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GLOBAL OFFERINGGLOBAL OFFERING
(A joint stock company incorporated in the People’s Republic of China with limited liability)
Stock code : 2050
Joint Sponsors, Overall Coordinators, Joint Global Coordinators,
Joint Bookrunners and Joint Lead Managers
Joint Bookrunners and Joint Lead Managers (in alphabetical order)


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IMPORTANT : If you are in any doubt about any of the contents of this prospectus, you should obtain professional independent advice.
ZHEJIANG SANHUA INTELLIGENT CONTROLS CO., LTD.
ʮ̡
(A joint stock company incorporated in the People’s Republic of China with limited liability)
Global Offering
Number of Offer Shares under the
Global Offering
: 360,330,000 H Shares (subject to Offer Size
Adjustment Option and the Over-allotment
Option)
Number of Hong Kong Offer Shares : 25,223,100 H Shares (subject to reallocation and
the Offer Size Adjustment Option)
Number of International Offer Shares : 335,106,900 H Shares (subject to reallocation, the
Offer Size Adjustment Option and the
Over-allotment Option)
Maximum Offer Price : HK$22.53 per H Share, plus brokerage of 1.0%,
SFC transaction levy of 0.0027%, Hong Kong
Stock Exchange trading fee of 0.00565% and
AFRC transaction levy of 0.00015% (payable in
full on application in Hong Kong dollars and
subject to refund)
Nominal value : RMB1.00 per H Share
Stock code : 2050
Joint Sponsors, Overall Coordinators, Joint Global Coordinators,
Joint Bookrunners and Joint Lead Managers
Joint Bookrunners and Joint Lead Managers (in alphabetical order)
Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take
no responsibility for the contents of this prospectus, make no representation as to its accuracy or completeness and expressly disclaim any liabilit y
whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this prospectus.
A copy of this prospectus, having attached thereto the documents specified in “Appendix V — Documents Delivered to the Registrar of Companies
and Available on Display” in this prospectus, has been registered by the Registrar of Companies in Hong Kong as required by Section 342C of the
Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong). The Securities and Futures Commission of
Hong Kong and the Registrar of Companies in Hong Kong take no responsibility as to the contents of this prospectus or any other documents referred
to above.
The Offer Price is expected to be determined by agreement between the Overall Coordinators (on behalf of the Underwriters) and our Company on the
Price Determination Date. The Price Determination Date is expected to be on or around Thursday, June 19, 2025 (Hong Kong time) and, in any event,
not later than 12:00 noon, Thursday, June 19, 2025 (Hong Kong time). The Offer Price will not be more than HK$22.53 per Offer Share and is currently
expected to be not less than HK$21.21 per Offer Share unless otherwise announced. If, for any reason, the Offer Price is not agreed by 12:00 noon,
Thursday, June 19, 2025 (Hong Kong time) between the Overall Coordinators (on behalf of the Underwriters) and our Company, the Global Offering
will not proceed and will lapse.
The Overall Coordinators, on behalf of the Underwriters, may, where considered appropriate and with the consent of our Company, reduce the
number of Hong Kong Offer Shares and/or the indicative Offer Price range below that is stated in this prospectus (being HK$21.21 per Offer Share to
HK$22.53 per Offer Share) at any time prior to the morning of the last day for lodging applications under the Hong Kong Public Offering. In such case,
notices of the reduction in the number of Hong Kong Offer Shares and/or the indicative Offer Price range will be published on the website of our
Company at https://zjshc.com and on the website of the Hong Kong Stock Exchange at www.hkexnews.hk as soon as practicable following the
decision to make such reduction, and in any event not later than the morning of the last day for lodging applications under the Hong Kong Public
Offering. For further details, see “Structure of the Global Offering” and “How to Apply for Hong Kong Offer Shares” in this prospectus.
The obligations of the Hong Kong Underwriters under the Hong Kong Underwriting Agreement are subject to termination by the Overall
Coordinators (on behalf of the Underwriters) if certain events occur prior to 8:00 a.m. on the Listing Date. For details, see “Underwriting” in this
prospectus.
The Offer Shares have not been and will not be registered under the U.S. Securities Act or any state securities laws in the United States and may
notbeoffered,sold,pledgedorotherwisetransferredwithintheUnitedStates,exceptpursuanttoanavailableexemptionfrom,orinatransaction
not subject to, the registration requirements of the U.S. Securities Act and in accordance with any applicable state securities laws in the United
States. The Offer Shares may only be offered and sold (a) in the United States to QIBs in reliance on Rule 144A or another available exemption
from registration requirements under the U.S. Securities Act, and (b) outside the United States in offshore transactions in reliance on Regulation
S. No public offering of the Offer Shares will be made in the United States.
IMPORTANT
June 13, 2025


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IMPORTANT NOTICE TO INVESTORS:
FULLY ELECTRONIC APPLICATION PROCESS
We have adopted a fully electronic application process for the Hong Kong Public
Offering. We will not provide printed copies of this prospectus to the public in relation
to the Hong Kong Public Offering.
This prospectus is available at the website of the Hong Kong Stock Exchange at
www.hkexnews.hk under the “ HKEXnews > New Listings > New Listing Information ”
section, and our website at https://zjshc.com. If you require a printed copy of this
prospectus, you may download and print from the website addresses above.
To apply for the Hong Kong Offer Shares, you may:
(1) apply online through the White Form eIPO service at www.eipo.com.hk ;o r
(2) apply electronically through the HKSCC EIPO channel and cause HKSCC
Nominees to apply on your behalf by instructing your broker or custodian
who is a HKSCC Participant to give electronic application instructions via
HKSCC’s FINI system to apply for the Hong Kong Offer Shares on your
behalf.
We will not provide any physical channels to accept any application for the Hong
Kong Offer Shares by the public. The contents of the electronic version of this prospectus
are identical to the printed prospectus as registered with the Registrar of Companies in
Hong Kong pursuant to Section 342C of the Companies (Winding Up and Miscellaneous
Provisions) Ordinance.
If you are an intermediary , broker or agent , please remind your customers, clients
or principals, as applicable, that this prospectus is available online at the website
addresses above.
Please refer to the section headed “How to Apply for Hong Kong Offer Shares” for
further details of the procedures through which you can apply for the Hong Kong Offer
Shares electronically.
Your application through the White Form eIPO service or the HKSCC EIPO channel
must be for a minimum of 100 Hong Kong Offer Shares and in one of the numbers set out
in the table.
If you are applying through the WhiteFormeIPO service, you may refer to the table
below for the amount payable for the number of Hong Kong Offer Shares you have
selected. You must pay the respective amount payable on application in full upon
application for Hong Kong Offer Shares.
If you are applying through the HKSCC EIPO channel, you are required to pre-fund
your application based on the amount specified by your broker or custodian ,a s
determined based on the applicable laws and regulations in Hong Kong.
IMPORTANT
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No. of
Hong Kong
Offer Shares
applied for
Amount
payable (2) on
application
No. of
Hong Kong
Offer Shares
applied for
Amount
payable (2) on
application
No. of
Hong Kong
Offer Shares
applied for
Amount
payable (2) on
application
No. of
Hong Kong
Offer Shares
applied for
Amount
payable (2) on
application
HK$ HK$ HK$ HK$
100 2,275.72 4,000 91,028.86 150,000 3,413,582.26 2,000,000 45,514,430.10
200 4,551.44 5,000 113,786.07 200,000 4,551,443.01 3,000,000 68,271,645.16
300 6,827.16 6,000 136,543.29 250,000 5,689,303.77 4,000,000 91,028,860.20
400 9,102.88 7,000 159,300.51 300,000 6,827,164.51 5,000,000 113,786,075.26
500 11,378.61 8,000 182,057.72 350,000 7,965,025.27 6,000,000 136,543,290.30
600 13,654.32 9,000 204,814.93 400,000 9,102,886.02 7,000,000 159,300,505.36
700 15,930.05 10,000 227,572.15 450,000 10,240,746.78 8,000,000 182,057,720.40
800 18,205.78 20,000 455,144.31 500,000 11,378,607.53 9,000,000 204,814,935.46
900 20,481.50 30,000 682,716.45 750,000 17,067,911.29 10,000,000 227,572,150.50
1,000 22,757.21 40,000 910,288.60 1,000,000 22,757,215.06 12,611,500
(1) 287,002,617.61
2,000 45,514.44 50,000 1,137,860.76 1,250,000 28,446,518.81
3,000 68,271.64 100,000 2,275,721.50 1,500,000 34,135,822.58
Notes:
(1) Maximum number of Hong Kong Offer Share you may apply for.
(2) The amount payable is inclusive of brokerage, SFC transaction levy, the Stock Exchange trading fee and
AFRC transaction levy. If your application is successful, brokerage will be paid to the Exchange
Participants (as defined in the Listing Rules) and the SFC transaction levy, the Stock Exchange trading fee
and AFRC transaction levy are paid to the Stock Exchange (in the case of the SFC transaction levy,
collected by the Stock Exchange on behalf of the SFC; and in the case of the AFRC transaction levy,
collected by the Stock Exchange on behalf of the AFRC).
No application for any other number of the Hong Kong Offer Shares will be
considered and any such application is liable to be rejected.
IMPORTANT
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If there is any change to the expected timetable of the Hong Kong Public Offering, we
will issue an announcement to be published on the website of the Hong Kong Stock Exchange
at www.hkexnews.hk and our website at https://zjshc.com.
Hong Kong Public Offering commences ............................ 9:00 a.m. on
Friday, June 13, 2025
Latest time to complete applications under the White Form eIPO
service through the designated website at www.eipo.com.hk (2) .......1 1:30 a.m. on
Wednesday, June 18, 2025
Application lists open (3) ........................................1 1:45 a.m. on
Wednesday, June 18, 2025
Latest time (a) to complete payment of White Form eIPO
applications by effecting internet banking transfer(s) or
PPS payment transfer(s) and (b) give electronic application
instructions to HKSCC
(4) ..................................... 12:00 noon on
Wednesday, June 18, 2025
If you are instructing your broker or custodian who is a HKSCC Participant will
submit electronic application instructions on your behalf through HKSCC’s FINI system
in accordance with your instruction, you are advised to contact your broker or custodian
for the earliest and latest time for giving such instructions, as this may vary by broker or
custodian.
Application lists close
(3) ....................................... 12:00 noon on
Wednesday, June 18, 2025
Expected Price Determination Date (5) ..............................o no r before
Thursday, June 19, 2025
Announcement of:
• the final Offer Price;
• the level of applications of the Hong Kong Public Offering;
• the level of indications of interest in the International
Offering; and
• the basis of allocation of the Hong Kong Offer Shares
to be published on the website of the Hong Kong
Stock Exchange at www.hkexnews.hk and
our website at https://zjshc.com (6) .................a to r before 11:00 p.m. on
Friday, June 20, 2025
EXPECTED TIMETABLE
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The results of allocations in the Hong Kong Public Offering (with successful
applicants’ identification document numbers, where appropriate) to be made available
through a variety of channels as described in the section headed “How to Apply for the
Hong Kong Offer Shares — Publication of Results”, including:
• on the website of the Stock Exchange
at www.hkexnews.hk and our website
at https://zjshc.com (6)
respectively ..............................a to r before 11:00 p.m. on
Friday, June 20, 2025
• on the designated results of allocation website
at www.iporesults.com.hk
(alternatively: www.eipo.com.hk/eIPOAllotment ) with
a “search by ID” function .........................f r o m1 1:00 p.m. on
Friday, June 20, 2025
to 12:00 midnight on
Thursday, June 26, 2025
• from the allocation results telephone
enquiry line by at +852 2862 8555
between 9:00 a.m. and 6:00 p.m. ............f r o m Monday, June 23, 2025
to Thursday, June 26, 2025
Despatch of H Share certificates in respect of wholly or
partially successful applications, or deposit of
H Share certificate into CCASS, on or before
(7) .............. Friday, June 20, 2025
Despatch of White Form e-Refund payment (8) instructions
and refund cheques in respect of wholly or
partially successful applications on or before .............. Monday, June 23, 2025
Dealings in our H Shares on the Hong Kong Stock Exchange
expected to commence at ...................................... 9:00 a.m. on
Monday, June 23, 2025
EXPECTED TIMETABLE
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Notes:
(1) All dates and times refer to Hong Kong local time and dates unless otherwise stated.
(2) You will not be permitted to submit your application through the designated website at
www.eipo.com.hk after 11:30 a.m. on the last day for making applications. If you have already submitted
your application and obtained an application reference number from the designated website before 11:30
a.m., you will be permitted to continue the application process (by completing payment of application
monies) until 12:00 noon on the last day for making applications, when the application lists close.
(3) If there is a “black” rainstorm warning, a tropical cyclone warning signal number 8 or above and/or
Extreme Conditions in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Wednesday,
June 18, 2025 the application lists will not open on that day. See the section headed “How to Apply for the
Hong Kong Offer Shares — Severe Weather Arrangements” for further details.
(4) If you instruct your broker or custodian who is an HKSCC Participant to give electronic application
instructions via FINI to apply for the Hong Kong Offer Shares on your behalf, you should contact your
broker or custodian for the latest time for giving such instructions which may be different from the latest
time as stated above.
(5) The Price Determination Date is expected to be on or before Thursday, June 19, 2025 (Hong Kong time)
and, in any event, not later than 12:00 noon on Thursday, June 19, 2025 (Hong Kong time). If, for any
reason, the Offer Price is not agreed by 12:00 noon on Thursday, June 19, 2025 (Hong Kong time), the
Global Offering will not proceed and will lapse.
(6) None of the websites or any of the information contained on the websites forms part of this prospectus.
(7) The H Share certificates will only become valid evidence of title at 8:00 a.m. on the Listing Date, which is
expected to be on or around Monday, June 23, 2025 provided that the Global Offering has become
unconditional in all respects. Investors who trade our H Shares on the basis of publicly available
allocation details before the receipt of H Share certificates or before the H Share certificates become valid
evidence of title do so entirely at their own risk.
(8) Applicants being individuals who are eligible for personal collection may not authorize any other person
to collect on their behalf. If you are a corporate applicant which is eligible for personal collection, your
authorized representative must bear a letter of authorization from your corporation stamped with your
corporation’s chop. Both individuals and authorized representatives must produce evidence of identity
acceptable to our H Share Registrar at the time of collection.
Any uncollected H Share certificates and/or refund checks will be dispatched by ordinary post, at the
applicants’ risk, to the addresses specified in the relevant applications.
White Form e-Refund payment instructions/refund cheques will be issued for the applicants who have
applied through WhiteFormeIPO service in respect of wholly or partially unsuccessful applications and
in respect of wholly or partially successful applications pursuant to the Hong Kong Public Offering if the
final Offer Price is less than the maximum Offer Price payable per Offer Share on application. Part of the
applicant’s Hong Kong identity card number or passport number, or, if the application is made by joint
applicants, part of the Hong Kong identity card number or passport number of the first-named applicant,
provided by the applicant(s) may be printed on the refund cheque, if any. Such data would also be
transferred to a third party for refund purposes. Banks may require verification of an applicant’s Hong
Kong identity card number or passport number before encashment of the refund cheques. Inaccurate
completion of an applicant’s Hong Kong identity card number or passport number may invalidate or
delay encashment of the refund cheques.
Applicants who have applied through White Form eIPO service and paid their applications monies
through single bank accounts may have refund monies (if any) dispatched to the bank account in the form
of White Form e-Refund payment instructions. Applicants who have applied through White Form eIPO
service and paid their application monies through multiple bank accounts may have refund monies (if
any) despatched to the address as specified in their application instructions in the form of refund
cheque(s) in favor of the applicant (or, in the case of joint applications, the first-named applicant) by
ordinary post at their own risk.
EXPECTED TIMETABLE
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For applicants who have applied for Hong Kong Offer Shares through the HKSCC EIPO channel, H Share
certificate(s) will be issued in the name of HKSCC Nominees, deposited into CCASS and credited to their
designated HKSCC Participant’s stock account.
For applicants who have applied through HKSCC EIPO channel, their broker or custodian will arrange
refund to their designated bank account subject to the arrangement between them and their broker or
custodian.
Further information is set out in the sections headed “How to Apply for Hong Kong Offer Shares —
Despatch/Collection of H Share Certificates and Refund of Application Monies”.
The above expected timetable is a summary only. You should read carefully the
sections headed “Underwriting”, “Structure of the Global Offering” and “How to
Apply for the Hong Kong Offer Shares” for details relating to the structure of the
Global Offering and the conditions and procedures for application for the Hong Kong
Offer Shares.
EXPECTED TIMETABLE
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IMPORTANT NOTICE TO PROSPECTIVE INVESTORS
This prospectus is issued by us solely in connection with the Hong Kong Public
Offering and the Hong Kong Offer Shares and does not constitute an offer to sell or a
solicitation of an offer to buy any security other than the Hong Kong Offer Shares offered by
this prospectus pursuant to the Hong Kong Public Offering. This prospectus may not be used
for the purpose of making, and does not constitute, an offer or invitation in any other
jurisdiction or in any other circumstances. No action has been taken to permit a public offering
of the Hong Kong Offer Shares in any jurisdiction other than Hong Kong and no action has
been taken to permit the distribution of this prospectus in any jurisdiction other than Hong
Kong. The distribution of this prospectus for purposes of a public offering and the offering and
sale of the Hong Kong Offer Shares in other jurisdictions are subject to restrictions and may
not be made except as permitted under the applicable securities laws of such jurisdictions
pursuant to registration with or authorization by the relevant securities regulatory
authorities or an exemption therefrom.
You should rely only on the information contained in this prospectus to make your
investment decision. The Hong Kong Public Offering is made solely on the basis of the
information contained and the representations made in this prospectus. We have not
authorized anyone to provide you with information that is different from what is contained in
this prospectus. Any information or representation not contained nor made in this prospectus
must not be relied on by you as having been authorized by us, any of the Joint Sponsors, the
Overall Coordinators, the Capital Market Intermediaries, the Joint Global Coordinators, the
Joint Bookrunners, the Joint Lead Managers, the Underwriters, any of our or their respective
directors, officers, employees, agents, or representatives of any of them or any other parties
involved in the Global Offering.
Page
Expected Timetable .................................................. i i i
Contents .......................................................... v i i
Summary .......................................................... 1
Definitions ........................................................ 2 1
Glossary of Technical Terms ........................................... 3 4
Forward-Looking Statements .......................................... 4 0
Risk Factors ........................................................ 4 2
Waivers from Strict Compliance with the Listing Rules ..................... 7 7
Information about this Prospectus and the Global Offering ................. 9 3
CONTENTS
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Directors, Supervisors and Parties Involved in the Global Offering ........... 9 7
Corporate Information ............................................... 1 0 4
Industry Overview .................................................. 1 0 6
Regulatory Overview ................................................ 1 3 0
History and Corporate Structure ....................................... 1 4 8
Business ........................................................... 1 6 1
Directors, Supervisors and Senior Management ........................... 2 4 8
Relationship with our Controlling Shareholders Group .................... 2 7 0
Connected Transactions .............................................. 2 8 0
Substantial Shareholders ............................................. 2 9 1
Share Capital ....................................................... 2 9 3
Financial Information ................................................ 2 9 8
Cornerstone Investors ................................................ 3 5 7
Future Plans and Use of Proceeds ...................................... 3 7 2
Underwriting ....................................................... 3 7 7
Structure of the Global Offering ....................................... 3 9 1
How to Apply for Hong Kong Offer Shares .............................. 4 0 8
Appendix I – Accountant’s Report .............................. I - 1
Appendix IA – Unaudited Interim Condensed Consolidated
Financial Information ........................... IA-1
Appendix II – Unaudited Pro Forma Financial Information ........... II-1
Appendix III – Summary of the Articles of Association .............. III-1
Appendix IV – Statutory and General Information .................. I V - 1
Appendix V – Documents Delivered to the Registrar of Companies and
Available on Display ............................ V - 1
CONTENTS
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This summary aims to give you an overview of the information contained in this
prospectus. As this is a summary, it does not contain all the information that may be
important to you. You should read the entire prospectus before you decide to invest in the Offer
Shares.
There are risks associated with any investment. Some of the particular risks in investing
in the Offer Shares are set out in the section headed “Risk Factors.” You should read that
section carefully before you decide to invest in the Offer Shares.
OVERVIEW
We are the world’s largest manufacturer of refrigeration and air-conditioning
control components and a global leader in automotive thermal management system
components in terms of revenue in 2024, according to Frost & Sullivan. Our market share
in the global refrigeration and air-conditioning control component market was
approximately 45.5% in terms of revenue in 2024, according to Frost & Sullivan. In the
global automotive thermal management system component market, we held a market
share of approximately 4.1% in terms of revenue in 2024, ranking fifth globally, according
to Frost & Sullivan. We have been dedicated to the R&D, promotion and adoption of
thermal management technology, providing customers across the globe with
energy-efficient solutions through our industry-leading products of high quality. With a
global perspective, we have established a business that spans two major sectors:
refrigeration and air-conditioning product components and automotive components.
Leveraging our extensive technological expertise and innovation in R&D, we are actively
broadening our business boundaries into emerging fields, such as bionic robot
electromechanical actuators.
Following our development strategy of prioritizing excellence and innovation, we
are committed to refining our existing product offerings while actively cultivating new
drivers for sustained growth. From the early days, we placed great importance on
establishing a global network. Our extensive global R&D layout, combined with our
localized production and sales network, allows us to respond swiftly to customer needs
while gaining stronger insights into diverse markets. This facilitates our development of
tailored products and delivery high-quality services. Our emphasis on advanced
management techniques, technology and talent is evident in our daily operations and
strategic planning. These principles have become integral to our corporate management
philosophy and encapsulated in our “SANHUA” brand, symbolizing the blossoming of
management, technology and talent.
SUMMARY
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We have made a number of significant achievements in various areas:
World’s Largest
refrigeration and air-conditioning
control component manufacturer(1)
Global Leading
automotive thermal management
system component manufacturer(1)
RMB27.9 bn
2024 Revenue
2005-2024
Revenue CAGR
23.3%
(2)
Net Profit CAGR
25.0%
(2)
2024 Overseas Revenue
44.7%
Global Presence
5 Continents
(7)
48
Factories Worldwide(8)
6
R&D Bases
Worldwide(9)
100% coverage
of the world’s
top 10 refrigeration and
air-conditioning manufacturers &
automobile manufacturers(4)
Over
4,000
Patents(5)
Around
8,000
Patent Applications(6)
World’s Largest
market share
for 9 major
products categories(3)
Notes:
(1) In terms of revenue in 2024, according to Frost & Sullivan. According to Frost & Sullivan, in terms of
revenue in 2024, we are the world’s largest manufacturer of refrigeration and air-conditioning control
components and the world’s fifth largest automotive thermal management system component
manufacturer. Our market share in the global refrigeration and air-conditioning control component
market was approximately 45.5% in terms of revenue in 2024, according to Frost & Sullivan. In the global
automotive thermal management system component market, we held a market share of approximately
4.1% in terms of revenue in 2024, ranking fifth globally, according to Frost & Sullivan.
(2) Based on data from the annual reports published by the Company on the Shenzhen Stock Exchange, our
revenue increased from 2005 to 2024 at a CAGR of 23.3%, and our net profit increased from 2005 to 2024
at a CAGR of 25.0%. Such figures have not been audited or reviewed by the Reporting Accountant.
(3) According to Frost & Sullivan, in 2024, under our refrigeration and air-conditioning product component
business, our four-way reversing valves, electronic expansion valves, micro-channel heat exchangers,
service valves, solenoid valves, Omega pumps and ball valves ranked first in their respective global
markets in terms of revenue, with market shares of 55.4%, 51.4%, 43.4%, 39.1%, 47.7%, 53.6% and 32.8%,
respectively. In the same year, under our automotive component business, our automotive electronic
expansion valves and integrated modules ranked first in their respective global markets in terms of
revenue, with market shares of 48.3% and 65.6%, respectively.
(4) As of December 31, 2024, we established business relationships with all the world’s top ten largest
refrigeration and air-conditioning manufacturers and automotive manufacturers in terms of revenue in
2023, according to Frost & Sullivan.
(5) As of December 31, 2024, we had over 3,300 patents in China and over 800 patents in overseas
jurisdictions.
(6) As of December 31, 2024, we had filed over 6,600 patent applications in China and over 1,300 patent
applications in overseas jurisdictions. In addition, we had over 100 valid applications under the PCT.
(7) As of December 31, 2024, our products had reached America, Europe, Asia, Oceania and Africa, spanning
over 80 countries and regions.
(8) As of December 31, 2024, we had a total of 48 factories worldwide, including 13 overseas factories in the
United States, Poland, Mexico, Turkey, Austria, Vietnam, Thailand and India.
(9) As of December 31, 2024, we had six R&D bases, including three in China, two in the United States and
one in Germany, that lead the innovation of applied R&D.
SUMMARY
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OUR JOURNEY
Our journey traces back to Xinchang Refrigeration Components Factory established
in 1984. In 1994, our predecessor, Sanhua-Fujikoki Co., Ltd., a Sino-Japanese joint venture,
was established. Following the conversion of Sanhua-Fujikoki Co., Ltd. into a joint stock
company in 2001, we became a public company listed on the Shenzhen Stock Exchange in
2005 (stock code: 002050.SZ).
Insisting on the idea of “small products, vast market, advanced technology and
specialized expertise” at the beginning stage of our business, we established our market
presence through production of valves used in refrigeration and air-conditioning systems.
Over the years, we have expanded our product offerings from singular valve products to
a broader array of refrigeration and air-conditioning product components and automotive
components. We recognize the importance of environmental sustainability, and are
committed to providing solutions that help our customers create environmentally-friendly
products. Such awareness has led us to recognize the transformative impact and
substantial market potential of New Energy Vehicles (“ NEVs ”) for a sustainable future
from the early stages of the NEV development. Our in-depth understanding of
air-conditioning thermal management and heat pump technologies promoted our decisive
move in pursuing strategic opportunities arising from the increasing demands for NEV
thermal management systems, allowing us to replicate the profound expertise and
technology advantages in this fast-growing sector. Capitalizing on the market insight and
industry resources accumulated from the mass production of a variety of parts and
components, we have recently entered into the bionic robot sector with a focus on
electromechanical actuator, paving our route to become a global industrial group
encompassing multiple industries and product categories.
The following diagram illustrates our key milestones since the establishment:
Phase I
From specializing in service valves
to excelling across multiple product
categories within the refrigeration
and air-conditioning control
component industry (1994-2004)
Phase II
Driving strategic global expansion and accelerating the growth of
our automotive component business by leveraging opportunities
in the capital markets (2005-2017)
Phase III
Proactively pursuing new growth trajectories while
enhancing business capabilities and expanding
technological reserves (2018-present)
2012
Acquisition of
Aweco
We acquired Aweco’s
worldwide operations,
strengthening our
localization efforts and
strategic presence in
Europe.
2017
Acquisition of
Sanhua Automotive
We acquire Zhejiang
Sanhua Automotive
Components Co., Ltd.,
expanding into the
automotive component
industry.
PACE Award
We became the first
Chinese company to win
the PACE Award.
2018
Acquisition of ATI
We acquired the tubing component business in
the United States and Mexico from ATI,
broadening the layout of our refrigeration and
air-conditioning product component business in
North America.
Establishment of Vietnam Production
Base
We completed the constr uction of o ur
Vietnam prod uction base and p ut it into
operat ion, establ ishing it as o ur then largest
overseas prod uction capac ity in Asia outside
of China.
2023
Top 100 Global
Automotive
Component
Companies
We were ranked
among the top
100 global
automotive
component
companies by
Automotive News.
2002
Global Service Valve
Market Leader
We emerged as a PRC
company with a presence
in the global service valve
market.
2005
Listing on
SZSE
We completed
the listing on
the Shenzhen
Stock
Exchange.
2004
Annual
Revenue
Surpassing
300 Million
Our annual
revenue
surpassed
RMB300 million
for the first time.
2013
No. 1 Market Share
of Refrigeration and
Air-conditioning
Control Components
Our market share of
refrigeration and
air-conditioning control
components, in terms of
revenue, reached the first
place in the world,
according to Frost &
Sullivan.
2024
Advancement in Bionic Robot
Electromechanical Actuators
R&D
By December 31, 2024, our R&D team
for bionic robot electromechanical
actuators expanded to over 180
members, and we have been
strategizing  our overseas production
layout and collaboration with key
customers for an early advantage.
2008
Acquisition of
Various Assets
We acquired a
range of
businesses from
our parent
company,
including the
global four-way
reversing valve
operations from
Ranco.
2015
Acquisition of Sanhua
Micro-Channel
We acquired Sanhua
(Hangzhou) Micro
Channel Heat Exchanger
Co., Ltd., establishing
micro-channel heat
exchanger business as a
core business.
1994
Opening the
Refrigeration and
Air-Conditioning
Product
Component
market with
service valves
We expanded market
with service valves,
deepening our
involvement in the
production of
refrigeration and
air-conditioning
product components.
OUR BUSINESS AND PRODUCT
We primarily engage in the R&D, manufacturing and sales of refrigeration and
air-conditioning product components and automotive components. Focusing on the R&D
and application of heat pump technology and thermal management systems, we prioritize
creating environmental thermal management solutions that enable efficient heat exchange
and intelligent temperature control. In addition, we have devoted ourselves to the R&D of
bionic robot electromechanical actuator products to pursue growth potential in this
promising area.
SUMMARY
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Refrigeration and Air-conditioning Product Components
The following chart illustrates our representative products under the refrigeration and
air-conditioning product component business along with their various application scenarios:
Air-conditioning and Refrigeration
Cold-chain Transport
Refrigerator/Freezer
Heat Pump Heating/Hot Water System
Industrial Refrigeration/Data Center Cooling
Brazed Plate Heat
Exchanger
Thermostatic
Expansion
Valve
Electronic
Expansion
Valve
Solenoid
Valve
Filter Drier
Washing Machine/Dishwasher/Coffee Maker/Wall-Hung Stove
Coffee Machine
Solenoid Valve
Water Inlet Valve
for Washing
Machines
Micro-channel
Condenser
Omega BLDC
Pump
Gas Valve
BLDC
Solenoid
Valve
Service
Valve
Electronic
Expansion
Valve
Four-way
Reversing
Valve
Micro-channel
Heat Exchanger
hi T t
Electronic
Expansion
V alve
Controller
 Service V alve Gigaforce
Four-way
Reversing V alve
Pressure
Sensor
Shielded Pump
for Water
Electric Switching
Water V alve
Water Ball
V alve
Brazed Plate
Heat Exchanger
Inverter
Controller
Motorized
Damper
Electric
V alve
Bistable
Solenoid V alve
Superconductive
Plate
Micro-channel
Condenser
SUMMARY
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Under the refrigeration and air-conditioning product component business, we
mainly engage in the development and application of control components, subsystems
and technology solutions which empower energy-efficient buildings, heating, ventilation
and air-conditioning (“ HVAC”) systems and household appliances thermal management
systems. We are a key supplier of refrigeration and air-conditioning control components,
which span valves, heat exchangers, pumps and controllers, among others, serving the
global market for residential and commercial air-conditioning, commercial and industrial
refrigeration and small household appliances, among others. Our key products in this
business sector comprise a variety of valve products, including electronic expansion
valves, four-way reversing valves, service valves, solenoid valves and ball valves. We also
offer heat exchanger products, specifically micro-channel heat exchangers, pump
products such as Omega pumps, and controller products, including inverter controllers
and pressure sensors. Such products are widely utilized in fields including air
conditioners, refrigerators, industrial refrigeration, cold-chain transport, heat pump
heating and washing machines. With strong product integration capabilities and a
commitment to long-term R&D investment, we harness economies of scale and lean
management to enhance product performance and reduce costs, thereby delivering added
value to our customers.
Automotive Components
The following diagram illustrates the application of our automotive components:
Electrical/Control System Thermal Management
Cabinet Thermal Management
Electronic
Expansion
Valve
Electric
Ball
Valve
Thermostatic
Expansion Valve
with Shut off
Accumulator
 Integrated
Module
Battery Thermal Management
Cooling Plate
 Battery Cooler
and Module
Electronic Water
Pump
Electronic Water
Valve
Integrated Module
Oil Cooler
Module
Electric
Oil Pump
Oil Cooler
 Oil Valve
Integrated
Representative
Automotive
Thermal Management
System Component
As an early entrant with strategic deployment in the NEV thermal management
market, we were among the first to set the stage for the creation of novel application
scenarios and industry development trends, which establishes us as a key supplier of
automotive thermal management system components in the global market. We are
committed to offering essential and comprehensive thermal management and control
solutions for NEVs and providing high-performance products that enhance energy
efficiency and reduce emissions for traditional internal combustion engine vehicles
(“ICEVs ”). We are actively involved in the R&D of valves, pumps, heat exchangers and
integrated modules, especially under cabinet thermal management, battery thermal
management and electrical/control system thermal management, designed to achieve
effective thermal management in automotive operations. Our efforts have successfully
SUMMARY
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integrated a substantial range of critical products into the supply chains of leading NEV
manufacturers, including automotive valve products, such as automotive electronic
expansion valves, automotive pump products, such as automotive electronic water
pumps, automotive heat exchanger products, such as battery coolers, and various types of
integrated modules, among others. Our manufacturing and innovation technology stand
at a leading place of the industry. In recent years, we have been dedicating more resources
to iterating our refrigeration and air-conditioning product components and automotive
components.
Strategic Emerging Business
As an early entrant that leads the development of thermal management
technologies, we have accumulated abundant experiences and expertise in developing
and manufacturing a considerable number of electric motors. By leveraging our motor
manufacturing expertise, scalability and cost-control capabilities, we have successfully
ventured into the production of bionic robot electromechanical actuators. We strive to
provide lighter, smaller and more precise electromechanical actuators through
independent R&D. As of the Latest Practicable Date, we were in the R&D phase, refining
prototypes before scalable commercialization, and we are actively deploying overseas
factories for their production to secure early advantages in the emerging bionic robot
electromechanical actuators market.
OUR STRENGTHS
We believe that the following strengths contribute to our market position, ensuring
our success and distinguishing us from our competitors:
• The world’s largest manufacturer of refrigeration and air-conditioning control
components and a global leader in automotive thermal management system
components;
• Commitment to technological innovation fueling rapid product iteration and
strategic readiness for future industry advancements;
• Commitment to lean production and efficient resource allocation;
• A comprehensive quality management system incorporating control measures
to ensure the delivery of high-quality goods;
• An early entrant in global market exploration, bolstered by an extensive
network encompassing sales, research and development and manufacturing;
• Long-term and in-depth partnerships with leading enterprises to drive
industry development; and
• Profound industry and management experience, progressive value concepts
and forward-thinking leadership.
OUR STRATEGIES
We are committed to providing competitive intelligent temperature control
solutions for high-quality customers around the world. We are transitioning from a cost
leadership model to technology leadership and advancing from developing mechanical
parts to providing integrated electronic control system solutions. We aim to establish
ourselves as a global leader in the thermal management field and drive the global
industrial trends through advanced technologies. We plan to pursue the following
strategies:
• Consolidating our existing strength and achieving consistent growth;
• Advancing the business growth of thermal management and bionic robot
electromechanical actuators through continuous research, development and
innovation;
SUMMARY
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• Continuously improving production and manufacturing management to
optimize costs while ensuring quality, thereby consistently creating value for
customers;
• Deepening global layout; and
• Leading the global transformation of energy-saving and eco-friendly
products, establishing a clean and low-carbon energy system and advancing
carbon neutrality goals.
RESEARCH AND DEVELOPMENT
We are dedicated to technological innovation, which is crucial in advancing our
capabilities and delivering value to our customers, while also driving our sales and
profitability. With over 30 years of operations, we have amassed significant
manufacturing expertise and continue to diligently track market trends to effectively
reduce costs while enhancing product performance. We have made, and will continue to
make, substantial investments in R&D activities. In 2022, 2023 and 2024, our R&D
expenses amounted to RMB989.0 million, RMB1,096.8 million and RMB1,351.8 million,
respectively, accounting for 4.6%, 4.5% and 4.8% of our revenue for the same periods,
respectively. As of December 31, 2024, we employed over 3,500 R&D personnel, including
global leading industry experts, and among which over 700 individuals held master’s
degrees or above.
Our R&D system consists of (i) one Research Center that focuses on strategic R&D,
(ii) six R&D bases, including three in China, two in the United States and one in Germany,
that lead the innovation of applied R&D; and (iii) technology departments that focus on
the improvement on product performance and production efficiency. Meanwhile, we
deploy R&D resources at our factories across the globe. The functions of these three are
progressively layered from the initial concept, to applied science and engineering
challenges, and further to mass production. This structured approach has stood the test of
time and forms the foundation of our efficient and effective R&D efforts.
PRODUCTION
As of December 31, 2024, we had a total of 48 factories worldwide, including 13
overseas factories in the United States, Poland, Mexico, Turkey, Austria, Vietnam,
Thailand and India. For 2022, 2023 and 2024, our total production capacity reached
approximately 539.0 million, 533.5 million and 575.7 million pieces of refrigeration and
air-conditioning product components, respectively, and 202.6 million, 255.1 million and
281.7 million pieces of automotive components, respectively. Our total production volume
reached approximately 451.5 million, 494.5 million and 537.3 million pieces of
refrigeration and air-conditioning product components, respectively, and 170.3 million,
232.4 million and 244.6 million pieces of automotive components, respectively. Our total
production capacity utilization rate was 83.8%, 92.2% and 91.2%, respectively, for 2022,
2023 and 2024. Out of the 48 factories, we have established 8 production bases. These bases
serve as production centers comprising factory clusters, warehouses and logistics hubs,
designed to support key nearby markets. For 2022, 2023 and 2024, the aggregate
production capacity of our 8 production bases accounted for approximately 67.1%, 67.3%
and 71.7%, respectively, of our total production capacity. The aggregate production
volume of our 8 production bases represented approximately 67.2%, 67.8% and 71.2%,
respectively, of our total production volume.
As of December 31, 2024, we had a production team of over 12,000 personnel,
supporting the operation of our global production network. We prioritize hiring locally
for our production team, which allows us to tap into the local talent pool and contribute to
the economic development of the communities where we operate. Employing local
personnel not only helps in fostering community relations but also ensures that our
workforce is familiar with regional practices and cultural nuances, which can enhance
productivity and workplace harmony.
SUMMARY
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RAW MATERIALS AND SUPPLIERS
Our raw materials primarily include copper and aluminum. Given the close
correlation between the prices of copper and aluminum we procure from our suppliers
and the often volatile bulk commodity copper and aluminum prices, we implement a
comprehensive risk management strategy to mitigate the impact of such fluctuations,
which primarily involves two independent approaches: (i) incorporating a raw material
price linkage mechanism in our contracts with both customers and suppliers, and (ii)
employing futures hedging. In negotiations with customers and suppliers, we generally
adopt either a one-time pricing model or a raw material price linkage mechanism. The
one-time pricing model sets a fixed price during the term of a contract, providing
certainty for both parties. The price linkage mechanism, on the other hand, adjusts prices
based on market fluctuations, ensuring that both our customers and suppliers and us
share the risks and benefits of price changes. In addition, we mitigate raw material price
risks by utilizing futures hedging, which involves using financial contracts to lock in
prices for future purchases, thereby offsetting any increases in the bulk commodity costs
of copper and aluminum. We have established a futures management process to address
the raw material price volatility. Our procurement department is tasked with monitoring
raw material price trends and fluctuations and provide insights into market conditions.
We have a strategic partnership with Shanghai Metals Market to monitor bulk commodity
raw material price movements both domestically and internationally. Based on the market
information, we take actions following our internal futures and foreign exchange
management mechanisms. See ”Business — Raw Materials and Suppliers — Raw
Materials and Procurement” and “Risk Factors — Risks Relating to Our Business and
Industry — Any hedging strategy may not adequately protect us from commodity price,
foreign exchange rate and interest rate risks, and fluctuations in exchange rates could
result in foreign currency exchange losses.”
We have established rigorous processes for supplier selection, evaluation and
management to ensure all suppliers meet our quality and performance standards. We
evaluate supplier’s financial condition, business performance, industry reputation, ESG
commitment and certifications. We also regularly evaluate the performance of our
suppliers, focusing on criteria that include raw material quality, delivery, cost and, where
applicable, the technical specifications of the products supplied by them. During the Track
Record Period, our major suppliers primarily include raw material and component
suppliers. In each year during the Track Record Period, the aggregate purchases from our
five largest suppliers in each of such year accounted for approximately 13.0%, 13.8% and
15.5%, respectively, of our total purchases, and the purchases from our largest supplier in
each of such year accounted for approximately 4.8%, 3.7% and 4.0%, respectively, of our
total purchases.
SALES AND MARKETING
We primarily conduct direct sales to our customers which we believe is critical to
predict and address customers’ needs. Passionate about delivering the best experience
possible to our customers, we have established an extensive global sales and marketing
network covering countries and regions across America, Europe, Asia, Oceania and Africa
to maintain close contact with major refrigeration and air-conditioning product
manufacturers and car manufacturers, as well as to explore business opportunities with
potential customers in emerging industries.
We have established long-term business relationships with a number of
world-leading companies providing refrigeration and air-conditioning products. As of
December 31, 2024, we established business relationships with all top ten largest
refrigeration and air-conditioning manufacturers in terms of revenue in 2023, whose
global market share totaled 75.6%, according to Frost & Sullivan. As of the same date, we
had established business relationships with all top ten largest automotive manufacturers
in terms of revenue in 2023, whose global market share totaled 55.0%, according to Frost &
Sullivan. Our customers primarily consist of automotive companies and refrigeration and
air-conditioning companies. During the Track Record Period, we derived substantially all
our revenue from direct sales to customers, which accounted for over 98.5% of our total
revenue in each of the years ended December 31, 2022, 2023 and 2024, respectively. In each
SUMMARY
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year during the Track Record Period, our five largest customers in each of such year
accounted for approximately 35.9%, 35.9%, 32.9% of our total revenue, respectively, and
sales to the largest customer in each of such year accounted for approximately 13.1%,
14.6% and 12.6% of our total revenue, respectively. In each year during the Track Record
Period, none of our five largest customers in each of such year were among our five largest
suppliers of that year, while all of our five largest suppliers in each year during the Track
Record Period were our customers, and, among our five largest customers for each year
during the Track Record Period, four were also our suppliers during the Track Record
Period. Our Directors confirmed that all of our sales to our major customers were
conducted in the ordinary course of business under normal commercial terms and on
arm’s length basis.
The following table sets forth our revenue by geographic location for the periods
indicated:
Year ended December 31,
2022 2023 2024
Amount % Amount % Amount %
(RMB in thousands, except for percentage)
China 11,415,857 53.5 13,403,443 54.6 15,446,506 55.3
North America 5,703,859 26.7 6,301,569 25.7 7,094,512 25.4
Europe 1,985,305 9.3 2,442,768 9.9 2,623,526 9.4
Asia (excluding China) 2,153,219 10.1 2,331,241 9.5 2,653,978 9.5
Others
(1) 89,310 0.4 78,781 0.3 128,643 0.5
Total 21,347,550 100.0 24,557,802 100.0 27,947,165 100.0
Note:
(1) Others comprise South America, Oceania and Africa.
See “Business — Sales and Marketing.”
COMPETITIVE LANDSCAPE
We mainly operate in the refrigeration and air-conditioning product component
industry and automotive component industry, which are highly competitive and
concentrated.
The global refrigeration and air-conditioning control component market is overall
highly concentrated. With the increasingly prominent technical barriers and scale
advantages in the refrigeration and air-conditioning control component market, the global
market concentration is showing an upward trend. Leading component manufacturers
have continuously consolidated their dominant positions through technological
improvement, product quality and cost efficiency advantages. In contrast, small
component manufacturers may find it difficult to compete with leading manufacturers,
due to insufficient technological reserves, limited production scale, and relatively weak
supply chain integration capabilities. According to Frost & Sullivan, we ranked first in the
refrigeration and air-conditioning control component market in terms of revenue, in 2024.
According to Frost & Sullivan, in terms of revenue, in 2024, we ranked first in the global
market of refrigeration and air-conditioning valves, heat exchangers and pumps, and
ranked second in the market of refrigeration and air-conditioning controllers. In the same
year, our four-way reversing valves, electronic expansion valves, micro-channel heat
exchangers, service valves, solenoid valves, Omega pumps and ball valves ranked first in
their respective global markets in terms of revenue, with market shares of 55.4%, 51.4%,
43.4%, 39.1%, 47.7%, 53.6% and 32.8%, respectively. In the same year, our pressure sensors
ranked second in the global sensors market in terms of revenue, with a market share of
15.9%.
SUMMARY
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The global automotive thermal management system component market is highly
concentrated. Leading companies leverage early advantages to accumulate expertise in
core components and system development capabilities. They also possess technical
advantages in system integration. According to Frost & Sullivan, in terms of revenue, in
2024, we ranked first in the global market of automotive valves and integrated modules,
respectively, and ranked fourth in the global market of automotive pumps. In 2024, our
automotive electronic expansion valves and integrated modules ranked first in their
respective global markets in terms of revenue, with market shares of 48.3% and 65.6%,
respectively. In the same year, our battery coolers and automotive electronic water pumps
ranked third and fourth in their respective global markets in terms of revenue, with
market shares of 5.9% and 5.5% respectively.
Our competitive edge is attributable to factors such as extensive industry
experience, leading market position and our ability to offer comprehensive solutions to
our customers. Our market leadership has been further solidified by our international
presence, diverse product portfolio, high-quality customer relations, robust R&D
capabilities, technical expertise and our visionary management team. Therefore, we
believe that we are well-positioned to maintain our leadership position and to capture
future opportunities in the refrigeration and air-conditioning product component
industry and automotive component industry.
See “Industry Overview.”
OUR CONTROLLING SHAREHOLDERS GROUP
As of the Latest Practicable Date, our Controlling Shareholders Group, including
Mr. Zhang Daocai, Ms. Yu Qingjuan, Mr. Zhang Yabo, Mr. Zhang Shaobo, Xinchang
Huaqing Investment, Xinchang Huaxin Industrial, Zhejiang Huateng Industrial, Sanhua
Holding, Hield International, Wealth Info and Sanhua Green Energy, collectively held
approximately 44.62% of our total share capital.
Immediately following the completion of the Global Offering (assuming that the
Offer Size Adjustment Option and the Over-allotment Option are not exercised), the
Controlling Shareholders Group will continue to hold in aggregate approximately 40.69%
of our total share capital. Therefore, they will remain as our Controlling Shareholders
Group immediately after the Listing.
For further details about our Controlling Shareholders Group, please see the section
headed “Relationship with our Controlling Shareholders Group”.
SUMMARY OF HISTORICAL FINANCIAL INFORMATION
The tables below present our summary of consolidated financial data derived from
our consolidated statements of profit or loss, consolidated statements of financial position
and consolidated statements of cash flows for the years ended December 31, 2022, 2023
and 2024, included in the Accountant’s Report in Appendix I to this prospectus. The
following data and discussion should be read in conjunction with our consolidated
financial statements and related notes and the section headed “Financial Information.”
SUMMARY
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Summary of Consolidated Statements of Profit or Loss
The following table sets forth a summary of our consolidated statements of profit or
loss for the periods indicated:
Year ended December 31,
2022 2023 2024
Amount % Amount % Amount %
(RMB in thousands, except for percentage of revenue)
Revenue 21,347,550 100.0 24,557,802 100.0 27,947,165 100.0
Cost of revenue (15,885,938) (74.4) (17,822,314) (72.6) (20,326,346) (72.7)
Gross profit 5,461,612 25.6 6,735,488 27.4 7,620,819 27.3
General and administrative
expenses (1,383,996) (6.5) (1,621,891) (6.6) (1,946,785) (7.0)
Selling and marketing
expenses (496,334) (2.3) (601,409) (2.4) (726,437) (2.6)
Research and development
expenses (988,954) (4.6) (1,096,834) (4.5) (1,351,799) (4.8)
Net impairment losses on
financial assets (97,762) (0.5) (51,478) (0.2) (56,379) (0.2)
Other income 260,185 1.2 291,162 1.2 292,301 1.0
Other gains/(losses), net 471,310 2.2 63,585 0.3 (83,795) (0.3)
Operating profit 3,226,061 15.1 3,718,623 15.1 3,747,925 13.4
Finance income 53,136 0.2 56,238 0.2 67,221 0.2
Finance costs (235,671) (1.1) (229,583) (0.9) (132,384) (0.5)
Finance costs, net (182,535) (0.9) (173,345) (0.7) (65,163) (0.2)
Share of profit or loss of
investments accounted for
using the equity method 7,732 0.0 7,986 0.0 8,925 0.0
Profit before income tax 3,051,258 14.3 3,553,264 14.5 3,691,687 13.2
Income tax expenses (443,206) (2.1) (619,549) (2.5) (579,961) (2.1)
Profit for the year 2,608,052 12.2 2,933,715 11.9 3,111,726 11.1
SUMMARY
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Revenue
The following table sets forth a breakdown of our revenue by major product types
under our two product categories for the periods indicated:
Year ended December 31,
2022 2023 2024
Amount % Amount % Amount %
(RMB in thousands, except for percentage)
Refrigeration and
air-conditioning product
components
Valves 8,812,275 41.3 9,834,606 40.0 10,702,920 38.3
Heat exchangers 2,057,745 9.6 2,121,123 8.6 2,693,826 9.6
Controllers 566,126 2.7 704,243 2.9 875,632 3.1
Pumps 580,250 2.7 514,399 2.1 554,762 2.0
Others
(1) 1,817,390 8.5 1,469,764 6.0 1,733,465 6.2
Sub-total 13,833,786 64.8 14,644,135 59.6 16,560,605 59.3
Automotive components
Integrated modules 2,362,963 11.1 3,361,041 13.7 4,262,920 15.3
Automotive valves 2,031,171 9.5 2,913,949 11.9 2,635,135 9.4
Automotive heat exchangers 1,187,226 5.6 1,554,219 6.3 1,670,952 6.0
Automotive pumps 1,128,587 5.3 1,413,572 5.8 1,622,634 5.8
Others
(2) 803,817 3.8 670,886 2.7 1,194,919 4.3
Sub-total 7,513,764 35.2 9,913,667 40.4 11,386,560 40.7
Total 21,347,550 100.0 24,557,802 100.0 27,947,165 100.0
Notes:
(1) Others primarily include containers, filters, plastic components, heater components, motorized dampers,
sight glasses, copper connectors, level switches, superconductive plates and pressure switches, among
others.
(2) Others primarily include blocks, liquid receivers, resolvers and energy storage products, among others.
During the Track Record Period, we experienced steady revenue growth from
RMB21,347.6 million in 2022 to RMB24,557.8 million in 2023, and further to RMB27,947.2
million in 2024, which was driven by sales of both refrigeration and air-conditioning
product components, as well as automotive components.
Cost of revenue
Our cost of revenue consists of (i) raw materials and consumables used, mainly
including copper and aluminum, (ii) employee benefit expenses, (iii) depreciation and
amortization, (iv) utility costs, (v) impairment losses on inventories, (vi) transportation
and storage charges and (vii) other expenses. During the Track Record Period, our cost of
revenue grew in line with our revenue.
SUMMARY
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Gross profit and gross profit margin
The following table sets forth a breakdown of our gross profit and gross profit
margin by product category for the periods indicated:
Year ended December 31,
2022 2023 2024
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
(RMB in thousands, except for percentages)
Refrigeration and air-conditioning
product components 3,550,459 25.7 3,960,720 27.0 4,481,755 27.1
Automotive components 1,911,153 25.4 2,774,768 28.0 3,139,064 27.6
Total 5,461,612 25.6 6,735,488 27.4 7,620,819 27.3
Despite the fierce competition in refrigeration and air-conditioning product
component market, our gross profit margin of refrigeration and air-conditioning product
components remained relatively stable at 27.0% and 27.1% in 2023 and 2024. We attribute
such performance to (i) our diversified product mix, including continual iteration and
upgrading of existing products and introduction of new products, (ii) effective cost
control through our product design optimization and supply chain management and (iii)
higher production efficiency resulting from (a) our efforts in improving production
techniques and deepening the implementation of lean production management
throughout our production network and (b) economies of scale brought by our consistent
expansion efforts. Our gross profit margin of our refrigeration and air-conditioning
product components increased from 25.7% in 2022 to 27.0% in 2023, primarily as a result of
the foregoing and a decrease in average logistics costs, mainly benefited from the gradual
normalization of the logistics industry, following the gradual lifting of restrictions
measures on COVID-19 pandemic both domestically and globally.
Our gross profit margin of our automotive components increased from 25.4% in
2022 to 28.0% in 2023, and further remained relatively stable at 27.6% in 2024, respectively,
mainly due to (i) our diversified product mix, including continual introduction of
competitive products and iteration and upgrading of existing products to enhance
performance, thereby maintaining the attractiveness of our offerings to customers and
customer loyalty, (ii) effective cost control through our product design optimization and
supply chain management and (iii) higher production efficiency resulting from (a) our
efforts in improving production techniques and deepening the implementation of lean
production management throughout our production network and (b) economies of scale
brought by our consistent expansion efforts.
Profit for the Year
Our net profit for the year increased by 6.1% from RMB2,933.7 million in 2023 to
RMB3,111.7 million in 2024. This increase was mainly due to (i) an increase in revenue
from refrigeration and air-conditioning product components, primarily as a result of the
increase in sales volume resulting from (a) our continual product innovation and iteration,
and (b) our enhanced cooperation with existing customers, and (ii) an increase in revenue
from automotive components, mainly due to the increase in sales volume resulting from
(a) our deeper penetration into the NEV market and continual expansion of customer
base, (b) our continual product innovation and upgrading, and (c) our strengthened
cooperation with existing customers, partially offset by increases in cost of revenue and
expenses.
Our net profit for the year increased by 12.5% from RMB2,608.1 million in 2022 to
RMB2,933.7 million in 2023. This increase was mainly due to (i) an increase in revenue
from refrigeration and air-conditioning product components, primarily as a result of the
SUMMARY
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increase in sales volume resulting from (a) our continual product innovation and iteration,
and (b) our enhanced cooperation with existing customers, and (ii) an increase in revenue
from automotive components, mainly due to the increase in sales volume resulting from
(a) strong market demand for thermal management systems, and (b) our continual
expansion of customer base and enhancement of customer loyalty, partially offset by
increases in cost of revenue and expenses.
See “Financial Information — Description of Major Components of Our Results of
Operations.”
Summary of Consolidated Statements of Financial Position
The following table sets forth a summary of our consolidated statements of financial
position for the periods indicated:
As of December 31,
2022 2023 2024
(RMB in thousands)
Total non-current assets 9,205,510 11,819,045 14,053,586
Total current assets 18,755,704 20,071,540 22,301,163
Total assets 27,961,214 31,890,585 36,354,749
Total non-current liabilities 5,385,990 2,008,032 3,201,801
Total current liabilities 9,455,924 11,818,845 13,633,304
Total liabilities 14,841,914 13,826,877 16,835,105
Net current assets 9,299,780 8,252,695 8,667,859
Total equity 13,119,300 18,063,708 19,519,644
For details of our fluctuation in key items of our consolidated statements of
financial position and net current assets during the Track Record Period, see “Financial
Information — Discussion of Certain Components of Consolidated Statements of
Financial Position.”
Our net current assets increased from RMB8,252.7 million as of December 31, 2023 to
RMB8,667.9 million as of December 31, 2024, primarily due to (i) an increase of
RMB1,469.5 million in other currents assets, which is primarily attributable to our
purchase of wealth management products mainly consisting of the principal- and
interest-guaranteed income vouchers issued by the securities companies and reverse
repurchase of government bond, and (ii) an increase of RMB1,377.5 million in trade and
notes receivables reflecting our revenue growth and business expansion and the
adjustments to credit policies for certain quality customers, partially off set by (i) an
increase of RMB1,910.6 million in trade and notes payables reflecting our business
expansion, and (ii) a decrease of RMB1,154.7 million in term deposits and restricted cash
mainly resulting from maturity of term deposits and our liquidity management.
Our net current assets decreased from RMB9,299.8 million as of December 31, 2022
to RMB8,252.7 million as of December 31, 2023, primarily due to (i) an increase of
RMB1,401.8 million in trade and notes payables reflecting our business expansion, (ii) a
decrease of RMB868.2 million in term deposits and restricted cash mainly resulting from
maturity of term deposits and our liquidity management and (iii) an increase of RMB788.8
million in borrowings, partially offset by (i) an increase of RMB1,574.6 million cash and
cash equivalents mainly resulting from an increase in net cash generated from operating
activities and (ii) an increase of RMB818.8 million in trade and notes receivables, both
reflecting our revenue growth and business expansion.
We recorded total equity of RMB13,119.3 million as of December 31, 2022. As of
December 31, 2023, we had total equity of RMB18,063.7 million, primarily attributable to
(i) a profit for the year of 2023 of RMB2,933.7 million and (ii) conversion of convertible
bonds of RMB2,837.1 million, partially offset by dividends declared of 928.7 million. Our
total equity then increased to RMB19,519.6 million as of December 31, 2024, primarily due
to a profit for the year of 2024 of RMB3,111.7 million, partially offset by dividends
declared of RMB1,315.3 million. See the Consolidated Statements of Changes in Equity to
the Accountant’s Report in Appendix I to this prospectus.
SUMMARY
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Summary of Consolidated Statements of Cash Flows
The following table sets forth a summary of our cash flows for the periods indicated:
Year ended December 31,
2022 2023 2024
(RMB in thousands)
Net cash generated from operating activities 2,366,052 3,560,363 4,026,185
Net cash used in investing activities (2,527,699) (1,045,679) (3,171,091)
Net cash used in financing activities (596,874) (1,091,850) (955,299)
Cash and cash equivalents at beginning of year 2,690,002 2,050,329 3,624,955
Effect of exchange rate changes 118,848 151,792 (81,247)
Cash and cash equivalents at end of year 2,050,329 3,624,955 3,443,503
KEY FINANCIAL RATIOS
The following table sets forth our key financial ratios for the periods indicated:
As of/Year ended December 31,
2022 2023 2024
Gross profit margin (1) 25.6% 27.4% 27.3%
Net profit margin (2) 12.2% 11.9% 11.1%
Gearing ratio (3) 48.6% 20.0% 21.0%
Notes:
(1) Gross profit margin equals gross profit for the year divided by revenue for the year and multiplied by
100%.
(2) Net profit margin equals net profit for the year divided by revenue for the year and multiplied by 100%.
(3) Gearing ratio equals total debt, including its total borrowings, for the year divided by total equity for the
year and multiplied by 100%.
See “Financial Information — Key Financial Ratios.”
RISK FACTORS
Our operations and the Global Offering involve certain risks and uncertainties,
including (i) risks relating to our business and industries and (ii) risks relating to the
Global Offering, which are set out in the section headed “Risk Factors” in this prospectus.
You should read that section in its entirety carefully before you decide to invest in the
Offer Shares. Some of the major risks we face include, but are not limited to:
• Our businesses are dependent on various downstream industries, and a
downturn experienced by any of these industries or the economy in China or
globally could adversely affect our business;
• The industries that we operate in are highly competitive, predominantly
among approximately three to five large manufacturers. If we fail to compete
effectively and successfully, our business, results of operations and financial
condition may be materially and adversely affected;
• If we fail to maintain an effective quality management system, particularly
during the production expansion, our business, reputation, financial
condition and results of operations may be adversely affected;
• If we fail to keep up with the evolution of technologies or adapt our
technology to emerging industry standards, or if our investments in new
technologies prove unsuccessful or ineffective, our business may be
materially and adversely affected; and
SUMMARY
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• We are susceptible to supply shortages, longer lead time and increased costs
of raw materials and key components, any of which could disrupt our supply
chain, increase our production costs, adversely affect our profitability and
delay deliveries of our products to customers.
See “Risk Factors.”
USE OF PROCEEDS
Assuming that the Offer Size Adjustment Option and the Over-allotment Option are
not exercised, after deducting the underwriting commissions and other estimated offering
expenses payable by us in connection with the Global Offering, and assuming an Offer
Price of HK$21.87 per Share (being the mid-point of the indicative Offer Price range of
HK$21.21 and HK$22.53), we estimate that we will receive net proceeds of approximately
HK$7,740.6 million from the Global Offering. We intend to use the proceeds from the
Global Offering for the purposes and in the amounts set forth below:
• approximately 30% of the net proceeds, or HK$2,322.2 million, will be used for
continuous global R&D and innovation of our product mix, including our
technologies, our existing products, new products and emerging business, to
consolidate our existing strength and achieve consistent growth.
• approximately 30% of the net proceeds, or HK$2,322.2 million, will be used to
further enhance our production capabilities and efficiencies, through
expanding and establishing production facilities and increasing the
production automation level in China.
• approximately 25% of the net proceeds, or HK$1,935.2 million, will be used to
expand our overseas production capabilities, which is expected to enable us to
deepen our global layout by expanding our overseas production capabilities,
which is expected to enable us to seize emerging business opportunities
globally and deepen the implementation of supply chain localization
strategies.
• approximately 5% of the net proceeds, or HK$387.0 million, will be used to
enhance our digital intelligence infrastructure, improving digitalization
capabilities across various business processes such as supply chain
management, R&D, production, quality control, sales and operations.
• approximately 10% of the net proceeds, or HK$774.1 million, will be used as
working capital and for general corporate uses.
See “Future Plans and Use of Proceeds.”
RECENT DEVELOPMENT
The Impact of Recent Developments in U.S. Tariffs
During the Track Record Period, there was no material increase in import tariffs of
the U.S. or European Union on our products.
The U.S. has recently enacted, and continues to propose to enact, new global tariffs.
U.S. tariff rates are generally set forth in the Harmonized Tariff Schedule of the U.S. (the
“HTSUS ”), and during the Track Record Period, we were subject to U.S. tariffs on
products exported from China, Mexico and Vietnam to the U.S. In addition, we were
subject to the additional tariffs ranging from 7.5% to 25% imposed on products exported
from China to the U.S. as a result of measures taken under Section 301 of the Trade Act of
1974 (the “ Section 301 Tariffs ”). Consequently, during the Track Record Period, our
products exported from China to the U.S. were subject to tariffs ranging from 8.9% to
29.2%. During the Track Record Period, tariffs imposed on our products exported from
China to the U.S. did not have a material adverse effect on our business operations and
financial condition, particularly due to our proactive approach to allocate additional
costs, including negotiating with customers to pass on certain extra costs through
SUMMARY
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increased selling prices. We believe the adverse impact on our competitiveness was also
modest, as evidenced by our continuous growth. During the Track Record Period, our
products exported from Mexico to the U.S. were subject to tariffs ranging from 0.0% to
4.0%, and products exported from Vietnam to the U.S. were subject to tariffs ranging from
1.4% to 4.0%.
Subsequent to the Track Record Period, during the course of February and April
2025, the President of the U.S., President Donald J. Trump (“ President Trump ”)
implemented additional tariffs as part of his “America First Policy.” Among these,
• for China, the additional tariffs on goods exported from China to the U.S.
peaked at 145% through a series of tariff changes from February to April 2025.
On May 12, 2025, the U.S. and China agreed to cancel certain tariffs altogether
and suspend others for 90 days by May 14, 2025. As a result, starting on May
14, 2025, during the 90-day pause, the total additional tariff rates on goods
exported from China to the U.S. became 30%, which would be applied on top
of the tariffs originally set out in the HTSUS and the Section 301 Tariffs.
• for Mexico, in February 2025, President Trump imposed 25% tariffs on goods
exported from Mexico to the U.S. In March 2025, President Trump granted a
one-month exemption on his new tariffs impacting goods exported from
Mexico for U.S. automakers and, in the same month, further postponed the
25% tariffs on many goods exported from Mexico to the U.S. for one month. In
April, President Trump imposed 10% “reciprocal tariffs” on all countries,
however, for Mexico, the United States-Mexico-Canada Agreement (USMCA)
compliant goods will continue to be subject to a 0% tariff and non-USMCA
compliant goods will in general be subject to a 25% tariff, as applicable.
• for Vietnam, in April, President Trump imposed 46% “reciprocal tariffs” on
goods exported from Vietnam to the U.S., but later suspended the tariffs for 90
days, while maintaining the 10% “reciprocal tariffs” on goods exported from
Vietnam to the U.S. As of the Latest Practicable Date, the 46% “reciprocal
tariffs” on Vietnam were still on pause.
President Trump subsequently raised the tariffs on steel and aluminum imports to
50%, with the change taking effect on June 4, 2025. Accordingly, from June 4, 2025, we were
subject to a 50% tariff on the value of steel and aluminum contained in our products.
Since we have factories in China, Mexico and Vietnam, which export products to the
U.S., as of the Latest Practicable Date, we were subject to U.S. tariffs on products exported
from China, Mexico and Vietnam to the U.S. Our products exported from China to the U.S.
were subject to tariffs ranging from 38.9% to 99.2%; products exported from Mexico to the
U.S. were subject to tariffs ranging from 0.0% to 53.0%; and products exported from
Vietnam to the U.S. were subject to tariffs ranging from 11.4% to 14.0%. However, there
continue to be significant uncertainties around changes to U.S. trade policies. See “Risk
Factors — Risks Relating to Our Business and Industry — Changes in international trade
policies, geopolitics and trade protection measures, export control and economic or trade
sanctions may materially and adversely affect our business, financial condition and
results of operations.”
Although we received a substantial proportion of revenue from North America
during the Track Record Period, the additional U.S. tariffs imposed on us did not have a
material adverse effect on our business operations or financial condition during the Track
Record Period and up to the Latest Practicable Date. This was due in part to arm’s length
negotiations with customers that allowed us to distribute extra costs. We believe that our
leading position in the global refrigeration and air-conditioning control component and
automotive thermal management system markets, coupled with our long-standing
customer relationships, will help us pass on the increased tariffs to our customers. At the
same time, our global presence affords us the flexibility to adjust our global production
capabilities and enables us to effectively manage our overall tariff costs. Our global
operational experience enables us to make precise commercial judgements and informed
decisions, as well as to adapt our strategies as necessary. We continue to monitor changes
in global tariff policies and leverage our domestic and international production capacities
SUMMARY
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to reduce their impact on our operations. Based on the above, we believe that the
additional U.S. tariffs as of the Latest Practicable Date will not have a material adverse
impact on our business operations, financial performance and expansion plans.
Summary of Unaudited Financial Information for the Three Months Ended March 31,
2025
As required by the Shenzhen Stock Exchange Listing Rules, we published our
quarterly report on April 30, 2025, containing our unaudited consolidated financial
statements as of and for the three months ended March 31, 2025 prepared under PRC
GAAP . We have included our unaudited consolidated financial statements prepared in
accordance with IAS 34 as of and for the three months ended March 31, 2025, in condensed
form, in the unaudited interim financial report set forth in Appendix IA to this Listing
Document. Our unaudited condensed consolidated financial statements have been
reviewed by our reporting accountant in accordance with Hong Kong Standard on Review
Engagements 2410.
Our revenue increased by 19.1% from RMB6,439.6 million for the three months
ended March 31, 2024 to RMB7,669.5 million for the three months ended March 31, 2025.
Specifically:
• our revenue from refrigeration and air-conditioning product components
increased by 28.2% from RMB3,868.7 million for the three months ended
March 31, 2024 to RMB4,960.1 million for the three months ended March 31,
2025; and
• our revenue from automotive components increased by 5.4% from RMB2,570.8
million for the three months ended March 31, 2024 to RMB2,709.4 million for
the three months ended March 31, 2025.
Our gross profit increased by 18.1% from RMB1,740.6 million for the three months
ended March 31, 2024 to RMB2,055.3 million for the three months ended March 31, 2025.
Our gross profit margin remained relatively stable at 27.0% and 26.8%, respectively, for
the three months ended March 31, 2024 and 2025. Specifically:
• our gross profit margin for refrigeration and air-conditioning product
components remained relatively stable at 26.9% and 26.5%, respectively, for
the three months ended March 31, 2024 and 2025; and
• our gross profit margin for automotive components remained relatively stable
at 27.3% and 27.4%, respectively, for the three months ended March 31, 2024
and 2025.
Our profit for the period increased by 42.9% from RMB646.2 million for the three
months ended March 31, 2024 to RMB923.5 million for the three months ended March 31,
2025. See “Appendix IA — Unaudited Interim Condensed Consolidated Financial
Information.”
NO MATERIAL ADVERSE CHANGE
Our Directors have confirmed that up to the date of this prospectus, there has been
no material adverse change in our financial or trading position or prospects since
December 31, 2024, being the end date of the periods reported in the Accountant’s Report
in Appendix I to this prospectus, and there is no event since December 31, 2024 that would
materially affect the information as set out in the Accountant’s Report in Appendix I to
this prospectus.
SUMMARY
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OUR LISTING ON THE SHENZHEN STOCK EXCHANGE
Since 2005, our Company has been listed on the Shenzhen Stock Exchange. As of the
Latest Practicable Date, our Directors confirmed that we had no instances of material
non-compliance with the rules of the Shenzhen Stock Exchange and other applicable
securities laws and regulations of the PRC in any material respects since our listing on the
Shenzhen Stock Exchange, and, to the best knowledge of our Directors having made all
reasonable enquiries, there was no material matter that should be brought to the
investors’ attention in relation to our compliance record on the Shenzhen Stock Exchange.
Based on the independent due diligence conducted by the Joint Sponsors, nothing has
come to the Joint Sponsors’ attention that would cause them to disagree with our
Directors’ confirmation with regard to the compliance records of the Company on the
Shenzhen Stock Exchange.
OFFERING STATISTICS
All statistics in the following table are based on the assumptions that (i) the Global
Offering has been completed and 360,330,000 H Shares are issued pursuant to the Global
Offering, (ii) the Offer Size Adjustment Option and the Over-allotment Option are not
exercised, and (iii) 4,090,011,814 Shares (excluding treasury shares) are issued and
outstanding following the completion of the Global Offering.
Based on an Offer
Price of HK$21.21
per H Share
Based on an Offer
Price of HK$22.53
per H Share
Market capitalization of our Shares
(1) HK$86,749.2 million HK$92,148.0 million
Unaudited pro forma adjusted net
tangible asset per Share (2)
RMB6.39
HK$6.97 (3)
RMB6.49
HK$7.09 (3)
Notes:
(1) The calculation of market capitalization of our Shares is based on 360,330,000 H shares and 3,729,681,814
A shares (excluding treasury shares) expected to be in issue (representing 4,090,011,814 Shares expected
to be in issue and outstanding) immediately following the completion of the Global Offering (assuming
the Offer Size Adjustment Option and the Over-allotment Option are not exercised). For details, see
“Share Capital — Upon Completion of the Global Offering” in this prospectus.
(2) The unaudited pro forma adjusted consolidated net tangible assets per Share is arrived at after the
adjustments referred to in “Appendix II — Unaudited Pro Forma Financial Information” in this
prospectus and on the basis that 4,092,719,535 Shares (including 1,200,921 treasury shares) were in issue
assuming that the Global Offering has been completed on December 31, 2024 but takes no account of the
Offer Size Adjustment Option and any Shares which may be allotted and issued by the Company
pursuant to the exercise of the Offer Size Adjustment Option and the Over-allotment Option, any Shares
that may be issued by the Company pursuant to the exercise of options or the vesting of restricted shares
or other awards that have been or may be granted from time to time under the Restricted Share Incentive
Schemes or any Shares which may be issued or repurchased by the Company after the Latest Practicable
Date.
(3) The estimated net proceeds from the Global Offering are translated into Renminbi at the rate of RMB1.00
to HK$1.0913. No representation is made that Hong Kong dollars has been, could have been or may be
converted to Renminbi, or vice versa, at that rate.
(4) The unaudited pro forma adjusted consolidated net tangible assets of our Group attributable to owners of
our Company have not been adjusted to illustrate the effect of the following:
Pursuant to a shareholders’ resolution dated April 16, 2025, it was resolved that a dividend of RMB0.25
per share totaling RMB932.75 million would be paid for 2024. This dividend is not recorded in the
financial statements of our Company for 2024 or this unaudited pro forma financial information. Had this
dividend been adjusted in the unaudited pro forma financial information, the net tangible assets of our
Group would decrease by RMB932.75 million and the net tangible assets per share would decrease by
RMB0.2279 (equivalent to HK$0.2487).
SUMMARY
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DIVIDEND
Pursuant to our Articles of Association, in principle, we distribute cash dividends
once a year. Within any three consecutive years, our distributed cumulative profits in cash
shall not be less than 30% of the average distributable profits realized in the latest three
years. The specific dividend ratios shall be determined by our Board according to relevant
regulations and our operating conditions, and shall be considered and resolved at our
general meeting.
Future profit distributions may be paid in the form of cash dividends or stock
dividends or a combination of cash dividends and stock dividends or other methods
permitted by laws and regulations. We preferentially adopt the method of cash dividends.
We shall adopt cash dividends for profit distribution provided that the conditions for cash
distribution are satisfied. When distributing profits in the form of stock dividends, we
will consider true and reasonable factors such as the growth of our Company and the
dilution to net assets per share.
During the Track Record Period, we declared cash dividends to our Shareholders as
follows:
Year ended December 31,
2022 2023 2024
(RMB in thousands)
Final dividends in respect of the previous
year, declared and paid during the year 535,335 716,973 926,626
Interim dividends in respect of current year,
declared and paid during the year 358,624 186,023 373,119
Total 893,959 902,996 1,299,745
On March 25, 2025, the Board of Directors proposed a final dividend of RMB2.5 per
10 shares (tax inclusive), totaling RMB932.75 million, in respect of the year ended
December 31, 2024. On April 16, 2025, the Shareholders’ meeting approved the proposed
final dividend for 2024. As of May 22, 2025, the dividends for the year ended December 31,
2024 have been fully paid to our Shareholders.
LISTING EXPENSES
Listing expenses represent professional fees, underwriting commissions and other
fees incurred in connection with the Global Offering. We estimate that our listing expenses
will be approximately HK$139.8 million (assuming an Offer Price of HK$21.87 per Offer
Share (being the mid-point of the indicative Offer Price range) and no exercise of the Offer
Size Adjustment Option and the Over-allotment Option), representing 1.8% of the gross
proceeds (based on the mid-point of our indicative price range for the Global Offering and
assuming that the Offer Size Adjustment Option and the Over-allotment Option are not
exercised) of the Global Offering. During the Track Record Period, we incurred listing
expenses of RMB10.0 million, of which RMB1.3 million was charged to the consolidated
statements of profit or loss as general and administrative expenses, and RMB8.7 million
will be deducted from equity. We expect to incur listing expenses of approximately
HK$139.8 million, of which approximately HK$9.4 million is expected to be recognized in
the consolidated statements of profit or loss as general and administrative expenses and
approximately HK$130.4 million is expected to be recognized as a deduction in equity
directly upon the Listing. Our Directors do not expect such expenses to materially impact
our results of operations in 2025. By nature, our listing expenses are composed of (i)
underwriting commission of approximately HK$104.1 million and (ii) non-underwriting
related expenses of approximately HK$35.7 million, which consist of fees and expenses of
legal advisors and the Reporting Accountant of approximately HK$23.0 million and other
fees and expenses of approximately HK$12.7 million.
SUMMARY
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In this prospectus, unless the context otherwise requires, the following terms and
expressions shall have the meanings set out below. Certain other terms are explained in the
section headed “Glossary of Technical Terms” in this prospectus.
“A Share(s)” or dinary shares issued by our Company, with a
nominal value of RMB1.00 each, which are listed on
the Shenzhen Stock Exchange and traded in Renminbi
“Accountant’s Report” the accountant’s report of our Company for the Track
Record Period, as included in Appendix I
“affiliate(s)” with respect to any specified person, any other
person, directly or indirectly, controlling or controlled
by or under direct or indirect common control with
such specified person
“AFRC” the Accounting and Financial Reporting Council of
Hong Kong
“Articles of Association” the articles of association of our Company, as
amended, which shall become effective on the Listing
Date, a summary of which is set out in Appendix V to
this prospectus
“associate(s)” has the meaning ascribed thereto under the Listing
Rules
“ATI” American Tubing International USA LLC, a US
producers of copper assemblies for use in the
air-conditioning and refrigeration industries that we
acquired in 2018
“Audit Committee” the audit committee of the Board
“Aweco” Aweco Group, a German electronic home appliance
component manufacturer with over 50 years of
operating history that we acquired in 2012
“Board” or “Board of Directors” the board of Directors of our Company
“business day” a day on which banks in Hong Kong are generally
open to the public for normal banking business and
which is not a Saturday, Sunday or public holiday in
Hong Kong
DEFINITIONS
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“Capital Market Intermediaries” the capital market intermediaries as named in
“Directors, Supervisors and Parties Involved in the
Global Offering”
“CCASS” the Central Clearing and Settlement System
established and operated by HKSCC
“China” or the “PRC” The People’s Republic of China, but for the purpose of
this prospectus and for geographical reference only
and except where the context requires, references in
this prospectus to “China” and the “PRC” do not
apply to Hong Kong, Macau Special Administrative
Region and Taiwan
“Companies Ordinance” the Companies Ordinance (Chapter 622 of the Laws of
Hong Kong), as amended, supplemented or otherwise
modified from time to time
“Companies (Winding Up and
Miscellaneous Provisions)
Ordinance” or “CWUMPO”
the Companies (Winding Up and Miscellaneous
Provisions) Ordinance (Chapter 32 of the Laws of
Hong Kong), as amended, supplemented or otherwise
modified from time to time
“Company”, “our Company”,
or “the Company”
Zhejiang Sanhua Intelligent Controls Co., Ltd. ( एϪɧ
ʮ̡ ), a PRC company established
on September 10, 1994, the A Shares of which have
been listed on the Shenzhen Stock Exchange (stock
code: 002050)
“connected person(s)” has the meaning ascribed to it under the Listing Rules
“connected transaction(s)” has the meaning ascribed to it under the Listing Rules
“Controlling Shareholder(s)” or
“Controlling Shareholders
Group”
Mr. Zhang Daocai, Ms. Yu Qingjuan, Mr. Zhang Yabo,
Mr. Zhang Shaobo, Xinchang Huaqing Investment,
Xinchang Huaxin Industrial, Zhejiang Huateng
Industrial, Sanhua Holding, Hield International,
Wealth Info and Sanhua Green Energy, collectively the
controlling shareholders group of our Company;
prior to the Listing and as of the Latest Practicable
Date, the controlling shareholders group held
approximately 44.62% of our total share capital, and
upon Listing, they will continue to remain as a group
of our Company’s controlling shareholders
“CSRC” the China Securities Regulatory Commission ( ʕ਷ᗇ
ึ )
DEFINITIONS
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“Director(s)” the director(s) of our Company
“EIT” the enterprise income tax
“EIT Law” the PRC Enterprise Income Tax Law ( ʕശɛ͏΍ձ਷
), which was promulgated on March 16,
2007, came into effect on January 1, 2008, and was
most recently amended on December 29, 2018
becoming effective on the same date
“Extreme Conditions” extreme conditions caused by a super typhoon as
announced by the government of Hong Kong
“FINI” “Fast Interface for New Issuance,” an online platform
operated by HKSCC that is mandatory for admission
to trading and, where applicable, the collection and
processing of specified information on subscription in
and settlement for all new listings
“Frost & Sullivan” Frost & Sullivan (Beijing) Inc., Shanghai Branch Co.,
an independent market research and consulting
company
“Frost & Sullivan Report” the report prepared by Frost & Sullivan
“General Rules of HKSCC” the General Rules of HKSCC as may be amended or
modified from time to time and where the context so
permits, shall include the HKSCC Operational
Procedures
“Global Offering” the Hong Kong Public Offering and the International
Offering
“Group”, “our Group”,
“the Group”, “we”,
“us”, or “our”
our Company and our subsidiaries from time to time,
and where the context requires, in respect of the
period prior to our Company becoming the holding
company of its present subsidiaries, such subsidiaries
as if they were subsidiaries of our Company at the
relevant time
“Guide for New Listing
Applicants”
the Guide for New Listing Applicants issued by the
Stock Exchange in December 2023
“H Share Registrar” Computershare Hong Kong Investor Services Limited
DEFINITIONS
–2 3–


