||
| Cash and bank balances | - | 1,274,447,199.74 | - | 1,274,447,199.74 | ||
| Financial assets held for trading | 860,832,278.88 | - | - | 860,832,278.88 | ||
| Notes receivable | - | 24,566,100.12 | - | 24,566,100.12 | ||
| Accounts receivable | - | 837,305,757.46 | - | 837,305,757.46 | ||
| Receivables financing | - | - | 15,305,668.26 | 15,305,668.26 | ||
| Other receivables | - | 80,996,902.82 | - | 80,996,902.82 | ||
| Current portion of non-current assets | - | 311,763,750.00 | - | 311,763,750.00 | ||
| Long-term receivables | - | 1,294,299.00 | - | 1,294,299.00 | ||
| Other non-current financial assets | 334,449,603.33 | - | - | 334,449,603.33 | ||
| 1,195,281,882.21 | 2,530,374,009.14 | 15,305,668.26 | 3,740,961,559.61 |
Financial liabilities
| At fair value through profit or loss | At amortized cost | Total | |||||||
| As required by standard | |||||||||
| Short-term borrowings | - | 41,815,129.24 | 41,815,129.24 | ||||||
| Financial liabilities held for trading | 57,022,555.58 | - | 57,022,555.58 | ||||||
| Notes payable | - | 149,918,253.31 | 149,918,253.31 | ||||||
| Accounts payable | - | 748,319,561.21 | 748,319,561.21 | ||||||
| Other payables | - | 90,080,142.50 | 90,080,142.50 | ||||||
| Current portion of non-current liabilities | - | 315,767,431.26 | 315,767,431.26 | ||||||
| Long-term borrowings | - | 57,884,494.89 | 57,884,494.89 | ||||||
| Lease liabilities | - | 68,989,111.33 | 68,989,111.33 | ||||||
| Other current liabilities | - | 1,449,810.18 | 1,449,810.18 | ||||||
| Other non-current liabilities | 26,142,283.35 | 110,254,009.20 | 136,396,292.55 | ||||||
| 83,164,838.93 | 1,584,477,943.12 | 1,667,642,782.05 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
VIII. Risks Associated with Financial Instruments (cont’d)
1. Classification of financial instruments (cont’d)
The carrying amounts of various financial instruments as at the balance sheet date areas follows: (cont’d)
2021
Financial assets
| At fair value through profit or loss | cost | At fair value through other comprehensive income | Total | |||
| As required by standard | As required by standard | |||||
| Cash and bank balances | - | 1,664,336,339.35 | - | 1,664,336,339.35 | ||
| Financial assets held for trading | 788,185,521.57 | - | - | 788,185,521.57 | ||
| Notes receivable | - | 13,272,025.04 | - | 13,272,025.04 | ||
| Accounts receivable | - | 741,135,648.09 | - | 741,135,648.09 | ||
| Receivables financing | - | - | 30,692,449.25 | 30,692,449.25 | ||
| Other receivables | - | 70,220,378.02 | - | 70,220,378.02 | ||
| Current portion of non-current assets | - | 108,385,000.00 | - | 108,385,000.00 | ||
| Long-term receivables | - | 143,750.00 | - | 143,750.00 | ||
| Other non-current financial assets | 162,523,519.41 | - | - | 162,523,519.41 | ||
| Other non-current assets | - | 300,150,000.00 | - | 300,150,000.00 | ||
| 950,709,040.98 | 2,897,643,140.50 | 30,692,449.25 | 3,879,044,630.73 |
Financial liabilities
| At fair value through profit or loss | At amortized cost | Total | |||||||
| As required by standard | |||||||||
| Short-term borrowings | - | 228,312,880.73 | 228,312,880.73 | ||||||
| Financial liabilities held for trading | 110,746,939.04 | - | 110,746,939.04 | ||||||
| Notes payable | - | 149,191,690.00 | 149,191,690.00 | ||||||
| Accounts payable | - | 619,265,856.18 | 619,265,856.18 | ||||||
| Other payables | - | 100,018,273.09 | 100,018,273.09 | ||||||
| Current portion of non-current liabilities | - | 38,495,724.83 | 38,495,724.83 | ||||||
| Long-term borrowings | - | 325,026,188.49 | 325,026,188.49 | ||||||
| Lease liability | - | 65,213,555.87 | 65,213,555.87 | ||||||
| Other current liabilities | - | 9,391,823.29 | 9,391,823.29 | ||||||
| Other non-current liabilities | 29,074,219.95 | 107,104,084.49 | 136,178,304.44 | ||||||
| 139,821,158.99 | 1,642,020,076.97 | 1,781,841,235.96 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
VIII. Risks Associated with Financial Instruments (cont’d)
2. Transfer of financial assets
Financial assets already transferred but not wholly derecognized
On 31 December 2022, the carrying value of the bank acceptance notes (BAs)endorsed by the Group to suppliers for the settlement of accounts payable wasRMB1,449,810.18 (31 December 2021: RMB9,391,823.29). The Group believed thatthe Group retained almost all their risks and rewards, including the risk of defaultassociated therewith, so the Group continued to confirm them and the settled accountspayable associated therewith in full amount. After the endorsement, the Group will nolonger reserve the right to use them, including the right to sell, transfer, or pledgethem to other third parties. On 31 December 2022, the carrying value of the accountspayable settled with them totaled RMB1,449,810.18 (31 December 2021:
RMB9,391,823.29).
Transferred financial assets that have been wholly derecognized but continue to beinvolved
On 31 December 2022, the carrying value of the BAs endorsed by the Group tosuppliers for the settlement of accounts payable was RMB23,495,743.47 (31December 2021: RMB23,598,786.91). On 31 December 2022, their maturity datevaried from one to 12 months. As stipulated in the Negotiable Instruments Law, if theaccepting bankrefuses to pay, their holders have the right to recourse from the Group ("continue to beinvolved"). The Group believed that the Group had transferred almost all their risksand rewards, so the Group derecognized the carrying value of them and the settledaccounts payable associated therewith. The maximum loss and undiscounted cashflows from continuing involvement and repurchase were equal to their carrying value.The Group believed that it was insignificant to continue to involve in fair value.
In 2022, the Group did not confirm the gains or losses on the transfer day. The Grouphad no income or expenses recognized in the current year and cumulatively due tocontinued involvement in derecognized financial assets. Endorsements occurredroughly evenly during the year.
3. Financial instrument risks
The Group is faced with various financial instrument risks in its routine activities, mainlyincluding credit risk, liquidity risk and market risk (including exchange rate risk and interest raterisk). The Group mainly has the following instruments: cash and bank balances, equityinvestment, borrowings, notes receivable, accounts receivable, notes payable and accountspayable. The risk management strategies adopted by the Group to lower risks associated withthese financial instruments are described below.
VIII. Risks Associated with Financial Instruments (cont’d)
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
3. Financial instrument risks (cont’d)
The Group's Board of Directors is fully responsible for the determination of risk managementobjectives and policies and assumes ultimate responsibility for such risk management objectivesand policies, but the Board of Directors has authorized the Chief Executive's Office of the Groupto design and implement procedures to ensure the effective execution of risks managementobjectives and policies. The Board of Directors reviews the effectiveness of the executedprocedures and the rationality of the risk management objectives and policies through the monthlyreports submitted by the treasury supervisor. The internal auditors of the Group will also audit therisk management policies and procedures and will report relevant findings to the Audit Committee.
The Group's overall goals for risk management are to develop risk management policies tominimize risks without unduly affecting the competitiveness and strain capacity of the Group.
Credit Risk
The Group transacts only with recognized and reputable third parties. According to the Group'spolicies, credit checks are needed for all customers that require transactions should be conductedby means of credit. Additionally, the Group performs continuous monitoring of the balance ofaccounts receivable to ensure that the Group will not face major bad debt risk. For transactions notsettled in the accounting standard currency of the relevant business unit, unless specificallyapproved by the credit control department of the Group, the Group will not provide credittransaction conditions.
Since the counterparties of cash and bank balances and notes receivable are banks with a goodreputation and high credit rating, the credit risk of such financial instruments is low.
Other financial assets of the Group mainly include accounts receivable, other receivables andcontract assets, the credit risk of which arises from counterparty default, and the maximum riskexposure is equal to the carrying value of these instruments.
The Group transacts only with recognized and reputable third parties, so no collateral is required.Credit risk concentration is managed by customer/counterparty, geographic region and industry.Because the customer base of accounts receivable of the Group is widely dispersed in differentdepartments and industries, there is no major credit risk concentration within the Group. TheGroup does not hold any collateral or other credit enhancement on the balance of accountsreceivable.