--- page 34 ---
“H Share(s)” shares in the share capital of our Company with a
nominal value of RMB1.00 each, to be listed and
traded on the Hong Kong Stock Exchange
“Hield International” Hield International (H.K.) Limited, a Hong Kong
company established on May 14, 2007, one of our
Controlling Shareholders
“HK” or “Hong Kong” the Hong Kong Special Administrative Region of the
PRC
“HK$”, “HK dollars” or
“Hong Kong dollars”
Hong Kong dollars, the lawful currency of Hong
Kong
“HKSCC” Hong Kong Securities Clearing Company Limited, a
wholly-owned subsidiary of Hong Kong Exchanges
and Clearing Limited
“HKSCC EIPO” the application for the Hong Kong Offer Shares to be
issued in the name of HKSCC Nominees and
deposited directly into CCASS to be credited to your
designated HKSCC Participant’s stock account
through causing HKSCC Nominees to apply on your
behalf, including by instructing your broker or
custodian who is an HKSCC Participant to give
electronic application instructions via HKSCC’s
FINI system to apply for the Hong Kong Offer Shares
on your behalf
“HKSCC Nominees” HKSCC Nom inees Limited, a wholly-owned
subsidiary of HKSCC
“HKSCC Operational
Procedures”
the operational procedures of HKSCC, containing the
practices, procedures and administrative or other
requirements relating to HKSCC’s services and the
operations and functions of CCASS, FINI or any other
platform, facility or system established, operated
and/or otherwise provided by or through HKSCC, as
from time to time in force
“HKSCC Participant(s)” a participant admitted to participate in CCASS as a
direct clearing participant, a general clearing
participant or a custodian participant
DEFINITIONS
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--- page 35 ---
“Hong Kong Offer Shares” the 25,223,100 H Shares being initially offered for
subscription in the Hong Kong Public Offering
(subject to reallocation and the Offer Size Adjustment
Option as described in “Structure of the Global
Offering”)
“Hong Kong Public Offering” the offer of the Hong Kong Offer Shares for
subscription by the public in Hong Kong at the Offer
Price (plus brokerage of 1.0%, SFC transaction levy of
0.0027%, AFRC transaction levy of 0.00015% and
Stock Exchange trading fee of 0.00565%) on the terms
and subject to the conditions described in this
prospectus, as further described in “Structure of the
Global Offering — The Hong Kong Public Offering”
“Takeovers Code” Codes on Takeovers and Mergers and Share
Buy-backs issued by the SFC
“Hong Kong Underwriters” the underwriters of the Hong Kong Public Offering as
listed in “Underwriting — Hong Kong Underwriters”
“Hong Kong Underwriting
Agreement”
the underwriting agreement, dated June 12, 2025,
relating to the Hong Kong Public Offering, entered
into by, among others, the Overall Coordinators, the
Hong Kong Underwriters and our Company
“IFRS Accounting Standards” International Financial Reporting Standards issued
by the International Accounting Standards Board
“Independent Third Party(ies)” person(s) or company(ies), who/which, to the best of
our Directors’ knowledge, information and belief,
is/are not our connected persons
“International Offer Shares” the 335,106,900 H Shares being initially offered for
subscription under the International Offering
together, where relevant, with any additional H
Shares that may be issued pursuant to any exercise of
the Offer Size Adjustment Option and the
Over-allotment Option (subject to reallocation as
described in “Structure of the Global Offering”)
DEFINITIONS
–2 5–


--- page 36 ---
“International Offering” the conditional placing of the International Offer
Shares at the Offer Price outside the United States in
offshore transactions in accordance with Regulation S
and in the United States to QIBs only in reliance on
Rule 144A or any other available exemption from the
registration requirements under the U.S. Securities
Act, as further described in “Structure of the Global
Offering”
“International Underwriters” the underwriters expected to enter into the
International Underwriting Agreement relating to the
International Offering
“International Underwriting
Agreement”
the international underwriting agreement, expected
to be entered into on or about June 19, 2025, relating to
the International Offering, by, among others, our
Company, the Overall Coordinators and the
International Underwriters in respect of the
International Offering, as further described in
“Underwriting — International Offering”
“Joint Bookrunners” the joint bookrunners as named in “Directors,
Supervisors and Parties Involved in the Global
Offering”
“Joint Global Coordinators” the joint global coordinators as named in “Directors,
Supervisors and Parties Involved in the Global
Offering”
“Joint Lead Managers” the joint lead managers as named in “Directors,
Supervisors and Parties Involved in the Global
Offering”
“Joint Sponsors” China International Capital Corporation Hong Kong
Securities Limited and Huatai Financial Holdings
(Hong Kong) Limited
“Latest Practicable Date” June 4, 2025, being the latest practicable date for
ascertaining certain information in this prospectus
before its publication
“Listing” the listing of the H Shares on the Main Board
“Listing Committee” the L isting Committee of the Hong Kong Stock
Exchange
DEFINITIONS
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--- page 37 ---
“Listing Date” the date, expected to be on or about Monday, June 23,
2025, on which the H Shares are to be listed and on
which dealings in the H Shares are to be first
permitted to take place on the Hong Kong Stock
Exchange
“Listing Rules” or
“Hong Kong Listing Rules”
the Rules Governing the Listing of Securities on The
Stock Exchange of Hong Kong Limited
“Main Board” the stock exchange (excluding the option market)
operated by the Hong Kong Stock Exchange which is
independent from and operates in parallel with the
Growth Enterprise Market of the Hong Kong Stock
Exchange
“Major Subsidiary” or
“Major Subsidiaries”
subsidiaries of the Company that meet any of the
following criteria: (1) any of the revenue, total profit,
net profit, total assets and net assets of which reaches or
exceeds 5% of the relevant financial indicators of the
Company’s consolidated financial statements in any
year/at the end of the Track Record Period; (2)
subsidiaries which hold important business licenses
and permits of the Company’s business; (3) subsidiaries
which have a significant impact on the Company’s
business operations and future development strategies
based on the Company’s comprehensive assessment of
the Company’s business composition and principal
business
“Ministry of Finance” or
“MOF”
Ministry of Finance of the PRC (݁
௅)
“MOFCOM” Ministry of Commerce of the PRC ( ʕശɛ͏΍ձ਷ਠ
ਕ௅)
“NDRC” National Development and Reform Commission of
the PRC (ึ )
“Nomination Committee” the nomination committee of the Board
“NPC” the National People’s Congress of the PRC ( ʕശɛ͏
ɽึ )
DEFINITIONS
–2 7–


--- page 38 ---
“Offer Price” the final offer price per Offer Share (exclusive of
brokerage of 1.0%, SFC transaction levy of 0.0027%,
AFRC transaction levy of 0.00015% and Stock
Exchange trading fee of 0.00565%), expressed in Hong
Kong dollars, at which Hong Kong Offer Shares are to
be subscribed for pursuant to the Hong Kong Public
Offering and International Offer Shares are to be
offered pursuant to the International Offering, to be
determined as described in “Structure of the Global
Offering — Pricing and Allocation”
“Offer Share(s)” the Hong Kong Offer Shares and the International
Offer Shares, together, where relevant, with any
additional H Shares which may be issued by our
Company pursuant to the exercise of the Offer Size
Adjustment Option and the Over-allotment Option
“Offer Size Adjustment Option” the option under the Hong Kong Underwriting
Agreement, exercisable by the Company with the
prior written agreement between the Company and
the Overall Coordinators (for themselves and on
behalf of the Underwriters) on or before the execution
of the Price Determination Agreement, pursuant to
which the Company may issue and allot up to an
aggregate of 54,049,500 additional H Shares
(representing in aggregate approximately 15.0% of the
Offer Shares initially being offered under the Global
Offering) at the Offer Price, to cover additional
market demand, as described in “Structure of the
Global Offering — Offer Size Adjustment Option”
“Overall Coordinators” the overall coordinators as named in the section
headed “Directors, Supervisors and Parties Involved
in the Global Offering”
DEFINITIONS
–2 8–


--- page 39 ---
“Over-allotment Option” the option expected to be granted by our Company to
the International Underwriters, exercisable by the
Overall Coordinators on behalf of the International
Underwriters for up to 30 days from the day following
the last day for the lodging of applications under the
Hong Kong Public Offering, to require our Company
to allot and issue up to an aggregate of 54,049,500
additional H Shares (representing in aggregate
approximately 15.0% of the Offer Shares initially
being offered under the Global Offering assuming the
Offer Size Adjustment Option is not exercised at all)
or up to 62,156,900 additional H Shares (representing
in aggregate approximately 15.0% of the Offer Shares
being offered under the Global Offering assuming the
Offer Size Adjustment Option is exercised in full) to
the International Underwriters to, among other
things, cover over-allocations in the International
Offering, if any, details of which are described in
“Structure of the Global Offering — Over-Allotment
Option”
“PBOC” the People’s Bank of China ( ʕ਷ɛ͏ვБ ), the central
bank of the PRC
“PRC Company Law” the Company Law of the PRC, as amended, modified
and/or otherwise supplemented from time to time
“PRC GAAP” generally accepted accounting principles in China
“PRC government” or “State” the central government of the PRC and all
governmental subdivisions (including provincial,
municipal and other regional or local government
entities) and instrumentalities thereof or, where the
context requires, any of them
“Price Determination
Agreement”
the agreement to be entered into between our
Company and the Overall Coordinators (for
themselves and on behalf of the Underwriters) on or
about the Price Determination Date to record and fix
the Offer Price
“Price Determination Date” the date, expected to be on or before Thursday, June
19, 2025 and in any event no later than 12:00 noon on
Thursday, June 19, 2025, on which the Offer Price is to
be fixed for the purposes of the Global Offering
DEFINITIONS
–2 9–


--- page 40 ---
“province” a province or, where the context requires, a provincial
level autonomous region or municipality, under the
direct supervision of the central government of the
PRC
“QIB” a qualified institutional buyer within the meaning of
Rule 144A
“Ranco” Changzhou Ranco Reversing Valve Co., Ltd. ( ੬ψᚆ
ʮ̡ ), a company primarily engaging in
the manufacturing and assembly of four-way
reversing valves and related products that we
acquired in 2008
“Regulation S” Regulation S under the U.S. Securities Act
“Relevant Persons” our Com pany, the Joint Sponsors, the Overall
Coordinators, the Joint Global Coordinator, the Joint
Bookrunner, the Joint Lead Manager, the Capital
Market Intermediaries, the Underwriters, any of their
respective directors, officers, employees, partners,
agents, advisors and any other parties involved in the
Global Offering
“Remuneration and
Evaluation Committee”
the remuneration and evaluation committee of the
Board
“RMB” or “Renminbi” Renminbi, the lawful currency of China
“Rule 144A” Rule 144A under the U.S. Securities Act
“SAFE” the State Administration for Foreign Exchange of the
PRC (̮ි၍ଣ҅ )
“SAIC” the State Administration of Industry and Commerce
of the PRC (၍ଣᐼ҅ ),
which has now been merged into the SAMR
“SAMR” the State Administration for Market Regulation of the
PRC (̹ఙ္ຖ၍ଣᐼ҅ )
“Sanhua Green Energy” Zhejiang Sanhua Green Energy Industrial Group Co.,
Ltd. (ʮ̡ ), a PRC company
established on September 30, 2001, one of our
Controlling Shareholders
DEFINITIONS
–3 0–


--- page 41 ---
“Sanhua Holding” Sanhua Holding Group Co., Ltd. (ʮ
̡), a PRC company established on July 11, 2000, one
of our Controlling Shareholders
“STA” the State Taxation Administration of the PRC ( ʕശɛ
೼ਕᐼ҅ )
“Securities Law” the Securities Law of the People’s Republic of China
(جas amended, supplemented
or otherwise modified from time to time
“SFC” Securities and Futures Commission of Hong Kong
“SFO” or “Securities and
Futures Ordinance”
Securities and Futures Ordinance (Chapter 571 of the
Laws of Hong Kong), as amended, supplemented or
otherwise modified from time to time
“Share(s)” ordinary share(s) in the share capital of our Company,
with a nominal value of RMB1.00 each, comprising A
Shares and H Shares
“Shareholder(s)” holder(s) of the Share(s)
“Shenzhen-Hong Kong Stock
Connect”
a securities trading and clearing links program
developed by the Hong Kong Stock Exchange,
Shenzhen Stock Exchange, HKSCC and China
Securities Depository and Clearing Corporation
Limited for mutual market access between Hong
Kong and Shenzhen
“Stabilizing Manager” China International Capital Corporation Hong Kong
Securities Limited
“State Council” the State Council of the PRC ( ʕശɛ͏΍ձ਷਷ਕ৫ )
“Stock Exchange” or
“Hong Kong Stock Exchange”
The Stock Exchange of Hong Kong Limited
“Strategy Management and ESG
Committee”
the strategy management and ESG committee of the
Board
“subsidiary” or “subsidiaries” has the meaning ascribed to it in section 15 of the
Companies Ordinance
“substantial shareholder(s)” has the meaning ascribed to it in the Listing Rules
DEFINITIONS
–3 1–


--- page 42 ---
“Supervisor(s)” member(s) of Supervisory Committee
“Supervisory Committee” the supervisory committee of our Company
“Track Record Period” the years ended December 31, 2022, 2023 and 2024
“Trial Measures” the T rial Administrative Measures of Overseas
Securities Offering and Listing by Domestic
Companies (“ ྤʫΆุྤ̮೯БᗇՎձɪ̹၍ଣ༊Б፬
جpromulgated by the CSRC on February 17, 2023
“U.S.”, “US” or “United States” the United States of America, its territories, its
possessions and all areas subject to its jurisdictions
“U.S. dollars”,
“US dollars” or “US$”
United States dollars, the lawful currency of the
United States
“U.S. Securities Act” United States Securities Act of 1933 and the rules and
regulations promulgated thereunder
“Underwriters” the Hong Kong Underwriters and the International
Underwriters
“Underwriting Agreements” the Hong Kong Underwriting Agreement and the
International Underwriting Agreement
“VAT” value-added tax
“Wealth Info” W ealth Info Limited, a Hong Kong company
established on June 2, 2005, one of our Controlling
Shareholders
“White Form eIPO” the application for Hong Kong Offer Shares to be
issued in the applicant’s own name, submitted online
through the designated website of the White Form
eIPO Service Provider at www.eipo.com.hk
“White Form eIPO Service
Provider”
Computershare Hong Kong Investor Services Limited
“Xinchang Huaqing
Investment”
Xinchang Huaqing Investment Co., Ltd. (ശ૶ҳ
ʮ̡ ), a PRC company established on February
29, 2016, one of our Controlling Shareholders
“Xinchang Huaxin Industrial” Xinchang Huaxin Industrial Co., Ltd. (ശอྼุϞ
ʮ̡ ), a PRC company established on March 16,
2016, one of our Controlling Shareholders
DEFINITIONS
–3 2–


--- page 43 ---
“Zhejiang Huateng Industrial” Zhejiang Huateng Industrial Co., Ltd. ( एϪശᙜྼุ
ʮ̡ ), a PRC company established on April 19,
2010, one of our Controlling Shareholders
“%” per cent
Unless otherwise specified, in this prospectus:
(a) certain amounts and percentage figures have been subject to rounding adjustments;
accordingly, figures shown as totals in certain tables may not be an arithmetic
aggregation of the figures preceding them; and
(b) for ease of reference, the names of PRC laws and regulations, governmental
authorities, institutions, nature persons or other entities (including certain of our
subsidiaries) have been included in this prospectus in both the Chinese and English
languages and in the event of any inconsistency, the Chinese versions shall prevail.
English translations of company names and other terms from the Chinese language
are provided for identification purposes only.
DEFINITIONS
–3 3–


--- page 44 ---
This glossary of technical terms contains explanations of certain technical terms used in
this prospectus in connection with our Company and our business. Such terminology and
meanings may not correspond to standard industry meanings or usages of those terms.
“actuator” a vital component in electromechanical systems that
converts energy into motion, enabling precise control
and movement
“AGV” Automated Guided Vehicle (AGV) is a mobile robot
used in industrial settings for transporting materials
and goods. AGVs operate without human
intervention, following predefined paths or using
navigation systems, thereby enhancing efficiency and
accuracy in warehousing and logistics operations
“alternate current” current that changes its magnitude and polarity at
regular interval of time
“APS” Advanced Planning and Scheduling (APS) is a system
that optimizes production planning and resource
allocation by using algorithms and data analysis. APS
helps in creating efficient production schedules,
balancing demand and capacity and improving
overall resource utilization
“Automotive News” a weekly newspaper written for the automotive
industry, established in 1925 and based in Detroit,
Michigan, the United State
“Automotive Platform” a shared set of common design, engineering and
production efforts, as well as major components, over
multiple different automotive modules or even
automotive types. It allows automakers to efficiently
develop a wide variety of automotives by sharing the
same basic foundation rather than start from scratch
for each new model
“bionic robot” advanced robotic systems that integrate biological
principles and engineering to enhance functionality
and adaptability. These robots mimic biological
organisms by using sensors, actuators, and control
algorithms to perform complex tasks, improve
interaction with environments and increase efficiency
in various applications
GLOSSARY OF TECHNICAL TERMS
–3 4–


--- page 45 ---
“BLDC fans” Brushless Direct Current (BLDC) fan is one type of
ceiling fan that consumes lower electricity compare to
normal induction fan
“braze welding” the use of a bronze or brass filler rod coated with flux
to join steel workpieces
“direct current” current that flows consistently in a single direction
“EAM” Enterp rise Asset Management (EAM) is a
comprehensive approach to manage the lifecycle of an
organization’s physical assets. It focuses on the
maintenance, operation and optimization of
equipment to maximize efficiency, ensure reliability
and extend asset longevity. EAM systems provide
tools for tracking asset performance, scheduling
maintenance and ensuring regulatory compliance
“EMC test” Electr omagnetic compatibility (EMC) testing
measures the ability of equipment or systems to
function satisfactorily in their electromagnetic
environment without introducing intolerable
electromagnetic disturbance to anything in that
environment
“EOL test” End-of-Line (EOL) test is a process conducted at the
end of manufacturing to verify that products meet
performance and safety standards
“ERP” Enterprise Resource Planning (ERP) is an integrated
software platform used to manage and automate core
business processes across an organization. ERP
systems consolidate data from various departments,
such as finance and supply chain to enhance
efficiency and provide a unified view of business
operations
“Ex-factory Defect Rate” refers to the number of defective products that enter
the market within a given year or period as a ratio of
the total quantity of products dispatched from the
factory
“GHG” greenhouse gas, gas in the atmosphere that raises the
surface temperature of planet Earth and strengthens
the greenhouse effect, contributing to climate change
GLOSSARY OF TECHNICAL TERMS
–3 5–


--- page 46 ---
“helium leakage test” A helium leakage test is performed with the help of a
helium leak detector known as a Mass Spectrometer
Leak Detector (MSLD). Helium leakage tests are
performed on pipelines, storage tankages and vessels
that store chemicals, crude oil, petroleum products or
other liquid materials to detect small leaks in these
sealed industrial containers. Corrective measures are
undertaken when leaks are discovered
“HVAC” Heating, Ventilation, and Air Conditioning (HVAC)
systems are integral components used to regulate
indoor environments. They are designed to provide
thermal comfort and acceptable indoor air quality by
controlling temperature, humidity and air flow
“ICEVs” Traditional internal combustion engine vehicles are
vehicles powered by an internal combustion engine
(ICE) that generates propulsion by burning fuel,
typically gasoline or diesel, within the engine
“IoT” Internet of Things (IoT) refers to the network of
physical objects embedded with sensors, software
and other technologies to connect and exchange data
with other devices and systems over the internet.
These objects range from everyday household items
to sophisticated industrial tools. The primary aim of
IoT is to enable seamless communication and
interaction between devices, enhancing efficiency,
automation and data-driven decision-making
“key refrigeration and
air-conditioning control
components”
Key refrigeration and air-conditioning control
components are major integral parts used in
air-conditioners and other refrigeration facilities for
household and commercial application scenarios to
provide essential functions such as heating and
cooling, refrigerant flow control and pressure
measurement, among others. Key refrigeration and
air-conditioning control components include
electronic expansion valves, four-way reversing
valves, service valves, solenoid valves, micro-channel
heat exchangers, Omega pumps, inverter controllers,
pressure sensors, among others
“Local Interconnect Network” A serial network protocol used for communication
between components in vehicles
GLOSSARY OF TECHNICAL TERMS
–3 6–


--- page 47 ---
“machine vision” A technology used for imaging-based automatic
inspection and analysis, which is essential for process
control and robot guidance. It involves capturing and
processing images to allow machines to interpret
visual data. It helps production lines automatically
identify and correct defects, ensuring consistency and
high quality
“MES” Manufacturing Execution System (MES) is a software
system that monitors, tracks and controls
manufacturing processes. MES provides real-time
data and insights into production operations,
facilitating production control, quality management
and decision-making
“MPS” Master Production Schedule (MPS) is a comprehensive
plan for manufacturing finished goods, detailing the
products, quantities and production timelines. It
ensures alignment with customer demand and
inventory policies, serving as a crucial input for
Material Requirements Planning (MRP) systems. The
MPS helps optimize resource allocation, minimize
waste and meet delivery deadlines
“MRP” Material Requirements Planning (MRP) is a system
used to manage manufacturing processes by
determining the quantity and timing of raw material
purchases. MRP analyzes production schedules,
inventory levels and supplier lead times to ensure
materials are available for production while
minimizing inventory costs
“muffler” a component designed to reduce noise and optimize
airflow in the air-conditioning system
“NEVs” New Energy Vehicles (NEVs) include but not limited
to battery EV , hybrid and fuel cell vehicles
GLOSSARY OF TECHNICAL TERMS
–3 7–


--- page 48 ---
“OTWB” Order, T ransportation, Warehouse and Billing
Management System (OTWB) is a comprehensive
logistics and transportation management system to
streamline operations for corporations. The OTWB
typically integrates an Order Management System,
which manages order processing and tracking, a
Transportation Management System, which optimizes
the planning and execution of the physical movement
of goods, a Warehouse Management System, which
oversees storage operations and inventory control,
and a Billing Management System, which manages
invoicing and payments
“output voltage” output voltage is the voltage released by a device,
such as a voltage regulator or a generator
“PACE Award” Automotive News PACE Award, an annual award by
Automotive News
“PCB soldering” the process of soldering electrical circuit boards
“PCT” Patent Cooperation Treaty (PCT) is an international
patent law treaty that provides a unified procedure
for filing patent applications in its contracting states
“PFC” Power factor correction (PFC) is the process of
compensating for the lagging current by creating a
leading current by connecting capacitors to the
supply
“PPM” Parts Per Million (PPM) is a metric used to quantify
the number of defective items in the production of one
million items
“PSIG” PSIG stands for pounds per square inch gauge. Gauge
pressure is pressure relative to atmospheric pressure.
Gauge pressure is what most gauges on your oilfield
valves and equipment will show
“R&D” research and development
“solenoid” An electric coil with a movable plunger in its center.
In the rest position, the plunger closes off a small
orifice. An electric current through the coil creates a
magnetic field. The magnetic field exerts an upwards
force on the plunger opening the orifice
GLOSSARY OF TECHNICAL TERMS
–3 8–


--- page 49 ---
“SRM” Supplier Relationship Management is a system that
manages interactions and communications with
suppliers. SRM facilitates the synchronization of
procurement plans with suppliers, ensuring timely
and efficient delivery of materials in accordance with
production needs and strategic objectives
“tce” tonne of standard coal equivalent. In calculating the
comprehensive energy consumption, various energy
sources should be converted into standard coal. The
actual fuel energy consumed should be converted into
the equivalent amount of standard coal based on its
lower heating value
“TUV certification” certification issued by Technischer Überwachungsverein
(Technical Inspection Association), a German
organization that conducts rigorous testing and
certification of products to ensure they meet stringent
safety, quality and environmental requirements. TUV
certification is recognized worldwide as a trademark
of trust and quality, which ensures that a product,
service, or process has been tested for safety and that
it complies with the requirements of national,
regional and international regulations
“UL certification” certification issued by Underwriters Laboratories, a
globally recognized safety science organization that
specializes in the testing and certification of products,
components and materials. UL certification ensures
that products, components and materials adhere to
high levels of safety and quality, and compliance with
relevant regulations and industry standards
“VOCs” Vola tile Organic Compounds, organic compounds
that participate in atmospheric photochemical
reactions or are defined as such by relevant
regulations
“wire harness welding” the action of welding the metal of the wires with any
required terminals
GLOSSARY OF TECHNICAL TERMS
–3 9–


--- page 50 ---
We have included in this prospectus forward-looking statements. Statements that are
not historical facts, including statements about our intentions, beliefs, expectations or
predictions for the future, are forward-looking statements.
This prospectus includes forward-looking statements. All statements other than
statements of historical facts contained in this prospectus, including, without limitation,
those regarding our future financial position, our strategy, plans, objectives, goals, targets
and future developments in the markets where we participate or are seeking to
participate, and any statements preceded by, followed by or that include the words
“believe,” “expect,” “estimate,” “predict,” “aim,” “intend,” “will,” “may,” “plan,”
“consider,” “anticipate,” “seek,” “should,” “could,” “would,” “continue,” or similar
expressions or the negative thereof, are forward-looking statements. These
forward-looking statements involve known and unknown risks, uncertainties and other
factors, some of which are beyond our control, which may cause our actual results,
performance or achievements, or industry results, to be materially different from any
future results, performance or achievements expressed or implied by the forward-looking
statements. These forward-looking statements are based on numerous assumptions
regarding our present and future business strategies and the environment in which we
will operate in the future. Important factors that could cause our actual performance or
achievements to differ materially from those in the forward-looking statements include,
among other things, the following:
• our ability to successfully implement our business plans and strategies;
• future developments, trends and conditions in the industry and markets in
which we operate or into which we intend to expand;
• general political and economic conditions of jurisdictions in which we
operate;
• our business operations and prospects;
• our capital expenditure plans;
• weather, natural disasters and climate change;
• the actions and developments of our competitors;
• our financial condition and performance;
• capital market developments;
• our dividend policy;
FORWARD-LOOKING STATEMENTS
–4 0–


--- page 51 ---
• any changes in the laws, rules and regulations of the central and local
governments in the PRC and other relevant jurisdictions and the rules,
regulations and policies of the relevant governmental authorities relating to
all aspects of our business and business plans; and
• various business opportunities that we may pursue.
FORWARD-LOOKING STATEMENTS
–4 1–


--- page 52 ---
An investment in our H Shares involves risks. You should carefully consider all of the
information in this prospectus, including our consolidated financial statements and related
notes, before making an investment in our H Shares.
Our business, financial condition, results of operations and prospects could be
materially and adversely affected by any of these risks, some of which are beyond our control.
Other risks and uncertainties that we are not currently aware of or that are not disclosed or
implied below, or which we do not currently believe to be material, may also be detrimental to
our business, financial condition and results of operations. You should consider our business
and prospects in light of the challenges we face, including those discussed in this section. The
trading price of our H Shares may decline due to any of these risks, and you may lose all or part
of your investment. This prospectus also contains forward-looking information that involves
risks and uncertainties. Our actual results could differ materially from those anticipated in
the forward-looking statements as a result of many factors, including the risks described below
and elsewhere in this prospectus.
RISKS RELATING TO OUR BUSINESS AND INDUSTRY
Our businesses are dependent on various downstream industries, including the
refrigeration and air-conditioning product, the ICEV and NEV, the home appliance,
data center, and cold-chain transportation industries. A downturn experienced by any
of these industries or the economy in China or globally could adversely affect our
business.
We primarily provide refrigeration and air-conditioning product components and
automotive components for various end market applications. Our financial performance
and operating results depend on the overall performance of the various downstream
industries where our products are used. These industries include, but are not limited to,
the refrigeration and air-conditioning product, the ICEV and NEV , the home appliance,
which covers refrigerators, washing machines, dishwashers, coffee makers and stoves,
among others, the heat pump and hot water system, industrial refrigeration, data center,
and cold-chain transportation industries. Our business is particularly susceptible to the
policies and performance trends within the refrigeration and air-conditioning product
industry, as well as the NEV industry. Changes in regulatory frameworks, environmental
standards and government incentives in these industries could impact our operational
capabilities and financial outcomes. If the end product markets cannot maintain robust
growth, our business and profitability may be adversely affected.
The demand for air-conditioning products has been increasing alongside the
increasing living standards globally. In addition, the demand for high-efficiency
refrigeration and air-conditioning products has risen due to the awareness of energy
efficiency and environmental impact, as well as new government legislation and
regulations mandating higher energy efficiency standards for household appliances. For
instance, China has introduced new energy efficiency standards for air-conditioners. From
July 2020, the production of fixed-frequency air-conditioners with original energy
efficiency level three has been discontinued. Additionally, the original level two and level
one standards have been reclassified to level five and level four, respectively, thereby
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establishing more stringent energy efficiency standards. In 2024, the State Council issued
the “Action Plan for Energy Conservation and Carbon Reduction from 2024 to 2025”
(2024-2025), which proposed to strengthen the management of
carbon emission intensity and implement special actions for energy conservation and
carbon reduction in different industries. Such supporting policies and growing awareness
for energy conservation and carbon reduction, in turn, drives the increasing demand for
refrigeration and air-conditioning components, such as electronic expansion valves that
can improve heat exchange efficiency and reduce energy waste by precisely regulating
refrigerant flow. However, any adverse change in any of the aforementioned factors may
negatively impact the market demand in the refrigeration and air-conditioning product
market, which, in turn, could adversely affect our performance.
In the automotive sector, the global sales volume of automotive components,
especially the thermal management system components, has experienced rapid growth
during the Track Record Period, primarily due to the rapid expansion of NEVs. According
to Frost & Sullivan, the global sales volume of NEVs has increased from 5.2 million units
in 2020 to 21.4 million units in 2024, and is expected to further increase to 47.2 million
units by 2029. Factors such as purchase costs, charging infrastructure, cruise range,
battery life and the availability of supporting facilities significantly influence the
development of the NEV industry. Additionally, government subsidies and economic
incentives, such as tax credits and reduced electricity rates, play a crucial role in shaping
the NEV demand, the elimination of which could potentially lead to a slowdown or
decline in demand for NEVs, which, in turn, could affect the demand for automotive
components. For instance, in 2021, the Ministry of Finance issued Fiscal Subsidy Policy for
Promotion and Application of New Energy Vehicles in 2022 2022 ϋอঐ๕ӛԓપᄿᏐ͜ৌ
ഄ, which indicates that, in 2022, subsidy standards for new energy vehicles will
be reduced, and the new energy vehicle purchases subsidy policy will be terminated on
December 31, 2022. Despite the introduction of favorable policies aimed at supporting the
growth of the NEV industry, there is no guarantee that demand for NEVs, and
consequently for automotive components, will continue to grow rapidly. In addition, on
October 4, 2024, the European Commission voted to enact the provisional tariffs on
Chinese imports of NEVs that had been in place since early July, when the commission
released the findings from its nine-month investigation into subsidies and overcapacity in
China’s NEV industry. The tariffs took effect on 31 October 2024 and were scheduled to
remain in place for five years. These tariffs could potentially increase the cost of Chinese
NEV imports, affecting demand for the Chinese NEVs and consequently impacting the
demand of our products by the Chinese NEV manufacturers.
Given our extensive operations across both China and international markets, we
may need to change or adapt our business focuses from time to time in response to the new
rules and policies regarding the end markets for our products, but we may not be able to
do so in a timely and efficient manner. Any new legislations or adverse changes in
requirements relating to the end product where our products are utilized could have an
impact on our business, financial condition and results of operations.
Furthermore, our operations are significantly influenced by economic, political and
social conditions in China and globally. Economic downturns, whether actual or
perceived, in our key markets or our customers’ key markets could affect our financial
condition and results. Global uncertainties, such as geopolitical tensions, inflation risks
and changes in monetary policies, also pose challenges to our business environment.
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The industries that we operate in are highly competitive, predominantly among
approximately three to five large manufacturers. If we fail to compete effectively and
successfully, our business, results of operations and financial condition may be
materially and adversely affected.
We primarily operate in the refrigeration and air-conditioning product component
market and automotive component market, which are highly competitive. The
competitive landscape in such markets is characterized by strong competition among a
few large manufacturers, who have substantial resources and are highly driven to
maintain or grow market share. In 2024, the top three providers of refrigeration and
air-conditioning control components accounted for over 80% of the total market share in
terms of revenue. In the same year, the top five providers of automotive thermal
management system components accounted for over 77% of the total market share in
terms of revenue. As a result, such competitive landscape demands our continuous
advancements and strategic initiatives in the innovation and iteration of products and
production processes, production capacity, supply chain and pricing, and failure to
compete successfully in such aspects may adversely affect our profitability and results of
operations. Especially, we rely on our ability to maintain robust cooperative relationships
with customers and respond rapidly to customer requirements to maintain
mutually-beneficial relationships with our existing and new customers. As we expand our
product portfolio, customer base and geographical markets, we will need significant
managerial, financial and human resources to exceed our competitors in these aspects. We
cannot assure you that we can maintain customer relationships and the pricing
competitiveness to secure sales orders or gain market share.
Entry into the refrigeration and air-conditioning product component market and
automotive component market requires substantial capital expenditures and significant
technological and manufacturing expertise. We may still face increasing competition from
emerging companies that may expand the scale of their operations. In addition, some of
our existing and new competitors may have greater financial, marketing, technical or
other resources than us. Greater resources may allow such competitors to respond to
changes in market demand more quickly and produce and sell new or more advanced
products, as well as better withstand downturns in the markets where we operate.
Intense competition may also lead to further consolidation in the industry. Leading
manufacturers can leverage technological innovation, strong economies of scale and
efficient resource allocation to consolidate resources from players of smaller scale, further
accelerating market consolidation. Our competitors may enter into strategic alliances such
as business partnerships or joint ventures, which may enable certain competitors to
further benefit from greater economies of scale and more effectively compete with us.
There can be no assurance that we will be able to continue to compete successfully, and
our failure to do so could have an adverse effect on our business, financial condition and
results of operations.
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If we fail to maintain an effective quality management system, particularly during the
production expansion, our business, reputation, financial condition and results of
operations may be adversely affected.
Our product quality is critical to our success. Although we have established a
stringent quality management system, it may not always identify latent product defects,
which could lead to failures during installation or use, resulting in safety hazards or
operational issues for our customers. The effectiveness of our quality management system
depends on a number of factors, including the design of the system, the machineries used,
the quality of our staff and related training programs and our ability to ensure that our
employees adhere to our quality management policies and guidelines. In the event that
the use of end-products that adopt our products results in an unsafe condition or injury as
a result of, among other factors, our component failures, manufacturing flaws, design
defects or inadequate disclosure of product-related risks or information, it could result in
product liability or warranty claims; we could be named as a defendant in such claims,
and any insurance that we carry may not be sufficient or it may not apply to all situations.
Similarly, our customers could be subjected to claims as a result of such accidents and
bring claims against us to hold us accountable. In addition, in the event that our products
fail to perform as expected or such failure of our products results in a recall, our
reputation may be damaged, which could make it more difficult for us to sell our products
to existing and prospective customers and could materially and adversely affect our
business, results of operations and financial condition.
We are required to comply with specific guidelines based on product safety and
restricted and hazardous materials laws and regulations that are applicable in the
jurisdictions into which our customers sell their products. Our safety standards for the
inspection of our products are also based on relevant national and industry standards.
There can be no assurance that our quality management system will continue to be
effective and in compliance with relevant laws, regulations and standards. Any significant
failure in, or deterioration of the efficacy of, our quality management system could result
in us losing accreditations and requisite certifications or qualifications, which could in
turn have a material adverse effect on our reputation, business and results of operations.
The scale up in our production to meet increasing demand can put pressure on our
quality assurance processes. For example, it may stretch existing resources, including
personnel and equipment, beyond their optimal capacity, leading to potential oversights
or errors. Bottlenecks may occur as quality assurance processes struggle to handle higher
volumes without delays or rushed evaluations. Increased production can also cause
accelerated wear and tear on equipment, affecting product quality. Scaling up may
involve process changes or new technologies, introducing unforeseen quality issues.
Additionally, sourcing additional materials or components to meet higher demand can
result in variability in quality, impacting the final product. These challenges collectively
increase the risk of defects or non-compliance with standards.
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Changes in international trade policies, geopolitics and trade protection measures,
export control and economic or trade sanctions may materially and adversely affect our
business, financial condition and results of operations.
Our global operations subject us to various applicable sanctions and export controls
regulations. We have exported our products to a large number of countries and regions
and derive significant sales from exporting to these countries and regions. As of December
31, 2024, our products had reached America, Europe, Asia, Oceania and Africa, spanning
over 80 countries and regions, including the United States, Mexico, the Netherlands,
Japan, Korea, Australia and South Africa, among others. In 2022, 2023 and 2024, revenue
from our overseas operations comprised approximately 46.5%, 45.4% and 44.7% of our
total revenue respectively. In the event that any of these countries or regions which we
export to imposes additional economic sanctions or enforces import restrictions or tariffs
in relation to our products, our business and operations may be adversely affected.
Exports of our products must be made in compliance with various economic
sanctions and export controls laws in different jurisdictions. For example, U.S. economic
sanctions prohibit the provision of products and services to certain countries or regions,
governments and persons targeted by U.S. sanctions. European Union sanctions also have
similar regimes to prohibit the provision of products and services to countries or regions,
governments and persons on their respective target list. Such laws and regulations are
likely subject to frequent changes, and their interpretation and enforcement involves
substantial uncertainties, which may be heightened by national security concerns or
driven by political or other factors that are out of our control. We take precautions to
prevent our products from being provided to any target of these sanctions. We could be
subject to future enforcement action with respect to compliance with governmental
economic sanctions and export controls laws that result in penalties and costs that could
have a material effect on our business and operating results.
In addition, we have operations in a large number of jurisdictions. Our
comprehensive global sales and marketing network spans across America, Europe, Asia,
Oceania and Africa. We have established R&D bases in China, the United States and
Germany. As of December 31, 2024, we operated 48 factories around the world, including
13 overseas factories in the United States, Poland, Mexico, Turkey, Austria, Vietnam,
Thailand and India. Therefore, government policies affecting international trade and
investment, such as capital controls, economic or trade sanctions, export controls, tariffs
or foreign investment filings and approvals, may affect the demand for our products and
services, impact the competitive position of our products, or affect our capability to sell
products in certain countries or regions. If any new tariffs, legislation or regulations are
implemented (including those imposing economic or trade sanctions, and those regarding
export control or outbound investments), or if existing trade agreements are renegotiated,
such changes could affect our business, financial condition and results of operations.
Especially, the evolving U.S. foreign policy and trade regulations, particularly the
potential introduction of further trade restrictions and tariffs on specific products and
products originating from certain countries or regions, could disrupt our supply chain,
increase costs and negatively impact our ability to compete in the global market.
Moreover, such changes could potentially provoke retaliatory measures from other
countries, exacerbating international trade tensions and contributing to an uncertain
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business environment. For example, the U.S. implemented several rounds of import tariffs
on products of Chinese origin, and the PRC government has also been imposing tariffs on
certain products imported from the U.S. into China responding to the U.S. tariffs. The
President of the United States has indicated his willingness to continue to increase the use
of tariffs by the U.S. to accomplish certain U.S. policy goals. It is uncertain whether any
further tariff restrictions will be implemented. Additionally, policy changes and related
uncertainty about policy changes could increase market volatility. Because of these
dynamics, we cannot predict the impact of any future changes to the U.S.’s or other
countries’ trading relationships or the impact of new laws or regulations adopted by the
U.S. or other countries on our business.
Historically, tariffs have led to increased trade and political tensions, between not
only the U.S. and China, but also between the U.S. and other countries in the international
community. There is significant uncertainty as to whether countries will be able to
successfully reach any trade deals with the U.S. Rising political tensions as a result of
trade policies could reduce trade volume, investment, and other economic activities
between major international economies. These developments, or the perception that any
of them could occur, may have a material adverse effect on global economic conditions
and the stability of global financial markets, which in turn can significantly impact our
business and results of operations. Consequently, such developments necessitate our
increased investments in monitoring policy developments and exploring strategies to
mitigate the impact on our operations. Economic sanctions and trade restriction measures
(including tariffs) taken by government authorities or other trade tensions or unfavorable
trade policies may affect the costs and/or marketability of our products, as, without the
impact of additional tariffs, the peers in other countries and regions which are not subject
to such tariffs, could potentially gain market share and improve their price
competitiveness. The current international trade tensions and political tensions, and any
escalation of such tensions, may have a material negative impact on our ability to continue
to sell to global customers and further grow our customer base. In addition, as our
business is closely interrelated with the performance of our customers’ end-use products
in the marketplace, if our customers are impacted by restrictive measures of trade
protection or export control, our performance and income will be adversely affected.
Geopolitical conditions may also lead to heightened restrictions on foreign investments,
introducing increased compliance requirements and uncertainty for investors.
Furthermore, in recent years, there have been heightened complexities in
international relations. Such tensions could reduce levels of international trade,
investment, technological exchange and other economic activities, which would have a
material adverse effect on global economic conditions and the stability of global financial
markets. Any of these factors could have a material adverse effect on our and our
customers’ business, prospects, financial condition and results of operations.
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If we fail to keep up with the evolution of technologies or adapt our technology to
emerging industry standards, or if our investments in new technologies prove
unsuccessful or ineffective, our business may be materially and adversely affected.
Technological innovation is key to our success. During the Track Record Period, we
made substantial R&D investments, which we believe are crucial factors for our future
growth and prospects. For the years ended December 31, 2022, 2023 and 2024, our R&D
expenses amounted to RMB989.0 million, RMB1,096.8 million and RMB1,351.8 million,
respectively, accounting for 4.6%, 4.5% and 4.8% of our total revenue in the respective
periods.
The revolution of technologies and the emergence of new industry standards pose
significant challenges. If we fail to keep up with these changes or adapt our technology
accordingly, our competitive position could be compromised. This may necessitate
additional investments in technology upgrades and process improvements to align with
industry standards. Failure to do so could result in our products becoming obsolete,
leading to a potential loss of market share and adversely affecting our business
operations.
However, there can be no assurance that our R&D projects will yield the expected
outcome or be completed within the anticipated time frame and budget. If we fail to
commercialize our R&D efforts, we may incur significant sunk costs. Even if the newly
developed products can be launched as we expected, there can be no assurance that they
will be accepted by our customers and achieve the anticipated sales target or profit. In
addition, a portion of our R&D expenses are allocated to developing general technologies
rather than specific products. While this investment is important for long-term innovation
and capability building, it may not immediately enhance the competitiveness of our
products in the market or produce the expected benefits or returns. Furthermore, there can
be no assurance that our existing or potential competitors will not develop products
which are similar or superior to our products or are more competitively priced. In such
cases, we may lose market share. Due to uncertainties in the time frame for developing
new products and the duration of market windows for these products, there is a risk that
we may have to abandon a product that is no longer commercially viable, even after we
have invested significant resources in the development of such product.
In addition, we have expanded our R&D efforts into our strategic emerging
business, which encompasses the development of electromechanical actuators for
biomimetic robots. The development of electromechanical actuators presents unique
technological challenges and risks and requires substantial investment and expertise, and
there is no assurance that our efforts will result in commercially viable products.
Furthermore, the robotics industry is characterized by rapid technological advancements
and evolving industry standards, which may render our current development obsolete or
require significant additional investment for us to remain competitive.
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We are susceptible to supply shortages, longer lead time and increased costs of raw
materials and key components, any of which could disrupt our supply chain, increase
our production costs, adversely affect our profitability and delay deliveries of our
products to customers.
Our production operations depend on obtaining adequate supplies of quality raw
materials on a timely basis. The raw materials used in our production of refrigeration and
air-conditioning product components and automotive components mainly include copper
and aluminum, which are bulk commodities that typically experience significant price
volatility. During the Track Record Period, costs on raw materials and consumables
accounted for a substantial amount of our cost of revenue, amounting to RMB11,758.4
million, RMB13,115.1 million and RMB14,979.8 million, accounting for 74.0%, 73.6% and
73.7% of our total cost of revenue in 2022, 2023 and 2024, respectively.
The purchase price of our raw materials is influenced by changes in bulk commodity
prices as well as market supply and demand. Our ability to pass on the increases in raw
material costs to our customers may be limited. The pricing of our products is, to a certain
extent, based on the costs of our raw materials; if we become subject to any significant
increase in the cost of raw materials that was not anticipated when negotiating the prices
with our customers, our profitability may be adversely affected. In addition, our ability to
negotiate with customers to include price terms, such as a raw material price linkage
mechanism, that counter the bulk commodity price risks is crucial to our profitability;
failure to secure such terms may have a material adverse effect on our business, financial
condition and results of operations. The hedging activities we undertake to address the
price fluctuations of essential raw materials may fail to protect or could harm our results
of operations. See “— Any hedging strategy may not adequately protect us from
commodity price, foreign exchange rate and interest rate risks, and fluctuations in
exchange rates could result in foreign currency exchange losses” and “— Business — Raw
Materials and Suppliers — Raw Materials and Procurement.”
Furthermore, any of our measures to address potential interruptions of supplies
may not be sufficient. In the event that our suppliers fail to cater to our growing demands,
we may be unable to meet market demand for our products, which may have an adverse
impact on our reputation and profitability. Additionally, factors that are beyond our
control, including natural disasters, public health hazard, civil unrest, wars, strikes or
trade sanctions or restrictions, may impact the supply and market price of raw materials.
Furthermore, although we implement quality inspections on the raw materials,
there can be no assurance that we will be able to identify all of the quality issues. Any such
factor could disrupt our procurement of raw materials and could have a material adverse
effect on our production capacity utilization, which, in turn, will adversely impact our
business, financial condition and results of operations.
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Our business requires a significant amount of capital expenditure for maintenance,
upgrades and expansion of production capacity, and there can be no assurance that we
will be able to have enough cash to successfully implement our capital expenditure
plans.
Our operations depend on the continuous maintenance, upgrades and expansion of
production capacity to meet evolving customer demands and market trends. As a
manufacturer of refrigeration and air-conditioning product components and automotive
components, as well as a new market entrant to the bionic robot electromechanical
actuators manufacturing industry, we require significant capital expenditure to ensure the
quality, efficiency and competitiveness of our products.
During the Track Record Period, we primarily used cash from operating activities in
the maintenance and upgrades of production facilities. During the Track Record Period,
our capital expenditures were RMB2,535.1 million, RMB3,249.1 million and RMB4,115.0
million in 2022, 2023 and 2024, respectively. There can be no assurance that we will be able
to generate sufficient cash from operations, or at all, to fund our planned capital
expenditures. Any delays or failures in securing necessary funding and any unforeseen
increases in costs or delays in the implementation of our capital expenditure plans could
adversely affect our operations and financial results. Moreover, the development in
industries where we operate may require us to make additional, unforeseen investments
to remain competitive. If we fail to allocate sufficient resources toward adapting to these
technological changes or if our investments do not yield the expected benefits, our market
position and profitability may be adversely impacted.
We face various risks associated with our international operations, and our inability to
effectively manage and contain them could adversely affect our business and
performance.
We have established a global R&D, manufacturing and sales network. Our
comprehensive global sales and marketing network spans across America, Europe, Asia,
Oceania and Africa. As of December 31, 2024, we had six R&D bases, including three
which are located in the United States and Germany. Our manufacturing is primarily
carried out in 48 major factories worldwide, including 13 overseas factories in the United
States, Poland, Mexico, Turkey, Austria, Vietnam, Thailand and India. As of December 31,
2024, our products had reached America, Europe, Asia, Oceania and Africa, spanning over
80 countries and regions worldwide, including the United States, Mexico, the
Netherlands, Japan, Korea, Australia and South Africa, among others. In 2022, 2023 and
2024, revenue from our overseas operations comprised approximately 46.5%, 45.4% and
44.7% of our total revenue, respectively. In line with our strategies, we intend to continue
to expand our international operations in the coming years. The demand for and market
acceptance of our products marketed and sold abroad are subject to uncertainty and can
be heavily influenced by local conditions and customs tariff policies. In addition, overseas
investments by PRC companies are also subject to various approvals, filings, reports,
registrations or other procedures from the National Development and Reform
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Commission, the Ministry of Commerce, the State Administration of Foreign Exchange
and other PRC regulatory authorities. The following sets forth some of the risks associated
with our international operations:
• exchange rate fluctuations and foreign exchange regulations, see “— Risks
Relating to Our Business and Industry — Any hedging strategy may not
adequately protect us from commodity price, foreign exchange rate and
interest rate risks, and fluctuations in exchange rates could result in foreign
currency exchange losses” and “— Risks Relating to Our Business and
Industry — Foreign exchange regulations may limit our business and results
of operations and our ability to remit dividends”;
• expenses associated with understanding and analyzing overseas markets,
monitoring regional and local economic, industry and consumer trends and
developing and maintaining efficient marketing and selling presence in such
markets;
• developing and maintaining customer relations and providing quality
customer services and support;
• expenses incurred and challenges in connection with compliance with local
commercial and legal requirements, including labor, environment and
industry-specific regulations;
• unanticipated adverse changes in regional and local economic conditions;
• political instability and civil unrest, cultural or regional conflicts and labor
disputes;
• trade barriers, such as local content requirements, tariffs, taxes and other
restrictions and expenses; and
• unanticipated logistic expense occurred in transportation, such as sudden
surge in transportation cost and shortfall in shipping capacity.
Failure to address any of the foregoing risks or complete such procedures with
respect to overseas operations in the course of our overseas expansion may adversely
affect our business, financial condition, operations and prospects. Especially, our
operations are governed by relevant laws and regulations in the PRC and other
jurisdictions where we operate relating to production safety, product quality and
environmental protection, among other things. New laws or regulations, changes to laws
and regulations, as well as the refinement of interpretations and applications of existing
ones, can impose additional compliance costs or require us to change our operations to
ensure compliance. The industry in which we operate is still evolving, and laws and
regulations may be interpreted and implemented more strictly, or new laws and
regulations may be adopted from time to time that require additional approvals, licenses
and permits. Failure to obtain, renew or maintain the necessary approvals, licenses and
permits required for our operations may render our operations to be substantially
disrupted, which could materially and adversely affect our business, financial condition
and results of operations.
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In addition, we may be subject to anti-corruption, anti-bribery, anti-money
laundering, financial and economic sanctions, governmental import or export controls
and similar laws and regulations in various jurisdictions in which we conduct activities.
Our policies and procedures instituted may not be sufficient and if any of our directors,
officers, employees, representatives, consultants, agents and business partners engaged in
any improper conduct, we may be held responsible. Non-compliance with
anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions
laws, or governmental import or export controls could subject us to whistleblower
complaints, adverse media coverage, investigations and severe administrative, civil and
criminal sanctions, collateral consequences, remedial measures and legal expenses, all of
which could materially and adversely affect our business, reputation, financial condition
and results of operations.
Ourbusinessdependssubstantiallyontheexpertiseanddedicationofourmanagement
team and highly skilled personnel on a global scale. We may face challenges in
recruiting and retaining such individuals, which could impede our technological
advancement and business growth.
We have been, and will continue to be, substantially dependent on the continued
services of our management team and highly skilled personnel. Retaining talent in a
global business operation involves navigating challenges, including cultural differences
that affect employee engagement and satisfaction and intense competition for skilled
professionals. Additionally, legal and regulatory compliance varies by country,
complicating employment contracts and benefits. We also endeavor to keep
communication and integration within our global teams with the implementation of
nuanced retention strategies that balance global consistency with local adaptation.
However, we cannot assure you that we will continue to successfully retain our
management team and skilled personnel. If we lose the services of any key member of
them, we may not be able to find suitable replacements in a timely manner, at acceptable
cost or at all, and our business, financial condition, results of operations and prospects
could be materially and adversely affected.
The shortage of skilled professionals could lead to delays in product development,
hinder our ability to respond to market demands, and affect our capacity to manage and
integrate our international operations effectively. Additionally, the loss of key personnel
or the inability to attract new talent could result in a loss of institutional knowledge and
expertise, adversely affecting our business operations and future prospects. Failure to
address these challenges may negatively impact our business performance, financial
condition and our ability to achieve strategic objectives in the rapidly evolving technology
sector.
As our business continues to grow globally, the demand for skilled R&D and
international management personnel has significantly increased. Our ability to innovate
and maintain a competitive advantage relies heavily on attracting and retaining highly
qualified professionals in fields where we operate to continuously innovate and iterate
our existing products and expand into our strategic emerging business. However, the
competition for such talent is intense, and there is a risk that we may not be able to recruit
or retain the necessary personnel to support our growth and international expansion
strategies.
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Failure to maintain the efficiency of our management and operation could adversely
affect our competitiveness.
Our leading position in the refrigeration and air-conditioning control component
market and the automotive thermal management system component market depends on
the strength of our management and operation. As we are expanding our business both
domestically and internationally and venturing into new areas such as producing
electromechanical actuators for bionic robots, we need to continuously improving our
management practices to sustain our leading market position.
However, there is no assurance that we can always ensure the continued
effectiveness of our management systems or sustain our operational efficiency. Failure to
maintain the effectiveness and efficiency of management and operation may expose us to
challenges such as resources mismanagement, supply chain disruptions or difficulties in
further scaling our productions. These challenges could adversely affect our
competitiveness and makes it difficult for us to sustain our market-leading position.
We are exposed to inventory management risks.
Our inventories primarily consist of raw materials, work in progress and finished
goods. As of December 31, 2022, 2023 and 2024, our inventories were RMB4,334.9 million,
RMB4,600.7 million and RMB5,280.4 million, respectively, of which finished goods
accounted for 60.7%, 68.0% and 71.4%, respectively. Our inventory turnover days for the
same periods was 92 days, 92 days and 89 days, respectively.
If we fail to manage our inventory effectively, we may be subject to increased
inventory storage costs, a heightened risk of inventory obsolescence, a decline in
inventory value and significant inventory write-offs. We cannot guarantee that our
inventory levels will be able to swiftly meet the demands of customers, which may
adversely affect our revenue. We also cannot guarantee that all of our inventory can be
sold as products within a reasonable period of time. Any of the above may materially and
adversely affect our results of operations and financial condition. On the other hand, if we
underestimate demand for our products, or if our suppliers fail to supply in a timely
manner, we may experience inventory shortages, which might result in a diminished
customer base and a decrease in revenue, any of which could harm our business, financial
condition and results of operations.
We have implemented an inventory management system that requires close internal
coordination to ensure that our inventory levels are sufficient to satisfy demand and do
not cause any disruptions in production while minimizing carrying costs. For details of
our inventory and inventory management policies, see “Business — Inventory
Management.” In the event of any damage or deterioration caused by factors beyond our
control, including catastrophic events such as outbreak of fire or explosion, we may suffer
from losses and such losses may not be compensated in a timely and adequate manner.
Our business performance and financial position may thereby be adversely affected.
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We may not be able to increase our production capacity and implement other
expansions as planned.
We intend to maintain our competitive advantages by, among others, expanding our
production capacity and exploring new business opportunities in the refrigeration and
air-conditioning product component and automotive component industries, as well as the
bionic robot electromechanical actuator industry. Such expansion plans and any other
future expansion plans would require significant capital investments in new production
facilities and in the engagement of additional qualified personnel. To capture these
opportunities, we have begun to expand our existing production facilities as well as
establish new production facilities globally. See “Business — Production” and “Future
Plans and Use of Proceeds.” We expect that we will incur substantial additional costs, such
as depreciation charges, raw material costs, financial costs and labor costs in relation to
the above expansion plans. In addition, the success of our existing and future expansion
plans depends on a few factors beyond our control, such as progress of the construction
conducted by third-party construction companies, local laws and regulations,
government support (including the issuance of a relevant operation license for the
expanded production capacity) and customer demand for our expanded production
capacity. The integration of future expansion projects into our existing operations may be
subject to unforeseeable delays, which may, among other things, increase our integration
costs, strain our production capacity at other locations, decrease our production efficiency
and cause delays in delivery of customer orders. As the success of our business expansion
plans depends on various factors, many of which are beyond our control, there can be no
assurance that we will be successful in implementing our strategies. Even if our strategies
are implemented successfully, there can be no assurance that our strategies will lead to
successful achievement of our business objectives.
Moreover, we may seek to expand our business through cooperation, strategic
investments, mergers and acquisitions and partnership in the future. The success of these
endeavors depends on the availability of, and competition for, suitable targets and
opportunities, as well as financial resources, including available cash and financing
capacity. Moreover, future cooperations, strategic investments, mergers and acquisitions
and partnerships may expose us to potential risks, including the diversion of management
attention and resources from our existing business and the inability to generate sufficient
income to offset the costs and expenses. These endeavors may also result in an increased
leverage, sharing of potential legal liabilities in respect of the target businesses, and
increased impairment charges related to goodwill and other intangible assets. As a result,
we cannot assure you that we will be able to achieve the strategic purpose of any
investment, partnership or cooperation, the desired level of control in management
decisions of the partnership or our anticipated investment return from such business
expansion. If we are unable to implement our expansion plans effectively, our business,
financial condition and results of operations may be materially and adversely affected.
In addition, if our management, systems, resources and supporting infrastructure
fail to effectively keep up with our planned expansion, we may experience difficulties in
managing our growth and operations, and our financial condition and results of
operations could be materially and adversely affected.
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Any hedging strategy may not adequately protect us from commodity price, foreign
exchange rate and interest rate risks, and fluctuations in exchange rates could result in
foreign currency exchange losses.
Our business is exposed to volatility in the price of raw materials, interest rate and
foreign exchange rates. In an effort to reduce the price fluctuations, we may choose to
mitigate fluctuations in the exchange rate by entering into forward foreign exchange
contracts. In 2022, 2023 and 2024, we recorded net foreign exchange gains of RMB230.9
million, RMB149.9 million and RMB62.3 million, respectively. However, such measures to
mitigate foreign exchange risks may not be effective. There may also be a limited range of
hedging instruments available to reduce our exposure to exchange rate fluctuations. The
cost of these foreign exchange hedging instruments can vary significantly over time and
may outweigh the potential benefits of reduced currency volatility.
We also implement a price linkage mechanism with our customers and suppliers,
and conduct hedging operations through commodities futures, among various other
strategies, to address the price fluctuations on essential raw materials. In 2022, 2023 and
2024, from raw material hedging activities, we recorded a net loss of RMB6.4 million, a net
gain of RMB9.5 million and a net gain of RMB8.6 million, respectively. However, there is
no guarantee that our customers will accept the price adjustment mechanism, and any
hedging activities we undertake may fail to protect or could harm our results of
operations, especially given: (i) hedging can be costly, especially during periods of price
volatility; (ii) the available hedges may not align precisely with the specific risks we aim
to manage; (iii) the duration of the hedge may not coincide with the duration of the risk
we seek to mitigate; and (iv) the counterparty or clearing agent involved in a hedging
transaction may default on its obligation to pay or deliver under the forward contract. In
2022 and 2023, we had gains from hedging operations of RMB30.6 million and RMB43.6
million, respectively, and in 2024, we had losses from hedging operations of RMB51.2
million, respectively. Such historical performance may not be indicative of the future
performance of our hedging operations, as market conditions and regulatory
environments may change. Our inability to effectively manage risks associated with
potential hedging activities may have a material adverse effect on our business, financial
condition and results of operations.
If we are unable to maintain high utilization of our production facilities, our
profitability may be adversely affected, particularly if there is industry overcapacity.
High utilization of production facilities is crucial for spreading fixed costs over a
larger quantity of products. Consequently, our ability to maintain or improve gross profit
margins depends significantly on sustaining high utilization rates. Our total utilization
rate was 83.8%, 92.2% and 91.2%, respectively, for 2022, 2023 and 2024. During the same
periods, the aggregate utilization rate of our eight production bases was 84.1%, 92.8% and
90.5%, respectively. However, various adverse factors, such as excess capacity, equipment
malfunction, interruptions in utility availability and quality control deficiencies, could
negatively affect our facility utilization.
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In the industries where we operate, there is a risk of overcapacity if demand for
refrigeration and air-conditioning product components and automotive components does
not grow as expected. This could exacerbate the challenges of maintaining high utilization
rates. Furthermore, the increase in global production capacity, driven by anticipated
demand for more air-conditioning products and NEVs, may be higher than actual market
demand. If the industries do not grow as expected, or if our production capacity
significantly exceeds this growth trajectory, we may face periods of industry-wide
oversupply and the consequent price drop. Further, it can be challenging to adjust
production levels swiftly due to capacity expansion projects that were previously
planned.
If customer demand declines significantly, parts of our production facilities may
become idle. This situation could lead to obsolescence of our facilities over time. Any
downturns resulting from production overcapacity or other market demand factors could
materially and adversely affect our business, financial condition and results of operations.
Wecouldbesubjecttochangesinourtaxrates,theadoptionofnewlocaloroverseastax
legislation or exposure to additional tax liabilities.
The PRC EIT Law imposes an EIT rate of 25% on business enterprises. Some of our
subsidiaries are entitled to preferential tax treatment. For example, during the Track
Record Period, certain of our subsidiaries in China have obtained High and New
Technology Enterprises certification, and they were subject to a preferential corporate
income tax rate of 15% with a validity period of three years. See “Financial Information —
Description of Major Components of Our Results of Operations — Income Tax Expenses.”
To the extent there are any changes in the laws and regulations governing preferential tax
treatment, or increases in our effective tax rate due to any other reasons, our tax liability
would increase correspondingly. In addition, the PRC authorities may amend or restate
regulations on income, value-added and other taxes. Non-compliance with China tax laws
and regulations may also result in penalties or fines imposed by relevant tax authorities.
Adjustments or changes to China tax laws and regulations and tax penalties or fines could
affect our businesses, financial condition and results of operations.
We also operate in countries and regions overseas and are subject to various taxes.
See “Financial Information — Description of Major Components of Our Results of
Operations — Income Tax Expenses.” Due to the fact that the tax environment can be
different in different jurisdictions and that the regulations regarding various taxes,
including but not limited to corporate income tax, are complex, our overseas operations
may expose us to risks associated with the overseas tax policy changes. Due to economic
and political conditions, tax rates in various jurisdictions may be subject to significant
change. Our effective tax rate could be affected by changes in the mix of earnings in
countries with differing statutory tax rates, changes in the valuation of deferred tax assets
and liabilities or changes in tax laws or their interpretation. In 2022, 2023 and 2024, in
China, our weighted average effective tax rate is 11.6%, 13.2% and 11.3%, respectively, and
in the United States, our weighted average effective tax rate is 17.0%, 12.8% and 16.9%,
respectively. See “Financial Information — Description of Major Components of Our
Results of Operations — Income Tax Expenses.” Dealing with such regulatory
complexities and changes may require us to divert more managerial and financial
resources, which in turn could affect our results of operations.
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We are also subject to the examination of our tax returns and other tax matters by
local and overseas tax authorities and governmental bodies. The tax treatments of our
transaction arrangements may be subject to interpretation by the respective tax
authorities, and there can be no assurance as to the outcome of these examinations. If our
weighted average effective tax rate was to increase, or if the ultimate determination of our
taxes owed is for an amount in excess of amounts previously accrued, our financial
condition, operating results and cash flows could be adversely affected.
Work stoppages, increases in labor costs and other labor-related matters may adversely
affect our business operations.
We believe that we have a good working relationship with our employees. We have
not experienced any material work stoppages, strikes or other major labor problems for
the years ended December 31, 2022, 2023 and 2024. However, there can be no assurance
that any of such events will not arise in the future. If our employees were to engage in a
strike or other work stoppage, we could experience significant disruption of our
operations and/or higher ongoing labor costs, which may have an adverse effect on our
business, financial condition and results of operations.
In addition, labor costs in regions where we operate have been increasing in recent
years and could potentially continue to increase, which may further increase our
manufacturing costs. Factors contributing to rising labor costs include inflationary
pressures, changes in minimum wage laws and increased demand for skilled workers.
Additionally, regulatory changes or enhanced employee benefits mandated by law could
further exacerbate these costs. The competition for skilled labor in our industry is intense
and we may be required to offer more attractive compensation packages to retain and
attract qualified personnel. We may not be able to pass on these increased costs to
customers by increasing the selling prices of our products in light of competitive pressure
in the markets where we operate. In such circumstances, our profit margin may decrease
and our financial condition and results of operations may be materially and adversely
affected.
Our production is dependent on the stable, timely and adequate supply of energy at
commercially reasonable prices.
We depend on a stable supply of energy, mainly including electricity, water and
steam, to maintain production. Our production volume and manufacturing costs are
affected by the price and supply of energy. The prices of energy are subject to a number of
factors which may be beyond our control, including inflation, supplier capacity
constraints, general economic conditions, commodity price fluctuations, demand from
other industries for energy and local and national regulatory requirements. Furthermore,
there can be no assurance that unexpected and serious shortages of energy will not occur
in the future or that we will be able to pass on any cost increases to our customers. Adverse
changes in power consumption policies, particularly those leading to higher energy
prices, could negatively impact our business, financial condition, operational results and
prospects. Significant fluctuations in these costs could materially affect our profitability if
we are unable to adjust our product prices accordingly, potentially undermining our
competitive advantages. Failure to pass increased costs onto our customers may lead to a
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reduction in our profit margins. If the supply of energy is affected by natural disasters,
adverse weather conditions, equipment failures, disruptions in transport or other
inclement factors, we may not be able to locate alternative sources of supply at
commercially reasonable prices or maintain the full energy supply required for
production, resulting the reduction or cessation of production capacity. Any such events
may have a material adverse effect on our business, financial condition and results of
operations.
Our manufacturing processes are potentially vulnerable to disruptions that can
increase our production costs. We may experience potential disruptions in operations
due to manufacturing difficulties or potential accidents.
Our manufacturing processes are complex, requiring equipment that is periodically
modified and upgraded to improve manufacturing yields and product performance, as
well as reduce unit manufacturing costs. From time to time, production difficulties may
arise that could cause delivery delays or reduced output. There is no guarantee that we
will not encounter manufacturing issues in achieving acceptable output or timely product
delivery due to factors such as construction delays, challenges in upgrading or modifying
existing production lines, building new plants, adapting to new manufacturing
technologies or processes or delays in equipment deliveries. Any of these issues could
constrain our production capacity and adversely affect our results of operations.
Furthermore, our manufacturing processes entail certain risks, such as industrial
accidents, which could lead to significant property damage or personal injury. Any such
incident, regardless of its location, could result in substantial production interruptions
and delays, or claims for significant damages due to personal injuries or property damage,
thereby adversely impacting our business, financial condition and operational results.
We may not be able to adequately protect or enforce our intellectual property rights or
prevent unauthorized parties from copying or reverse engineering our products and
solutions, and such efforts to defend and protect our intellectual property may be
costly.
The success of our products and our business depends in part on our ability to
obtain patents and other intellectual property rights and maintain adequate legal
protection for our products in the jurisdictions where we operate. We rely on a
combination of patent, trademark, trade secret and laws related to intellectual property in
China and other countries to establish and protect our proprietary rights, and yet all of
which may provide only limited protection.
We cannot assure you that patents will be issued with respect to our currently
pending patent applications in a manner that gives us adequate defensive protection or
competitive advantages, if at all, or that any patent issued to us will not be challenged,
invalidated or circumvented. Our currently issued patents and any patents that may be
issued or registered in the future may not provide sufficiently broad protection or may not
prove to be enforceable in actions against alleged infringers. We cannot assure you that the
steps we have taken will prevent unauthorized use of our technology or the reverse
engineering of our technology. The confidentiality procedures and contractual restrictions
implemented by us may not be sufficient or effective.
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Protecting against the unauthorized use of our intellectual property and other
proprietary technology is expensive and difficult, particularly internationally.
Unauthorized parties may attempt to copy or reverse engineer our technologies or certain
aspects of our solutions that we consider proprietary. Litigation may be necessary in the
future to enforce or defend our intellectual property rights, to prevent unauthorized
parties from copying or reverse engineering our solutions, to determine the validity and
scope of our proprietary rights or to block infringing products where we operate. Any
such litigation, whether initiated by us or a third party, could result in substantial costs
and diversion of management resources, either of which could adversely affect our
business, operating results and financial condition. Even if we obtain favorable outcomes
in litigation, we may not be able to obtain adequate remedies.
We may not be able to detect and prevent fraud or other misconduct committed by our
employees or third parties.
We are exposed to the risk of fraud or other misconduct committed by our
employees, agents, customers or other third parties that could subject us to financial
losses and sanctions imposed by governmental authorities as well as seriously harm our
reputation. Our internal control system and procedures to monitor our operations and
overall compliance may be unable to identify non-compliance and/or suspicious
transactions in a timely manner, or at all. Further, it is not always possible to detect and
prevent fraud and other misconduct, and the precautions we take to prevent and detect
such activities may not be effective. There will therefore continue to be the risk that fraud
and other misconduct may occur, which may have an adverse effect on our business,
reputation, financial performance and results of operations.
We are exposed to the risk of fraud or other misconduct committed by our suppliers.
Failure by any of our suppliers to fulfill the commitment to integrity may lead to ethical
issues and subject us to potentially severe reputational risk and loss of profit and decline
in the trust of customers and partners.
We may face claims of infringement on know-how and intellectual property rights by
third parties which, if resolved unfavorably, could result in the loss of rights and the
obligation to pay damages.
Our continued success depends on our ability to use and develop our technology
and know-how without infringing the intellectual property rights of third parties. The
validity and scope of claims relating to our products and other technologies involve
complex scientific, legal and factual questions and analyses and may therefore be highly
uncertain.
There can be no assurance that we will not be subject to such claims in the future.
Moreover, because patent applications in many jurisdictions are kept confidential for an
extended period before they are published, we may be unaware of pending patent
applications by other parties that relate to our technologies, products or processes.
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The defense and prosecution of intellectual property suits, patent opposition
proceedings and related legal and administrative proceedings can be both costly and
time-consuming and may divert the efforts and resources of our technical and
management personnel. An adverse determination in any such litigation or proceeding to
which we may become a party could subject us to liability to third parties, require us to
seek licenses from third parties, pay ongoing royalties or redesign our products or subject
us to injunctions prohibiting the manufacture and sale of our products or the use of our
technologies. Litigation could also result in our customers deferring or limiting their
purchase or use of our products until resolution, as well as diversion of our management’s
attention. The occurrence of any of the foregoing could have an adverse effect on our
business, financial condition and results of operations.
We are dependent upon third parties for services in connection with our business.
We rely on third-party service providers for services in connection with our
business, such as logistics. However, the services delivered by third-party providers may
not always be timely or meet satisfactory quality standards. If the third-party service
providers fail to perform satisfactorily, substantially reduce the amount and scope of
services provided to us, or substantially increase the prices of their services or terminate
their business relationship with us, we may need to replace the third-party service
providers or take other remedial actions, which could increase our costs of operations. As
we do not have direct control over the third-party service providers, if they become
involved in the provision of services without relevant qualifications, or fail to comply
with our requirements or those of our customers or applicable laws and regulations, our
reputation in the industry may be adversely affected. This, in turn, may materially and
adversely affect our business, financial condition and results of operations.
We derive a substantial portion of our revenue from our top five customers and any
significant decrease in their order levels may negatively affect our business.
A majority of our revenue is derived from a limited number of customers. In each
year during the Track Record Period, revenue from our top five customers in each of such
year accounted for 35.9%, 35.9% and 32.9% of our total revenue, respectively, and revenue
attributable to our largest customer in each of such year accounted for 13.1%, 14.6% and
12.6% of our total revenue, respectively, and as such, we may be affected by risks arising
from customer concentration. Although our long-term business relationships with our
major customers provide high visibility for future revenue, there can be no assurance that
we will be able to maintain our relationships with them in the future. Demand from our
major customers may fall short of our estimation due to changes in our customers’
business models, strategies or financial condition, or changes in the refrigeration and
air-conditioning product component market environment, automotive component market
environment and macroeconomic conditions, among other things. In addition, any
adverse changes in our relationships or in the key commercial arrangements with our
major customers may cause material fluctuations or declines in our revenue and have a
material adverse effect on our business, financial condition, results of operations and
prospects.
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Accordingly, if any of our major customers significantly reduces its purchase
volume or ceases to place orders with us, or if we misinterpret the market demand, we
may not be able to identify new customers in a timely manner and conduct our sales on
commercially reasonable terms, or seek alternative ways to make up for the decrease in
sales, which in turn could have a material adverse effect on our business, financial
condition, results of operations and prospects.
Our historical results may not be indicative of our future performance and our results
of operations, and we may not be able to manage future growth effectively.
The historical financial information included in this prospectus is not expected to be
indicative of our future financial results. Such financial information is not intended to
represent or predict the results of operations of any future periods.
Our future growth is, to a certain extent, based upon our forward-looking
assessment of market prospects. We cannot guarantee that our assessment will always
turn out to be correct or that we can grow our business as planned. Our expansion plans
may be affected by a number of factors beyond our control. Such factors include changes
in the general economic conditions and the competitive landscape of the industries where
we operate, as well as the relevant regulations and policies and the supply and demand
for our products.
Managing our growth will require significant expenditures and allocation of
resources. We need to effectively manage our growth and maintain profits as we expect
our costs and expenses to continue to increase in the future. We will also need to expand,
train, manage and motivate our workforce and manage our relationships with suppliers,
customers and other business partners. We also expect to continue to invest in our current
and planned production expansion projects as well as R&D activities. All these endeavors
entail risks and demand considerable management efforts, skills and significant
additional expenditures, which could strain our capacity to enhance our operational,
auditing, human resources, financial and management controls. If we fail to achieve the
necessary level of efficiency in our organization as we grow, our business, financial
condition, results of operations and prospects may be materially and adversely affected.
We may be exposed to credit risks arising from our trade receivables. Failure to collect
our trade receivables in a timely manner or at all could have a material and adverse
impact on our business, financial condition, liquidity and prospects.
Our trade and notes receivables primarily include amounts due from our customers
for products in the ordinary course of business. As of December 31, 2022, 2023 and 2024,
our trade and notes receivables amounted to RMB7,432.1 million, RMB8,250.8 million and
RMB9,628.3 million, respectively. The credit period granted to our customers was
generally 60 to 120 days from the date of billing. See “Financial Information — Discussion
of Certain Components of Consolidated Statements of Financial Position — Trade and
Notes Receivables” in this prospectus.
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Our trade receivables turnover days increased from 79 days in 2022 to 86 days in
2023 and then to 88 days in 2024, primarily due to higher revenue contribution from
certain quality customers and the adjustments to credit policies for such customers. We
cannot assure you that we will be able to collect all or any of our trade receivables on time,
or at all. The occurrence of such event would materially and adversely affect our financial
condition and results of operations.
We historically invested and may in the future invest in wealth management products.
During the Track Record Period, we invested in wealth management products
issued by the banks to mobilize our capital and generate investment returns for the
benefits of our Shareholders. As of December 31, 2022, 2023 and 2024, our wealth
management products issued by the banks, which were measured at fair value through
profit or loss, amounted to RMB100.0 million, nil and nil, respectively. Going forward, we
may from time to time invest in wealth management products with low/medium risks or
low-risks on a case-by-case basis if these products are in our interest upon evaluations and
analyses. The investment in wealth management products may be subject to various risks
that are out of our control, including risks relating to macro-economic environment and
general market conditions, as well as the risk control and the credit of the issuing banks.
We cannot assure you that we will achieve fair value gains on the wealth management
products we invest in or we will not incur any fair value losses on our investments in
wealth management products in the future. If we incur such fair value losses, our results
of operations, financial condition and prospects may be adversely affected. There can also
be no assurance that the internal policies and guidelines that we currently have in place to
manage our investment in wealth management products will always be effective, or at all.
If we fail to properly manage the risks in relation to our investment in wealth management
products, we may incur losses, and as a result, our financial condition may be adversely
affected.
Divestitures of businesses and assets may have a material and adverse effect on our
business and financial condition.
We may undertake in the future, partial or complete divestitures or other disposal
transactions in connection with certain of our businesses and assets, particularly ones that
are not closely related to our core focus areas or might require excessive resources or
financial capital, to help us meet objectives. These decisions are largely based on our
management’s assessment of the business models and likelihood of success of these
businesses. However, our judgment could be inaccurate, and we may not achieve the
desired strategic and financial benefits from these transactions. Our financial results
could be adversely affected by the impact from the loss of earnings and corporate
overhead contribution/allocation associated with divested businesses.
Furthermore, reducing or eliminating our ownership interests in these businesses
might negatively affect our operations, prospects, or long-term value. We may lose access
to resources or know-how that would have been useful in the development of our own
business. Our ability to diversify or expand our existing businesses or to move into new
areas of business may be reduced, and we may have to modify our business strategy to
focus more exclusively on areas of business where we already possess the necessary
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expertise. We may sell our interests too early, and thus forego gains that we otherwise
would have received had we not sold. Selecting businesses to dispose of or spin off,
finding buyers for them (or the equity interests in them to be sold) and negotiating prices
for what may be relatively illiquid ownership interests with no easily ascertainable fair
market value will also require significant attention from our management and may divert
resources from our existing business, which in turn could have an adverse effect on our
business operations.
Considering, amongst others, the market conditions, financing needs and
development of the subsidiaries and business, we retain the possibility to spin off certain
business of our Group, such as the controllers business. We have obtained from the Hong
Kong Stock Exchange a waiver from strict compliance with the three-year restriction
requirement under paragraph 3(b) of Practice Note 15 in relation to the potential spin-offs
of the controller business of our Group. For additional information, see “Waivers from
Strict Compliance with the Listing Rules — Waiver in Respect of Strict Compliance with
Practice Note 15 and the Three-Year Restriction on Spin-Offs.”
Failure to comply with present or future environmental, safety and occupational health
regulations and standards may have a material adverse effect on our business, financial
condition and results of operations.
Our business is subject to regulations and standards relating to environmental,
safety and occupational health matters where we operate. Under these laws and
regulations, we are required to maintain safe production conditions and to protect the
occupational health of our employees. However, there can be no assurance that we will
not experience any material accidents or worker injuries in the course of our
manufacturing process in the future.
In addition, our manufacturing process produces pollutants such as wastewater,
waste gas and industrial solid waste. The discharge of such pollutants from our
manufacturing operations into the environment, if in violation of relevant regulations,
may give rise to liabilities that may require us to incur costs to remedy such discharge.
There can be no assurance that the situations that will give rise to environmental liabilities
will be discovered, or that any environmental laws adopted in the future will not affect
our operating costs and other expenses. Should stricter environmental protection
standards and regulations be imposed in the future, there can be no assurance that we will
be able to comply with such new regulations. Any increase in the manufacturing costs
resulting from the implementation of additional environmental protection measures
and/or failure to comply with new environmental laws or regulations may have a
material adverse effect on our business, financial condition or results of operations.
We face risks related to title defects related to our properties.
As of December 31, 2024, in China, our Company and Major Subsidiaries owned (i)
21 properties, each exceeding 1,000 square meters, with an aggregate site area of
approximately 783.7 thousand square meters, that had obtained the relevant title
certificates in China, and (ii) 14 properties, which were still in the process of obtaining the
relevant title certificates in China, with an aggregate site area of approximately 1,200
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thousand square meters. These properties are primarily used for our productions and
operations, as well as dormitories. See “Business — Properties.” While we strive to obtain
relevant title certificates for these properties, we may not be able to ultimately obtain
these title certificates, and our ownership and use of such properties may be affected.
Failure to make adequate contributions to various employee benefit plans as required
by regulations may subject us to penalties.
We are subject to various labor-related laws and regulations in the PRC and other
jurisdictions where we operate. For example, PRC laws and regulations require us to
participate in various government sponsored employee benefit plans. These benefit plans
include social insurance, housing provident funds and other welfare-oriented payment
obligations. According to applicable PRC laws and regulations, employers must open
social insurance registration accounts and housing provident fund accounts and pay
social insurance premiums and housing provident fund contributions for employees.
During the Track Record Period, we did not make full social insurance and housing
provident fund contributions for certain of our employees, as required by relevant laws
and regulations. We may be required to pay any shortfall in social insurance contributions
within a prescribed time period and to pay penalties. Our Directors are of the view that
the amount of shortfall and penalties was immaterial, and will not have a material adverse
impact on our operations or financial performance. However, we cannot assure you that
any new laws and regulations or any changes in the implementation of the existing laws
and regulations will not require us to pay any contribution shortfall or impose late
payment penalties and fines on us, thereby adversely affecting our financial condition and
results of operations.
Our information technology networks and systems may encounter malfunction,
unexpected system failure, interruption, insufficiency or security breaches. Abreach in
our cybersecurity, or failure to protect confidential information, may result in legal and
financial exposures and reputational damages.
We rely on information technology networks and systems for electronic
communications among our personnel, suppliers, customers and other business partners
and for synchronization with our manufacturers and logistics providers on demand
forecast, order placements and manufacturing and service status and capacity. Our
business involves storage and transmission of data about our business, suppliers,
customers and other business partners. Our information technology systems, some of
which are managed by third parties, may be susceptible to damage, disruptions or
shutdowns due to failures during the process of upgrading or replacing software,
databases or components, power outages, hardware failures, computer viruses, attacks by
computer hackers, telecommunication failures, user errors or catastrophic events. Any
such breach could compromise our networks and the information stored therein, possibly
resulting in legal and regulatory actions, disruption of operations and customer services,
and otherwise harming our business, reputation and future operations. If we do not
effectively resolve the issues in a timely manner, our business, results of operations and
financial condition may be materially and adversely affected, and we could experience
delays in reporting our financial results.
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We may be subject to risks associated with our products and may lack sufficient
insurance coverage for such claims. We may not be able to obtain adequate insurance
forlossesandliabilitiesarisingfromvariousoperationalrisksandhazardstowhichwe
are exposed.
The products that we produce have the possibility to cause damage. Accordingly,
we face the inherent risk of exposure to claims when the malfunction of our products
results in property damage, personal injury or death. Our products may experience
defects, which could subject us to lawsuits, product recalls or redesign efforts, all of which
would be time-consuming and costly. Product liability claims against us could require us
to pay substantial monetary compensation. Moreover, a product liability claim could
generate substantial negative publicity about our products and business and inhibit or
prevent commercialization of our future products, which would materially and adversely
affect our brands, business, prospects and results of operations. As of the Latest
Practicable Date, we obtained and maintained insurance policies that we believe are
customary for businesses of our size and type and in line with standard commercial
practice in the industry, however, our insurance coverage might not be sufficient to cover
all potential product liability claims.
In addition, our business is subject to a variety of operational risks, including
production disruptions due to operational errors, power outages, equipment failures and
suspension due to other risks; operational restrictions imposed by environmental or other
regulatory requirements; social, political and labor unrest; environmental or industrial
accidents; and catastrophic incidents such as fires, earthquakes, explosions, floods or
other natural disasters. Furthermore, as we continue to expand our operations in overseas
markets, we may be exposed to risks related to geopolitical tensions, policy changes and
intellectual property and technology protection. These aforementioned risks may result
in, including but not limited to, damage to or destruction of production facilities, personal
injury or casualties, environmental damage, monetary loss and legal liability. The
occurrence of any of these events may result in disruption of our operations and cause us
to suffer substantial losses or incur significant liabilities. We may not have adequate or
any insurance to cover these operational risks. If we incur material losses or liabilities,
and insurance is not adequate to cover such losses or liabilities, our business, financial
condition and results of operations may be materially and adversely affected.
Maintaining our brand image is critical to our success, and any failure to do so could
severelydamageourreputationandbrands,whichwouldhaveamaterialadverseeffect
on our business, financial condition and results of operations.
Our brands have worldwide recognition, and our success depends on our ability to
maintain and enhance our brand image and reputation. The value and reputation of our
brands depend on factors such as the quality, design, performance, functionality and
durability of our products, product innovation and customer experience. We intend to
continue making investments in these areas in order to develop, maintain and enhance
our brand image. For example, among selling and marketing expenses, the marketing and
traveling expenses were RMB48.0 million, RMB68.0 million and RMB79.6 million for the
years ended December 31, 2022, 2023 and 2024, respectively, accounting for 9.7%, 11.3%
and 11.0% of our total selling and marketing expenses for the same periods. As a result,
RISK FACTORS
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costs associated with maintaining our brand image can be significant, and we may further
incur substantial expenses to establish our brand image in new markets we have decided
to or will enter. However, we cannot assure you that our investments in these areas would
be successful, and expenses related to maintaining our brand image may have an adverse
impact on our results of operations and financial condition if they do not yield the
expected results.
Our brands, reputation and product sales could be harmed if, for example, our
products fail to meet the expectations of our customers or contain defects or fail. In
addition, adverse publicity about regulatory or legal action against us could damage our
reputation and brand image, undermine customer confidence in us and reduce long-term
demand for our products. See “— We may be involved in legal proceedings and
commercial or contractual disputes, which could materially and adversely affect our
reputation, business, results of operations and financial condition.”
In addition, negative publicity concerning our Company, including our
Shareholders, affiliates, Directors, officers, employees, business partners and other third
parties, as well as the broader industry, can have detrimental effects. Such publicity,
regardless of its accuracy, can tarnish our reputation, result in loss of customer trust,
decreased sales and challenges in maintaining or establishing business relationships with
our customers. It can also result in heightened scrutiny from regulators and stakeholders,
potentially leading to increased compliance costs or legal challenges, subsequently
impacting our business operations, financial condition, results and future prospects.
We may be involved in legal proceedings and commercial or contractual disputes,
which could materially and adversely affect our reputation, business, results of
operations and financial condition.
We may be involved in legal proceedings and commercial or contractual disputes in
the ordinary course of our business. We cannot assure you that we will not be involved in
various legal and other disputes in the future, which may expose us to additional risks
and losses. In addition, we may have to pay legal costs associated with such disputes,
including fees relating to appraisal, auction, execution and legal advisory services.
Litigation and other disputes may lead to inquiries, investigations and proceedings by
regulatory authorities and other governmental agencies and may result in damage to our
reputation, additional operating costs and diversion of resources and management’s
attention from our business operations. The disruption of our business due to judgment,
arbitration and legal proceedings against us or adverse adjudications in proceedings
against our Directors, senior management or key employees may materially and adversely
affect our reputation, business, results of operations, financial condition and prospects.
Our future strategic acquisitions or investments, if any, may not be successful, and we
may not realize anticipated strategic benefits and financial returns from such
transactions.
We may engage from time to time in acquisitions and other strategic investments in
order to expand our production capacity, diversify our product portfolio, gain access to
new markets and stable sources of raw materials or acquire new technologies. However,
RISK FACTORS
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there can be no assurance that our efforts, or any future acquisitions or investments, will
be successful or that we will achieve the anticipated strategic benefits and financial
returns from such transactions.
There are various risks associated with our acquisitions and investments, which
include the following:
• challenges related to integration of acquired company’s or investee’s
operations into our business;
• substantial delays or reduction in anticipated synergies;
• events beyond our control, including changes in regulations, technology and
economic conditions, which could adversely affect our ability to realize
benefits and returns from such transaction;
• potential increase in indebtedness that could constrain our operations;
• exposure to unknown or contingent liabilities that could require significant
expenditures and capital injections;
• failure to train, motivate, integrate and retain employees of acquired company
or investee;
• diversion of management time and attention from our existing operations to
address the transactions and related challenges or those associated with
integration processes; and
• unanticipated write-offs or charges and impairment of goodwill.
If we fail to address any of the foregoing risks, our business, financial condition and
results of operations may be materially and adversely affected.
You may experience complexities in effecting service of legal process and enforcing
foreign court judgments against us and our management.
We are a company incorporated under the laws of the PRC, and the majority of our
Directors, Supervisors and executive officers reside in China. As a result, it may not be
possible for you to directly effect service of process upon us or such Directors, Supervisors
or executive officers who reside in China, including with respect to matters arising under
U.S. federal securities laws or applicable state securities laws.
On July 3, 2008, the Supreme People’s Court and the Government of the Hong Kong
Special Administrative Region signed the Arrangement between the Mainland and the
HKSAR on Reciprocal Recognition and Enforcement of the Decisions of Civil and
Commercial Cases under Consensual Jurisdiction (ʝႩ
τર ) (the “ 2008 Arrangement ”). Under the
2008 Arrangement, where any designated court of China or Hong Kong court has made an
RISK FACTORS
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enforceable final judgment requiring payment of money in a civil and commercial case
pursuant to a choice of court agreement, the party concerned may apply to the relevant
court of China or Hong Kong court for recognition and enforcement of the judgment. The
2008 Arrangement took effect on August 1, 2008, but the effectiveness of any action
brought under the arrangement remains uncertain. On January 18, 2019, the Supreme
People’s Court and the Department of Justice under the Government of the Hong Kong
Special Administrative Region signed the Arrangement on Reciprocal Recognition and
Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland
and of the Hong Kong Special Administrative Region by The Supreme People’s Court of
The People’s Republic of China (ʝႩ̙ձ
τર ) (the “ 2019 Arrangement ”), which became effective on
January 29, 2024. The 2019 Arrangement regulates, among others, the scope and
particulars of judgments, the procedures and methods of the application for recognition
or enforcement, the review of the jurisdiction of the court that issued the original
judgment, the circumstances where the recognition and enforcement of a judgment shall
be refused and the approaches towards remedies for the reciprocal recognition and
enforcement of judgments in civil and commercial matters between the courts in China
and those in Hong Kong. However, the 2008 Arrangement will remain applicable to a
“choice of court agreement in writing” within the meaning of the 2008 Arrangement which
is made before the effective date of the 2019 Arrangement.
In accordance with the Civil Procedure Law of the PRC and other applicable laws,
regulations and interpretations, a court judgment obtained in the United States and any of
the other jurisdictions mentioned above may be recognized and enforced in China or
Hong Kong in consideration of the treaties providing for the reciprocal enforcement of
judgments of court between China and the country where the judgment was made.
Holders of our H Shares may be subject to PRC income tax on dividends from us or on
any gain realized on the transfer of our H Shares.
As is customary with all major economies, China has tax treaties or similar
arrangements with jurisdictions across the world. Under the EIT Law and its
implementation rules and Notice on the Issues concerning Withholding the Enterprise
Income Tax on the Dividends Paid by Chinese Resident Enterprises to H-share Holders
Which Are Overseas Non-resident Enterprises by State Taxation Administration (೼
͏ΆุΣྤ̮ Hٙ
) (Guo Shui Han [2008] No. 897) ( ਷೼Ռ[2008]897 ໮), dated November 6, 2008,
issued by the STA, subject to any applicable tax treaty or similar arrangement between
China and your jurisdiction of residence that provides for a different income tax
arrangement, PRC withholding tax at the rate of 10% is normally applicable to dividends
from PRC sources payable to investors that are resident enterprises outside of the PRC
which do not have an establishment or place of business in the PRC, or which have such
establishment or place of business if the relevant income is not effectively connected with
the establishment or place of business. Any gain realized on the transfer of shares by such
investors is subject to 10% (or a lower rate) PRC income tax if such gain is regarded as
income derived from sources within the PRC unless a treaty or similar arrangement
otherwise provides. As of the Latest Practicable Date, there were no specific rules on how
to levy tax on gains realized by non-resident enterprise holders of H Shares through the
sale or transfer by other means of H Shares.
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Under the Individual Income Tax Law of the PRC ()
and its implementation rules, income and gains from sources within the PRC paid to
foreign individual investors who are not residents in the PRC are generally subject to a
PRC withholding tax at a rate of 20%, unless specifically exempted by the tax authority of
the State Council or reduced or eliminated by an applicable tax treaty. Pursuant to the
Circular on Questions Concerning the Collection of Individual Income Tax Following the
Repeal of Guo Shui Fa [1993] No. 045 by State Taxation Administration (೼ਕᐼ҅ᗫ
਷೼೯ [1993]045 ) (Guo Shui Han [2011]
No. 348) ( ਷೼Ռ[2011]348 ໮) dated June 28, 2011, issued by the STA, dividends paid to
non-PRC resident individual holders of H Shares are generally subject to individual
income tax of the PRC at the withholding tax rate of 10%, depending on whether there is
any applicable tax treaty between the PRC and the jurisdiction in which the non-PRC
resident individual holder of H Shares resides, as well as the tax arrangement between the
PRC and Hong Kong. Non-PRC resident individual holders who reside in jurisdictions
that have not entered into tax treaties with the PRC are subject to a 20% withholding tax on
dividends received from us. However, pursuant to the Circular Declaring that Individual
Income Tax Continues to be Exempted over Income of Individuals from Transfer of Shares
by Ministry of Finance of the People’s Republic of China and State Taxation
Administration (ٙ
) (Guo Shui Han [1998] No. 61) ( ਷೼Ռ[1998]61 ໮) issued by the MOF of the PRC and
the STA on March 30, 1998, gains of individuals derived from the transfer of listed shares
of enterprises may be exempt from individual income tax. As of the Latest Practicable
Date, the aforesaid provision has not expressly provided that individual income tax shall
be collected from non-PRC resident individuals on the sale of shares of PRC resident
enterprises listed on overseas stock exchanges.
If any PRC income tax is collected from the transfer of our H Shares or on dividends
paid to our non-PRC resident investors, the value of your investment in our H Shares may
be affected. Furthermore, our Shareholders whose jurisdictions of residence have tax
treaties or arrangements with the PRC may not qualify for benefits under such tax treaties
or arrangements.
Ourbusinessmaybemateriallyandadverselyaffectedbyforcemajeureevents,natural
disasters or other issues beyond our control.
Natural and man-made disasters and other force majeure events which are beyond
our control may adversely affect the economy, infrastructure and livelihood of the people
there. An occurrence or recurrence of any of such events could result in disruptions to our
operations, which could adversely affect our business, financial condition, results of
operations and prospects.
Our business operations could be disrupted if any of our employees is suspected of
contracting any epidemic disease, since it could require our offices or facilities to be closed
for disinfection or other remedial measures, which would adversely delay or disrupt our
production schedule, and we may experience raw material shortages or price surges if the
operations of any of our suppliers are disrupted by pandemics.
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Moreover, natural disasters, including earthquakes, floods, landslides and
droughts, could result in deaths, significant economic losses and significant and extensive
damage to factories, power lines and other properties, as well as blackouts, transportation
and communications disruptions and other losses in the affected areas. Any future natural
disasters, public health and public security hazards may, among other things, materially
and adversely affect or disrupt our operations. Furthermore, such natural disasters,
public health and public security hazards may severely restrict the level of economic
activity in affected areas, which may in turn materially and adversely affect our business,
results of operations and prospects.
Foreign exchange regulations may limit our business and results of operations and our
ability to remit dividends.
Conversion and remittance of foreign currencies are subject to the foreign exchange
regulations. It cannot be guaranteed that under a certain exchange rate we shall have
sufficient foreign exchange to meet our foreign exchange needs. For example, under the
current PRC foreign exchange regulation, foreign exchange transactions under the current
account conducted by us, including the payment of dividends, do not require advance
approval from the SAFE, but we are required to present relevant documentary evidence of
such transactions and conduct such transactions at designated foreign exchange banks
within the PRC that have the licenses to carry out foreign exchange business. Foreign
exchange transactions under the capital account, however, normally need to be approved
by or registered with the SAFE or its local branch unless otherwise permitted by law. Any
insufficiency of foreign exchange may restrict our ability to obtain sufficient foreign
exchange for dividend payments to shareholders or satisfy any other foreign exchange
obligation. If we fail to obtain approvals from the SAFE to convert Renminbi into any
foreign exchange for any of the above purposes, our potential offshore capital expenditure
plans and even our business may be materially and adversely affected and could subject
us to administrative penalties and fines.
RISKS RELATING TO THE GLOBAL OFFERING
We will be concurrently subject to listing and regulatory requirements of China and
Hong Kong.
As we are listed on the Shenzhen Stock Exchange and will be listed on the Main
Board in Hong Kong, we will be required to comply with the listing rules (where
applicable) and other regulatory regimes of both jurisdictions, unless an exemption is
available or a waiver has been obtained. Accordingly, we may incur additional costs and
resources in continuously complying with all sets of listing rules in the two jurisdictions.
The characteristics of the A share and H share markets may differ.
Our A Shares are listed and traded on the Shenzhen Stock Exchange. Following the
Global Offering, our A Shares will continue to be traded on the Shenzhen Stock Exchange
and our H Shares will be traded on the Stock Exchange. Under current laws and
regulations of China, without the approval from the relevant regulatory authorities, our H
Shares and A Shares are neither interchangeable nor fungible, and there is no trading or
RISK FACTORS
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settlement between the H Share and A Share markets. With different trading
characteristics, the H Share and A Share markets have divergent trading volumes and
liquidity and investor bases, as well as different levels of retail and institutional investor
participation. As a result, the trading performance of our H Shares and A Shares may not
be comparable. Nonetheless, fluctuations in the price of our A Shares may adversely affect
the price of our H Shares, and vice versa. Due to the different characteristics of the H Share
and A Share markets, the historical prices of our A Shares may not be indicative of the
performance of our H Shares. You should therefore not place undue reliance on the
trading history of our A Shares when evaluating the investment decision in our H Shares.
There has been no prior public market for our H Shares, and their liquidity and market
price may be volatile.
There was no public market for our H Shares prior to the Global Offering. There can
be no guarantee that a public market for our H Shares with adequate liquidity and trading
volume will develop and be sustained following the completion of the Global Offering. In
addition, the Offer Price of our H Shares is expected to be fixed by agreement between the
Overall Coordinators (for themselves and on behalf of the Underwriters) and us, which
may not be indicative of the market price of our H Shares following the completion of the
Global Offering.
If an active public market for our H Shares does not develop following the
completion of the Global Offering, the market price and liquidity of our H Shares may be
materially and adversely affected.
The liquidity, trading volume and market price of our H Shares following the Global
Offering may be volatile, which could result in substantial losses to investors.
The price at which our H Shares will trade after the Global Offering will be
determined by the marketplace, which may be affected by various factors beyond our
control, including:
• our financial performance;
• changes in securities analysts’ estimates, if any, of our financial performance;
• the history of, and the prospects for, ourselves and the industry in which we
operate;
• an assessment on the prospects for, and timing of, our future revenue and cost;
• structures that independent research analysts may publish, if any;
• the present state of our development;
• the valuation of publicly traded companies that are engaged in business
activities;
• general market sentiment regarding the industry we operate in;
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• changes in laws and regulations of China;
• our actual or perceived failure to compete effectively in the market; and
• political, economic, financial and social conditions.
In addition, the Hong Kong Stock Exchange has from time to time experienced
significant volatility in trading prices and volumes that have affected the market prices of
securities of companies quoted on the Hong Kong Stock Exchange. As a result, investors in
our H Shares may experience volatility in the market price of their H Shares and a
decrease in the value of their H Shares regardless of our operating performance or
prospects.
Our Controlling Shareholders Group have substantial influence over our Group and
their interests may not be aligned with the interests of our other Shareholders.
Our Controlling Shareholders Group have significant influence in determining the
outcome of any corporate transaction or other matter submitted to the Shareholders for
approval, including but not limited to mergers, privatizations, consolidations and the sale
of all, or substantially all, of our assets, election of Directors and other significant
corporate actions. Immediately following the completion of the Global Offering
(assuming that the Offer Size Adjustment Option and the Over-allotment Option are not
exercised), the Controlling Shareholders Group will be together entitled to control the
exercise of approximately 40.72% of the voting rights and thus remain as Controlling
Shareholders Group of our Company. The interests of our Controlling Shareholders Group
might differ from the interests of our other Shareholders. In the event that our Controlling
Shareholders Group cause us to pursue strategic objectives that conflict with the interests
of our other Shareholders, our other Shareholders could be disadvantaged, and their
interests could be damaged. Any conflict of interest between our Controlling Shareholders
Group and our other Shareholders may also materially and adversely affect aspects such
as the decision and implementation of our business plans, which may in turn affect our
operations and prospects.
Our historical dividends may not be indicative of our future dividend policy, and there
can be no assurance whether and when we will pay dividends in the future.
We have declared dividends in the past. We protect our Shareholders’ interest by
ensuring a consistent dividend policy. However, there is no assurance that dividends of
any amount will be declared or distributed by us in any year in the future. Under the
applicable laws and regulations of China, the payment of dividends may be subject to
certain limitations. Moreover, the calculation of our profit under the China Accounting
Standards for Business Enterprises (“ PRC GAAP”) may differ in certain respects from the
calculation under the International Financial Reporting Standards (“ IFRS Accounting
Standards ”). As a result, even if we report a profit for the year under IFRS Accounting
Standards, we may not have distributable profits as determined by PRC GAAP .
Additionally, the declaration, payment and amount of any future dividends are subject to
the discretion of our Directors after taking into account various factors, including but not
RISK FACTORS
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limited to our results of operations, financial condition, cash flows, capital expenditure
requirements, market conditions, our strategic plans and prospects for business
development, regulatory restrictions on the payment of dividends and other factors as our
Directors may deem relevant, and subject to the approval at a Shareholders’ meeting. Any
declaration and payment as well as the amount of dividends will be subject to our
constitutional documents and the applicable laws and regulations of China. See “Financial
Information — Dividends and Dividend Policy” for further details of our dividend policy.
No dividend shall be declared or payable except out of our profits and reserves lawfully
available for distribution. Our historical dividends should not be taken as indicative of
our dividend policy in the future.
Under the existing foreign exchange regulations of China, payments of current
account items, including profit distributions, interest payments and trade and
service-related foreign exchange transactions, can be made in foreign currencies without
prior SAFE approval by complying with certain procedural requirements. However,
approval from or registration with competent government authorities is required where
RMB is to be converted into foreign currency and remitted out of China to pay capital
expenses, such as the repayment of loans denominated in foreign currencies. If the foreign
exchange control system prevents us from obtaining sufficient foreign currencies to satisfy
our foreign currency demands, we may not be able to pay dividends in foreign currencies
to our Shareholders. Further, we cannot assure you that new regulations will not be
promulgated in the future that would affect the remittance of RMB into or out of China.
Should the Offer Price be higher than the net tangible book value per Share, subject to
pricing, you may experience an immediate dilution in the book value of the Offer
Shares you purchased in the Global Offering and may experience further dilution if we
issue additional Shares in the future.
If the Offer Price of our H Shares is higher than the net tangible book value per Share
immediately prior to the Global Offering, purchasers of our H Shares in the Global
Offering will experience an immediate dilution. Existing Shareholders will receive an
increase in the pro forma adjusted consolidated net tangible assets value per share of their
shares.
Forward-looking statements contained in this prospectus are subject to risks and
uncertainties.
This prospectus contains certain statements and information that are
forward-looking and uses forward-looking terminology such as “anticipate,” “believe,”
“could,” “going forward,” “intend,” “plan,” “project,” “seek,” “expect,” “may,” “ought
to,” “should,” “would” or “will” and similar expressions. You are cautioned that reliance
on any forward-looking statement involves risks and uncertainties and that any or all of
those assumptions could prove to be inaccurate, and as a result the forward-looking
statements based on those assumptions could also be incorrect. In light of these and other
risks and uncertainties, the inclusion of forward-looking statements in this prospectus
should not be regarded as representations or warranties by us that our plans and
objectives will be achieved, and these forward-looking statements should be considered in
light of various important factors, including those set forth in this section. Subject to the
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requirements of the Listing Rules, we do not intend publicly to update or otherwise revise
the forward-looking statements in this prospectus, whether as a result of new information,
future events or otherwise. Accordingly, you should not place undue reliance on any
forward-looking information. All forward-looking statements in this prospectus are
qualified by reference to this cautionary statement.
Youshouldnotplaceanyrelianceonanyinformationreleasedbyusinconnectionwith
the listing of our A Shares on the Shenzhen Stock Exchange.
As our A Shares are listed on the Shenzhen Stock Exchange, we have been subject to
periodic reporting and other information disclosure requirements in China. As a result,
from time to time, we publicly release information relating to us on the Shenzhen Stock
Exchange or other media outlets designated by the CSRC. However, the information
announced by us in connection with our A Shares listing is based on regulatory
requirements of the securities authorities, industry standards and market practices in
China, which are different from those applicable to the Global Offering. The presentation
of financial and operational information for the Track Record Period disclosed on the
Shenzhen Stock Exchange or other media outlets may not be directly comparable to the
financial and operational information contained in this prospectus. As a result,
prospective investors in our H Shares should be reminded that, in making their
investment decisions as to whether to purchase our H Shares, they should rely only on the
financial, operating and other information included in this prospectus. By applying to
purchase our H Shares in the Global Offering, you will be deemed to have agreed that you
will not rely on any information other than that contained in this prospectus and any
formal announcements made by us in Hong Kong with respect to the Global Offering.
Our future financing may cause dilution of your shareholding or place restrictions on
our operations.
In order to raise capital and expand our business, we may consider offering and
issuing additional Shares or other securities convertible into or exchangeable for our
Shares in the future other than on a pro rata basis to our then existing Shareholders. As a
result, the shareholdings of those Shareholders may experience dilution in net asset value
per Share. If additional funds are to be raised through debt financing, certain restrictions
may be imposed on our operations, which may:
• further limit our ability or discretion to pay dividends;
• increase our risks in adverse economic conditions;
• adversely affect our cash flows; or
• limit our flexibility in business development and strategic plans.
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Certain facts, forecasts and statistics derived from external sources contained in this
prospectus may not be reliable and the market opportunity estimates may not be
accurate.
We have derived certain facts and other statistics in this prospectus, particularly the
section headed “Industry Overview”, from information provided by various public
sources, industry associations, independent research institutes and other third-party
sources, including the Frost & Sullivan Report that we commissioned. Our Directors and
Joint Sponsors have exercised reasonable care in selecting and identifying the information
sources, and believe that the sources of such information are appropriate sources for such
information. We have taken reasonable care in extracting and reproducing such
information. The information from official government sources has not been
independently verified by us, the Joint Sponsors, the Overall Coordinators, the
Underwriters, or any other party involved in the Global Offering, and no representation is
given as to its accuracy. Due to possibly flawed or ineffective collection methods or
discrepancies between published information and market practice and other data
problems, the statistics herein may be inaccurate. In addition, we cannot assure you that
information in this prospectus is stated or compiled on the same basis or with the same
degree of accuracy as or consistent with similar statistics presented elsewhere or similar
metrics we used, and such information may not be complete or up-to-date. You should
consider carefully how much weight or importance you should attach to or place on such
facts or statistics.
Market opportunity estimates included in this prospectus, including our ability to
capture a meaningful share of the relevant markets, are subject to significant uncertainty
and are based on assumptions and estimates that may not prove to be accurate. The
variables that go into the calculation of our market opportunity are subject to change over
time and there is no guarantee that our market opportunity estimates will materialize in
customers using our products and services as anticipated. Any expansion in our market
depends on a number of factors, including the cost, performance and perceived value
associated with our business and those of our competitors. Even if the market in which we
compete meets the size estimates and growth forecasted in this prospectus, our business
could fail to grow at similar rates, if at all. Our growth is subject to many factors, including
our success in implementing our business strategy, which is inherently subject to certain
risks and uncertainties.
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You should read the entire prospectus carefully and we strongly caution you not to
place any reliance on any information contained in press articles or other media
regarding us or the Global Offering.
The Global Offering is being made solely on the basis of the information and
representations contained in this prospectus, which are true and accurate to the best of our
knowledge and belief. Any information not contained in this prospectus should not be
relied upon in making an investment decision with respect to the securities being offered.
Prior to the publication of this prospectus, there has been coverage in the media
regarding us and the Global Offering, which may have contained, among other things,
certain financial information, projections, valuations and other forward-looking
information about us and the Global Offering. Investors should be aware that information
and opinions published by third-party sources may have been based on outdated,
incomplete, or inaccurate information. These sources may also have conflicts of interest,
and their opinions may not be independent or objective. The media’s coverage of our
Company and the Global Offering may be influenced by a wide range of factors, including
the bias of individual journalists, the preferences of media outlets and the demands of
advertisers.
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In preparation of the Global Offering, we have sought the following waivers from
strict compliance with certain provisions of the Listing Rules.
Rules Subject matter
Rules 8.12 and 19A.15 of the
Listing Rules
Management presence in Hong Kong
Rules 3.28 and 8.17 of the
Listing Rules
Appointment of joint company secretaries
Paragraph 26 of Appendix D1A
to the Listing Rules
Particulars of any alterations in the capital of
any member of our Group
Paragraph 3(b) of Practice Note
15 to the Listing Rules
Three-year restriction on spin-offs
Chapter 14A of the Listing Rules Continuing connected transactions
Rules 4.04(2) and 4.04(4)(a) Acquisition after the Track Record Period
Rule 8.08(1)(b) and 19A.13A
of the Listing Rules
Minimum public float of the H Shares
Rule 10.04 and Paragraph 5(2)
of Appendix F1 to the Listing
Rules
Subscription for H Shares by existing
shareholders and/or their close associates
Paragraph 4.2 of Practice Note
18 of the Listing Rules
Clawback mechanism
Paragraph 5(1) of Appendix F1
to the Listing Rules and
Chapter 4.15 of the Guide for
New Listing Applicants
Proposed subscriptions of H Shares by certain
cornerstone investors who are connected clients
WAIVER IN RESPECT OF MANAGEMENT PRESENCE IN HONG KONG
Pursuant to Rules 8.12 and 19A.15 of the Listing Rules, an issuer must have
sufficient management presence in Hong Kong. This will normally mean that at least two
of its executive directors must be ordinarily resident in Hong Kong. We do not have
sufficient management presence in Hong Kong for the purposes of Rule 8.12 and Rule
19A.15 of the Listing Rules.
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
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Our Group’s management headquarters, senior management, business operations
and assets are primarily based outside Hong Kong. The Directors consider that the
appointment of executive directors who will be ordinarily resident in Hong Kong would
not be beneficial to, or appropriate for, our Group and therefore would not be in the best
interests of our Company or the Shareholders as a whole. Therefore, our Company does
not, and does not contemplate in the foreseeable future that we will, have sufficient
management presence in Hong Kong for the purpose of satisfying the requirements under
the Listing Rules.
Accordingly, we have applied for, and the Stock Exchange has granted, a waiver
from strict compliance with Rules 8.12 and 19A.15 of the Listing Rules. We will ensure that
there is an effective channel of communication between the Stock Exchange and us by way
of the following arrangements:
(i) pursuant to Rule 3.05 of the Listing Rules, we have appointed and will
continue to maintain two authorised representatives who shall act at all times
as the principal channel of communication with the Stock Exchange. Each of
our authorised representatives will be readily contactable by the Stock
Exchange by telephone, facsimile and/or e-mail to deal promptly with
enquiries from the Stock Exchange. Both of our authorised representatives are
authorised to communicate on our behalf with the Stock Exchange. At present,
our two authorised representatives are Mr. Zhang Yabo and Ms. Ho Wing Nga,
our joint company secretaries;
(ii) pursuant to Rule 3.20 of the Listing Rules, each Director will provide their
contact information to the Stock Exchange and to the authorised
representatives. This will ensure that the Stock Exchange and the authorised
representatives should have means for contacting all Directors promptly at all
times as and when required;
(iii) we will endeavour to ensure that each Director who does not ordinarily reside
in Hong Kong possesses or can apply for valid travel documents to visit Hong
Kong and can meet with the Stock Exchange within a reasonable period; and
(iv) pursuant to Rule 3A.19 of the Listing Rules, we have retained the services of
Huatai Financial Holdings (Hong Kong) Limited as compliance adviser (the
“Compliance Adviser ”), who will act as an additional channel of
communication with the Stock Exchange. We will ensure that the Compliance
Adviser will have access at all times to our authorised representatives, our
Directors and other officers. We shall also ensure that such persons will
promptly provide such information and assistance as the Compliance Adviser
may need or may reasonably request in connection with the performance of
the Compliance Adviser’s duties as set forth in Chapter 3A of the Listing
Rules. We shall ensure that there are adequate and efficient means of
communication among our Company, our authorised representatives, our
Directors, other officers and the Compliance Adviser, and will keep the
Compliance Adviser fully informed of all communications and dealings
between us and the Stock Exchange.
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
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--- page 89 ---
WAIVER IN RESPECT OF JOINT COMPANY SECRETARIES
Pursuant to Rules 3.28 and 8.17 of the Listing Rules, the company secretary must be
an individual who, by virtue of their academic or professional qualifications or relevant
experience, is, in the opinion of the Stock Exchange, capable of discharging the functions
of the company secretary.
Pursuant to Note 1 to Rule 3.28 of the Listing Rules, the Hong Kong Stock Exchange
considers the following academic or professional qualifications to be acceptable:
(i) a member of The Hong Kong Chartered Governance Institute;
(ii) a solicitor or barrister as defined in the Legal Practitioners Ordinance
(Chapter 159 of the Laws of Hong Kong); and
(iii) a certified public accountant as defined in the Professional Accountants
Ordinance (Chapter 50 of the Laws of Hong Kong).
Pursuant to Note 2 to Rule 3.28 of the Listing Rules, in assessing the “relevant
experience”, the Hong Kong Stock Exchange will consider the individual’s:
(i) length of employment with the issuer and other issuers and the roles he/she
played;
(ii) familiarity with the Listing Rules and other relevant laws and regulations
including the Securities and Futures Ordinance, the Companies Ordinance,
the CWUMPO and the Takeovers Code;
(iii) r elevant training taken and/or to be taken in addition to the minimum
requirement under Rule 3.29 of the Listing Rules; and
(iv) professional qualifications in other jurisdictions.
Our Company appointed Mr. Hu Kaicheng (“ Mr.Hu ”), our Board Secretary, and Ms.
Ho Wing Nga, the Managing Director, Entity Solutions of Computershare Hong Kong
Investor Services Limited, (“ Ms. Ho”), as joint company secretaries of our Company. For
further details, please see the section headed “Directors, Supervisors and Senior
Management — Joint Company Secretaries” for their biographies.
Ms. Ho is a fellow member of both The Hong Kong Chartered Governance Institute
and The Chartered Governance Institute in the United Kingdom and therefore meets the
qualification requirements under Note 1 to Rule 3.28 of the Listing Rules and is in
compliance with Rule 8.17 of the Listing Rules.
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
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--- page 90 ---
Our Company’s principal business activities are outside Hong Kong. Our Company
believes that it would be in the best interests of our Company and the corporate
governance of our Group to have as its joint company secretary a person such as Mr. Hu,
who is an employee of our Company and who has day-to-day knowledge of our
Company’s affairs. Mr. Hu has the necessary nexus to the Board and close working
relationship with the management team of our Company in order to perform the function
of a joint company secretary and to take the necessary actions in the most effective and
efficient manner.
Accordingly, we have applied for, and the Stock Exchange has granted, a waiver
from strict compliance with the requirements under Rules 3.28 and 8.17 of the Listing
Rules for a three-year period from the Listing Date, in accordance with paragraphs 11 to 17
of Chapter 3.10 of the Guide for New Listing Applicants, on the conditions that: (i) Mr. Hu
must be assisted by a person with qualifications under Rules 3.28 and 8.17 of the Listing
Rules; and (ii) the waiver will be revoked if there are material breaches of the Listing Rules
by our Company. In addition, Mr. Hu will comply with the annual professional training
requirement under Rule 3.29 of the Listing Rules and will enhance his knowledge of the
Listing Rules during the three-year period from the Listing Date. Our Company will
further ensure that Mr. Hu has access to the relevant training and support that would
enhance his understanding of the Listing Rules and the duties of a company secretary of
an issuer listed on the Stock Exchange. Before the end of the three-year period, we shall
demonstrate to the Stock Exchange’s satisfaction and seek its confirmation that Mr. Hu,
having had the benefit of Ms. Ho’s assistance during the three-year period, has attained
the relevant experience under Note 2 to Rule 3.28 of the Listing Rules and is capable of
discharging the functions of company secretary so that a further waiver would not be
necessary.
WAIVER IN RESPECT OF ALTERATION IN SHARE CAPITAL
Paragraph 26 of Appendix D1A to the Listing Rules requires this prospectus to
include the particulars of any alterations in the capital of any member of our Group within
the two years immediately preceding the issue of this prospectus.
As of the Latest Practicable Date, we have 74 subsidiaries globally. It would be
unduly burdensome for us to disclose the required information in respect of all of our
subsidiaries as our Company would have to incur additional costs and devote additional
resources in compiling and verifying the relevant information for such disclosure, which
would not be material nor meaningful to investors. Therefore, we have identified 19 Major
Subsidiaries and none of the other subsidiaries of our Company individually contributed
to 5% or more of our revenue, total profit or net profit during each year in the Track Record
Period, or total assets or net assets as of December 31, 2022, 2023 or 2024, or holds any
material assets, intellectual property rights, proprietary technologies, licences or permits
of the Group, or has a significant impact on the Company’s business operations and future
development strategies based on the Company’s comprehensive assessment of the
Company’s business composition and principal business. The non-disclosure of such
information will not prejudice the interests of our Shareholders or potential investors.
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
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--- page 91 ---
By way of illustration, after intercompany eliminations, as of December 31, 2022,
2023 and 2024, the aggregate assets of the Major Subsidiaries represent approximately
82.6%, 87.2% and 85.6% of our total assets and for each of the financial years ended
December 31, 2022, 2023 and 2024, the aggregate revenue of the Major Subsidiaries
represents approximately 86.1%, 89.6% and 86.3% of our total revenue; and the aggregate
profit before tax of the Major Subsidiaries represent approximately 69.2%, 72.1% and
73.0% of the Group’s total profit before tax for each of the financial years ended December
31, 2022, 2023 and 2024. None of the other subsidiaries of our Company that are not Major
Subsidiaries individually contributes to 5% or more of our Group’s total assets as of
December 31, 2022, 2023 and 2024 or 5% or more of our Group’s revenue or profit before
tax for each of the financial years ended December 31, 2022, 2023 and 2024. Accordingly,
the remaining subsidiaries which are not Major Subsidiaries in our Group are relatively
insignificant to the overall results of our Group.
We have disclosed the particulars of the changes in the share capital of our
Company and the Major Subsidiaries in the section headed “Appendix IV — Statutory and
General Information — 1. Further Information About Our Group — C. Further
Information About Our Major Subsidiaries” in this prospectus.
We have applied for, and the Stock Exchange has granted, a waiver from strict
compliance with the requirements under paragraph 26 of Appendix D1A to the Listing
Rules, in respect of disclosing the particulars of any alteration in the capital of any
member of our Group within the two years immediately preceding the issue of this
prospectus.
WAIVER IN RESPECT OF STRICT COMPLIANCE WITH PRACTICE NOTE 15 AND
THE THREE-YEAR RESTRICTION ON SPIN-OFFS
Paragraph 3(b) of Practice Note 15 (“ PN15 ”) provides that the Listing Committee
would not normally consider a spin-off application within three years of the date of listing
of the issuer with regard to proposals submitted by issuers to effect the separate listing on
the Stock Exchange or elsewhere of assets or business wholly or partly within their
existing groups (the “ spin-off ”), given the original listing of the issuer will have been
approved on the basis of the issuer’s portfolio of businesses at the time of listing, and that
the expectation of investors at that time would have been that the issuer would continue
to develop those businesses.
Given our significant scale of overall business operation, we assess different
opportunities for financing and business operation from time to time with an aim to create
value to our Shareholders, including spinning off certain subsidiaries or business, subject
to, amongst others, the market conditions, financing needs and development of the
subsidiaries and business. We wish to retain the possibility to spin-off the controller
business of the Company (the “ Proposed Spin-off Business ”) within three years from the
Listing (the “ Potential Spin-off ”). The exact timing of the Potential Spin-off would
depend on a number of factors, including the status of the business development of the
Proposed Spin-off Business, financing needs and the market conditions.
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
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--- page 92 ---
The Proposed Spin-off Business principally engages in the R&D, manufacturing and
sales of controllers, with a main focus currently on the core component of refrigeration
air-conditioning units, such as variable frequency controllers. With a strong R&D team
comprising technical development experts in the field of controllers, the Proposed
Spin-off Business aims to master high-end core technologies in this industry and develop
high-quality controller products globally.
The Proposed Spin-off Business is distinct from the other business lines of the
Company. The Company started the Proposed Spin-off Business in 2011, when the
Company established the current entity operating the Proposed Spin-off Business (the
“Current Operating Entity ”) in 2011. The Company has since then acquired business of
several companies engaging in the production of controllers for refrigeration
air-conditioning units, which were then all independent from the Company. The Proposed
Spin-off Business expects to further expand into developing and manufacturing electronic
intelligent controllers for other fields such as energy storage and automotive thermal
management.
As of December 31, 2024, the Current Operating Entity has a total of around 550
employees. As of the Latest Practicable Date, the Current Operating Entity is
approximately 72% owned by the Company. As of December 31, 2022, 2023 and 2024, the
total assets of the Proposed Spin-off Business, and for each year ended December 31, 2022,
2023 and 2024, revenue and profit of Proposed Spin-off Business all accounted for less
than 3% of that of our Group, respectively.
Since the commencement of the Proposed Spin-off Business, the factory and
production lines used to operate the Proposed Spin-off Business have been independent
from those used by the rest of the Company. The management team of the Current
Operating Entity also manages the Proposed Spin-off Business independently and has
developed a team of around 160 members dedicated in the R&D of controllers as of
December 31, 2024. Accordingly, the Current Operating Entity in respect of the Proposed
Spin-off Business also independently reviews and accesses the revenue, cost and profit
performance, which is distinct from the rest of the Company. In addition, the Proposed
Spin-off Business has a wide scope of customers, including but not limited to the
Company. As of December 31, 2024, the revenue generated from members of the Group
represents around 20.8% of the total revenue of the Current Operating Entity, while the
revenue generated from customers other than members of the Group represents around
79.2%.
The market size of China’s controller industry is substantial with rapid growth and
vibrant financing activities. Despite the increased uncertainty in the internal and external
environment in 2023, the development of China’s controller industry maintained a rapid
growth momentum with favorable policies and introduction of relevant economic
stimulus. For example, according to Frost & Sullivan, the scale of China’s controller
market is expected to grow from RMB3.4 trillion in 2023 to RMB5.7 trillion in 2028, with a
compound annual growth rate of 10.8%.
As of the Latest Practicable Date, our Company confirms that there is no omission of
any material information relating to the Potential Spin-off in this prospectus.
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
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--- page 93 ---
Safeguards to Protect the Interests of the Shareholders
Despite the potential spin-offs within three years of Listing, our Company believes
that there are sufficient safeguards to protect the interests of the Shareholders for the
following reasons:
(i) The financial contribution of the Proposed Spin-off Business is immaterial.
The Proposed Spin-off Business has an immaterial financial contribution to
the Group, with the highest applicable percentage ratio falling below 5% for
the financial year ended December 31, 2023. As the Proposed Spin-off
Business will continue to be conducted by a subsidiary of the Company and
consolidated to the financial statements of the Group after the Potential
Spin-off, there will not be any material adverse impact on the consolidated
financial statements of the Group after the Proposed Spin-off.
(ii) Pursuant to Provisions on the Spin-offs of Listed Companies (Trial) ( ɪ̹ʮ
༊Б) (the “ Spin-off Rules ”), any proposed spin-offs,
regardless of size, must be approved by two-thirds of the votes casted by
shareholders (including both A Shares and, if applicable, H Shares
shareholders) entitled to vote at the general meeting, as well as two-thirds of
votes casted by the minority shareholders, who are not directors, supervisors
or senior management of our Company and who individually or collectively
hold less than 5% of the total number of shares in our Company (the
“Minority Shareholders”) , entitled to vote at the general meeting. Before any
proposed spin-off is submitted to the shareholders for voting, our Company
will disclose the relevant spin-off plan to its shareholders, which shall include
but not limited to the following: (i) the purpose, commercial rationality,
necessity, and feasibility of the spin-off; (ii) the impact of the spin-off on the
shareholders of the Company, in particular, the Minority Shareholders, as well
as impact on the creditors and other stakeholders of the Company; and (iii)
the potential risks faced at each stage of the spin-off plan, and specific
measures and plans to address such risks. Hence, the shareholders of the
Company (including the Minority Shareholders) can make an informed
decision as to whether to vote for or against such spin-off plan. As such, the
Company believes the interest of the shareholders and its rights will not be
prejudiced.
(iii) Pursuant to the Spin-off Rules, (i) the net profit of the subsidiary to be spun
off, to which the listed company is entitled under the equity in the
consolidated financial statements of the listed company for the latest financial
year, shall not exceed 50% of the net profit attributable to shareholders of the
listed company, and (ii) the net assets of the subsidiary to be spun off, to
which the listed company is entitled under the equity in the consolidated
financial statements of the listed company for the latest financial year, shall
not exceed 30% of the net assets attributable to shareholders of the listed
company. The above regulatory restrictions on the size of spin-off provide
additional safeguard to protect the interests of the shareholders of our
Company.
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
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--- page 94 ---
(iv) Our Directors owe fiduciary duties to our Company, including the duty to act
in good faith and in the best interest of our Company. As such, our Directors
will only pursue a potential spin-off if there are clear commercial benefits for
both our Company and the Proposed Spin-off Business. In addition, our
Directors will not direct our Company to conduct any spin-off if they believe
that it will have an adverse impact on the interests of our Company and the
Shareholders of our Company.
We have applied for, and the Stock Exchange has granted, a waiver from strict
compliance with the requirements in paragraph 3(b) of PN15 in relation to the Potential
Spin-off within three years after the Listing subject to the following conditions:
(i) The Proposed Spin-off Business is distinct from the remaining business of our
Group and the Potential Spin-off will not have any material adverse impact to
the operations of the remaining Group;
(ii) The Company will updated the status of the Proposed Spin-off in its annual
and interim reports within three years after the Listing;
(iii) The Potential Spin-off will not lead to any material adverse impact to the
operations and financial position of the remaining Group nor will it lead to a
material change in the Company’s principal business resulting in the
Company failing to meet applicable listing eligibility requirements under the
Listing Rules;
(iv) The Company will disclose in this prospectus details of its intention to the
Proposed Spin-off, including its principal business, the relevant financial
contribution to the Company during the Track Record Period, the relevant
reasons and benefits to the Company and its Shareholders, the basis that the
Proposed Spin-off will not affect the Company’s core business and the
possibility of the Proposed Spin-off;
(v) The Company will seek approvals from the respective Shareholders pursuant
to the requirements under the applicable PRC laws, including the Spin-off
Rules; and
(vi) The Company will comply with (a) all other requirements of PN15 in respect
of the Potential Spin-off unless otherwise waived by the Stock Exchange, and
(b) the applicable requirements under Chapter 14 and/or Chapter 14A of the
Listing Rules.
Notwithstanding the above waiver, whether or when to proceed with the Potential
Spin-off, depends on various factors such as market conditions, the regulatory approval
procedure, financial performance and valuation of business segments. The Potential
Spin-off remain highly uncertain and could be subject to material changes in the future.
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
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CONTINUING CONNECTED TRANSACTIONS
We have entered into certain transactions which will constitute continuing
connected transactions of our Company under the Listing Rules following the completion
of the Listing. We have applied to the Stock Exchange for, and the Stock Exchange has
granted, a waiver from strict compliance with the announcement requirements under the
Listing Rules. For further details in this respect, see the section headed “Connected
Transactions.”
WAIVER IN RESPECT OF ACQUISITION AFTER THE TRACK RECORD PERIOD
Rules 4.04(2) and 4.04(4) of the Listing Rules require that the new applicant includes
in its accountants’ report the results and balance sheet of any business or subsidiary
acquired, agreed or proposed to be acquired, since the date to which its latest audited
accounts have been made up, in respect of each of the three financial year immediately
preceding the issue of the listing document.
Pursuant to note (4) of Rule 4.04(4) of the Listing Rules, the Stock Exchange may
consider an application for a waiver from strict compliance with Rules 4.04(2) and 4.04(4)
of the Listing Rules taking into account the following factors:
(a) that all the percentage ratios (as defined under Rule 14.04(9) of the Listing
Rules) are less than 5% by reference to the most recent audited financial year
of the new applicant’s trading record period;
(b) if the acquisition will be financed by the proceeds raised from a public offer,
the new applicant has obtained a certificate of exemption from the SFC in
respect of the relevant requirements under paragraphs 32 and 33 of the Third
Schedule to the Companies (Winding Up and Miscellaneous Provisions)
Ordinance; and
(c) (i) where a new applicant’s principal activities involve the acquisition of
equity securities (the Stock Exchange may require further information where
securities acquired are unlisted), the new applicant is not able to exercise any
control, and does not have any significant influence over the underlying
company or business to which Rules 4.04(2) and 4.04(4) of the Listing Rules
relate, and has disclosed in its listing document the reasons for the acquisition
and a confirmation that the counterparties and their respective ultimate
beneficial owners are independent of the new applicant and its connected
persons. In this regard, “control” means the ability to exercise or control the
exercise of 30% (or any amount specified in the Hong Kong Code on Takeovers
and Mergers as the level for triggering a mandatory general offer) or more of
the voting power at general meeting, or being in a position to control the
composition of a majority of the board of directors of the underlying company
or business; or (ii) with respect to an acquisition of a business (including
acquisition of an associated company and any equity interest in a company
other than in the circumstances covered under sub-paragraph (a) above) or a
subsidiary by a new applicant, the historical financial information of such
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
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--- page 96 ---
business or subsidiary is unavailable, and it would be unduly burdensome for
the new applicant to obtain or prepare such financial information; and the
new applicant has disclosed in its listing document information required for
the announcement for a discloseable transaction under Rules 14.58 and 14.60
of the Listing Rules on each acquisition. In this regard, “unduly burdensome”
will be assessed based on each new applicant’s specific facts and
circumstances (e.g. why the financial information of the acquisition target is
not available and whether the new applicant or its controlling shareholder has
sufficient control or influence over the seller to gain access to the acquisition
target’s books and records for the purpose of complying with the disclosure
requirements under Rules 4.04(2) and 4.04(4) of the Listing Rules).
In April 2025, our Group has entered into an equity transfer agreement in respect of
our strategic investment into SH Advanser, S. de R.L. de C.V ., a Mexican company
primarily engaging in the provision of property services and other management services
for factories (the “ Target ”), pursuant to which, through our two subsidiaries, we acquired
100% equity interest in the Target from two individuals, who, to the best of the Directors’
knowledge, information and belief having made all reasonable enquiries, are Independent
Third Parties (the “ Transferors ”), at a consideration of $10,000.00 Mexican Pesos
(“MXN ”), equivalent to approximately RMB3,712.09, based on an exchange rate of
MXN2.6939 to RMB1.00 (the “ Investment ”). The consideration has been fully paid up in a
lump sum in cash and the Investment has been completed on the same day as we entered
into the equity transfer agreement. The consideration for the Investment was equal to the
original amount invested by the Transferors and was determined through arm’s length
commercial negotiations.
The Company believes that the acquisition of the Target will contribute to our
business expansion and will also support the Group’s long-term business development.
Our Directors considered that the Investment is on a normal commercial terms, fair and
reasonable and in the interest of our Company and the Shareholders as a whole.
The Company has applied to the Stock Exchange for, and the Stock Exchange has
granted, a waiver from strict compliance with Rules 4.04(2) and 4.04(4)(a) of the Listing
Rules in respect of the Investment on the following grounds:
(i) Under Rule 14.04(9) of the Listing Rules, all the applicable percentage ratios in
relation to the Investment are below 5% by reference to the most recent
audited financial year of the Track Record Period. Therefore, we consider the
Investment to be immaterial in the context of our Company’s operations as a
whole and will not result in any significant change to our financial position
since December 31, 2024. All information that is reasonably necessary for the
potential investors to make an informed assessment of the Company’s
activities or financial position has been included in this prospectus. As such, a
waiver from strict compliance with Rules 4.04(2) and 4.04(4) of the Listing
Rules would not prejudice the interests of the investing public.
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--- page 97 ---
(ii) Given the Target was established in February 2025, the Target does not have
available historical financial information which is readily available for
disclosure in this prospectus in accordance with the Listing Rules. In addition,
it would require considerable time and resources for our Company and its
reporting accountants to fully familiarize themselves with the management
accounting policies of the Target and compile the necessary financial
information and supporting documents for disclosure in this prospectus. In
addition, having considered the Investment to be immaterial and that the
Company does not expect the Investment to have any material effect on its
business, financial condition or operations, we believe that it would not be
meaningful and would be impractical for us to disclose the audited financial
information of the Target as required under Rules 4.04(2) and 4.04(4)(a) of the
Listing Rules and include the financial information of the Target during the
Track Record Period in this prospectus.
(iii) The Company has provided alternative information about the Investment in
this prospectus. Such information includes that which would be required for a
discloseable transaction under Chapter 14 of the Listing Rules that the
Company’s directors consider to be material, including, for example,
descriptions of the Target’s principal business activities, the consideration for
the Investment, and a statement that whether each of the counterparty is an
Independent Third Party. Since the relevant percentage ratios of the
Investment is less than 5% by reference to the most recent fiscal year of our
Track Record Period, the current disclosure is adequate for potential investors
to form an informed assessment of the Company. The Company will not use
any proceeds from the Listing to fund the Investment.
WAIVER IN RESPECT OF MINIMUM PUBLIC FLOAT OF THE H SHARES
Rule 8.08(1)(a) and (b) (as amended by Rule 19A.13A) of the Listing Rules states that
there must be an open market in the securities for which listing is sought. This will
normally mean that: (a) at least 25% of the issuer’s total number of issued shares must at
all times be held by the public; (b) where an issuer has one class of securities or more apart
from the class of securities for which listing is sought, the total securities of the issuer held
by the public (on all regulated market(s) including the Stock Exchange) at the time of
listing must be at least 25% of the issuer’s total number of issued shares. However, the
class of securities for which listing is sought must not be less than 15% of the issuer’s total
number of issued shares, having an expected market capitalisation at the time of listing of
not less than HK$125,000,000.
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We have applied to the Stock Exchange to request the Stock Exchange to exercise its
discretion under Rule 8.08(1)(b) and 19A.13A of the Listing Rules, and the Stock Exchange
has granted, a waiver from strict compliance with Rule 8.08(1)(b) and Rule 19A.13A of the
Listing Rules that the minimum percentage of H Shares of our Company to be held by the
public upon Listing and from time to time following Listing shall be no less than 6.67% of
our Company’s total issued share capital (excluding treasury shares), subject to the
following conditions:
(a) comply with the public float requirement under Rule 8.08(1) of the Listing
Rules where at least 25% of our Company’s total number of issued shares (A
Shares and H Shares in aggregate and excluding treasury shares) must be held
by the public from time to time;
(b) announce the percentage of H Shares held by the public immediately after the
completion of the Global Offering (before any exercise of the Offer Size
Adjustment Option and the Over-allotment Option and after any exercise of
the Offer Size Adjustment Option and the Over-allotment Option);
(c) confirm the sufficiency of public float in successive annual reports after
Listing; and
(d) implement appropriate measures and mechanisms to ensure continual
maintenance of minimum 6.67% public float of H Shares upon Listing.
ALLOCATION OF H SHARES TO EXISTING MINORITY SHAREHOLDERS AND/OR
THEIR CLOSE ASSOCIATES
Rule 10.04 of the Listing Rules requires that a person who is an existing shareholder
of the issuer may only subscribe for or purchase any securities for which listing is sought
which are being marketed by or on behalf of the issuer either in his or its own name or
through nominees if the conditions in Rules 10.03(1) and (2) of the Listing Rules are
fulfilled. It is provided in Rule 10.03(1) of the Listing Rules that no securities may be
offered to existing shareholders on a preferential basis and no preferential treatment may
be given to them in the allocation of the securities; and in Rule 10.03(2) that the minimum
prescribed percentage of public shareholders required by Rule 8.08(1) must be achieved.
Paragraph 5(2) of Appendix F1 to the Listing Rules provides that no allocations will
be permitted to the existing shareholders of the applicant or their close associates,
whether in their own names or through nominees, in the Global Offering unless the
conditions set out in Rules 10.03 and 10.04 of the Listing Rules are fulfilled.
Chapter 4.15 of the Guide for New Listing Applicants provides that the Stock
Exchange will consider giving consent and granting waiver from Rule 10.04 of the Listing
Rules to an applicant’s existing shareholders or their close associates to participate in an
initial public offering if any actual or perceived preferential treatment arising from their
ability to influence the applicant during the allocation process can be addressed.
Prior to the Listing, our Company’s share capital comprises entirely A Shares listed
on the Shenzhen Stock Exchange. We have a large and widely dispersed public A Share
shareholder base.
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
–8 8–


--- page 99 ---
We have applied for, and the Stock Exchange has granted, a waiver from strict
compliance with the requirements under Rule 10.04 and consent under Paragraph 5(2) of
Appendix F1 to the Listing Rules to permit H Shares in the International Offering to be
placed to certain existing minority Shareholders who (i) hold less than 5% of the total
voting rights in our Company prior to the completion of the Global Offering and (ii) are
not and will not become (upon the completion of the Global Offering) core connected
persons of our Company or the close associates of any such core connected person
(together, the “ Existing Minority Shareholders ”) and/or their close associates, subject to
the conditions as follows:
(i) the Joint Sponsors confirm that each Existing Minority Shareholder to whom
our Company may allocate the H Shares in the International Offering holds
less than 5% of the total voting rights in our Company before Listing;
(ii) the Joint Sponsors confirm that each Existing Minority Shareholder is not, and
will not be, a core connected person of our Company or any close associate of
any such core connected person immediately prior to or following the Global
Offering;
(iii) the Joint Sponsors confirm that none of the Existing Minority Shareholders
has the right to appoint a Director and/or have any other special rights;
(iv) the Joint Sponsors confirm that allocation to the Existing Minority
Shareholders or their close associates will not affect our ability to satisfy the
public float requirement as prescribed by the Stock Exchange under Rule 8.08
of the Listing Rules or otherwise approved by the Stock Exchange;
(v) the Joint Sponsors confirm to the Stock Exchange in writing that based on (i)
their discussions with our Company and the Overall Coordinators; and (ii) the
confirmations provided to the Stock Exchange by our Company and the
Overall Coordinators (confirmations (vi) and (vii) mentioned below), and to
the best of their knowledge and belief, they have no reason to believe that any
of the Existing Minority Shareholders or their close associates received any
preferential treatment, or is in a position to exert influence on the Company to
obtain actual or perceived preferential treatment in the allocation either as a
cornerstone investor or as a placee by virtue of their relationship with our
Company other than the preferential treatment of assured entitlement under a
cornerstone investment following the principles set out in Chapter 4.15 of the
Guide for New Listing Applicants, and details of the allocation to the Existing
Minority Shareholders holding more than 1% of the issued share capital of the
Company immediately prior to the completion of the Global Offering will be
disclosed in this prospectus and/or the allotment results announcement, as
the case may be;
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
–8 9–


--- page 100 ---
(vi) our Company will confirm to the Stock Exchange in writing that:
a. in the case of participation as cornerstone investors, no preferential
treatment has been, nor will be, given to the Existing Minority
Shareholders or their close associates by virtue of their relationship
with our Company, other than the preferential treatment of assured
entitlement under a cornerstone investment following the principles set
out in Chapter 4.15 of the Guide for New Listing Applicants, nor is the
Existing Minority Shareholder in a position to exert influence on the
Company to obtain actual or perceived preferential treatment, and the
Existing Minority Shareholders or their close associates’ cornerstone
investment agreements do not contain any material terms which are
more favorable to the Existing Minority Shareholders or their close
associates than those in other cornerstone investment agreements; or
b. in the case of participation as placees, no preferential treatment has
been, nor will be, given to the Existing Minority Shareholders or their
close associates, nor is the Existing Minority Shareholder in a position to
exert influence on the Company to obtain actual or perceived
preferential treatment, by virtue of their relationship with our Company
in any allocation in the placing tranche; and
(vii) in the case of participation as placees, the Overall Coordinators will confirm
to the Stock Exchange that, to the best of their knowledge and belief, no
preferential treatment has been, nor will be, given to the Existing Minority
Shareholders or their close associates by virtue of their relationship with our
Company in any allocation in the placing tranche.
WAIVER IN RESPECT OF CLAWBACK MECHANISM
Paragraph 4.2 of Practice Note 18 of the Listing Rules requires a clawback
mechanism to be put in place, which would have the effect of increasing the number of
Hong Kong Offer Shares to certain percentages of the total number of Offer Shares offered
in the Global Offering if certain prescribed total demand levels are reached.
Subject to the Stock Exchange granting the waiver described below, the Hong Kong
Public Offering and the International Offering will initially account for 7.0% and 93.0% of
the Global Offering, respectively, subject to the clawback mechanism described below. We
have applied for, and the Stock Exchange has granted to us, a waiver from strict
compliance with the requirements of Paragraph 4.2 of Practice Note 18 to the Listing Rules
such that the allocation of the Offer Shares in the Hong Kong Public Offering will be
adjusted as follows:
(a) if the number of the Offer Shares validly applied for under the Hong Kong
Public Offering represents 14 times or more but less than 46 times the number
of the Offer Shares initially available for subscription under the Hong Kong
Public Offering, then the number of Offer Shares will be reallocated to the
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
–9 0–


--- page 101 ---
Hong Kong Public Offering from the International Offering, so that the total
number of Offer Shares available under the Hong Kong Public Offering will be
36,033,000 Offer Shares, representing approximately 10.0% of the Offer Shares
initially available under the Global Offering (assuming the Offer Size
Adjustment Option and the Over-allotment Option are not exercised);
(b) if the number of the Offer Shares validly applied for under the Hong Kong
Public Offering represents 46 times or more but less than 93 times the number
of the Offer Shares initially available for subscription under the Hong Kong
Public Offering, then the number of Offer Shares to be reallocated to the Hong
Kong Public Offering from the International Offering will be increased so that
the total number of the Offer Shares available under the Hong Kong Public
Offering will be 48,644,600 Offer Shares, representing approximately 13.5% of
the Offer Shares initially available under the Global Offering (assuming the
Offer Size Adjustment Option and the Over-allotment Option are not
exercised); and
(c) if the number of the Offer Shares validly applied for under the Hong Kong
Public Offering represents 93 times or more the number of the Offer Shares
initially available for subscription under the Hong Kong Public Offering, then
the number of Offer Shares to be reallocated to the Hong Kong Public Offering
from the International Offering will be increased, so that the total number of
the Offer Shares available under the Hong Kong Public Offering will be
95,487,500 Offer Shares, representing approximately 26.5% of the Offer Shares
initially available under the Global Offering (assuming the Offer Size
Adjustment Option and the Over-allotment Option are not exercised).
In each case, the additional Offer Shares reallocated to the Hong Kong Public
Offering will be allocated between pool A and pool B and the number of Offer Shares
allocated to the International Offering will be correspondingly reduced in such manner as
the Overall Coordinators deem appropriate. In addition, the Overall Coordinators would
have discretion to allocate Offer Shares from the International Offering to the Hong Kong
Public Offering to satisfy valid applications under the Hong Kong Public Offering. On the
other hand, if the Hong Kong Public Offering is not fully subscribed, the unsubscribed
Offer Shares under the Hong Kong Public Offering may be reallocated to the International
Offering. See “Structure of the Global Offering — The Hong Kong Public Offering —
Reallocation” for further details.
CONSENT IN RESPECT OF THE PROPOSED SUBSCRIPTION OF H SHARES BY A
CORNERSTONE INVESTOR WHO IS A CONNECTED CLIENT
Paragraph 5(1) of Appendix F1 to the Listing Rules provides that no allocations will
be permitted to “connected clients” of the overall coordinator(s), any syndicate member(s)
(other than the overall coordinator(s)) or any distributor(s) (other than syndicate
member(s)) (collectively, the “ Distributors ”, and each a “ Distributor ”), without the prior
written consent of the Stock Exchange.
Paragraph 13(7) of the Appendix F1 to the Listing Rules states that “connected
client” in relation to an exchange participant means any client which is a member of the
same group of companies as such exchange participant.
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
–9 1–


--- page 102 ---
Huatai Capital Investment Limited (“ HTCI ”) has entered into a cornerstone
investment agreement with the Company and China International Capital Corporation
Hong Kong Securities Limited and Huatai Financial Holdings (Hong Kong) Limited
(“Huatai ”). HTCI and Huatai Securities Company Limited (“ HTSC ”) will enter into a
series of cross border delta-one OTC swap transactions (the “ Greenwoods OTC Swaps ”)
with each other and their ultimate clients (the “ HTCI Ultimate Clients (Greenwoods) ”),
respectively, pursuant to which HTCI will hold the Offer Shares on a non-discretionary
basis to hedge the Greenwoods OTC Swaps, respectively, while the economic risks and
returns of the underlying Offer Shares are passed to the HTCI Ultimate Clients
(Greenwoods). HTCI, HTSC and Huatai, one of the Joint Sponsors, Overall Coordinators
and Underwriters of the Global Offering, are members of the same group of companies.
Accordingly, HTCI is a connected client of Huatai.
We have applied for, and the Stock Exchange has granted, a consent under
paragraph 5(1) of Appendix F1 to the Listing Rules to permit HTCI (in connection with the
Greenwoods OTC Swaps) to participate in the Global Offering as a cornerstone investor
on the following basis and conditions as set out in Paragraph 5 of Chapter 4.15 of the
Guide for New Listing Applicants:
(a) any Offer Shares to be allocated to HTCI will be held on behalf of independent
third parties;
(b) the cornerstone investment agreement of HTCI does not contain any material
terms which are more favorable to HTCI than those in other cornerstone
investment agreements;
(c) no preferential treatment has been, nor will be, given to HTCI by virtue of its
relationship with Huatai, in any allocation of Offer Shares in the International
Offering other than the assured entitlement under the cornerstone investment
agreement;
(d) HTCI confirms that to the best of its knowledge and belief, it has not received
and will not receive preferential treatment in the allocation of Offer Shares in
the Global Offering as a cornerstone investor by virtue of its relationship with
Huatai, other than the assured entitlement under the relevant cornerstone
investment agreements;
(e) each of the Company, the Overall Coordinators and HTCI has provided the
Stock Exchange with written confirmations in accordance with Chapter 4.15 of
the Guide for New Listing Applicants; and
(f) details of the cornerstone investment and details of the allocations will be
disclosed in this prospectus and the allotment results announcement.
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
–9 2–


--- page 103 ---
DIRECTORS’RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS
This prospectus, for which our Directors (including any proposed Director who is
named as such in this prospectus) collectively and individually accept full responsibility,
includes particulars given in compliance with the Hong Kong Listing Rules, the
Companies (Winding Up and Miscellaneous Provisions) Ordinance and the Securities and
Futures (Stock Market Listing) Rules (Chapter 571V of the Laws of Hong Kong) for the
purpose of giving information with regard to our Group. Our Directors, having made all
reasonable enquiries, confirm that to the best of their knowledge and belief, the
information contained in this prospectus is accurate and complete in all material respects
and not misleading or deceptive, and there are no other matters the omission of which
would make any statement herein or this prospectus misleading.
RESTRICTIONS ON OFFER AND SALE OF H SHARES
Each person acquiring the Hong Kong Offer Shares under the Hong Kong Public
Offering will be required to, or be deemed by his acquisition of Hong Kong Offer Shares
to, confirm that he is aware of the restrictions on the offer and sale of the Hong Kong Offer
Shares described in this prospectus.
No action has been taken to permit a public offering of the H Shares or the
distribution of this prospectus in any jurisdiction other than Hong Kong. Accordingly, and
without limitation to the following, this prospectus may not be used for the purpose of,
and does not constitute, an offer or invitation in any jurisdiction or in any circumstances
in which such an offer or invitation is not authorized or to any person to whom it is
unlawful to make such an offer or invitation for subscription. The distribution of this
prospectus and the offering and sale of the Offer Shares in other jurisdictions are subject to
restrictions and may not be made except as permitted under the applicable securities laws
of such jurisdictions pursuant to registration with or authorization by the relevant
securities regulatory authorities or an exemption therefrom. In particular, the Offer Shares
have not been publicly offered and sold, and will not be offered and sold, directly or
indirectly, in mainland China or the U.S.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
–9 3–


--- page 104 ---
CSRC FILING
We have filed the required documents with the CSRC, and we have received a filing
notice from the CSRC dated May 8, 2025, confirming our completion of the filing
procedures pursuant to the new filing regime introduced by the new regulations on filing
for the Global Offering and the application for listing of the H Shares on the Stock
Exchange.
INFORMATION ON THE GLOBAL OFFERING
This prospectus is published solely in connection with the Hong Kong Public
Offering. For applications under the Hong Kong Public Offering, this prospectus contains
the terms and conditions of the Hong Kong Public Offering. The Global Offering
comprises the Hong Kong Public Offering of initially 25,223,100 Offer Shares and the
International Offering of initially 335,106,900 Offer Shares (assuming the Offer Size
Adjustment Option and the Over-allotment Option are not exercised and subject, in each,
to reallocation on the basis as set out in “Structure of the Global Offering”).
The Offer Shares are offered solely on the basis of the information contained and
representations made in this prospectus and on the terms and subject to the conditions set
out herein and therein. No person is authorized to give any information in connection
with the Global Offering or to make any representation not contained in this prospectus,
and any information or representation not contained herein must not be relied upon as
having been authorized by our Company, the Joint Sponsors, the Overall Coordinators,
the Joint Global Coordinators, the Joint Lead Managers, the Joint Bookrunners, the
Underwriters, the Capital Market Intermediaries, any of our or their affiliates or any of
their respective directors, officers, employees, advisers, agents or representatives, or any
other persons or parties involved in the Global Offering. Neither the delivery of this
prospectus nor any subscription or acquisition made under it shall, under any
circumstances, create any implication that there has been no change in our affairs since the
date of this prospectus or that the information in this prospectus is correct as of any
subsequent time.
UNDERWRITING
The Listing is sponsored by the Joint Sponsors and the Global Offering is managed
by the Overall Coordinators. The Hong Kong Public Offering is fully underwritten by the
Hong Kong Underwriters subject to the terms and conditions of the Hong Kong
Underwriting Agreement and is subject to us and the Overall Coordinators (for
themselves and on behalf of the Hong Kong Underwriters) agreeing on the Offer Price.
The International Offering is expected to be fully underwritten by the International
Underwriters, subject to the terms and conditions of the International Underwriting
Agreement. See “Underwriting” for further details on the Underwriters and the
underwriting arrangements.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
–9 4–


--- page 105 ---
APPLICATION FOR LISTING OF THE H SHARES ON THE HONG KONG STOCK
EXCHANGE
We have applied to the Hong Kong Stock Exchange for the granting of listing of, and
permission to deal in, our H Shares to be issued pursuant to the Global Offering (including
any H Shares which may be issued pursuant to the exercise of the Offer Size Adjustment
Option and the Over-allotment Option). Dealings in the H Shares on the Hong Kong Stock
Exchange are expected to commence on Monday, June 23, 2025. Except for the A Shares
that have been listed on the Shenzhen Stock Exchange and our pending application to the
Hong Kong Stock Exchange for the listing of, and permission to deal in, the H Shares, no
part of our share or debt securities is listed on or dealt in on the Hong Kong Stock
Exchange or any other stock exchange and no such listing or permission to list is being or
proposed to be sought in the near future.
Under section 44B(1) of the Companies (Winding Up and Miscellaneous Provisions)
Ordinance, any allotment made in respect of any application will be invalid if the listing
of, and permission to deal in, the H Shares on the Hong Kong Stock Exchange is refused
before the expiration of three weeks from the date of the closing of the application lists, or
such longer period (not exceeding six weeks) as may, within the said three weeks, be
notified to our Company by or on behalf of the Hong Kong Stock Exchange.
H SHARES WILL BE ELIGIBLE FOR ADMISSION INTO CCASS
Subject to the granting of listing of, and permission to deal in, the H Shares on the
Hong Kong Stock Exchange and our compliance with the stock admission requirements of
HKSCC, the H Shares will be accepted as eligible securities by HKSCC for deposit,
clearance and settlement in CCASS with effect from the date of commencement of
dealings in the H Shares on the Hong Kong Stock Exchange or any other date as
determined by HKSCC. Settlement of transactions between participants of the Hong Kong
Stock Exchange is required to take place in CCASS on the second settlement day after any
trading day. All activities under CCASS are subject to the General Rules of HKSCC and
HKSCC Operational Procedures in effect from time to time. Investors should seek the
advice of their stockbroker or other professional advisers for the details of the settlement
arrangements as such arrangements may affect their rights and interests. All necessary
arrangements have been made for the H Shares to be admitted into CCASS.
REGISTER OF MEMBERS AND STAMP DUTY
All of the H Shares issued pursuant to applications made in the Global Offering will
be registered on our H Share register to be maintained in Hong Kong by our H Share
Registrar, Computershare Hong Kong Investor Services Limited. Our principal register of
members will be maintained by us at our headquarters in mainland China.
Dealings in the H Shares registered in our H Share Register will be subject to Hong
Kong stamp duty.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
–9 5–


--- page 106 ---
DIVIDENDS PAYABLE TO HOLDERS OF H SHARES
Unless determined otherwise by our Company, dividends payable in Hong Kong
dollars in respect of our H Shares will be paid to the shareholders as recorded on the H
Share Register of our Company in Hong Kong and sent by ordinary post, at the
shareholders’ risk, to the registered address of each shareholder of our Company.
PROFESSIONAL TAX ADVICE RECOMMENDED
You should consult your professional advisers if you are in any doubt as to the
taxation implications of subscribing for, purchasing, holding, disposal of, dealing in or the
exercise of any rights in relation to our H Shares. None of our Company, the Joint
Sponsors, the Overall Coordinators, the Joint Global Coordinators, the Joint Lead
Managers, the Joint Bookrunners, the Underwriters, the Capital Market Intermediaries,
any of our or their affiliates or any of their respective directors, officers, employees,
advisers, agents or representatives, or any other persons or parties involved in the Global
Offering accepts responsibility for any tax effects on, or liabilities of, any person resulting
from the subscription, purchase, holding, disposal of, dealing in, or the exercise of any
rights in relation to, our H Shares.
LANGUAGE
If there is any inconsistency between this prospectus and its Chinese translation,
this prospectus shall prevail. For ease of reference, the names of the Chinese laws and
regulations, government authorities, institutions, natural persons or other entities
(including certain of our subsidiaries) have been included in this prospectus in both the
Chinese and English languages. In the event of any inconsistency, the Chinese name shall
prevail.
ROUNDING
Certain amounts and percentage figures, such as share ownership and operating
data, included in this prospectus may have been subject to rounding adjustments.
Accordingly, figures shown as totals in certain tables may not be an arithmetic
aggregation of the figures preceding them.
CURRENCY TRANSLATIONS
Solely for your convenience, this prospectus contains translations among certain
amounts denominated in Renminbi, Hong Kong dollars and U.S. dollars.
Unless otherwise specified, this prospectus contains certain translations for
convenience purposes at the following rates: Renminbi into Hong Kong dollars at the rate
of RMB1.00 to HK$1.0913, Renminbi into U.S. dollars at the rate of US$1.00 to RMB7.1886
and Hong Kong dollars into U.S. dollars at the rate of US$1.00 to HK$7.8448.
No representation is made that any amounts in RMB or Hong Kong dollars can be or
could have been at the relevant dates converted at the above rate or any other rates or at
all.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
–9 6–


--- page 107 ---
DIRECTORS & SUPERVISORS
Name Position Address Nationality
Mr. ZHANG Yabo
(΋͛ )
Executive Director
and Chairman of
the Board
No.1, Lakeside Court,
Sanhua Hezhuang,
Qixing Street,
Xinchang County,
Zhejiang Province, PRC
Chinese
Mr. WANG Dayong
(΋͛ )
Executive Director 121, Building 13, Mingqinyuan,
Greentown Rose Garden,
No.688 Rose Avenue,
Xinchang County,
Zhejiang Province, PRC
Chinese
Mr. NI Xiaoming
(΋͛ )
Executive Director Room 1901, Unit 1, Building 4,
Mingyuejiangnan, Binjiang
District, Hangzhou,
Zhejiang Province, PRC
Chinese
Mr. CHEN Yuzhong
(΋͛ )
Executive Director No.9, Lakeside Court,
Sanhua Hezhuang,
Qixing Street,
Xinchang County,
Zhejiang Province, PRC
Chinese
Mr. ZHANG Shaobo
(΋͛ )
Non-executive
Director
No. 3, Lakeside Court,
Sanhua Hezhuang,
Qixing Street,
Xinchang County,
Zhejiang Province, PRC
Chinese
Mr. REN Jintu
(ɺ΋͛ )
Non-executive
Director
1-3-601, Sunshine Coast,
No. 6, Yongjiang Road,
Shangcheng District, Hangzhou,
Zhejiang Province, PRC
Chinese
Mr. BAO Ensi
(౶΋͛ )
Independent
Non-executive
Director
Room 601, Block A,
Building 6, Piku Hutong,
Xicheng District,
Beijing, PRC
Chinese
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED
IN THE GLOBAL OFFERING
–9 7–


--- page 108 ---
Name Position Address Nationality
Mr. SHI Jianhui
(ሾ΋͛ )
Independent
Non-executive
Director
25-402, Bo Jing Ting,
Yinzhou, Ningbo,
Zhejiang Province, PRC
Chinese
Ms. PAN Yalan
(ᆙԭళɾɻ )
Independent
Non-executive
Director
5-1-201, Zhijingyuan,
Xixichengyuan,
Xihu District, Hangzhou,
Zhejiang Province, PRC
Chinese
Mr. Ge Jun
(΋͛ )
Independent
Non-executive
Director
Room A, 26/F,
11 Bonham Road,
Central and Western District,
Hong Kong
Chinese
Mr. ZHAO Yajun
(΋͛ )
Supervisor 28-2-402 Jinchang Wenhua,
Gongshu District, Hangzhou,
Zhejiang Province, PRC
Chinese
Mr. MO Yang
(୽เ΋͛ )
Supervisor Room 502, Unit 1,
Block 4, Huanglong Apartment,
No.2 Fengtan Road,
Xihu District, Hangzhou,
Zhejiang Province, PRC
Chinese
Mr. CHEN Xiaoming
(΋͛ )
Supervisor No.3, Building 9, Tianhe Garden,
Xinchang County,
Zhejiang Province, PRC
Chinese
See “Directors, Supervisors and Senior Management” for further details.
PARTIES INVOLVED IN THE GLOBAL OFFERING
Joint Sponsors China International Capital Corporation Hong
Kong Securities Limited
29/F One International Finance Centre
1 Harbour View Street
Central
Hong Kong
Huatai Financial Holdings (Hong Kong) Limited
62/F, The Center
99 Queen’s Road Central
Hong Kong
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED
IN THE GLOBAL OFFERING
–9 8–


--- page 109 ---
Overall Coordinators China International Capital Corporation Hong
Kong Securities Limited
29/F One International Finance Centre
1 Harbour View Street
Central
Hong Kong
Huatai Financial Holdings (Hong Kong) Limited
62/F, The Center,
99 Queen’s Road Central
Hong Kong
Joint Global Coordinators China International Capital Corporation Hong
Kong Securities Limited
29/F One International Finance Centre
1 Harbour View Street
Central
Hong Kong
Huatai Financial Holdings (Hong Kong) Limited
62/F, The Center
99 Queen’s Road Central
Hong Kong
Joint Bookrunners China International Capital Corporation Hong
Kong Securities Limited
29/F One International Finance Centre
1 Harbour View Street
Central
Hong Kong
Huatai Financial Holdings (Hong Kong) Limited
62/F, The Center
99 Queen’s Road Central
Hong Kong
ABCI Capital Limited
11/F, Agricultural Bank of China Tower
50 Connaught Road Central
Hong Kong
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED
IN THE GLOBAL OFFERING
–9 9–