Criteria for judging significant increases in credit risk
The Company assesses whether or not the credit risk of the relevant financial instruments hasincreased significantly since the initial recognition at each balance sheet date. While determiningwhether the credit risk has significantly increased since initial recognition or not, the Companytakes into account the reasonable and substantiated information that is accessible without exertingundue extra cost or effort, including qualitative and quantitative analysis based on the historicaldata of the Company, external credit risk rating, and forward-looking information. Based on thesingle financial instrument or the combination of financial instruments with similar characteristicsof credit risk, the Company compares the risk of default of financial instruments on the balancesheet date with that on the initial recognition date in order to determine changes in the risk ofdefault during the expected lifetime of financial instruments.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
VIII. Risks Associated with Financial Instruments (cont’d)
3. Financial instrument risks (cont’d)
Credit risk (cont’d)
Definition of credit-impaired financial assetsThe standard adopted by the Group to determine whether a credit impairment occurs is consistentwith the internal credit risk management objectives of the relevant financial instrument, takinginto account quantitative and qualitative criteria. When the Group assesses whether the creditimpairment of debtor occurred, the principal factors considered are as follows:
（1） Significant financial difficulty of the issuer or debtor;
（2） Debtors’ breach of contract, such as defaulting or becoming overdue on interest or
principal payments;
（3） The creditor of the debtor, for economic or contractual reasons relating to the debtor’s
financial difficulty, having granted to the debtor a concession that the creditor would nototherwise consider;
（4） It is becoming probable that the debtor will enter bankruptcy or other financial
restructuring;
（5） The disappearance of an active market for that financial asset because of financial
difficulties of the issuer or debtor;
（6） The purchase or origination of a financial asset at a deep discount that reflects the
incurrence of credit losses.
The credit impairment on a financial asset may be caused by the combined effect of multipleevents and may not be necessarily due to a single event.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
VIII. Risks Associated with Financial Instruments (cont’d)
3. Financial instrument risks (cont’d)
Liquidity risk
The Group monitors its risk to the shortage of funds using a recurring liquidityplanning tool. This tool considers the maturity profile of its financial instruments andprojected cash flows from operations.
The maturity profile of financial liabilities based on undiscounted contractual cashflow is summarized as follows:
2022
| Within 1 month | 1-3 months | 3 months-1 year | 1-5 years | Over 5 years | Total | |||||||
| Short-term borrowings | 10,109,326.19 | 13,053,856.47 | 18,592,633.64 | - | - | 41,755,816.30 | ||||||
| Financial liabilities held for trading | - | - | 57,022,555.58 | - | - | 57,022,555.58 | ||||||
| Notes payable | - | - | 149,918,253.31 | - | - | 149,918,253.31 | ||||||
| Accounts payable | - | - | 748,319,561.21 | - | - | 748,319,561.21 | ||||||
| Other payables | - | - | 90,080,142.50 | - | - | 90,080,142.50 | ||||||
| Current portion of non-current liabilities | 769,865.02 | 2,725,256.25 | 302,043,449.86 | - | - | 305,538,571.13 | ||||||
| Long-term borrowings | - | - | - | 58,982,718.09 | 1,075,526.84 | 60,058,244.93 | ||||||
| Lease liabilities | - | - | - | 68,989,111.33 | - | 68,989,111.33 | ||||||
| Other current liabilities | - | - | 1,449,810.18 | - | - | 1,449,810.18 | ||||||
| Other non-current liabilities | - | - | - | 26,142,283.35 | - | 26,142,283.35 | ||||||
| 10,879,191.21 | 15,779,112.72 | 1,367,426,406.28 | 154,114,112.77 | 1,075,526.84 | 1,549,274,349.82 |
2021
| Within 1 month | 1-3 months | 3 months-1 year | 1-5 years | Over 5 years | Total | |||||||
| Short-term borrowings | 190,705,475.51 | 30,521,787.76 | 7,394,911.43 | - | - | 228,622,174.70 | ||||||
| Financial liabilities held for trading | - | - | 110,746,939.04 | - | - | 110,746,939.04 | ||||||
| Notes payable | - | - | 149,191,690.00 | - | - | 149,191,690.00 | ||||||
| Accounts payable | - | - | 619,265,856.18 | - | - | 619,265,856.18 | ||||||
| Other payables | - | - | 100,018,273.09 | - | - | 100,018,273.09 | ||||||
| Current portion of non-current liabilities | 1,430,597.18 | 2,498,486.89 | 37,889,311.44 | - | - | 41,818,395.51 | ||||||
| Long-term borrowings | - | - | - | 325,847,350.33 | 3,602,076.70 | 329,449,427.03 | ||||||
| Lease liabilities | - | - | - | 65,213,555.87 | - | 65,213,555.87 | ||||||
| Other current liabilities | - | - | 9,391,823.29 | - | - | 9,391,823.29 | ||||||
| Other non-current liabilities | - | - | - | 136,178,304.44 | - | 136,178,304.44 | ||||||
| 192,136,072.69 | 33,020,274.65 | 1,033,898,804.47 | 527,239,210.64 | 3,602,076.70 | 1,789,896,439.15 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
VIII. Risks Associated with Financial Instruments (cont’d)
3. Financial instrument risks (cont’d)
Market Risk
Interest rate risk
The Group’s exposure to risk of changes in market interest rates relates primarily tothe Group’s long-term liabilities with floating interest rates.
The sensitivity analysis of interest rate risks is set out in the following table, reflectingthe impact of reasonable and probable change in interest rates on net profit or loss(through the impact on floating rate loans) and other comprehensive income (net oftax) assuming that other variables remain constant.
2022
| (decrease) in basis points | (decrease) in net profit or loss | (decrease) in other comprehensive income net of tax | (decrease) in total equity | |||||||||
| Loans | 0.5 | (1,458,187.97 | ) | - | (1,458,187.97 | ) | ||||||
| Loans | (0.5 | ) | 1,458,187.97 | - | 1,458,187.97 | |||||||
2021
| Increase/ (decrease) in basis points | Increase/ (decrease) in net profit or loss | Increase/ (decrease) in other comprehensive income net of tax | Increase/ (decrease) in total equity | |||||||||
| Loans | 0.5 | (1,361,068.13 | ) | - | (1,361,068.13) | |||||||
| Loans | (0.5 | ) | 1,361,068.13 | - | 1,361,068.13 | |||||||
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
VIII. Risks Associated with Financial Instruments (cont’d)
3. Financial instrument risks (cont’d)
Market Risk
Exchange rate risk
The Group is exposed to trading exchange rate risks. Such exposures arise from salesor purchases by business units in currencies other than the units’ functionalcurrencies. Approximately 87% (2021：85%) of the Group’s sales are priced incurrencies other than the functional currencies of the business units that incur thesales, and approximately 13% (2021：15%) of costs are priced in the functionalcurrencies of the business units.
The sensitivity analysis of exchange rate risks is set out in the following table,reflecting the impact of reasonable and probable change in the exchange rates of EURand USD on net profit or loss and other comprehensive income (net of tax) assumingthat other variables remain constant.
2022
| Increase/ (decrease) in exchange rate (%) | Increase/ (decrease) in net profit or loss | Increase/ (decrease) in other comprehensive income net of tax | Increase/ (decrease) in total equity | |||||||||
| Stronger RMB against EUR | 2 | (8,836,102.40 | ) | - | (8,836,102.40 | ) | ||||||
| Weaker RMB against EUR | (2 | ) | 8,836,102.40 | - | 8,836,102.40 | |||||||
| Stronger RMB against USD | 2 | (6,699,491.41 | ) | - | (6,699,491.41 | ) | ||||||
| Weaker RMB against USD | (2 | ) | 6,699,491.41 | - | 6,699,491.41 |
2021
| Increase/ (decrease) in exchange rate (%) | Increase/ (decrease) in net profit or loss | Increase/ (decrease) in other comprehensive income net of tax | Increase/ (decrease) in total equity | ||||||||
| Stronger RMB against EUR | 2 | (1,228,442.79) | - | (1,228,442.79) | |||||||
| Weaker RMB against EUR | (2 | ) | 1,228,442.79 | - | 1,228,442.79 | ||||||
| Stronger RMB against USD | 2 | (5,522,074.97) | - | (5,522,074.97) | |||||||
| Weaker RMB against USD | (2 | ) | 5,522,074.97 | - | 5,522,074.97 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
VIII. Risks Associated with Financial Instruments (cont’d)
4. Capital management
The primary objective of the Group’s capital management is to safeguard the Group’sability to continue as a going concern and to maintain healthy capital ratios in order tosupport its business and maximize shareholders’ value.
The Group manages its capital structure and makes adjustments in the light of changesin economic conditions and in the risk profiles of relevant assets. To maintain oradjust the capital structure, the Group may adjust the dividend payment toshareholders, return capital to shareholders or issue new shares. The Group is notsubject to any externally imposed capital requirements. No changes were made in theobjectives, policies or processes for managing capital during 2022 and 2021.
XI.Disclosure of Fair Values
1. Assets and liabilities measured at fair value
2022
| Input applied in the measurement of fair value | ||||
| Quoted prices in active markets | Significant observable inputs | Significant unobservable inputs | Total | |
| （Level 1） | （Level 2） | （Level 3） | ||
| Continuous measurement of fair value | ||||
| Financial assets held for trading | 860,832,278.88 | - | - | 860,832,278.88 |
| Receivables financing | - | 15,305,668.26 | - | 15,305,668.26 |
| Other non-current financial assets | 28,708,356.60 | 99,633,064.36 | 206,108,182.37 | 334,449,603.33 |
| 889,540,635.48 | 114,938,732.62 | 206,108,182.37 | 1,210,587,550.47 | |
| Input applied in the measurement of fair value | |||||||
| Quoted prices in active markets | Significant observable inputs | Significant unobservable inputs | Total | ||||
| （Level 1） | （Level 2） | （Level 3） | |||||
| Continuous measurement of fair value | |||||||
| Financial liabilities held for trading | - | - | 57,022,555.58 | 57,022,555.58 | |||
| Other non-current liabilities | - | 1,298,626.48 | 135,097,666.07 | 136,396,292.55 | |||
| - | 1,298,626.48 | 192,120,221.65 | 193,418,848.13 | ||||
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
IX. Disclosure of Fair Values (cont’d)
1. Assets and liabilities measured at fair value (cont’d)
2021
| Input applied in the measurement of fair value | |||||
| Quoted prices in active markets | Significant observable inputs | Significant unobservable inputs | Total | ||
| （Level 1） | （Level 2） | （Level 3） | |||
| Continuous measurement of fair value | |||||
| Financial assets held for trading | 775,249,020.94 | - | 12,936,500.63 | 788,185,521.57 | |
| Receivables financing | - | 30,692,449.25 | - | 30,692,449.25 | |
| Other non-current financial assets | 5,640,775.44 | - | 156,882,743.97 | 162,523,519.41 | |
| 780,889,796.38 | 30,692,449.25 | 169,819,244.60 | 981, 401,490.23 | ||
| Input applied in the measurement of fair value | |||||||
| Quoted prices in active markets | Significant observable inputs | Significant unobservable inputs | Total | ||||
| （Level 1） | （Level 2） | （Level 3） | |||||
| Continuous measurement of fair value | |||||||
| Financial liabilities held for trading | - | - | 110, 746,939.04 | 110, 746,939.04 | |||
| Other non-current liabilities | - | - | 136,178,304.44 | 136,178,304.44 | |||
| - | - | 246,925,243.48 | 246,925,243.48 | ||||
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
IX. Disclosure of Fair Values (cont’d)
2 Assets and liabilities disclosed at fair value
2022
| Input applied in the measurement of fair value | |||||||||
| Quoted prices in active markets | Significant observable inputs | Significant unobservable inputs | Total | ||||||
| （Level 1） | （Level 2） | （Level 3） | |||||||
| Long-term receivables | - | - | 1,305,000.00 | 1,305,000.00 | |||||
| Long-term borrowings | - | 57,884,494.89 | - | 57,884,494.89 | |||||
| Current portion of non-current assets | - | - | 1,463,750.00 | 1,463,750.00 | |||||
| Current portion of non-current liabilities | - | 315,767,431.26 | - | 315,767,431.26 | |||||
| - | 373,651,926.154 | 2,768,750.00 | 376,420,676.15 | ||||||
2021
| Input applied in the measurement of fair value | |||||||||
| Quoted prices in active markets | Significant observable inputs | Significant unobservable inputs | Total | ||||||
| （Level 1） | （Level 2） | （Level 3） | |||||||
| Long-term receivables | - | - | 143,750.00 | 143,750.00 | |||||
| Long-term borrowings | - | 325,026,188.49 | - | 325,026,188.49 | |||||
| Current portion of non-current assets | 4,595,000.00 | 4,595,000.00 | |||||||
| Current portion of non-current liabilities | 21,342,646.25 | - | 21,342,646.25 | ||||||
| - | 346,368,834.74 | 4,738,750.00 | 351,107,584.74 | ||||||
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements2022 Expressed in Renminbi Yuan
IX. Disclosure of Fair Values (cont’d)
3. Estimation of fair value
Fair value of financial instruments
The management has assessed cash and bank balances, notes receivable, accountsreceivable, notes payable and accounts payable, and because the remaining maturity isnot long, their fair value is similar to their carrying value.
In a fair transaction, the fair value of financial assets and financial liabilities isdetermined by the amount of voluntary asset exchange or debt redemption betweenthe parties to the transaction, rather than the amount in the case of force sale orliquidation. The following methods and assumptions are used to estimate the fairvalue.
The fair value of long-term receivables and long- and short-term borrowings isdetermined by the discounted future cash flow method, where the market yield ofother financial instruments with similar contract terms, credit risks and remainingmaturity serves as the discount rate. On 31 December 2022, the result of the self-default risk assessment of long- and short-term borrowings was not significant.
The fair values of unlisted equity investments have been estimated using a market-based valuation technique based on assumptions that are not supported by observablemarket prices or rates. The valuation requires the Group to determine comparablelisted companies based on industry, size, leverage and strategy, and to calculate anappropriate price multiple for each comparable company identified. They areadjusted for considerations such as illiquidity and size differences between thecomparable companies based on company-specific facts and circumstances. TheGroup believes that the estimated fair values resulting from the valuation techniqueand the related changes in fair values are reasonable, and that they were the mostappropriate values at the balance sheet date.
4. Unobservable inputs
Below is a summary of the significant unobservable inputs to the fair valuemeasurement of Level 3:
| Closing fair value | Valuation technique | Unobservable inputs | Range | |||||||||
| Other non-current financial assets | 17,530,308.16 | Option pricing model | Volatility | 39.12%-44.63% | ||||||||
| Other non-current financial assets | 188,577,874.21 | Comparison approach | Liquidity discount | 10.00%-20.00% | ||||||||
| Financial liabilities held for trading | 57,022,555.58 | Discounted cash flow method | Weighted average cost | 4.48% | ||||||||
| Other non-current liabilities | 135,097,666.07 | Discounted cash flow method | Weighted average cost | 4.76%-14.10% |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
IX. Disclosure of Fair Values (cont’d)
5. Reconciliation in fair value measurement
Reconciliation of continuous fair value measurements categorized within Level 3 ofthe fair value hierarchy:
2022
| Opening | Transfer out of | Total current gains and losses | Purchase | Disposal | Settlement | Closing | Change in unrealized gains and losses for the period of assets | ||||||||
| balance | Level 3 | Through profit or loss | Through other comprehensive income | balance | held at end of period through profit or loss | ||||||||||
| Financial assets held for trading | 12,936,500.63 | - | (8,292,000.00) | - | - | - | (4,644,500.63) | - | - | ||||||
| Other non-current financial assets | 156,882,743.97 | (94,496,262.63 | ) | 45,117,740.43 | 378,960.60 | 98,225,000.00 | - | - | 206,108,182.37 | 45,117,740.43 | |||||
| - | |||||||||||||||
| 169,819,244.60 | (94,496,262.63 | ) | 36,825,740.43 | 378,960.60 | 98,225,000.00 | (4,644,500.63) | 206,108,182.37 | 45,117,740.43 | |||||||
| Opening | Total current gains and losses | Purchase | Disposal | Settlement | Closing | Change in unrealized gains and losses for the period of liabilities | |||||||||
| balance | Through profit or loss | Through other comprehensive income | balance | held at end of period through profit or loss | |||||||||||
| Financial liabilities held for trading | 110,746,939.04 | (164,544.82) | - | - | - | (53,559,838.64) | 57,022,555.58 | (164,544.82) | |||||||
| Other non-current l iabilities | 136,178,304.44 | (4,118,251.52) | 437,613.15 | 2,600,000.00 | - | - | 135,097,666.07 | (4,118,251.52) | |||||||
| 246,925,243.48 | (4,282,796.34) | 437,613.15 | 2,600,000.00 | - | (53,559,838.64) | 192,120,221.65 | (4,282,796.34) | ||||||||
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
IX. Disclosure of Fair Values (cont’d)
5. Reconciliation in fair value measurement (cont’d)
Reconciliation of continuous fair value measurements categorized within Level 3 ofthe fair value hierarchy: (cont’d)
2021
| Opening | Total current gains and losses | Purchase | Disposal | Closing | Change in unrealized gains and losses for the period of assets | |||||
| balance | Through profit or loss | Through other comprehensive income | Balance | held at end of period through profit or loss | ||||||
| held for traing | - | 13,181,681.67 | (245,181.04) | - | - | 12,936,500.63 | 13,181,681.67 | |||
| Other non-current financial liabilities | - | 25,029,844.93 | (559,232.00) | 132,412,131.04 | - | 156,882,743.97 | 25,029,844.93 | |||
| 38,211,526.60 | (804,413.04) | 132,412,131.04 | - | 169,819,244.60 | 38,211,526.60 | |||||
| Opening | Total current gains and losses | Purchase | Disposal | Settlement | Closing | Change in unrealized gains and losses for the period of liabilities | |||||
| balance | Through profit or loss | Through other comprehensive income | balance | held at end of period through profit or loss | |||||||
| Financial liabilities held for trading | 41,408,109.80 | 95,161,739.92 | (3,73 9,957.81) | - | (36,121,968.12) | 14,039,015.25 | 110,746,939.04 | 95,161,739.92 | |||
| Other non-current l iabilities | 68,737,415.25 | (18,949,558.78) | (4,342,115.80) | 104,771,579.02 | - | (14,039,015.25) | 136,178,304.44 | (18,949,558.78) | |||
| 110,145,525.05 | 76,212,181.14 | (8,082,073.61) | 104,771,579.02 | (36,121,968.12) | - | 246,925,243.48 | 76,212,181.14 | ||||
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
IX. Disclosure of Fair Values (cont’d)
5. Reconciliation in fair value measurement (cont’d)
In the continuous fair value measurement at Level 3, gains and losses through profitor loss relating to financial assets and non-financial assets is analyzed as follows:
| 2022 | ||||||
| relating to financial assets | relating to non-financial assets | |||||
| Total gains and losses through profit or loss | 36,825,740.43 | - | ||||
| Change in unrealized gains and losses for the period of assets held at end of period through profit or loss | 45,117,740.43 | - | ||||
| 2021 | |||||
| Gains and losses relating to financial assets | Gains and losses relating to non-financial assets | ||||
| Total gains and losses through profit or loss | 38,211,526.60 | - | |||
| Change in unrealized gains and losses for the period of assets held at end of period through profit or loss | 38,211,526.60 | - | |||
In the continuous fair value measurement at Level 3, gains and losses through profitor loss relating to financial assets and non-financial assets is analyzed as follows:
| 2022 | ||||||
| Gains and losses relating to financial liabilities | Gains and losses relating to non-financial liabilities | |||||
| Total gains and losses through profit or loss | (4,282,796.34) | |||||
| Change in unrealized gains and losses for the period of assets held at end of period through profit or loss | (4,282,796.34) | |||||
| 2021 | ||||||
| Gains and losses relating to financial liabilities | Gains and losses relating to non-financial liabilities | |||||
| Total gains and losses through profit or loss | 76,212,181.14 | |||||
| Change in unrealized gains and losses for the period of assets held at end of period through profit or loss | 76,212,181.14 | |||||
6. Transfers between levels of fair value measurement
In 2022, due to the recent financing, the fair value measurement of the tradingfinancial assets held by the Group is transfer from the third level to the second level,and the conversion amount is RMB 94,496,262.63. There are no other materialtransfer during the year. (2021: No such transfers in the Reporting Period.)