--- page 110 ---
BOCI Asia Limited
26th Floor, Bank of China Tower
1 Garden Road
Central
Hong Kong
Caitong International Securities Co., Limited
Unit 2401-05, 24/F, Grand Millennium Plaza
181 Queen’s Road Central
Hong Kong
GF Securities (Hong Kong) Brokerage Limited
27/F, GF Tower
81 Lockhart Road, Wan Chai
Hong Kong
Zheshang International Financial Holdings Co.,
Limited
1703-1706, 17/F, Infinitus Plaza
199 Des Voeux Road Central, Sheung Wan
Hong Kong
Joint Lead Managers China International Capital Corporation Hong
Kong Securities Limited
29/F One International Finance Centre
1 Harbour View Street
Central
Hong Kong
Huatai Financial Holdings (Hong Kong) Limited
62/F, The Center
99 Queen’s Road Central
Hong Kong
ABCI Securities Company Limited
10/F, Agricultural Bank of China Tower
50 Connaught Road Central
Hong Kong
BOCI Asia Limited
26th Floor, Bank of China Tower
1 Garden Road
Central
Hong Kong
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED
IN THE GLOBAL OFFERING
– 100 –


--- page 111 ---
Caitong International Securities Co., Limited
Unit 2401-05, 24/F, Grand Millennium Plaza
181 Queen’s Road Central
Hong Kong
GF Securities (Hong Kong) Brokerage Limited
27/F, GF Tower
81 Lockhart Road, Wan Chai
Hong Kong
Zheshang International Financial Holdings Co.,
Limited
1703-1706, 17/F, Infinitus Plaza
199 Des Voeux Road Central, Sheung Wan
Hong Kong
Capital Market Intermediaries China International Capital Corporation Hong
Kong Securities Limited
29/F One International Finance Centre
1 Harbour View Street
Central
Hong Kong
Huatai Financial Holdings (Hong Kong) Limited
62/F, The Center
99 Queen’s Road Central
Hong Kong
ABCI Capital Limited
11/F, Agricultural Bank of China Tower
50 Connaught Road Central
Hong Kong
ABCI Securities Company Limited
10/F, Agricultural Bank of China Tower
50 Connaught Road Central
Hong Kong
BOCI Asia Limited
26th Floor, Bank of China Tower
1 Garden Road
Central
Hong Kong
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED
IN THE GLOBAL OFFERING
– 101 –


--- page 112 ---
Caitong International Securities Co., Limited
Unit 2401-05, 24/F, Grand Millennium Plaza
181 Queen’s Road Central
Hong Kong
GF Securities (Hong Kong) Brokerage Limited
27/F, GF Tower
81 Lockhart Road, Wan Chai
Hong Kong
Zheshang International Financial Holdings Co.,
Limited
1703-1706, 17/F, Infinitus Plaza
199 Des Voeux Road Central, Sheung Wan
Hong Kong
Legal advisers to our Company As to Hong Kong and U.S. laws
Clifford Chance
27/F, Jardine House
One Connaught Place
Central
Hong Kong
As to PRC laws
T&C Law Firm
11/F, Block A, Huanglong Century Square
No. 1 Hangda Road
Xihu District
Hangzhou, Zhejiang Province
PRC
Legal advisers to the Joint
Sponsors and the
Underwriters
As to Hong Kong and U.S. laws
Linklaters
11/F, Alexandra House
Chater Road
Central
Hong Kong
As to PRC laws
Jingtian & Gongcheng
34th Floor, Tower 3, China Central Place
77 Jianguo Road, Chaoyang District
Beijing, PRC
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED
IN THE GLOBAL OFFERING
– 102 –


--- page 113 ---
Independent Auditor and
Reporting Accountant
Confucius International CPA Limited
Certified Public Accountants
Room 1501-8, 15/F., Tai Yau Building,
181 Johnston Road, Wan Chai
Hong Kong
Industry Consultant Frost & Sullivan (Beijing) Inc., Shanghai Branch Co.
Room 2504, Wheelock Square
1717 West Nanjing Road
Jing’an District
Shanghai, PRC
Receiving Bank
Industrial and Commercial Bank of China (Asia) Limited
33/F., ICBC Tower
3 Garden Road
Central
Hong Kong
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED
IN THE GLOBAL OFFERING
– 103 –


--- page 114 ---
Registered Office and
Headquarters in
Mainland China
No. 219 Woxi Avenue, Chengtan Street
Xinchang, Shaoxing, Zhejiang Province
PRC
Principal Place of
Business in Hong Kong
46/F, Hopewell Centre
183 Queen’s Road East
Wanchai
Hong Kong
Company Website https://zjshc.com (the information contained on this
website does not form part of this prospectus)
Joint Company Secretaries Mr. Hu Kaicheng (௱೻΋͛ )
No. 219 Woxi Avenue, Chengtan Street
Xinchang, Shaoxing, Zhejiang Province
PRC
Ms. Ho Wing Nga ( О൘ඩɾɻ )
FCG (CS, CGP), HKFCG (CS, CGP) (PE)
46/F, Hopewell Centre
183 Queen’s Road East
Wanchai
Hong Kong
Authorized Representatives Mr. Zhang Yabo (΋͛ )
No. 219 Woxi Avenue, Chengtan Street
Xinchang, Shaoxing, Zhejiang Province
PRC
Ms. Ho Wing Nga ( О൘ඩɾɻ )
46/F, Hopewell Centre
183 Queen’s Road East
Wanchai
Hong Kong
Audit Committee Mr. Bao Ensi (౶΋͛ ) (Chairman)
Ms. Pan Yalan ( ᆙԭళɾɻ )
Mr. Shi Jianhui (ሾ΋͛ )
Remuneration and
Evaluation Committee
Mr. Shi Jianhui (ሾ΋͛ ) (Chairman)
Mr. Ren Jintu (ɺ΋͛ )
Mr. Bao Ensi (౶΋͛ )
Nomination Committee Ms. Pan Yalan ( ᆙԭళɾɻ ) (Chairman)
Mr. Zhang Yabo (΋͛ )
Mr. Shi Jianhui (ሾ΋͛ )
CORPORATE INFORMATION
– 104 –


--- page 115 ---
Strategy Management and ESG
Committee
Mr. Zhang Yabo (΋͛ ) (Chairman)
Mr. Wang Dayong (΋͛ )
Mr. Ni Xiaoming (΋͛ )
Mr. Chen Yuzhong (΋͛ )
Mr. Zhang Shaobo (΋͛ )
Mr. Shi Jianhui (ሾ΋͛ )
H Share Registrar Computershare Hong Kong Investor Services Limited
Shops 1712-1716,
17th Floor Hopewell Centre
183 Queen’s Road East
Wan Chai
Hong Kong
Compliance Adviser Huatai Financial Holdings (Hong Kong) Limited
62/F, The Center,
99 Queen’s Road Central
Hong Kong
Principal Banks Industrial and Commercial Bank of China
Shaoxing Xinchang Branch
159 Middle Gushan Road, Nanming Street
Xinchang, Shaoxing, Zhejiang Province
China
Agricultural Bank of China
Shaoxing Xinchang Branch
1 Middle Gushan Road, Nanming Street
Xinchang, Shaoxing, Zhejiang Province
China
J.P. Morgan Chase Bank N.A. – Ohio Branch
1111 Polaris Pkwy
Columbus, OH 43240
U.S.
Commerzbank AG Singapore Branch
#17-01 Guoco Midtown
128 Beach Road
Singapore, 189773
CORPORATE INFORMATION
– 105 –


--- page 116 ---
The information and statistics set out in this section have been extracted, in part, from
various official government sources and a market research report prepared by Frost & Sullivan
(the “ Frost & Sullivan Report ”) and commissioned by us. We believe that these sources are
appropriate sources for such information and statistics and reasonable care has been exercised
by us in selecting and identifying the named information sources, compiling, extracting and
reproducing the information, and ensuring no material omission of the information. Neither
our Company nor any of the Relevant Persons (which, for the purpose of this paragraph) has
independently verified the information and statistics from official government sources, and no
representation is given as to its accuracy.
The refrigeration and air-conditioning control components are core sub-components
of refrigeration and air-conditioning product components, designed to enable functions
including system monitoring, regulation and intelligent control, among others. We
primarily operate in (i) the refrigeration and air-conditioning control component industry,
(ii) automotive thermal management system component industry and (iii) strategic
emerging industries including bionic robot electromechanical actuator industry.
REFRIGERATION AND AIR-CONDITIONING CONTROL COMPONENT MARKET
Overview of Refrigeration and Air-conditioning Control Components
Refrigeration and air-conditioning control components are integral parts used in air
conditioners and other refrigeration facilities for household and commercial application
scenarios. They provide essential functions such as controlling heating and cooling
processes, regulating refrigerant flow, measuring pressure, among others. The primary
components category that fulfill these essential functions include valves, heat exchangers,
controllers and pumps.
Functions and Applications of Refrigeration and Air-Conditioning Control Components
Main ApplicationFunctionComponentCategory
Refrigeration and air conditioning systemBall Valve(4)
Split type air conditionersService Valve(3)
Air conditioning, refrigeration and
heat pump systemsPressure Sensor
Refrigeration and air conditioning systemAssemblies
Refrigeration and air conditioning system and
washing machineOthers
Refrigeration and air conditioning systemOthers
Heat
Exchangers
Controllers Refrigeration and air conditioning systemInverter Controller
Refrigeration and air conditioning systemOthers
Refrigeration and air conditioning systemOthers
Household and commercial air conditioning,
refrigeration systems, and washing machine
Refrigeration and air conditioning system,
refrigeratorElectronic Expansion Valve
Valves
Refrigeration units, freezers, air conditioners,
heat pumps and coffee machineSolenoid Valve(2)
Household and commercial air conditioning,
refrigeration systems, and washing machineMicro-channel Heat Exchanger
Refrigeration and heating cycle systemsFour-way Reversing Valve(1)
DishwashersOmega Pump(5)
Pumps
Others
Regulate refrigerant flow into the e vaporator to opt imize cooling
efficiency
Change the direction of the refrigerant flow to enable the transition
between cooling and heating modes
Electrically controlled to control the flow of refrigerants
Regulate refrigerant circulates through the system
Efficiently control the flow of refrigerant
Connect valves and carry and transport refrigerants
Including electr ic valve, thermostat ic expans ion valve, electr ic
switching water valve, water inlet valve for washing machines, gas
valve and other valves that reg ulate the flow of refr igerants and
fluid
Heat exchanger w ith a channel hydra ulic d iameter of less than
3mm, which improves the heat exchange capacity of the fluid
Including brazed plate heat exchanger and other heat exchangers
that efficiently transfer heat
Detect press ure and con vert it into a s ignal for prec ise system
regulation
Optimize energy performance by intelligently ad justing the
operating modes of compressors
Including controller, temperat ure controller and other controllers
that regulate and control the cooling process
Pumps housings with integrated, direct or indirect heating of the
rinse water, opt ionally assembled systems including inlet and
outlet hoses and integrated thermal safety elements
Including drain pump, shielded pump for water and other pumps
used for the transportation, circulation and pressure regulation of
liquids or gases
Including motorized damper, micro-channel condenser, supercon-
ductive plate, filter dr ier, fl uid reser voir, m uffler and other
components used for controlling heating and cooling processes
Source: the Frost & Sullivan Report
INDUSTRY OVERVIEW
– 106 –


--- page 117 ---
Notes:
(1) The scope of four-way reversing valves includes gigaforce four-way reversing valves.
(2) The scope of solenoid valves includes bistable solenoid valves and coffee machine solenoid valves.
(3) The scope of service valves includes bar-stock service valves.
(4) The scope of ball valves includes water ball valves.
(5) The scope of Omega pumps includes Omega BLDC pumps.
The value chain of refrigeration and air-conditioning control component market
involves upstream raw material suppliers, midstream refrigeration and air-conditioning
control component manufacturers and downstream applications. Upstream raw material
suppliers primarily produce raw materials that primarily include copper, aluminum and
other non-ferrous metals. Midstream refrigeration and air-conditioning control
component manufacturers primarily produce a variety of components. Downstream
applications primarily include household and commercial applications, among which
household applications mainly include household air conditioners, refrigerators and
dishwashers, among others, whilst commercial applications mainly include commercial
air conditioners, refrigeration systems in cold chain logistics and cooling systems in data
centers, among others.
Global Market Size of Refrigeration and Air-conditioning Control Components
The global market size of refrigeration and air-conditioning control components in
terms of revenue increased from RMB27.5 billion in 2020 to RMB36.4 billion in 2024, with
a CAGR of 7.4%. With the increasing demand for refrigeration and air-conditioning, the
global market size of refrigeration and air-conditioning control components categories in
terms of revenue is expected to reach RMB51.6 billion in 2029, representing a CAGR of
7.2% from 2024 to 2029. In terms of revenue in 2024, the global market size of valves, heat
exchangers, controllers and pumps accounted for 49.2%, 16.5%, 19.2% and 3.0%,
respectively, of the global market size for refrigeration and air-conditioning control
components, totaling an aggregate of 87.9%.
0
10
20
30
40
50
60
Revenue (Billion RMB)
2020 2021 2022 2023
0.9 0.94.7
3.5 3.8
12.4 14.4
6.0 6.5
4.3
29.9
1.0
4.4
16.0
6.5
4.1
32.0
1.1
5.2
16.8
6.6
4.1
33.8
27.5
2024 2025 E 2026E 2027E 2028E 2029E
1.1
6.0
17.9
7.0
4.4
36.4
1.2
7.0
19.1
7.4
4.5
39.2
1.2
8.0
20.4
7.8
4.7
42.1
1.3
9.2
21.8
8.2
4.7
45.2
1.3
10.4
23.2
8.6
4.8
48.3
1.4
11.7
24.7
9.0
4.8
51.6
CAGR (2024-2029E)CAGR (2020-2024)Revenue
6.6%9.7%
14.1%14.8%
5.2%3.9%
4.4%7.0%
2.1%-1.7%
Revenue of Refrigeration and Air-conditioning Control Components Market By Category (Global), 2020 – 2029E
Valves
Heat exchangers
Controllers
Pumps
(1)
Others(2)
7.2%7.4%Total
Source: Interviews Conducted by Frost & Sullivan with Experts from Leading Market Players; the Frost & Sullivan Report
Notes:
(1) The revenue of Omega pumps under the pumps category equals the shipment of Omega pumps
multiplied by the average selling price, as major manufacturers of Omega pumps include appliance
manufacturers who produce Omega pumps to be integrated into their own products and do not generate
revenue from sales of Omega pumps. For other pumps under the pumps category, revenue is calculated
based on sales volume and average selling price.
(2) Others include approximately ten types of components, such as motorized damper, micro-channel
condenser, superconductive plate, filter drier and other components used for controlling heating and
cooling processes.
INDUSTRY OVERVIEW
– 107 –


--- page 118 ---
Based on (i) the functions to achieve the control of heating and cooling process and
(ii) the impacts on system performances including efficiency, energy conservation, precise
regulation and automatic control, there are certain key refrigeration and air-conditioning
control components (the “ key components ”). Key components primarily include
four-way reversing valves, electronic expansion valves, service valves, micro-channel
heat exchangers, solenoid valves, Omega pumps, inverter controllers, ball valves and
pressure sensors.
From 2020 to 2024, the global revenue of four-way reversing valves, electronic
expansion valves, service valves, micro-channel heat exchangers, solenoid valves, Omega
pumps, inverter controllers, ball valves and pressure sensors grew at a CAGR of 4.8%,
13.6%, 2.4%, 16.9%, 6.5%, 9.3%, 9.8%, 9.9% and 4.7%, respectively. The global revenue of
four-way reversing valves, electronic expansion valves, service valves, micro-channel
heat exchangers, solenoid valves, Omega pumps, inverter controllers, ball valves and
pressure sensors is expected to grow at a CAGR of 2.2%, 11.6%, 1.8%, 14.4%, 4.9%, 6.9%,
5.0%, 4.8% and 6.1% from 2024 to 2029, respectively. In terms of revenue in 2024, the global
market size of four-way reversing valves, electronic expansion valves, service valves,
micro-channel heat exchangers, solenoid valves, Omega pumps, inverter controllers, ball
valves and pressure sensors accounted for 14.6%, 12.9%, 9.1%, 15.1%, 2.5%, 2.7%, 15.9%,
2.2% and 3.3%, respectively, of the global market size for refrigeration and
air-conditioning control components, totaling an aggregate of 78.3%.
50
4.0 4.5 4.9 5.40.7 0.72.9 3.2 3.7 4.73.0 3.3 3.2 3.22.8 3.0 3.8 4.24.4 4.9 4.9 5.2
0.7
Revenue (Billion RMB)
0.51.0
2020
0.9
0.61.2
2021
0.9 0.7
0.71.1
2022
1.00.9
0.71.2
2023
20.0 22.3
26.523.9
0
10
20
30
40
5.8 6.1 6.4 6.8 7.1 7.4
5.5 6.4 7.4 8.4 9.5 10.73.3 3.3 3.4 3.4 3.5 3.6
4.7 5.3 5.9 6.6 7.3 8.1
5.3 5.5 5.6 5.7 5.8 5.9
0.91.0
0.81.2
1.1 1.0
0.81.3
2024
1.01.1
0.91.4
2025E
1.01.2
0.91.4
2026E
1.11.3
0.91.5
2027E
1.1
1.01.6
2028E 2029E
1.4
28.5 30.8 33.1 35.4 38.0
40.8
CAGR (2024-2029E)CAGR (2020-2024)Revenue
2.2%4.8%
11.6%13.6%
1.8%2.4%
14.4%16.9%
4.9%6.5%
6.9%9.3%
5.0%9.8%
4.8%9.9%
6.1%4.7%
8.0%9.1%Total
Revenue of Key Refrigeration and Air-conditioning Control Components Market (Global), 2020 – 2029E
Four-way reversing valves
Electronic expansion valves
Service valves
Micro-channel heat exchangers
Solenoid valves
Omega pumps(1)
Inverter controllers
Ball valves
Pressure sensors
Source: Interviews Conducted by Frost & Sullivan with Experts from Leading Market Players; the Frost & Sullivan Report
Note:
(1) The revenue of the global market size of Omega pumps equals the shipment of Omega pumps multiplied
by the average selling price, as major manufacturers of Omega pumps include appliance manufacturers
who produce Omega pumps to be integrated into their own products and do not generate revenue from
sales of Omega pumps.
INDUSTRY OVERVIEW
– 108 –


--- page 119 ---
China is the largest refrigeration and air-conditioning control component market in
the world. In terms of revenue of refrigeration and air-conditioning control components in
2024, China accounted for approximately 47.3% of the global revenue. By 2029, the
revenue of refrigeration and air-conditioning control components in China is expected to
account for approximately 48.3% of the global revenue.
Revenue of Refrigeration and Air-conditioning
Control Component Market (By Region), 2024
Revenue of Refrigeration and Air-conditioning
Control Component Market (By Region), 2029E
47.3%
25.0%
19.4%
2.4%
5.9%
China
Asia (excluding China)
Europe
Others
North America
48.3%
25.3%
21.3%
3.1%
2.0%
China
Asia (excluding China)
Europe
Others
North America
Source: Interviews Conducted by Frost & Sullivan with Experts from Leading Market Players; the Frost & Sullivan Report
Market Size of Refrigeration and Air-conditioning Control Components in China
The market size of refrigeration and air-conditioning control components in China
in terms of revenue increased from RMB13.4 billion in 2020 to RMB17.2 billion in 2024,
with a CAGR of 6.4%. With the increasing demand for refrigeration and air-conditioning,
the market size of refrigeration and air-conditioning control components categories in
China in terms of revenue is expected to reach RMB24.9 billion in 2029, representing a
CAGR of 7.7% from 2024 to 2029.
0
10
30
20
Revenue (Billion RMB)
2020 2021 2022 2023
1.2 1.4 1.6 1.8
0.2 0.32.2
2.9
6.9 7.8
2.9
2.0
14.4
0.3
8.5
2.9
1.9
15.2
0.3
8.9
2.9
1.9
15.8
13.4
2024 2025 E 2026E 2027E 2028E 2029E
2.1 2.4
0.3
9.6
3.1
2.1
17.2
0.4
10.2
3.3
2.2
18.5
0.5
2.7
11.1
3.4
2.2
19.9
0.5
3.2
12.0
3.6
2.3
21.6
0.5
3.7
12.9
3.8
2.3
23.2
0.6
4.2
13.8
4.0
2.3
24.9
CAGR (2024-2029E)CAGR (2020-2024)Revenue
7.6%8.5%
15.4%13.6%
5.2%1.7%
10.6%15.4%
2.6%-2.1%
Revenue of Refrigeration and Air-conditioning Control Components Market By Category (China), 2020 – 2029E
Valves
Heat exchangers
Controllers
Pumps
(1)
Others(2)
7.7%6.4%Total
Source: China Refrigeration and Air-Conditioning Industry Association; Interviews Conducted by Frost & Sullivan with
Experts from Leading Market Players; the Frost & Sullivan Report
Notes:
(1) The revenue of Omega pumps under the pumps category equals the shipment of Omega pumps
multiplied by the average selling price, as major manufacturers of Omega pumps include appliance
manufacturers who produce Omega pumps to be integrated into their own products and do not generate
revenue from sales of Omega pumps. For other pumps under the pumps category, revenue is calculated
based on sales volume and average selling price.
(2) Others include approximately ten types of components, such as motorized damper, micro-channel
condenser, superconductive plate, filter drier and other components used for controlling heating and
cooling processes.
INDUSTRY OVERVIEW
– 109 –


--- page 120 ---
From 2020 to 2024, the revenue of four-way reversing valves, electronic expansion
valves, service valves, micro-channel heat exchangers, solenoid valves, Omega pumps,
inverter controllers, ball valves and pressure sensors in China grew at a CAGR of 3.4%,
13.0%, 1.7%, 16.5%, 10.6%, 18.4%, 8.6%, 11.9% and 19.2%, respectively. The revenue of
four-way reversing valves, electronic expansion valves, service valves, micro-channel
heat exchangers, solenoid valves, Omega pumps, inverter controllers, ball valves and
pressure sensors in China is expected to grow at a CAGR of 2.8%, 13.3%, 2.0%, 14.3%,
8.0%, 13.2%, 3.7%, 5.4% and 10.3% from 2024 to 2029, respectively.
0.4 2.3 2.4 2.5 2.5 2.7 2.8 2.9 3.1
1.8
0.0
1.9 1.31.5 1.41.4
1.4 2.1 2.4 2.7 3.1
1.6
3.52.2 2.4 2.7
1.5 1.5 1.6 1.6
5.2
2.8 3.0 2.9
4.2
3.1 3.5 4.0 4.6
3.6
3.7
5.9
1.7
4.0
4.9
3.0 3.2 3.3 3.4 3.5
3.6
1.11.4
0.4
0.5 0.0
0.5
0.6 0.0
0.5
1.80.6 0.1
0.5
0.60.1
0.6
0.60.1
0.6
0.70.1
0.6
0.70.1
0.7
0.8 0.9
0.7
10.1
11.7
0.1 0.1
3.0
13.0 14.3 15.3 16.5
17.9 19.3
21.0
12.0
0.3 0.4 0.4 0.4 0.6 0.6 0.6 0.7 0.7 0.71.00
10
20
30
Revenue (Billion RMB)
2020 2021 2022 2023 2024 2025 E 2026E 2027E 2028E 2029E
CAGR (2024-2029E)CAGR (2020-2024)Revenue
2.8%3.4%
13.3%13.0%
2.0%1.7%
14.3%16.5%
8.0%10.6%
13.2%18.4%
3.7%8.6%
5.4%11.9%
10.3%19.2%
8.5%8.8%Total
Revenue of Key Refrigeration and Air-conditioning Control Components Market (China), 2020 – 2029E
Four-way reversing valves
Electronic expansion valves
Service valves
Micro-channel heat exchangers
Solenoid valves
Omega pumps(1)
Inverter controllers
Ball valves
Pressure sensors
Source: China Refrigeration and Air-Conditioning Industry Association; Interviews Conducted by Frost & Sullivan with
Experts from Leading Market Players; the Frost & Sullivan Report
Note:
(1) The revenue of the market size of Omega pumps in China equals the shipment of Omega pumps
multiplied by the average selling price, as major manufacturers of Omega pumps include appliance
manufacturers who produce Omega pumps to be integrated into their own products and do not generate
revenue from sales of Omega pumps.
Market Drivers and Future Opportunities of Refrigeration and Air-conditioning
Control Components
Favorable policies promote low energy consumption. As energy costs continue to
rise, consumers are more willing to purchase appliances that can help them save utility
costs and reduce their adverse impact on the environment. Meanwhile, governments
worldwide have introduced a series of low-carbon and energy-saving policies to
accelerate the green transformation of economic development. For instance, the State
Council issued the “Action Plan for Energy Conservation and Carbon Reduction from
2024 to 2025” (2024-2025) in 2024, which proposed to strengthen the
management of carbon emission intensity, and implement special actions for energy
conservation and carbon reduction in different industries. Such supporting policies and
growing awareness for energy conservation and carbon reduction drives the increasing
demand for refrigeration and air-conditioning control components, such as electronic
expansion valves that can improve heat exchange efficiency and reduce energy waste by
precisely regulating refrigerant flow, and inverter controllers that can optimize energy
performance by intelligently adjusting the operating modes of compressors. In addition,
due to the accelerated elimination of refrigerants that cause environmental pollutions, the
upgrade and replacement of air conditioners further drives the growth in downstream
demand.
INDUSTRY OVERVIEW
–1 1 0–


--- page 121 ---
Growing requirements for product performance drive product iteration and
upgrading. Consumers are placing greater value on air conditioners of better quality and
functionality that contribute to a healthy, comfortable, and eco-friendly home
environment, which raises growing requirements for product performance of
refrigeration and air-conditioning control components. In response to the growing
requirements for product performance, refrigeration and air-conditioning control
component manufacturers have been dedicated to conducting product iteration and
upgrading. For instance, the technological upgrading in micro-channel heat exchangers
such as the innovative design of bending areas can achieve miniaturization of core
components and significantly enhance energy efficiency by increasing heat exchange
surface area.
Rising living standards and increasing penetration rate of air conditioners. With
increasing consumer purchasing power and living standards, the penetration rate of air
conditioners, particularly in emerging markets, continues to rise, further fueling the
growth of the global air conditioners market. The global per capita annual net income
grew at a CAGR of 4.9% from 2020 to 2024, whilst in emerging markets such as India, the
per capita annual net income grew at a CAGR of 6.1% during the same period. Moreover,
the penetration rate of air conditioners in some regions stays relatively low, with the
average volume of air conditioners per hundred households in China, Americas and
Europe reaching approximately 153, 95 and 43 as of December 31, 2024, respectively, while
the average volume of air conditioners per hundred households in India reaching only 20
as of December 31, 2024. Therefore, the rising living standards create a greater demand for
air conditioners, thereby stimulating demand for refrigeration and air-conditioning
control components.
Global warming drives surging demand for air conditioners. In recent years, due to
global warming, extreme weather events, such as prolonged heatwaves, have become
increasingly frequent, driving a significant increase in demand for air conditioning. For
instance, in Europe, unprecedentedly high temperatures have resulted in the highest
recorded average temperatures in summer, which has accelerated the popularization of
air conditioners. From 2020 to 2024, the revenue of residential air conditioners in Europe
increased from RMB43.5 billion to RMB68.8 billion, with a CAGR of 12.1%. Further, the
surging demand for air conditioners in Europe boosted the demand for refrigeration and
air-conditioning control components.
Growth in China’s exports driven by increasing demand from overseas market. The
demand for refrigeration and air-conditioning control components in overseas markets
continues to grow, driven by strict implementation of energy-saving and
emission-reduction policies, as well as consumers’ preference for high-performance
products. China’s refrigeration and air-conditioning control component manufacturers
leads the global supply and are expanding their brand influence through superior product
quality, efficient supply chain management and price advantages, thereby accelerating
their global business expansion. Therefore, driven by increasing demand in overseas
markets, the exports of refrigeration and air-conditioning control components in China is
expected to maintain a stable growth in the future. With the early advantage and global
recognition, the global R&D bases, localized production and sales network, the
collaboration with many internationally renowned enterprises, and high-quality products
and service tailored to local customer needs in overseas markets, our Group can benefit
from the increasing demand from overseas market.
Growth prospects from emerging applications. With the rapid growth of the cold
chain logistics industry and data center industry, refrigeration and air-conditioning
control components have ushered in broad development opportunities in emerging
markets. From 2020 to 2024, the market size of cold chain logistics in China grew at a
CAGR of 8.8%, whilst the market size of data center services in China grew at a CAGR of
11.6% during the same period. Emerging downstream applications raise higher
requirements for the efficiency and reliability of refrigeration and air-conditioning
systems, thereby driving the growth in demand for specialized components tailored for
cold chain logistics and data centers. In the future, the growth prospects from emerging
applications will further promote the development of the refrigeration and
air-conditioning control component market.
INDUSTRY OVERVIEW
– 111 –