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
XII. Relationships and Transactions with Related Parties
1. Controlling Shareholder
| Relationship with the Company | Interest in the Company (%) | ||||||
| Tang Zhuolin (individual) | One of the Company’s controlling shareholders and actual controllers | 21.81 | |||||
| Tang Zhuomian (individual) | One of the Company’s controlling shareholders and actual controllers | 7.81 |
The ultimate controllers of the Company are Tang Zhuolin and Tang Zhuomian.
2. Subsidiaries
See Note VII.1.
3. Associates
See Note VII.2.
4. Other related parties
| Relationship with the Company | |
| Qiu Yezhi | Director and General Manager |
| Xie Weiwei | Director and Deputy General Manager |
| Mai Zhirong | Independent Director (left on August 12, 2022) |
| Peng Xiaowei | Independent Director (left on August 12, 2022) |
| He Weifeng | Independent Director (left on August 12, 2022) |
| Chen Huiyi | Chairman of the Supervisory Committee |
| Zhao Xiuhe | Supervisor |
| He Baohua | Supervisor |
| Zhou Wenhui | Director and Board Secretary (left on July 26, 2022) |
| Shao Yongfeng | Chief Financial Officer and Vice President |
| Li Ketian | Independent Director (Started on August 12, 2022) |
| Liu Da | Independent Director (Started on August 12, 2022) |
| Tu Haichuan | Independent Director (Started on August 12, 2022) |
| Feng Jia | Director and Board Secretary (Started on July 26, 2022) |
5. Major transactions between the Group and related parties
（1） Salary of key management
| 2022 | 2021 | |||||||||
| Salary of key management | 12,448,768.93 | 13,521,226.06 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
XIII. Share-based Payments
1. Overview
| 2022 | 2021 | |||||
| Total equity instruments granted | 29,490,000.00 | 26,840,000.00 |
| 2022 | 2021 | |||||
| Total employee services exchanged with share-based payments | 70,041,990.38 | 40,413,913.40 |
Equity-settled share-based payments are as follows:
| 2022 | 2021 | |||||
| Cumulative amount of equity-settled share-based payments recognized in capital surplus | 70,041,990.38 | 40,413,913.40 | ||||
| Total costs of equity-settled share-based payments | 29,628,076.98 | 15,243,506.90 |
The fair value of equity instruments at the date of grant was determined at that date.The fair value of the first grant of restricted shares in 27 March 2020 was RMB
4.38/share (RMB 60.07 million). The fair value of the reserved restricted shares in 29December 2020 was RMB 4.44/share (RMB 14.59 million) and the fair value of therestricted shares in 21 March 2022 was RMB 4.57/share (RMB9.91 million). Thenumber of exercisable equity instruments at each balance sheet date during the vestingperiod is determined taking into account the separation rate, the companyperformance requirements and the individual performance requirements.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
XI. Share-based Payments (cont’d)
2. Share-based payment plan
On 27 March 2020, the Company convened the 44th (Extraordinary) Meeting of theThird Board of Directors, where the Proposal on Granting Restricted Shares toAwardees was approved, and the Board of Directors agreed to grant 22.85 millionrestricted shares to 42 awardees. The grant date for the first grant of restricted shareswas 27 March 2020. On 8 June 2020, the Company approved the Proposal onAdjusting Matters Related to the 2020 Restricted Share Incentive Plan, the number ofawardees was adjusted to 40, and the number of granted restricted shares was adjustedto 22.6 million. The exercise price of this restricted share grant was RMB1. As at 31December 2020, the accumulated amount of subscription funds received by theCompany for the first grant of restricted shares under this incentive plan totaledRMB22,600,000.00.
As authorized by the first Extraordinary Meeting of the Third Board of Directors in2020, on 29 December 2020, the Company convened the 4th (Extraordinary) Meetingof the Fourth Board of Directors, where the Proposal on Granting Reserved RestrictedShares to Awardees was approved, and the Board of Directors agreed to grant 4.24million restricted shares to 18 awardees. The grant date was 29 December 2020. As at31 December 2021, the accumulated amount of subscription funds received by theCompany for the reserved restricted shares under this incentive plan totaledRMB4,240,000.00.
The maximum number of unexercised share options currently available under the planis equal to 10% of the shares issued by the Company. According to the plan, themaximum number of shares in the share options granted to each eligible granteeduring any period spanning 12 months is 1% of the shares issued by the Company atany time. Any grant of share options above this limit shall be subject to the approvalof the General Meeting.
The arrangements for unlocking the restricted shares under the restricted shareincentive plan are as follows:
| Unlocking arrangements | Time of unlocking | Percentage of unlocking |
| 1st unlocking period | From the first trading day 12 months after the date of listing of the first grant of/reserved restricted shares to the day of the last trading day within 24 months after the date of listing of the first grant of restricted shares | 20% |
| 2nd unlocking period | From the first trading day 24 months after the date of listing of the first grant of/reserved restricted shares to the day of the last trading day within 36 months from the date of listing of the first grant of restricted shares | 40% |
| 3rd unlocking period | From the first trading day 36 months after the date of listing of the first grant of/reserved restricted shares to the day of the last trading day within 48 months from the date of listing of the first grant of restricted shares | 40% |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
XI. Share-based Payments (cont’d)
2. Share-based payment plan (cont’d)
The unlocking conditions of the restricted share incentive plan are as follows:
In addition to meeting the relevant requirements for granting, awardees must alsomeet the following unlocking conditions on the sale of granted restricted shares:
Performance appraisal requirements at the company level:
| Unlocking period | Performance appraisal objectives | |
| 1st unlocking period | The adjusted average net profit for 2018 and 2019 is used as the base of the performance appraisal, and the growth rate of net profit in 2020 shall not be less than 20% | |
| 2nd unlocking period | The adjusted average net profit for 2018 and 2019 is used as the base of the performance appraisal, and the growth rate of net profit in 2021 shall not be less than 35% | |
| 3rd unlocking period | The adjusted average net profit for 2018 and 2019 is used as the base of the performance appraisal, and the growth rate of net profit in 2022 shall not be less than 55% |
The net profit during the appraisal period from 2020 to 2022 mentioned above refersto the audited consolidated statement of net profit attributable to the shareholders ofthe Company excluding the impact of share-based payments under this and otherequity incentive plans. The base of performance appraisal is the average net profit (thenet profit attributable to shareholders of the listed company in consolidatedstatements) of the Company for 2018 and 2019 after deducting the relevant financialimpacts of Beijing Pride New Energy Battery Technology Co., Ltd.
Performance appraisal requirements at the personal level:
The performance appraisal results of the awardees are divided into Levels A, B, C andD. The non-resalable restricted shares of those awardees with appraisal results ofLevel D will be repurchased and retired by the Company, and the repurchase price isthe grant price.
As authorized by the first Extraordinary Meeting of the Fourth Board of Directors in2022, on 21 March 2022, the Company convened the 15th (Extraordinary) Meeting ofthe Fourth Board of Directors, where the Proposal on Granting Restricted Shares toAwardees was approved, and the Board of Directors agreed to grant 2.65 millionrestricted shares to 7 awardees. The grant date was 21 March 2022. As at 31December 2022, the accumulated amount of subscription funds received by theCompany for the reserved restricted shares under this incentive plan totaledRMB2,650,000.00.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
XI. Share-based Payments (cont’d)
2. Share-based payment plan (cont’d)
The arrangements for unlocking the restricted shares under the restricted shareincentive plan are as follows:
| Unlocking arrangements | Time of unlocking | Percentage of unlocking |
| 1st unlocking period | From the first trading day 12 months after the date of listing of the first grant of restricted shares to the day of the last trading day within 24 months after the date of listing of the first grant of restricted shares | 20% |
| 2nd unlocking period | From the first trading day 24 months after the date of listing of the first grant of restricted shares to the day of the last trading day within 36 months from the date of listing of the first grant of restricted shares | 40% |
| 3rd unlocking period | From the first trading day 36 months after the date of listing of the first grant of restricted shares to the day of the last trading day within 48 months from the date of listing of the first grant of restricted shares | 40% |
The unlocking conditions of the restricted share incentive plan are as follows:
In addition to meeting the relevant requirements for granting, awardees must alsomeet the following unlocking conditions on the sale of granted restricted shares:
Performance appraisal requirements at the company level:
| Unlocking period | Performance appraisal objectives | |
| 1st unlocking period | The average net profit for 2020 and 2021 is used as the base, and the growth rate of net profit in 2022 shall not be less than 10% | |
| 2nd unlocking period | The average net profit for 2020 and 2021 is used as the base, and the growth rate of net profit in 2023 shall not be less than 20% | |
| 3rd unlocking period | The average net profit for 2020 and 2021 is used as the base, and the growth rate of net profit in 2024 shall not be less than 30% |
The above assessment annual net profit index refers to the net profit attributable to theshareholders of the Company in the audited consolidated statements and excluding theimpact of the share payment expenses of this and other equity incentive plans as thecalculation basis.
Performance appraisal requirements at the personal level:
The performance appraisal results of the awardees are divided into Levels A, B, C andD. The non-resalable restricted shares of those awardees with appraisal results ofLevel D will be repurchased and retired by the Company, and the repurchase price isthe grant price.
XIV. Commitments and Contingent Events
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
1. Significant commitments
As at the balance sheet date, the Group had no commitments which were required tobe disclosed.
2. Contingent Events
As at the balance sheet date, the Group had no contingent events which were requiredto be disclosed.
XV. Events after the Balance Sheet DateAs at the balance sheet date, the Group had no events after the balance sheet datewhich were required to be disclosed.
XVI. Other Significant Matters
1. Segment reporting
Operating segment
For management purposes, the Group divides its business in to two operatingsegments—domestic and overseas. Operating segment
2022
| Item | Domestic entities | Overseas entities | Offset | Total |
| Operating revenue | 1,581,783,109.71 | 2,756,556,385.95 | (445,630,986.02) | 3,892,708,509.64 |
| Cost of sales | 1,081,978,416.13 | 2,141,063,654.54 | (389,736,322.13) | 2,833,305,748.54 |
| Total assets | 5,407,121,469.14 | 2,914,415,535.60 | (1,392,959,889.64) | 6,928,577,115.10 |
| Total liabilities | 1,489,530,074.02 | 1,952,540,777.80 | (779,488,999.67) | 2,662,581,852.15 |
2021
| Item | Domestic entities | Overseas entities | Offset | Total |
| Operating revenue | 1,432,489,346.39 | 2,404,840,482.92 | (312,595,045.37) | 3,524,734,783.94 |
| Cost of sales | 963,221,707.93 | 1,820,431,964.95 | (228,581,613.09) | 2,555,072,059.79 |
| Total assets | 5,013,665,276.72 | 2,480,339,949.36 | (1,136,836,390.89) | 6,357,168,835.19 |
| Total liabilities | 1,385,366,306.26 | 1,778,520,920.31 | (660,293,937.05) | 2,503,593,289.52 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
XIV. Other Significant Matters (cont’d)
2. Leases
(1) As lessee
| 2022 | ||||||
| Interest expense on lease liabilities | 2,474,602.57 | |||||
| Short term lease expense through profit or loss adopting simplified approach | 1,205,273.76 | |||||
| Total cash outflows related to lease | 29,438,261.70 |
Assets leased by the Group include houses and buildings, and transportation equipment usedin the course of business,the lease term of houses,buildings and machinery is usually 8 years,and the lease term of transportation equipment is usually 3 years.
Significant operating leasesAccording to the lease contracts signed with the lessors, minimum lease paymentsunder irrevocable operating leases falling due are as follows:
| 2022 | |||
| Within 1 year (inclusive) | 25,598,122.85 | ||
| 1-2 years (inclusive of 2 years) | 23,464,449.78 | ||
| 2-3 years (inclusive of 3 years) | 20,701,964.22 | ||
| Over 3 years | 37,161,132.39 | ||
| 106,925,669.24 |
Other information on lease
For the right-of-use assets, see Note V.17; for the simplified approach on short-term leasesand leases of assets of low value, see Note III.27; for lease liabilities, see Note V.31&34.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
XVII. Notes to Major Items in the Company Financial Statements
1. Account Receivable
Accounts receivable are interest-free. The aging of accounts receivable is analyzed asfollows:
| 2022 | 2021 | ||||||||||||
| Within 1 year | 212,140,018.11 | 114,456,911.82 | |||||||||||
| 1-2 years | 39,011,159.02 | 38,918,748.38 | |||||||||||
| 2-3 years | 1,456,776.00 | 2,987,247.70 | |||||||||||
| 3-4 years | 1,688,672.44 | - | |||||||||||
| 4-5 years | - | 1,454,595.00 | |||||||||||
| Over 5 years | 3,004,100.00 | 1,556,499.20 | |||||||||||
| 257,300,725.57 | 159,374,002.10 | ||||||||||||
| Less: allowances for doubtful accounts receivable | 4,454,823.68 | 4,670,936.43 | |||||||||||
| 252,845,901.89 | 154,703,065.67 | ||||||||||||
| 2022 | |||||||||||||
| Gross amount | Allowance | Carrying amount | |||||||||||
| Amount | Percentage | Amount | Percentage | ||||||||||
| （%） | （%） | ||||||||||||
| Accounts receivable for which allowances are established individually | 3,004,100.00 | 1.17 | 3,004,100.00 | 100 | - | ||||||||
| Accounts receivable for which allowances are established by group with similar credit risk characteristics | 254,296,625.57 | 98.83 | 1,450,723.68 | 0.57 | 252,845,901.89 | ||||||||
| 257,300,725.57 | 100.00 | 4,454,823.68 | 252,845,901.89 | ||||||||||