--- page 122 ---
Competitive Landscape of Global Refrigeration and Air-conditioning Control
Components
The global refrigeration and air-conditioning control component market is highly
concentrated, with approximately 60 refrigeration and air-conditioning control
component manufacturers as of December 31, 2024. With the increasingly prominent
technical barriers and scale advantages in the refrigeration and air-conditioning control
component market, the global market concentration is showing an upward trend. Leading
component manufacturers have continuously consolidated their dominant positions
through technological improvement, product quality and cost efficiency advantages. In
contrast, small component manufacturers may find it difficult to compete with leading
manufacturers, due to insufficient technological reserves, limited production scale, and
relatively weak supply chain integration capabilities. Our competitors in the global
refrigeration and air-conditioning control component market mainly include Dun’an
Environment, Saginomiya Seisakusho, Fujikoki and Danfoss, among others.
In terms of revenue in 2024, the global top three manufacturers of refrigeration and
air-conditioning control components accounted for approximately 81.0%, among which
our Group ranked first, with a market share of approximately 45.5%.
Top Three Providers of Refrigeration and Air-conditioning Control Components
in terms of Revenue (Global), 2024
3.3 9.1%Company B(2) Japan3
Ranking
1 Our Group Zhejiang Province, China 16.6 45.5%
Company Headquarter Revenue
(Billion RMB) Market Share
2 Company A(1) Zhejiang Province, China 9.6 26.4%
Source: Annual Reports; Interviews Conducted by Frost & Sullivan with Experts from Leading Market Players; the Frost
& Sullivan Report
Notes:
(1) Company A is a group established in 2001 and listed on the Shenzhen Stock Exchange in 2004, engaging
in the provision of refrigeration components, air conditioning equipment and core components of NEV
thermal management systems.
(2) Company B is a private group established in 1948, engaging in the provision of refrigeration components,
automatic controls, air conditioning and other HVAC equipment.
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In terms of revenue in 2024, the global top three manufacturers of valves of
refrigeration and air-conditioning control components accounted for approximately
89.7%, among which our Group ranked first, with a market share of approximately 59.8%.
In terms of revenue in 2024, the global top three manufacturers of heat exchangers of
refrigeration and air-conditioning control components accounted for approximately
92.8%, among which our Group ranked first, with a market share of approximately 44.6%.
Top Three Providers of Refrigeration
and Air-conditioning Valves
in terms of Revenue (Global), 2024
Top Three Providers of Refrigeration
and Air-conditioning Heat Exchangers
in terms of Revenue (Global), 2024
1.4 7.8%Company B Japan3
Ranking
1 Our Group Zhejiang Province, China 10.7 59.8%
Company Headquarter Revenue
(Billion RMB)
Market
Share
2 Company A Zhejiang Province, China 4.0 22.1%
1.2 1 9.1%Company D(2) Denmark3
Ranking
1 Our Group Zhejiang Province, China 2.7 44.6%
Company Headquarter Revenue
(Billion RMB)
Market
Share
2 Company C (1) Sweden 1.8 2 9.1%
Source: Annual Reports; Interviews Conducted by Frost & Sullivan with Experts from Leading Market Players; the Frost
& Sullivan Report
Notes:
(1) Company C is a group established in 1883 and listed on the Nasdaq Stockholm Exchange in 2002 and the
London Stock Exchange in 2010, engaging in the provision of products in the areas of heat transfer,
separation and fluid handling.
(2) Company D is a private established in 1933, engaging in the provision of heat exchangers, high pressure
pumps and other components for HVAC equipment.
In terms of revenue in 2024, the global top three manufacturers of controllers of
refrigeration and air-conditioning control components accounted for approximately
31.6%, among which our Group ranked second, with a market share of approximately
12.5%.
In terms of revenue in 2024, the global top three manufacturers of pumps of
refrigeration and air-conditioning control components accounted for approximately
87.5%, among which our Group ranked first, with a market share of approximately 49.2%.
Top Three Providers of Refrigeration
and Air-conditioning Controllers
in terms of Revenue (Global), 2024
Top Three Providers of Refrigeration
and Air-conditioning Pumps
in terms of Revenue (Global), 2024
0.1 8.8%Company F(2) Denmark3
Ranking
1 Our Group Zhejiang Province, China 0.6 49.2%
Company Headquarter Revenue
(Billion RMB)
Market
Share
2 Company E(1) Germany 0.3 2 9.5%
0.4 6.2%Company B Japan3
Ranking
1 Company D Denmark 0.9 12.9%
Company Headquarter Revenue
(Billion RMB)
Market
Share
2 Our Group Zhejiang Province, China 0.9 12.5%
Source: Interviews Conducted by Frost & Sullivan with Experts from Leading Market Players; the Frost & Sullivan Report
Notes:
(1) Company E is a private group established in 1967, engaging in the provision of dishwashers, refrigerator,
freezers, vacuum cleaners, and other home appliances. Company E’s revenue of pumps equals shipment
of pumps multiplied by average selling price.
(2) Company F is a private group established in 1945, engaging in the provision of high-efficiency,
energy-saving pumps and water solutions for domestic homes.
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In terms of revenue in 2024, the global top three manufacturers of electronic
expansion valves accounted for approximately 87.6%, among which our Group ranked
first, with a market share of approximately 51.4%.
In terms of revenue in 2024, the global top three manufacturers of four-way
reversing valves accounted for approximately 87.3%, among which our Group ranked
first, with a market share of approximately 55.4%.
In terms of revenue in 2024, the global top three manufacturers of solenoid valves
accounted for approximately 74.7%, among which our Group ranked first, with a market
share of approximately 47.7%.
In terms of revenue in 2024, the global top three manufacturers of service valves
accounted for approximately 78.6%, among which our Group ranked first, with a market
share of approximately 39.1%.
Top Three Providers of Electronic Expansion Valves, Four-way Reversing Valves,
Solenoid Valves and Service Valves in terms of Revenue (Global), 2024
Electronic Expansion Valves Four-way Reversing Valves
0.8 14.2%Company B Japan3
Ranking
1 Our Group Zhejiang Province, China 2.9 55.4%
Company Headquarter Revenue
(Billion RMB)
Market
Share
2 Company A Zhejiang Province, China 0. 9 17.7%
0.6 13.7%Company A Zhejiang Province, China3
Ranking
1 Our Group Zhejiang Province, China 2.4 51.4%
Company Headquarter Revenue
(Billion RMB)
Market
Share
2 Company G (1) Japan 1.1 22.5%
Solenoid Valves Service Valves
0.1 9.0%Company G Japan3
Ranking
1 Our Group Zhejiang Province, China 0.4 47.7%
Company Headquarter Revenue
(Billion RMB)
Market
Share
2 Company B Japan 0.2 18.0%
0.3 9.5%Company H(2) Guangdong Province, China3
Ranking
1 Our Group Zhejiang Province, China 1.3 39.1%
Company Headquarter Revenue
(Billion RMB)
Market
Share
2 Company A Zhejiang Province, China 1.0 30.0%
Source: Annual Reports; Interviews Conducted by Frost & Sullivan with Experts from Leading Market Players; the Frost
& Sullivan Report
Notes:
(1) Company G is a private group established in 1949, engaging in the provision of in-vehicle
air-conditioning systems, space air-conditioners and other various kinds of climatic temperature
controlling equipment.
(2) Company H is a private group established in 2007, engaging in the production of refrigeration
components, including service valves, four-way reversing valves, electronic expansion valves, among
others.
In terms of revenue in 2024, the global top three manufacturers of micro-channel
heat exchangers accounted for approximately 70.7%, among which our Group ranked
first, with a market share of approximately 43.4%.
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In terms of revenue in 2024, the global top three manufacturers of Omega pumps
accounted for approximately 96.6%, among which our Group ranked first, with a market
share of approximately 53.6%.
In terms of revenue in 2024, the global top three manufacturers of pressure sensors
accounted for approximately 56.2%, among which our Group ranked second, with a
market share of approximately 15.9%.
In terms of revenue in 2024, the global top three manufacturers of ball valves
accounted for approximately 80.3%, among which our Group ranked first, with a market
share of approximately 32.8%.
The global market size of inverter controllers in terms of revenue reached
approximately RMB5.8 billion in 2024. The global inverter controller market is
concentrated, with approximately 40 market participants as of December 31, 2024. In
terms of revenue in 2024, our Group accounted for approximately 10.9% of the global
market size of inverter controllers.
Top Three Providers of Micro-channel Heat Exchanger, Omega Pump,
Inverter Controller, Pressure Sensor and Ball Valve
in terms of Revenue (Global), 2024
Micro-channel Heat Exchangers Omega Pumps
(1)
0.5 8.4%Company A Zhejiang Province, China3
Ranking
1 Our Group Zhejiang Province, China 2.4 43.4%
Company Headquarter Revenue
(Billion RMB)
Market
Share
2 Company D Denmark 1.0 18. 9%
0.1 5.6%Company I(2) Guangdong Province, China3
Ranking
1 Our Group Zhejiang Province, China 0.5 53.6%
Company Headquarter Revenue
(Billion RMB)
Market
Share
2 Company E Germany 0.3 37.4%
Pressure Sensors Ball Valves
0.1 18.8%Company A Zhejiang Province, China3
Ranking
1 Our Group Zhejiang Province, China 0.3 32.8%
Company Headquarter Revenue
(Billion RMB)
Market
Share
2 Company D Denmark 0.2 28.7%
0.2 15.0%Company J(3) United States3
Ranking
1 Company B Japan 0.3 25.3%
Company Headquarter Revenue
(Billion RMB)
Market
Share
2 Our Group Zhejiang Province, China 0.2 15.9%
Source: Annual Reports; Interviews Conducted by Frost & Sullivan with Experts from Leading Market Players; the Frost
& Sullivan Report
Notes:
(1) The revenue of Omega pumps equals the shipment of pumps multiplied by the average selling price, as
major manufacturers of Omega pumps include appliance manufacturers who produce Omega pumps to
be integrated into their own products and do not generate revenue from sales of Omega pumps.
(2) Company I is a group established in 2000 and listed on the Shenzhen Stock Exchange in 2013 and the
Hong Kong Stock Exchange in 2024, engaging in the provision of a wide range of home appliances,
including air conditioners, refrigerators, washing machines and kitchen appliances, among others.
(3) Company J is a group established in 1916 and listed on the New York Stock Exchange in 2010, engaging in
the provision of mission-critical sensors, electrical protection components and sensor-rich solutions.
INDUSTRY OVERVIEW
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AUTOMOTIVE THERMAL MANAGEMENT SYSTEM COMPONENT MARKET
Overview of Automotive Thermal Management System Components
The automotive thermal management components are a type of core automotive
components. The thermal management system is composed of components that monitor
and control the operating temperature of various automotive systems, such as the engine
and passenger cabin areas, to improve efficiency and prevent damage to the components.
Given (i) the functions to achieve the control of cooling and heating process within
automotive thermal management systems, and (ii) the impact on system performances
such as control accuracy, efficiency and energy conservation, there are four crucial
component categories in automotive thermal management system components: (i)
integrated modules, (ii) automotive valves, including automotive electronic expansion
valves and automotive electronic water valves, (iii) automotive pumps, including
electronic and mechanical water pumps and (iv) automotive heat exchangers, including
battery coolers and cooling plates.
Based on automotive types, automotive thermal management system can be divided
into thermal management system for ICEVs and thermal management system for NEVs.
Thermal management system for ICEVs consists of a powertrain thermal management
system and cabinet thermal management system. Thermal management system for NEVs
is more complex, including systems for cabinet thermal management, battery thermal
management and electrical/control system thermal management, thus it generates more
demands and sets higher performance requirements for thermal management system
components, including electronic expansion valves, electronic water pumps and electric
compressors. The demand for automotive thermal management system components is
driven by the transformation in the downstream automotive industry. Considering the
transition from ICEVs to NEVs, leading thermal management system component
manufacturers are at the forefront of product upgrades, driving the iteration of thermal
management system components and further enhancing their application in NEVs.
With the rapid development of NEV industry, the importance of the NEV thermal
management system is becoming increasingly prominent. In particular, electronic
expansion valves, which can precisely control the flow of refrigerants, effectively manage
the temperatures of cabin areas, batteries and motors of NEVs. Meanwhile, integrated
modules optimize space utilization and enhance system efficiency by integrating multiple
functions. As key components of thermal management system in NEVs, automotive
electronic expansion valves and integrated modules are experiencing a surge in demand.
Functions and Applications of Automotive Thermal Management System Components
Main ApplicationFunctionComponentCategory
Battery thermal managementBattery Cooler and Module
Cabinet thermal management, electr ical/
control system thermal management, battery
thermal management
Others
Automotive
Valves
Automotive
Heat
Exchangers Cabinet thermal management, electrical/
control system thermal management, battery
thermal management
Others
Cabinet thermal management, electrical/
control system thermal management, battery
thermal management
Others
Cabinet thermal management, electrical/
control system thermal management, battery
thermal management
Cabinet thermal management, battery thermal
managementIntegrated ModulesIntegrated
Modules
Cabinet thermal managementElectronic Expansion Valve
Battery thermal managementElectronic Water Pump
Automotive
Pumps
Others
Optimize space utilizati
on and enhance system effic iency by
integrating multiple functions
Effectively facilitate the cool ing and heat ing functions within the
thermal management systems of NEVS
Including o il valve, electr ic ball valve, thermostat ic expans ion
valve w ith sh ut off electron ic water p ump and other valves that
regulate the flow of liquid or gas
Introduce the refrigerant from the a ir conditioning system, which
absorb the heat transferred from the battery cool ing circuit in the
evaporator and carry the heat away
Including cool ing plate, o il cooler, o il cooler mod ule and other
heat exchangers that efficiently transfer heat
Drive the circulation of coolant, absorbing heat, and transferring it
to the outside air through a cooling device
Including electr ic o il p ump and other p umps that used for the
transportation, circulation and pressure regulation of liquids
Including accumulators, compressors and other components used
in the automotive thermal management system
Source: the Frost & Sullivan Report
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The value chain of the automotive thermal management system component market
primarily involves upstream raw material suppliers, midstream automotive thermal
management system components providers and downstream automotive companies.
Upstream raw materials primarily include copper, aluminum and other non-ferrous
metals. Midstream participants primarily include automotive thermal management
system component manufacturers that produce components such as valves, pumps and
heat exchangers, and system integrators that are responsible for system assembly and
produce integrated modules such as the engine cooling system, HVAC system and battery
cooling system. The downstream of automotive thermal management system components
is automotive companies.
Global Market Size of Automotive Thermal Management System Components
The global market size of automotive thermal management system components in
terms of revenue increased from RMB169.5 billion in 2020 to RMB279.8 billion in 2024,
with a CAGR of 13.3%. In particular, driven by the rapid development of the NEV
industry, the revenue generated by thermal management system components for NEVs
increased from RMB16.4 billion in 2020 to RMB116.2 billion in 2024, with a CAGR of
63.1%. By 2029, the global market size of automotive thermal management system
components in terms of revenue is expected to reach RMB528.9 billion, with a CAGR of
13.6% from 2024 to 2029. In particular, the revenue generated by thermal management
system components for NEVs is expected to reach RMB377.1 billion, with a CAGR of
26.6% from 2024 to 2029. China is the largest market in the global automotive thermal
management system component market, with revenue of automotive thermal
management system components accounting for approximately 48.4% in 2024.
0
100
200
300
400
500
600
Revenue (Billion RMB)
Revenue CAGR (2020-2024) CAGR (2024-2029 E)
63.1% 26.6%
1.7% -1.5%
13.3%
NEV Thermal Management System Components
ICEV Thermal Management System Components
Total 13.6%
Revenue of Automotive Thermal Management System Component Market by Automotive Types (Global), 2020 – 2029E
2020 2021 2022 2023 2024 2025 E 2026E 2027E 2028E 2029E
153.1 152.1
40.0
152.6
77.9
163.5
102.0
163.6
116.2
163.9
166.3
161.5
211.7
157.7 154.4
262.6 317.4
169.5 192.1
230.5
265.5 279.8
330.2
373.2
420.3
471.8
151.8
377.1
528.9
16.4
Source: International Organization of Motor Vehicle Manufacturers; Interviews Conducted by Frost & Sullivan with
Experts from Leading Market Players; the Frost & Sullivan Report
The global market size of each of four crucial categories — integrated modules,
automotive valves, automotive heat exchangers and automotive pumps — in terms of
revenue reached RMB6.5 billion, RMB13.7 billion, RMB122.6 billion and RMB18.8 billion
in 2024, growing at a CAGR of 55.1%, 31.6%, 8.9% and 22.0%, respectively, from 2020 to
2024, and is expected to reach RMB20.5 billion, RMB30.7 billion, RMB173.9 billion and
RMB37.5 billion, growing at a CAGR of 25.9%, 17.6%, 7.3% and 14.8% from 2024 to 2029,
respectively. In 2024, in terms of revenue, the global market size of integrated modules,
automotive valves, automotive heat exchangers and automotive pumps accounted for
2.3%, 4.9%, 43.8% and 6.7%, respectively, of the global market size of automotive thermal
management system components, totaling an aggregate of 57.7%.
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0
20
40
60
80
100
120
140
160
180
4.6 8.5
1.1
87.3
6.6 10.8
2.4
93.7
10.0 14.6
3.9
105.2
12.4 17.4
5.2
118.3
13.7 18.8
6.5
122.6
16.2 21.7
8.7
131.2
19.4 25.2
11.0
140.9
23.1 29.2
13.6
151.2
26.8
33.3
16.7
162.2
30.7
37.5
20.5
173.9
Revenue (Billion RMB)
2020 2021 2022 2023 2024 2025 E 2026E 2027E 2028E 2029E
Revenue of Automotive Thermal Management System Components by Crucial Categories (Global), 2020 – 2029E
CAGR (2024-2029E)CAGR (2020-2024)Revenue
25.9%55.1%
17.6%31.6%
Integrated Modules
Automotive Valves
14.8%22.0%Automotive Pumps
7.3%8.9%Automotive Heat Exchangers
Source: International Organization of Motor Vehicle Manufacturers; Interviews Conducted by Frost & Sullivan with
Experts from Leading Market Players; the Frost & Sullivan Report
In recent years, the global penetration rate of NEVs increased from 6.7% in 2020 to
23.6% in 2024, and is expected to further increase to 43.7% by 2029. NEVs are becoming
increasingly important in the global automotive market, prompting the significant
development of NEV thermal management systems.
Taking into account (i) the functions to achieve the control of cooling and heating
process within NEV thermal management systems and (ii) the impact on system
performances such as control accuracy, efficiency and energy conservation, the integrated
modules, automotive electronic expansion valves, automotive electronic water pumps,
and battery coolers are four crucial components in NEV thermal management systems.
Specifically, the integrated modules optimize space utilization and enhance system
efficiency by integrating multiple functions. The automotive electronic expansion valves
effectively facilitate the cooling and heating functions within the NEV thermal
management systems. Automotive electronic water pump are responsible for driving the
circulation of coolant, absorbing heat, and transferring it to the outside air through a
cooling device. Battery coolers introduce the refrigerant from the air conditioning system,
which absorb the heat transferred from the battery cooling circuit in the evaporator and
carry the heat away.
Further, as of December 31, 2024, there were over 30 types of components in NEV
thermal management system, among which the integrated modules, automotive
electronic expansion valves, automotive electronic water pumps and battery coolers
accounted for 5.6%, 1.6%, 13.9% and 11.4%, respectively, of the global market size of NEV
thermal management system components in terms of revenue in 2024, totaling an
aggregate of 32.5%. Automotive electronic expansion valves, automotive electronic water
pumps and battery coolers are representative components of valves, pumps and heat
exchangers of automotive thermal management systems, respectively, in the era of
automotive electrification. These components ensure the precise control of cooling and
heating process within NEV thermal management systems and effectively manage the
temperatures of cabin areas, batteries and motors of NEVs. Additionally, automotive
electronic expansion valves, automotive electronic water pumps and battery coolers hold
a relatively higher share in their respective categories compared to the share of other
components in the same category, accounting for 13.9%, 86.2% and 10.8%, respectively, of
the global market size of valves, pumps and heat exchangers within automotive thermal
management systems components in terms of revenue in 2024.
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The global market size of integrated modules in terms of revenue increased from
RMB1.1 billion in 2020 to RMB6.5 billion in 2024, with a CAGR of 55.1%, and is expected to
reach RMB20.5 billion in 2029, with a CAGR of 25.9% from 2024 to 2029. The global market
size of automotive electronic expansion valves in terms of revenue increased from RMB0.4
billion in 2020 to RMB1.9 billion in 2024, with a CAGR of 48.0%, and is expected to reach
RMB4.1 billion in 2029, with a CAGR of 16.4% from 2024 to 2029. The global market size of
automotive electronic water pumps in terms of revenue increased from RMB6.6 billion in
2020 to RMB16.2 billion in 2024, with a CAGR of 25.0%, and is expected to reach RMB29.7
billion in 2029, with a CAGR of 12.9% from 2024 to 2029. From 2020 to 2024, the global
market size of battery cooler in terms of revenue increased from RMB2.9 billion to
RMB13.2 billion, with a CAGR of 45.9%, and is expected to reach RMB35.0 billion in 2029,
with a CAGR of 21.6% from 2024 to 2029.
0
5
10
15
20
25
30
35
0.41.1
6.6
0.8
2.4 1.3
3.9
11.6
2.0
5.2
1.9
18.1
15.6
20.5
11.0
8.7
19.4
3.1
26.3
16.7
29.0 29.7
35.0
2.9
8.8
5.5
8.8
14.8
12.1
16.2
6.5
13.2
2.3 2.7
23.3
13.6
23.9
3.6 4.1
20.5
Revenue (Billion RMB)
2020 2021 2022 2023 2024 2025 E 2026E 2027E 2028E 2029E
Revenue of Automotive Thermal Management System Components by Crucial Components (Global), 2020 – 2029E
CAGR (2024-2029E)CAGR (2020-2024)Revenue
16.4%48.0%
25.9%55.1%
12.9%25.0%
Automotive Electronic Expansion Valves
Integrated Modules(1)
Automotive Electronic Water Pumps
21.6%45.9%Battery Coolers
Source: International Organization of Motor Vehicle Manufacturers; Interviews Conducted by Frost & Sullivan with
Experts from Leading Market Players; the Frost & Sullivan Report
Note:
(1) Integrated modules are both a subset of the aforementioned four crucial component categories and a
subset of the aforementioned four crucial components, as integrated modules do not have further
sub-classifications.
Market Size of Automotive Thermal Management System Components in China
The market size of automotive thermal management system components in China in
terms of revenue increased from RMB55.1 billion in 2020 to RMB135.5 billion in 2024, with
a CAGR of 25.2%. In particular, the revenue generated by thermal management system
components for NEVs in China increased from RMB9.6 billion in 2020 to RMB98.0 billion
in 2024, with a CAGR of 78.7%. By 2029, the market size of automotive thermal
management system components in China in terms of revenue is expected to reach
RMB314.9 billion, with a CAGR of 18.4% from 2024 to 2029. In particular, the revenue
generated by thermal management system components for NEVs in China is expected to
reach RMB293.2 billion, with a CAGR of 24.5% from 2024 to 2029.
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0
50
100
150
200
250
300
350
Revenue (Billion RMB)
Revenue CAGR (2020-2024) CAGR (2024-2029 E)
78.7% 24.5%
-4.7% -10.4%
25.2%
NEV Thermal Management System Components
ICEV Thermal Management System Components
Total 18.4%
Revenue of Automotive Thermal Management System Component Market (China), 2020 – 2029E
2020 2021 2022 2023 2024 2025 E 2026E 2027E 2028E 2029E
43.8 39.1
49.6
37.5
98.0
36.6
132.7
33.6
171.0
29.0
211.0
24.7 21.7
251.6
293.2
45.5
68.4 88.7
135.5
41.1
68.8
109.9
169.3
204.6
204.0
276.3
314.9
55.1
24.69.6
Source: China Association of Automobile Manufacturers; Interviews Conducted by Frost & Sullivan with Experts from
Leading Market Players; the Frost & Sullivan Report
The market size of integrated modules, automotive valves, automotive heat
exchangers and automotive pumps in China in terms of revenue reached RMB4.6 billion,
RMB9.5 billion, RMB49.3 billion and RMB11.4 billion in 2024, growing at a CAGR of
67.6%, 52.1%, 15.9% and 39.7%, respectively, and is expected to reach RMB14.5 billion,
RMB26.6 billion, RMB98.8 billion and RMB30.0 billion in 2029, with a CAGR of 25.9%,
22.9%, 14.9% and 21.4% from 2024 to 2029, respectively.
0
10
20
30
40
50
60
70
80
90
100
1.8 3.0
0.6
27.3
3.1 4.4
1.4
30.9
5.2 6.7
2.6
35.8
9.5 11.4
4.6
49.3
7.0 8.7
3.6
42.6
12.6 14.8
6.0
59.1
15.9 18.4
7.7
68.9
19.4 22.2
9.7
78.3
22.9 26.0
12.0
88.1
26.6 30.0
14.5
98.8
Revenue (Billion RMB)
2020 2021 2022 2023 2024 2025 E 2026E 2027E 2028E 2029E
Revenue of Crucial Automotive Thermal Management System Components Categories (China), 2020 – 2029E
CAGR (2024-2029E)CAGR (2020-2024)Revenue
22.9%52.1%
21.4%39.7%
Automotive Valves
Automotive Pumps
25.9%67.6%Integrated Modules
14.9%15.9%Automotive Heat Exchangers
Source: China Association of Automobile Manufacturers; Interviews Conducted by Frost & Sullivan with Experts from
Leading Market Players; the Frost & Sullivan Report
In recent years, the penetration rate of NEVs in China increased from 5.4% in 2020 to
40.9% in 2024, and is expected to further increase to 76.8% by 2029. The increasing
penetration rate of NEVs in China promotes the significant growth of integrated modules,
automotive electronic expansion valves, automotive electronic water pumps and battery
coolers, which are crucial components in NEV thermal management systems.
The market size of integrated modules in China in terms of revenue increased from
RMB0.6 billion in 2020 to RMB4.6 billion in 2024, with a CAGR of 67.6%, and is expected to
reach RMB14.5 billion in 2029, with a CAGR of 25.9% from 2024 to 2029. The market size of
automotive electronic expansion valves in China in terms of revenue increased from
RMB0.2 billion in 2020 to RMB1.7 billion in 2024, with a CAGR of 75.0%, and is expected to
reach RMB4.0 billion in 2029, with a CAGR of 18.4% from 2024 to 2029. The market size of
automotive electronic water pumps in China in terms of revenue increased from RMB2.2
billion in 2020 to RMB10.2 billion in 2024, with a CAGR of 47.4%, and is expected to reach
RMB24.4 billion in 2029, with a CAGR of 19.2% from 2024 to 2029. From 2020 to 2024, the
INDUSTRY OVERVIEW
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market size of battery coolers in China in terms of revenue increased from RMB1.1 billion
to RMB10.6 billion, with a CAGR of 76.1%, and is expected to reach RMB29.9 billion in
2029, with a CAGR of 23.0% from 2024 to 2029.
0
5
10
15
20
25
30
0.20.6
2.2
0.51.4 0.9
2.6
5.9
1.4
3.6
1.7
12.8
13.8
15.7
7.7
6.0
17.4
3.0
21.4
12.0
25.7
24.4
29.9
1.1
3.6 2.9
5.9
7.8 8.2
10.2
4.6
10.6
2.1 2.5
18.5
9.7
21.5
3.5 4.0
14.5
Revenue (Billion RMB)
2020 2021 2022 2023 2024 2025 E 2026E 2027E 2028E 2029E
Revenue of Crucial Automotive Thermal Management System Components (China), 2020 – 2029E
CAGR (2024-2029E)CAGR (2020-2024)Revenue
18.4%75.0%
25.9%67.6%
19.2%47.4%
Automotive Electronic Expansion Valves
Integrated Modules(1)
Automotive Electronic Water Pumps
23.0%76.1%Battery Coolers
Source: China Association of Automobile Manufacturers; Interviews Conducted by Frost & Sullivan with Experts from
Leading Market Players; the Frost & Sullivan Report
Note:
(1) Integrated modules are both a subset of the aforementioned four crucial component categories and a
subset of the aforementioned four crucial components, as integrated modules do not have further
sub-classifications.
Market Drivers and Future Opportunities of Automotive Thermal Management System
Components
Rapid development of the NEV industry. Owing to the de-carbonization goals of the
global automobile industry, the improvement of NEV technologies, and the development
of NEV charging infrastructure, the global NEV industry has been experiencing rapid
development. The global sales volume of NEVs grew from 5.2 million in 2020 to 21.4
million in 2024, with a CAGR of 42.7%, while the global sales volume of ICEVs
experienced a decrease from 72.8 million in 2020 to 69.2 million in 2024, with a CAGR of
-1.3%. Meanwhile, technological advancements such as 5G and the Internet of Things
(“IoT ”) have accelerated the development of intelligent connected vehicles, and the
commercialization of autonomous driving technology is gradually unfolding, which has
further increased the penetration of NEVs. From 2020 to 2024, the global penetration rate
of NEVs increased from 6.7% to 23.6%. The continuously developing NEV industry has
driven the rapid expansion of the automotive thermal management system component
market.
Growing demand for reliable thermal management system. Advancements in NEV
battery and charging technology require more reliable thermal management system to
ensure charging safety. Batteries are prone to overheating during the charging process,
and improper temperature control may affect performance or even cause safety issues.
Therefore, an efficient thermal management system is crucial for maintaining the optimal
operating temperature of batteries, ensuring the safety and performance. With the
development of high-voltage fast charging and battery technologies, the need for rapid
heat dissipation increases, which drives the demand for efficient automotive thermal
management system, thereby stimulating the growing demand for thermal management
system components.
Integrated and modular design. With the advancements in automotive thermal
management technology, the automotive thermal management system components are
evolving towards an integrated and modular design. Integrated thermal management
system connects some or all circuits of the motor systems, battery systems, electronic
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control systems and air conditioning systems into a large circulation loop, which can not
only achieve comprehensive thermal management and reduce energy waste, but also
effectively reduces overall vehicle weight and space occupied. Modular design of
automotive thermal management system can shorten the assembly time, enhance the
versatility across different vehicle models and reduce the maintenance costs of these
systems.
Development of intelligent control. Intelligent thermal management system can
monitor the vehicle’s operating conditions and environmental parameters in real time
through intelligent components. They automatically adjust the operating modes and
parameter settings of the thermal management system to improve efficiency and
performance. The intelligent control can not only achieve precise temperature regulation,
but also adapt to various situations based on user characteristics and current or future
road conditions, as well as weather information. Additionally, the advancement of
autonomous driving technology will significantly increase the computational power
requirements of automotive chips, leading to more prominent chip cooling issues, which
will drive the growing demand for efficient thermal management system components.
Green and efficient development. With the increasing global attention to
environmental protection and sustainable development, green and low-carbon
development is the core goal of automotive thermal management system. The
advancements of battery cooling and heating technology, the development of heat pump
technology, and the replacement of refrigerants with weak greenhouse effects promote the
optimization of vehicle energy consumption, which raises higher requirements for
product performance of thermal management system components.
Globalization. Under the trend of global economic integration, the global
procurement of automotive thermal management system components has become a major
trend in the automotive industry. As market competition intensifies, major automobile
manufacturers in the world have been dedicated to seeking the best suppliers of
automotive thermal management system components and advanced technical solutions
worldwide, which provides broad development opportunities for automotive thermal
management system component manufacturers to expand business layout in overseas
markets.
Competitive Landscape of Global Automotive Thermal Management System
Components
The global automotive thermal management system component market is highly
concentrated. Leading companies leverage first-mover advantages to accumulate
expertise in core components and system development capabilities. They also possess
technical advantages in system integration. As of December 31, 2024, there were over 400
market participants in the global automotive thermal management system component
market. Our competitors in the global automotive thermal management system
components market mainly include DENSO Corporation, Hanon Systems, Valeo SE and
MAHLE GmbH, among others. In terms of revenue in 2024, the global top five providers
of automotive thermal management system components accounted for approximately
77.9%, among which our Group ranked fifth, with a market share of approximately 4.1%.
Top Five Providers of Automotive Thermal Management System Components
in terms of Revenue (Global), 2024
35.7 12.8%Company M(3) France3
Ranking
1 Company K(1) Japan 84.7 30.3%
Company Headquarter Revenue
(Billion RMB)
Market
Share
2 Company L(2) Korea 54.1 1 9.3%
11.4 4.1%Our Group Zhejiang Province, China5
4 Company N(4) Germany 31.8 11.4%
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Source: Annual Reports; Interviews Conducted by Frost & Sullivan with Experts from Leading Market Players; the Frost
& Sullivan Report
Notes:
(1) Company K is a group established in 1949 and listed on the Nagoya Stock Exchange in 1951 and the Tokyo
Stock Exchange in 1953, engaging in the provision of automotive component and systems, industrial
products and home appliances.
(2) Company L is a group established in 1986 and listed on the Korea Exchange in 1996, engaging in the
provision of automotive thermal and energy management solutions.
(3) Company M is a group established in 1923 and listed on the Euronext Paris in 1932, engaging in the
provision of components, integrated systems, and modules for the automobile industry.
(4) Company N is a private group established in 1920, engaging in the provision of engine systems, filtration,
electrics, mechatronics, and thermal management.
The global market of integrated modules is concentrated, with less than 15 market
participants as of December 31, 2024. In terms of revenue in 2024, the top three providers
of integrated modules accounted for approximately 89.6%, among which our Group
ranked first, with a market share of approximately 65.6%.
The global market of automotive valves is relatively concentrated, with less than 70
market participants as of December 31, 2024. In terms of revenue in 2024, the top three
providers of automotive valves accounted for approximately 39.4%, among which our
Group ranked first, with a market share of approximately 19.3%.
The global market of automotive heat exchangers is concentrated, with less than 50
market participants as of December 31, 2024. In terms of revenue in 2024, our Group
accounted for approximately 1.4% of the global revenue.
The global market of automotive pumps is concentrated, with less than 50 market
participants as of December 31, 2024. In terms of revenue in 2024, the top five providers of
automotive pumps accounted for approximately 80.6%, among which our Group ranked
fourth, with a market share of approximately 8.6%.
Top Three Providers of Integrated Modules, Automotive Valves and
Top Five providers of Automotive Pumps in terms of Revenue (Global), 2024
Integrated Modules Automotive Valves
0.5 7.5%Company M France3
Ranking
1 Our Group Zhejiang Province, China 4.3 65.6%
Company Headquarter Revenue
(Billion RMB)
Market
Share
2 Company K Japan 1.1 16.5%
0.8 5.7%Company A Zhejiang Province, China3
Ranking
1 Our Group Zhejiang Province, China 2.6 19.3%
Company Headquarter Revenue
(Billion RMB)
Market
Share
2 Company G Japan 2.0 14.4%
Automotive Pumps
2.8 15.1%Company L Korea3
Ranking
1 Company P(1) Germany 5.5 2 9.4%
Company Headquarter Revenue
(Billion RMB)
Market
Share
2 Company K Japan 3. 9 20.7%
1.3 6.8%Company Q(2) Germany5
4 Our Group Zhejiang Province, China 1.6 8.6%
Source: Annual Reports; Interviews Conducted by Frost & Sullivan with Experts from Leading Market Players; the Frost
& Sullivan Report
Notes:
(1) Company P is a private group established in 1868, engaging in the provision of automotive technology
and service.
(2) Company Q is a private group established in 2019, engaging in the provision of automotive drivetrain
and powertrain technologies.
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The global market of automotive electronic expansion valves is concentrated, with
less than 20 market participants as of December 31, 2024. In terms of revenue in 2024, the
top three providers of automotive electronic expansion valves accounted for
approximately 89.7%, among which our Group ranked first, with a market share of
approximately 48.3%.
The global market of battery coolers is relatively concentrated, with less than 30
market participants as of December 31, 2024. In terms of revenue in 2024, the global top
three providers of battery coolers accounted for approximately 62.7%, among which our
Group ranked third, with a market share of approximately 5.9%.
The global market of automotive electronic water pumps is relatively concentrated,
with less than 50 market participants as of December 31, 2024. In terms of revenue in 2024,
the global top five providers of automotive electronic water pumps accounted for
approximately 69.1%, among which our Group ranked fourth, with a market share of
approximately 5.5%.
Top Three Providers of Automotive Electronic Expansion Valves and Battery Coolers
and Top Five Providers of Automotive Electronic Water Pumps in terms of Revenue
(Global), 2024
Automotive Electronic Expansion Valves Battery Coolers
0.3 17.3%Company A Zhejiang Province, China3
Ranking
1 Our Group Zhejiang Province, China 0.9 48.3%
Company Headquarter Revenue
(Billion RMB)
Market
Share
2 Company G Japan 0.5 24.1%
0.8 5.9%Our Group Zhejiang Province, China3
Ranking
1 Company N Germany 5.4 40. 9%
Company Headquarter Revenue
(Billion RMB)
Market
Share
2 Company R (1) United States 2.1 15. 9%
Automotive Electronic Water Pumps
2.2 13.6%Company L Korea3
Ranking
1 Company P Germany 4.5 27.8%
Company Headquarter Revenue
(Billion RMB)
Market
Share
2 Company K Japan 3.1 1 9.1%
0.5 3.1%Company S(2) Zhejiang Province, China5
4 Our Group Zhejiang Province, China 0.9 5.5%
Source: Annual Reports; Interviews Conducted by Frost & Sullivan with Experts from Leading Market Players; the Frost
& Sullivan Report
Notes:
(1) Company R is a group established in 1916 and listed on the New York Stock Exchange in 2004, engaging
in the provision of automotive thermal management components.
(2) Company S is a private group established in 2016, engaging in the provision of automotive thermal
management solutions.
CHALLENGES OF REFRIGERATION AND AIR-CONDITIONING CONTROL
COMPONENTS AND AUTOMOTIVE THERMAL MANAGEMENT SYSTEM
COMPONENTS
Fluctuations in Downstream Demands. Refrigeration and air-conditioning control
components and automotive thermal management system components have various
downstream applications, including refrigeration and air-conditioning products, ICEVs
and NEVs, home appliances, data centers, and cold-chain transportation industries.
Changes in market demands from these downstream industries could impact operational
conditions and financial outcomes. If downstream demands cannot maintain robust
growth, market participants may face challenges in business operation and profitability.
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Keep up with Technological Advancements. The rapid advancement of technologies
and the emergence of new industry standards present significant challenges to
manufacturers of refrigeration and air-conditioning control components and automotive
thermal management system components. These manufacturers must continually invest
in R&D to keep pace with technological upgrades and process improvements, ensuring
alignment with ever-evolving industry standards. Failure to do so could lead to a decline
in their competitiveness.
Cost Control Capabilities. The raw materials used in the production of refrigeration
and air-conditioning control components and automotive thermal management system
components primarily include copper and aluminum, which are bulk commodities known
for significant price volatility. If market participants face substantial increases in raw
material costs that were not anticipated during price negotiations with customers, their
profitability may be adversely affected. Consequently, establishing a robust cost control
mechanism has become one of the major challenges.
ENTRY BARRIERS OF REFRIGERATION AND AIR-CONDITIONING CONTROL
COMPONENTS AND AUTOMOTIVE THERMAL MANAGEMENT SYSTEM
COMPONENTS
Technical Barrier. The refrigeration and air-conditioning control component market
and automotive thermal management system component market have high technical
barriers. Established market players need to master knowledge of production processes
for diversified components to cater the customers’ requirements. Additionally, these
components must be compatible with numerous downstream applications such as
different air conditioners and vehicle models, which raises higher requirements for the
technical capabilities of market players. However, it is rather difficult for new entrants to
accumulate the relevant technologies in a short period of time.
Customer Barrier. Established market players need to obtain customer recognition
and establish trust through long-term cooperation. Since there are differences in the
requirements for refrigeration and air-conditioning control components and thermal
management system components among different customers, market players need to
collaborate deeply with their customers and participate in the product development
process as early as possible. For new entrants, it takes a considerable amount of time to
attract new customers and establish their own customer reserves.
Production Barrier. Established market players generally have established stringent
standards for product design and production processes. They also have to strictly adhere
to quality management systems to ensure high standards of product qualities.
Additionally, leading manufacturers with large-scale production can benefit from
economies of scale to respond quickly to market demand, complete timely delivery of
various large orders, and effectively reduce costs. New entrants need a lot of time to
accumulate experience and expertise in production and achieve large-scale production.
Capital Barrier. The refrigeration and air-conditioning control component market
and automotive thermal management system component market require a large amount
of investment in production facilities and equipment, which raises a high capital barrier
for new entrants. Additionally, sufficient working capital is necessary to meet customers’
procurement needs. New entrants may face financial pressure due to limited production
capacity and market share in the initial stages.
BIONIC ROBOT ELECTROMECHANICAL ACTUATOR MARKET
Overview of Bionic Robot Electromechanical Actuator Market
Electromechanical actuators are one of the core components of a bionic robot
system, which is responsible for converting electrical signals into corresponding
mechanical motions to achieve precise control of the joints or moving parts of bionic
robots. Electromechanical actuators mainly include motors, reducers and sensors, among
others. The coordinated operation of these components provides the required torque and
speed, allowing bionic robots to move along the predetermined trajectory. Based on
motion types, electromechanical actuators are primarily categorized into rotary actuators
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and linear actuators. Rotary actuators are designed to drive joints for rotational
movement and are suitable for applications like shoulder, elbow and hip joints. Linear
actuators generate straight-line motion and are ideal for scenarios requiring linear
displacement, such as the extension or contraction of limbs. The precise control,
high-precision positioning and real-time monitoring capabilities of electromechanical
actuators are crucial for enhancing the movement performance, stability and intelligence
of bionic robots, and are key components that drive technological progress and enable
broad applications of bionic robotics.
At present, the bionic robotics industry is still in the exploring stage.
Electromechanical actuators manufacturers generally establish stable collaborations with
bionic robotics manufacturers to jointly develop products that cater to market demand,
and continually refine the design and performance of electromechanical actuators based
on customers’ feedback. Driven by the supporting policies such as the “Guiding Opinions
on Innovative Development of Humanoid Robots” (ኬจԈ )
issued by the Ministry of Industry and Information Technology in 2023 and proposed to
achieve batch production of bionic robots by 2025 and realize large-scale development by
2027, the accelerated production plans by leading industry players, the technological
breakthroughs in mechanical design, motion control and artificial intelligence, and the
performance improvement and cost reduction of core components, the bionic robot
industry is expected to realize mass production in the near future. As bionic robot
technology matures and achieves mass production, the demand for electromechanical
actuators in the bionic robotics market is expected to significantly increase, thereby
driving the rapid growth of market size.
From 2020 to 2024, the global market size of bionic robot electromechanical
actuators in terms of revenue increased from RMB93.9 million to RMB1,376.1 million, with
a CAGR of 95.7%. As the downstream demand continues to grow, by 2029, the global
market size of bionic robot electromechanical actuators in terms of revenue is expected to
reach approximately RMB62.8 billion, representing a CAGR of 114.7% from 2024 to 2029.
Market Drivers and Future Opportunities of Bionic Robot Electromechanical Actuators
Aging population and rising labor costs. As many countries transition into aged
societies, labor resources are becoming increasingly scarce. In 2023, the proportion of
individuals aged 60 and above in the global population reached 14.2%, and it is expected
to reach 16.7% by 2030. Bionic robots become an alternative for replacing labor force due
to their ability to imitate human movements, adapt to complex environments and perform
delicate tasks. Meanwhile, with the economic development, labor costs are gradually
rising. To maintain competitiveness, companies need to find effective ways to reduce
labor costs. Bionic robots equipped with efficient electromechanical actuators can help
companies to reduce long-term operational costs, and improve production flexibility and
responsiveness. Therefore, the aging population and rising labor costs have stimulated
the demand for bionic robots, thereby accelerating the development of the bionic robot
electromechanical actuator market.
Supportive policies. The Chinese government attaches great importance to the
development of the robotics industry and has issued a series of policies to support its
growth. For instance, in 2023, the Ministry of Industry and Information Technology
(“MIIT ”) issued the “Guiding Opinions on Innovative Development of Humanoid
Robots” (ኬจԈ ), which emphasized to strengthen the
development of foundational components and develop actuators with high power density.
Additionally, in 2021, the MIIT and other 14 departments jointly issued the “14th
Five-Year Plan for Development of Robotics Industry” ( ”ɤ̬ʞ”஝ྌ),
which proposed to achieve breakthroughs in a number of core technologies and high-end
products in the robotics industry by 2025, with the performance and reliability of key
components reaching the level of similar international products. These policies
collectively support the development of the bionic robot electromechanical actuators
industry, and accelerate technological advancements and market expansion.
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Industrial chain synergy. As the domestic production rates of core components such
as motors, reducers and sensors continue to increase, domestic manufacturers are gaining
competitive advantages in these critical areas. Electromechanical actuators manufacturers
that establish stable cooperative relationships with upstream component manufacturers
and downstream bionic robots manufacturers can facilitate synergy along the industrial
chain, which can ensure the stable and adequate supply of key components, reduce
production costs, respond to market demands timely, and promote technological
advancements in the entire industrial chain.
Technological innovation. With the development of advanced technologies such as
artificial intelligence (“ AI ”), sensing technology and new materials, bionic robot
electromechanical actuators have made significant progress in performance and expanded
their applications. Electromechanical actuators manufacturers have been dedicated to
enhancing competitiveness through continuous technological innovation. For instance,
the application of AI and digital technologies has improved the fine-control capabilities of
electromechanical actuators. AI technology enables the analysis of actuator movement
patterns and environmental changes, optimizes control strategies and achieves more
precise motion control. Meanwhile, digital technologies, such as high-precision sensors,
high-speed data processing, and Internet of Things (“ IoT”) connectivity, further enhance
the response speed and operational accuracy of actuators, which ensures that the real-time
motion status of actuators can be captured and accurately fed back to the control system,
thereby enhancing the system stability and reliability. Due to technological innovation,
electromechanical actuators can adapt to a wider range of application scenarios and task
requirements.
Expanding downstream applications of bionic robots. With continuous
technological advancements, the downstream applications of bionic robots have
expanded from the industrial sector to multiple industries, including education and
entertainment, emergency rescue, medical services and logistics services, among others.
The extensive application scenarios stimulate a growing demand for bionic robot
electromechanical actuators, and raise higher requirements for product performance. For
instance, applied in medical services, humanoid robots are utilized for surgical assistance,
rehabilitation therapy and elderly care, which requires actuators to have enhanced
flexibility, safety and response speed.
Entry Barriers of Bionic Robot Electromechanical Actuators
Technical barrier. As a critical component of bionic robots, the design and
manufacturing of electromechanical actuators involve multiple disciplines including
mechanical design, electronic engineering and materials science, among others, which
requires market participants to have sufficient technical accumulation. To develop
products with a precise control of position, speed and force, electromechanical actuators
manufacturers need to possess expertise in material selection, production processes and
control algorithms. Moreover, with continuous evolution of market demand, the
participants need to maintain their competitiveness through continuous technological
innovation and product iteration. Therefore, new entrants without sufficient technical
reserves and strong capabilities in technological innovation may find it difficult to master
core technologies of electromechanical actuators in a short period of time, while the
participants with early advantages, technical reserves and manufacturing capabilities
such us our Group can obtain prominent competitiveness and quickly capture market
shares.
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Capital barrier. The electromechanical actuators industry requires substantial
capital investment to support research and development, prototyping, mass production
and product iteration. During the R&D process, participants need to invest in the
procurement of advanced equipment, the recruitment and training of specialized talents,
technology research and product development. Entering the production stage,
participants need to invest in the establishment of production facilities and the
procurement of raw materials and components to ensure the stable production. Therefore,
sufficient capital investment is one of the major barriers for new entrants.
Customer resource barrier. Currently, the bionic robotics industry is still in the
exploring stage. Established electromechanical actuators manufacturers need to establish
cooperative relationships with bionic robot manufacturers, fully cooperate with
customers in product development and application testing, and continuously optimize
product design and performance. Once bionic robots achieve mass production,
electromechanical actuators manufacturers will establish long-term and stable
partnerships with their customers, ensuring steady demands. New entrants may find it
difficult to gain customer trust in a short time, whereas participants that have early
business layout can establish their own customer base and quickly capture market shares.
Talent barrier. The bionic robot electromechanical actuators market is a technology
intensive industry. The manufacturers require talents with theoretical foundation and
practical experience to design and develop high-performance and reliable
electromechanical actuators. Moreover, as electromechanical actuator technology
continues to evolve, the manufacturers need to have innovative talents to promote
technological innovation and product upgrades. However, the talents with expertise in
bionic robot electromechanical actuators are relatively rare, and cultivating these talents
requires a lengthy period of time. Therefore, new entrants may face significant challenges
in establishing sufficient talent reserves.
ANALYSIS OF RAW MATERIAL PRICES IN CHINA
The average prices of copper and aluminum in China are primarily influenced by
macro economy, supply and demand dynamics, policy regulations, and average prices in
global markets. From 2020 to 2024, the average prices of copper and aluminum in China
increased from RMB49,356 per tonne and RMB14,549 per tonne to RMB75,616 per tonne
and RMB20,283 per tonne, with a CAGR of 11.3% and 8.7%, respectively. In 2021, the
economic recovery in China following the COVID-19 pandemic led to a rapid increase in
demand for copper and aluminum. In addition, restrictions on energy and power
consumption significantly drove up the prices of these metals in China. In 2023, the
demand for aluminum from downstream industries such as real estate and infrastructure
construction declined, resulting in a decrease in aluminum prices. However, increased
demand from the new energy and power industries boosted copper demand, leading to a
rise in copper prices. In 2024, as central banks of major economies commence a
rate-cutting cycle, copper prices are expected to rise rapidly due to its financial attributes.
By 2029, the average prices of copper and aluminum in China is expected to reach
RMB78,523 per tonne and RMB21,920 per tonne, with a CAGR of 0.8% and 1.6% from 2024
to 2029, respectively.
The price fluctuations of copper and aluminum bring challenges for manufacturers
of refrigeration and air-conditioning control components and automotive thermal
management system component. These fluctuations in raw material prices poses a
challenge for cost control, requiring companies to optimize procurement strategies and
enhance cost management capabilities to mitigate the operational risks resulted from
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price fluctuations of copper and aluminum. Failure to establish effective cost control and
hedging mechanisms to address raw material price fluctuations may result in increased
production costs, reduced profits, and forced adjustments in product prices, thereby
impacting market competitiveness.
21,92021,67021,48921,20020,66920,28319,12720,46619,330
14,549
49,356
Average Price (RMB per Tonne)
Average Price  CAGR (2020-2024) CAGR (2024-2029 E)
Average Price of Major Raw Materials (China), 2020 – 2029E
11.3%Copper 0.8%
68,421 68,959
75,616 76,977 77,977 78,523 78,523 78,523
2021 20222020
80,000
70,000
60,000
50,000
20,000
10,000
0 2023 2024 2025 E 2026E 2027E 2028E 2029E
Aluminum 8.7% 1.6%
68,654
Source: National Development and Reform Commission; International Monetary Fund; Interviews Conducted by Frost &
Sullivan with Experts from Leading Market Players; the Frost & Sullivan Report
SOURCE AND RELIABILITY OF INFORMATION
In connection with the Global Offering, we engaged an independent market
research consultant, Frost & Sullivan, to conduct an analysis of, and to prepare an
industry report on, the industries where we operate with a commission fee of
RMB270,000. Founded in 1961, Frost & Sullivan is an independent global consulting firm
that conducts industry research and prepares industry reports on a wide range of
industries, among other services. The information from Frost & Sullivan disclosed in this
prospectus is extracted from the Frost & Sullivan Report with its consent.
In compiling and preparing the Frost & Sullivan Report, Frost & Sullivan used the
following key methodologies to collect multiple sources, validate the collected data and
information, and cross-check each respondent’s information and expressions against
those of others: (i) detailed primary research, which involved discussing the status of the
industry with leading industry participants and industry experts; and (ii) secondary
research, which involved reviewing published sources including reports of market
participants, independent research reports and data based on Frost & Sullivan’s own
research database.
Frost & Sullivan adopted the following primary assumptions while making
projections for preparing the Frost & Sullivan Report: (i) global economy is likely to
maintain steady growth in the next decade; (ii) global social, economic and political
environment is likely to remain stable in the forecast period; and (iii) market drivers like
surging demand for air conditioners, accelerated urbanization and rising living
standards, favourable policies and growing requirements for product performance,
among others.
Except as otherwise noted, all of the data and forecasts contained in this section are
derived from the Frost & Sullivan Report. Our Directors confirm that after taking
reasonable care, there is no material adverse change in the overall market information
since the date of the Frost & Sullivan Report that would materially qualify, contradict or
have an impact on such information.
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Our business are subject to relevant laws, rules and regulations of the places where
we operate in many aspects. This section sets out a summary of the PRC laws, regulations
and regulatory documents (the “ PRC laws ”) that are significant to our current business
activities in the PRC, which are subject to changes in the future. However, it does not
include a detailed analysis of the PRC laws relating to our business activities and
operations in the PRC and is not intended to be an exhaustive list of all PRC laws
applicable to our operations in the PRC.
LAWS AND REGULATIONS RELATING TO COMPANIES
The Company Law of the PRC was promulgated by the Standing Committee of the
National People’s Congress (the “ SCNPC ”) on December 29, 1993 and implemented since
July 1, 1994, and last amended on December 29, 2023 and came into effect on July 1, 2024.
Under the Company Law of the PRC, companies are generally classified into two
categories, namely, limited liability companies and joint stock limited companies. The
major amendments to the latest Company Law of the PRC, which came into effect on July
1, 2024, include improving the company establishment and exit regime, optimizing the
organizational structures of companies, improving the capital system of companies,
strengthening the responsibilities of controlling shareholder and management, and
reinforcing the corporate social responsibilities, among others. We do not expect the
amendments to have any material adverse effect on our operational and financial
performance.
LAWS AND REGULATIONS RELATING TO FOREIGN INVESTMENT
Investment activities in the PRC by foreign investors are principally governed by
the Catalog of Encouraged Industries for Foreign Investment ( ོᎸ̮ਠҳ༟ପุͦ፽,
the “ Encouraged Catalog ”), the Special Administrative Measures (Negative List) for
Foreign Investment Access (૶ఊ, the “Negative List ”)
and the Foreign Investment Law of the PRC (, the “ Foreign
Investment Law ”), together with its implementation rules and ancillary regulations,
which are promulgated and amended from time to time by the MOFCOM and the National
Development and Reform Commission (the “ NDRC ”).
The Foreign Investment Law was promulgated by the National People’s Congress
(the “ NPC”) in March 15, 2019 and came into effect on January 1, 2020, which replaced
three then existing laws on foreign investments in the PRC, namely, Law of the PRC on
Chinese-Foreign Equity Joint Ventures ( ), Law of the
PRC on Wholly Foreign-owned Enterprise () and Law of the
PRC on Chinese-Foreign Contractual Joint Ventures ( ʕശɛ͏΍ձ਷ʕ̮ΥЪ຾ᐄΆุ
). The Foreign Investment Law, by means of legislation, establishes the basic
framework for the access, promotion, protection and regulation of foreign investment
with the aim of investment protection and fair competition. According to the Foreign
Investment Law, foreign investment shall enjoy pre-establishment national treatment,
except for foreign investments that operate in industries deemed to be either “restricted”
or “prohibited” in the Negative List promulgated or approved by the State Council. To
ensure the effective implementation of the Foreign Investment Law, the Regulations on
Implementing the Foreign Investment Law of the PRC (ૢ
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Է, the “ Foreign Investment Law Implementation Regulations ”) was promulgated by
the State Council in December 2019 and came into effect on January 1, 2020, which further
clarified that the state encourages and promotes foreign investment, protects the
legitimate rights and interests of foreign investors, regulates administration on foreign
investment, continues to optimize foreign investment environment and advances a
higher-level of opening.
The NDRC and the MOFCOM jointly issued the Special Administrative Measures
(Negative List) for Foreign Investment Access (2024 Edition) (݄
૶ఊ2024, the “ 2024 Negative List ”) on September 6, 2024, which
implemented since November 1, 2024, to replace the previous Negative List. Pursuant to
the Foreign Investment Law, the Foreign Investment Implementation Regulations and the
2024 Negative List, foreign investors shall not make investments in prohibited industries
as specified in the Negative List, while foreign investments must satisfy certain conditions
stipulated in the Negative List for investment in restricted industries. Industries not listed
in the Negative List are deemed “permitted” for foreign investments.
LAWS AND REGULATIONS RELATING TO OVERSEAS INVESTMENT
Pursuant to the Administrative Measures for Overseas Investment ( ྤ̮ҳ༟၍ଣ፬
) promulgated by the MOFCOM on September 6, 2014 and implemented since October
6, 2014, the MOFCOM and provincial competent commerce authorities shall carry out
administration either by record-filing or approval on a case-by-case basis of overseas
investment by enterprises. Overseas investment by enterprises that involves sensitive
countries and regions or sensitive industries shall be subject to administration by
approval. Overseas investment by enterprises that falls in any other circumstances shall
be subject to administration by record-filing.
Pursuant to the Administrative Measures for Overseas investment of Enterprises
( ) promulgated by the NDRC on December 26, 2017 and
implemented since March 1, 2018, a domestic enterprise (the “ Investor ”) making overseas
investment shall obtain approval, conduct record-filing or other procedures applicable to
overseas investment projects (the “ Projects ”), report relevant information, and cooperate
with the supervision and inspection. Sensitive Projects carried out by Investors directly or
through overseas enterprises controlled by them shall be subject to approval;
non-sensitive Projects directly carried out by Investors, namely, non-sensitive projects
involving Investors’ direct contribution of assets or interests or provision of financing or
guarantee shall be subject to record-filing. The aforementioned “sensitive project” refers
to projects that involve a sensitive country or region or a sensitive industry. The catalog of
sensitive industries shall be promulgated by the NDRC. The currently effective sensitive
industry catalog is the Catalog of Sensitive Sectors for Overseas investment (2018 Edition)
(ྤ̮ҳ༟ઽชБุͦ፽2018), which came into effect on March 1, 2018.
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LAWS AND REGULATIONS RELATING TO PRODUCT QUALITY
According to the Product Quality Law of the PRC (, the
“ProductQualityLaw ”), which was promulgated by the SCNPC on February 22, 1993 and
implemented since September 1, 1993, and last amended on December 29, 2018, engaging
in product manufacturing and sales activities within the territory of the PRC shall comply
with the Product Quality Law. Manufacturers shall be responsible for the quality of the
products they produce and sell. Quality of products shall meet the following
requirements: (i) the products shall be free from any unreasonable threats to personal or
property safety, and shall conform to national standards or industrial standards for
ensuring human health and personal or property safety if there are such standards; (ii) the
products shall have the functions they should have, except where there are description
about the functional defects; and (iii) the products shall meet the standards specified on
the products or their packages and the quality condition specified by way of product
instructions or samples. In case of violation of the Product Quality Law, the market
regulatory authorities have the right to order the producers and sellers to stop production
and sales, confiscate the products which are illegally produced or sold and impose fines.
In case of serious violations, the business license of the producer or seller will be revoked,
and if the violation constitutes an offence, the violating producer or seller is obliged to
hold criminal responsibility in.
Pursuant to the Civil Code of the PRC (Պ ), which was
promulgated by the NPC on May 28, 2020 and came into effect on January 1, 2021, in the
event of damages caused to others due to the defects in a product, the infringed party may
seek compensation from the producer or the seller of such product and shall have the right
to request the producer and the seller to assume tortious liability, such as cessation of
infringement, removal of obstruction, and elimination of danger.
LAWS AND REGULATIONS RELATING TO PRODUCTION SAFETY
Pursuant to the Production Safety Law of the PRC (, the
“Production Safety Law ”) promulgated by the SCNPC on June 29, 2002 and implemented
since November 1, 2002, and last amended on June 10, 2021, entities engaged in
production and business activities in the PRC shall comply with the Production Safety
Law and other laws and regulations relating to production safety. To ensure production
safety, entities shall strengthen the management, establish and improve responsibility
systems and policies, improve conditions, promote the development of standards, and
enhance the level in this aspect. The primary persons in charge of the production and
operation entities are fully responsible for the production safety of their entities. Violation
of the Production Safety Law may result in imposition of fines, suspension of operation,
an order to cease operation, or even assumption of criminal responsibility in case serious
consequences are caused.
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LAWS AND REGULATIONS RELATING TO FIRE PREVENTION
According to the Fire Prevention Law of the PRC ( )
promulgated by the SCNPC on April 29, 1998 and implemented since September 1, 1998,
and last amended on April 29, 2021 and implemented since the same date, together with
the Interim Provisions on the Administration of Examination and Acceptance of Fire
Prevention Design for Construction Projects ( )
promulgated by the Ministry of Housing and Urban-Rural Development on April 1, 2020
and implemented since June 1, 2020, and last amended on August 21, 2023 and
implemented since October 30, 2023, the fire prevention design and construction work of
a construction project must conform to the national fire prevention technical standards.
For construction projects which are required to have fire prevention design in accordance
with the national fire prevention technical standards for project construction, the
examination and acceptance system on fire prevention design for construction project
shall be applied. Where, upon the completion of construction projects, application for
acceptance on fire prevention is required by the competent department of housing and
urban-rural development under the State Council, the construction entities shall apply to
the competent department of housing and urban-rural development for acceptance checks
for fire prevention. With respect to construction projects other than those mentioned
above, construction entities shall, after an acceptance check, file their results to the
competent department of housing and urban-rural development for record purposes, and
such department shall conduct random inspections thereof. Construction projects that are
subject to fire prevention acceptance check in accordance with the laws are prohibited
from being put into use if they do not go through or fail the fire prevention acceptance
check. Other construction projects that fail the random inspections according to laws shall
be suspended from using.
LAWS AND REGULATIONS RELATING TO IMPORT AND EXPORT OF GOODS
Import and Export Management
According to the Regulations of the PRC on the Administration of Import and
Export of Goods (ආ̈ɹ၍ଣૢԷ ) promulgated by the State Council
on December 10, 2001 and came into effect on January 1, 2002, and last amended on March
10, 2024 and came into effect on May 1, 2024, the Foreign Trade Law of the PRC ( ʕശɛ͏
) promulgated by the SCNPC on May 12, 1994 and came into effect on
July 1, 1994, and last amended on December 30, 2022 and came into effect on the same
date, the Customs Law of the PRC () promulgated by the SCNPC
on January 22, 1987 and came into effect on July 1, 1987, and last amended on April 29,
2021 and came into effect on the same date, the Measures for Record Filing and
Registration by Foreign Business Operators ( ) promulgated
by MOFCOM on June 25, 2004 and came into effect on July 1, 2004, and last amended on
May 10, 2021 and came into effect on the same date, and the Administrative Provisions of
the Customs of the PRC on Record-filing of Customs Declaration Entities ( ʕശɛ͏΍ձ
) promulgated by the General Administration of Customs of
the PRC on November 19, 2021 and came into effect on January 1, 2022, foreign trade
business operators engaging in the import or export of goods or technology must go
through the record filing and registration formalities with the MOFCOM or the agency
entrusted by the MOFCOM.
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Unless otherwise provided, the declaration for imported or exported goods and the
payment of duties may be made by the consignees or consignors themselves, or by
entrusted customs brokers. Customs declaration entities refer to consignees or consignors
of imported or exported goods or customs brokers that have filed for record with customs.
Customs declaration entities may conduct customs declaration business within the
customs territory of the PRC.
Import and Export Commodity Inspection
According to the Law of the PRC on Import and Export Commodity Inspection
( ) promulgated by the SCNPC on February 21,1989
and implemented since August 1, 1989, and last amended on April 29, 2021 and came into
effect on the same date, and the Regulations for the Implementation of the Law of the PRC
on Import and Export Commodity Inspection (ૢ
Է) promulgated by the State Council on August 31, 2005 and implemented since
December 1, 2005, and last amended on March 29, 2022 and implemented since May 1,
2022, the General Administration of Customs shall be responsible for inspection of
commodities in the PRC. The entry-exit inspection and quarantine authorities shall
conduct inspection on the import and export of commodities listed in the catalog and on
the import and export other commodities that shall be subject to the inspection by the
entry-exit inspection authorities as prescribed by laws and administrative regulations. For
the imported and exported commodities other than those that are subject to inspection by
the entry-exit inspection and quarantine authorities as mentioned above, the entry-exit
inspection and quarantine authorities shall conduct random inspection in accordance
with state regulations. Imported commodities subject to inspection may not be sold or
used if they have not been inspected. Exported commodities subject to inspection may not
be exported if they have not been inspected or fail to pass the inspection.
LAWS AND REGULATIONS RELATING TO ANTI-MONOPOLY AND ANTI-UNFAIR
COMPETITION
Anti-Monopoly
According to the Anti-Monopoly Law of the PRC () (the
“Anti-MonopolyLaw ”) promulgated by the SCNPC on August 30, 2007 and implemented
since August 1, 2008, and last amended on June 24, 2022 and implemented since August 1,
2022, the Anti-Monopoly Law applies to the monopolistic practices in domestic economic
activities in the PRC as well as the monopolistic practices outside the PRC which have
exclusion or restriction effects on domestic market competitions. The monopolistic
practices under the Anti-Monopoly Law include any monopoly agreement reached by any
operators, abuse of market-dominating position by any operators and any concentration
of operators which has eliminated or limited or may eliminate or limit the market
competition. The anti-monopoly law enforcement agency of the State Council are
responsible for enforcement of the Anti-Monopoly Law in accordance with the provisions
thereof. The anti-monopoly law enforcement authorities of the State Council may,
depending on the needs of their work, authorize the corresponding authorities of the
people’s governments of provinces, autonomous regions, and municipalities to be
responsible for enforcement of the Anti-Monopoly Law. Operators who violate the
provisions of the Anti-Monopoly Law shall be ordered by the anti-monopoly law
enforcement authority to stop the illegal act and may be imposed a fine.
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Anti-Unfair Competition Law
According to the Anti-Unfair Competition Law of the PRC ( ʕശɛ͏΍ձ਷ˀʔ͍
) (the “ Anti-Unfair Competition Law ”) promulgated by the SCNPC on
September 2, 1993 and implemented since December 1, 1993, and last amended on April
23, 2019 and came into effect on the same date, operators shall comply with the principle
of voluntariness, equality, fairness, integrity and abide by laws and business ethics in
market transactions. Under the Anti-Unfair Competition Law, unfair competition refers to
disruption on market competition or order by an operator in violation of the provisions
under the Anti-Unfair Competition Law in the production and operating activities, which
cause damage to the legitimate rights and interests of other operators or consumers.
Operators who violate the Anti-Unfair Competition Law shall bear corresponding civil,
administrative and criminal responsibilities depending on the specific circumstances.
LAWS AND REGULATIONS RELATING TO ENVIRONMENT PROTECTION
Environment Protection
According to the Environmental Protection Law of the PRC (ڭ
) promulgated by the SCNPC on September 13, 1979 and came into effect on the same
date, and amended on April 24, 2014 and implemented since January 1, 2015, enterprises,
public institutions and other manufacturers shall prevent and reduce environmental
pollution and ecological damage, and shall assume liabilities for any damage caused in
accordance with the laws. Pollutant-discharging enterprises, public institutions and other
manufacturers shall adopt measures to prevent and treat waste gas, waste water, waste
residue, medical waste, dust, malodorous gas, radioactive substances generated in
manufacturing, construction or any other activities, and any other environmental
pollution and hazards such as noise, vibration, ray radiation and electromagnetic
radiation.
Atmospheric Pollution
According to the Atmospheric Pollution Prevention and Control Law of the PRC (ʕശɛ
) promulgated by the SCNPC on September 5, 1987, and
implemented since June 1, 1988, and last amended on October 26, 2018 and came into
effect on the same date, enterprises, public institutions, and other business entities shall,
according to relevant provisions and monitoring norms of the state, monitor the industrial
waste gases and the toxic and hazardous atmospheric pollutants listed in the catalog
mentioned in Article 78 of the Atmospheric Pollution Prevention and Control Law of the
PRC they have discharged, and preserve the original monitoring records. Enterprises and
public institutions discharging industrial waste gases or the toxic or hazardous
atmospheric pollutants listed in the aforementioned catalog and other entities subject to
pollutant discharging licensing administration shall obtain a pollutant discharge license.
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Water Pollution
According to the Water Pollution Prevention and Control Law of the PRC ( ʕശɛ͏
) promulgated by the SCNPC on May 11, 1984, and implemented
since November 1, 1984, and last amended on June 27, 2017 and implemented since
January 1, 2018, an enterprise or public institution or other business entity which directly
or indirectly discharges industrial waste water or medical sewage to waters or waste
water or sewage that may be discharged after a pollutant discharge license has been
obtained as required shall obtain a pollutant discharge license.
Solid Waste
According to the Law of the PRC on Prevention and Control of Environmental
Pollution Caused by Solid Wastes ( )
promulgated by the SCNPC on October 30, 1995, and implemented since April 1, 1996, and
last amended on April 29, 2020 and implemented since September 1, 2020, any entity or
individual that produces, collects, stores, transports, utilizes, or disposes solid wastes
shall take measures to prevent or reduce environmental pollution caused by solid wastes,
and be liable for resultant environmental pollution in accordance with the law.
Noise Pollution
According to the Law of the PRC on Prevention and Control of Pollution From Noise
( ), which was promulgated by the SCNPC on December
24, 2021 and came into effect on June 5, 2022, the emission of noise and generation of
vibration shall comply with the noise emission standards, the relevant ambient vibration
control standards and the requirements of relevant laws, regulations and rules.
Environmental Impact Assessment
According to the Environmental Impact Assessment Law of the PRC ( ʕശɛ͏΍ձ
) promulgated by the SCNPC on October 28, 2002 and implemented
since September 1, 2003, and last amended on December 29, 2018 and came into effect on
the same date, and the Regulations on the Administration of Construction Project
Environmental Protection (ᚐ၍ଣૢԷ ) promulgated by the State
Council on November 29, 1998 and came into effect on the same date, and last amended on
July 16, 2017 and implemented since October 1, 2017, the state implements an
environmental impact assessment system for construction projects. An environmental
impact report is required to thoroughly assess the potential environmental impact if the
construction project may result in a material impact on the environment; an
environmental impact statement is required to analyze or conduct a project-based
evaluation if the construction project may result in slight impact on the environment; a
registration form of environmental impact is required to be filed if the construction project
may only result in minimal impact on the environment and no environmental impact
assessment is required. No construction project can be commenced without undergoing
assessment on environmental impact in accordance with the laws. After the completion of
the construction project for which an environment impact report or an environment
impact statement was prepared, the construction unit shall, in accordance with the
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standards and procedures formulated by competent administrative department for
environment protection under the State Council, conduct inspection and acceptance of the
ancillary environment protection facilities, and prepare an inspection and acceptance
report. No ancillary environment protection facilities of such projects may be put into
production or use until such facilities pass the inspection and acceptance; Any ancillary
facilities that failed to undergo or pass the inspection and acceptance procedure may not
be put into production or use.
If an enterprise violates the aforesaid laws and regulations, the environmental
protection administrative departments at the county level or above may order it to
suspend production or construction, impose a fine and order it to conduct restoration.
Permission for Pollutant Discharges
According to the Regulations on the Administration of Permitting of Pollutant
Discharges (રϮ஢̙၍ଣૢԷ) promulgated by the State Council on January 24, 2021
and implemented since March 1, 2021, and the Catalog for the Classified Management of
Pollutant Discharge Permitting for Stationary Pollution Sources (2019 Edition) (ݑ
๕રϮ஢̙ʱᗳ၍ଣΤ፽2019) issued by the Ministry of Ecology and Environment
on December 20, 2019 and came into effect on the same date, enterprises, public
institutions and other manufacturers which are subject to pollutant discharge permit
management as stipulated by laws must apply for and obtain pollutant discharge permits.
Without this permit, discharging pollutants is prohibited. Pollutant discharging entities
with a significant volume of pollutant generation, emissions or environmental impact are
subject to comprehensive management on permission of pollutant discharge. Those with a
smaller volume of pollutant generation, emissions and environmental impact are subject
to simplified management on permission of pollutant discharge. Entities with minimal
pollutant generation, emissions and environmental impact are subject to pollutant
discharge registration management.
LAWS AND REGULATIONS RELATING TO LARGE-SCALE RENEWAL OF
EQUIPMENT AND THE TRADE-IN
According to the Action Plan for Promoting Large-scale Equipment Renewals and
Trade-ins of Consumer Goods ( ) (the
“Action Plan ”) issued by the State Council on March 7, 2024 and came into effect on the
same date, measures including equipment renewal, trade-ins of consumer goods,
recycling, refining the standards, and strengthening policy support will be taken to
promote investment and consumption. In the field of trade-in of household appliances,
the Action Plan encourages giving preferential discount to consumers who exchange old
household appliances for energy-saving ones, and encourages better-off regions to give
subsidies to consumers to purchase green and smart home appliances.
According to the Measures on Increasing Efforts to Support Large-scale Equipment
Renewals and Trade-ins of Consumer Goods (˸ᔚ
) jointly issued by the NDRC and the Ministry of Finance on July 24, 2024,
approximately RMB300 billion in ultra-long special treasury bonds will be earmarked to
boost large-scale equipment renewals and trade-ins of consumer goods. Individual
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consumers will enjoy trade-in subsidies for 8 types of household appliances, namely air
conditioners, refrigerators, washing machines, water heaters, televisions, computers,
household stoves, and range hoods with energy efficiency or water efficiency standards of
level 2 or above. The subsidy is set at 15% of the selling prices of the appliances, and an
additional subsidy of 5% of the selling prices will be given for the purchase of the
appliances with energy efficiency or water efficiency standards of level 1 and above. Each
consumer can be subsidized for one unit of each type of the appliances, and the subsidy
for each unit may not exceed RMB2,000.
According to the Policy on Increasing Efforts to Expand Scope of Large-scale
Equipment Renewals and Trade-ins of Consumer Goods (׵2025ɽ஝ᅼ
 ) jointly issued by the NDRC and the Ministry of
Finance on January 8, 2025, in terms of household appliances, the government will
strengthen support for the trade-ins of household appliances, and will continue to
support the trade-ins of 8 types of household appliances such as refrigerators, washing
machines, televisions, air conditioners, computers, water heaters, household stoves, range
hoods, among others, and include 4 types of household appliances such as microwaves,
water purifiers, dishwashers, and rice cookers in the subsidy scope. Individual consumers
who purchase products with Level 2 energy efficiency or water efficiency standards from
the 12 categories of household appliances mentioned above will receive a subsidy of 15%
of the product’s selling price; for products with Level 1 energy efficiency or water
efficiency standards, the subsidy standard is 20% of the product’s selling price. Each
consumer can receive a subsidy for 1 item per product category (up to 3 items for air
conditioning products), with a maximum subsidy of RMB2,000 per item. Individual
consumers who have already enjoyed the trade-in subsidy for certain types of household
appliances in 2024 can continue to enjoy the subsidy for purchasing similar household
appliances in 2025. In terms of car purchase, the government will improve the subsidy
standards for car replacement and update, and expand the scope of support for car
scrapping and update. If an individual consumer transfers a registered passenger car
under their name and purchases a new passenger car, they will receive a subsidy for car
replacement and renewal. The maximum subsidy for purchasing a new energy passenger
car per unit shall not exceed RMB15,000, and the maximum subsidy for purchasing a fuel
passenger car per unit shall not exceed RMB13,000. Individual consumers who scrap
eligible diesel and other fuel passenger vehicles or new energy passenger vehicles and
purchase eligible new energy passenger vehicles or 2.0-liter and below displacement fuel
passenger vehicles will receive a subsidy of RMB20,000 per unit for purchasing new
energy passenger vehicles and a subsidy of RMB15,000 per unit for purchasing 2.0-liter
and below displacement fuel passenger vehicles.
LAWS AND REGULATIONS RELATING TO TAXATION
Income Tax
According to the Enterprise Income Tax Law of the People’s Republic of China
( ) (the “ EIT Law”) promulgated by the SCNPC on March
16, 2007 and implemented since January 1, 2008, and last amended on December 29, 2018
and implemented since the same date, and the Implementation Rules of the EIT Law of the
People’s Republic of China (ૢԷ) promulgated by the
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State Council on December 6, 2007 and came into effect on January 1, 2008, and last
amended on April 23, 2019 and came into effect on the same date, a resident enterprise
means an enterprise established within the PRC in accordance with the laws, or
established in accordance with any laws of foreign country or region but with an actual
management entity within the PRC. A resident enterprise is subject to an EIT of 25% for
any income generated within or outside the PRC. A preferential EIT rate is applicable to
any key industry and project which is supported and encouraged by the State. Key
high-tech enterprises which are supported by the State may enjoy a reduced EIT rate of
15%.
Value-Added Tax
According to the Interim Regulations on Value-added Tax of the People’s Republic
of China (೼ᅲБૢԷ ) promulgated by the State Council on
December 13, 1993 and implemented since January 1, 1994, and last amended on
November 19, 2017 and came into effect on the same date, and the Detailed Rules for the
Implementation of the Interim Regulations on Value-added Tax of the People’s Republic
of China ( ) promulgated by the Ministry of
Finance on December 25, 1993 and implemented since the same date, and last amended on
October 28, 2011 and implemented since November 1, 2011, entities and individuals that
sell goods or processing and repair services, sales services, intangible assets, or
immovables, or import goods within the territory of the PRC are taxpayers of value-added
tax (VAT), and shall pay VAT in accordance with law. Unless otherwise stipulated, the VAT
rate is 17% for taxpayers selling goods, provision of labor services, leasing tangible
movable property or importing goods; 11% for taxpayers selling transportation, postal,
basic telecommunications, or construction services, or leasing or selling real estate,
transferring land use rights, or selling or importing specified goods; and unless otherwise
stipulated, 6% for taxpayers selling services or intangible assets.
According to the Notice on Adjusting Value-added Tax Rate (ٙ
) jointly issued by the MOF and the STA on April 4, 2018 and came into effect on May
1, 2018, the tax rates of 17% and 11% originally applicable to any taxpayer who makes VAT
taxable sales or imports goods were adjusted to 16% and 10% respectively.
According to the Announcement on Relevant Policies for Deepening Value-added
Tax Reform (ʮѓ ), which was jointly promulgated by the
MOF, the STA and the General Administration of Customs on March 20, 2019, the tax rate
of 16% and 10% originally applicable to general VAT taxpayers who make VAT taxable
sales or import goods were adjusted to 13% and 9%, respectively.
Dividend Distribution
According to the Individual Income Tax Law of the PRC (੻
) promulgated by the SCNPC on September 10, 1980 and implemented since the
same date, and last amended on August 31, 2018 and implemented since January 1, 2019,
and the Implementation Provisions of the Individual Income Tax Law of the PRC ( ʕശɛ
ૢԷ ) promulgated by the SCNPC on January 28, 1994 and
implemented since the same date, and last amended on December 18, 2018 and
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implemented since January 1, 2019, dividends distributed by PRC enterprises are subject
to individual income tax levied at a uniform rate of 20%. For a foreign individual who is
not a resident of the PRC, the receipt of dividends from an enterprise in the PRC is
normally subject to individual income tax of 20% unless specifically exempted by the tax
authority of the State Council or reduced by relevant tax treaty. Meanwhile, according to
the Notice on Issues Concerning Differentiated Individual Income Tax Policies on
Dividends and Bonus of Listed Companies (ഄ
) issued by the Ministry of Finance, the State Administration of Taxation
and the CSRC on September 7, 2015 and came into effect on September 8, 2015, where an
individual holds the shares of a listed company obtained from the public offering for more
than one year and transfers the stock of the listed company on the stock market, the
dividend and bonus income shall be temporarily exempted from individual income tax.
Where an individual acquires shares of a listed company from the public offering and
transfers the stock of the listed company on the stock market, if the holding period is
within one month (inclusive), the dividend income shall be included in the taxable income
in full; if the holding period is more than one month but less than one year (inclusive), the
dividend income shall be included in the taxable income at the rate of 50%; the aforesaid
income shall be subject to individual income tax at a uniform rate of 20%.
According to the EIT Law and the Regulation on the Implementation of the EIT Law
of the PRC since January 1, 2008, an enterprise income tax rate of 10% shall normally be
applicable to dividends declared to non-PRC resident investors which do not have an
establishment or place of business in the PRC, or which have such establishment or place
of business but the relevant income is not effectively connected with the establishment or
place of business, to the extent such dividends are derived from sources within the PRC,
unless the jurisdiction in which such non-PRC resident investors are incorporated has a
tax treaty with the PRC that provides for a preferential withholding arrangement.
According to the Notice on the Issues Concerning Withholding the Enterprise Income Tax
on the Dividends Paid by the PRC Resident Enterprises to H Share Holders Which Are
Overseas Non-resident Enterprises (͏ΆุΣྤ̮ H͏Άุ
 ) issued by the State Administration of
Taxation on November 6, 2008 and implemented on the same date, a PRC resident
enterprise is required to withhold enterprise income tax at a uniform rate of 10% on
dividends paid to non-PRC resident enterprise holders of H Shares since 2008.
According to the Arrangement between the Mainland of China and the Hong Kong
Special Administrative Region for the Avoidance of Double Taxation and the Prevention of
Fiscal Evasion with respect to Taxes on Income (੻ᒒеᕐ
τર), the PRC government may impose tax on dividends paid by a
PRC company to a Hong Kong resident (including natural person and legal entity), but
such tax shall not exceed 10% of the total dividends payable by the PRC company. If a
Hong Kong resident directly holds 25% or more of equity interest in a PRC company and
the Hong Kong resident is the beneficial owner of the dividends and meets other
conditions, such tax shall not exceed 5% of the total dividends payable by the PRC
company. The Fifth Protocol to the Arrangement between the Mainland China and the
Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the
Prevention of Fiscal Evasion with Respect to Taxes on Income (ʫήձ
) (the “ Fifth
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Protocol ”), issued by The State Administration of Taxation and came into effect on
December 6, 2019 provides that such provisions shall not apply to arrangements or
transactions made for one of the primary purposes of obtaining such tax benefits.
Pursuant to applicable regulations, we intend to withhold tax at a rate of 10% from
dividends paid to non-PRC resident enterprise holders of our H Shares (including HKSCC
Nominees). Non-PRC resident enterprises that are entitled to be taxed at a reduced rate
under an applicable income tax treaty will be required to apply to the PRC tax authorities
for a refund of any amount withheld in excess of the applicable treaty rate, and payment
of such refund will be subject to the PRC tax authorities’ verification.
LAWS AND REGULATIONS RELATING TO FOREIGN EXCHANGE
According to the Regulations of the People’s Republic of China on Foreign Exchange
Administration ( ʕശɛ͏΍ձ਷̮ි၍ଣૢԷ ) promulgated by the State Council on
January 29, 1996 and implemented since April 1, 1996, and last amended on August 5, 2008
and implemented since the same date, payments of current account items, such as profit
distributions, interest payments and trade and service-related foreign exchange
transactions, subject to certain procedural requirements, can be carried out in foreign
currency without prior approval from the SAFE. On the contrary, approval from or
registration with relevant government authorities is required where RMB is to be
converted into foreign currencies and remitted out of China to pay capital items such as
direct investment, repayment of foreign currency loans, repatriation of investments and
securities investment outside China.
According to the Circular on Issues Concerning the Administration of Foreign
Exchange Involved in Overseas Listing ( )
promulgated on December 26, 2014 by the SAFE and implemented since the same date, a
domestic company shall, within 15 working days after the completion of its overseas
listing and issuance, register the overseas listing with the local branch of the State
Administration of Foreign Exchange of the place where it is incorporated. The funds
raised by domestic companies through overseas listing may be repatriated to China or
deposited overseas, provided that the use of funds shall be consistent with those as set out
in the public disclosure documents such as the prospectus or corporate bond issuance
prospectus, circulars to shareholders and resolutions of the board of directors or
shareholders’ meeting.
According to the Notice on Revolutionize and Regulate Capital Account Settlement
Management Policies ( ) promulgated by the
SAFE on June 9, 2016 and implemented since the same date, and last amended on
December 4, 2023 and implemented since the same date, foreign exchange receipts under
capital accounts (including foreign exchange capital, foreign debts, and repatriated funds
raised through overseas listing) subject to discretionary settlement as expressly
prescribed in relevant policies may be settled with banks depending on the actual need of
the domestic institutions for business operation. Where the existing laws and regulations
have restrictive provisions on the settlement of foreign exchange receipts under capital
accounts of domestic institutions, such provisions shall prevail. The tentative percentage
of foreign exchange settlement for foreign currency receipts under capital account of
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domestic institutions is fixed at 100% for the time being, subject to adjustment by the
SAFE in due time in line with the balance of payment.
LAWS AND REGULATIONS RELATING TO LABOR AND SOCIAL INSURANCE
Labor Regulations
According to the Labor Law of the People’s Republic of China ( ʕശɛ͏΍ձ਷௶ਗ
) promulgated by the SCNPC on July 5,1994, and came into effect on January 1, 1995
and last amended on December 29, 2018 and implemented since the same date, the Labor
Contract Law of the People’s Republic of China ( )
promulgated by the SCNPC on June 29, 2007, and implemented since January 1, 2008, and
last amended on December 28, 2012 and implemented since July 1, 2013, and the
Implementation Regulations of the Labor Contract Law of the People’s Republic of China
(ૢԷ ) promulgated by the State Council on September
18, 2008 and implemented since the same date, labor contracts shall be entered into in
writing if employment relationships are to be established between employers and
employees. Employers shall truthfully inform the employees of the work duties, working
conditions, occupational hazards, labor remuneration and any other information that
employees request to know. Employers shall pay labor remuneration to the employees in
full and in a timely manner in accordance with the provisions of the employment contracts
and relevant laws and regulations, and the wages of the employees may not be lower than
the local standards on minimum wages.
Social Insurance
According to the Social Insurance Law of the People’s Republic of China ( ʕശɛ͏
) promulgated by the SCNPC on October 28, 2010, and came into effect
on July 1, 2011 and last amended on December 29, 2018, and implemented since same date,
the Provision Regulations for The Collection And Payment of Social Insurance Premiums
(ᎈ൬ᅄᖮᅲБૢԷ) promulgated by the State Council on January 22, 1999 and
implemented since the same date, and last amended on March 24, 2019 and implemented
since the same date, Trial Measures on Maternity Insurance of employees ( Άุᔖʈ͛ԃ
) promulgated by the Ministry of Labor (now being the Ministry of Human
Resources and Social Security) on December 14, 1994 and implemented since January 1,
1995, the Regulation on Work-related Injury Insurance (ᎈૢԷ) promulgated by
the State Council on April 27, 2003 and implemented since January 1, 2004, last amended
on December 20, 2010 and implemented since January 1, 2011, enterprises are required to
register for social insurance at the local social insurance department and provide social
insurance for their employees. Where an enterprise fails to pay social insurance
premiums, the collection agency of the social insurance premiums has the power to order
the breaching enterprise to pay or make up the amount within a prescribed time limit, and
those that fail to pay within the time limit will be subject to administrative penalties such
as fines.
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Housing Provident Fund
According to the Administrative Regulations on the Housing Provident Fund
(၍ଣૢԷ ) promulgated by the State Council on April 3, 1999 and
implemented since the same date, and last amended on March 24, 2019 and implemented
since the same date, enterprises are required to complete the registration of contribution
to the housing provident fund with the housing fund management center, and the
procedures for opening or transfer of the housing provident fund accounts for their
employees. Enterprises shall make contribution to the housing provident fund in a timely
manner. Where an enterprise fails to pay or underpays the housing provident fund, the
housing provident fund management center has the power to order the breaching
enterprise to make the payment within a prescribed time limit. If the contribution to the
housing provident fund has not been made after the expiration of the time limit, an
application may be made to a people’s court for mandatory enforcement.
LAWS AND REGULATIONS RELATING TO INTELLECTUAL PROPERTY
Patent
According to the Patent Law of the People’s Republic of China ( ʕശɛ͏΍ձ਷ਖ਼
) promulgated by the SCNPC on March 12, 1984 and implemented since April 1,
1985, last amended on October 17, 2020 and implemented since June 1, 2021, and the
Implementation Rules of the Patent Law of the People’s Republic of China ( ʕശɛ͏΍ձ
) promulgated by the State Council on June 15, 2001 and implemented
since July 1, 2001, last amended on December 11, 2023 and implemented since January 20,
2024, patents in the PRC are categorized into invention patents, utility model patents and
design patents. Commencing from the date of application, the duration of patent rights for
invention patents, utility model patents, and design patents are twenty years, ten years
and fifteen years, respectively. The patent right enjoyed by the patentee are protected by
law. No person may misappropriate the patent without permission or authorization of the
patentee. Otherwise, the use of the patent in question constitutes an infringement of the
patent right.
Trademark
According to the Trademark Law of the People’s Republic of China ( ʕശɛ͏΍ձ
) promulgated by the SCNPC on August 23, 1982 and implemented since March
1, 1983, last amended on April 23, 2019 and implemented since November 1, 2019, and the
Implementation Rules of the Trademark Law of the People’s Republic of China ( ʕശɛ͏
ૢԷ ) promulgated by the State Council on August 3, 2002 and
implemented since September 15, 2002, last amended on April 29, 2014 and implemented
since May 1, 2014, trademarks approved by and registered with the Trademark Office are
registered trademarks, including good marks, service marks, collective marks and
certification marks. The valid period of a registered trademark is ten years, commencing
from the date of the registration. For continuous use of the registered trademark, the
trademark registrant is required to apply for renewal within twelve months before the
expiry date. The valid period for each renewal of registration is ten years, commencing
from the date immediately following the expiration of the previous validity period of the
trademark.
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Copyright
According to the Copyright Law of the People’s Republic of China ( ʕശɛ͏΍ձ਷
) promulgated by the SCNPC on September 7, 1990 and implemented since June
1, 1991, last amended on November 11, 2020 and implemented since June 1, 2021, works of
PRC citizens, legal persons or unincorporated organization, which refer to intellectual
achievements in the fields of literature, art, and science that are original and can be
expressed in a certain form, whether published or not, enjoy copyrights. A copyright
holder enjoys various rights, including the right of publication, the right of authorship
and the right of reproduction.
According to the Regulations for the Protection of Computer Software (ၑዚழ΁
ᚐૢԷ) promulgated by the State Council on June 4, 1991 and implemented since
October 1, 1991, last amended on January 30, 2013 and implemented since March 1, 2013,
and the Measures for the Registration of Computer Software Copyright (ၑዚழ΁ഹЪ
) promulgated by National Copyright Administration on February 20, 2002
and implemented since the same date, last amended on June 18, 2004 and implemented
since July 1, 2004, the National Copyright Administration is in charge of the registration
and administration of copyright for software nationwide and designates the China
Copyright Protection Center as the software registration authority. The China Copyright
Protection Center grants certificates of registration to computer software copyright
applicants who are in compliance with the requirements under the Regulations for the
Protection of Computer Software and the Measures for the Registration of Computer
Software Copyright.
Domain name
Pursuant to the Measures for the Administration of Internet Domain Names ( ʝᑌ
) promulgated by the Ministry of Industry and Information Technology
on August 24, 2017 and implemented since November 1, 2017, domain name registration is
handled through domain name service agencies established under relevant regulations,
and applicants become domain name holders upon successful registration.
LAWS AND REGULATIONS RELATING TO NETWORK SECURITY AND DATA
SECURITY
Pursuant to the Cybersecurity Law of the PRC ( )
promulgated by SCNPC on November 7, 2016 and implemented since June 1, 2017, no
individual or entity is allowed to engage in any activities endangering cyber security,
including hacking into others’ networks, interference with the normal functions of others’
networks and theft of cyber data; or provide any programs or tools specifically used for
activities endangering cyber security, including hacking, interference with the normal
functions and protective measures of a network, and theft of cyber data; it is
impermissible for any individual or entity to provide any assistance such as technical
support, advertising and promotion, or payment and settlement to any person who,
having been brought to such individual or entity’s knowledge, engages in activities
endangering cyber security. Network operators are required to take technical and any
other necessary measures to ensure the security of personal data they collect, and prevent
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information leaks, damage or loss. In the event that leakage, damage or loss of personal
data occurs or is likely to occur, such network operators are required to take remedial
measures immediately, and inform users in a timely manner as required and report to
relevant competent authorities.
Pursuant to the Data Security Law of the People’s Republic of China ( ʕശɛ͏΍ձ
) promulgated by SCNPC on June 10, 2021 and implemented since
September 1, 2021, the State established a data classification and hierarchical protection
system to conduct classified and hierarchical protection based on the importance of data
in economic and social development, as well as the degree of harm to national security,
public interest or the legitimate rights and interests of individuals and entities once such
data is tampered with, destroyed, leaked or illegally obtained and used. Relevant
authorities are coordinated under the national data security coordination mechanism ( ਷
ᅰኽτΌʈЪ՘ሜዚՓ ) to compile a catalog of key data to strengthen the protection of
key data. The State established a data security review system to conduct national security
reviews for data processing activities that affect or may affect national security.
Pursuant to Measures on Cybersecurity Review ( ) jointly
announced by the Cyberspace Administration of China and several regulatory authorities
in China on April 13, 2020 and implemented since June 1, 2020, last amended on December
28, 2021 and implemented since February 15, 2022, the Cybersecurity Review Office ( ၣഖ
܃is established under the Cyberspace Administration of China, and
responsible for formulating cybersecurity review systems and standards and organizing
cybersecurity reviews. Key information infrastructure operators who purchase network
products and services and network platform operators who engage in data processing
activities that affect or may affect national security are subject to cybersecurity review by
the Cybersecurity Review Office. Network platform operators with personal data of more
than one million users must file applications to the Cybersecurity Review Office for
cybersecurity review before listing overseas. If the member units under the cybersecurity
review working mechanism opine that any network products and services and data
processing activities affect or potentially affect national security, the Cybersecurity
Review Office has the duty to conduct a review in accordance with relevant requirements
after reporting to the Central Cyberspace Affairs Commission for approval in compliance
with the procedure.
LAWS AND REGULATIONS RELATING TO SECURITIES AND OVERSEAS LISTING
Securities Laws and Regulations
Pursuant to the Securities Law of the People’s Republic of China ( ʕശɛ͏΍ձ਷ᗇ
) (the “ Securities Law ”) promulgated by SCNPC on December 29, 1998 and
implemented since July 1, 1999, last amended on December 28, 2019 and implemented
since March 1, 2020, trading activities in securities market in China are comprehensively
regulated, including the issuance and trading of securities, takeovers by listed companies,
the duties and responsibilities of stock exchanges, securities companies and securities
regulatory authorities. The Securities Law further regulates that the issuance of securities
overseas directly or indirectly by domestic companies or having their securities listed
overseas are required to comply with relevant regulations of the State Council, with
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detailed implementation measures to be issued by the State Council separately. The China
Securities Regulatory Commission (the “ CSRC ”) is the securities regulatory body set up
by the State Council to supervise and administer the securities market pursuant to the
laws and regulations, to maintain market order, and to ensure lawful market operations.
Currently, the issuance and trading of H shares are principally regulated by the laws and
regulations promulgated by the State Council and the CSRC.
Overseas Listing
The CSRC issued several regulations regarding the requirements of the management
of filings for overseas offering and listing by domestic companies, which promulgated on
February 17, 2023 and implemented since March 31, 2023, including the Trial
Administrative Measures of Overseas Securities Offering and Listing by Domestic
Companies together with several supporting guidelines ( ྤʫΆุྤ̮೯БᗇՎձɪ̹၍
), together with several supporting guidelines (collectively referred to as the
“Overseas Listing Measures ”). According to the Overseas Listing Measures, the PRC
domestic companies that seek to offer and have their securities listed overseas, either
directly or indirectly, are required to submit required documents to the CSRC within three
working days after its application for overseas listing is submitted.
The Overseas Listing Measures provides that no overseas offering and listing shall
be made under any of the following circumstances: (i) such listing and fund-raising are
explicitly prohibited by law, administrative regulations or relevant state stipulations; (ii)
the oversea offering and listing may endanger national security as reviewed and
determined by competent authorities under the State Council in accordance with laws;
(iii) either the domestic company or its controlling shareholder(s), or the de facto
controller(s), has/have committed crimes such as corruption, bribery, embezzlement,
misappropriation of property or undermining the order of the socialist market economy
during the latest three years; (iv) the domestic company is suspected of committing a
crime or severe violation of laws and regulations, and is under investigation in accordance
with law and no clear conclusion has been made thereof yet; (v) there is/are material
ownership dispute(s) over equity interests held by the domestic company’s controlling
shareholder(s) or the shareholder(s) that are controlled by the controlling shareholder(s)
or the de facto actual controller(s). Additionally, the Overseas Listing Measures stipulates
that if the following significant events take place after its oversea offering and listing, the
issuer shall report the specific situation to the CSRC within three working days after the
occurrence and make an announcement of the relevant event: (i) change of control; (ii)
being subject to investigation, punishment or any other measures by overseas securities
regulatory authorities or relevant competent authorities; (iii) change of listing status or
listing board transfer; (iv) voluntary or compulsory termination of the listing. Meanwhile,
domestic companies engaging in overseas offering and listing activities shall strictly
comply with national security laws, administrative regulations and relevant rules on,
among others, foreign investment, network security, and data security, and effectively
fulfil their obligations to safeguard national security.
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Pursuant to the Provisions on Strengthening Confidentiality and Archives
Administration Concerning Overseas Securities Offering and Listing by Domestic
Companies ( )
jointly issued by the CSRC, MOF, the National Administration of State Secrets Protection
and the National Archives Administration on February 24, 2023 and implemented since
March 31, 2023, a domestic company that provides or publicly discloses, either directly or
through its overseas listed entities, any documents and materials involving state secrets or
work secrets of government agencies to entities such as relevant securities companies,
securities service providers or overseas regulators, and individuals shall obtain approval
from competent authorities with approval authority in accordance with law, and file with
the secrecy administrative department at the same level. The working papers prepared
within China by the securities companies and securities service providers that provide
corresponding services for overseas offering and listing of domestic companies are
required to be kept within China. Cross border transfer shall go through the approval
procedures in accordance with relevant regulations of China.
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OVERVIEW
Our journey traces back to Xinchang Refrigeration Components Factory (ጤႡиৣ
΁ᅀ) in 1984, which was incorporated as a legal entity under the system of the collective
ownership-based economy of the PRC. It was later renamed Zhejiang Province Xinchang
Refrigeration Components Headquarters Factory (Ⴁиৣ΁ᐼᅀ ). On September
10, 1994, together with Fujikoki Manufacturing Co., Ltd. (ה,)
Mitsubishi Corporation (ٟand Orient Trading Co., Ltd. (ٟ,)
it established Sanhua-Fujikoki Co., Ltd. (ʮ̡ ) as a Sino-Japanese joint
venture, marking the establishment of our Company. On December 19, 2001,
Sanhua-Fujikoki Co., Ltd. was converted to a joint stock company, which later changed its
name to Zhejiang Sanhua Intelligent Controls Co., Ltd. See “— Major Shareholding Changes
of Our Company” below for details.
With over 30 years of operations, we have amassed significant manufacturing
expertise and continue to diligently track market trends to effectively reduce costs while
enhancing product performance.
In 2005, the A shares of our Company were listed on the Shenzhen Stock Exchange
(stock code: 002050) and were further included in the Shanghai-Shenzhen 300 Index,
Shenzhen 100 Index, MSCI, FTSE Russell and other major indices.
KEY CORPORATE AND BUSINESS DEVELOPMENT MILESTONES
The following is a summary of our Group’s key corporate and business
development milestones:
Year Event
1994 Sanhua-Fujikoki Co., Ltd. (ʮ̡ ) was incorporated
as a Sino-Japanese joint venture and our Company has since then
established.
2001 Sanhua-Fujikoki Co., Ltd. (ʮ̡ ) was converted to a
joint stock company.
2005 Our Company was officially listed on the Shenzhen Stock Exchange
(stock code: 002050).
2008 We acquired a variety of assets from our parent company, including
Ranco’s global four-way reversing valve business, after which we
became the world’s largest manufacturer of four-way reversing valves.
2012 We acquired Aweco’s worldwide operations, strengthening our
localization efforts and strategic presence in Europe.
2015 We acquired the entire equity of Sanhua (Hangzhou) Micro Channel
Heat Exchanger Co., Ltd. (ʮ̡ ), whose
micro-channel heat exchanger business subsequently became one of
our core businesses.
HISTORY AND CORPORATE STRUCTURE
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Year Event
2017 We acquired the entire equity of Zhejiang Sanhua Automotive
Components Co., Ltd. (ʮ̡ ), thereby
expanding our range of products to include automotive components,
such as automotive electronic expansion valves, temperature control
valves and automotive thermostatic expansion valves. Our
automotive electronic expansion valves earned us the distinction of
being the first Chinese company to win the PACE Award.
2018 Our Vietnam production base was completed and put into operation.
We acquired the tubing component business in the United States and
Mexico from ATI, broadening the layout of our refrigeration and
air-conditioning product component business in North America.
2023 We were ranked among the top 100 global automotive component
manufacturers by Automotive News.
2024 As of D ecember 31, 2024, the R&D team for our bionic robot
electromechanical actuator had grown to over 180 members, more
than three times of that as of December 31, 2023. We have been
proactively planning our overseas production layout and
collaborating with our key customers to develop products, aiming to
gain an early advantage in the industry.
MAJOR SUBSIDIARIES
The principal business activities and date of establishment of each of our Major
Subsidiaries are shown below:
Name of company
Equity
interest
attributable
to our Group Principal business activities
Date and
jurisdiction of
establishment
Zhejiang Sanhua Trading Co., Ltd.
(ʮ̡ )
(“Sanhua Trading ”)
100% Sales of refrigeration and
air-conditioning product
components
March 27, 2012,
PRC
Zhejiang Sanhua Climate & Appliance
Controls Group Co., Ltd.
(ʮ̡ )
(“Sanhua Climate &
Appliance Controls ”)
100% R&D, manufacturing and sales of
refrigeration and
air-conditioning product
components
December 17,
2004, PRC
Zhejiang Sanhua Automotive Components
Co., Ltd.
(ʮ̡ )
(“Sanhua Automotive Components ”)
100% R&D, manufacturing and sales of
automotive components
October 12,
2004, PRC
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Name of company
Equity
interest
attributable
to our Group Principal business activities
Date and
jurisdiction of
establishment
Shaoxing Sanhua New Energy Automotive
Components Co., Ltd.
(ʮ̡ )
(“Shaoxing Sanhua New Energy
Automotive Components ”)
100% R&D, manufacturing and sales of
automotive components
February 10,
2017, PRC
Zhejiang Sanhua Commercial Refrigeration
Co., Ltd.
(ʮ̡ )
(“Sanhua Commercial Refrigeration ”)
100% R&D, manufacturing and sales of
refrigeration and
air-conditioning product
components
October 9, 2020,
PRC
Zhejiang Sanhua Automotive Components
Trading Co., Ltd.
(ʮ̡ )
(“Sanhua Automotive Components
Trading ”)
100% Sales of automotive components August 31, 2021,
PRC
Sanhua (Hangzhou) Micro Channel Heat
Exchanger Co., Ltd.
(ʮ̡ )
(“Sanhua Micro Channel Heat
Exchanger ”)
100% R&D, manufacturing and sales of
refrigeration and
air-conditioning product
components
August 4, 2006,
PRC
Shaoxing Sanhua Automotive Thermal
Management Technology Co., Ltd.
(ʮ̡ )
(“Sanhua Automotive Thermal
Management ”)
100% R&D, manufacturing and sales of
automotive components
December 3,
2020, PRC
Wuhu Sanhua Auto-Control Components
Co., Ltd.
(ʮ̡ )
(“Wuhu Sanhua Auto-Control ”)
100% R&D, manufacturing and sales of
refrigeration and
air-conditioning product
components
October 14, 2011,
PRC
Guangdong Sanhua Green Energy Auto
Parts Co., Ltd.
(ʮ̡ )
(“Guangdong Sanhua ”)
100% R&D, manufacturing and sales of
automotive components
February 17,
2023, PRC
Sanhua International Singapore
Pte. Ltd.
(ʮ̡ )
(“Sanhua International Singapore ”)
100% Sales of refrigeration and
air-conditioning product
components and automotive
components
October 24, 2005,
Singapore
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Name of company
Equity
interest
attributable
to our Group Principal business activities
Date and
jurisdiction of
establishment
Sanhua International, Inc.
(ʮ̡ )
(“Sanhua International ”)
100% Sales of refrigeration and
air-conditioning product
components and automotive
components
May 10, 2002,
United States
R-Squared Puckett, Inc.
(Rʮ̡ )
(“R-Squared Puckett ”)
100% R&D, manufacturing and sales of
refrigeration and
air-conditioning product
components
May 7, 1997,
United States
Sanhua Singapore Automotive Investment
Pte. Ltd.
(ʮ̡ )
(“Sanhua Automotive Investment ”)
100% Sales of automotive components November 20,
2023, Singapore
Sanhua Automotive Poland Sp.z.o.o.
(ப΂ʮ̡ )
(“Sanhua Poland ”)
100% R&D, manufacturing and sales of
automotive components
November 30,
2022, Poland
Sanhua Industry (Thailand) Co., Ltd.
(ʮ̡ )
(“Sanhua Thailand ”)
100% R&D, manufacturing and sales of
refrigeration and
air-conditioning product
components
January 31, 2023,
Thailand
Sanhua Automotive Mexico S. de R.L. de C.V .
(ʮ̡ )
(“Sanhua Mexico ”)
100% Manufacturing of automotive
components
June 15, 2016,
Mexico
Sanhua (Vietnam) Company Limited
(ʮ̡ )
(“Sanhua Vietnam ”)
100% R&D, manufacturing and sales of
refrigeration and
air-conditioning product
components
September 4,
2018, Vietnam
AWECO Polska Appliance SP .z.o.o.
(ப΂ʮ̡ )
(“Aweco Poland ”)
100% R&D, manufacturing and sales of
refrigeration and
air-conditioning product
components
May 18, 2006,
Poland
The Company held majority equity interests in the above Major Subsidiaries
throughout the Track Record Period.
See “Appendix IV — Statutory and General Information — C. Further Information
about Our Major Subsidiaries” for more details on share capital changes of the Major
Subsidiaries.
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MAJOR SHAREHOLDING CHANGES OF OUR COMPANY
Our Founder and Early Development of Our Company
When Xinchang Refrigeration Components Factory was established in 1984, Mr.
Zhang Daocai was appointed as the factory director, the person-in-charge of the factory. In
February 1985, Xinchang Refrigeration Components Factory changed its name to Zhejiang
Province Xinchang Refrigeration Components Headquarters Factory (Ⴁиৣ΁
ᐼᅀ). On September 10, 1994, under the leadership of Mr. Zhang Daocai, Sanhua-Fujikoki
Co., Ltd. (ʮ̡ ,“ Sanhua-Fujikoki ”) was established as a Sino-Japanese
joint venture by Zhejiang Province Xinchang Refrigeration Components Headquarters
Factory together with Fujikoki Manufacturing Co., Ltd. (ה,)
Mitsubishi Corporation (ٟand Orient Trading Co., Ltd. (ό䔼
ٟFujikoki Manufacturing Co., Ltd. (הMitsubishi Corporation (
ٟand Orient Trading Co., Ltd. (ٟare all Independent
Third Parties, each held 37%, 39%, 15% and 9% of the share capital, respectively.
Conversion into Joint Stock Limited Company and Listing on the Shenzhen Stock
Exchange
Following three capital transfers, the total investment from foreign investors
decreased below 25%. On October 18, 2001, based on an agreement among all then
shareholders, Sanhua-Fujikoki was converted from a limited liability company to a joint
stock limited company with registered capital of RMB83 million. On December 19, 2001,
we finished the registration procedures of the conversion and our then shareholders
consists Sanhua Holding, Zhejiang Zhongda Group Co., Ltd. (ʮ̡ ,
“Zhejiang Zhongda ”), Zhang Yabo, Oriental Trading Co., Ltd., Ren Jintu, and Wang
Jianmin, each held 50%, 25%, 10%, 9%, 3%, 3% of the then share capital of our Company.
Zhejiang Zhongda and Wang Jianmin are both Independent Third Parties. According to
then applicable PRC regulations, since Oriental Trading Co., Ltd. held 9% of the total
share capital of our Company, the Ministry of Commerce of the PRC approved the change
of our Company to a foreign-invested joint-stock company with a foreign investment less
than 25% on October 29, 2003. Subsequently, on March 1, 2004, with the approval of the
Zhejiang Provincial Administration for Industry and Commerce, the company type of our
Company was changed to a Sino-foreign joint-stock company (with a foreign investment
ratio of less than 25%).
In 2005, we completed the listing of our A Shares on the Shenzhen Stock Exchange
(stock code: 002050) (the “ A-Shares Listing ”). In the A-Shares Listing, we issued an
aggregate of 30,000,000 A Shares, accounting for 26.55% of our Company’s then issued
shares of 113,000,000 immediately following the A-Shares Listing.
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Upon completion of the A-Shares Listing, the shareholding structure of our
Company was as follows:
Shareholder Name
Number of
Shares
Shareholding
Percentage
(%)
Non-tradable Shares
Sanhua Group 41,500,000 36.73
Zhejiang Zhongda 20,750,000 18.36
Zhang Yabo 8,300,000 7.35
Oriental Trading Co., Ltd. 7,470,000 6.61
Ren Jintu 2,490,000 2.20
Wang Jianmin 2,490,000 2.20
Tradable A Shares 30,000,000 26.55
Total 113,000,000 100
Other Major Shareholding Changes
On October 25, 2005, the non-tradable shareholders of our Company agreed to
compensate the tradable shareholders by distributing Shares, thereby granting the
non-tradable Shares the right to be listed and traded on the Shenzhen Stock Exchange. For
every ten tradable Shares held, the tradable shareholders would receive three Shares from
the non-tradable shareholders. Based on the 30 million tradable Shares as of November 17,
2005, holders of each ten tradable Shares received three Shares from the non-tradable
shareholders. Specifically, Sanhua Holding transferred 4,660,714 shares (whose
shareholding decreased from 36.73% to 32.60% accordingly), Zhejiang Zhongda
transferred 2,330,357 shares (whose shareholding decreased from 18.36% to 16.30%
accordingly), Oriental Trading Co., Ltd. transferred 838,929 shares (whose shareholding
decreased from 6.61% to 5.87% accordingly), Zhang Yabo transferred 900,000 shares
(whose shareholding decreased from 7.35% to 6.55% accordingly), and Ren Jintu
transferred 270,000 shares (whose shareholding decreased from 2.20% to 1.96%
accordingly) to the tradable shareholders.
In 2008, following the approval of our Shareholders and the relevant regulatory
authority, we were approved to purchase assets through a combination of share issuance
and cash payment. According to this approval, our Company issued 151,000,000 ordinary
A Shares to Sanhua Holding to purchase 74% equity in Sanhua Climate & Appliance
Controls, 100% equity in Xinchang Sitong Electromechanics Co., Ltd. (ࠢ
ʮ̡), 100% equity in Xinchang Sanyuan Machinery Co., Ltd. (ʮ̡ ),
100% equity in Sanhua International (USA) Co., Ltd., and 100% equity in Nihon Sanhana
Trading Co., Ltd. (ٟand to acquire 75% equity in Changzhou Ranco
Reversing Valve Co., Ltd. (ʮ̡ ) with cash. After completing this share
issuance for asset purchase, our registered capital was changed to RMB264,000,000
consisting of 264,000,000 A Shares.
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In 2010, following the approval of our Shareholders and the relevant regulatory
authority, we were approved of a private issuance of no more than 50 million new Shares.
In December 2010, we issued 33,368,666 shares to seven qualified subscribers including
Sanhua Holding, Zhang Jianguo, Shanghai Jinlifang Equity Investment Management
Partnership Co., Ltd. (Υྫ), Zhejiang Aoxin
Holding Group Co., Ltd. (ʮ̡ ), Zhejiang Industrial Investment
Fund Partnership (LLP) (Υྫ), Shenzhen Zhongxin
Lianhe Venture Capital Co., Ltd. (ʮ̡ ) and Meng Shengxi.
Except Sanhua Holding, all of them are Independent Third parties and Shanghai Jinlifang
Equity Investment Management Partnership Co., Ltd. (ᛆҳ༟ΥྫΆุ
Υྫ) and Shenzhen Zhongxin Lianhe Venture Capital Co., Ltd. (ᑌΥ௴
ʮ̡ ) was deregistered. After the completion of this private placement, our
registered capital was changed to RMB297,368,666 consisting of 297,368,666 A Shares.
In 2015, following the approval of our Shareholders and the relevant regulatory
authority, we were approved to purchase assets through issuance of 208,809,136 A Shares
to Zhejiang Sanhua Qianjiang Automotive Parts Group Co., Ltd. (፺Ϫӛԓ௅΁ණ
ʮ̡ , now known as Sanhua Green Energy) to purchase 100% equity in Sanhua
Micro Channel Heat Exchanger. Additionally, we were approved of a private issuance of
no more than 61,349,694 A Shares to raise supporting funds for the asset purchase. After
completing this share issuance for asset purchase and raising supporting funds, our
registered capital was changed to RMB1,801,476,140 consisting of 1,801,476,140 A Shares.
In 2017, following the approval of our Shareholders and the relevant regulatory
authority, we were approved to issue 230,686,695 A Shares to Sanhua Green Energy to
purchase 100% equity in Sanhua Automotive Components. Additionally, we were
approved of a private issuance of no more than RMB132,231,000 worth of A Shares to raise
supporting funds. After completing this share issuance for asset purchase and raising
supporting funds, our registered capital was changed to RMB2,120,316,835 consisting of
2,120,316,835 A Shares.
For details changes in share capital of our Company within the two years
immediately preceding the date of this prospectus, see “Statutory and General
Information — 1. Further Information about our Company — B. Changes in Share Capital
of our Company” in Appendix IV to this prospectus.
EXCHANGEABLE BONDS ISSUED BY SANHUA GREEN ENERGY
On April 27, 2023, Sanhua Green Energy issued an exchangeable bonds
(“Exchangeable Bonds ”) in an aggregate principal amount of RMB2.05 billion with
maturity date on April 27, 2026 at a coupon rate of 1.00%, which are listed on the SZSE and
are exchangeable for A Shares of the Company held by Sanhua Green Energy from
February 19, 2024 to April 24, 2026 (the “ EB Exercise Period ”).
Based on the terms and conditions of the Exchangeable Bonds, The initial exchange
price of the Exchangeable Bonds should not be lower than the closing price of the A Shares
before the disclosure date of the offering circular of the Exchangeable Bonds or the
average closing price of the A Shares over the 20 prior trading days. When the A Shares
HISTORY AND CORPORATE STRUCTURE
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undergoes changes such as share dividends, capital increase from reserves, rights issues,
or cash dividends, the conversion price will be adjusted according to the following
formulas:
• Share Dividends or Capital Increase from Reserves : P1=P0×N/(N+n)
• Rights Issues : P1=P0×(N+k)/(N+n), k=n×A/M
• Cash Dividends : P1=P0-D
Where, “P1” is the adjusted conversion price, “P0” is the conversion price before
adjustment, “N” is the total number of ordinary shares before the share dividend, capital
increase, or rights issue, “n” is the number of new shares issued in the share dividend,
capital increase, or rights issue, “A” is the price of the rights issue, “M” is the closing price
of the Shares on the trading day before the announcement date of the rights issue
announcing the effective and irrevocable terms of the rights issue, and “D” is the amount
of cash dividend per share.
In addition, within the first 24 months of the term of the Exchangeable Bonds, if the
closing price of A Shares is below 90% of the current exchange price for at least ten out of
any consecutive 20 trading days, the authorized person of the board of directors of Sanhua
Green Energy has the right to decide whether to adjust the exchange price downward.
After the first 24 months of the term of the exchangeable bonds, if the closing price of the
A Shares is below 100% of the current exchange price for at least ten out of any consecutive
20 trading days, the authorized person of the board of directors of Sanhua Green Energy
has the right to decide whether to adjust the exchange price downward. If there has been
an adjustment to the exchange price during the aforementioned 20 trading days, the
closing price and exchange price before the adjustment day will be calculated based on the
pre-adjustment prices, and the closing price and exchange price on and after the
adjustment day will be calculated based on the post-adjustment prices.
The initial exchange price of the Exchangeable Bonds was RMB26.80 per Share and
was adjusted to RMB25.95 per Share due to distributions of dividends of the Company as
of the Latest Practicable Date.
As security for the obligations of Sanhua Green Energy under the Exchangeable
Bonds, Sanhua Green Energy pledged 220 million A Shares of the Company held by it to
Zheshang Securities Co., Ltd., the pledge agent for the holders of the Exchangeable Bonds
(the “ Pledge Agent ”). Under the terms and conditions of the Exchangeable Bonds, the
initial pledged shares should be no less than the market value of the 160% of the
Exchangeable Bonds (calculated based on the closing price of the A Shares on the
preceding trading day for 20 consecutive trading days). In addition, Sanhua Green Energy
is obliged to pledge additional A Shares and/or cash, which would be triggered when the
market value of the pledged shares is less than 140% of the outstanding principal and
interest of the Exchangeable Bonds, calculated based on the closing price of the A Shares
on the preceding trading day for 10 consecutive trading days, Sanhua Green Energy must,
within 20 trading days from the date of triggering this event, pledge additional A Shares
or cash to bring the collateral ratio to 160% or above. If a holder of the Exchangeable Bonds
HISTORY AND CORPORATE STRUCTURE
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makes exchanges for A Shares during the EB Exercise Period, Sanhua Green Energy will
transfer beneficial interest in the pledged A Shares to the holder, and the pledge on these
transferred A Shares will be released.
Due to the exercise of part of the Exchangeable Bonds, as of the Latest Practicable
Date, the outstanding amount of the Exchangeable Bonds is RMB349.71 million and the
maximum number of A Shares could be exchanged is 13,476,300 Shares. As of the Latest
Practicable Date, Sanhua Green Energy held 677,851,480 of A Shares of the Company,
representing 18.16% of the total issued share capital of the Company. Assuming all the
remaining Exchangeable Bonds were exchanged into the A Shares of the Company at the
conversion price of RMB25.95 per Share, the A Shares held by Sanhua Green Energy would
decrease to 664,375,180 A Shares, representing (i) approximately 17.80% of the Company’s
issued share capital as of the Latest Practicable Date, (ii) approximately 16.23% of the
Company’s issued share capital upon the completion of the Global Offering, assuming
that the Offer Size Adjustment Option and the Over-allotment Option are not exercised
and (iii) approximately 15.78% of the Company’s issued share capital upon the completion
of the Global Offering and the exercise of the Offer Size Adjustment Option and the
Over-allotment Option in full. This may however be subject to adjustment as a result of
the adjustment of exchange price of the Exchangeable Bonds. As of the Latest Practicable
Date, a total of 155,103,526 A Shares held by Sanhua Green Energy, representing 4.16% of
the total issued share capital of the Company, are under pledge for the Exchangeable
Bonds.
MAJOR ACQUISITIONS, DISPOSALS AND MERGERS
We had not carried out any major acquisitions, disposals or mergers during the
Track Record Period and up to the Latest Practicable Date.
OUR LISTING ON THE SHENZHEN STOCK EXCHANGE AND REASONS FOR THE
LISTING ON THE STOCK EXCHANGE
Since 2005, our Company has been listed on the Shenzhen Stock Exchange. As of the
Latest Practicable Date, our Directors confirmed that we had no instances of material
non-compliance with the rules of the Shenzhen Stock Exchange and other applicable
securities laws and regulations of the PRC in any material respects since our listing on the
Shenzhen Stock Exchange, and, to the best knowledge of our Directors having made all
reasonable enquiries, there was no material matter that should be brought to the
investors’ attention in relation to our compliance record on the Shenzhen Stock Exchange.
Based on the independent due diligence conducted by the Joint Sponsors, nothing has
come to the Joint Sponsors’ attention that would cause them to disagree with our
Directors’ confirmation with regard to the compliance records of the Company on the
Shenzhen Stock Exchange.
Our Company seeks to be listed on the Hong Kong Stock Exchange in order to
provide further capital for the development and expansion of our business, provide an
additional fundraising platform for our Company should the need arise, further
strengthen our business profile and market position in the industry, and better attract
overseas investors and talents. See “Business — Our Strategies” and “Future Plans and
Use of Proceeds” for more details.
HISTORY AND CORPORATE STRUCTURE
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THE CONCERT PARTIES
Pursuant to an acting-in-concert agreement entered into among Mr. Zhang Daocai,
Mr. Zhang Yabo and Mr. Zhang Shaobo (together, the “ Concert Parties ”) dated March 14,
2017, all the Concert Parties agreed to act in concert by aligning their votes at the Board
and/or the shareholders’ meetings of our Company in accordance with the consensus
achieved among them. The Concert Parties entered into the acting-in-concert agreement in
accordance with regulations applicable to companies listed on Shenzhen Stock Exchange
which deem them as joint controllers of the Company. If the Concert Parties are unable to
reach consensus on any matter presented, the opinion represented by the majority of the
voting rights held by the Concert Parties in the Company’s Shares shall be adopted. The
acting-in-concert agreement was executed to ensure the Company remains under
long-term stable control, thereby to secure the Group’s sustained development and
establish a mechanism for addressing differing opinions among the Concert Parties. This
agreement is intended to remain valid for long.
PROPOSED GLOBAL DEPOSITARY RECEIPT APPLICATION
As approved by the Board on November 28, 2022 and by the shareholders of the
Company on December 14, 2022, we proposed to offer Global Depositary Receipts
(“GDR”) of the Company globally and list the GDRs on the SIX Swiss Exchange (the
“Proposed GDR Application ”). The listing application was later submitted to the SIX
Swiss Exchange on December 20, 2022 and a conditional approval was obtained from the
SIX Swiss Exchange. The Proposed GDR Application plan was further approved and
prolonged by the Board on June 3, 2024 and by the shareholders of the Company on June
20, 2024. However, based on the needs of the Company business operation in October
2024, we terminated the Proposed GDR Application and proceeded to seek a listing of our
Shares on the Stock Exchange. During our preparation for the Proposed GDR Application,
we did not encounter any material difficulties or legal impediments which led us to
suspend the preparation for the Proposed GDR Application.
To the best of our Directors’ knowledge, our Directors are not aware of (1) any other
matters relating to the Proposed GDR Application that are relevant to the Listing and
should be reasonably highlighted in this prospectus for investors to form an informed
assessment of our Company; (2) any enquiries from CSRC, the Shenzhen Stock Exchange
or the SIX Swiss Exchange relating to the Proposed GDR Application that would affect our
Company’s suitability for listing on the Stock Exchange; (3) any other matters relating to
the Proposed GDR Application that may have implications on our Company’s suitability
for listing on the Stock Exchange or on the truthfulness, accuracy and completeness of
information disclosed in this prospectus; (4) any disagreement or dispute between us and
the professional parties involving in the Proposed GDR Application; or (5) any other
matters that need to be brought to the attention of the Stock Exchange and investors in
Hong Kong in relation to the Proposed GDR Application. Based on the independent due
diligence conducted by the Joint Sponsors, nothing in relation to the Proposed GDR
Application has come to their attention that should be brought to the investors’ attention.
HISTORY AND CORPORATE STRUCTURE
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OUR SHAREHOLDING AND CORPORATE STRUCTURE
Shareholding and Corporate Structure Immediately before the Global Offering
The following chart depicts a simplified shareholding and beneficial ownership structure of our Group immediately prior to the
completion of the Global Offering (assuming that no changes are made to the issued share capital of our Company between the Latest
Practicable Date and Listing):
Hield International (H.K.) Limited
Wealth Info Limited
Zhejiang Sanhua Green Energy Industrial Group Co., Ltd.(8)
Our Company
1.05%
25.41%
18.16%
28.20%
100%
100%
46.22%
9.04%28.77%12.35%
21%6%51%22%
38.84%
11.78% 10.04%
45.45%
Other A Shareholders
55.38%
Sanhua
International
100%
99.996%
100%
Sanhua
Vietnam
100%
Sanhua Commercial
Refrigeration
100%100%
Sanh
ua Trad
ing
100%
Sanhua Automotive
Components
100%
100%100% 100%
100%100%
100%Sanhua Automotive
Europe GmbH
100%
Guangdong
Sanhua
100%
Sanhua Mexico Aweco Poland
100% 100%
95.57% 4.43% 100%
Sanhua Poland(6)
99%
0.002%
Mr. Zhang
Yabo(2)(3)
Mr. Zhang
Daocai(1)(3)
Ms. Yu
Qingjuan(3)
Mr. Zhang
Shaobo(2)(3)
Xinchang Huaqing Investment Co., Ltd.(3)
Xinchang Huaxin Industrial Co., Ltd.(3) Zhejiang Huateng Industrial Co., Ltd.(3)
Sanhua Holding Group Co., Ltd.(3)
Sanhua Climate &
Appliance Controls
Sanhua
Automotive
Thermal
Management
Sanhua
Automotive
Components
Trading
Shaoxing
Sanhua
New Energy
Automotive
Components
Sanhua International
Singapore
Sanhua Automotive
Investment
Sanhua Aweco
Appliance Systems
GmbH
Wuhu Sanhua
Auto-Control
Sanhua Micro
Channel Heat
Exchanger
Sanhua Thailand(5) R-Squared Puckett
Other Subsidiaries
of Our Company(4)
HISTORY AND CORPORATE STRUCTURE
– 158 –