| 2021 | |||||||||||
| Gross amount | Allowance | Carrying amount | |||||||||
| Amount | Percentage | Amount | Percentage | ||||||||
| （%） | （%） | ||||||||||
| Accounts receivable for which allowances are established individually | 3,011,094.20 | 1.89 | 3,011,094.20 | 100 | - | ||||||
| Accounts receivable for which allowances are established by group with similar credit risk characteristics | 156,362,907.90 | 98.11 | 1,659,842.23 | 1.06 | 154,703,065.67 | ||||||
| 159,374,002.10 | 100.00 | 4,670,936.43 | 154,703,065.67 | ||||||||
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
XV. Notes to Major Items in the Company Financial Statements (cont’d)
1. Accounts receivable (cont’d)
As at 31 December 2022, accounts receivable for which allowances are establishedindividually are as follows:
| Gross amount | Allowance | ECL （%） | Reason for allowance | |||||||
| Customer 1 | 939,000.00 | 939,000.00 | 100.00 | Customer’s inability to settle the amount due | ||||||
| Customer 2 | 641,600.00 | 641,600.00 | 100.00 | Customer’s inability to settle the amount due | ||||||
| Customer 3 | 608,800.00 | 608,800.00 | 100.00 | Customer’s inability to settle the amount due | ||||||
| Customer 4 | 516,000.00 | 516,000.00 | 100.00 | Customer’s inability to settle the amount due | ||||||
| Customer 5 | 283,000.00 | 283,000.00 | 100.00 | Customer’s inability to settle the amount due | ||||||
| Customer 6 | 15,700.00 | 15,700.00 | 100.00 | Customer’s inability to settle the amount due | ||||||
| 3,004,100.00 | 3,004,100.00 |
As at 31 December 2021, accounts receivable for which allowances are establishedindividually are as follows:
| Gross amount | Allowance | ECL （%） | Reason for allowance | |||||||
| Customer 1 | 939,000.00 | 939,000.00 | 100.00 | Customer’s inability to settle the amount due | ||||||
| Customer 2 | 641,600.00 | 641,600.00 | 100.00 | Customer’s inability to settle the amount due | ||||||
| Customer 3 | 608,800.00 | 608,800.00 | 100.00 | Customer’s inability to settle the amount due | ||||||
| Customer 4 | 515,595.00 | 515,595.00 | 100.00 | Customer’s inability to settle the amount due | ||||||
| Customer 5 | 283,000.00 | 283,000.00 | 100.00 | Customer’s inability to settle the amount due | ||||||
| Other Companies | 23,099.20 | 23,099.20 | 100.00 | Customer’s inability to settle the amount due | ||||||
| 3,011,094.20 | 3,011,094.20 |
Accounts receivable for provision for bad debts according to the combination of credit riskcharacteristics:
| 2022 | 2021 | ||||||||||||||||
| Estimated book balance of default | ECL(%) | Expected credit losses within the exsisting period | Estimated book balance of default | ECL(%) | Expected credit losses within the exsisting period | ||||||||||||
| Within 1 year | 212,140,018.11 | 0.11 | 240,789.05 | 114,456,911.82 | 0.34 | 390,298.12 | |||||||||||
| 1-2 years | 39,011,159.02 | 0.11 | 42,024.92 | 38,918,748.38 | 0.94 | 365,205.21 | |||||||||||
| 2-3 years | 3,145,448.44 | 37.13 | 1,167,909.71 | 2,987,247.70 | 30.27 | 904,338.90 | |||||||||||
| 254,296,625.57 | 1,450,723.68 | 156,362,907.90 | 1,659,842.23 | ||||||||||||||
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
XV. Notes to Major Items in the Company Financial Statements (cont’d)
1. Accounts receivable (cont’d)
Movements in allowances for doubtful accounts receivable are as follows:
| Opening balance | Established in the period | Written off in the period | Reversed in the period | Closing balance | ||||
| 2022 | 4,670,936.43 | - | - | (216,112.75) | 4,454,823.68 | |||
| 2021 | 6,654,009.15 | 84,975.11 | (1,369,120.41) | (698,927.42) | 4,670,936.43 |
Top 5 of accounts receivable are as follows:
| 2022 | closing balance of total accounts receivable | Allowance | ||||
| Dongfang Precision (HK) | 125,873,821.40 | 48.92 | - | |||
| Dongfang Precision (Netherland) | 86,838,377.31 | 33.75 | - | |||
| EDF | 11,999,541.34 | 4.66 | - | |||
| Customer 12 | 9,074,479.80 | 3.53 | 74,410.73 | |||
| Customer 13 | 5,630,879.10 | 2.19 | 46,173.21 | |||
| 239,417,098.95 | 93.05 | 120,583.94 |
| 2021 | As a % of the closing balance of total accounts receivable | Allowance | ||||
| Dongfang Precision (HK) | 77,716,283.13 | 48.76 | - | |||
| Dongfang Precision (Netherland) | 33,917,508.35 | 21.28 | - | |||
| Customer 18 | 7,126,000.00 | 4.47 | 145,370.40 | |||
| Customer 19 | 4,558,625.50 | 2.86 | 92,995.96 | |||
| Customer 20 | 2,730,000.00 | 1.71 | 55,692.00 | |||
| 126,048,416.98 | 79.08 | 294,058.36 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements2022 Expressed in Renminbi Yuan
XV. Notes to Major Items in the Company Financial Statements (cont’d)
2. Other receivables
| 2022 | 2021 | |||||
| Other receivables | 577,361,759.62 | 444,140,266.79 | ||||
| Dividends receivable | 17,840,000.00 | - | ||||
| 595,201,759.62 | 444,140,266.79 |
The aging of other receivables is analyzed as follows:
| 2022 | 2021 | |||||
| Within 1 year | 139,336,039.54 | 442,798,058.31 | ||||
| 1-2 years | 437,233,397.22 | 548,952.82 | ||||
| 2-3 years | 117,761.18 | 52,186.57 | ||||
| 3-4 years | 24,092.04 | 288,333.00 | ||||
| 4-5 years | 217,983.00 | 1,495,285.41 | ||||
| Over 5 years | 1,587,511.18 | 112,475.22 | ||||
| 578,516,784.16 | 445,295,291.33 | |||||
| Less: allowances for doubtful other receivables | 1,155,024.54 | 1,155,024.54 | ||||
| 577,361,759.62 | 444,140,266.79 |
Other receivables are classified by nature as follows:
| 2022 | 2021 | |||||
| Internal transactions with related parties | 562,762,515.20 | 438,222,987.97 | ||||
| Prepaid service charges | 2,772,188.53 | 3,277,042.22 | ||||
| Security deposits | 2,089,429.81 | 1,427,885.96 | ||||
| Employee loans and petty cash | 1,806,931.45 | 1,722,721.94 | ||||
| Performance compensation | 500,000.00 | 500,000.00 | ||||
| Others | 8,585,719.17 | 144,653.24 | ||||
| 578,516,784.16 | 445,295,291.33 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
XV. Notes to Major Items in the Company Financial Statements (cont’d)
2. Other receivables (cont’d)
Movements in allowances for doubtful other receivables that are established based onthe 12-month ECL and the lifetime ECL are as follows:
2022
| Stage 1 | Stage 2 | Stage 3 | Total | ||||||||
| 12-month ECL | Lifetime ECL | Financial assets with credit impairment (lifetme ECL) | |||||||||
| Opening and closing balance | 655,024.54 | 500,000.00 | - | 1,155,024.54 | |||||||
2021
| Stage 1 | Stage 2 | Stage 3 | Total | ||||||||
| 12-month ECL | Lifetime ECL | Financial assets with credit impairment (lifetime ECL) | |||||||||
| Closing balance | 655,024.54 | 500,000.00 | - | 1,155,024.54 | |||||||
Movements in allowances for doubtful other receivables are as follows:
| Opening balance | Established in the period | Reversed in the period | Closing balance | ||||||||
| 2022 | 1,155,024.54 | - | - | 1,155,024.54 | |||||||
| 2021 | 1,155,024.54 | - | - | 1,155,024.54 |
XV. Notes to Major Items in the Company Financial Statements (cont’d)
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
2. Other receivables (cont’d)
As at 31 December 2022, top 5 of other receivables are as follows:
| 2022 | As a % of total other receivables | Nature | Age | Closing balance of allowance | ||||||||||
| Hainan Yineng | 466,903,350.55 | 80.71 | Current account | Within 1 year;1-2 years | - | |||||||||
| Yinglian Digital | 52,856,671.23 | 9.14 | Current account | Within 1 year;1-2 years | - | |||||||||
| Dongfang Digicom (Guangdong) | 25,031,945.37 | 4.33 | Current account | Within 1 year;1-2 years | - | |||||||||
| Dongfang Precision (Netherland) | 6,608,152.98 | 1.14 | Current account | Within 1 year;1-2 years | - | |||||||||
| Dongfang Digicom | 6,424,864.39 | 1.11 | Current account | Within 1 year;1-2 years | - | |||||||||
| 557,824,984.52 | 96.43 | - |
As at 31 December 2021, top 5 of other receivables are as follows:
| 2021 | As a % of total other receivables | Nature | Age | Closing balance of allowance | |||||||||||
| Hainan Yineng | 412,234,185.81 | 92.58 | Current account | Within 1 year | - | ||||||||||
| Yinglian Digital | 15,156,527.09 | 3.40 | Current account | Within 1 year | - | ||||||||||
| Dongfang Digicom (Guangdong) | 4,704,601.17 | 1.06 | Current account | Within 1 year | - | ||||||||||
| Dongfang Digicom | 3,065,170.33 | 0.69 | Current account | Within 1 year | - | ||||||||||
| Shunyi Investment | 1,698,000.00 | 0.38 | Current account | Within 1 year | - | ||||||||||
| 436,858,484.40 | 98.11 | - |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
XV. Notes to Major Items in the Company Financial Statements (cont’d)
3. Long-term equity investments
2022
| Opening | Change in the period | Period-end | |||||||||||||
| balance | Opening impairment allowance | Additional investment | Reduction in investment | Change in other equity | Write-off impairment | Closing balance | Closing impairment allowance | ||||||||
| Subsidiaries | |||||||||||||||
| Dong Fang Precision (HK) Limited | 1,856,010.00 | - | - | - | - | 1,856,010.00 | - | ||||||||
| Dongfang Precision (Netherland) | 307,666.80 | - | - | - | 660,101.01 | - | 967,767.81 | - | |||||||
| Guangdong Fosber Intelligent Equipment Co., Ltd. | 54,242,190.72 | - | - | - | 1,033,279.72 | - | 55,275,470.44 | - | |||||||
| Suzhou Shunyi Investment Co., Ltd. | 305,584,828.17 | - | - | - | - | - | 305,584,828.17 | - | |||||||
| Suzhou Parsun Power Machine Co., Ltd. | 28,720,378.11 | (45,303,485.99) | - | - | 2,836,047.20 | - | 31,556,425.31 | (45,303,485.99) | |||||||
| Foshan Yinglian Digital Printing Equipment Co., Ltd. | 21,903,462.34 | - | - | - | - | - | 21,903,462.34 | - | |||||||
| Dongfang Digicom Data Technology Co., Ltd. | 3,710,751.60 | - | - | - | 1,708,976.31 | - | 5,419,727.91 | - | |||||||
| Dongfang Digicom Data Technology (Guangdong) Co., Ltd. | 1.00 | - | - | - | 470,212.33 | - | 470,213.33 | - | |||||||
| Hainan Yineng Investment Co., Ltd. | 100,000,000.00 | - | - | - | 1,572,033.67 | - | 101,572,033.67 | - | |||||||
| Italy EDF | 977,696.67 | - | - | - | 220,033.67 | - | 1,197,730.34 | - | |||||||
| Tianjin Hangchuang | 20,000,000.00 | - | - | - | - | - | 20,000,000.00 | - | |||||||
| Shenzhen Wonder Printing System Co.,Ltd | - | - | 173,800,000.00 | - | - | - | 173,800,000.00 | - | |||||||
| - | |||||||||||||||
| 537,302,985.41 | (45,303,485.99) | 173,800,000.00 | - | 8,500,683.91 | - | 719,603,669.32 | (45,303,485.99) | ||||||||
| Opening | Change in the period | Period-end | |||||||||||
| balance | Opening impairment allowance | Investment income under equity method | Other investment change | Closing balance | Closing impairment allowance | ||||||||
| Associates/joint ventures | |||||||||||||
| Guangdong Jaten Robot & Automation Co., Ltd. | 74,780,345.62 | - | 3,143,695.45 | 8,609,443.05 | 86,533,484.12 | - | |||||||
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
XV. Notes to Major Items in the Company Financial Statements (cont’d)
3. Long-term equity investments (cont’d)
2021
| Opening | Change in the period | Period-end | ||||||||||||
| balance | Opening impairment allowance | Additional investment | Reduction in investment | Impairment allowance | Closing balance | Closing impairment allowance | ||||||||
| Subsidiaries | ||||||||||||||
| Dong Fang Precision (HK) Limited | 1,856,010.00 | - | - | - | - | 1,856,010.00 | - | |||||||
| Dongfang Precision (Netherland) | 307,666.80 | - | - | - | - | 307,666.80 | - | |||||||
| Guangdong Fosber Intelligent Equipment Co., Ltd. | 16,738,279.20 | - | 36,121,968.12 | - | - | 54,242,190.72 | - | |||||||
| Suzhou Shunyi Investment Co., Ltd. | 305,584,828.17 | - | - | - | - | 305,584,828.17 | - | |||||||
| Suzhou Parsun Power Machine Co., Ltd. | 106,359,575.73 | (61,855,054.35) | - | (81,305,560.15) | 16,551,568.36 | 28,720,378.11 | (45,303,485.99) | |||||||
| Foshan Yinglian Digital Printing Equipment Co., Ltd. | 21,903,462.34 | - | - | - | - | 21,903,462.34 | - | |||||||
| Dongfang Digicom Data Technology Co., Ltd. | 3,000,000.00 | - | - | - | - | 3,710,751.60 | - | |||||||
| Dongfang Digicom Data Technology (Guangdong) Co., Ltd. | - | - | 1.00 | - | - | 1.00 | - | |||||||
| Hainan Yineng Investment Co., Ltd. | - | - | 100,000,000.00 | - | - | 100,000,000.00 | - | |||||||
| Italy EDF | - | - | - | - | - | 977,696.67 | - | |||||||
| Tianjin Hangchuang | - | - | 20,000,000.00 | - | - | 20,000,000.00 | - | |||||||
| - | ||||||||||||||
| 455,749,822.24 | (61,855,054.35) | 156,121,969.12 | (81,305,560.15) | 16,551,568.36 | 537,302,985.41 | (45,303,485.99) | ||||||||
| Opening | Change in the period | Period-end | ||||||||
| balance | Opening impairment allowance | Investment income under equity method | Closing balance | Closing impairment allowance | ||||||
| Associates/joint ventures | ||||||||||
| Guangdong Jaten Robot & Automation Co., Ltd. | 70,900,088.92 | - | 3,880,256.70 | 74,780,345.62 | - | |||||
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
XV. Notes to Major Items in the Company Financial Statements (cont’d)
4. Operating revenue and costs
| 2022 | 2021 | ||||||||||||
| Revenue | Costs | Revenue | Costs | ||||||||||
| Principal operations | 451,368,550.29 | 269,503,960.08 | 384,635,560.97 | 244,033,927.30 | |||||||||
| Other operations | 69,673,546.95 | 3,323,764.83 | 102,121,739.94 | 12,332,173.69 | |||||||||
| 521,042,097.24 | 272,827,724.91 | 486,757,300.91 | 256,366,100.99 | ||||||||||
Operating revenue is as follows:
| 2022 | 2021 | ||||
| Revenue arising from contracts with customers | 518,957,952.12 | 482,430,794.95 | |||
| Lease revenue | 2,084,145.12 | 4,326,505.96 | |||
| 521,042,097.24 | 486,757,300.91 |
Breakdown of operating revenue arising from contracts with customers is as follows:
2022
| Reporting segments | Total | ||
| Principal place of business | |||
| Mainland China | 152,236,401.33 | ||
| Other regions | 366,721,550.79 | ||
| 518,957,952.12 | |||
| Principal product type | |||
| Goods | 450,366,148.27 | ||
| Services | 26,023,502.28 | ||
| Interest income | 38,612,370.94 | ||
| Others | 3,955,930.63 | ||
| 518,957,952.12 | |||
| By revenue recognition time | |||
| Revenue recognition at a point of time | |||
| Sale of goods | 450,366,148.27 | ||
| Others | 3,955,930.63 | ||
| 454,322,078.90 | |||
| Revenue recognition for a period of time | |||
| Rendering of services | 26,023,502.28 | ||
| Interest income | 38,612,370.94 | ||
| 64,635,873.22 | |||
| 518,957,952.12 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
XV. Notes to Major Items in the Company Financial Statements (cont’d)
4. Operating revenue and costs (cont’d)
Revenue recognized in the period included in the book value of contractual liabilities at thebeginning of year is as follows:
| 2022 | ||||||
| Advances on sales | 18,352,946.11 |
The Company’s information about contractual performance obligations is as follows:
Sale of manufactured goodsContractual performance obligations are fulfilled when delivering manufacturedgoods to customers, and normally the payment in advance for some customers areneeded.
Rendering of servicesContractual performance obligations are fulfilled during the rendering of services.