--- page 169 ---
Notes:
(1) Mr. Zhang Daocai is the father of Mr. Zhang Yabo and Mr. Zhang Shaobo and they have entered into an
acting in concert agreement. See “— The Concert Parties.” Ms. Yu Qingjuan is the spouse of Mr. Zhang
Daocai. Mr. Zhang Daocai is the founder of our Company.
(2) Mr. Zhang Yabo is an Executive Director, the Chairman of the Board and the Chief Executive Officer of
our Company. See “Directors, Supervisors and Senior Management — Directors.” Mr. Zhang Shaobo is a
Non-executive Director our Company. See “Directors, Supervisors and Senior Management —
Directors.”
(3) Mr. Zhang Daocai, Mr. Zhang Yabo and Mr. Zhang Shaobo, by acting in concert and through their
respectively controlled entities, Xinchang Huaqing Investment, Xinchang Huaxin Industrial, Zhejiang
Huateng Industrial, as of the Latest Practicable Date, altogether controlled 71.98% of the voting rights in
Sanhua Holding.
As of the Latest Practicable Date, (i) the remaining interests of Xinchang Huaxin Industrial were held as
to 14.61% by Mo Yang, a Supervisor, 11.10% by Chen Jinyu, a director of Sanhua Automotive Components
thus a connected person of the Company, 3.33% by Zhao Yajun, a Supervisor, and 32.12% by five
Independent Third Parties, none of whom held 30% or more interest in Xinchang Huaxin Industrial. One
of the five Independent Third Parties is Xinchang Huayi Investment Co., Ltd. (ʮ̡ ,
“Xinchang Huayi ”) which held 11.10% interest in Xinchang Huaxin Industrial, was wholly owned by
Xinchang Daocai Charity Foundation (ึ ,“ Daocai Charity ”) as of the Latest
Practicable Date. Daocai Charity was established in January 2013 with donations from Mr. Zhang Daocai,
Mr. Zhang Yabo and Mr. Zhang Shaobo (the “ Donators ”) as a charity organization focusing on aiding the
needy, supporting education, and promoting public welfare in rural areas and has no shareholders.
Daocai Charity, which is not controlled by the Donators, should not be seen as an associate of the
Donators and thus is not a connected person but an Independent Third Party; (ii) the remaining interests
in Zhejiang Huateng Industrial were held as to 20.44% by Yuan Ze, 15.29% by Pan Yong, 12.11% by Yu
Yingkui, each a connected person at subsidiary level of our Company, and 6.71% by two Independent
Third Parties; (iii) the remaining interests in Sanhua Holding were held as to 2.60% by Wang Dayong, an
Executive Director, 2.19% by Ren Jintu, a Non-executive Director, 2.05% by Ni Xiaoming, an Executive
Director, 1.92% by Chen Yuzhong, an Executive Director, 2.47%, 0.96%, 0.90%, 0.89%, and 0.63% by Shi
Chuliang, Huang Xuedong, Cai Rongsheng, Yin Bin and Dong Shifu, each a connected person at
subsidiary level of our Company, respectively, 0.26% by Yu Jiandian, a deemed connected person at
subsidiary level of our Company, and 13.15% by 27 Independent Third Parties; (iv) the remaining
interests in Sanhua Green Energy were held as to 13.10% by Xinchang Huazhuo Enterprise Management
Co., Ltd. (ʮ̡ ), which was held as to 49% by Zhou Sipeng (who is a supervisor of
Major Subsidiary) and therefore a connected person at subsidiary level of our Company, and 12.48% by
an Independent Third Party Xinchang Huayong Enterprise Management Co., Ltd. (ࠢ
ʮ̡).
(4) Other subsidiaries include, in aggregate, 53 subsidiaries established in various jurisdictions.
(5) As of the Latest Practicable Date, the remaining 0.002% interest in Sanhua Thailand was held by Zhejiang
Sanhua Heat Exchanger Co., Ltd. (ʮ̡ ), one of our wholly-owned subsidiaries.
(6) As of the Latest Practicable Date, the remaining 1% interest in Sanhua Poland was held by Sanhua Aweco
Appliance Systems GmbH, wholly owned by Sanhua International Singapore, one of our wholly-owned
subsidiaries.
(7) As of the Latest Practicable Date, the Board has approved a repurchase mandate to repurchase A Shares of
the Company. See “Appendix IV — Statutory and General Information — 1. Further Information about
Our Group — B. Changes in Share Capital of our Company” for more details.
(8) See “— Exchangeable Bonds Issued by Sanhua Green Energy.”
HISTORY AND CORPORATE STRUCTURE
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Shareholding and Corporate Structure Immediately following the Global Offering
The following chart depicts the shareholding and beneficial ownership structure of our Group immediately following the
completion of the Global Offering, assuming that the Offer Size Adjustment and the Over-allotment Option are not exercised and that no
changes are made to the issued share capital of the Company between the Latest Practicable Date and Listing:
Sanhua
International
100%
99.996%
100%
Sanhua
Vietnam
100%
Sanhua Commercial
Refrigeration
100%100%
Sanhua Trading
100%
Sanhua Automotive
Components
Sanhua
Automotive
Components
Trading
Shaoxing
Sanhua
New Energy
Automotive
Components
100%
100%100%
Sanhua
Automotive
Thermal
Management
100%
Sanhua Micro
Channel Heat
Exchanger
100%100%
100%Sanhua Automotive
Europe GmbH
100%
Guangdong
Sanhua
100%
Sanhua Mexico Aweco Poland
100% 100%
95.57% 4.43% 100%
Sanhua Poland(6)
99%
0.002%
Sanhua Holding Group Co., Ltd.(3)
Hield International (H.K.) Limited
Wealth Info Limited
Zhejiang Sanhua Green Energy Industrial Group Co., Ltd.
Our Company
23.17%
0.95%
16.56%
28.20%
100%
100%
46.22%
9.04%28.77%12.35%
21%6%51%22%
38.84%
11.78% 10.04%
45.45%
Other A Shareholders H Shareholders
8.81%50.51%
Mr. Zhang
Yabo(2)(3)
Mr. Zhang
Daocai(1)(3)
Ms. Yu
Qingjuan(3)
Mr. Zhang
Shaobo(2)(3)
Xinchang Huaqing Investment Co., Ltd.(3)
Xinchang Huaxin Industrial Co., Ltd.(3) Zhejiang Huateng Industrial Co., Ltd.(3)
Sanhua Climate &
Appliance Controls
R-Squared Puckett
Other Subsidiaries
of Our Company(4)Wuhu Sanhua
Auto-Control
Sanhua Thailand(5)
Sanhua Aweco
Appliance Systems
GmbH
Sanhua International
Singapore
Sanhua Automotive
Investment
Notes (1) to (6): Please refer to the details contained in the preceding page.
HISTORY AND CORPORATE STRUCTURE
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OVERVIEW
We are the world’s largest manufacturer of refrigeration and air-conditioning
control components and a global leader in automotive thermal management system
components in terms of revenue in 2024, according to Frost & Sullivan. Our market share
in the global refrigeration and air-conditioning control component market was
approximately 45.5% in terms of revenue in 2024, according to Frost & Sullivan. In the
global automotive thermal management system component market, we held a market
share of approximately 4.1% in terms of revenue in 2024, ranking fifth globally, according
to Frost & Sullivan. In line with our mission to develop an intelligent, low-carbon
economy and create a sustainable, quality living environment, we have been dedicated to
the R&D, promotion and adoption of thermal management technology, providing
customers across the globe with energy-efficient solutions through our industry-leading
products of high quality. With a global perspective, we have established a business that
spans two major sectors: refrigeration and air-conditioning product components and
automotive components. Leveraging our extensive technological expertise and innovation
in R&D, we are actively broadening our business boundaries into emerging fields, such as
bionic robot electromechanical actuators.
Following our development strategy of “focusing on excellence and innovating for
success,” we are committed to refining our existing product offerings while actively
cultivating new drivers for sustained growth. From the early days, we placed great
importance on establishing a global network. Our extensive global R&D layout, combined
with our localized production and sales network, allows us to respond swiftly to customer
needs while gaining stronger insights into diverse markets. This facilitates our
development of tailored products and delivery high-quality services. Our emphasis on
advanced management techniques, technology and talent is evident in our daily
operations and strategic planning. These principles have become integral to our corporate
management philosophy and encapsulated in our “SANHUA” brand, symbolizing the
blossoming of management, technology and talent.
BUSINESS
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We have made a number of significant achievements in various areas:
World’s Largest
refrigeration and air-conditioning
control component manufacturer(1)
Global Leading
automotive thermal management
system component manufacturer(1)
RMB27.9 bn
2024 Revenue
2005-2024
Revenue CAGR
23.3%
(2)
Net Profit CAGR
25.0%
(2)
2024 Overseas Revenue
44.7%
Global Presence
5 Continents
(7)
48
Factories Worldwide(8)
6
R&D Bases
Worldwide(9)
100% coverage
of the world’s
top 10 refrigeration and
air-conditioning manufacturers &
automobile manufacturers(4)
Over
4,000
Patents(5)
Around
8,000
Patent Applications(6)
World’s Largest
market share
for 9 major
products categories(3)
Notes:
(1) In terms of revenue in 2024, according to Frost & Sullivan. According to Frost & Sullivan, in terms of
revenue in 2024, we are the world’s largest manufacturer of refrigeration and air-conditioning control
components and the world’s fifth largest automotive thermal management system component
manufacturer. Our market share in the global refrigeration and air-conditioning control component
market was approximately 45.5% in terms of revenue in 2024, according to Frost & Sullivan. In the global
automotive thermal management system component market, we held a market share of approximately
4.1% in terms of revenue in 2024, ranking fifth globally, according to Frost & Sullivan.
(2) Based on data from the annual reports published by the Company on the Shenzhen Stock Exchange, our
revenue increased from 2005 to 2024 at a CAGR of 23.3%, and our net profit increased from 2005 to 2024
at a CAGR of 25.0%. Such figures have not been audited or reviewed by the Reporting Accountant.
(3) According to Frost & Sullivan, in 2024, under our refrigeration and air-conditioning product component
business, our four-way reversing valves, electronic expansion valves, micro-channel heat exchangers,
service valves, solenoid valves, Omega pumps and ball valves ranked first in their respective global
markets in terms of revenue, with market shares of 55.4%, 51.4%, 43.4%, 39.1%, 47.7%, 53.6% and 32.8%,
respectively. In the same year, under our automotive component business, our automotive electronic
expansion valves and integrated modules ranked first in their respective global markets by revenue in
terms of revenue, with market shares of 48.3% and 65.6%, respectively.
(4) As of December 31, 2024, we established business relationships with all the world’s top ten largest
refrigeration and air-conditioning manufacturers and automotive manufacturers in terms of revenue in
2023, according to Frost & Sullivan.
(5) As of December 31, 2024, we had over 3,300 patents in China and over 800 patents in overseas
jurisdictions.
(6) As of December 31, 2024, we had filed over 6,600 patent applications in China and over 1,300 patent
applications in overseas jurisdictions. In addition, we had over 100 valid applications under the PCT.
(7) As of December 31, 2024, our products had reached America, Europe, Asia, Oceania and Africa, spanning
over 80 countries and regions.
(8) As of December 31, 2024, we had a total of 48 factories worldwide, including 13 overseas factories in the
United States, Poland, Mexico, Turkey, Austria, Vietnam, Thailand and India.
(9) As of December 31, 2024, we had six R&D bases, including three in China, two in the United States and
one in Germany, that lead the innovation of applied R&D.
BUSINESS
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Our Journey
Our journey traces back to Xinchang Refrigeration Components Factory established
in 1984. In 1994, our predecessor, Sanhua-Fujikoki Co., Ltd., a Sino-Japanese joint venture,
was established. Following the conversion of Sanhua-Fujikoki Co., Ltd. into a joint stock
company in 2001, we became a public company listed on the Shenzhen Stock Exchange in
2005 (stock code: 002050.SZ).
Insisting on the idea of “small products, vast market, advanced technology and
specialized expertise” at the beginning stage of our business, we established our market
presence through production of valves used in refrigeration and air-conditioning systems.
Over the years, we have expanded our product offerings from singular valve products to
a broader array of refrigeration and air-conditioning product components and automotive
components. We recognize the importance of environmental sustainability, and are
committed to providing solutions that help our customers create environmentally-friendly
products. Such awareness has led us to recognize the transformative impact and
substantial market potential of New Energy Vehicles (“ NEVs ”) for a sustainable future
from the early stages of the NEV development. Our in-depth understanding of
air-conditioning thermal management and heat pump technologies promoted our decisive
move in pursuing strategic opportunities arising from the increasing demands for NEV
thermal management systems, allowing us to replicate the profound expertise and
technology advantages in this fast-growing sector. Capitalizing on the market insight and
industry resources accumulated from the mass production of a variety of parts and
components, we have recently entered into the bionic robot sector with a focus on
electromechanical actuator, paving our route to become a global industrial group
encompassing multiple industries and product categories.
Our journey since our establishment can be divided into three main phases:
Phase I
From being a
leader in service
valves to
becoming a
leader across
multiple product
categories within
the refrigeration
and
air-conditioning
control
component
industry
(1994-2004)
At the beginning of our establishment, we focused on service
valves as the main product to expand market presence.
While expanding our product portfolio under our
refrigeration and air-conditioning product components
business, we dedicated efforts to enhancing our reputation
and elevating the technical sophistication and quality of our
offerings.
• We remain committed to promoting the development
of electronic expansion valves, solenoid valves and
other refrigeration and air-conditioning control
components within our refrigeration and
air-conditioning product lines, while deepening our
involvement in the refrigeration and air-conditioning
industry
• In 2002, we emerged as a leading PRC company in
terms of global market share of service valves in terms
of sale volume
• In 2004, our annual revenue exceeded RMB300 million
for the first time
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Phase II
Driving strategic
global expansion
and accelerating
the growth of our
automotive
component
business by
leveraging
opportunities in
the capital
markets
(2005-2017)
During this period of rapid growth, we emerged as the
global leader in refrigeration and air-conditioning control
components. We also expanded our business portfolio to
incorporate the automotive components. Capitalizing on the
rapid growth of China’s capital market by seeking listing on
the Shenzhen Stock Exchange, engaging in mergers and
acquisitions, and pursuing organic growth, we were able to
expand our automotive component business and secure a
leading market position in refrigeration and
air-conditioning control components and automotive
thermal management system components.
• In 2005, we completed the listing on the Shenzhen
Stock Exchange. With funds raised through such IPO,
we initiated technical renovation projects for 2 million
air-conditioning solenoid valves and 1.5 million
air-conditioning ball valves. Additionally, we invested
in a project for the expansion of production capacity to
achieve annual production capacity of five million sets
of air-conditioning electronic expansion valves
• In 2008, we acquired a variety of assets from our
parent company, thereby achieving comprehensive
coverage in the refrigeration and air-conditioning
product components sector. Among these assets
acquired was Ranco’s global four-way reversing valve
business. After the acquisition, we became the world’s
largest manufacturer of four-way reversing valves
• In 2012, we acquired Aweco’s worldwide operations,
strengthening our localization efforts and strategic
presence in Europe
• In 2013, our market share of refrigeration and
air-conditioning control components, in terms of
revenue, reached the first in the world
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• In 2015, we acquired the entire equity of Sanhua
(Hangzhou) Micro Channel Heat Exchanger Co., Ltd.
(the “ Sanhua Micro Channel Heat Exchanger ”),
whose micro-channel heat exchanger business
subsequently became one of our core businesses. The
acquisition aimed to enhance our core competitiveness
in the refrigeration and air-conditioning product
component sector, expand our product portfolio,
achieve synergies within the supply chain and
expedite our entry into global markets by leveraging
the international production capabilities of Sanhua
Micro Channel Heat Exchanger. Micro-channel heat
exchangers were alternatives to the traditional copper
tube & fin heat exchangers and had already shown
substantial market growth potential. At the time of the
acquisition, Sanhua Micro Channel Heat Exchanger
was already a leading market player, distinguished by
its research and development capabilities, customer
base and overseas presence. We acquired Sanhua
Micro Channel Heat Exchanger from a related party, a
wholly-owned subsidiary of Sanhua Holding. This
transaction was conducted in strict adherence to
affiliated transaction review procedures and relevant
information disclosure obligations, and we employed
independent valuation to ensure fair transaction
pricing
• In 2017, we acquired the entire equity of Zhejiang
Sanhua Automotive Components Co., Ltd., thereby
expanding our range of products to include
automotive components, such as automotive
electronic expansion valves, temperature control
valves and automotive thermostatic expansion valves.
Our automotive electronic expansion valves earned us
the distinction of being the first Chinese company to
win the PACE Award
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Phase III
Proactively
pursuing new
growth
trajectories while
enhancing
business
capabilities and
expanding
technological
reserves
(2018-present)
In the third stage, while continuing to expand our presence
in the refrigeration and air-conditioning product component
and automotive component sectors, we ventured into the
R&D and production of bionic robot electromechanical
actuators. Building on our established expertise and
technological capabilities, and leveraging our technological
innovation and capabilities large-scale manufacturing
strengths, we are charting a new path for growth.
• Our revenue from refrigeration and air-conditioning
product component business continued to grow
steadily, and our market share in the global
refrigeration and air-conditioning control component
market reached 45.5% in 2024. As of December 31,
2024, we had been the world’s largest manufacturer of
refrigeration and air-conditioning control components
for twelve consecutive years. In 2024, we have
achieved comprehensive coverage of automotive
valves, automotive pumps, automotive heat
exchangers and integrated modules under our
automotive thermal management system component
business, and our global market share of automotive
electronic expansion valves and integrated modules
ranked first in terms of global revenue, sales volume
and production volume. Such achievements further
reinforced our standing as a significant player in the
global component market
• In 2018, we completed the construction of our Vietnam
production base and put it into operation, establishing
it as our then largest overseas production capacity in
Asia outside of China
• In 2018, we acquired the tubing component business in
the United States and Mexico from ATI, broadening
the layout of our refrigeration and air-conditioning
product component business in North America
• In 2023, we were ranked among the top 100 global
automotive component manufacturers by Automotive
News
• As of December 31, 2024, the R&D team for our bionic
robot electromechanical actuator had grown to over
180 members. We have been proactively planning our
overseas production layout and collaborating with our
key customers to develop products, aiming to gain an
early advantage in the industry
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The following diagram illustrates our key milestones since the establishment:
Phase I
From specializing in service valves
to excelling across multiple product
categories within the refrigeration
and air-conditioning control
component industry (1994-2004)
Phase II
Driving strategic global expansion and accelerating the growth of
our automotive component business by leveraging opportunities
in the capital markets (2005-2017)
Phase III
Proactively pursuing new growth trajectories while
enhancing business capabilities and expanding
technological reserves (2018-present)
2012
Acquisition of
Aweco
We acquired Aweco’s
worldwide operations,
strengthening our
localization efforts and
strategic presence in
Europe.
2017
Acquisition of
Sanhua Automotive
We acquire Zhejiang
Sanhua Automotive
Components Co., Ltd.,
expanding into the
automotive component
industry.
PACE Award
We became the first
Chinese company to win
the PACE Award.
2018
Acquisition of ATI
We acquired the tubing component business in
the United States and Mexico from ATI,
broadening the layout of our refrigeration and
air-conditioning product component business in
North America.
Establishment of Vietnam Production
Base
We completed the constr uction of o ur
Vietnam prod uction base and p ut it into
operat ion, establ ishing it as o ur then largest
overseas prod uction capac ity in Asia outside
of China.
2023
Top 100 Global
Automotive
Component
Companies
We were ranked
among the top
100 global
automotive
component
companies by
Automotive News.
2002
Global Service Valve
Market Leader
We emerged as a PRC
company with a presence
in the global service valve
market.
2005
Listing on
SZSE
We completed
the listing on
the Shenzhen
Stock
Exchange.
2004
Annual
Revenue
Surpassing
300 Million
Our annual
revenue
surpassed
RMB300 million
for the first time.
2013
No. 1 Market Share
of Refrigeration and
Air-conditioning
Control Components
Our market share of
refrigeration and
air-conditioning control
components, in terms of
revenue, reached the first
place in the world,
according to Frost &
Sullivan.
2024
Advancement in Bionic Robot
Electromechanical Actuators
R&D
By December 31, 2024, our R&D team
for bionic robot electromechanical
actuators expanded to over 180
members, and we have been
strategizing  our overseas production
layout and collaboration with key
customers for an early advantage.
2008
Acquisition of
Various Assets
We acquired a
range of
businesses from
our parent
company,
including the
global four-way
reversing valve
operations from
Ranco.
2015
Acquisition of Sanhua
Micro-Channel
We acquired Sanhua
(Hangzhou) Micro
Channel Heat Exchanger
Co., Ltd., establishing
micro-channel heat
exchanger business as a
core business.
1994
Opening the
Refrigeration and
Air-Conditioning
Product
Component
market with
service valves
We expanded market
with service valves,
deepening our
involvement in the
production of
refrigeration and
air-conditioning
product components.
Our Business and Products
We primarily engage in the R&D, manufacturing and sales of refrigeration and
air-conditioning product components and automotive components. Focusing on the R&D
and application of heat pump technology and thermal management systems, we prioritize
creating environmental thermal management solutions that enable efficient heat exchange
and intelligent temperature control. In addition, we have devoted ourselves to the R&D of
bionic robot electromechanical actuator products to pursue growth potential in this
promising area.
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Refrigeration and Air-conditioning Product Components
The following chart illustrates our representative products under the refrigeration and
air-conditioning product component business along with their various application scenarios:
Air-conditioning and Refrigeration
Cold-chain Transport
Refrigerator/Freezer
Heat Pump Heating/Hot Water System
Industrial Refrigeration/Data Center Cooling
Brazed Plate Heat
Exchanger
Thermostatic
Expansion
Valve
Electronic
Expansion
Valve
Solenoid
Valve
Filter Drier
Washing Machine/Dishwasher/Coffee Maker/Wall-Hung Stove
Coffee Machine
Solenoid Valve
Water Inlet Valve
for Washing
Machines
Micro-channel
Condenser
Omega BLDC
Pump
Gas Valve
BLDC
Solenoid
Valve
Service
Valve
Electronic
Expansion
Valve
Four-way
Reversing
Valve
Micro-channel
Heat Exchanger
hi T t
Electronic
Expansion
V alve
Controller
 Service V alve Gigaforce
Four-way
Reversing V alve
Pressure
Sensor
Shielded Pump
for Water
Electric Switching
Water V alve
Water Ball
V alve
Brazed Plate
Heat Exchanger
Inverter
Controller
Motorized
Damper
Electric
V alve
Bistable
Solenoid V alve
Superconductive
Plate
Micro-channel
Condenser
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Under the refrigeration and air-conditioning product component business, we
mainly engage in the development and application of control components, subsystems
and technology solutions which empower energy-efficient buildings, heating, ventilation
and air-conditioning (“ HVAC”) systems and household appliances thermal management
systems. We are a key supplier of refrigeration and air-conditioning control components,
which span valves, heat exchangers, pumps and controllers, among others, serving the
global market for residential and commercial air-conditioning, commercial and industrial
refrigeration and small household appliances, among others. Our key products in this
business sector comprise a variety of valve products, including electronic expansion
valves, four-way reversing valves, service valves, solenoid valves and ball valves. We also
offer heat exchanger products, specifically micro-channel heat exchangers, pump
products such as Omega pumps, and controller products, including inverter controllers
and pressure sensors. Such products are widely utilized in fields including air
conditioners, refrigerators, industrial refrigeration, cold-chain transport, heat pump
heating and washing machines. With strong product integration capabilities and a
commitment to long-term R&D investment, we harness economies of scale and lean
management to enhance product performance and reduce costs, thereby delivering added
value to our customers.
Automotive Components
The following diagram illustrates the application of our automotive components:
Electrical/Control System Thermal Management
Cabinet Thermal Management
Electronic
Expansion
Valve
Electric
Ball
Valve
Thermostatic
Expansion Valve
with Shut off
Accumulator
 Integrated
Module
Battery Thermal Management
Cooling Plate
 Battery Cooler
and Module
Electronic Water
Pump
Electronic Water
Valve
Integrated Module
Oil Cooler
Module
Electric
Oil Pump
Oil Cooler
 Oil Valve
Integrated
Representative
Automotive
Thermal Management
System Component
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As an early entrant with strategic deployment in the NEV thermal management
market, we were among the first to set the stage for the creation of novel application
scenarios and industry development trends, which establishes us as a key supplier of
automotive thermal management system components in the global market. We are
committed to offering essential and comprehensive thermal management and control
solutions for NEVs and providing high-performance products that enhance energy
efficiency and reduce emissions for ICEVs. We are actively involved in the R&D of
automotive valves, automotive pumps, automotive heat exchangers and integrated
modules, especially under cabinet thermal management, battery thermal management
and electrical/control system thermal management, designed to achieve effective thermal
management in automotive operations. Our efforts have successfully integrated a
substantial range of critical products into the supply chains of leading NEV
manufacturers, including automotive valve products, such as automotive electronic
expansion valves, automotive pump products, such as automotive electronic water
pumps, automotive heat exchanger products, such as battery coolers, and various types of
integrated modules, among others. Our manufacturing and innovation technology stand
at a leading place of the industry. In recent years, we have been dedicating more resources
to iterating our refrigeration and air-conditioning product components and automotive
components.
Strategic Emerging Business
As an early entrant that leads the development of thermal management
technologies, we have accumulated abundant experiences and expertise in developing
and manufacturing a considerable number of electric motors. By leveraging our motor
manufacturing expertise, scalability and cost-control capabilities, we have successfully
ventured into the production of bionic robot electromechanical actuators. We strive to
provide lighter, smaller and more precise electromechanical actuators through
independent R&D. As of the Latest Practicable Date, we were in the R&D phase, refining
prototypes before scalable commercialization, and we are actively deploying overseas
factories for their production, aiming to gain an early advantage in the emerging bionic
robot electromechanical actuators market.
Our Management and Corporate Culture
Guided by the business philosophy of “focusing on excellence and innovating for
success,” we place customer needs at a leading place of our operations, ensuring swift and
efficient market responsiveness, outstanding customer service and continuous
technological innovation. We have established a standardized management system with
an emphasis on talent development and team engagement. We are dedicated to sharing
our growth and achievements with our employees. We encourage employees’ initiative
and creativity through regular incentive programs. Our incentive mechanism is closely
linked to employees performance appraisal, taking into account both the long-term and
short-term interests of our employees. In 2015, we launched our first employee stock
ownership plan, followed by equity incentive plans in 2018, 2020, 2022 and 2024,
respectively, aiming to motivate and retain key talents. We continually enhance our
long-term employee incentive mechanisms to benefit a broader range of individuals, from
senior management to key talents, both domestically and internationally. As of December
31, 2024, we had nearly 2,000 employees who had worked with us for over twenty years.
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We also attach great importance to rewarding our Shareholders and investors for
their ongoing support. Since our listing on the Shenzhen Stock Exchange, we have
maintained a generous dividend payout, totaling RMB7.3 billion. Our dividend payout
ratios for 2022, 2023 and 2024, calculated by dividing the declared cash dividends by the
net profit during the respective periods were 34.3%, 30.8% and 41.8%. Meanwhile, we
introduce share repurchase programs based on market conditions to maximize our
Shareholders’ benefits. For 2022, 2023 and 2024, we repurchased treasury shares
amounting RMB104.6 million, RMB190.1 million and RMB300.0 million, respectively.
Our Performance
During the Track Record Period, we achieved a solid revenue growth with stable
and industry-leading margins, according to Frost & Sullivan. Our revenue increased by
15.0% from RMB21,347.6 million in 2022 to RMB24,557.8 million in 2023, and further
increased by 13.8% from RMB24,557.8 million in 2023 to RMB27,947.2 million in 2024. Our
gross profit margin increased from 25.6% in 2022 to 27.4% in 2023, and further decreased
from 27.4% in 2023 to 27.3% in 2024. In 2022, 2023 and 2024, our net profit amounted to
RMB2,608.1 million, RMB2,933.7 million and RMB3,111.7 million, respectively, and during
the same period, our net profit margin remained at a level of above 11.0%. During the
same periods, our net cash generated from operating activities amounted to RMB2,366.1
million, RMB3,560.4 million and RMB4,026.2 million, respectively.
OUR STRENGTHS
The World’s Largest Manufacturer of Refrigeration and Air-conditioning Control
Components and a Global Leader in Automotive Thermal Management System
Components
We are the world’s largest manufacturer of refrigeration and air-conditioning
control components and a global leader in automotive thermal management system
components in terms of revenue in 2024, according to Frost & Sullivan. Our market share
in the global refrigeration and air-conditioning control component market was
approximately 45.5% in terms of revenue in 2024, according to Frost & Sullivan. In the
global automotive thermal management system component market, we held a market
share of approximately 4.1% in terms of revenue in 2024, ranking fifth globally, according
to Frost & Sullivan. Since our listing on the Shenzhen Stock Exchange, we have achieved
sustained and steady growth. According to the annual reports disclosed by the Company
on the Shenzhen Stock Exchange, our revenue increased from 2005 to 2024 at a CAGR of
23.3% and our net profit increased from 2005 to 2024 at a CAGR of 25.0%. Such figure has
not been audited or reviewed by the Reporting Accountant.
According to Frost & Sullivan, we are the world’s largest manufacturer of
refrigeration and air-conditioning control components in terms of revenue in 2024. In
2024, our global market share of refrigeration and air-conditioning control components,
measured by revenue, reached approximately 45.5%, surpassing the combined market
share of the second and third largest manufacturers. In the same year, our four-way
reversing valves, electronic expansion valves, micro-channel heat exchangers, service
valves, solenoid valves, Omega pumps and ball valves ranked first in their respective
global markets in terms of revenue, with market shares of 55.4%, 51.4%, 43.4%, 39.1%,
47.7%, 53.6% and 32.8%, respectively. In the same year, our pressure sensors ranked
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second in the global sensors market in terms of revenue, with a market share of 15.9%. We
are also a leader in the global automotive thermal management system component
market. According to Frost & Sullivan, in 2024, in terms of revenue, we ranked first in the
global markets of automotive valves and integrated modules. In the same year, our battery
coolers and automotive electronic water pumps ranked third and fourth in their
respective global markets in terms of revenue, with market shares of 5.9% and 5.5%
respectively.
According to Frost & Sullivan, the global market size of refrigeration and
air-conditioning control components in terms of total revenue is expected to increase from
RMB36.4 billion in 2024 to RMB51.6 billion in 2029, at a CAGR of 7.2%. Meanwhile, the
total revenue generated by thermal management system components for NEVs is expected
to increase from RMB116.2 billion in 2024 to RMB377.1 billion in 2029, at a CAGR of 26.6%.
As of December 31, 2024, in terms of revenue, we had maintained our position as the
world’s largest manufacturer of refrigeration and air-conditioning control components for
twelve consecutive years and had been the manufacturer with the largest revenue from
automotive electronic expansion valves and integrated modules for four consecutive
years. We believe that our leading position and early entrant in the refrigeration and
air-conditioning control component and the NEV thermal management system
component industries, combined with our close partnerships with world-renowned
customers, will enable us to seize the market opportunities in the rapidly developing
market and sustain our rapid growth.
Commitment to Technological Innovation Fueling Rapid Product Iteration and
Strategic Readiness for Future Industry Advancements
We focus on investing in technologies that enable us to stay ahead of industry trends
and establish a foundation for long-term growth. We develop forward-looking
technologies through significant investment in the Technology Development Process
(“TDP ”), which is a structured approach to creating and refining new technologies,
covering R&D stages from the initial concept to research, development and
commercialization. While these investments may not necessarily yield immediate returns,
they are beneficial to our future growth and enhances our responsiveness to potential new
customer requests that involve novel technological demands. To support these efforts, we
have established a professional product performance laboratory and a reliability
laboratory, both certified by CNAS and equipped with numerous sets of specialized
testing equipment. In 2022, 2023 and 2024, our investments in R&D amounted to
RMB989.0 million, RMB1,096.8 million and RMB1,351.8 million, accounting for 4.6%, 4.5%
and 4.8% of our total revenue for the same periods, respectively. As of December 31, 2024,
we had over 3,500 R&D personnels around the world, representing over 18% of our total
number of employees. There were over 700 with master’s degree or above, accounting for
approximately 20% of our total R&D personnels.
We have accumulated strong R&D capabilities and the ability for rapid product
iteration and advancement. While consolidating our existing product advantages, we are
also swiftly expanding into new industries, leveraging the synergies among various
business segments. We are dedicated to establishing a globally competitive R&D system
that encompasses all stages from initial concept to production. See “— Research and
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Development — Our R&D System.” This comprehensive R&D framework allows us to
identify emerging industry needs and proactively engage in product R&D, thereby
positioning us at a leading place of breakthrough innovations. For instance, we
recognized the potential in the thermal management of NEVs and adapted electronic
expansion valves, originally used in the air-conditioning sector, for automotive
applications, to enable precise control of the refrigerant flow and optimize the cooling and
heating functions within the thermal management systems of NEVs. This innovation was
recognized with the 2017 PACE Award, making us the first Chinese enterprise to receive
this award since its establishment in 1995. Today, our automotive electronic expansion
valves are widely utilized in mainstream NEVs. We also value ongoing fundamental
research, especially in material development, to discover alternative materials that are
more eco-friendly, cost-effective, or simplify processing. Such efforts reinforce our
dedication to sustainability, reduce operational costs, and enhance overall efficiency.
We possess a robust technological foundation in valve and pump components
related to thermal management, enabling us to swiftly adapt and apply technologies
across various applications. We have rapidly entered the electronic expansion valve and
inverter controller markets by leveraging our expertise in refrigeration and
air-conditioning control components. Through ongoing technological innovation, we are
actively involved in heat pump upgrades and thermal management integration. We
consistently invest in developing foundational components to create products that offer
increased energy efficiency, reduced pipeline complexity and enhanced mileage for NEV
models. Since 2009, we have independently developed automotive electronic expansion
valve products with Local Interconnect Network communication mode, making us the
first company globally to apply electronic expansion valves to the thermal management of
electric vehicles.
Furthermore, we have ventured into the bionic robot electromechanical actuator
market by capitalizing on our research and development and large-scale production
capabilities. This allows us to offer competitive R&D solutions to our long-term strategic
partners and core customers in emerging industries, thereby establishing a new growth
trajectory. We believe that this R&D strategy not only enhances the attractiveness of our
products but also bolsters customer loyalty by fostering a deeper understanding of our
customers and their future strategic directions.
Our product development is centered on delivering exceptional services to our
customers. To address the safety risks associated with refrigerant leakage in
air-conditioning systems and to comply with international safety regulations, we have
strategically collaborated with our customers to introduce the electric ball valve. This
product swiftly and effectively shuts off the refrigerant circuit within the system,
preventing safety hazards caused by significant leaks in enclosed spaces. Furthermore, it
features adjustable refrigerant flow, ensuring compliance with safety standards across
various countries while accommodating diverse customer usage scenarios, thereby
providing added value to customers. In the evolution of our electronic expansion valve,
we have incorporated features such as two-stage flow regulation, low-noise operation and
high-capacity full-open flow to enhance the comfort of household indoor air-conditioning
units. These advancements facilitate dehumidification, quiet operation and energy
savings.
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As of December 31, 2024, we had obtained over 3,300 patents in China, including
over 1,400 invention patents. We had also obtained over 800 patents in overseas
jurisdictions. This marks significant progress compared to June 2005, when we were listed
on the Shenzhen Stock Exchange with only 47 domestic utility model patents.
Our long-standing commitment to innovation has not only earned us recognition as
a market leader but also established us as a notable figure in industry standard-setting
and collaborative research. We have been invited to lead the drafting of more than twenty
Chinese national or industry standards. Moreover, we have established critical national
R&D platforms such as the National Enterprise Technology Center and the National
Postdoctoral Research Workstation. Throughout the years, our innovative efforts have
been recognized through numerous prestigious awards. As early as in 1987, our
predecessor’s RF-H thermostatic expansion valve was recognized as Zhejiang Province
High-Quality Product. We have received awards including but not limited to the National
Quality Award, the Management Science Award from the China Management Science
Society and the Manufacturing Single Product Champion Award. In addition, we were
selected as a ‘green factory’ in the fifth batch of green manufacturing and have been
recognized as national key high-tech enterprise. Furthermore, we are committed to
“industry-university-research collaboration,” and have established long-term
partnerships with renowned universities such as Shanghai Jiaotong University, Zhejiang
University, Xi’an Jiaotong University and South China University of Technology. In
collaboration with these prestigious institutions, we explore the development of vehicles
and the advanced technology in NEV thermal management systems and address key
challenges in the industry.
Commitment to Lean Production and Efficient Resource Allocation
Our global manufacturing network, which uniformly employs lean production
methodology, constitutes the core advantage of our production capabilities,
distinguishing us from our peers. We benefit from economies of scale, with our network of
48 factories worldwide, out of which we have established 8 production bases. Our
production bases offer cost advantages through large-scale production line setups, while
our individual factories located around the world provide the flexibility to swiftly
respond to and meet the diverse needs of local customers . Moreover, our global
production layout, which facilitates localized production or assembly, allows us to
navigate the rapid global trade developments with greater ease and resilience.
Our production management pivots around optimizing resource allocation and
implementing process automation. Specifically, we reduce production cycles and enhance
production efficiency. For example, initially, we depended on external suppliers for the
provision of winding equipments. Recognizing maintenance challenges and limited
efficiency improvements, we proactively developed proprietary high-precision,
high-speed winding machines and optimized their synchronization mechanisms. By
introducing advanced winding and transmission methods alongside advanced electrical
programming, our equipment’s efficiency has been enhanced by approximately 40%
compared to imported winding equipment. Moreover, the optimization of component
structures has led to over 50% reduction in manufacturing costs compared to imported
winding equipment. Apart from that, we strive to achieve a combination of
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informatization and automation, demonstrated by our efforts to use Internet of Things
(“IoT”) technologies to realize real-time equipment performance monitoring and optimal
production resources allocation. This approach not only helps us achieve stable output
and consistent product quality, but also elevates production efficiency, enabling us to
meet customer demands for product quality and timely delivery. Over the years, we have
self-developed and manufactured automatic assembly equipment tailored to the specific
needs of each production line, such as automated assembly lines equipped with assembly,
imaging inspection, laser welding and automated testing. For production processes that
require a higher level of precision, we have purchased equipment and specialized
machines to support automated component production. These automation facilities are
deployed extensively across our factories worldwide. Through the implementation and
continuous refinement of our automation initiatives, we have substantially reduced
repetitive manual labor while maintaining stringent control over each step of the process,
and are thus able to minimize the risk of defects and enhance both precision and speed.
Furthermore, the synergies among our different product categories enable us to conduct
scale production in a cost-effective manner. Consequently, we maintain our
competitiveness within the industry and enhance our profitability.
A Comprehensive Quality Management System Incorporating Control Measures to
Ensure the Delivery of High-quality Goods
We are dedicated to developing advanced manufacturing technologies and
implementing a standardized quality management system to deliver superior products.
Quality is a pivotal factor in our success. Our close collaboration with leading industry
companies necessitates that our products adhere to the highest quality standards.
Maintaining high yields in mass production poses a challenge to our quality control
capabilities, impacting our reputation and financial performance.
To address this, we have established comprehensive quality standards that
encompass all production processes and product categories. Our robust quality control
system and procedures cover supplier management, new product development, process
control and after-sales service. These efforts have earned us international certifications for
quality, environmental health and safety (“ EHS ”) and hazardous substance control
systems, including ISO 9001, IATF 16949 and QC 080000. We analyze customer
requirements for quality, warranty and after-sales service, integrating these into our
quality assurance system.
We greatly enhance product consistency and precision through rigorous research
and development, stringent quality control during production, standardization of
components and the implementation of automation technology. This approach allows us
to boost production efficiency and reduce costs while maintaining high product quality.
Concurrently, we advocate for the use of intelligent management systems to strengthen
production and operational management. By employing data-driven management
systems, such as IoT platforms and Enterprise Asset Management (“ EAM”) systems, we
can accurately trace products, identify defective items, swiftly determine root causes and
continuously improve process stability.
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We are equipped with advanced quality inspection equipment and have a dedicated
quality inspection team, which help us achieve a low defect rate in our products. For
example, the Ex-factory Defect Rate of our electronic expansion valve product category
under our refrigeration and air-conditioning product component business decreased from
3.09 PPM in 2022 to 3.05 PPM in 2023, and further reduced to 2.99 PPM in 2024.
Additionally, we have a robust after-sales service team dedicated to addressing quality
issues. Such setup enables us to swiftly respond to customer needs, address any issues
that may arise and make improvements to our products. During the Track Record Period
and up to the Latest Practicable Date, we did not experience any material customer
complaints or product recalls, customer return, liability claim, complaint, or quality issue.
Our outstanding product quality has earned us a number of prestigious awards,
including the National Quality Award issued by China Association for Quality, the
Quality Management Innovation Award issued by the People's Government of Qiantang
District, Hangzhou City, the National Machinery Industry Quality Award issued by China
Machine Building Quality Management Association and the Zhejiang Provincial
Government Quality Award issued by the Zhejiang Provincial People's Government.
An Early Entrant in Global Market Exploration, Bolstered by an Extensive Network
Encompassing Sales, Research and Development and Manufacturing
Our global presence enables us to adeptly manage the cyclical fluctuations across
various business segments and market demands. Being an early entrant started overseas
sales efforts in the 1990s, we have established early advantage through strategic
deployment in overseas markets. Over the years, we have successfully made many of our
products household names enjoying global recognition. As of December 31, 2024, our
products had reached America, Europe, Asia, Oceania and Africa, spanning over 80
countries and regions worldwide. This network allows us to provide a comprehensive
array of products across numerous countries and regions, facilitating collaboration with
many internationally renowned enterprises, including Daikin, Panasonic, Ford, BSH,
Siemens, Volkswagen, Mercedes-Benz, BYD and Geely.
To further enhance our global market presence, we acquired Ranco’s global
four-way reversing valve business in 2008 and Aweco’s global operations in 2012. As of
December 31, 2024, we operated 13 overseas factories which are located in the United
States, Mexico, Poland, Turkey, Austria, Vietnam, Thailand and India, out of which we had
established 4 production bases in Mexico, Poland, Vietnam and Thailand. We have also set
up three overseas R&D bases in the United States and Germany. Our global R&D network
and localized production and sales network enable us to quickly meet local customer
needs and gain deeper insight into different markets. As a result, we are able to provide
products and service better tailored to the needs of local customers, and become more
resilient to supply chain challenges brought by international market volatilities. Through
the management of our internal supply chain, we continuously optimize resource
allocation, expand our market reach and diversify our profit streams. As of December 31,
2024, we had over 5,300 overseas employees spreading across over 25 countries and
regions outside China, accounting for approximately 27% of the total number of
employees.
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During the Track Record Period, we achieved stable growth in revenue from
overseas markets. Our revenue from overseas markets in 2022, 2023 and 2024 was
RMB9,931.7 million, RMB11,154.4 million and RMB12,500.7 million, respectively,
accounting for 46.5%, 45.4% and 44.7% of our total revenue for the same periods,
respectively. With our visionary global expansion strategies, we believe that we will
continue to benefit from the rapid growth of the overseas markets and maintain our global
market leadership.
Long-term and In-depth Partnerships with Leading Enterprises to Drive Industry
Development
Aiming to anticipate our customers’ needs and foster mutual growth, we are
dedicated to delivering products and services of the highest quality to maximize the value
we create for them. Building a robust industry ecosystem and nurturing strong customer
relationships are among our top priorities. Since our establishment, we have established
deep trusted partnerships with customers by consistently exceeding their expectations for
product quality, cost, delivery efficiency and technological innovation and advancement,
among others. Our comprehensive product matrix offers customers a one-stop supply
solution, which we believe further enhances consumer loyalty. Throughout the Track
Record Period, as our customer base expanded and the value delivered to each customer
increased, we successfully transitioned numerous customers from purchasing a single
product type to acquiring multiple product categories under our comprehensive product
matrix. Therefore, our collaboration with customers has deepened continuously, which
has further contributed to the growth of our market share.
While we expand the application and enhance the value of our products in
collaboration with our customers, we are frequently inspired by them. Their pursuit of
higher performance and durability in products motivates us to continually iterate and
upgrade our existing offerings. Additionally, their enthusiasm for innovation and new
technologies drives our commitment to R&D investment, enabling us to consistently
achieve technological breakthroughs across various areas and strengthen the foundation
for our future development.
Under the refrigeration and air-conditioning product component business, we focus
on the R&D and application of heat pump technology and thermal management system
control products. We have cooperated with the major customers, such as Carrier, BSH,
Daikin, Gree, Haier, Hitachi, JCI, LG, Midea, Mitsubishi, Panasonic, Samsung, Siemens,
Toshiba and Trane, for an average of more than 25 years. Our efforts have earned us
extensive recognition from our customers, which includes Rumei Building Technology
Strategic Partner, LG Excellent Supplier in South Korea, Daikin GEC Global Outstanding
Supplier Challenge Award, Haier 2024 Annual Excellent Partner Award, JCI Global
Growth Award and 2024 Carrier Supplier of the Year. As of December 31, 2024, we
established business relationships with all top ten largest refrigeration and
air-conditioning manufacturers in terms of revenue in 2023, whose global market share
totaled 75.6%, according to Frost & Sullivan.
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Under the automotive component business, we have extensive technical expertise
that allows us to evolve from a single-part supplier to an industry leader who can provide
comprehensive solutions for automotive thermal management. We cooperate with
renowned automotive companies such as Mercedes-Benz, BMW, BYD, Ford, Geely,
General Motors, GAC, Honda, Hyundai, Leapmotor, Li Motor, NIO, Stellantis, SAIC,
Toyota, Volkswagen, Volvo and Xpeng, and also serve automotive thermal management
integrators such as Denso, Hanon, MAHLE and Valeo. Furthermore, we have become the
exclusive supplier of thermal management products for multiple Automotive Platforms.
Our market presence enables us to drive changes in the automotive thermal management
industry and reshape the global industry landscape. Our partnerships with the above
customers last for an average of over eight years, during which we have received
benchmark supplier awards including, among others, SAIC-GM Technology Innovation
Award, BYD Best Partner Award, Geely Quality Contribution Award and Best Partner
Award, NIO Quality Excellence Partner Award, Volvo Best Cost Optimization Award,
GAC Toyota Quality Cooperation Award, Leapmotor Quality Award and Value Award,
Xpeng Business Partner Award and General Motors Supplier Quality Excellence Award
2023. As of December 31, 2024, we had established business relationships with all top ten
largest automotive manufacturers in terms of revenue in 2023, whose global market share
totaled 55.0%, according to Frost & Sullivan.
We are deeply involved in the new product development process of our customers.
Typically, when NEV manufacturer customers devise a new product plan, they provide us
with specifications for various components. We work closely with them to refine and
enhance these products, delivering reliable and professional technical solutions. This
collaboration fosters strong customer loyalty, enabling us to become a long-term certified
parts supplier for many automotive companie s — a significant advantage given the
lengthy certification cycles often required by car manufacturers. Throughout this process,
we assist customers in scrutinizing and perfecting the products they need, earning their
recognition with our professional technical solutions.
Profound Industry and Management Experience, Progressive Value Concepts and
Forward-thinking Leadership
Our management team is highly experienced in the thermal management industry,
possessing extensive industry expertise, clear market insights and strong management
capabilities. Our founder, Mr. Zhang Daocai, and our chairman, Mr. Zhang Yabo, have
extensive experience in the thermal management industry. Mr. Zhang Daocai holds
prestigious positions in the industry such as vice president of China Enterprise
Confederation and China Entrepreneurs Association. Over the years, he has been awarded
the National “May Day” Labor Medal, the National Outstanding Entrepreneur, the
China’s Master in Operations Award and the Most Creative Chinese Business Leader in
the Asia-Pacific Region. Our Chairman and Chief Executive Officer, Mr. Zhang Yabo,
graduated from Shanghai Jiaotong University, serves as a delegate to the 14th National
People’s Congress, an executive member of the 13th Executive Committee of the All-China
Federation of Industry and Commerce and the vice president of the China Refrigeration
and Air-Conditioning Industry Association. He was also awarded the Outstanding Young
Private Entrepreneur of Zhejiang Province, the Master of Management of Zhejiang
Province, China, the Top Ten Outstanding Young Entrepreneurs of the Yangtze River Delta
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and the Excellent Entrepreneur of Zhejiang Province. Our visionary management team
has led us in creating a diverse range of products and expanding our global market reach
through product enhancements and applications across multiple industries. Under their
leadership, we have strengthened our competitive edge through professional products,
bespoke services and refined management. Throughout the years, we have evolved from a
single-sector supplier providing alternatives to imported goods domestically to a global
leader in the refrigeration and air-conditioning control component market and
automotive thermal management system component market. We are the fifth largest
automotive thermal management system component manufacturer with a market share of
approximately 4.1% in terms of revenue in 2024, according to Frost & Sullivan.
A significant majority of the core members of our management team comprise
individuals with technical backgrounds and extensive expertise. They possess a keen
awareness of technology and product iterations. Beyond their management
responsibilities, they actively lead different business segments, optimizing execution
efficiency and exploring new possibilities for business growth. With their expertise in
refrigeration and air-conditioning product components, automotive components and
bionic robot electromechanical actuators, our management team have established a solid
groundwork for our evolution into a global industrial group spanning multiple industries
and product categories. Our management team have worked together for over ten years,
demonstrating a high degree of stability.
Our management team embraces the value of staying current and adheres to a
talent-focused philosophy. They recruit and promote talent, empowering individuals by
granting them sufficient authority and autonomy, space for execution. We regularly
implement equity incentive plans to boost employees’ enthusiasm and initiative, allowing
them to share in our growth and achievements.
We believe that the expertise, vision and loyalty of our management team are crucial
to our success and will continue to drive our future growth. With their leadership,
combined with our early advantage, robust R&D capabilities and diversified industrial
applications and customer base, we are confident in our ability to not only maintain our
current market position while actively exploring new growth opportunities and seizing
market prospects.
OUR STRATEGIES
We are committed to providing competitive intelligent temperature control
solutions for high-quality customers around the world. We are transitioning from a cost
leadership model to technology leadership and advancing from developing mechanical
parts to providing integrated electronic control system solutions. We aim to establish
ourselves as a global leader in the thermal management field and drive the global
industrial trends through advanced technologies.
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Consolidating Our Existing Strength and Achieving Consistent Growth
We aim to consolidate our existing business while exploring opportunities for
further growth. In the refrigeration and air-conditioning product component sector, the
global demand for energy efficiency will drive the continuous technological advancement
and expand the applications of core components such as electronic expansion valves . We
plan to continuously develop our products in line with customer needs and market trends
through iterating and upgrading existing products and by effectively leveraging synergies
across different business segments. Meanwhile, considering the substantial growth
potential of products like micro-channel heat exchangers, the associated components
typically used in the same thermal systems, such as heat pumps, water heaters and water
tanks, are poised to generate new market opportunities, allowing us to further utilize our
technical reserves. We also plan to strengthen our position in the cold storage and cold
chain market through our inverter controllers. The container refrigeration systems used in
the cold storage and cold chain market poise challenge to electronic control systems due to
harsh working conditions, the need for energy efficiency, space constraints, exposure to
vibration and movement and the requirement for remote monitoring and control. We plan
to address these challenges through customized research and development and targeted
product implementation.
In the automotive component sector, the substantial growth in the global market for
NEVs has driven the demand for thermal management systems, as the core components of
the cabinet thermal management systems, the battery thermal management systems and
the electrical/control system thermal management systems require optimal operating
temperatures. With enhanced connectivity among thermal management subsystems and
increasing complexity in their integration, the demand for efficient and stable thermal
management systems is escalating driving the demand for our automotive thermal
management systems and the related components. We plan to further iterate and upgrade
our current competitive products and reduce the production costs by leveraging
economies of scale. Additionally, we will actively collaborate with more global
automotive companies to develop automotive thermal management systems, providing
customers with tailored solutions. We believe that this strategy will enhance our customer
loyalty, increase our market share and deepen our collaboration with downstream
automotive companies.
Advancing the Business Growth of Thermal Management and Bionic Robot
Electromechanical Actuators through Continuous Research, Development and
Innovation
Our core initiatives throughout our development journey are the continuous
iteration of existing technologies and the ongoing development of new ones. We remain
steadfast in focusing on the independent development and innovation of technology
pathways, consistently increasing our investment in technological research and
development. We are committed to maintaining our leadership in R&D through
vigorously developing core technologies with proprietary intellectual property rights,
attracting leading R&D talent, and building substantial scale advantages and
technological barriers.
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We plan to further optimize the technology of our existing products and
continuously iterate them across the eight key dimensions: design cost, performance,
customer delivery, carbon index, innovation competitiveness, process equipment, supply
chain and quality (“ Eight Key Dimensions ”). We position our technology departments
that focus on the improvement on product performance and production efficiency as the
frontline that closely observe and understand customer needs. With their insights, we are
able to conduct specialized and customized R&D with enhanced responsiveness, further
enabling us to maintain our industry leadership, expand our market share, and discover
new opportunities for profit growth.
Meanwhile, we prioritize the ongoing development of foundational technology to
establish a solid basis for rapid and robust production, cost reduction, efficiency
enhancement and sustainable development. As materials dictate the upper limits of cost,
process complexity and product performance, we are consistently exploring material
utilization, innovate key component structures and production techniques to
substantially reduce the costs from the design stage, thus maintaining our
competitiveness. Building on traditional material research, we plan to further strengthen
our collaboration with universities and suppliers to advance the R&D of new materials,
enhance product performance and reduce costs.
Furthermore, amidst the current wave of scientific and technological revolution and
industrial transformation, we believe that artificial intelligence, particularly the concept
of using machine to replace certain human tasks, will be the driving force and objective of
future development. With years of deep engagement in the field of intelligent control and
a profound understanding of motor technology and applications, we are well-positioned
to capitalize on this trend and continue our investment in integrated solutions for bionic
robot electromechanical actuators. By continuously expanding our R&D team, we are set
to achieve substantial advancements in the field of electromechanical actuators.
Continuously Improving Production and Manufacturing Management to Optimize
Costs while Ensuring Quality, thereby Consistently Creating Value for Customers
We recognize that effective cost control and a higher level of automation are crucial
to our success. To achieve these goals, we plan to further enhance lean production
management across our production lines and upgrade our automated production
equipment. By integrating this advanced equipment into more production lines, we aim to
improve both product quality and output. Additionally, we intend to offer further training
to our staff to enhance their skills in operating automated production equipment.
We plan to optimize our production layout and actively embrace the advancements
brought by artificial intelligence in industrialization, informatization and digitalization.
We will refine our management strategies in planning, equipment, quality and personnel
to achieve comprehensive data analysis across the entire production line, thereby
improving production efficiency and rigorously controlling product quality.
We are dedicated to maintaining stringent product quality that surpasses industry
standards. We intend to enhance our production and inspection processes by refining
process design, inspection procedures and utilizing automated imaging. This approach
will enable us to reduce costs while further improving product quality, thereby
maintaining our leadership in the industry.
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Deepening Global Layout
Expanding our product coverage and brand presence in global markets is at the core
of our strategy. In 2022 and 2023 and 2024, our revenue from overseas markets amounted
to RMB9,931.7 million, RMB11,154.4 million and RMB12,500.7 million, respectively,
accounting for 46.5%, 45.4% and 44.7% of our total revenue in the same periods,
respectively. Nonetheless, there remains potential for further penetration and substitution
of certain products in international markets. We are committed to enhancing our
globalization efforts by implementing a global localization strategy that integrates R&D,
manufacturing and sales. Furthermore, we aim to respond promptly and accurately to the
needs of our local customers, adapting our operations and market development strategies
to align with globalization trends.
From a product perspective, we intend to deepen our understanding of local
markets and tailor our offerings to meet the specific needs of customers in different
regions. On the production front, we will adhere to our localization strategy while
continuing to develop production bases and factories outside China. Our primary focus
will be on production capacity planning for refrigeration and air-conditioning product
components in Mexico, Poland, Vietnam and Thailand, as well as advancing the
construction of our automotive components facilities in Mexico and Poland. This
approach will enable us to strengthen our supply chain localization strategy, reach
customers more promptly, reduce waiting times and assist customers in optimizing their
production planning and efficiency. From a human resources perspective, we aim to build
a global team and cultivate local employees with a deep understanding of their respective
markets. We will also provide ample growth opportunities and incentives for our overseas
employees, ensuring their development and engagement.
Moreover, we intend to pursue global mergers and acquisitions closely related to
our existing businesses. Given the substantial benefits our previous acquisitions have
brought to our operations, we believe further acquisitions will enhance our overseas
production and R&D capabilities, thereby strengthening our position in international
markets.
Leading the Global Transformation of Energy-saving and Eco-friendly Products,
EstablishingaCleanandLow-carbonEnergySystemandAdvancingCarbonNeutrality
Goals
We place great importance on our ESG investments. The global focus on
environmental protection has raised expectations for energy-efficient, intelligent and
comfortable products such as air conditioners and refrigerators. As a leader in creating a
sustainable and quality living environment, we are committed to prioritizing
environmental protection and energy efficiency alongside economic benefits. Our goal is
to become a resource-saving and environmentally friendly enterprise. We are dedicated to
creating products that embody energy saving, environmental protection and intelligent
control. To achieve this, we are continually developing new products and technologies
with proprietary intellectual property rights, concentrating on energy saving,
environmental protection, material conservation and consumption reduction. We consider
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it our responsibility to improve the energy efficiency of the end products. With a strong
emphasis on researching and applying heat pump technology and thermal management
systems, our efforts are focused on developing thermal management solutions for cold
and heat exchange and intelligent temperature control.
We will continue to advance the application of the smart energy IoT platform by
leveraging real-time digital information display, traceability, technological
transformation and energy-saving and consumption reduction analysis. We will
accelerate the deployment of photovoltaic systems in our production bases to enhance
clean energy usage, and we will implement waste heat recovery technology to reduce
energy consumption and improve resource utilization efficiency. To further enhance
energy efficiency, we plan to optimize production and manufacturing processes,
streamline technological workflows and adjust the operation modes of existing
energy-using equipment appropriately. Concurrently, we will focus on reducing energy
consumption and carbon emissions through initiatives such as investigating compressed
air pipeline leakage points, upgrading air compressors, reducing emissions through
trigeneration, and recovering and utilizing nitrogen.
We have actively participated in the government-encouraged smart microgrid
project and have established a microgrid system integrating natural gas distributed
energy, energy storage and photovoltaic power generation in Xinchang Sanhua Industrial
Park. This project supports energy conservation, emission reduction and green
development, realizes multi-energy complementarity for energy utilization efficiency,
aligns with national policy guidance, and has been included in the “Zhejiang Province
2023 New Power System Pilot Project Plan”. We are committed to proactively fulfilling our
social responsibilities and achieving our sustainability goals in accordance with the ESG
principles we uphold. In 2024, we released our ESG report, where we reiterate our
commitment to sustainable development. In the ESG report, we outlined sustainable
development strategies and objectives, identified ESG-related concerns and performed a
detailed analysis of key ESG issues. We adhere to a people-oriented approach to safeguard
the rights and interests of our employees. We have established a balanced human resource
management system and a scientific and comprehensive performance appraisal system to
promote gender equality and equal pay for equal work. We strive for the common
development of both employees and the enterprise.
Our ambition is underpinned by our confidence in our technological innovations
and solutions, propelling us towards a future where sustainability and business
development are seamlessly integrated. We believe that our sustainable development
strategy will position us as one of the substantial players in the industry globally and a
pivotal contributor to creating a green and high-quality living environment for humanity.
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OUR BUSINESS
We are the world’s largest manufacturer of refrigeration and air-conditioning
control components and a global leader in automotive thermal management system
components in terms of revenue in 2024, according to Frost & Sullivan. Our market share
in the global refrigeration and air-conditioning control component market was
approximately 45.5% in terms of revenue in 2024, according to Frost & Sullivan. In the
global automotive thermal management system component market, we held a market
share of approximately 4.1% in terms of revenue in 2024, ranking fifth globally, according
to Frost & Sullivan. Since our inception, we had been dedicated to the R&D and
application of heat pump technology and thermal management systems. We focus on
providing our customers with industry-leading environmental thermal management
solutions that enable intelligent temperature control and heat exchange. We primarily
provide refrigeration and air-conditioning product components and automotive
components for various end market applications, helping our customers to achieve better
energy efficiency for their products.
• According to Frost & Sullivan, we are the world’s largest manufacturer of
refrigeration and air-conditioning control components in terms of revenue in
2024. In 2024, our global market share of refrigeration and air-conditioning
control components, measured by revenue, reached approximately 45.5%,
surpassing the combined market share of the second and third largest
manufacturers. In terms of major product types, in 2024, we ranked first by
revenue in the global market of refrigeration and air-conditioning valves, heat
exchangers and pumps, respectively, and ranked second by revenue in the
market of refrigeration and air-conditioning controllers. On the key
component level, in 2024, our four-way reversing valves, electronic expansion
valves, micro-channel heat exchangers, service valves, solenoid valves,
Omega pumps and ball valves ranked first in their respective global markets,
with market shares of 55.4%, 51.4%, 43.4%, 39.1%, 47.7%, 53.6% and 32.8%,
respectively. In the same year, our pressure sensors ranked second in the
global pressure sensor market, with a market share of 15.9%.
• We are also a leader in the global automotive thermal management system
component market. In terms of major product types, in 2024, we ranked first
by revenue in the global market of automotive valves and integrated modules,
respectively, and ranked fourth by revenue in the global market of automotive
pumps, according to Frost & Sullivan. On the key component level, in 2024,
our automotive electronic expansion valves and integrated modules ranked
first in their respective global markets in terms of revenue, with market shares
of 48.3% and 65.6%, respectively; in the same year, our battery coolers and
automotive electronic water pumps ranked third and fourth in their
respective global markets in terms of revenue, with market shares of 5.9% and
5.5% respectively, according to Frost & Sullivan.
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Possessing a global outlook, we started our strategic deployment in overseas
markets since the 1990s. Over the years, we have strategically expanded our R&D,
production and sales to create a robust network that supports our dynamic global
presence. Specifically, we have developed a comprehensive global sales and marketing
network across America, Europe, Asia, Oceania and Africa. We have established R&D
bases in China, the United States and Germany. As of December 31, 2024, we operated 48
factories around the world, including 13 overseas factories in the United States, Poland,
Mexico, Turkey, Austria, Vietnam, Thailand and India. Out of the 48 factories, we have
established 8 production bases. These bases serve as production centers comprising
factory clusters, warehouses and logistics hubs, designed to support key nearby markets.
Today, we have become the strategic partner of many renowned manufacturers of
air-conditioning and refrigeration appliances and automotive companies worldwide. We
prioritize localized services, which we believe not only expedite response time and
optimize logistical processes, but also enhance precision in manufacturing, ensuring that
we meet customers’ requirements. Notably, our global production layout supports
production and assembly localization, allowing us to navigate the rapid global trade
developments while swiftly responding to customer demands in a cost-efficient manner.
India
-1  factory
Vietnam
-1   factory
-1 prod uction base
Thailand
-1  factory
-1 prod uction base
China
-35  factor ies
-4 prod uction bases
-3  R&D bases
Austria
-1  factory
Turkey
-1  factory
Poland
-2  factories
-1 prod uction base
Mexico
-5  factories
 -1  prod uction base
United States
-1  factory
-2  R&D bases
Germany
-1  R&D base
As of December 31, 2024, o ur prod ucts had reached Amer ica, Europe, As ia, Ocean ia and Afr ica, spann ing over 80 co untries and reg ions worldw ide.
Areas where the Company has prod uction bases/factor ies/R&D bases
During the Track Record Period, we primarily engaged in the R&D, manufacturing
and sales of (i) refrigeration and air-conditioning product components, including
electronic expansion valves, four-way reversing valves, solenoid valves, micro-channel
heat exchangers, service valves, pressure sensors and Omega pumps, which are widely
utilized in fields including air conditioners, refrigerators, industrial refrigeration,
cold-chain transport, heat pump heating and washing machines, and (ii) automotive
components, including automotive valves, automotive pumps, automotive heat
exchangers and integrated modules, for both NEVs and ICEVs.
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The following table sets forth a breakdown of our revenue by major product types
under our two product categories for the periods indicated:
Year ended December 31,
2022 2023 2024
Amount % Amount % Amount %
(RMB in thousands, except for percentage)
Refrigeration and
air-conditioning product
components
Valves 8,812,275 41.3 9,834,606 40.0 10,702,920 38.3
Heat exchangers 2,057,745 9.6 2,121,123 8.6 2,693,826 9.6
Controllers 566,126 2.7 704,243 2.9 875,632 3.1
Pumps 580,250 2.7 514,399 2.1 554,762 2.0
Others
(1) 1,817,390 8.5 1,469,764 6.0 1,733,465 6.2
Sub-total 13,833,786 64.8 14,644,135 59.6 16,560,605 59.3
Automotive components
Integrated modules 2,362,963 11.1 3,361,041 13.7 4,262,920 15.3
Automotive valves 2,031,171 9.5 2,913,949 11.9 2,635,135 9.4
Automotive heat
exchangers 1,187,226 5.6 1,554,219 6.3 1,670,952 6.0
Automotive pumps 1,128,587 5.3 1,413,572 5.8 1,622,634 5.8
Others
(2) 803,817 3.8 670,886 2.7 1,194,919 4.3
Sub-total 7,513,764 35.2 9,913,667 40.4 11,386,560 40.7
Total 21,347,550 100.0 24,557,802 100.0 27,947,165 100.0
Notes:
(1) Others primarily include containers, filters, plastic components, heater components, motorized dampers,
sight glasses, copper connectors, level switches, superconductive plates and pressure switches, among
others.
(2) Others primarily include blocks, liquid receivers, resolvers and energy storage products, among others.
Leveraging our established capabilities, scalability and cost efficiency in the mass
production of electric motors and related products, we are strategically expanding into
the bionic robot market by developing electromechanical actuators, which are essential
components that translate commands from a robot’s control system into its physical
movements. As of the Latest Practicable Date, we were in the R&D phase, refining
prototypes before scalable commercialization. We aim to create actuators that are lighter,
smaller and functions more precisely than the existing options. We are also planning an
overseas production layout to enhance our global presence and manufacturing
capabilities, aiming for an early advantage and positioning ourselves as a leading player
in the bionic robot electromechanical actuator market.
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OUR PRODUCTS
Refrigeration and Air-conditioning Product Components
Under the refrigeration and air-conditioning product component business, we
primarily engage in the R&D, manufacturing and sales of components, sub-system and
technology solutions for residential and commercial refrigeration, as well as home
appliances such as dishwasher, washing machine and coffeemaker. Our key products in
this business sector comprise a variety of valve products, including electronic expansion
valves, four-way reversing valves, service valves, solenoid valves and ball valves. We also
offer heat exchanger products, specifically micro-channel heat exchangers, pump
products such as Omega pumps, and controller products, including inverter controllers
and pressure sensors. According to Frost & Sullivan, in 2024, we ranked first in the
refrigeration and air-conditioning control component market in terms of revenue.
According to the same source, in 2024, in terms of revenue, we ranked first in the global
market of refrigeration and air-conditioning valves, heat exchangers and pumps, and
ranked second in the market of refrigeration and air-conditioning controllers. In the same
year, our four-way reversing valves, electronic expansion valves, micro-channel heat
exchangers, service valves, solenoid valves, Omega pumps and ball valves ranked first in
their respective global markets in terms of revenue, with market shares of 55.4%, 51.4%,
43.4%, 39.1%, 47.7%, 53.6% and 32.8%, respectively. In the same year, our pressure sensors
ranked second in the global sensors market in terms of revenue, with a market share of
15.9%.
The development of our refrigeration and air-conditioning product component
business is driven by consistent innovation and refinement. While our products have been
well-established and widely recognized in the market for decades, we persistently
innovate and refine them to address evolving customer needs. We work closely with our
customers from early R&D to scale production, dedicated to providing them with
up-to-date energy-saving systematic solutions. We also collaborate with customers on
development projects, where our customers present us with challenges and objectives,
and we devise solutions through R&D efforts. Our close relationship with the customers
enhances our understanding of customer requirements and foster innovation, allowing us
to deliver more effective and customized outcomes, which leads to increased customer
satisfaction and loyalty. Additionally, this process can drive our own growth and expertise
by exposing us to diverse challenges and encouraging continuous improvement, so that
we can identify opportunities to reduce costs, stay ahead of the market trends and be
among the first to come up with the solutions and products to capture potential business
opportunities. Today, we have established long-term business relationships with a
number of world-leading companies providing refrigeration and air-conditioning
products, including Carrier, BSH, Daikin, Gree, Haier, Hitachi, JCI, LG, Midea,
Mitsubishi, Panasonic, Samsung, Siemens, Toshiba and Trane. As of December 31, 2024,
we established business relationships with all top ten largest refrigeration and
air-conditioning manufacturers in terms of revenue in 2023, whose global market share
totaled 75.6%, according to Frost & Sullivan.
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The following chart illustrates our representative products under our refrigeration
and air-conditioning product component business along with their various application
scenarios:
Air-conditioning and Refrigeration
Cold-chain Transport
Refrigerator/Freezer
Heat Pump Heating/Hot Water System
Industrial Refrigeration/Data Center Cooling
Brazed Plate Heat
Exchanger
Thermostatic
Expansion
Valve
Electronic
Expansion
Valve
Solenoid
Valve
Filter Drier
Washing Machine/Dishwasher/Coffee Maker/Wall-Hung Stove
Coffee Machine
Solenoid Valve
Water Inlet Valve
for Washing
Machines
Micro-channel
Condenser
Omega BLDC
Pump
Gas Valve
BLDC
Solenoid
Valve
Service
Valve
Electronic
Expansion
Valve
Four-way
Reversing
Valve
Micro-channel
Heat Exchanger
hi T t
Electronic
Expansion
V alve
Controller
 Service V alve Gigaforce
Four-way
Reversing V alve
Pressure
Sensor
Shielded Pump
for Water
Electric Switching
Water V alve
Water Ball
V alve
Brazed Plate
Heat Exchanger
Inverter
Controller
Motorized
Damper
Electric
V alve
Bistable
Solenoid V alve
Superconductive
Plate
Micro-channel
Condenser
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The following diagram illustrates the application of our major products in the
mainstream air-conditioning system solutions:
Service Valve
Electronic Expansion
Valve Controller
Solenoid Valve
Micro-channel
Heat Exchanger
Micro-channel
Heat Exchanger
four-way
Reversing Valve
Bar-stock
Service Valve Ball Valve
Muffler
Fluid Reservoir
Refrigeration
Cycle
High-pressure
Steam
Low-pressure
steam
High-pressure
Liquid Refrigerant
Low-pressure
Liquid Refrigerant
Inverter Controller
Filter Driers
Electronic
Expansion Valve
Our Product Portfolio
We offer a wide range of quality refrigeration and air-conditioning product
components featuring a variety of specifications. We also tailor our products to meet
specific customer requirements. Our product portfolio primarily includes valves, heat
exchangers, pumps and controllers, among others. During the Track Record Period, the
unit selling price of our valve products ranged from approximately RMB2 to
approximately RMB16,722; the unit selling price of our heat exchanger products ranged
from approximately RMB23 to approximately RMB7,632; the unit selling price of our
controller products ranged from approximately RMB4 to approximately RMB9,500; and
the unit selling price of our pump products ranged from approximately RMB25 to
approximately RMB169. Our key valve products include electronic expansion valves,
four-way reversing valves, service valves, solenoid valves and ball valves. We also offer
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key heat exchanger products, specifically micro-channel heat exchangers, pump products
such as Omega pumps, and controller products, including inverter controllers
andpressure sensors. The features of our key products are elaborated as follows:
Sanhua Electronic
Expansion Valve
Electronic Expansion Valve
Electronic expansion valves are components used in
refrigeration and air-conditioning systems to regulate the
amount of flow of refrigerant into the evaporator. They play a
crucial role in controlling the cooling process by precisely
adjusting the refrigerant flow based on the system’s cooling
demand. By precisely managing the flow, the system can
operate more efficiently, using only the necessary amount of
energy to achieve the desired cooling effect. Our electronic
expansion valve can also quickly respond to changes in
operating conditions, ensuring consistent and reliable cooling
performance of the system. We have iterated the design of our
electronic expansion valves over the years and optimized the
flow channel design to make sure that, while the valves
maintain instant and precise control over the refrigerant flow,
the refrigerant flows quietly in the system.
Furthermore, our electronic expansion valves can
operate effectively in diverse operating environment, as they
are capable of efficiently managing refrigerant flow in systems
with varying pressure conditions. We have fine-tuned the
design to minimize the leakage of refrigerant, which is
essential for maintaining system efficiency, preventing
refrigerant loss and ensuring precise control over the cooling
process. Our electronic expansion valves can be used in a broad
range of applications from the residential refrigeration
air-conditioning systems to industrial refrigeration units. In
2019, it was awarded “Single Champion Product in
Manufacturing” by the Ministry of Industry and Information
Technology in China.
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Four-way Reversing Valve
Four-way reversing valves are primarily used in
refrigeration and heating cycle systems to enable the transition
between cooling and heating modes by switching the flow path
of the refrigerant. They effectively change the direction of the
refrigerant flow, enabling the heat pump to extract heat from
the outside and transfer it inside during the heating cycle, or
remove heat from the inside and expel it outside during the
cooling cycle. They can also be applied in scenarios involving
flow path control, such as compressor management, to achieve
specific system functions. Our four-way reversing valves
utilize advanced flow paths and electronic control technology
to achieve low energy consumption and high energy efficiency.
We have launched brand new stainless steel four-way
reversing valves. We redesigned and developed our stainless
steel four-way reversing valves based on our original copper
four-way reversing valves and have made them more compact
and space-efficient for installation. The new design is also
compatible with our calibrated production line, which ensures
high yield rate. Upon their launch, such products were
integrated in high-end air-conditioning products in Japan. The
use of stainless steel enhances product durability and, due to
stainless steel’s lower thermal conductivity, reduces energy
loss, thereby enhancing energy efficiency of the end products.
Furthermore, the production process is more environmentally
friendly, as it reduces wastewater and waste material
emissions compared to the processing of copper four-way
reversing valves. By leveraging the cost-effectiveness of
stainless steel as the raw material, we help customers achieve
optimal performance while maintaining reasonable material
costs. During the development process, we have also overcome
production challenges by identifying and customizing optimal
soldering materials, welding techniques and surface
treatments.
In 2020, our four-way reversing valves was awarded
“Single Champion Product in Manufacturing” by the Ministry
of Industry and Information Technology in China.
Sanhua Four-way
Reversing Valve
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Sanhua Solenoid Valve
Solenoid Valve
Solenoid valves are electromechanically operated valves
used to control the flow of refrigerant in various systems,
including refrigeration units, freezers, air conditioners and
heat pumps. A solenoid valve primarily consists of a coil of
wire, known as a solenoid and a movable plunger. When an
electric current passes through the solenoid, it creates a
magnetic field that moves the plunger, opening or closing the
valve to regulate the flow of refrigerant. These valves are
crucial for maintaining the desired temperature and efficiency
in cooling and heating systems.
Our solenoid valves offer several key features that
enhance their functionality. The double-sealed coils are
designed to be waterproof, ensuring that the valve can operate
safely in moist environments. This design also contributes to
low energy consumption, making the valves more efficient and
cost-effective to operate. Additionally, our solenoid valves are
built for safety and reliability, providing consistent
performance over time. Our design allows our solenoid valves
to quickly and effectively manage the flow of refrigerant. They
can also handle high maximum operating pressure
differentials, making them suitable for a wide range of
applications and conditions. Furthermore, our solenoid valves
are engineered for quick and easy installation, reducing the
time and effort required to integrate them into existing
systems. With these features, our solenoid valves stand out as a
versatile and essential component in modern refrigeration and
air-conditioning systems.
Service Valve
Service valves play a crucial role as a connection point
between indoor and outdoor units. By turning the valve stem, a
mechanist can easily open or close the internal passage, which
helps regulate how refrigerant circulates through the system.
These valves are especially important during maintenance, as
they make it possible to perform tasks like vacuuming the
system, adding refrigerant and carrying out other essential
servicing activities. Our service valves have been enhanced
with a new design that offers better sealing performance,
ensuring a more secure and leak-proof operation. The
segmented structure has been optimized for greater durability
and we’ve applied a special surface treatment to boost
resistance against corrosion, extending the valve’s lifespan
even in challenging environments.
Sanhua Service Valve
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Sanhua Micro-channel
Heat Exchanger
Micro-channel Heat Exchanger
Micro-channel heat exchangers are a sophisticated type
of heat exchangers distinguished by their small channel size,
with a hydraulic diameter of less than 3mm. Micro-channel
heat exchangers are designed for enhanced heat exchange
efficiency due to their unique structure, comprising fins,
flattened tubes and manifold tubes. The fins are extremely thin
and feature numerous small openings, increasing the surface
area for heat exchange. The flattened tubes, while appearing
ordinary, contain many micropores that are less than a
millimeter in size, further augmenting the heat exchange
surface. This design significantly enlarges the heat exchange
area on the refrigerant side compared to traditional
tube-and-fin heat exchangers, thereby achieving improved
heat exchange efficiency. The manifold tube streamlines fluid
management within the heat exchanger, resulting in a more
compact and space-efficient design. We have also upgraded the
traditional copper tube & fin heat exchangers to micro-channel
heat exchangers made entirely of aluminum, which is fully
recyclable, making it a more environmentally friendly choice
than the traditional copper tube & fin heat exchangers. Our
micro-channel heat exchanger allows for a reduction of up to
20% in refrigerant charging compared to traditional heat
exchanger solutions, thereby reducing refrigerant usage and
fundamentally achieving energy saving and emission
reduction.
We have enhanced the design, so that our micro-channel
heat exchangers are suitable for a variety of applications,
including household and commercial refrigeration and
air-conditioning systems. Compared to the traditional copper
tube & fin heat exchangers, our micro-channel heat exchangers
provide at least 30% more heat exchange efficiency and are 30%
smaller in size, allowing for more compact designs and easier
integration into various applications. Additionally, they are
over 50% lighter in weight compared to the traditional copper
tube & fin heat exchangers, which can reduce the overall
weight of the end equipment, leading to potential savings in
transportation and installation costs. Furthermore, aluminum
micro-channel heat exchangers can achieve up to a 20%
reduction in refrigerant charge, which not only lowers the
environmental impact but also reduces operating costs. In
addition, we have developed a dual-system micro-channel
heat exchanger called OPTIFLOW. In systems that previously
required two sets of heat exchangers, only one set of
OPTIFLOW heat exchangers is needed to meet their heat
exchange requirements.
Our aluminum micro-channel heat exchanger has been
recognized for its innovation and efficiency and was awarded
“Single Champion Product in Manufacturing” by the Ministry
of Industry and Information Technology in China in 2018.
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Omega Pump
Omega pumps are a component used in dishwashers,
designed to streamline and enhance the products’
functionality. These pumps feature housings that incorporate
either direct or indirect heating of the rinse water. As water
flows through the pump, it absorbs heat, removing the
necessity for a separate heating element. Such capability not
only saves space but also simplifies the design and installation
process of the dishwasher.
The pumps can be part of a larger system that includes
inlet and outlet hoses, as well as built-in thermal safety
elements. These safety features ensure that the water and
electricity are kept separate, reducing the risk of electrical
hazards. Additionally, Omega pumps can incorporate various
functional loops within the dishwasher, contributing to a more
efficient and compact design. Our Omega pumps feature a
triple-side flushing function that enhances the efficiency of the
dishwasher, resulting in a more effective dish cleaning process.
This design not only saves energy, but also makes the
dishwasher more environmentally friendly and cost-effective
to operate.
Sanhua Omega Pump
Sanhua Inverter
Controller
Inverter Controller
Inverter controllers play a crucial role in modern
electrical systems by regulating output voltage and frequency
through the management of internal power switching
elements. Such functions allow for speed control and precise
energy savings, making these controllers indispensable in
applications such as inverter compressors, Brushless Direct
Current (“ BLDC ”) fans and water pumps.
Key features of inverter controllers include the use of
180° sine wave full DC vector control and full-range active
Power Factor Correction (“ PFC ”) technology. These
technologies are complemented by torque compensation
functions and advanced algorithms for field weakening
control, stator heating and high-frequency injection. These
features collectively enhance the performance and efficiency of
the systems they are integrated into.
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Additionally, inverter controllers are equipped with an
electronic expansion valve controller circuit and a direct
current frequency conversion fan circuit. These components
ensure that the system’s overall functionality is maximized,
allowing for optimal performance across various applications.
The inclusion of a Bootloader function supports online
program upgrades, ensuring that the system can be easily
updated and maintained.
Furthermore, inverter controllers have passed relevant
Electromagnetic Compatibility (“ EMC”) and reliability tests
and have obtained UL, TUV and CQC certifications, attesting
to their safety and reliability. With high energy efficiency,
versatility and reliability, inverter controllers are a vital
component in achieving efficient and effective drive control in
various applications.
Pressure Sensor
Pressure sensors are integral components in
air-conditioning, refrigeration and heat pump systems. They
function by detecting pressure through sensitive and
conversion elements, which then transform this pressure into a
usable output signal, typically in the form of voltage or
current. This signal is crucial as it is transmitted to the overall
control system, facilitating the automatic regulation of these
systems.
Key features of our pressure sensors include the use of
high-performance digital circuits, which ensure qualities such
as excellent linearity, minimal temperature variation and high
accuracy across a broad operating range. Their compact size
and straightforward installation make them versatile, with
multiple models available to suit different needs. Additionally,
these sensors utilize superior pressure cores, providing
excellent stability under stringent process controls. They are
designed to accommodate various pressure ranges and levels
of accuracy, making them suitable for a wide array of
applications.
Sanhua Pressure Sensor
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Sanhua Ball Valve
Ball Valve
Ball valves are a crucial component in refrigeration
systems, designed to efficiently control the flow of refrigerant.
They operate by opening and closing an internal passage
through the movement of the valve stem, allowing for quick
and effective shut-off. This capability is particularly important
during servicing, as it enables the isolation of refrigerant,
ensuring that maintenance tasks can be performed safely and
effectively.
Key features of our ball valves include their
compatibility with all common Hydrofluorocarbon,
Hydrofluoroolefin and Hydrocarbon refrigerants, making
them versatile for various application scenarios. They boast a
reliable welded design, which enhances their durability and
performance. Additionally, ball valves have a high working
pressure rating of 700 PSIG, ensuring they can withstand
demanding conditions within refrigeration systems.
Automotive Components
We provide automotive components that are crucial for automotive thermal
management. In recent years, the societal shift towards green, low-carbon,
energy-efficient and emission-reducing practices has led to the increasing popularity of
NEVs. Unlike ICEVs that typically rely on air-conditioning systems for cooling and
engine-derived heat for warming, NEVs require air-conditioning systems to function in
both directions. In this context, thermal management systems play a vital role in keeping
the cabin comfortable and maintaining the optimal temperature for the cabinet thermal
management systems, the battery thermal management systems and the electrical/control
system thermal management systems, thereby sustaining the performance and safety of
NEVs. Nowadays, the rapid development of NEVs, along with the advancements in
battery and charging technologies, is driving the market demand for reliable automotive
thermal management systems, according to Frost & Sullivan. Capitalizing on such trend,
we leveraged our established advantages and expertise in refrigeration and
air-conditioning product components to develop integrated automotive thermal
management system components. Today, we have become a world-leading automotive
thermal management system component manufacturer for both ICEVs and NEVs. In 2022,
2023 and 2024, revenue from automotive components to be incorporated in NEVs
amounted to RMB6,685.9 million, RMB9,027.5 million and RMB10,452.3 million,
respectively, accounting for 89.0%, 91.1% and 91.8% of the total revenue from automotive
components business, respectively. Our Revenue from automotive components to be
incorporated in ICEVs amounted to RMB827.8 million, RMB886.2 million and RMB934.3
million, respectively, accounting for 11.0%, 8.9% and 8.2% of the total revenue from
automotive components business, respectively. Our products cover a wide range of
automotive components for cabinet thermal management, battery thermal management
and electrical/control system thermal management, mainly including automotive valves,
automotive pumps, automotive heat exchangers and integrated modules, among others.
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Our key automotive valve products primarily include automotive electronic expansion
valves. Our key automotive pump product primarily include automotive electronic water
pumps, and our key automotive heat exchanger products primarily include battery
coolers. We also offer various types of integrated modules. During the Track Record
Period, the unit selling price of our automotive valve products ranged from
approximately RMB7 to approximately RMB345; the unit selling price of our automotive
pumps ranged from approximately RMB65 to approximately RMB361; the unit selling
price of our automotive heat exchanger products ranged from approximately RMB44 to
approximately RMB1,400; and the unit selling price of our integrated modules ranged
from approximately RMB670 to approximately RMB2,800. As of December 31, 2024, we
established business relationships with all top ten largest automotive manufacturers in
terms of revenue in 2023, whose global market share totaled 55.0%, according to Frost &
Sullivan. According to the same source, in terms of revenue, in 2024, we ranked first in the
global market of automotive valves and integrated modules, respectively, and ranked
fourth in the global market of automotive pumps. We are also the top player, in terms of
revenue, for a number of products in the automotive component business sector,
including automotive electronic expansion valves and integrated modules, holding the
largest market shares of 51.1% and 59.9% in 2022, 48.9% and 64.6% in 2023 and 48.3% and
65.6% in 2024. In addition, in 2024, our battery coolers and automotive electronic water
pumps ranked third and fourth in their respective global markets in terms of revenue,
with market shares of 5.9% and 5.5% respectively.
We specialize in the R&D of automotive thermal management system components
and solutions. Our exceptional technical expertise in component manufacturing,
particularly in valve components, positions us uniquely to design and produce intricate
thermal management integrated modules that meet the high performance standards. Our
outstanding capability in developing and manufacturing components enables us to
understand devices comprehensively and deliver complex, integrated solutions to our
customers. Through years of focused research and development in automotive thermal
management systems, we have amassed profound expertise that enables us to expand our
existing capabilities into new areas. Notably, we recognized the potential in the thermal
management of NEVs and adapted electronic expansion valves, originally used in the
air-conditioning sector, for automotive applications, to enable precise control of the
refrigerant flow and optimize the cooling and heating functions within the thermal
management systems of NEVs. Today, our automotive electronic expansion valves are
widely utilized in mainstream NEVs. This innovation was recognized with the 2017 PACE
Awards, making us the first Chinese company to receive this award since its establishment
in 1995. Furthermore, our proficiency in standardizing components throughout the
production stages ensure product uniformity, enhance quality control and improve
efficiency. With standardized components, we are able to deliver intricate and integrated
solutions in a more cost-effective manner.
In our operations, we stress engaging with automobile manufacturers during the
initial phases of their R&D processes, which allows us to gain a significant competitive
edge by becoming integral to their system development from the outset. This early
involvement enables us to align our designs closely with the manufacturers’ evolving
needs and specifications, fostering a collaborative relationship that often progresses from
supplying individual components to developing comprehensive, complex modules
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tailored to their requirements. Through continuous product and technology iterations, we
refine and enhance our offerings, ensuring that they not only meet but also exceed
industry standards in terms of cost-effectiveness and quality. As such products provide
tangible benefits to our customers, our position as a trusted partner in their development
journey is constantly reinforced. Our strategic approach to product development also
involves planning for successive iterations of a product even before the initial launch. This
forward-thinking strategy ensures that we are always a step ahead in the innovation cycle,
ready to introduce improved products that incorporate the latest technological
advancements and customer feedback. Over the years, we have become a trustworthy
partner for renowned automobile manufacturers including Mercedes-Benz, BMW, BYD,
Ford, Geely, General Motors, GAC New Energy, Honda, Hyundai, Li Motor, NIO,
Stellantis, SAIC, Toyota, Volkswagen, Volvo and Xpeng and other well-known domestic
and foreign automobile companies. Our commitment to technological innovation,
combined with our scale production capabilities and rigorous quality control, has created
value to our customers and earned us customer loyalty, which has, in turn, generated
higher returns and solidified our market leadership.
The following diagram illustrates the application of our automotive components.
Electrical/Control System Thermal Management
Cabinet Thermal Management
Electronic
Expansion
Valve
Electric
Ball
Valve
Thermostatic
Expansion Valve
with Shut off
Accumulator
 Integrated
Module
Battery Thermal Management
Cooling Plate
 Battery Cooler
and Module
Electronic Water
Pump
Electronic Water
Valve
Integrated Module
Oil Cooler
Module
Electric
Oil Pump
Oil Cooler
 Oil Valve
Integrated
Representative
Automotive
Thermal Management
System Component
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Our Product Portfolio
We offer a wide range of automotive components featuring a variety of
specifications. We also tailor our products to meet specific customer requirements. Our
key products primarily include automotive electronic expansion valves, automotive
electronic water pumps, battery coolers and integrated modules, which are elaborated as
follows:
Sanhua Automotive
Electronic Expansion
Valve
Automotive Electronic Expansion Valve
Automotive electronic expansion valves effectively
facilitate the cooling and heating functions within the thermal
management systems of NEVs. Specifically, they regulate the
temperature of the cabin, battery and powertrain components
of NEVs. We are the creator of the automotive electronic
expansion valve, which has been recognized with the 2017
PACE Award and is now essential for the thermal management
of NEVs.
Our automotive electronic expansion valves play a
crucial role in controlling the cooling process by precisely
adjusting the refrigerant flow based on the system’s cooling
demand. Our automotive electronic expansion valves can also
quickly respond to changes in operating conditions, ensuring
consistent and reliable cooling performance of the system.
With superior control accuracy, they reduce the energy
consumption of the thermal management system and ensure
enhanced passenger comfort and stable battery temperature
control, which significantly extends the lifespan of NEV
batteries. Consequently, it helps enhance the overall NEV
system performance. We believe that, compared to the last
generation of automotive thermal management system
components, our electronic expansion valves enhance the
thermal management efficiency by over 20%.
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Automotive Electronic Water Pump
Automotive electronic water pumps are indispensable
components in modern automotive thermal management
systems. They are designed to circulate coolant within cars to
cool down the battery, motor and other key components of a
car while also ensuring that the car’s heating system functions
properly. Our world-class automotive water pumps are
well-known for their excellent performance and reliability,
which help our customers’ products to function effectively and
efficiently.
The main features of our automotive electronic water
pumps are shaped by our commitment to innovation and high
standards. We have utilized advanced digital communication
technology in our automotive electronic water pumps so that
they can precisely control the flow of coolant in the circuit.
Besides the adoption of advanced technology, our automotive
water pumps are able to operate stably under various
conditions for extended periods, which benefit our customers
by enhanced vehicle reliability and reduced maintenance
needs. Additionally, through an optimized design, our
automotive electronic water pumps have lower losses when
transferring coolant, which helps improve the overall energy
utilization of the car. Finally, our automotive water pumps
operate with remarkably low noise levels which can provide
the users with quiet and comfortable in-car experience.
Sanhua Automotive
Electronic Water Pump
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Sanhua Battery Cooler
Battery Cooler
Battery coolers are critical components of the thermal
management system in NEVs. They are designed to cool both
the battery and power system while simultaneously recovering
waste heat. By enhancing energy utilization efficiency, our
battery cooler significantly improves battery performance,
ensuring our customers’ vehicles operate at their best status.
Customer-orientation lies at the heart of our product
design, especially for our battery coolers. Our battery coolers
are compact, light and efficient, which enable the users to have
more comfortable and reliable driving experience. With small
size and powerful functions, our battery coolers can be
integrated into various NEVs. This space-saving design not
only optimizes space utilization but also enhances the vehicle’s
overall aesthetics. Additionally, our battery coolers employ
advanced heat exchange technology to swiftly transferring
heat generated by battery and power system to the cooling
media, which helps battery to maintain within its optimal
operating temperature range, thereby extending battery life.
Other than being durable and powerful, our battery coolers are
designed to be lightweighted. This reduces the overall vehicle
weight, which in turn contributes to improved performance in
NEVs and reduced vehicles’ energy consumption.
Integrated Module
Integrated modules are a vital part of the thermal
management systems in NEVs. They help manage
air-conditioning, battery thermal management and power
drive cooling. As an award-wining manufacturer in the
industry, our integrated modules are innovative both in terms
of design and function.
Our integrated modules are technological-driven,
advanced, accurate and efficient. With the adoption of
advanced digital control technology to precisely adjust
refrigerant and coolant flow, our integrated modules facilitate
efficient temperature control within a vehicle. Like our battery
coolers, our integrated modules are designed to be
lightweighted and compact. The lightweight construction not
only improves energy efficiency and dynamic performance of
vehicles but also lowers production costs by minimizing
material use and simplifying manufacturing processes. With
these advanced features, our integrated modules address the
challenges of space, weight and cost in traditional thermal
management systems and provides an efficient, economical
and compact solution for NEVs.
Sanhua Integrated
Module
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RESEARCH AND DEVELOPMENT
We are dedicated to technological innovation, which is crucial in advancing our
capabilities and delivering value to our customers, while also driving our sales and
profitability. With over 30 years of operations, we have amassed significant
manufacturing expertise and continue to diligently track market trends to effectively
reduce costs while enhancing product performance. We have made, and will continue to
make, substantial investments in R&D activities. In 2022, 2023 and 2024, our R&D
expenses amounted to RMB989.0 million, RMB1,096.8 million and RMB1,351.8 million,
respectively, accounting for 4.6%, 4.5% and 4.8% of our revenue for the same periods,
respectively. As of December 31, 2024, we employed over 3,500 R&D personnel, including
global leading industry experts, and among which over 700 individuals held master’s
degrees or above.
We place great importance on the collaboration with leading universities and
research institutes. We actively collaborate with universities to conduct researches on the
design and optimization of products to further improve the efficiency of our products. We
also have close cooperation with national key laboratories, collaboratively delving into
the novel issues of refrigeration and air-conditioning control components, automotive
thermal management and bionic robots. Such joint efforts offer us unique opportunities to
investigate advanced technologies for industrial application and overcome critical and
common challenges in the relevant fields.
Our R&D System
Our R&D system consists of (i) one Research Center that focuses on strategic R&D,
(ii) six R&D bases, including three in China, two in the United States and one in Germany,
that lead the innovation of applied R&D; and (iii) technology departments that focus on
the improvement on product performance and production efficiency. Meanwhile, we
deploy R&D resources at our factories across the globe. The functions of these three are
progressively layered from the initial concept, to applied science and engineering
challenges, and further to mass production. This structured approach has stood the test of
time and forms the foundation of our efficient and effective R&D efforts.
Our Research Center
Our Research Center plays a crucial role in driving innovation and technological
advancement, with a strong emphasis on exploring new frontiers poised to revolutionize
industries. By focusing on cutting-edge fields such as robotics, autonomous machines,
and advanced sensor technologies, the Research Center is not merely responding to
current market demands but is actively shaping the future landscape of technology and
business. Its forward-thinking approach involves anticipating technological trends and
preparing for products and solutions that may emerge over the next three to five years.
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Furthermore, our Research Center is instrumental in advancing core technologies
that have broad applications across a range of industries. For example, it has been
working on software development, bionic simulation technology and alternative material
development to improve product functionality and enhance production efficiency.
In addition, our Research Center provides systematic technology and R&D support
to our R&D bases and technology departments, as it accumulated profound foundational
knowledge and has world-class experts. For instance, when fulfilling a customer’s request
for a customized product, our Research Center may analyze the entire system, searching
for the fundamental issues and offering solutions from a holistic perspective. This
approach not only resolves the issue at hand, but also makes full use of each chance to
improve the performance and structure of our products.
Our R &D Bases
Our R&D bases focus on practical applications and innovations that can be expected
to be implemented in products or production processes in the near future. We have
established a comprehensive global R&D network, strategically positioned in regions with
distinct industry perspectives to foster innovation and effectively address the diverse
needs of our customers. This network is integral to our mission of maintaining a leading
edge in the refrigeration and air-conditioning control components and automotive
thermal management system component industries. We have six R&D bases, each of
which is tasked with specific roles that contribute to our overall technological
advancement, ensuring that we deliver solutions and remain responsive to market
demands. By leveraging the unique strengths and expertise of each location, we are able to
drive forward our commitment to excellence and innovation.
Our R&D base in Hangzhou serves as the cornerstone of our innovation efforts,
focusing on early customer engagement and market trend analysis. It is dedicated to the
development of new products and technologies, ensuring that we remain at a leading
place of core technology research and innovation for our global customers. This R&D base
plays a crucial role in translating market insights into actionable development strategies,
thereby driving our product pipeline forward. Our R&D base in Stuttgart is located in the
heart of Germany’s automotive industry, specializing in the development and testing of
core component products of valves, chillers, accumulators or integrated heat exchangers.
It acts as a vital partner for our European customers, forming early-stage R&D
partnership. This base is equipped with state-of-the-art testing facilities for
comprehensive system testing and performance analysis, which are essential in the
European market. Our R&D base in Detroit, the automotive hub of the North America,
excels in delivering system-level technical solutions and strategic support for new
product development. It facilitates effective communications with North American
customers and automotive industry associations, ensuring that we continue to stay ahead
of technological trends. Its capabilities in system rigging and testing allow for rapid
adaptation to project and customer needs, supporting our commitment to innovation and
customer satisfaction.
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Our Technology Departments
Our technology departments are tasked with iterating on existing products,
customizing them to meet specific customer requirements and upgrading production
equipment. Positioned under business units and close to the factories, they play a crucial
role in implementing and scaling the advanced technologies and products developed by
the Research Center and R&D bases, ensuring these innovations are effectively translated
into scale production. Their close ties with business units give them a deep understanding
of customer requirements, allowing them to skillfully create customized products and
adjust production lines as needed. Our technology department ensures that our R&D
results are successfully brought to market and continue to meet market demands.
Our Technologies
Through years of dedicated R&D activities, we have successfully transformed our
R&D results into a series of proprietary technologies, which enabled us to compete
effectively in the market. Our core technologies include:
Chain Structure Motor Technology
The chain structure motor technology, designed for dishwashers and steam ovens,
utilizes a straight-bar unwinding process. This involves welding after coiling and
replacing copper enameled wire with aluminum enameled wire, significantly reducing
the cost of BLDC motors while maintaining hydraulic performance. Applied in the
circulation washing and heating pumps of dishwashers and steam ovens, this technology
optimizes motor lamination design, achieving a comprehensive hydraulic efficiency of
over 39%, a leading level in the industry. The new chain structure unwinding process
increases the utilization rate of enameled wire by 24%, further reducing motor costs by
substituting aluminum for copper enameled wire.
Integrated module technology
The development of integrated module technology leverages the latest
advancements in new materials and innovative processes, which has led to the successful
engineering of lightweight, compact and cost-effective integrated modules adaptable to
various refrigerants. These modules are pivotal in the efficient thermal management
systems of NEVs, seamlessly delivering both cooling and heating functions. They are
crucial for maintaining optimal temperature control within the passenger cabin, battery,
electronic control and drive systems of NEVs, ensuring enhanced performance and
reliability.
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Full-stroke coaxiality technology
The full-stroke coaxiality technology ensures that a moving part remains perfectly
aligned along its central axis throughout its entire range of motion. This alignment is
crucial for the efficient and smooth operation of machinery, as it reduces wear and tear
and enhances the precision of the product. Our full-stroke coaxiality technology for
electronic expansion valves employs a sleeve-guided assembly method, effectively
addressing the issue of eccentric wear on the product’s sealing surface by ensuring that
the moving components remain perfectly aligned along their central axis throughout their
entire range of motion. This precise alignment reduces the likelihood of uneven pressure
or contact on the sealing surfaces, which can lead to eccentric wear. These electronic
expansion valves are integral to the cooling systems of air-conditioning. Our technology
utilizes a nut, valve needle component and valve seat core in a sleeve structure design,
enhancing the assembly coaxiality and reliability of the product. This structural
innovation has been recognized with the Zhejiang Province Patent Gold Award and the
China Patent Excellence Award.
Heat exchanger unit technology
Our heat exchanger unit technology, designed for plate heat exchangers, focuses on
the ultimate design of heat exchange units. This design significantly reduces pressure
drop, enhances heat exchange efficiency, and improves structural strength. These heat
exchangers play a crucial role in intelligently regulating the coolant temperature within
the thermal management systems of new energy vehicles. They are essential for the
cooling and waste heat recovery of the battery and power systems, ensuring optimal
performance and energy efficiency in NEVs.
Intelligent integrated control technology
The intelligent integrated control technology for thermal management in water
pumps combines electronic control hardware and software, addressing issues such as low
efficiency, delayed response and difficulties with Over-the-Air (“ OTA”) upgrades,
thereby enhancing system intelligence. Automotive electronic water pumps, utilizing
digital communication to control the coolant circuit flow, serve as critical driving
components in the vehicle’s thermal management system. This integration ensures
optimal performance and responsiveness, making the system more efficient and adaptable
to the dynamic needs of modern vehicles.
R&D Process
We identify potential R&D projects based on our business development strategy and
industry trends, as well as the needs of our customers. Specifically, our R&D projects can
be divided into (i) strategic innovation initiatives and the continuous optimization of our
product portfolio; (ii) new product development plans proposed by our marketing
department based on their comprehensive analysis of market trends; and (iii) bespoke
product orders tailored to specific customer requirements.
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Our R&D process is primarily structured into the Technology Development Process
(“TDP”) and the Product Development Process (“ PDP”). TDP is dedicated to advancing
technical innovation and creating a strong technical reserve to address future needs and
support our proactive iteration of existing products. Our TDP is forward-looking,
dedicated to continuously improving and optimizing the performance of existing
products while also designing new functionalities for the existing products. In addition to
our R&D capabilities, this process relies heavily on our industry expertise and market
insights. Our Research Center plays a crucial role in this R&D process, exploring market
trends and technological advancements to ensure we stay at a leading place of the
industry and are prepared for future demands. The following diagram illustrates the
major TDP processes for our products:
Preliminary
research
Opportunity
analysis
Conceptual design
and review
Product function
design and review
Design verification
and review Technology release
PDP is centered around the needs and preferences of customers to design products
immediately usable in customers’ application scenarios. Our PDP is directly initiated by
customer requirements, and the R&D outcome is typically tailored to customers’ specific
requirements. At the beginning of the process, our customers define the scope and
objectives of the projects, and remain involved throughout the PDP to ensure that the R&D
outcomes are tailored to their specific needs and are scalable upon their acceptance.
Accordingly, a PDP project typically requires the cooperation across multiple
departments, including sales, procurement and quality management departments.
The following diagram illustrates the major PDP processes for our products:
Approval for
project plans and
product proposals
Product design and
development Process design Manufacturing
implementation Product release Scale up and
mass production
TDP and PDP are intricately interlinked and often occur simultaneously. The TDP
focuses on developing new technologies and innovations, which are then integrated into
the PDP to create new products. As PDP progresses, feedback from product development
can inform and refine the TDP , leading to further technological advancements. This
dynamic interaction ensures that technological innovations are effectively translated into
practical applications, allowing for continuous improvement and adaptation throughout
the R&D process. Such synergy ensures a seamless transition from technological
development to product realization, enhancing overall efficiency and effectiveness in
bringing new products to market.
R&D Initiatives
Our R&D efforts in refrigeration and air-conditioning product components
primarily focus on advancing low-carbon and energy-efficient solutions, with an
emphasis on variable flow control technologies. Our initiatives aim to cement our position
as a global leader in the thermal management field. We are addressing specific technical
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challenges related to valves that manage variable flow rates, which are crucial for the
effective operation of thermal management systems. Additionally, we are developing
smart valves that precisely adjust fluid flow rates, enhancing both precision and
efficiency. We aim to further improve the uniformity of two-phase flows, ensuring the
consistent flow of liquid refrigerant alongside vapour in cooling systems for optimal
performance. Furthermore, our R&D projects target reducing noise caused by fluid flow
through valves.
In the field of automotive components, our strategic focus is on leading innovation
in key areas such as smart driving thermal management, solid-state battery thermal
management and energy storage systems. We aim to create advanced thermal
management solutions that seamlessly integrate efficiency, safety and intelligence across a
wide range of applications. Our R&D efforts are dedicated to developing advanced
components for new energy vehicles, with a primary emphasis on optimizing component
design, ensuring seamless vertical supply chain integration and accelerating the
advancement of new materials and processes. We aim to produce components that are
smaller, lighter and more efficient, making them compatible with various vehicle models.
We are also working on enhancing standardization to achieve higher levels of production
standardization and automation. Our R&D projects include the development of novel
refrigerant valves, lightweight heat exchangers, high-capacity water pump
platform-based technologies, high-precision multi-path water valves, and heat pump
modules. Additionally, we are investigating new electric motor and electronic control
platform-based technologies, alongside innovations in new materials. Further, we are
advancing multiple R&D initiatives related to flow plate processes, injection moulding
techniques, equipment technology and flexible production lines.
PRODUCTION
As of December 31, 2024, we had a total of 48 factories worldwide, including 13
overseas factories in the United States, Poland, Mexico, Turkey, Austria, Vietnam,
Thailand and India. For 2022, 2023 and 2024, our total production capacity reached
approximately 539.0 million, 533.5 million and 575.7 million pieces of refrigeration and
air-conditioning product components, respectively, and 202.6 million, 255.1 million and
281.7 million pieces of automotive components, respectively. Our total production volume
reached approximately 451.5 million, 494.5 million and 537.3 million pieces of
refrigeration and air-conditioning product components, respectively, and 170.3 million,
232.4 million and 244.6 million pieces of automotive components, respectively. Our total
production capacity utilization rate was 83.8%, 92.2% and 91.2%, respectively, for 2022,
2023 and 2024. Out of the 48 factories, we have established 8 production bases. These bases
serve as production centers comprising factory clusters, warehouses and logistics hubs,
designed to support key nearby markets. For 2022, 2023 and 2024, the aggregate
production capacity of our 8 production bases accounted for approximately 67.1%, 67.3%
and 71.7%, respectively, of our total production capacity during the same respective years.
The aggregate production volume of our 8 production bases represented approximately
67.2%, 67.8% and 71.2%, respectively, of our total production volume during the same
respective years.
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As of December 31, 2024, we had a production team of over 12,000 personnel,
supporting the operation of our global production network. We prioritize hiring locally
for our production team, which allows us to tap into the local talent pool and contribute to
the economic development of the communities where we operate. Employing local
personnel not only helps in fostering community relations but also ensures that our
workforce is familiar with regional practices and cultural nuances, which can enhance
productivity and workplace harmony.
The following table sets forth certain information relating to our principal
production bases as of December 31, 2024:
Facility
Year of
Commencement
of Operation
Aggregate
GFA Product Category
(square meter)
Hangzhou Production Base 2006 306,111 Refrigeration and air-conditioning
product components &
Automotive components
Wuhu Production Base 2011 211,779 Refrigeration and air-conditioning
product components
Poland Production Base 2013 56,285 Refrigeration and air-conditioning
product components &
Automotive components
Xinchang Production Base 2014 795,995 Refrigeration and air-conditioning
product components
Mexico Production Base 2016 300,850 Refrigeration and air-conditioning
product components &
Automotive components
Vietnam Production Base 2018 131,272 Refrigeration and air-conditioning
product components
Shaoxing Binhai Production Base 2019 788,313 Automotive components
Thailand Production Base 2023 46,849 Refrigeration and air-conditioning
product components
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The following table sets forth the production capacity and production volume by business segment for the periods indicated:
Year ended December 31,
2022 2023 2024
Production
capacity
Production
volume
Utilization
rate
Production
capacity
Production
volume
Utilization
rate
Production
capacity
Production
volume
Utilization
rate
(in thousand pieces, except for percentages)
Refrigeration and air-conditioning product components 539,044 451,511 83.8% 533,504 494,502 92.7% 575,724 537,271 93.3%
Automotive components 202,595 170,309 84.1% 255,107 232,351 91.1% 281,736 244,589 86.8%
Notes:
(1) Our production capacity for each period is calculated based on working days, working hours per day and pace of production, after taking into accoun t time required
for maintenance and replacement of machinery and equipment.
(2) Our production capacity utilization rate for each period is calculated based by dividing the production volume by the production capacity. The de crease in
production capacity utilization rate of automotive components from 2023 to 2024 was primarily due to the expansion in production capacity outpacing the growth in
production volume.
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During the Track Record Period and up to the Latest Practicable Date, we were
upgrading our existing production facilities in response to the increasing demand, as well
as evolving specifications and requirements for refrigeration and air-conditioning
product components and automotive components. Additionally, we were establishing
new production facilities in locations strategically critical to our key markets, with a goal
to meet the increasing demand for the aforementioned products. In order to grow our
business, meet the increasing demand from our customers and capture the potential
growth opportunities in the refrigeration and air-conditioning product components,
automotive components and the electromechanical actuators for bionic robot in China and
globally, we plan to use the net proceeds of the Global Offering and our internal funds to
expand our production capacity and upgrade our factories in China and overseas. See
“Future Plans and Use of Proceeds.”
Production Process
Our production process involves the coordination of raw materials and
components, manufacturing, assembly, testing, packaging and warehousing. We adhere to
established manufacturing practices and processes across our factories, which ensure
consistency, quality and efficiency in our operations. By standardizing these practices, we
can optimize the use of our production facilities and resources. As a result, we may
introduce new products without the need for significant reconfiguration or investment in
additional infrastructure. Standardization allows us to swiftly adapt to market demands
and expand our product portfolio, thereby enhancing our competitive edge and meeting
diverse customer needs while maintaining operational efficiency.
The following diagram illustrates the major manufacturing and assembly processes
for the representative products of ours:
Production Process of Refrigeration and Air-conditioning Electronic Expansion Valve
Cleaning
Cleaning
Valve needle assembly
Valve seat assembly
Nut intaking
Packaging
Raw materials intaking and
parts processing
Raw materials intaking and
parts processing
Valve body
assembly
Performance
test
Production Process of Four-Way Reversing Valve
Welding
Performance
testParts intaking Small valve body
parts assembly Welding Cleaning Pilot valve
assembly
Welding
Parts intaking and
processing
Main valve
assembly Welding Packag ingPerformance
test
Valve body
parts assembly Cleaning Braze
welding
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Production Process of Service Valve
Parts intaking and
processing Cleaning Welding Surface
treatment Assembly Performance
test Packaging
Production Process of Pressure Sensor
Enclosure assembly Cal ibration PCB solder ing Leakage test
Wire harness welding F inal test
Parts and pressure
sensing chip intaking
Pressure sensing
chip assembly
Pressure sensing chip
testing
Pressure sensor
assembly welding
Packaging and
warehousing
Production Process of Micro-channel Heat Exchanger
Flat tube intaking
Bending Fins making
Frame assembly
Installing accessories
Flame welding
Helium test
Correcting fins
Inspection
Warehousing
Packaging
Bracket connector
Aluminum foil
intaking
Flat tube
intaking
Pick-up tube
intaking
Partition board
intaking
Spot welding bracket
 connector
Pre-welding inspection
Braze welding through
spraying and NR
welding
Pre-reflow inspection
Production Process of Automotive Electronic Expansion Valve
Valve seat set
assembly
Helium leakage
test Coil set assembly Comprehensive
performance test
Inspection and
packaging
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Production Process of Solenoid Valve
Iron core
assembly
Cleaning Comprehensive
test
Helium test and
laser marking
Noise sampling
inspection
Head parts
intaking
Spring intaking
Orifice shaping
and packaging
Raw materials intaking
and parts processing
Head intaking and
shading coil processing
Raw materials
intaking and
parts processing
Head parts
processing
Cleaning
Valve body
assembly,
welding and
surface treatment
Cleaning
Valve body
parts extrusion
Press fitting and
laser welding
Production Process of Heat Pump Integrated Modules
Coil
assembly EOL testValve body
assembly
Heat
exchanger
assembly
Helium
leakage test
Electrical
inspection
Visual
inspection
Water pump
and
water valve
assembly
Water tank
assembly
Production Standardization
We exert efforts to apply standardization throughout the stages from product
designing to manufacturing to ensure uniformity, enhance quality and improve efficiency.
Product standardization notably enhances research and development efficiency while
accommodating customers’ tailoring needs. By adopting this approach, we can address
specific customer demands with minimal alterations to the core structure of a
standardized component, or, where a substantial part of a component is standardized, we
can use the standardized base as a consistent platform where upper-level modules can be
added on to meet diverse requirements. In addition, as our customers’ products evolve
and become more complex, their need for integrated modules also increases in complexity
and scale. By assembling standardized components of the desired functions, we can
rapidly create customized modules. On the flip side, once a particular function in an
integrated module is no longer required, we can easily remove the relevant standard
component from the integrated module without the need to redesign the entire module.
Furthermore, product standardization is essential for the production automation,
which greatly enhances production efficiency, ensures quality consistency and reduces
costs. Additionally, because the components are uniform, the production lines can easily
adapt to create different products with customized features, requiring only minor changes
to the production setup, making it easier and quicker to switch between manufacturing
various customized products. This is especially meaningful when certain products reach
the end of their lifecycle, as it allows us to efficiently transition to producing new or
updated products without extensive downtime or costly reconfigurations. Such flexibility
optimizes the utilization of production lines and mitigates risks associated with market
changes. Moreover, product standardization facilitates production automation by
providing uniform specifications that allow automated systems to operate efficiently and
consistently, reducing the need for frequent adjustments and human intervention. To
achieve automated production, we design products with structures most suitable for
automated production from the outset and continuously refine production line designs
and equipment to meet the technical demands of production automation.
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Production Automation
We have commenced to enhance production and operational efficiency through
automation and digitalization. By integrating advanced technologies such as IoT, machine
vision and digital systems, we streamline processes and improve our product quality.
Production
We incorporated automated production lines and industrial robots into our
production processes to handle highly repetitive and complex tasks, which reduces
human error and enhances the quality and consistency of our products. Our production
standardization also helps to streamline the quality control process. Specifically, we plan
thoroughly from the start and maintain strict oversight during production, utilizing
automation and digital tools. We utilize technologies such as machine vision, sensors and
control systems to achieve precise detection and management monitoring, thereby
improving the efficiency and accuracy of our production process. For instance, we have
implemented an IoT platform that collects and manages critical data, including equipment
status, process parameters, quality inspection data and production cycles, to generate
real-time analysis and correlation of data related to quality, processes and efficiency. Such
platform makes production issues more transparent and easier to interpret, reducing the
response time for our quality control personnel to address any faults or alerts.
Additionally, our Enterprise Asset Management (“ EAM”) system provides a structured
approach to managing equipment assets throughout their lifecycle. We also plan to further
advance our production capabilities by implementing a data-focused strategy and
utilizing advanced AI technologies such as predictive maintenance to improve production
efficiency and ensure consistently high product quality. We have employed information
technology systems such as Manufacturing Execution System (“ MES”) and Enterprise
Resource Planning (“ ERP”) to conduct research and applications across multiple areas,
including production control, equipment management, safety and environmental
protection, energy management, quality control and decision support. Together, such
systems optimize production processes and ensure efficient resource utilization and
continuous production. Furthermore, we have implemented aerial unmanned delivery
and storage systems in our machining and injection molding processes to further
streamline operations. We also use Advanced Planning and Scheduling (“ APS”) systems
to optimize our production planning and resource allocation.
Warehousing
We have implemented automated storage systems in our domestic warehouse. By
utilizing Automated Guided Vehicle (“ AGV ”), we can retrieve and store our goods
automatically with efficiency and accuracy, reducing manual intervention as well as
enhancing space utilization and logistics efficiency. Notably, AGV assists us in inventory
management, as it ensures that our goods are managed according to the “first-in,
first-out” principle and are delivered precisely to the production line as specified by the
MES. We use manufacturing dashboards to monitor inventory. By presenting real-time
data on order fulfillment rates, excessive inventory and stagnant inventory, we can make
informed procurement and production decisions, thereby optimizing our inventory
management and demand forecasting.
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Production Equipment and Machinery
In recent years, we have independently developed our production lines with a focus
on enhancing product functionality. Our operations are supported by a diverse range of
equipment and machinery tailored to accommodate our various product types. We own
the principal equipment and machinery involved in our production process. Beyond
acquiring equipment and machinery from third-party suppliers, we are capable of
independently developing equipment, and are able to procure components and conduct
in-house processing and assembly of our equipment. The details of our equipment and
machinery involved in the production process are set out below:
Equipment and
machinery Functions
Our major products
manufactured using such
equipment and machinery
Welding
Equipment
Joining metals or thermoplastic
materials through heating and
pressure processes
Four-way reversing valves and
expansion valves
Metalworking
Equipment
Cutting, shaping, milling and
drilling metal materials
Micro-channel heat exchanger
fins, four-way reversing
valves and expansion valves
Injection
Molding
Equipment
Heating and melting plastic
materials, which are then
injected into molds to form
specific shapes
Coil casings and water pump
housings
Surface Mount
Technology)
(“SMT”)
Equipment
Mounting electronic
components directly onto the
surface of printed circuit
boards (“ PCBs ”)
Sensors and controller
Industrial
Robots
Performing automated tasks
such as welding, handling,
assembly, painting and
inspection
Water-cooled automotive
assemblies
Automated
Assembly
Equipment
Automatically assembling parts
into complete products
Integrated modules, four-way
reversing valves, expansion
valves, ball valves and
micro-channel heat
exchangers
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We conduct careful and timely maintenance of our production facilities. Each piece
of our major production equipment or machinery undergoes regular servicing and
maintenance, adhering to predefined schedules. We have established and will continually
update internal procedures tailored to the unique characteristics and requirements of each
piece of production equipment or machinery. During the Track Record Period and up to
the Latest Practicable Date, we have not encountered any prolonged suspension of the
production process or significant interruption in our business operations due to failures
or breakdown of our machineries and equipment.
RAW MATERIALS AND SUPPLIERS
Raw Materials and Procurement
Our raw materials primarily include copper and aluminum. For the years ended
December 31, 2022 and 2023 and 2024, our costs of raw materials and consumables were
RMB11,758.4 million, RMB13,115.1 million and RMB14,979.8 million, respectively,
accounting for 74.0%, 73.6% and 73.7% of our total cost of revenue during the respective
periods. Given the close correlation between the prices of copper and aluminum we
procure from our suppliers and the often volatile bulk commodity copper and aluminum
prices, we implement a comprehensive risk management strategy to mitigate the impact
of such fluctuations, which primarily involves two independent approaches: (i)
incorporating a raw material price linkage mechanism in our contracts with both
customers and suppliers, and (ii) employing futures hedging. The one-time pricing model
sets a fixed price during the term of a contract, providing certainty for both parties. The
price linkage mechanism, on the other hand, adjusts prices based on market fluctuations,
ensuring that both our customers and suppliers and us share the risks and benefits of price
changes. During the Track Record Period, we adopted the raw material price linkage
mechanism for the majority of our contracts with the customers and suppliers.
We develop procurement plans primarily based on production schedules, inventory
levels, supply lead time and product lifetime. We carefully select the most suitable raw
materials suppliers according to the procurement plans. For the procurement of raw
materials, we utilize the Material Requirements Planning (“ MRP”) system to analyze the
timing and scheduling of raw material deliveries, taking into account factors such as the
Master Production Schedule (“ MPS”), production scheduling, inventory safety, supplier
lead times and minimum order quantities. These procurement plans are synchronized
with the Supplier Relationship Management (“ SRM”) system through which these plans
can be communicated to our suppliers, who will then execute deliveries according to our
plans. For the procurement of others, after the procurement plans are approved, our
supply chain management department will conduct a price inquiry, evaluating potential
suppliers on criteria including price, quality and delivery timelines. We typically establish
a reasonable price with our suppliers through a process of inquiry or competitive bidding,
based on thorough market research. During the Track Record Period, we did not enter into
any long-term supply agreements with our suppliers that included fixed-price
arrangements. In response to the potential raw material price increases, we primarily
mitigate the impact by building long-term relationships with our suppliers, signing
linkage pricing agreements with the suppliers and maintaining close communication and
conducting secondary source evaluations. Meanwhile, we conduct R&D on new materials
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and develop new suppliers to maintain the flexibility to switch to alternative materials or
suppliers in the event of severe shortages or price volatility of certain raw materials. We
have implemented periodic reviews and internal mechanisms to monitor the price of our
raw materials by considering current stock levels, future sales and market trends. We
timely adjust our stock levels to maintain optimal inventory levels considering
anticipated price fluctuations.
In addition, we mitigate raw material price risks by utilizing futures hedging to lock
in prices for raw materials, thereby offsetting any increases in the bulk commodity costs of
copper and aluminium. We have established a futures management process to address the
raw material price volatility. Our procurement department is tasked with monitoring raw
material price trends and fluctuations and provide insights into market conditions. We
adopt futures hedging, which involves using financial contracts to lock in prices for future
purchases, to protect us against adverse price movements. We have a strategic partnership
with Shanghai Metals Market to monitor bulk commodity raw material price movements
both domestically and internationally. Based on the market information, we take actions
following our internal futures and foreign exchange management mechanisms.
Our Suppliers
We have established rigorous processes for supplier selection, evaluation and
management to ensure all suppliers meet our quality and performance standards. We
evaluate supplier’s financial condition, business performance, industry reputation, ESG
commitment and certifications. We also regularly evaluate the performance of our
suppliers, focusing on criteria that include raw material quality, delivery, cost and, where
applicable, the technical specifications of the products supplied by them.
Agreements with Suppliers
We generally procure raw materials from suppliers through non-exclusive supply
contracts. Due to the widespread use of copper and aluminum as standard materials and
products, we can procure most of our materials and components at competitive prices. We
proactively adopt supplier management policies including maintaining two or more
suppliers, securing stock in advance and having alternative suppliers to ensure the stable
supply of raw materials. We have established long-term relationships with our suppliers
with sufficient supply of raw materials and reliable supply channels.
We typically enter into framework supply agreements with suppliers, the salient
terms of which are set out below:
• Duration. Generally with an indefinite term.
• Product specification. We specify the product name, manufacturer or brand,
specification, price, quantity, delivery timeline and other detailed items in
each purchase order we send to our suppliers.
• Payment and credit term. Payment and credit terms are typically separately
included in each order that we place with the supplier.
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• Logistics. We are responsible for making timely payments to our suppliers,
who are responsible for delivering qualifying products to our designated
warehouses.
• Quality guarantee. Products are typically accepted in accordance with our
specifications, as well as national, local and industry standards. Should any
quality issues arise during the warranty period, the supplier shall be
responsible for replacement.
• Termination. The agreements can generally be terminated by notice by both
parties, or when one party breaches the agreement.
Major Suppliers
During the Track Record Period, our major suppliers primarily include raw material
and component suppliers. In each year during the Track Record Period, the aggregate
purchases from our five largest suppliers in each of such year accounted for
approximately 13.0%, 13.8% and 15.5%, respectively, of our total purchases, and the
purchases from our largest supplier in each of such year accounted for approximately
4.8%, 3.7% and 4.0%, respectively, of our total purchases. To avoid supplier concentration,
we diversify our supplier base by engaging multiple suppliers for the same goods or
services and implementing strategic sourcing practices. Additionally, we conduct regular
market analysis, develop supplier relationships and maintain contingency plans to ensure
supply chain resilience. All of our five largest suppliers in each year during the Track
Record Period were our customers. We primarily sell metal scrap, refrigeration and
air-conditioning product components and automotive components to our five largest
suppliers in each year during the Track Record Period. In each year during the Track
Record Period, the aggregate revenue generated from our five largest suppliers in each of
such year were less than 0.1%.
As of the Latest Practicable Date, none of our Directors, their associates or any of
our Shareholders (who owned or to the knowledge of Directors had owned more than 5%
of our issued share capital) had any interest in any of our five largest suppliers in each
year during the Track Record Period.
The Directors confirm that we did not experience any material shortage of supply,
raw material quality issue, disruptions, disputes or delays in relation to the supply of
suppliers, or any material breach or early termination of our contractual arrangements
with suppliers during the Track Record Period and up to the Latest Practicable Date.
SALES AND MARKETING
We primarily conduct direct sales to our customers which we believe is critical to
predict and address customers’ needs. We are passionate about delivering the best
experience possible to our customers. During the Track Record Period, we derived
substantially all our revenue from direct sales to customers. We have established an
extensive global sales and marketing network covering countries and regions across
America, Europe, Asia, Oceania and Africa to maintain close contact with major
refrigeration and air-conditioning product manufacturers and car manufacturers, as well
as to explore business opportunities with potential customers in emerging industries. Our
extensive sales and marketing network typically consist of employees with expertise and
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experience in the relevant industry, whose industry insights enable efficient
communications with the customers. We also sell our products to regional business
partners with local customer resources to achieve effective customer outreach and market
penetration in certain geographical areas, revenue contribution of which was less than
1.5% of our total revenue in each of the years ended December 31, 2022, 2023 and 2024,
respectively.
We have adopted a comprehensive customer strategy that covers the entire process
from customer acquisition to product delivery. We maintain close contact with customers
to gain a deep understanding of their needs and the current landscape of competing
products, and we attach great importance to helping customers use our products properly.
Leveraging our thorough understanding of international market dynamics and customer
needs, we are able to better position our products, engage in strategic collaborations with
our customers to co-develop new products, promptly address any technical issues during
production and provide satisfactory after-sales services. In addition, we collect feedback
directly from customers to garner insights that help drive our business and operations
forward. Our dedication to quality end-to-end service to our global customer base further
strengthens our industry influence and reputation.
Our International Footprint
Our overseas markets are critical to our business development. We have had export
orders since the 1990s. In 2001, we established our first overseas sales subsidiary in Osaka,
Japan, marking the start of our rapid international expansion. From these early steps of
setting up overseas marketing companies, we have evolved through strategic cross-border
acquisitions and the establishment of overseas factories and warehouses and R&D bases
to become a global leader in manufacturing refrigeration and air-conditioning control
components and automotive thermal management system components. We are the fifth
largest automotive thermal management system component manufacturer with a market
share of approximately 4.1% in terms of revenue in 2024, according to Frost & Sullivan.
Nowadays, we boast a comprehensive global network featuring R&D, manufacturing and
sales, while continuing to actively expand our global layout to pursue new business
opportunities.
We are committed to enhancing our globalization efforts by implementing a global
localization strategy that integrates R&D, manufacturing and sales. Over the years, we
have established a global R&D, manufacturing and sales network, laying a strong
foundation for further expansion worldwide. Our R&D activities are supported by six
R&D bases, including three that are located in the United States and Germany, where we
harness the talents and resources of the global community. Our manufacturing is
primarily carried out in 48 major factories worldwide, 13 of which are in 8 foreign
countries, enabling us to produce and deliver globally and enjoy the growth opportunities
of such overseas markets. We also have sales and marketing forces scattered across the
globe, dedicated to providing quality end-to-end service to our global customer base. As
of December 31, 2024, our products had reached America, Europe, Asia, Oceania and
Africa, spanning over 80 countries and regions worldwide. As of December 31, 2024, we
employed approximately 19,000 employees globally, including over 5,300 overseas
employees.
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In addition to organic growth, we expand overseas business through pursuing
mergers and acquisitions, which allow us to leverage the market insights and network of
the targets to accelerate market entry. We have acquired Ranco’s global four-way
reversing valve business, Aweco’s global operations and ATI’s tubing component business
in the United States and Mexico, among others, and continue to pursue a proactive and
prudent strategy for future overseas acquisitions. We seek to strengthen cooperation with
our overseas partners and increase our overseas sales through our overseas subsidiaries
and factories. We value business partners whose strategic goals align with ours, with a
wealth of market and industry experience and are committed to investing the necessary
resources to support our shared vision. We respect and embrace cultural differences and
share our commitment to compliance, integrity and sustainability in our cooperation.
As of December 31, 2024, our overseas sales have extended to America, Europe,
Asia, Oceania and Africa. Our offerings in these regions are primarily refrigeration and
air-conditioning product components and automotive components, including electronic
expansion valves, four-way reversing valves, service valves, micro-channel heat
exchangers, integrated modules and electronic water pumps. We intend to accelerate the
international expansion through promotion and sales efforts, continued establishment of
overseas subsidiaries and increased investments in local factories. We plan to build more
overseas factories and production lines. In addition, we are committed to forging stronger
partnerships with esteemed international business allies to explore internationalization
strategies, advocate for global standards and develop a PCT international patent
framework. Through such initiatives, we aim to strengthen our product competitiveness
in overseas markets, elevate our reputation, and drive the growth of our international
business.
The following table sets forth our revenue by geographic location for the periods
indicated:
Year ended December 31,
2022 2023 2024
Amount % Amount % Amount %
(RMB in thousands, except for percentage)
China 11,415,857 53.5 13,403,443 54.6 15,446,506 55.3
North America 5,703,859 26.7 6,301,569 25.7 7,094,512 25.4
Europe 1,985,305 9.3 2,442,768 9.9 2,623,526 9.4
Asia (excluding China) 2,153,219 10.1 2,331,241 9.5 2,653,978 9.5
Others
(1) 89,310 0.4 78,781 0.3 128,643 0.5
Total 21,347,550 100.0 24,557,802 100.0 27,947,165 100.0
Note:
(1) Others comprise South America, Oceania and Africa.
Our Customers
The major customers of our refrigeration and air-conditioning product component
business are domestic and foreign refrigeration and air-conditioning manufacturers. For
our automotive component business, the major customers include major domestic and
foreign automotive companies.
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Key Terms of Sales Contracts
We generally enter into framework agreements with major customers, who place
orders based on actual demand under the framework agreements. Although the contract
terms vary, they usually include the following key terms:
• Duration. Typically ranging from six months to indefinite term, terminating
automatically when one party breaches the agreement. Depending on the
nature of our customers’ business, certain contracts may be subject to
automatic renewal.
• Quality control. The quality of the products shall be in compliance with the
specific standards designated by our customers, or in compliance with
applicable national, local or industry standards.
• Price. The prices of the product are generally specified in each purchase order
in the case where the main sales agreement is a framework agreement.
• Payment terms. We generally grant our customers a credit period of 60 to 120
days.
• Confidentiality. We usually set confidentiality clauses with our customers
and such obligation shall continue to exist for a certain period of time after the
termination of the agreement.
• Delivery and transportation. Our delivery options include customer pick up
and home delivery. For home delivery, we appoint third-party logistics
companies to accommodate the delivery and purchase relevant insurances.
The logistics companies are responsible for any product damage during the
transportation.
• Warranty. We usually set out warranty periods depending on the products
and the sales agreement. During the warranty period, our customers may
request that we replace or repair defective parts and components free of
charge. Following the expiration of the warranty period, we provide repair
and maintenance service and supply parts and components to our customers
for a fee based on the services required.
• Termination. Our customers are typically entitled to terminate the agreement
without cause with prior written notice. The agreements may also be
terminated under certain conditions as specified in the agreements, including
termination by default due to a material breach that is not remedied timely,
false representations, or bankruptcy. In such cases, the non-defaulting party
may terminate the agreement with written notice.
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Major Customers
Our customers primarily consist of automotive companies and refrigeration and
air-conditioning companies. In each year during the Track Record Period, our five largest
customers accounted for approximately 35.9%, 35.9%, 32.9% of our total revenue,
respectively, and sales to the largest customer accounted for approximately 13.1%, 14.6%
and 12.6% of our total revenue, respectively. Our primary means of settlement includes
bank acceptance notes and bank remittance. The tables below set forth the basic
information of our top five customers in each year during the Track Record Period:
For the year ended December 31, 2022
Customer
Transaction
amount
Percentage
to total
revenue
Approximate
years of
business
relationship
(1)
Background and
principal business activity
Major products
purchased Location
Credit
term
(RMB in
thousands) (%)
Customer A 2,799,824 13.1 9 years an international company listed on
NASDAQ that primarily engages in
the automotive business, with
operations on a global scale
automotive components the United
States
90 days
Customer B 1,899,779 8.9 over 20 years an international company listed on
Shenzhen Stock Exchange and Hong
Kong Stock Exchange that primarily
engages in the refrigeration and
air-conditioning business, with
operations on a global scale
refrigeration and
air-conditioning
product components
China 60-240
days
Customer C 1,335,774 6.3 over 20 years an international company listed on
New York Stock Exchange that
primarily engages in the refrigeration
and air-conditioning business, with
operations on a global scale
refrigeration and
air-conditioning
product components
the United
States
75 days
Customer D 936,315 4.4 over 20 years an international company listed on
Tokyo Stock Exchange that primarily
engages in the refrigeration and
air-conditioning business, with
operations on a global scale
refrigeration and
air-conditioning
product components
Japan 35 days
Customer E 699,094 3.3 over 20 years an international company listed on
Shenzhen Stock Exchange that
primarily engages in the refrigeration
and air-conditioning business, with
operations on a global scale
refrigeration and
air-conditioning
product components
China 60-240
days
Total 7,670,786 35.9
Note:
(1) As of December 31, 2024
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For the year ended December 31, 2023
Customer
Transaction
amount
Percentage
to total
revenue
Approximate
years of
business
relationship
(1)
Background and
principal business activity
Major products
purchased Location
Credit
term
(RMB in
thousands) (%)
Customer A 3,582,715 14.6 9 years an international company listed on
NASDAQ that primarily engages in
the automotive business, with
operations on a global scale
automotive components the United
States
90 days
Customer B 2,143,121 8.7 over 20 years an international company listed on
Shenzhen Stock Exchange and Hong
Kong Stock Exchange that primarily
engages in the refrigeration and
air-conditioning business, with
operations on a global scale
refrigeration and
air-conditioning
product components
China 60-270
days
Customer C 1,128,597 4.6 over 20 years an international company listed on
New York Stock Exchange that
primarily engages in the refrigeration
and air-conditioning business, with
operations on a global scale
refrigeration and
air-conditioning
product components
the United
States
75 days
Customer F 1,071,372 4.4 16 years an international company listed on
Shenzhen Stock Exchange that
primarily engages in the automotive
business, with operations on a
global scale
automotive components China 120-240
days
Customer G 895,109 3.6 8 years an international company listed on
Hong Kong Stock Exchange that
primarily engages in the automotive
business, with operations on a
global scale
automotive components China 60-75 days
Total 8,820,915 35.9
Note:
(1) As of December 31, 2024
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For the year ended December 31, 2024
Customer
Transaction
amount
Percentage
to total
revenue
Approximate
years of
business
relationship
(1)
Background and
principal business activity
Major products
purchased Location
Credit
term
(RMB in
thousands) (%)
Customer A 3,527,626 12.6 9 years an international company listed on
NASDAQ that primarily engages in
the automotive business, with
operations on a global scale
automotive components the United
States
60-90 days
Customer B 2,429,873 8.7 over 20 years an international company listed on
Shenzhen Stock Exchange and Hong
Kong Stock Exchange that primarily
engages in the refrigeration and
air-conditioning business, with
operations on a global scale
refrigeration and
air-conditioning
product components
China 285 days
Customer C 1,315,669 4.7 over 20 years an international company listed on
New York Stock Exchange that
primarily engages in the refrigeration
and air-conditioning business, with
operations on a global scale
refrigeration and
air-conditioning
product components
the United
States
90-106
days
Customer D 1,039,137 3.7 over 20 years an international company listed on
Tokyo Stock Exchange that primarily
engages in the refrigeration and
air-conditioning business, with
operations on a global scale
refrigeration and
air-conditioning
product components
Japan 35 days
Customer F 881,391 3.2 16 years an international company listed on
Shenzhen Stock Exchange that
primarily engages in the automotive
business, with operations on a global
scale
automotive components China 240 days
Total 9,193,696 32.9
Note:
(1) As of December 31, 2024
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As of the Latest Practicable Date, none of our Directors, their associates or any of
our Shareholders (who owned or to the knowledge of Directors had owned more than 5%
of our issued share capital) had any interest in any of our five largest customers in each
year during the Track Record Period.
During the Track Record Period and up to the Latest Practicable Date, none of our
customers requested to terminate their agreements with us.
During the Track Record Period, Customer B, Customer C, Customer E and
Customer F were also our suppliers. We primarily procured raw materials from
Customers B, C, E and F for the production of products under refrigeration and
air-conditioning product components and automotive component businesses. In 2022,
2023 and 2024, our procurement from each of Customers B, C, E and F accounted for less
than 1% of our total purchases for the same year, respectively. All of our agreements with
Customers B, C, E and F are negotiated on an arm’s length basis. Our Directors confirmed
that all of our sales to our major customers were conducted in the ordinary course of
business under normal commercial terms and on arm’s length basis.
After-sale Services
We believe that the accessibility of high-quality after-sales services is an important
consideration behind a consumer’s purchase decision. Our global sales network serves as
the primary contact point for customers to receive after-sales services, which cover
delivery, return and exchange of defective products, as well as trainings to ensure proper
installation of our products and the verification of the application conditions of our
products. We believe that the provision of satisfactory after-sales services is a crucial
determinant of our success. It enhances the value chain of our products and fosters
satisfaction among customers and end-users.
When a complaint arises, our committed team will typically visit the customer’s site
to thoroughly understand the context and determine the cause of the problem. Our
objective is to address the complaints by making the necessary adjustments to the
customer’s application to ensure the smooth operations of our products in the first place.
Subsequently, we analyze the issues internally to prevent the recurrence of similar
problems in design.
We provide product return and exchange services that are tailored to address the
requirements and concerns of the customer. We developed a standard product return
procedure. When a customer raises a quality issue with our products, our technical team
will promptly verify the concern. Following an internal analysis and review that confirms
a product deficiency, our quality control department will inform the sales team to initiate
a return request to complete the return and exchange procedure. During the Track Record
Period and up to the Latest Practicable Date, we did not experience any material customer
return or complaint, or product recall that adversely impacted our reputation, business
operations or financial condition, nor were we subject to any material product liability
claim. We believe such arrangement would foster trusted, stable relationships with
customers and sustain our long-term growth. Our sales team are required to attend
regular training sessions to improve their knowledge and skills. To ensure the quality of
our after-sales services, we conduct regular appraisals on our sales persons with regards
to their performance.
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Moreover, our sales team conduct customer satisfaction evaluation on a regular
basis by collecting and analyzing information from our customers in respective of their
satisfaction towards our products and services. By doing so, we gain valuable insights
into areas where we excel and identify opportunities for improvement. Moreover, these
evaluations serve as a platform for us to follow up on their evolving needs. By
understanding our customers’ future requirements and preferences, we can explore
further collaboration opportunities and generate ideas for product iteration and
innovation.
Pricing
We take into account various factors when determining the price of our products,
including production costs, technological differentiation, customer demand, supply chain
dynamics, procurement strategies and expected gross profit margins of each product, as
well as the competitive landscape where the sales take place. We also evaluate the
competitive landscape, including the overall market conditions as well as prices for
similar products offered by our peers. Due to the extensive variety and specifications of
our products, there is a significant disparity in their pricing.
Marketing
We take a customer-centric marketing approach to build and expand our business
relationships. We formulate targeted marketing strategies, participate online and offline
marketing activities such as exhibitions, forums and online technical seminars to meet our
business promotion needs and enhance our brand awareness. As we continue to expand
domestically and globally, we optimize our sales and marketing network to ensure that we
have sufficient geographic coverage across both existing and new markets. Our strong
brand reputation and significant industry influence have been cultivated through
extensive and deep partnerships with leading customers across various sectors. Moreover,
we allocate considerable resources to expanding our presence in emerging application
domains. We adopt tailored strategies for customers in different industries and devote
significant resources to business development in emerging applications. We make full use
of the opportunity to participate in exhibitions to showcase our latest products and
technologies to domestic and foreign customers, enhance our brand awareness, and
develop business relationships with potential customers. We participate in major global
exhibitions and summits, as well as key industry exhibitions annually, including China
Refrigeration Expo, Appliance & Electronics World Expo, Air-Conditioning, Heating,
Refrigerating Expo (“ AHR Expo ”) and Chillventa International Trade Fair for
Refrigeration, Air-Conditioning, Ventilation and Heat Pumps (“ Chillventa ”) for our
refrigeration and air-conditioning product components as well as World Vehicle Thermal
Management Systems Conference and Exhibition (“ WVTMS ”), New Energy Vehicle Low
Temperature Heat Pump and Energy Storage Thermal Management Summit, International
Motor Show (“ IAA MOBILITY ”) and the International Suppliers Fair (“ IZB”) for our
automotive component business. Additionally, we have set up showrooms, welcoming top
executives and research and development heads from customer companies to experience
our products in-person.
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QUALITY CONTROL
We have comprehensive policies and detailed procedures in place to ensure product
quality. We have obtained a series of certificates including ISO 9001 for our quality
management system, QC 080000 for our hazardous substance process management
system, ISO 10012:2003 for our measurement management systems, IATF 16949 for our
international standard for automotive quality management system and other various
certificates for our specific products issued by China Quality Certification Center.
In addition, we have established a quality manual (the “ Quality Manual ”)
including procedures and policies on the packaging management, disqualified products
control, inventory managements and products delivery control. We are in strict
compliance with the Quality Manual, based on which we publish the annual quality
policy where each department formulates quality improvement strategies and objectives.
The quality management department tracks the implementation of those quality
objectives instantaneously, assesses the development and takes according to measures. At
the same time, we review the significant quality problems, if any, during quality reflection
meetings so as to prevent any re-occurrence of such quality problems. The effectiveness
and adequacy of our quality manual are rigorously evaluated through annual internal
audits. Our quality control measures can be described as follows:
• Selection and Management of Suppliers. We have established a
comprehensive supplier management system to ensure the selection of
high-quality raw material and service suppliers. Our process includes a
rigorous supplier admission procedure and regular evaluations based on our
Supplier Performance Evaluation Management Method. We also require
adherence to our Raw Material Quality Assurance Certificate Management
Process to ensure all materials meet our standards. Through these measures,
we maintain a reliable and efficient supply chain.
• Inspection of Raw Materials. We adhere to stringent standards and technical
requirements for raw materials and components, supported by detailed
drawings and procurement plans. Our supply management department
oversees the procurement and management of raw materials, ensuring
compliance with our raw material storage management policies and inventory
management methods. Each batch of raw materials undergoes thorough
inspection upon arrival, with inspection records meticulously maintained. We
monitor the non-conformance rates of incoming batches and initial usage to
ensure only materials meeting our quality standards are accepted into
inventory.
• Production Process. Our production processes are meticulously monitored
through systematic inspection and reporting to maintain product quality.
Each business unit within our Company is responsible for manufacturing a
specific product category. Upon completion, the inspection staff within each
unit reports to our quality assurance department for a final inspection,
ensuring adherence to our quality standards.
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• Finished Products. We have established comprehensive testing guidelines
that detail the procedures and requirements for evaluating our finished
products. These guidelines ensure that our products consistently meet our
stringent quality standards and align with our customers’ specifications prior
to dispatch. To maintain their relevance and effectiveness, we regularly
review and update these guidelines. Our quality assurance department
closely monitors the testing processes to ensure consistency and high
standards across all business units.
• Warehousing. All materials and goods are stored according to specified
conditions, considering environmental factors, location, and stacking height
requirements. Warehouse managers maintain detailed inventory records to
ensure alignment between records, physical stock and inventory cards. Each
item is labeled according to product identification and traceability standards.
Special measures are implemented for hazardous and explosive materials to
ensure their safe storage and handling.
• Delivery. We ensure that our products are packaged and delivered to
customer-designated destinations with the utmost care. Our logistics
processes are designed to maintain the integrity and quality of our products
throughout transportation. Delivery times are tailored to meet customer
requirements and vary depending on the destination.
Our quality policies are designed to ensure continuous improvement and adherence
to both internal and customer standards. We have designated employees to dynamically
track these objectives, investigate the causes of both improvements and deteriorations and
implement necessary measures. We also hold regular meetings, such as quality review
sessions and defect report meetings, to retrospectively analyze significant quality issues,
with an aim to prevent the future occurrences and recurrences of such issues.
Furthermore, we conduct in-depth analysis of customers’ quality manuals and integrate
their quality requirements into our policies. In alignment with relevant industry
standards, we regularly review and optimize our processes to achieve agile and rapid
quality management. We also conduct thorough analyses of defects and anomalies
encountered during the warranty process and in the aftermarket services to prevent future
issues and ensure continuous improvement in quality management. Our quality
assurance measures are validated primarily through Ex-factory Defect Rate measured in
PPM, which refers to the number of defective products that enter the market within a
given year or period as a ratio of the total quantity of products dispatched from the
factory, multiplied by 1,000,000. For instance, the Ex-factory Defect Rate of our electronic
expansion valve product category under our refrigeration and air-conditioning product
component business decreased from 3.09 PPM in 2022 to 3.05 PPM in 2023, and further
reduced to 2.99 PPM in 2024. According to Frost & Sullivan, such Ex-factory Defect Rates
are lower than the industry average, which ranged from 10 PPM to 15 PPM during the
Track Record Period. These figures underscore our commitment to high quality.
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WAREHOUSING AND LOGISTICS
We are dedicated to developing an efficient and transparent logistics supply chain
to ensure customer satisfaction and enhance our inventory efficiency. We are consistently
refining and standardizing the warehousing and distribution systems within our
self-operated warehouses worldwide, while also effectively managing third-party
logistics providers. As of the Latest Practicable Date, we owned 20 self-operated
warehouses in China and 23 self-operated warehouses in other overseas jurisdiction
including the United States, Mexico, Poland, Vietnam, Turkey, Austria and Thailand. In
addition, we had 108 third-party warehouses in China and 12 third-party warehouses in
other overseas countries or regions, including the United States, Mexico, Ireland, Spain,
France and Czech Republic. Such warehouses are strategically located near our customers
to enhance service delivery and better meet their needs. The salient terms of the
agreements with third-party warehousing service providers are set forth below:
• Duration . Typically one year.
• Principal rights and obligations . Generally, third-party warehousing service
providers are accountable for warehousing services, including sorting,
warehousing, storage and dispatch of goods as per our instructions, among
others. We are generally responsible for product packaging and appointing
personnel for account reconciliation, payment and coordination with these
providers, among others.
• Payment . Typically monthly settlement.
• Quality . Third-party warehousing service providers are required to ensure
proficient warehouse management and comply with our specified warehouse
management requirements and assessment criteria.
• Termination . We may usually terminate the agreements unilaterally with one
month’s prior notice, based on business circumstances.
We have implemented the OTWB, which standardizes online operations from order
placement to product delivery, facilitating seamless coordination from the factory to the
customer. The OTWB helps us shorten the supply chain cycle, reduce finished goods
inventory and improve inventory turnover, while enabling information sharing and
transparency among our Company, carriers and customers.
We are also advancing the Warehouse Management System (the “ WMS”) system to
standardize warehouse operations, enhancing the accuracy, traceability and
responsiveness of warehouse material management. The integration of IoT and other
intelligent technologies, such as automated storage and distribution, contributes to
creating a smart campus that boosts logistics efficiency and service quality. By linking
systems like OTWB and WMS, we are able to effectively manage domestic and
international logistics operations.
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We have also introduced a centralized bidding model to engage high-quality service
providers for transport, supported by a comprehensive management and metrics system
to ensure service quality. Through ongoing enhancements, we are consistently improving
delivery timeliness, accuracy and customer satisfaction while achieving cost reductions.
During the Track Record Period and up to the Latest Practicable Date, we had not
experienced any significant delay or inappropriate handling of goods that materially and
adversely affected our business operations.
INVENTORY MANAGEMENT
Our supply chain management is coordinated to achieve synergy and desirable
allocation of resources among order placement, procurement management, product
manufacturing, shipping and other processes. We manage and maintain sufficient
inventory levels to support production. We analyze and determine the procurement
strategies according to the forecast supply, market analysis and the estimation of
fluctuations of the volume in procurement period and procurement price. Based on such
analysis, we set different reasonable and safe inventory levels for different kind of
inventories in response to changes in customer demand and fluctuations of raw material
prices.
Our management emphasizes the asset management and holds quarterly meetings
to review the asset management problems we came across, to propose the improvement
plans and the goals, and to re-assess those plans and goals in the next quarterly meeting.
In addition, we have strict rules and standard on the inventory management workflows
including (i) the arrangement and placement of the inventories, (ii) the environment and
safety requirement, (iii) storage, (iv) outbound, (v) handling of disqualified products, (vi)
storage and inspection, (vii) inventory management and (viii) the handover process. We
also digitalize and standardize our inventory management through the ERP , MES and
WMS systems, which enhance the efficiency and accuracy of our inventory management
processes.
Our inventory turnover days in 2022 and 2023 and 2024 was 92 days, 92 days and 89
days, respectively.
INFORMATION TECHNOLOGY
Information technology systems are essential to competitiveness and efficient
operations. We utilize and maintain IT systems that evolve in tandem with our business
growth. We have instituted an information technology system covering all material
aspects of our operations, including inventory management, production, quality control,
external relationship management, internal relationship management and operation
management. Our information technology team is responsible for developing and
maintaining IT systems in line with our business expansion and customizing them to meet
our business needs. Our key information technology systems are set forth below:
• ERP system. Our enterprise resource planning system (“ ERP ”) helps us
integrate the core business processes of various departments, including
financial management, supply chain, production and inventory. It can provide
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real-time data analysis, reduce costs, enhance operational efficiency and
support our decision-making process, thereby increasing our flexibility and
competitiveness. It facilitates the management of core activities such as
production planning, inventory management, procurement, supply chain
operations and finance. It also supports compliance with industry regulations
and standards, ensuring streamlined operations across our Group.
• MES system. Our Manufacturing Execution System (“ MES ”) serves as a
crucial bridge between the ERP and our production department. Its core
functions include production scheduling, resource management, quality
control, data collection and real-time monitoring of plant personnel,
equipment and materials. It assists us in conducting timely checks, enhancing
production efficiency, and minimizing downtime and production errors,
thereby optimizing our production processes and improving our resource
utilization. It provides us with greater visibility and control, supporting our
decision-making process, facilitating smart manufacturing and lean
production, and thereby enhancing our competitiveness and market
responsiveness.
• OA system. Our office automation (“ OA”) system is primarily utilized for
daily office management. It streamlines routine administrative tasks,
enhances communication and improves overall organizational efficiency by
providing a centralized platform for document management, scheduling and
internal collaboration.
• CRM system . Our Customer Relationship Management (“ CRM ”) system
manage and analyze customer interactions and data throughout the customer
lifecycle. Its main functions include contact management, sales automation
and customer service. It organizes customer information, automating
marketing tasks, tracking customer interactions, and providing insights into
customer behavior and preferences. It helps us tailor marketing efforts more
effectively, personalize communications, optimize sales processes and
ultimately enhance customer satisfaction.
During the Track Record Period and up to the Latest Practicable Date, we had not
experienced any information technology system failure or downtime that had a material
adverse effect on our business operations.
INTELLECTUAL PROPERTY
We depend on our proprietary technologies and production know-how to maintain
our competitive position in the markets in which we operate, and we create intellectual
property through our extensive R&D activities. Our general policy is to apply for patents
on an ongoing basis, in China and other appropriate jurisdictions, on patentable
developments that are considered to have commercial significance. Our portfolio of
patents covers our proprietary technologies used in products as well as many aspects of
our product design and manufacturing processes.
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We seek to protect our intellectual property and proprietary rights primarily
through intellectual property laws, relying on a combination of patent, trademark, trade
secret and other intellectual property laws in China and other countries. As of December
31, 2024, we held a robust portfolio of intellectual property worldwide, comprising over
3,300 patents in China. Our patents span critical sectors, primarily including refrigeration
and air-conditioning product component and automotive component. Within our patents
in China, we had over 1,400 invention patents and over 1,500 utility model patents.
Moreover, we had over 800 patents in overseas jurisdictions including the United States,
Europe, Japan and South Korea, the majority of which were invention patents. As of the
same date, we had filed over 6,600 patent applications in China and over 1,300 patent
applications in overseas aforementioned jurisdictions. In addition, we had over 100 valid
applications under the PCT.
As of December 31, 2024, we had led the drafting of 28 Chinese national or industry
standards. Apart from that, we had also participated in the drafting of 29 Chinese national
or industry standards. We also own 17 high-tech enterprises, one national enterprise
technology center and one national postdoctoral research workstation.
As of December 31, 2024, we had 110 registered trademarks in China and 74
registered trademarks overseas, including the United States, Canada, Germany, the
United Kingdom, Italy, South Korea and Japan with our brand “SANHUA” among these
trademarks.
We have a range of internal control policies and measures in place to protect our
intellectual property rights and trade secrets. We proactively pursue patent applications
for our technological innovations and utilize our patent rights to safeguard our legitimate
interests. Meanwhile, our intellectual property team is proactive in taking reasonable
steps to detect possible infringement of our intellectual property rights. Upon identifying
potential patent infringements by any competitors, we conduct thorough analyses and
comparisons of the competing products. For products that are confirmed to infringe on
our patents, we typically take legal actions timely by securing evidence and filing relevant
lawsuits. This proactive approach underscores our commitment to protecting our
intellectual property and maintaining our competitive edge in the market. We rely on
non-disclosure agreements to protect our interests in non-patentable know-how and
hard-to-patent manufacturing processes. All contracts we enter into with employees,
suppliers and other strategic partners are reviewed and approved by our in-house legal
team to ensure that they contain adequate safeguards to prevent unauthorized disclosure.
To the best of our knowledge, knowledge and belief, our intellectual property rights have
not been subject to any material intellectual property claims by third parties during the
Track Record Period and as of the Latest Practicable Date.
COMPETITION
We mainly operate in the refrigeration and air-conditioning product component
industry and automotive component industry, which are highly competitive and
concentrated.
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The global refrigeration and air-conditioning control component market is overall
highly concentrated. With the increasingly prominent technical barriers and scale
advantages in the refrigeration and air-conditioning control component market, the global
market concentration is showing an upward trend. For key products in this industry,
except for inverter controller market which is relatively fragmented, the top three players
in the world accounted for 87.3%, 87.6%, 70.7%, 78.6%, 74.7%, 96.6%, 56.2% and 80.3% in
terms of revenue in four-way reversing valves, electronic expansion valves, micro-channel
heat exchangers, service valves, solenoid valves, Omega pumps, pressure sensors and ball
valves, respectively, in 2024. Leading component manufacturers have continuously
consolidated their dominant positions through technological improvement, product
quality and cost efficiency advantages. In contrast, small component manufacturers may
find it difficult to compete with leading manufacturers, due to insufficient technological
reserves, limited production scale, and relatively weak supply chain integration
capabilities. According to Frost & Sullivan, we ranked first in the refrigeration and
air-conditioning control component market in terms of revenue in 2024. According to
Frost & Sullivan, in terms of revenue in 2024, we ranked first in the global market of
refrigeration and air-conditioning valves, heat exchangers and pumps, and ranked second
in the market of refrigeration and air-conditioning controllers. In the same year, our
four-way reversing valves, electronic expansion valves, micro-channel heat exchangers,
service valves, solenoid valves, Omega pumps and ball valves ranked first in their
respective global markets in terms of revenue, with market shares of 55.4%, 51.4%, 43.4%,
39.1%, 47.7%, 53.6% and 32.8%, respectively. In the same year, our pressure sensors ranked
second in the global sensors market in terms of revenue, with a market share of 15.9%.
The global automotive thermal management system component market is highly
concentrated. Leading companies leverage early advantages to accumulate expertise in
core components and system development capabilities. They also possess technical
advantages in system integration. According to Frost & Sullivan, in terms of revenue in
2024, we ranked first in the global market of automotive valves and integrated modules,
respectively, and ranked fourth in the global market of automotive pumps. For
automotive electronic expansion valves, integrated modules, battery coolers and
automotive electronic pumps, the top three players in the world accounted for 89.7%,
89.6%, 62.7% and 60.5% of the market share in terms of revenue, respectively, in 2024. In
the same year, our automotive electronic expansion valves and integrated modules ranked
first in their respective global markets in terms of revenue, with market shares of 48.3%
and 65.6%, respectively. In addition, in the same year, our battery coolers and automotive
electronic water pumps ranked third and fourth in their respective global markets in
terms of revenue, with market shares of 5.9% and 5.5% respectively.
See “Industry Overview — Refrigeration and Air-Conditioning Control Component
Market — Competitive Landscape of Refrigeration and Air-conditioning Control
Components” and “Industry Overview — Automotive Thermal Management System
Component Market — Competitive Landscape of Global Automotive Thermal
Management System Components.”
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Our competitive edge is attributable to factors such as extensive industry
experience, leading market position and our ability to offer comprehensive solutions to
our customers. Our market leadership has been further solidified by our international
presence, diverse product portfolio, high-quality customer relations, robust R&D
capabilities, technical expertise and our visionary management team. Therefore, we
believe that we are well-positioned to maintain our leadership position and to capture
future opportunities in the refrigeration and air-conditioning product component
industry and automotive component industry.
EMPLOYEES
As of December 31, 2024, we had 19,787 full-time employees located in both China
and overseas. The following table sets forth a breakdown of our employees by function as
of the same date:
Business Function
Number of
Employees Percent (%)
Production 12,961 65.5
R&D 3,578 18.1
Finance & Administration 2,547 12.9
Sales 701 3.5
Total 19,787 100.0
Adhering to our employee-centered core values, we focus on improving the
working environment for employees, realizing their personal value, improving their
quality of life and promoting their career growth, which are also important parts of our
development strategy. We treat our employees as our core assets and strive to enhance the
morale and cohesion of our Company.
Pursuant to the relevant labor laws and regulations, we established various labor
management policies regarding the timely signing of employee contracts, timely and full
payment of wages, payments of social welfares, vacations and welfare benefits.
Furthermore, we have a performance appraisal system in place which assesses the
performance of the management personnel based on the overall business objectives. In
addition, we established a training system, providing trainings for our employees and
encouraging them to study proactively in their spare time.
In addition, we attach great importance to the cultivation of our corporate culture,
aiming at creating a healthy, positive and cooperative working environment. We take care
of our employees through “Sanhua Family” fund to help the employees facing financial
difficulties. We also organize social events such as sports meetings, job skills