The expected time for recognizing in revenue the total transaction price allocated tooutstanding (or partly outstanding) contractual performance obligations as at theperiod-end is as follows:
| 2022 | 2021 | |||||
| Within 1 year | 29,803,024.37 | 21,697,782.14 |
5. Investment income
| 2022 | 2021 | |||||
| Dividends under cost method | 17,840,000.00 | 18,992,000.00 | ||||
| Income from disposal of long-term equity investments | - | 21,681,323.17 | ||||
| Income from financial assets held for trading | 3,827,951.76 | 13,531,732.69 | ||||
| Income from long-term equity investments measured at equity method | 3,143,695.45 | 3,880,256.70 | ||||
| 24,811,647.21 | 58,085,312.56 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
XV. Notes to Major Items in the Company Financial Statements (cont’d)
6. Major transactions between the Company and related parties
(1) Transaction of goods and services with related parties
Purchases of goods and services from related parties
| 2022 | 2021 | |||
| Fosber Group | Purchases of goods | - | 4,134.82 | |
| Italy EDF | Purchases of goods | 2,868,721.41 | 1,423,463.44 | |
| 2,868,721.41 | 1,427,598.26 |
Sales of goods and services to related parties
| Nature of transaction | 2022 | 2021 | ||||
| Sales of goods | ||||||
| Dongfang Precision (HK) | Sales of goods | 171,028,352.25 | 104,120,103.27 | |||
| Dongfang Precision (Netherland) | Sales of goods | 56,133,478.23 | 34,585,113.86 | |||
| Fosber ASIA | Sales of goods | 4,950,006.92 | 7,016,887.07 | |||
| Italy EDF | Sales of goods | 12,834,213.72 | 8,028,881.97 | |||
| 244,946,051.12 | 153,750,986.17 | |||||
| Rendering of services | ||||||
| Hainan Yineng | Rendering of services | 18,273,836.24 | 45,999,823.31 | |||
| Fosber ASIA | Rendering of leasing | 2,064,483.40 | 4,297,934.53 | |||
| Italy EDF | Rendering of services | - | 631,728.39 | |||
| Fosber ASIA | Rendering of services | 1,628,341.84 | 246,169.29 | |||
| Yinglian Digital | Rendering of services | 153,842.22 | 105,216.14 | |||
| Dongfang Digicom | Rendering of services | - | 54,665.21 | |||
| Dongfang Digicom (Guangdong) | Rendering of services | 246,417.10 | 9,312.91 | |||
| 22,366,920.80 | 51,344,849.78 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
XV. Notes to Major Items in the Company Financial Statements (cont’d)
6. Major transactions between the Company and related parties (cont’d)
(2) Interest income of related parties
| Nature of transaction | 2022 | 2021 | |||||
| Hainan Yineng | Interest income | 34,878,049.06 | 30,593,754.97 | ||||
| Yinglian Digital | Interest income | 2,686,891.68 | 227,996.66 | ||||
| Dongfang Digicom | Interest income | 494,726.27 | 56,624.19 | ||||
| Dongfang Digicom (Guangdong) | Interest income | 1,247,087.29 | 76,672.53 | ||||
| 39,306,754.30 | 30,955,048.35 |
(3) Interest expenses of related parties
| Nature of transaction | 2022 | 2021 | ||
| Dongfang Precision (Netherland) | Interest expenses | - | 605,927.88 |
(4) Lending to and borrowing from related parties
Lending to related parties
2022
| Note | Borrowing amount | Start date | End date | ||||||
| Dongfang Digicom (Guangdong) | a | 19,000,000.00 | 2022/1/14-2022/12/19 | 2027/1/13-2027/12/18 | |||||
| Hainan Yineng | 50,000,000.00 | 2022/11/24 | 2022/11/24 | ||||||
| Dongfang Precision (Netherland) | 6,594,298.45 | 2022/3/22 | 2027/3/22 | ||||||
| Dongfang Digicom | b | 3,000,000.00 | 2022/5/13-2022/10/14 | 2027/5/12-2027/10/13 | |||||
| Yinglian Digital | c | 35,007,925.89 | 2022/1/23-2022/12/19 | 2024/1/22-2024/12/18 | |||||
| 113,602,224.34 |
Note:
a. Dongfang Digicom (Guangdong) borrowed RMB 19,000,000.00 from the Group at an
annual interest rate of 9.8% in 2022. (2021: RMB 4,500,000.00, an annual interest rate of
9.8%).
b. Dongfang Digicom borrowed RMB 3,000,000.00 from the Group at an annual interestrate of 9.8% in 2022. (2021: RMB 2,950,000.00, an annual interest rate of 9.8%).
c. Yinglian Digital borrowed RMB 35,007,925.89 from the Group at an annual interest rateof 9.8% in 2022. (2021: RMB 10,994,480.66, an annual interest rate of 9.8%).
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements
2022 Expressed in Renminbi Yuan
XV. Notes to Major Items in the Company Financial Statements (cont’d)
6. Major transactions between the Company and related parties (cont’d)
(5) Guarantees for related parties
Provision of guarantees for related parties
2022
| Amount of guarantee | Start date | End date | Having expired or not | |||||||||
| Dongfang Precision (Netherland) | 241,859,950.00 | 2020/6/29 | 2023/6/29 | No |
2021
| Amount of guarantee | Start date | End date | Having expired or not | |||||||||
| Dongfang Precision (Netherland) | 241,859,950.00 | 2020/6/29 | 2023/6/29 | No | ||||||||
| Dongfang Precision (Netherland) | 177,604,620.00 | 2021/2/3 | 2022/2/3 | No |
7. Balances of amounts due from related parties
(1) Accounts receivable
| 2022 | 2021 | |||||||
| Gross amount | Allowance | Gross amount | Allowance | |||||
| Dongfang Precision (HK) | 125,873,821.40 | - | 77,716,283.13 | - | ||||
| Dongfang Precision (Netherland) | 86,838,377.31 | - | 33,917,508.35 | - | ||||
| Italy EDF | 11,999,515.22 | - | 2,666,531.33 | - | ||||
| Fosber ASIA | 2,033,754.02 | - | 1,934,399.54 | - | ||||
| Yinglian Digital | 941,966.99 | - | 778,894.24 | - | ||||
| 227,687,434.94 | - | 117,013,616.59 | - | |||||
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
XV. Notes to Major Items in the Company Financial Statements (cont’d)
7. Balances of amounts due from related parties (cont’d)
(2) Other Receivables
| 2022 | 2021 | ||||||||
| Gross amount | Allowance | Gross amount | Allowance | ||||||
| Hainan Yineng | 466,903,350.55 | - | 412,234,185.81 | - | |||||
| Yinglian Digital | 53,013,045.29 | - | 15,156,527.09 | - | |||||
| Dongfang Digicom (Guangdong) | 25,031,945.37 | - | 4,704,601.17 | ||||||
| Dongfang Digicom | 6,424,864.39 | - | 3,065,170.33 | - | |||||
| Shunyi Investment | 1,698,000.00 | - | 1,698,000.00 | - | |||||
| Suzhou High-Tech Zone Jinquan Business Management Partnership (Limited Partnership) | - | - | 903,000.00 | - | |||||
| Fosber ASIA | 1,280,118.38 | - | 447,649.04 | - | |||||
| Dongfang Precision (Netherland) | 6,608,152.98 | - | 13,854.53 | - | |||||
| Yining International | 1,000.00 | - | - | - | |||||
| - | |||||||||
| 560,960,476.96 | - | 438,222,987.97 | - | ||||||
Except the borrowings receivable from related parties, all receivables from related parties arenon-interest bearing, unsecured, and have no fixed repayment period.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
XV. Notes to Major Items in the Company Financial Statements (cont’d)
8. Balances of amounts due to related parties
(1) Accounts payable
| 2022 | 2021 | |||||
| Italy EDF | 177,681.12 | 88,980.71 | ||||
| Dongfang Precision (Netherland) | 51,212.19 | 46,755.18 | ||||
| Dongfang Precision (HK) | 6,155.19 | 5,852.89 | ||||
| Yinglian Digital | 205,124.43 | - | ||||
| Dongfang Digicom (Guangdong) | 1,130,000.00 | - | ||||
| Fosber Group | 1,899.00 | - | ||||
| 1,572,071.93 | 141,588.78 |
(2) Other payables
| 2022 | 2021 | |||||
| Dongfang Precision (Netherland) | 331,099.71 | 91,664,646.54 | ||||
| Hainan Yineng | 68,000,000.00 | 50,000,000.00 | ||||
| Fosber ASIA | 1,015,465.78 | 1,138,167.89 | ||||
| Yinglian Digital | 171,706.39 | 11,020.46 | ||||
| Italy EDF | 56,189.26 | - | ||||
| 69,574,461.14 | 142,813,834.89 |
Except the borrowings receivable from related parties, all payables to related parties are non-interest bearing, unsecured, and have no fixed repayment period.
Guangdong Dongfang Precision Science & Technology Co., Ltd.Notes to the Financial Statements2022 Expressed in Renminbi Yuan
XVIII. Supplementary information
1. Schedule of exceptional gains and losses
| 2022 | |||
| Gain or loss on disposal of non-current assets (inclusive of impairment allowance write-offs) | (351,386.78 | ) | |
| Government grants through profit or loss | 20,933,377.44 | ||
| Gain or loss on fair-value changes on held-for-trading and derivative financial assets and liabilities & income from disposal of held-for-trading and derivative financial assets and liabilities and other debt investments | 35,196,327.83 | ||
| Non-operating income and expenses other than the above | 1,761,273.49 | ||
| Subtotal of non-recurring gain or loss | 57,539,591.98 | ||
| Income tax effects | (7,277,576.78 | ) | |
| Subtotal of non-recurring gain or loss, net of tax | 50,262,015.20 | ||
| Non-controlling interests effects (net of tax) | (1,460,765.90 | ) | |
| 48,801,249.30 |
Guangdong Dongfang Precision Science & Technology Co., Ltd.
Notes to the Financial Statements2022 Expressed in Renminbi Yuan
2. Return on equity (ROE) and earnings per share (EPS)
2022
| Weighted average ROE (%) | EPS | ||||||||
| Basic | Diluted | ||||||||
| Net profit attributable to ordinary shareholders of the Company | 11.72 | 0.37 | 0.37 | ||||||
| Net profit attributable to ordinary shareholders of the Company before exceptional gains and losses | 10.44 | 0.33 | 0.33 | ||||||
2021
| Weighted average ROE (%) | EPS | ||||||||
| Basic | Diluted | ||||||||
| Net profit attributable to ordinary shareholders of the Company | 11.72 | 0.35 | 0.35 | ||||||
| Net profit attributable to ordinary shareholders of the Company before exceptional gains and losses | 9.55 | 0.29 | 0.28 | ||||||