competitions, festival parties and other recreational activities to effectively enhance the
team cohesion. In 2015, we set up an employee stock ownership plan to motivate and
retain key talents. In 2018, 2020, 2022 and 2024, we launched equity incentive plans to
incentivize a wide range of employees from the Company’s senior management to the core
talents.
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As required by the laws and regulations in the jurisdictions in which we operate, we
participate in employee social security plans.
During the Track Record Period and up to the Latest Practicable Date, we did not
have any strikes, protests or other material labor conflicts that may materially impair our
business and image. As of the Latest Practicable Date, our employees were represented by
a labor union.
PROPERTIES
As of December 31, 2024, our Company and Major Subsidiaries owned the land use
rights of 30 parcels in China, each exceeding 1,000 square meters, with an aggregate site
area of approximately 2,040.59 thousand square meters, among all the land parcels owned
by our Company and Major Subsidiaries. All of these land parcels have been granted land
use right certificates. As of December 31, 2024, our Company and Major Subsidiaries
owned (i) 21 properties, each exceeding 1,000 square meters, with an aggregate site area of
approximately 783.7 thousand square meters, that had obtained the relevant title
certificates in China, and (ii) 14 properties, which were still in the process of obtaining the
relevant title certificates in China, with an aggregate site area of approximately 1,200
thousand square meters. These land parcels and properties are primarily used for our
productions and operations, as well as dormitories. For the fourteen properties in the
process of obtaining the relevant title certificates, we have obtained the necessary
planning permits for land use, construction planning permits and construction works
commencement permits, and all of these properties have passed fire safety inspections or
have completed fire safety filings. We have received written confirmation from the
competent authorities stating that they have not imposed any administrative penalties for
failing to obtain the relevant title certificates for such properties during the Track Record
Period. During the Track Record Period and as of the Latest Practicable Date, we had not
received any notice from the relevant authorities regarding any classification of these
properties as illegal structures, and had not been subject to any penalties associated with
these properties. Our PRC Legal Advisor is of the view that (i) the lack of title certificates
does not affect the safe use of such properties; (ii) the absence of title certificates does not
in itself result in fines; and (iii) there are no substantial legal impediments to obtaining
title certificates for these properties. The fact that we have not obtained the relevant title
certificates is primarily due to the ongoing necessary procedures. See “Risk Factors — We
face risks related to title defects related to our properties.” Our PRC legal advisor is of the
view that these defects would not materially or adversely affect our use of the properties
for our business.
As of December 31, 2024, our Company and Major Subsidiaries leased 11 properties
for productions and operations, each exceeding 1,000 square meters, with an aggregate
site area of approximately 50.99 thousand square meters, in China, among all the
properties exceeding 1,000 square meters leased by our Company and Major Subsidiaries.
As of the Latest Practicable Date, we did not have any single property with a book
value accounting for 15% or more of our total assets. According to Chapter 5 of the Hong
Kong Listing Rules and section 6(2) of the Companies Ordinance (Exemption of
Companies and Prospectuses from Compliance with Provisions) Notice, this prospectus is
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exempt from the requirements of section 342(1)(b) of the Companies (Winding up and
Miscellaneous Provisions) Ordinance to include all interests in land or buildings in a
valuation report as described under paragraph 34(2) of the Third Schedule to the
Companies (Winding up and Miscellaneous Provisions) Ordinance.
INSURANCE
We consider our insurance coverage to be adequate and in accordance with the
commercial practices in the industries in which we operate. Our assets, employee safety
and other applicable items/risks are covered by commercial insurances including product
liability insurance, recall insurance, accident insurance, property insurance,
transportation insurance and liability insurance for senior management personnel. We
will continue to review and assess our risk portfolio and make necessary and appropriate
adjustment to our insurance plans to align with our needs and with industry practice.
During the Track Record Period, we did not make any material insurance claims in
relation to our business.
However, there can be no guarantee that we will not incur losses or suffer claims
beyond the limits, or outside the relevant coverage, of our insurance policies. See “Risk
Factors — Risks Relating to Our Business and Industry — We may be subject to risks
associated with our products and may lack sufficient insurance coverage for such claims.
We may not be able to obtain adequate insurance for losses and liabilities arising from
various operational risks and hazards to which we are exposed.”
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
We recognize environmental protection, integrity and transparency as important
aspects of our business development process, and are committed to making a positive and
sustainable impact on our stakeholders through environmentally and socially responsible
operations.
Governance
We have established a multi-tiered Environmental, Social and Governance (“ ESG”)
management structure. Our Board, as the highest governance body for our ESG
management, is responsible for formulating, overseeing and reviewing our ESG strategy,
including strategic direction, target setting and key policies, as well as identifying and
evaluating ESG-related risks and opportunities to ensure that the impact of these factors
on our long-term development is adequately considered. We have established a Strategy
Management and ESG Committee to examine ESG-related issues and make
recommendations on policies related thereto. It reviews the implementation of our ESG
strategies and objectives from time to time and updates the Board on a regular basis. We
have also set up a dedicated ESG Working Group, which is responsible for planning our
overall strategies and action points on ESG issues and assisting various departments to
break down their objectives and define their responsibilities, so as to ensure the effective
implementation of relevant measures.
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Strategy
We have dedicated personnel to identify and monitor ESG-related risks and
opportunities and applicable regulatory and supervisory requirements to proactively
address current and anticipated challenges. In the process of promoting green and smart
development, we have implemented measures across various business areas, including
the refrigeration and air-conditioning product component and the automotive
component. For refrigeration and air-conditioning product component business, we focus
on advancing eco-friendly refrigerant technology to lead global green development in this
field, and for automotive component business, we optimize our customers’ energy
efficiency and reduce carbon emissions through our leading thermal management
technology.
These measures not only drive green and smart development, but also help
maintain our competitive advantages amidst increasingly stringent environmental
regulations and evolving market demands. Moreover, with the implementation of
comprehensive risk adaptation and mitigation plans, we have established scientific
indicators and objectives to ensure the efficient implementation of our green and smart
strategies. We are now focusing on carbon emission control, resource efficiency
improvement and labor rights management, among others, and have established a clear
management framework and milestones to drive continuous improvement in key ESG
domains.
And up to the Latest Practicable Date, we strictly comply with applicable
ESG-related laws and regulations. In 2022, 2023 and 2024, there was no material violation
with regard to ESG-related laws and regulations. Over these years, we have annually
invested a certain amount of resources in developing our ESG compliance management
system, addressing key topics such as environmental protection, production safety and
information security. These efforts include upgrades to pollutant treatment facilities,
conducting emergency drills for production safety and performing special audits on
information security. For example, we have invested RMB27.2 million, RMB33.7 million
and RMB34.3 million in 2022, 2023 and 2024, respectively, in environmental protection
initiatives, representing 0.1%, 0.1% and 0.1% of our revenue, respectively. Such
investments did not have any material impact on our financial performance. During the
Track Record Period, our ordinary business operations were not materially impacted by
measures taken to achieve the reduction targets.
Risk Management
We proactively review our operations and industry characteristics and referencing
domestic and global ESG standards, policies, industry trends and key focus areas of global
ESG ratings. This allows us to identify ESG-related risks and opportunities we face.
Simultaneously, we assess and rank risks across dimensions such as probability and
impact through questionnaires, and the results of such analyses are reviewed and
approved by our Strategy Management and ESG Committee.
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Our ESG-related risk and opportunity management follows a four-step process:
(i) grasp the ESG-related policy landscape, industry trends, and global ESG rating
standards, while identifying our stakeholders and communication methods; (ii) conduct
preliminary identification and screening of ESG issues relevant to us followed by in-depth
analysis to evaluate their impacts and relevance to our business; (iii) develop appropriate
risk assessment methodologies and thresholds, and engage our Directors, executives,
Shareholders, government and regulatory authorities, customers, employees, suppliers
and community and other stakeholders to evaluate risks according to such
methodologies, and rank the related issues by importance and urgency to form an issue
matrix; and (iv) has our Strategy Management and ESG Committee reviewed and
approved the results of the above analyses, determined the focus areas of risk
management, and developed corresponding management and response strategies.
We identify four categories of ESG issues that have a material impact on our
business.
Responding to Climate Change
The transition to green and low-carbon development, exemplified by new energy
vehicles, represents both new quality productive forces and a strategic focus for the
automotive industry’s transformation. In addition, the growing regulation of greenhouse
gas (“ GHG”) emissions globally has accelerated the phase-out of traditional refrigerant
technologies.
To this end, we actively implement the corresponding measures, which mainly
include: (i) prospectively exploring the upgrading of thermal management technologies
for new energy vehicles, while establishing technology partnerships and collaborating
with leading scientific research institutes to promote technological innovation; and (ii)
investing heavily in the R&D of eco-friendly refrigerants, aiming to seize market
opportunities and enhance the core competitiveness of our products. For instance, in
compliance with The Kigali Amendment to the Montreal Protocol on Substances that Deplete the
Ozone Layer, we are actively researching alternative refrigerants for the air-conditioning
sector and developing clean refrigerant technologies in this regard, such as CO
2 and R134a
refrigerants.
Energy Management
As a key player in the refrigeration and air-conditioning control components and
automotive thermal management system component supply chains, we face increasing
demands from clients to enhance our environmental performance by increasing the use of
clean energy and providing carbon footprint reports for our products. Meanwhile, in the
face of more stringent energy-saving policies and assessment targets issued by local
governments than the national dual carbon strategy, we mainly rely on municipal power
supply for our production operations, and we may be subject to carbon allowance trading
and energy efficiency audits by regulatory authorities in the future. As a result, we need to
further reduce our energy consumption levels.
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To this end, we actively implement the corresponding measures, which mainly
include: (i) adopting measures such as installation of distributed photovoltaic systems,
energy storage facilities and purchase of green power certificates; and (ii) introducing an
intelligent energy system to monitor the energy consumption across divisions, workplaces
and high-energy-consuming equipments in real time, and to identify energy wastage in a
timely manner by providing early warnings of energy consumption anomalies.
Employment and Labor Standards
If we fail to properly manage employment practices at our overseas factories and
branches, resulting in issues such as forced labor or the use of child labor, we could face
penalties from local authorities or be criticized by non-governmental organizations,
which could jeopardize our external image and reputation. Furthermore, inadequate
management of labor rights, such as discrimination or wage arrears, could lead to higher
employee turnover, which would, in turn, affect our production and operational
efficiency.
To this end, we actively implement the corresponding measures, which mainly
include: (i) strictly prohibiting child labor and compulsory employment, firmly opposing
discrimination, and ensuring legal compliance and equality of employment through
random internal inspections; and (ii) continuously monitoring the economic conditions
and changes in the cost of living of our employees in the jurisdictions in which we operate,
and assessing and adjusting the remuneration levels of our employees timely.
Occupational Health and Safety
Our occupational health and safety protection facilities and equipment are widely
distributed, and inadequate supervision may result in failures not being detected in a
timely manner, thereby creating a risk of accidents. In addition, any deficiency in our
safety facilities or failure of our employees to wear labor protection equipment may result
in administrative penalties issued by governmental regulatory authorities, which could
have negative impacts and result in fines.
To this end, we actively implement the corresponding measures, which mainly
include: (i) establishment of a comprehensive mechanism for the identification and
management of potential hazards, including monthly regular production safety hazard
investigation and management and implementation of a safety inspection plan; and (ii) ad
hoc inspections and weekly unscheduled random safety inspections of our workshops in
conjunction with the relevant incentive and penalty mechanism to ensure the safety of the
lives and properties of our employees.
Indicators and Targets
We collect and analyze quantitative data as part of our assessment of ESG-related
risks. For instance, our GHG emissions intensity per unit of revenue for 2023 was 0.1 tons
of CO
2 equivalent per RMB10,000. In comparison, we analyzed 12 companies in the
refrigeration and air-conditioning control components industry or the automotive
thermal management system components industry and found that their average emissions
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intensity was similarly approximately 0.10 tons of CO 2 equivalent per RMB10,000,
demonstrating alignment with our performance level. Moving forward, we remain
committed to implementing proactive climate change strategies to further reduce our
GHG emissions intensity while closely monitoring our progress toward achieving our
targets.
We plan to reduce our GHG emissions intensity per unit of revenue by over 30%
compared to the level of 2020 by 2030. Additionally, we aim to achieve carbon neutrality
by 2050 and strive to attain full lifecycle carbon neutrality for our products by 2060. We
believe that achieving these targets will not only help mitigate potential financial
pressures from future carbon tariffs and related policies but also enhance the market
competitiveness of our green products, drive the transition of our supply chain toward a
greener, low-carbon direction, attract more green investment, and create greater
long-term value for our business.
We not only focus on reducing our own greenhouse gas emissions, energy
consumption, wastewater, and waste gas discharges, but also place strong emphasis on
reduction of emissions and resource usage throughout the supply chain. By embedding
environmental performance into supplier admission and evaluation systems, promoting
the adoption of low-energy-consumption equipment and clean energy, and encouraging
resource conservation practices, we implement a comprehensive approach to reducing
emissions and resource usage. This enables us to systematically lower pollutant
discharges, energy use, and environmental risks across all stages of the supply chain.
Responding to Climate Change
Our refrigeration and air-conditioning product component business is vulnerable to
climate risks, while our automotive component business is well-positioned to capitalize
on climate-related opportunities. In line with our ESG strategy, we integrate low-carbon
principles into our operations and product design, developing advanced products that
meet the demands of a low-carbon economy. Leveraging on digital and intelligent
management models, we aim to establish an industry-leading carbon emissions
management system. We have formulated and implemented comprehensive emission
reduction plans and practices, including but not limited to: (i) conducting product
eco-design initiatives; (ii) undertaking product carbon footprint accounting; (iii) utilizing
the Sanhua Smart Energy Management Platform; (iv) adopting renewable energy; and (v)
establishing “green factories”. Due to our expansion investments in factories across China
and overseas, our total GHG emissions showed an upward trend for 2023 and 2024. In
2022, 2023 and 2024, our total GHG emissions (Scope 1 and 2) were approximately 209.6
thousand, 253.3 thousand and 356.3 thousand tons of CO
2 equivalent, respectively. These
emissions comprised Scope 1 GHG emissions of approximately 26.6 thousand, 32.3
thousand and 64.9 thousand tons of CO
2 equivalent, respectively, and Scope 2 GHG
emissions of approximately 183.0 thousand, 221.0 thousand and 291.4 thousand tons of
CO
2 equivalent, respectively, and Scope 3 GHG emissions of approximately 36.8
thousand, 39.6 thousand and 77.0 thousand tons of CO 2 equivalent, respectively. In 2024,
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we began to include Scope 3 GHG emissions from upstream leased assets in our statistics,
resulting in an increase in Scope 3 greenhouse gas emissions for 2024 compared to the
previous two years.*
Energy Management
We have set a clear target to reduce energy consumption. We aim to reduce energy
consumption per unit of revenue to 0.039 tce per RMB10,000 by 2030, representing a 10%
decrease from the 2024 level of 0.043 tce per RMB10,000. In addition, we have set
quantitative targets to increase the proportion of electricity sourced from renewable
energy. The goal of our renewable energy management is to ensure that approximately
15% of our annual electricity consumption is from renewable sources. For 2022, 2023 and
2024, the proportion of electricity sourced from renewable energy reached approximately
6.3%, 12.7% and 16.0%, respectively.
To support the achievement of renewable energy usage targets and the continuous
increase in the proportion of renewable energy consumption, we allocate a certain amount
of funds annually for the construction and maintenance of photovoltaic power generation
facilities, as well as the purchase of green electricity and green certificates. We believe that
these investments not only help reduce GHG emissions, enhance the autonomy and
stability of energy use and mitigate the impact of traditional energy price fluctuations on
operating costs, but also alleviate, to some extent, the financial demand associated with
potential future energy consumption, thereby enhancing our long-term competitiveness.
We have established internal management systems such as the Energy Management
Measures and the Energy Management System Manual. These efforts are aimed at
monitoring energy consumption across our campuses, business units, workshops, and
energy-intensive equipment in real time through the development of an intelligent energy
IoT management platform and carbon emission calculation software. Regular energy
analysis reports are generated and presented to senior management, ensuring continuous
updates on the status of energy management. Based on the actual progress of
energy-saving and consumption-reduction targets, we adjust our energy management
strategies accordingly. In terms of energy management within the supply chain, we
implement a green procurement strategy by incorporating environmental performance
into supplier admission and evaluation systems. We encourage suppliers to adopt
low-energy-consumption equipment and clean energy sources, aiming to reduce overall
energy consumption and carbon emissions across the supply chain.
*Note: Scope 1 GHG emission factors refer to the China Energy Statistical Yearbook ; Scope 2 GHG emission factors
for China are based on the Announcement on the Release of the 2022 CO 2 Emission Factors for Electricity.
As for the CO 2 emission factors for electricity in overseas countries and regions, we rely on the
information announced by the energy management departments of the respective countries and regions
due to the differences in the situation among the regions. Regarding Scope 3 GHG emission factors,
which include GHG emissions from downstream transport, upstream leasing and downstream leasing,
we follow the GHG Accounting System Corporate Value Chain (Scope 3) Accounting and Reporting
Standards in our calculation.
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In 2024, we formulated and published the Sanhua Environmental Statement and
have continuously implemented a series of energy-saving and consumption-reduction
projects, including but not limited to: (i) replacing high-energy, high-voltage equipment,
achieving annual energy savings of approximately 158.4 MWh; (ii) deploying a
centralized air conditioning integrated management software system for remote
management and monitoring of operations; and (iii) investing in photovoltaic power
generation and purchasing green electricity to optimize our energy structure. In 2022,
2023 and 2024, our total energy consumption was approximately 58.4 thousand tonne of
standard coal equivalent (“ tce”), 74.9 thousand tce and 121.4 thousand tce, respectively.
During this period, we consumed approximately 316.4 thousand MWh, 402.7 thousand
MWh and 615.8 thousand MWh of electricity, respectively. Among these, we acquired
approximately 20.0 thousand MWh, 51.1 thousand MWh and 98.5 thousand MWh of green
electricity in 2022, 2023 and 2024, respectively. The upward trend in our energy
consumption during the Track Record Period was primarily due to our expansion
investments in factories across China and overseas, and we extended the scope of
statistical data related to energy consumption.
Emissions and Wastes
We have established quantitative targets for air pollutants and waste. Specifically,
we aim to reduce the VOCs emissions per unit of revenue to 4.5 grams per RMB10,000 by
2030, representing a 10% decrease from the 2024 level of 5.0 grams per RMB10,000, and
similarly, reduce waste generation per unit of revenue to 12.51kg per RMB10,000 by 2030,
representing a 10% decrease from the 2024 level of 13.9kg per RMB10,000. Additionally,
we achieved full compliance with regulations concerning wastewater discharge, air
emissions and solid waste disposal in 2022, 2023 and 2024.
To maintain compliance in pollutant discharge and waste management, we allocate
annual investments toward the construction, upgrades and operational maintenance of
environmental protection facilities. These initiatives include optimizing air treatment
systems, enhancing wastewater treatment capacity and improving solid waste
classification and recycling systems. We believe these investments not only ensure
operational stability and regulatory compliance but also mitigate potential risks
associated with stricter environmental regulations.
We have established internal management systems such as the Hazardous Waste
Management Measures, Wastewater and Air Pollutant Control Procedures, and Solid
Waste Control Procedures to ensure that our emissions of air pollutants, water pollutants
and waste disposal meet regulatory requirements and uphold high environmental
standards. We regularly identify and assess environmental factors, implement strict
control measures, and conduct performance evaluations on compliant emissions of
exhaust gas and wastewater and compliant disposal of hazardous waste according to the
Safety and Environmental Assessment Management Regulations. In terms of pollutant
and waste control within the supply chain, we explicitly include clauses related to
hazardous substances in the supplier Corporate Social Responsibility audit checklist and
performance evaluation system. We focus on assessing whether suppliers continuously
monitor and effectively treat hazardous wastewater and waste gas, and whether they
properly manage and dispose of hazardous solid waste, striving to reduce toxic emissions
and environmental risks at the source throughout the supply chain.
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Our waste reduction initiatives include but are not limited to: (i) upgrading oil mist
collection in machining workshops to centralized collection for external pipeline
discharge; (ii) enhancing welding fume collection in assembly workshops with centralized
water-spray filtration before discharge; and (iii) promoting digitalization of hazardous
waste storage facilities and providing training related to waste disposal. In 2022, 2023 and
2024, we discharged a total of approximately 196.2 tons, 231.4 tons and 310.1 tons of water
pollutants, respectively. During these same periods, our air pollutant emissions totaled
approximately 49.0 thousand kg, 57.9 thousand kg and 68.5 thousand kg, respectively.
Additionally, we generated approximately 5.7 thousand tons, 5.6 thousand tons and 5.4
thousand tons of hazardous waste, and approximately 8.8 thousand tons, 10.1 thousand
tons and 33.6 thousand tons of non-hazardous waste, respectively*.
Use of Resources
We have established a quantitative target for reducing water consumption. We are
committed to reducing water consumption per unit of revenue to approximately 1.4 m
3
per RMB10,000 by 2030, representing a 10% from the 2024 level of 1.6 m 3 per RMB10,000.
We value the conservation and efficient use of water resources and have established
a dedicated team to oversee water resource management, striving to enhance our water
resource management system. Simultaneously, we have implemented various
water-saving measures, including but not limited to: (i) reducing the consumption of
purified water during manufacturing processes by adjusting production techniques; (ii)
reusing over 90% of product testing water after sedimentation treatment; and (iii)
purifying and reusing contaminated water resources. In terms of resource conservation
within the supply chain, we encourage suppliers to establish sound water monitoring
systems, continuously optimize production processes, and enhance wastewater treatment
capabilities to reduce water waste and minimize negative environmental impact.
Additionally, we actively promote circular economy initiatives, including but not
limited to: (i) transitioning from single-use packaging to reusable packaging for electronic
expansion valve products; and (ii) replacing single-use cardboard boxes with recyclable
pallet collars, achieving approximately 48,000 cycles of reuse annually, with an average
lifespan of two years for internal liners and three years for external boxes. In 2022, 2023,
and 2024, our total water consumption was approximately 3,643.3 thousand m³, 4,002.1
thousand m³, and 4,496.1 thousand m³, respectively. During these same periods, we
utilized approximately 12.6 thousand, 16.1 thousand and 14.6 thousand tons of packaging
materials for finished products, respectively*.
* Note: Due to our expansion investments in factories across China and overseas, and we extended the scope of
statistical data related to resources and emissions, adding some domestic and overseas factories in 2024,
our total water pollutants, air pollutant emissions, hazardous and non-hazardous waste, and water
consumption have shown an upward trend.
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Employment and Labor Standards
In 2024, we joined the United Nations Global Compact and actively uphold its Ten
Principles . Additionally, in 2024, we formulated and published the Sanhua Labor and
Human Rights Statement, demonstrating our commitment to providing every employee
with a safe, equitable, and healthy working environment.
Our employment and labor management measures include but are not limited to: (i)
ensuring no discrimination in employment, compensation, training, and promotion
opportunities based on race, religion, gender, nationality, age, marital status, or disability;
(ii) strictly prohibiting the employment of child labor and any form of forced labor; (iii)
safeguarding employee rights concerning compensation, working hours, rest and leave,
occupational safety, health, and training; (iv) establishing clear regulations on
remuneration for pregnant employees, ensuring no discrimination or unjust wage
reduction during pregnancy, maternity leave, or breastfeeding periods; (v) promoting
work-life balance by offering meal subsidies, housing allowances, transportation
stipends, holiday benefits, and organizing activities such as expert medical consultations
and childcare services; and (vi) lowering employee turnover through regular monitoring
of turnover rates, analysis on reasons for employee departures and timely adjustment to
remuneration, benefits and management policies. For 2022, 2023 and 2024, our total
number of employees was 14,860, 17,732, and 19,787, respectively. The total number of
female employees was 6,776, 6,551, and 6,722, respectively, while the total number of male
employees was 8,084, 11,181, and 13,065, respectively. In 2022, 2023, and 2024, the number
of our management employees was 3,243, 3,847 and 4,353, respectively, with female
employees accounting for 29.0%, 22.8% and 23.2%, respectively.
Health and Safety
Our health and safety goal is to achieve zero recognized occupational disease and
prevent any serious or above-level workplace safety incidents each year. We have
obtained ISO 45001 Occupational Health and Safety Management System certification and
proactively established safety production and occupational health regulations, including
the Safety Production Rules and Regulations, Safety Hazard Investigation Management
Measures, Occupational Disease Hazard Monitoring and Evaluation Management System,
Occupational Disease Hazard Warning and Notification Measures, and Environment,
Occupational Health and Safety Monitoring and Control Procedures. During the Track
Record Period, we did not experience any major violations of occupational health and
safety regulations.
We have implemented various occupational health and safety management
measures, including but not limited to: (i) implementing the Safety Production
Responsibility System, signing Safety Production Responsibility Agreements, and
developing Job Operation Procedures based on job-specific risks; (ii) conducting safety
status evaluation by annually assessing occupational health hazards at worksites and
regularly updating the list of hazardous sources and job-specific occupational hazards;
(iii) organizing safety incident emergency drills, certification training for safety officers,
and workshops on accident prevention and emergency response; and (iv) providing
employees in high-risk positions with pre-employment, in-service, and post-employment
health examinations, and offering workers diagnosed with occupational diseases the
reassignment to suitable positions.
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Development and Training
In terms of employee training, we are committed to building a multi-level,
multi-sequence talent development system, covering position-related professional
knowledge, skills, and management abilities to comprehensively enhance employees’
personal growth. We offer leadership development programs such as Navigator, Voyager,
landlubber, Navigator for New Managers, and Management Trainee programs, as well as
specialized training for different sequences, including Quality Excellence, Production
Planning Excellence, Procurement Excellence, Financial Excellence, Human Resources
Business Partner Training Camp, IT Project Manager Training Camp, Marketing Young
Talent Camp, Process Designer.
Regarding employee promotion, we have established a dual career development
path for management and professional roles, and have formulated related management
systems, including the Annual Pioneer Evaluation Management Method, Professional
Technical Talent Level Evaluation Method, and Management Measures for Cultivating
Talent Echelon of R&D Talents. We conduct an annual talent review and, based on the
results, create personal development plans and successor plans for employees in key
positions, promoting their growth and advancement.
Supply Chain Management
We focus on the ESG performance of our suppliers and use it as a key evaluation
criterion. To this end, the main measures we have adopted for supplier ESG management
include but are not limited to: (i) before supplier admission, evaluating supplier risks
from dimensions such as operational status, production conditions, and qualifications
certification based on our Potential Supplier Audit Report Analysis; (ii) during the
supplier audit phase, conducting social responsibility assessments of suppliers to check
their compliance in areas such as environmental protection, labor practices, and business
ethics; and (iii) after confirming cooperation, actively signing agreements with suppliers
that include ESG-related clauses, such as the Supplier Code of Conduct, Basic Supply
Agreement, and Integrity and Self-Discipline Cooperation Agreement, and supervising
suppliers’ fulfillment of environmental and social responsibilities.
Product Responsibility
Our product responsibility goal is to ensure that no penalty incidents related to
violations of laws and regulations in relation to product and service occur within each
year. During the past three years, there was no product recalls due to safety and health
reasons, nor any penalty incidents related to violations of laws and regulations in relation
to product and service.
We have obtained certifications for quality control systems, including IATF 16949,
ISO 9001, QC 080000, ISO 10012 and ISO 17025, and have established internal management
policies set out in our Quality Manual, Product Safety Management Control Procedures,
and Product Identification and Traceability Control Procedures, among others. To actively
ensure product quality and safety, the key measures we take include but are not limited to:
(i) effectively monitoring product quality during the mass production phase by executing
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the requirements of the Monitoring and Measurement Control Procedures and
Non-conforming Product Control Procedures; (ii) regularly setting goals and plans for
quality improvement activities tracking the progress of these plans monthly, which
includes activities such as Quality Control Circles, standardized operations, and good
product conditions; and (iii) conducting annual internal quality audits.
Business Ethics
We hold zero-tolerance of corruption and take all necessary measures to prevent and
combat corrupt practices. In 2024, we formulated and announced the Sanhua Business
Ethics Declaration, which is our first public business ethics-related policy implemented,
which outlines our management mechanisms on employee integrity management,
supplier integrity management, conflict of interest prevention, and anti-unfair
competition.
To enhance our business ethics management and standardize employee conduct
guidelines, we actively implement various control measures, including but not limited to:
(i) actively facilitating various reporting channels, establishing regulations for managing
and handling whistleblower information, and encouraging employees to report violations
of business ethics; (ii) focusing on protecting whistleblowers at all times, allowing
anonymous or pseudonymous reports, and ensuring strict protection of whistleblower
information during acceptance, registration, storage, investigation, and other stages; and
(iii) conducting anti-corruption training for directors and employees.
LICENSES AND APPROVALS
During the Track Record Period and up to the Latest Practicable Date, we have
obtained all licenses, approvals, permits and certificates that are material and necessary
for our business operations in jurisdictions where we operate, and such licenses, permits,
approvals and certificates are valid and subsisting.
REGULATORY COMPLIANCE AND LEGAL PROCEEDINGS
Legal Proceedings
We may from time to time be subject to various legal or administrative claims and
proceedings arising from the ordinary course of business. Litigation or any other legal or
administrative proceeding, regardless of the outcome, is likely to result in substantial cost
and diversion of our resources, including our management’s time and attention. See “Risk
Factors — Risks Relating to Our Business and Industry — We may be involved in legal
proceedings and commercial or contractual disputes, which could materially and
adversely affect our reputation, business, results of operations and financial condition.”
As of the Latest Practicable Date, we and our major subsidiaries are not involved in any
court, arbitral or administrative proceedings which we believe may be of material
importance to our assets and liabilities or profits and losses nor, so far as we are aware, are
any such proceedings pending or threatened. See “Risk Factors — Risks Relating to Our
Business and Industry — We may be involved in legal proceedings and commercial or
contractual disputes, which could materially and adversely affect our reputation,
business, results of operations and financial condition.”
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During the Track Record Period and up to the Latest Practicable Date, we had not
been and were not involved in any material non-compliance incidents that have led to
fines, enforcement actions or other penalties that could, individually or in the aggregate,
have a material adverse effect on our business, financial condition and results of
operations.
RISK MANAGEMENT AND INTERNAL CONTROL
We are exposed to various risks during our operations. We have put in place a set of
internal control and risk management policies and procedures to address potential
operational, financial, legal and market risks identified in relation to our operations. We
also periodically review these procedures to ensure their effectiveness. Our policies and
procedures relate to managing our procurement and production, as well as monitoring
our sales performance and product quality.
To monitor the ongoing implementation of our risk management policies and
corporate governance measures after the Listing, we have adopted, or will continue to
adopt, among other things, the following risk management measures:
• establish an Audit Committee to review and supervise our financial reporting
process and internal control system. For the qualifications and experience of
the committee members, see “Directors, Supervisors and Senior
Management — Board Committees — Audit Committee;”
• adopt policies to ensure compliance with the Listing Rules, including but not
limited to aspects related to risk management, connected transactions and
information disclosure;
• organize training sessions for our Directors, supervisors and senior
management in respect of the relevant requirements of the Listing Rules and
duties of directors of companies listed in Hong Kong;
• provide trainings periodically to our senior management and employees on
professional behavior requirements and ethics standards to enhance their
knowledge and compliance with applicable laws and regulations, and include
relevant policies against non-compliance in our employee discipline measures
and supervision guidelines;
• set clear guidelines and processes for identifying, measuring and addressing
price and currency risks, ensuring that all hedging activities are conducted
within a structured and consistent framework;
• enhance our reporting and records system for factories, including centralizing
their quality control and safety management systems and conducting regular
inspections of the facilities;
• establish a set of emergency procedures in the event of major quality-related
issues;
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• provide enhanced training programs on quality assurance and product safety
procedures; and
• distribute employee handbooks to enhance employees’ awareness of
complying with laws and regulations.
AWARDS AND RECOGNITIONS
During the Track Record Period, we received awards and recognition in respect of
our products, technology and innovation. The following table sets out major awards and
recognitions we received during the Track Record Period:
Year Award/Recognition Awarding entity
2022 National Technology Innovation
Demonstration Enterprise
Ministry of Industry and
Information Technology
2022 World-Class Machinery Enterprise China Machinery Industry
Enterprise Management
Association
2022 Zhejiang Province Benchmark
Enterprise for Management
Improvement
Zhejiang Provincial
Department of Economy
and Information
Technology
2023 Key Enterprise Research Institute of
Zhejiang Province
Zhejiang Provincial
Department of Science
and Technology
2023 Leading Technology Enterprise of
Zhejiang Province
Zhejiang Provincial
Department of Science
and Technology
2023 Hidden Champion Enterprise of
Zhejiang Province
Zhejiang Provincial
Department of Economy
and Information
Technology
2024 Manufacturing Industry Single
Champion Enterprise
Ministry of Industry and
Information Technology
2024 Zhejiang Famous Brand for Export Zhejiang Provincial
Department of
Commerce
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OVERVIEW
Upon Listing, our Board will consist of ten Directors, comprising four executive
Directors, two non-executive Directors and four independent non-executive Directors.
Our Directors are appointed for a term of three years and are eligible for re-election upon
expiry of their term of office. The Independent Non-executive Directors shall not hold
office for more than six consecutive years pursuant to the relevant PRC laws and
regulations.
Our Company also established a supervisory committee that is primarily
responsible for supervising the performance of the Board and senior management and the
financial operations, internal control and risk management. Our Supervisory Committee
consists of three Supervisors including one employee representative Supervisor. Our
Supervisors are elected for a term of three years and may be subject to re-election.
DIRECTORS
The following table provides information about our Directors:
Name Age Positions
Date of
joining our
Group
Date of
appointment
as a Director Role and Responsibility
Mr. ZHANG Yabo
(΋͛ )
51 Executive Director,
Chairman of the
Board and Chief
Executive Officer
August 2001 October 2009
(Executive
Director)
and
December
2012
(Chairman
of the Board)
Overall strategic
planning, business
development and
management of our
Group
Mr. WANG Dayong
(΋͛ )
55 Executive Director
and President
December 2001 December 2012 Responsible for advising
the operation and
management of our
Group and the overall
operations of
residential
refrigeration business
Mr. NI Xiaoming
(΋͛ )
56 Executive Director January 2009 May 2011 Responsible for the
overall operations of
micro-channel heat
exchanger business
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Name Age Positions
Date of
joining our
Group
Date of
appointment
as a Director Role and Responsibility
Mr. CHEN Yuzhong
(΋͛ )
59 Executive Director
and Chief Engineer
December 2001 November
2011
Responsible for the
overall operations of
commercial
refrigeration business
Mr. ZHANG Shaobo
(΋͛ )
46 Non-executive
Director
January 2001 May 2015 Providing professional
opinion and judgment
to the Board
Mr. REN Jintu
(ɺ΋͛ )
63 Non-executive
Director
June 2001 January 2022 Providing professional
opinion and judgment
to the Board
Mr. BAO Ensi
(౶΋͛ )
56 Independent
Non-executive
Director
August 2021 August 2021 Supervising and
providing independent
opinion and judgment
to the Board
Mr. SHI Jianhui
(ሾ΋͛ )
53 Independent
Non-executive
Director
May 2020 May 2020 Supervising and
providing independent
opinion and judgment
to the Board
Ms. PAN Yalan
(ᆙԭళɾɻ )
59 Independent
Non-executive
Director
February 2021 February 2021 Supervising and
providing independent
opinion and judgment
to the Board
M r .G eJ u n
(΋͛ )
53 Independent
Non-executive
Director
Listing Date Listing Date Supervising and
providing independent
opinion and judgment
to the Board
Save that Mr. Zhang Yabo and Mr. Zhang Shaobo are brothers, none of our Directors,
Supervisors and members of senior management is related to other Directors, Supervisors
or members of senior management. Save as disclosed in this section, (i) none of our
Directors held any directorships in public companies, the securities of which are listed on
any securities market in Hong Kong or overseas in the last three years immediately
preceding the date of this prospectus; (ii) to the best knowledge, information and belief of
the Directors having made all reasonable inquiries, there were no other matters with
respect to the appointment of the Directors that need to be brought to the attention of the
Shareholders and there was no information relating to our Directors that is required to be
disclosed pursuant to Rule 13.51(2) of the Listing Rules.
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Executive Directors
Mr. Zhang Yabo (΋͛), aged 51, has been our Executive Director since
October 2009, and our Chairman of the Board and the Chief Executive Officer since
December 2012.
Mr. Zhang joined our Group in August 2001 and has been serving as the director and
vice chairman of the board of directors of Sanhua Holding Group Co., Ltd. (ණྠ
ʮ̡ ) since May 2007. Prior to his current positions in our Group, Mr. Zhang has been
an employee of Orient Trading Co., Ltd. (ٟfrom August 1996 to July 1997,
assistant to general manager of Shanghai Sanhua Electric Co., Ltd. (ʮ̡ )
from July 1997 to September 2000, vice president and director of Sanhua Holding Group
Co., Ltd. (ʮ̡ ) from July 2000 to September 2003, chairman of the board
of Sanhua-Fujikoki Co., Ltd. (ʮ̡ ), the predecessor of our Company,
from August 2001 to November 2001, Chairman of the Board of our Company from
December 2001 to April 2007, the vice president of Sanhua Holding Group Co., Ltd. (ڀ
ʮ̡ ) from May 2007 to September 2009 and the general manager of our
Company from September 2009 to December 2012. Mr. Zhang has also been serving as the
general manager of Zhejiang Sanhua Climate & Appliance Controls Group Co., Ltd. ( एϪ
ʮ̡ ) since July 2001, the executive director of Hangzhou Zhicheng
Investment Management Co., Ltd. (ʮ̡ ) since July 2007, a director
of Wuhu ALDOC Technology Co., Ltd. (ப΂ʮ̡ ) since February 2016,
the chairman of the board of Xinchang Huaxin Industrial Co., Ltd. (ʮ̡ )
since March 2016 and the chairman of the board of Hangzhou Sanhua Research Institute
Co., Ltd. (ʮ̡ ) since February 2017.
Mr. Zhang received his MBA degree from China Europe International Business
School ( ʕᆄ਷ყʈਠኪ৫ ) in 2005 and his bachelor’s degree in Mechanical Manufacturing
Technology and Equipment and bachelor’s degree in Refrigeration and Cryogenic
Technology from Shanghai Jiao Tong University ( ɪऎʹஷɽኪ ) in 1996.
Mr. WANG Dayong (΋͛), aged 55, has been our Executive Director and the
President since December 2012.
Mr. Wang joined our Group in December 2001. He has joined Sanhua Holding Group
Co., Ltd. (ʮ̡ ) since December 1992, with his current position as a
director. Prior to his current positions in the Company, Mr. Wang had served as a director
of our Company from April 2006 to May 2011. Mr. Wang had successively served as the
chief of planning section, secretary of general manager, director of manufacturing
department, director of refrigeration valve business department, assistant to general
manager, assistant to president, vice president and director of Sanhua Holding Group Co.,
Ltd. (ʮ̡ ) since December 1992. Mr. Wang has also been serving as the
executive director of Xinchang Huayong Enterprise Management Co., Ltd. (ശӰΆุ
ʮ̡ ) since November 2021 and a director of Ningbo Jiaerling Pneumatic
Machinery Co., Ltd. (ʮ̡ ) since October 2023.
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Mr. Wang received his EMBA degree from Zhejiang University ( एϪɽኪ ) in 2005
and received his bachelor’s degree in Quality Management from Beijing Institute of
Machinery ( ̏ԯዚ૛ʈุኪ৫ ) in 1992. Mr. Wang was qualified as a senior economist in
2020 by Zhejiang Provincial Department of Human Resources and Social Security.
Mr. NI Xiaoming (΋͛), aged 56, has been our Executive Director since May
2011.
Mr. Ni joined our Group in January 2009. Mr. Ni currently serves as a director of
Sanhua Holding Group Co., Ltd. (ʮ̡ ) since July 2000, a director and
general manager of Sanhua (Hangzhou) Micro Channel Heat Exchanger Co., Ltd. (ψɧ
ʮ̡ ) since August 2006 and May 2010, respectively and a director of
Zhejiang Sanhua Commercial Refrigeration Co., Ltd. (ʮ̡ ) since
October 2020. Prior to his current positions in our Group, Mr. Ni served as the deputy
director of foreign economic affairs office of Xinchang Refrigeration Components Factory
(Ⴁиৣ΁ᐼᅀ ) from 1991 to 1994, deputy manager of marketing department, director
of foreign trade department and member of management committee of Sanhua Holding
Group Co., Ltd. (ʮ̡ ) from 1995 to 2000, the deputy general manager of
sales of our Company from January 2009 to July 2009 and the deputy general manager of
Sanhua Danfoss (Hangzhou) Microchannel Heat Exchanger Co., Ltd., now known as
Sanhua (Hangzhou) Micro Channel Heat Exchanger Co., Ltd. (ࠢ
ʮ̡) from August 2009 to April 2010.
Mr. Ni received master’s degree in EMBA from China Europe International Business
School ( ʕᆄ਷ყʈਠኪ৫ ) in 2006 and bachelor’s degree in Industrial Management
Engineering from Zhejiang University of Technology ( एϪʈุɽኪ ) in 1990. He was
qualified as senior economist in 2021 by Zhejiang Provincial Department of Human
Resources and Social Security.
Mr. Ni was a director of Zhejiang Sanhua Nanwang Microelectronics Co. Ltd. ( एϪ
ʮ̡ ,“ Sanhua Nanwang ”) which was incorporated in the PRC prior
to its business license being revoked. The principal business of Sanhua Nanwang was
research and development, production, and sales of network transmission equipment,
conference television systems, projection equipment, and videophones. The business
license of Sanhua Nanwang was revoked on October 29, 2009 due to cessation of business
operation. To the best of our Directors’ knowledge, information and belief, there was no
judgment or findings of fraud, dishonesty, any misconduct or wrongful act on the part of
Mr. Ni involved in the revocation of the business license of Sanhua Nanwang and as of the
Latest Practicable Date, there was no outstanding liability or ongoing claim or litigation
against Mr. Ni in his capacity as a director prior to the revocation. Mr. Ni confirmed that
this company was solvent at the time its business license was revoked.
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Mr. CHEN Yuzhong (΋͛), aged 59, has been our Executive Director since
November 2011 and our Chief Engineer since December 2012.
Mr. Chen joined our Group in December 2001. Mr. Chen currently serves as a
director of Sanhua Holding Group Co., Ltd. (ʮ̡ ) since November 2014,
the general manager of Zhejiang Sanhua Climate & Appliance Controls Group Co., Ltd.
(ʮ̡ ) since August 2015, a director and the general manager of
Zhejiang Sanhua Commercial Refrigeration Co., Ltd. (ʮ̡ ) since
October 2020 and the chairman of Zhejiang Sanhua Plate Exchange Technology Co., Ltd.
(ʮ̡ ) since December 2021. Prior to his current positions in the
Group, Mr. Chen has worked at Sanhua Holding Group Co., Ltd. (ʮ̡ )
from February 1989 to December 2000 with his last position as director of chief engineer’s
office and served as the chief engineer of Sanhua-Fujikoki Co., Ltd. (ʮ̡ ),
the predecessor of our Company, from September 2001 to December 2001 and the Chief
Engineer and a vice general manager of our Company from December 2001 to May 2011 and
May 2011 to December 2012, respectively.
Mr. Chen received postgraduate diploma in Business Management from Zhejiang
University ( एϪɽኪ ) in 2005 and graduated from Chemical Engineering Department of
Zhejiang University ( एϪɽኪ ), specializing in Light Industry Machinery in 1989. Mr.
Chen was qualified as senior engineer in 2021 by Zhejiang Provincial Department of
Human Resources and Social Security (ღᝂ ).
Non-executive Directors
Mr. ZHANG Shaobo (΋͛), aged 46, has been our Non-executive Director
since May 2015.
Mr. Zhang joined our Group in January 2001. Mr. Zhang currently serves as the
assistant to president, a director of Sanhua Holding Group Co., Ltd. (ʮ
̡) since May 2010 and the chairman of Zhejiang Sanhua Green Energy Industrial Group
Co., Ltd. (ʮ̡ ) since August 2023. Mr. Zhang has also been
serving as the general manager of Hangzhou Sanhua International Building Co., Ltd. (؄
ʮ̡ ) since July 2013, a director of Ningbo Fuerda Smartech Co., Ltd.
(ʮ̡ ) since December 2019, the chairman of the board of
Zhejiang Huateng Industrial Co., Ltd. (ʮ̡ ) since December 2021 and
the chairman of the board of Zhejiang Sanhua Zhiyuan Real Estate Co., Ltd. (౽๕
ʮ̡ ) since October 2023. Mr. Zhang had served as the deputy head of the
finance department of Sanhua Holding Group Co., Ltd. (ʮ̡ )f r o m
August 2003 to May 2005, the executive director and general manager of Zhejiang Sanhua
Zhicheng Real Estate Development Co., Ltd. (ʮ̡ )f r o mM a y
2017 to December 2023 and the general manager of Zhejiang Sanhua Green Energy
Industrial Group Co., Ltd. (ʮ̡ ) from April 2019 to August
2023.
Mr Zhang received his MBA degree from China Europe International Business
School ( ʕᆄ਷ყʈਠኪ৫ ) in 2010.
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Mr. Zhang was a director of Shanghai Tihu Drinks&Food Co., Ltd. ( ɪऎⳀⲾ᎛භϞ
ʮ̡,“ Shanghai Tihu ”) which was incorporated in the PRC prior to its business license
being revoked. The principal business of Shanghai Tihu was catering services and
conference services. The business license of Shanghai Tihu was revoked on February 5,
2024 due to cessation of business operation. To the best of our Directors’ knowledge,
information and belief, there was no judgment or findings of fraud, dishonesty, any
misconduct or wrongful act on the part of Mr. Zhang involved in the revocation of the
business license of the above company, and as of the Latest Practicable Date, there was no
outstanding liability or ongoing claim or litigation against Mr. Zhang in his capacity as a
director prior to the revocation. Mr. Zhang confirmed that this company was solvent at the
time its business license was revoked.
Mr. REN Jintu (ɺ΋͛), aged 63, has been our Non-executive Director since
January 2022.
Mr. Ren joined our Group in June 2001. Mr. Ren currently serves as a director of
Sanhua Holding Group Co., Ltd. (ʮ̡ ) since August 1994 and a director
of Zhejiang Sanhua Green Energy Industrial Group Co., Ltd. (ʮ
̡) since March 2001. Mr. Ren has also been serving as the supervisor of Hangzhou Sanhua
International Building Co., Ltd. (ʮ̡ ) since July 2013, the
supervisor of Xinchang County United Investment Management Co., Ltd. (ጤᑌΥҳ༟
ʮ̡ ) since April 2015 and a director of Ningbo Fuerda Smartech Co., Ltd. ( ྐྵ
ʮ̡ ) since April 2021. Prior to his current position in the
Group, Mr. Ren had worked at Xinchang Refrigeration Components Factory (Ⴁиৣ΁
ᐼᅀ) from August 1984 to August 1998, with his last position as deputy factory director
and served as our general manager from June 2001 to January 2006, our Director from June
2001 to March 2006, the vice president of Sanhua Holding Group Co., Ltd. (ණྠϞ
ʮ̡) and the general manager of Shanghai Jingyi Real Estate Co., Ltd. (ήପ
ʮ̡ ) from December 2005 to May 2015.
Mr. Ren is qualified as a senior accountant. Mr. Ren attended correspondence
education in the Modern Economy Management major at Beijing Correspondence School
of Economics ( ̏ԯ຾᏶Ռબɽኪ ) from January 1987 to July 1988.
Mr. Ren was a director of Shenyang Durui Wheel Co. Ltd. (ʮ̡ ,
“Shenyang Durui ”) which was incorporated in the PRC prior to its winding-up. As of
November 30, 2013, based on the unaudited financial statements of Shenyang Durui, it
was insolvent and unable to pay its debts. Due to severe losses in production and
operation, the shareholders of Shenyang Durui unanimously agreed to cease its
production and operations and proceed with the relevant procedures for winding up and
creditor protection procedures according to PRC company law. Shenyang Durui then filed
voluntary winding up and liquidation application with the Intermediate People’s Court of
Shenyang, Liaoning Province. In March 2015, the court declared Shenyang Durui
bankrupt. On June 24, 2020, Shenyang Durui’s business license was then revoked. Mr. Ren
was a non-executive director of Shenyang Durui not involved in its daily management and
was not a party to the winding-up and liquidation application.
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To the best of our Directors’ knowledge, information and belief, there was no
judgment or findings of fraud, dishonesty, any misconduct or wrongful act on the part of
Mr. Ren involved in the winding-up of the above company. As of the Latest Practicable
Date, there was no outstanding liability or ongoing claim or litigation against Mr. Ren in
his capacity as a director of Shenyang Durui.
Independent Non-executive Directors
Mr. BAO Ensi (౶΋͛), aged 56, has been our Independent Non-executive
Director since August 2021.
Mr. Bao joined our Group in August 2021. Mr. Bao served as a member of the
Issuance Examination Committee at China Securities Regulatory Commission ( ʕ਷ᗇՎ္
ึ ) from December 2003 to May 2007, the assistant to the
chairman of Huge Capital Management Co., Ltd. (ʮ̡ )f r o m
January 2015 to November 2024, an independent director of FuJian YanJing HuiQuan
Brewery Co., Ltd (ʮ̡ , listed on the Shanghai Stock
Exchange under the stock code of 600573) from April 2015 to April 2021, an independent
director of Norinco International Cooperation Ltd. (ʮ̡ , listed on
the Shenzhen Stock Exchange under the stock code of 000065) from August 2015 to August
2021, an independent director of Sunwave Communications Co., Ltd. (ʮ
̡, listed on the Shenzhen Stock Exchange under the stock code of 002115) from September
2015 to August 2021, the independent director of China Aerospace Times Electronics Co.,
Ltd. (ʮ̡ , listed on the Shanghai Stock Exchange under the
stock code of 600879) from June 2020 to June 2023 and an independent director of China
Railway Trust Co., Ltd. (ப΂ʮ̡ ) from April 2022 to June 2024.
Mr. Bao is qualified as a senior accountant in PRC by China National Machinery
Industry Corporation ( ʕ਷ዚ૛ༀ௪ණྠʮ̡), which was authorized to assess and
issue senior accountant qualification titles pursuant to regulations of the relevant national
ministries and commissions of the PRC, in 2004. Mr. Bao also served as the person in
charge of financing of China Financial Futures Exchange (ה׸from May
2007 to December 2014. Mr. Bao also served various positions in China Securities
Regulatory Commission (CSRC) from 1996 to 2007, including a standing committee
member of Stock Issuance Examination Committee (ึ ). During his
tenure as a member of the Stock Issuance Examination Committee at the CSRC, Mr. Bao
was primarily responsible for reviewing and analyzing the financial information of listing
applications, and providing opinions and inquiries. Mr. Bao also accumulated extensive
experience in reviewing and analyzing the audited financial statements of public
companies during this period. Mr. Bao received his doctoral degree in Accounting from
Central University of Finance and Economics ( ʕ̯ৌ຾ɽኪ ) in 2003, his master’s degree
in Accounting from Central University of Finance and Economics ( ʕ̯ৌ຾ɽኪ ) in 1995,
and his bachelor degree diploma in Commercial Accounting from Anhui University of
Technology ( τᏏʈุɽኪ ) in 1988.
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Mr. SHI Jianhui (ሾ΋͛), aged 53, has been our Independent Non-executive
Director since May 2020.
Mr. Shi joined our Group in May 2020. Prior to his current position in the Group, Mr.
Shi currently serves as the managing partner of Ningbo Meishan Bonded Area Xiaozhi
Venture Capital Partnership (Limited Partnership) (೼ಥਜʃ౽௴ุҳ༟ΥྫΆ
Υྫ) since September 2017, a director of BioMintec Environment (Shanghai) Co.,
Ltd. (ʮ̡ ) since January 2020, the chairman of the board of
Hangzhou Homierobot Co., Ltd. (ʮ̡ ) since April 2021, the managing
partner of Ningbo Lingdong Venture Capital Partnership (Limited Partnership) (ᜳਗ
Υྫ) since July 2020, a director of Shanghai SDRIVE Technology
Co., Ltd. (ʮ̡ ) since January 2022, an independent director of AAPICO
Hitech Public Company Limited (listed on the Stock Exchange of Thailand under the stock
code of AH) since June 2022, the managing partner of Hangzhou Chishi Enterprise
Management Consulting Partnership (Limited Partnership) (ψԏͩΆุ၍ଣፔ༔ΥྫΆ
Υྫ) since August 2022 and an independent director of Ningbo Fangzheng Tod
Co., Ltd. (ʮ̡ , listed on Shenzhen Stock Exchange under the
stock code of 300998) since December 2023. Prior to his current positions, he served as an
executive director of Minth Group Co., Ltd. (ʮ̡ , listed on the Stock
Exchange under the stock code of 00425) from November 2005 to August 2017, where he
acted as the chairman of the board from April 2016 to August 2017, and the director of
Beijing LiangDao Automotive Technology Co., Ltd. (ʮ̡ )f r o m
January 2019 to February 2022.
Mr. Shi received his master’s degree in EMBA respectively from Shanghai Advanced
Institute of Finance (ፄኪ৫ ) in 2017 and Cheung Kong Graduate School of
Business (Ϫਠኪ৫ ) in 2007, and his bachelor’s degree in Mechanical Design from
Zhejiang University of Technology ( एϪʈุɽኪ ) in 1993.
For further information about Mr. Shi, please refer to “Directors, Supervisors and
Senior Management — Further Information About Mr. Shi Jianhui” in this prospectus.
Ms. Pan Yalan ( ᆙԭళɾɻ), aged 59, has been our Independent Non-executive
Director since February 2021.
Ms. Pan joined our Group in February 2021. She currently serves as a professor of
Accounting College of Hangzhou University of Electronic Technology (Ҧɽኪ )
since November 2005, an independent director of Zhejiang Daily Digital Culture Group
Co., Ltd (ʮ̡ , listed on the Shanghai Stock Exchange under the
stock code of 600633) since December 2021, a member of the CPPCC of Zhejiang Province
(ึ ) since January 2023, an independent director of
Xianheng International Science & Technology Co., Ltd. (ʮ̡ , listed
on the Shanghai Stock Exchange under the stock code of 605056) since September 2023 and
a standing council member of Zhejiang Provincial Taxation Society (೼ਕኪึ ) since
June 2024. Prior to her current positions, she served as an independent director of
Zhejiang Dali Technology Co., Ltd. (ʮ̡ , listed on the Shenzhen
Stock Exchange under the stock code of 002214) from December 2006 to November 2012,
an independent director of Zhejiang Busen Garments Co., Ltd. (ࠢ
ʮ̡, listed on the Shenzhen Stock Exchange under the stock code of 002569) from July
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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2008 to October 2014, an independent director of Hangzhou First Applied Material Co.,
Ltd. (ʮ̡ , listed on the Shanghai Stock Exchange under the
stock code of 603806) from December 2012 to December 2015, an independent director of
Apeloa Pharmaceutical Co., Ltd. (ʮ̡ , listed on the Shenzhen Stock
Exchange under the stock code of 000739) from April 2014 to March 2016 and an
independent director of Zhejiang Lin’an Rural Commercial Bank Co., Ltd. ( एϪᑗτ༵Ӏ
ʮ̡ ) from February 2020 to October 2024.
Ms. Pan received her master’s degree in MBA from Zhejiang University ( एϪɽኪ )
in 2000. She received her bachelor’s degree in Industrial Accounting from Hangzhou
Dianzi University (Ҧɽኪ ) in 1987.
For further information about Ms. Pan, please refer to “Directors, Supervisors and
Senior Management — Further Information About Ms. Pan Yalan” in this prospectus.
Mr. Ge Jun (΋͛), aged 53, has been our Independent Non-Executive Director
since the Listing Date.
Mr. Ge has also been serving as the dean of Hong Kong Academy of Industry and
Innovation Limited since December 2024, an independent director of Helport AI Limited
(listed on NASDAQ under the stock code of HPAI) since August 2024, an independent
director of China Mengniu Dairy Company Limited (ʮ̡ , listed on the
Stock Exchange under the stock code of 02319) since December 2021, the independent
director of Huize Holding Ltd. (ʮ̡ , listed on NASDAQ under the stock
code of HUIZ) since February 2020, the independent director of Shenzhen Aisidi Co., Ltd.
(ʮ̡ , listed on the Shenzhen Stock Exchange under the stock code
of 002416) since October 2022 and a director of Business Operation Technologies Limited
(ʮ̡ ) since August 2022.
Mr. Ge worked at Shanghai Academy of Building Research (Ӻ৫ )
from July 1993 to August 1996. Mr. Ge held many positions in China Europe International
Business School ( ʕᆄ਷ყʈਠኪ৫ ) from August 1996 to August 2015, including
administrative manager, deputy director of corporate and public relations, director of the
school office, secretary general of the foundation and assistant to the Dean. He served as
the dean of Pudong Innovation Research Institute (Ӻ৫ ) from September 2015
to February 2017, the deputy dean of Shanghai Advanced Institute of Finance at Shanghai
Jiao Tong University (ፄኪ৫ ) from February 2017 to November
2019, an independent director of Meinian Onehealth Healthcare Holdings Co., Ltd. (ϋ
ʮ̡ , listed on the Shenzhen Stock Exchange under the stock code
of 002044) from October 2015 to October 2021, a director of LeadBank Technology Co., Ltd.
(ʮ̡ ) from November 2015 to December 2024, an independent director of
Shanghai Fumed Tianjian Co., Ltd. (ʮ̡ )f r o m
December 2015 to November 2021 and an independent director of Focus Media
Information Technology Co Ltd. (ʮ̡ , listed on the Shenzhen
Stock Exchange under the stock code of 002027) from January 2016 to November 2022.
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Mr. Ge received his bachelor’s degree in Physicochemistry from Xiamen University
(ɽኪ ) in 1993. He also completed a Chevening Fellowship awarded by the Foreign
and Commonwealth Office of the United Kingdom for Studies in Responsible Business at
the International Centre for Corporate Social Responsibility of Nottingham University
Business School at University of Nottingham.
SUPERVISORS
The following table provides information about our Supervisors:
Name Age Position
Date of
joining our
Group
Date of
Appointment
as a
Supervisor Role and Responsibility
Mr. ZHAO Yajun
(΋͛ )
53 Supervisor and
Chairman of the
Supervisory
Committee
November
2011
November
2011
(Supervisor)
and August
2021
(Chairman
of the
Supervisory
Committee)
Supervising the finances
of our Group and
exercising supervision
over the Directors and
senior management
Mr. MO Yang
(୽เ΋͛ )
48 Supervisor August 2021 August 2021 Supervising the finances
of our Group and
exercising supervision
over the Directors and
senior management
Mr. CHEN Xiaoming
(΋͛ )
56 Employee
Representative
Supervisor
March 2011 March 2011 Supervising the finances
of our Group and
exercising supervision
over the Directors and
senior management
Mr. ZHAO Yajun (΋͛ ), aged 53, is the chairman of our Supervisory
Committee. He has been our Supervisor since November 2011.
He joined our Group in November 2011. Mr. Zhao has been serving as the deputy
director of finance of Sanhua Holding Group Co., Ltd. (ʮ̡ ) since
March 2014, a director of Xinchang Huaxin Industrial Co., Ltd. (ʮ̡ )
since March 2017, the supervisor of Wuhu ALDOC Technology Co., Ltd. (Ҧ
ப΂ʮ̡ ) since July 2018 the supervisor of Zhejiang Sanhua Green Energy Industrial
Group Co., Ltd. (ʮ̡ ) since July 2019, the supervisor of
Zhejiang Sanhua Climate & Appliance Control Co., Ltd. (ʮ̡ ) since
July 2019, a supervisor of Ningbo Fuerda Smartech Co., Ltd. (ࠢ
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ʮ̡) since April 2021 and the supervisor of Ningbo Jiaerling Pneumatic Machinery Co.,
Ltd. (ʮ̡ ) since October 2023. Prior to his current positions in the
Group, he served as the deputy minister of Finance Department of Sanhua Holding Group
Co., Ltd. (ʮ̡ ) from January 2004 to February 2011 and the minister of
finance department of Sanhua Holding Group from February 2011 to February 2014. He
also worked as Pan-China Certified Public Accountants LLP (౷ஷ
Υྫ) from 1996 to 2003.
Mr. Zhao received his master’s degree in Management Engineering from Zhejiang
University ( एϪɽኪ ) in 1996 and his bachelor’s degree in Foundry from Zhejiang
University ( एϪɽኪ ) in 1993.
Mr. Mo Yang (୽เ΋͛), aged 48, has been our Supervisor since August 2021.
Mr. Mo joined Sanhua Holding Group Co., Ltd. (ʮ̡ ) in August
2005, with his current position as a supervisor since November 2014 and the person in
charge of the board of directors office since December 2019. Prior to his current position in
the Group, Mr. Mo successively served as the secretary of the president, the secretary of
the chairman of the board of directors, the vice minister of human resources department
and the minister of the president’s office of Sanhua Holding Group Co., Ltd. (ණྠ
ʮ̡ ) from August 2005 to December 2019 and the assistant to the executive deputy
general manager of Zhejiang Sanhua Climate & Appliance Controls Group Co., Ltd. ( एϪ
ʮ̡ ) from July 2004 to April 2006.
Mr. Mo received his master’s degree in Political Economy from Zhejiang University
(एϪɽኪ ) in 2002 and his bachelor’s degree in Polymer Chemistry from Beijing
University of Chemical Technology ( ̏ԯʷʈɽኪ ) in 1999.
Mr. Mo was a supervisor of Sanhua Nanwang. To the best of our Directors’
knowledge, information and belief, there was no judgment or findings of fraud,
dishonesty, any misconduct or wrongful act on the part of Mr. Mo involved in the
revocation of the business license of Sanhua Nanwang, and as of the Latest Practicable
Date, there was no outstanding liability or ongoing claim or litigation against Mr. Mo in
his capacity as a supervisor prior to the revocation. Mr. Mo confirmed that this company
was solvent at the time its business license was revoked.
Mr. CHEN Xiaoming (΋͛), aged 56, has been our Employee Representative
Supervisor since March 2011.
Mr. Chen joined our Group in March 2011. Mr. Chen has served as the deputy
general manager and director of manufacturing department and products business
department of Sanhua Vietnam Company Limited (ʮ̡ ) since April 2022.
Prior to his current position in the Group, Mr. Chen worked at Sanhua Holding Group Co.,
Ltd. (ʮ̡ ) from August 1988 to October 2011 and Changzhou Ranco
Reversing Valve Co., Ltd. (ʮ̡ ) from November 2011 to July 2013. Mr.
Chen held several positions in Wuhu Sanhua Auto-Control Components Co., Ltd. ( ጾಳɧ
ʮ̡ ) from August 2013 to March 2022, with his last position as the
manufacturing director.
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Mr. Chen graduated from Zhejiang Institute of Technology ( एϪʈኪ৫ ) with a
major in Industrial Analysis in 1993. Mr. Chen was qualified as an engineer in 2000.
SENIOR MANAGEMENT
The following table provides information about members of the senior management
of our Company (other than our Executive Directors):
Name Age Position
Date of
joining our
Group
Date of
Appointment
as a Senior
Management Role and Responsibility
Mr. HU Kaicheng
(௱೻΋͛ )
50 Vice President and
Board Secretary
December 2008 October 2014
(Vice
President);
January 2015
(Board
Secretary)
Responsible for overall
corporate governance,
information disclosure,
investor relation and
other Board-related
matters
Mr. YU Yingkui
(΋͛ )
50 Vice President and
Chief Financial
Officer
November
2007
January 2016
(Vice
President);
October 2011
(Chief
Financial
Officer)
Responsible for the
overall financial
management and
accounting of our
Group
Mr. Hu Kaicheng (௱೻΋͛), aged 50, has been our Vice President since October
2014 and the Board Secretary of the Company since January 2015.
Mr. Hu joined our Group in December 2008. Mr. Hu has been serving as the
chairman of the board of directors of Hangzhou Leaderway Electronics Co., Ltd. (ψ΋௄
ʮ̡ ) since October 2023 and the independent director of Pinlive Foods Co., Ltd.
(ʮ̡ , listed on the Shenzhen Stock Exchange under the stock code of
300892) since September 2023. Prior to his current positions in the Group, Mr. Hu
successively served as the director of supplier management, procurement director of
Zhejiang Sanhua Climate & Appliance Controls Group Co., Ltd. (ʮ
̡) and procurement director of the Company from August 2006 to August 2009. He
served in the international trade department in Sanhua Holding Group Co., Ltd. (ٰ
ʮ̡ ) from September 2009 to December 2010 and the procurement director of our
Company from January 2011 to October 2014.
Mr. Hu received his Executive Master of Business Administration from Shanghai
Jiao Tong University ( ɪऎʹஷɽኪ ) in 2017 and his bachelor’s degree in Polymer
Materials from Tongji University ( Ν᏶ɽኪ ) in 1997.
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Mr. YU Yingkui (΋͛), aged 50, has been our Vice President since January
2016 and the Chief Financial Officer of the Company since October 2011.
Mr. Yu joined our Group in November 2007 and held several positions in our Group,
including the minister of the financial department of the Company. Prior to his current
positions in the Group, Mr. Yu worked at Xinchang Vocational Education Center (ᔖ઺
ʕː), now known as Xinchang Vocational High School (ᔖุ৷ॴʕኪ ), from August
1996 to April 2001 and served as the chief accountant of the financial department of
Sanhua Holding Group Co., Ltd. (ʮ̡ ) and Zhejiang Sanhua Climate &
Appliance Controls Group Co., Ltd. (ʮ̡ ) from April 2001 to
December 2003. Mr. Yu has been serving as a director of Zhejiang Huateng Industrial Co.,
Ltd. (ʮ̡ ) since April 2010, the supervisor of Wuhu Sanhua
Auto-Control Components Co., Ltd. (ʮ̡ ) since October 2011, the
supervisor of Zhejiang Sanhua Trading Co., Ltd. (ʮ̡ ) since November
2011, a director of Zhejiang Sanhua Climate & Appliance Controls Group Co., Ltd. ( एϪɧ
ʮ̡ ) since March 2012, a director of Sanhua International Singapore Pte.
Ltd. (ʮ̡ ) since December 2012, the supervisor of Sanhua
AWECO Appliance Systems (Wuhu) Co., Ltd. (ʮ̡) since
May 2013, the supervisor of Zhejiang Sanhua Automotive Components Co., Ltd. (ӛ
ʮ̡ ) since January 2018 and the supervisor of Zhejiang Sanhua Commercial
Refrigeration Co., Ltd. (ʮ̡ ) since October 2020.
Mr. Yu graduated from Shanghai University of Finance and Economics ( ɪऎৌ຾ɽ
ኪ) with a major in Accounting in 2011 and his bachelor’s degree in Economics from
Hangzhou Dianzi University (Ҧɽኪ ) in 1996.
For the biographies of our executive Directors, including Mr. Zhang Yabo, Mr. Wang
Dayong, and Mr. Chen Yuzhong, see the section headed “Directors” above.
FURTHER INFORMATION ABOUT MR. SHI JIANHUI
Prior to joining our Group in May 2020, Mr. Shi Jianhui (“ Mr. Shi ”), our
Independent Non-executive Director, was disqualified from being a director of any listed
or unlisted corporation incorporated in Hong Kong for three years, effective from
November 27, 2019 due to a court order (“ Order ”) obtained by the SFC for a breach of his
fiduciary duties while he was an executive director and the chief executive officer of
Minth Group Limited (“ Minth ”, listed on the Stock Exchange under the stock code 00425)
in an acquisition of two companies by a subsidiary of Minth in 2008 (“ Incident ”).
According to the SFC’s investigation, the then chairman, executive director and
controlling shareholder of Minth failed to (i) procure the subsidiary of Minth to negotiate
for the lowest possible price for the plots of land acquired during the acquisition; (ii)
disclose to the board of directors of Minth his conflict of interests including the family
relationship with the sellers and his own controlling interests in the acquisition targets,
the full terms of the acquisition, and the manner in which the consideration for the
acquisition was eventually dealt with; and (iii) take action to prevent Minth from making
false and/or misleading representations, as well as material non-disclosure to the SFC, the
Stock Exchange, and the investing public. In the Incident, according to the investigation of
the SFC, after the then chairman, executive director, and controlling shareholder of Minth
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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confirmed no connected relationship with the acquisition target, Mr. Shi, along with three
other then executive directors of Minth, did not make further inquiries and if further
inquiries had been made, the conflict of interests in the acquisition would have been
revealed, and it might have prevented Minth from making numerous misrepresentations
to the SFC, the Stock Exchange and the investing public. Mr. Shi was not involved in the
failure to disclose the connected relationship in the acquisition leading to the Incident and
no fraudulent or dishonest conduct of Mr. Shi was found or mentioned in the Order. No
other penalties were imposed on Mr. Shi from the Incident. The Incident was unrelated to
our Group and Mr. Shi’s role as our Independent Non-executive Director.
Despite the Incident involving Mr. Shi, after conducting a comprehensive
assessment (including understanding the nature of the Incident), our Company and the
Directors (excluding Mr. Shi) believe that the Order did not adversely affect Mr. Shi’s
suitability to act as an Independent Non-executive Director, and Mr. Shi possesses the
experience, knowledge, and skills required to serve as a director of a listed company.
Therefore, according to Listing Rules 3.08 and 3.09, after considering the following
reasons, Mr. Shi is suitable to serve as a director:
(i) According to the PRC Company Law and the rules of the Shenzhen Stock
Exchange, the Order did not prohibit Mr. Shi from acting as an independent
director of any PRC incorporated company, and the Order expired on
November 26, 2022;
(ii) As disclosed in Mr. Shi’s biography above, Mr. Shi has accumulated extensive
experience in board affairs at multiple listed companies as well as abundant
experience in the industries our Group operates in. To the best of our
knowledge after making all reasonable inquiries, apart from the Incident
mentioned above, Mr. Shi has no other non-compliance records during his
tenure as a director of our Company or any other listed company;
(iii) Since December 2023, Mr. Shi has been serving as an independent director of
Ningbo Fangzheng Automotive Mould Co., Ltd. (ʮ
̡, listed on the Shenzhen Stock Exchange under the stock code of 300998) and
since June 2022, as an independent director of AAPICO Hitech Public
Company Limited (listed on the Stock Exchange of Thailand under the stock
code of AH). These companies have decided to continue employing Mr. Shi as
an independent director after the Incident, demonstrating Mr. Shi’s value to
these companies and his ability to fulfill his duties as an independent director;
(iv) Mr. Shi has participated in relevant trainings, development and updated to his
knowledge and skills to keep up with the latest regulatory developments,
including trainings and reading materials on topics such as corporate
governance, connected transactions, directors’ responsibilities, continuous
obligations of listed companies under the Listing Rules and the consequences
of violating the Listing Rules and Hong Kong laws;
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(v) We have also implemented internal control measures to ensure full
compliance with applicable laws and regulations in the future, including but
not limited to appointing the compliance adviser and enhancing the
connected transaction management policies. We have established a
comprehensive connected transaction management system to be effective
upon listing. This system will facilitate the identification, assessment, and
monitoring of connected transactions, thereby preventing similar incidents
from happening to our Company. The review process involves coordinated
review and management of the connected transactions by multiple
departments, including the Board office, legal department, and the relevant
business units functional departments. Following the review process, review
reports will be formed to evaluate the connected transactions. These review
report will consider and report on the connected person’s background, and
the transaction’s authenticity, fairness, and necessity. If necessary, the review
report will be subsequently presented to the Board of Directors or the general
meeting of shareholders for deliberation, depending on its materiality. In
reviewing the transactions, Directors, including Independent Non-executive
Directors, and Supervisors may seek independent professional advice at the
cost of our Company to assist in reviewing and evaluating the relevant
transactions. During the Board meeting deliberations, person-in-charge of
relevant departments be required to attend and provide clarifications. If any
issues remain unclear or feasibility concerns arise during the review, the
Board may request to postpone the proposal’s review. Directors and
shareholders with related or connected interests will be required to abstain
from voting; and
(vi) Our Company and the Directors will ensure compliance with all applicable
laws and regulations, including but not limited to the Listing Rules, by timely
consulting the compliance adviser and seeking independent legal advice
when necessary (especially before entering into any transaction or corporate
action subject to Chapter 14 and Chapter 14A of the Listing Rules).
In light of the above reasons, the Directors are of the view that Mr. Shi is suitable to
serve as a director.
FURTHER INFORMATION ABOUT MS. PAN YALAN
Prior to joining our Group, Ms. Pan Yalan, our Independent Non-executive Director,
was an independent director of Zhejiang Busen Garments Co., Ltd. (ࠢ
ʮ̡, listed on the Shenzhen Stock Exchange under the stock code of 002569, “ Busen ”)
from July 2008 to October 2014. During her tenure at Busen, Ms. Pan received a warning
decision (the “ Warning ”) from the CSRC, among other decisions made by CSRC against
Busen and seven other directors and a senior manager of Busen at that time, regarding
Busen’s false disclosure of the financial information of Guangxi Kanghua Agricultural Co.
Ltd. (ʮ̡ ,“ GuangxiKanghua ”) during the proposed acquisition of
Busen by Guangxi Kanghua (the “ Proposed Acquisition ”). It was discovered in the
Warning that Busen falsely increased the total assets, revenue of Guangxi Kanghua in the
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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asset reorganization report published by Busen on the Shenzhen Stock Exchange. The
persons mainly responsible for and in charge of the Proposed Acquisition was found by
CSRC to be the then chairman of the board, the board secretary and vice president of
Busen and Ms. Pan was not involved in the false disclosure of financial information
leading to the Warning. Ms. Pan, together with other directors, was found liable and
received the Warning because of signing the asset reorganization report and consenting to
be jointly responsible for the asset reorganization report. Ms. Pan was then an
independent director of Busen and no fraudulent or dishonest conduct of Ms. Pan was
found or mentioned in the Warning. The Warning and the Proposed Acquisition were
unrelated to our Group and Ms. Pan’s role as our Independent Non-executive Director.
Despite the Warning involving Ms. Pan, after conducting a comprehensive
assessment (including understanding the nature of the underlying incident leading to the
Warning), our Company and the Directors (excluding Ms. Pan) believe that the Warning
did not adversely affect Ms. Pan’s suitability to act as an Independent Non-executive
Director, and Ms. Pan possesses the experience, knowledge, and skills required to serve as
a director of a listed company. Therefore, according to Listing Rules 3.08 and 3.09, after
considering the following reasons, Ms. Pan is suitable to serve as a director:
(i) According to the PRC Company Law and the rules of the Shenzhen Stock
Exchange, the Warning did not disqualify Ms. Pan from acting as an
independent director of any PRC incorporated company;
(ii) As disclosed in Ms. Pan’s biography above, Ms. Pan has accumulated
extensive experience in board affairs at multiple listed companies in PRC and
is a professor with deep knowledge in the field of audit and accounting. To the
best of our knowledge after making all reasonable inquiries, apart from the
Warning mentioned above, Ms. Pan has no other non-compliance records
during her tenure as a director of our Company or any other listed company;
(iii) Ms. Pan has served and has been serving as independent directors of multiple
PRC listed companies after the Warning, demonstrating Ms. Pan’s value to
these companies and her ability to fulfill her duties as an independent
director;
(iv) Ms. Pan has participated in relevant trainings, development and updated to
her knowledge and skills to keep up with the latest regulatory developments,
including trainings and reading materials on topics such as corporate
governance, directors’ responsibilities, continuous obligations of listed
companies under the Listing Rules and the consequences of violating the
Listing Rules and Hong Kong laws;
(v) We have also implemented internal control measures to ensure full
compliance with applicable laws and regulations in the future, including but
not limited to appointing the compliance adviser and enhancing the
information disclosure policies. We have established a comprehensive
information disclosure management system to be effective upon listing. This
system will monitor and manage our information disclosure activities to
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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prevent similar incidents happening to our Company. It includes a clear
review process to ensure the accuracy and truthfulness of disclosures,
involving coordinated reviews by multiple departments (such as the Board
office, legal department, finance department and relevant business units and
functional departments), including the secretary to the Board. In addition, in
reviewing the disclosure on certain transactions, Directors, including
Independent Non-executive Directors, and Supervisors may seek
independent professional advice at the cost of our Company to assist in
reviewing and evaluating the relevant transactions; and
(vi) Our Company and the Directors will ensure compliance with all applicable
laws and regulations, including but not limited to the Listing Rules, by timely
consulting the compliance adviser and seeking independent legal and/or
financial advice when necessary (especially before entering into any
transaction or corporate action subject to Chapter 14 and Chapter 14A of the
Listing Rules).
In light of the above reasons, the Directors are of the view that Ms. Pan is suitable to
serve as a director. Based on the independent due diligence conducted by the Joint
Sponsors, nothing has come to the Joint Sponsors’ attention that would cause them to
disagree with our Directors’ confirmation that each of Mr. Shi and Ms. Pan is suitable to
serve as a director under Listing Rules 3.08 and 3.09.
JOINT COMPANY SECRETARIES
Mr. Hu Kaicheng (௱೻΋͛) has been appointed as our joint company secretary.
See “— Senior Management” above for Mr. Hu’s biography.
Ms. Ho Wing Nga (О൘ඩɾɻ) has been appointed as our joint company secretary.
Ms. Ho is the Managing Director, Entity Solutions of Computershare Hong Kong Investor
Services Limited and the joint company secretary and company secretary for various
companies listed on the Stock Exchange. Ms. Ho has over 25 years of experience in
corporate governance services.
Ms. Ho obtained a master’s degree in corporate governance from the Hong Kong
Polytechnic University (ಥଣʈɽኪ ) in December 2006 and became an associate of The
Hong Kong Chartered Governance Institute (the “ HKCGI ”, previously known as the
Hong Kong Institute of Chartered Secretaries) in the same month. In March 2015, Ms. Ho
became a fellow of both the HKCGI and The Chartered Governance Institute. She is also a
holder of the practitioner’s endorsement of HKCGI and a member of The Hong Kong
Institute of Directors.
As of the Latest Practicable Date, Ms. Ho acted as the sole company secretary of
AustAsia Group Ltd. (ʮ̡ , listed on the Stock Exchange under the stock
code of 02425), Central China Management Company Limited (ʮ̡ , listed
on the Stock Exchange under the stock code of 09982) and GOGOX Holdings Limited (َ
ʮ̡ , listed on the Stock Exchange under the stock code of 02246) and a joint
company secretary of Concord Healthcare Group Co., Ltd. (΅
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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ʮ̡ , listed on the Stock Exchange under the stock code of 02453), DPC Dash Ltd. ( ༺
ʮ̡ , listed on the Stock Exchange under the stock code of 01405), Financial
Street Property Co., Limited (ʮ̡ , listed on the Stock Exchange under
the stock code of 01502), Hangzhou Jiuyuan Gene Engineering Co., Ltd. (ψɘ๕ਿΪʈ೻
ʮ̡ , listed on the Stock Exchange under the stock code of 02566), JY Gas Limited
(ʮ̡ , listed on the Stock Exchange under the stock code of 01407) and
Laekna, Inc. (ʮ̡ , listed on the Stock Exchange under the stock code of
02105).
CONFIRMATION FROM OUR DIRECTORS
Rule 3.09D of the Listing Rules
Each of our Directors confirms that he or she (i) has obtained the legal advice
referred to under Rule 3.09D of the Listing Rules in December 2024, and (ii) understands
his or her obligations as a director of a listed issuer under the Listing Rules.
Rule 3.13 of the Listing Rules
Each of the Independent Non-executive Directors has confirmed (i) his or her
independence as regards each of the factors referred to in Rules 3.13(1) to (8) of the Listing
Rules, (ii) he or she has no past or present financial or other interest in the business of the
Company or its subsidiaries or any connection with any core connected person of the
Company under the Listing Rules as of the Latest Practicable Date, and (iii) that there are
no other factors that may affect his or her independence at the time of his/her
appointments.
DISCLOSURE UNDER RULE 8.10(2) OF THE LISTING RULES
As of the Latest Practicable Date, none of our Directors had interests in any
business, which competes directly or indirectly with our business for the purpose of Rule
8.10(2) of the Hong Kong Listing Rules.
MANAGEMENT AND CORPORATE GOVERNANCE
Board Committees
We have established four Board Committees in accordance with the relevant laws
and regulations in mainland China, the Articles of Association and the code of corporate
governance practices under the Listing Rules, namely the Audit Committee, the
Remuneration and Evaluation Committee, the Nomination Committee and the Strategy
Management and ESG Committee. The functions of the four committees are summarized
as follows.
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Audit Committee
We have established the Audit Committee with written terms of reference in
compliance with Rule 3.21 of the Listing Rules and the Corporate Governance Code set
out in Appendix C1 to the Listing Rules. The primary duties of the Audit Committee are to
review and supervise the financial reporting process and internal controls system of our
Group, review and approve connected transactions and provide advice and comments to
the Board. The Audit Committee comprises three members, namely Mr. Bao Ensi, Ms. Pan
Yalan and Mr. Shi Jianhui as the members of the Audit Committee, with Mr. Bao Ensi as the
chairperson of the Audit Committee and the Director appropriately qualified as required
under Rules 3.10(2) and 3.21 of the Listing Rules.
Remuneration and Evaluation Committee
We have established the Remuneration and Evaluation Committee with written
terms of reference in compliance with Rule 3.25 of the Listing Rules and the Corporate
Governance Code set out in Appendix C1 to the Listing Rules. The primary duties of the
Remuneration and Evaluation Committee are to review and make recommendations to the
Board on the terms of remuneration packages, bonuses and other compensation payable to
our Directors and other senior management. The Remuneration and Evaluation
Committee comprises three members, namely Mr. Shi Jianhui, Mr. Bao Ensi and Mr. Ren
Jintu, with Mr. Shi Jianhui as the chairperson of the Remuneration and Evaluation
Committee.
Nomination Committee
We have established a Nomination Committee with written terms of reference in
compliance with the Code on Corporate Governance in Appendix C1 to the Listing Rules.
The primary duties of the Nomination Committee are to make recommendations to our
Board on the appointment of Directors and management of Board succession and evaluate
the Board diversity policy. The Nomination Committee comprises three members, namely
Ms. Pan Yalan, Mr. Zhang Yabo and Mr. Shi Jianhui, with Ms. Pan Yalan as the chairperson
of the Nomination Committee.
Strategy Management and ESG Committee
We have established a Strategy Management and ESG Committee with written
terms of reference. The primary duties of the Strategy Management and ESG Committee
are to make recommendations to our Board on the long-term development strategy and
major investments and projects of our Company. The Strategy Management and ESG
Committee comprises six members, namely Mr. Zhang Yabo, Mr. Wang Dayong, Mr. Ni
Xiaoming, Mr. Chen Yuzhong, Mr. Zhang Shaobo and Mr. Shi Jianhui, with Mr. Zhang
Yabo as the chairperson of the Strategy Management and ESG Committee.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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Corporate Governance Code
We aim to implement a high standard of corporate governance, which we believe is
crucial to safeguard the interests of our Shareholders. To accomplish this, we expect to
comply with the Corporate Governance Code set out in Appendix C1 of the Listing Rules
after the Listing, save that Mr. Zhang Yabo will serve as both our Chairman of the Board
and Chief Executive Officer as discussed below.
Pursuant to code provision A.2.1 of the Corporate Governance Code, companies
listed on the Stock Exchange are expected to comply with, but may choose to deviate from
the requirement that the responsibilities between the chairman of the board and the chief
executive officer should be segregated and should not be performed by the same
individual. We do not have a separate Chairman of the Board and Chief Executive Officer
and Mr. Zhang Yabo currently performs these two roles. The Board believes that vesting
the roles of both Chairman of the Board and Chief Executive Officer in the same person
has the benefit of ensuring consistent leadership within our Group and enables more
effective and efficient overall strategic planning for our Group. The Board considers that
the balance of power and authority for the present arrangement will not be impaired, and
this structure will enable our Company to make and implement decisions promptly and
effectively.
Board Diversity
Our Company has adopted a board diversity policy which sets out the approach to
achieve diversity of the Board. Our Company recognizes and embraces the benefits of
having a diverse Board and sees increasing diversity at the Board level, including gender
diversity, as an essential element in maintaining our Company’s competitive advantages
and enhancing our ability to attract, retain and motivate employees from the widest
possible pool of available talent. Pursuant to the board diversity policy, in reviewing and
assessing suitable candidates to serve as a director of our Company, the Nomination
Committee will consider a number of aspects, including but not limited to gender, age,
cultural and educational background, professional qualifications, skills, knowledge, and
industry and regional experience. In particular, our Company currently has one female
Director in the Board and will continue to work towards enhancing the gender diversity of
the Board. Our Directors have a balanced mix of knowledge and skills, and we have six
Non-executive Directors, including four Independent Non-executive Directors, with
different industry backgrounds. Taking into account our existing business model and
specific needs as well as the different background of our Directors, the composition of our
Board satisfies our board diversity policy. Pursuant to the board diversity policy, the
Nomination Committee will discuss periodically and when necessary, agree on the
measurable objectives for achieving diversity, including gender diversity, on the Board
and recommend them to the Board for formal adoption.
Management Presence
Pursuant to Rule 8.12 of the Listing Rules, an issuer must have a sufficient
management presence in Hong Kong. This will normally mean that at least two of its
executive directors must be ordinarily resident in Hong Kong. We do not have sufficient
management presence in Hong Kong for the purposes of Rule 8.12 of the Listing Rules.
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Accordingly, we have applied for, and the Hong Kong Stock Exchange and granted,
a waiver from strict compliance with Rule 8.12 of the Listing Rules. See “Waivers from
Strict Compliance with the Listing Rules” for further details.
REMUNERATION
Our Directors, Supervisors and senior management receive their remuneration in
the form of basic annual payments and performance-related annual payments, including
fees, salaries, share-based compensation, pension schemes contribution and/or other
benefits in kind.
For the years ended December 31, 2022, 2023 and 2024, the total remuneration paid
to our Directors amounted to RMB14.1 million, RMB15.4 million and RMB19.1 million,
respectively.
For the years ended December 31, 2022, 2023 and 2024, the total remuneration paid
to our Supervisors amounted to RMB0.5 million, RMB0.6 million and RMB0.6 million,
respectively.
For the years ended December 31, 2022, 2023 and 2024, the total emoluments paid to
the five highest paid individuals by us amounted to RMB20.8 million, RMB26.6 million,
and RMB35.1 million, respectively.
For the years ended December 31, 2022, 2023 and 2024, no payment was made by us
to any of the Directors or the five highest paid individuals as an inducement to join us or
as compensation for loss of office. Our Non-executive Directors and Supervisors (except
the Employee Supervisor) do not receive remuneration from our Company. None of the
Directors or Supervisors waived their remuneration during the relevant period.
The remuneration of our Directors, Supervisors and senior management is
determined with reference to factors including the completion status of our Company’s
financial indicators and business objectives, scope of work and responsibilities of senior
management, completion status of various performance indicators for Directors and
senior management and operational performance regarding the business innovation and
profit-generating capabilities of directors and senior management.
Save as disclosed above and in “Financial Information”, “Appendix I —
Accountant’s Report” and “Appendix IV — Statutory and General Information”, no other
payments have been paid or are payable in respect of the Track Record Period to our
Directors, Supervisors and senior management by our Group. Under the arrangements
currently in force, we estimate the aggregate remuneration, excluding discretionary
bonus, of our Directors and Supervisors for the year ending December 31, 2025 to be
approximately RMB18.4 million.
See the Accountant’s Report in Appendix I for details on remuneration paid to our
Directors, Supervisors and senior management and, on an aggregate basis, the five highest
paid individuals of our Group during the Track Record Period, and paragraphs headed
“Appendix IV — Statutory and General Information — 4. Our Incentive Schemes” for
details regarding the incentive plans for our Directors and senior management.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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COMPLIANCE ADVISER
We have appointed Huatai Financial Holdings (Hong Kong) Limited as our
compliance adviser pursuant to Rule 3A.19 of the Listing Rules. The compliance adviser
will provide us with guidance and advice as to compliance with the requirements under
the Listing Rules and applicable Hong Kong laws. Pursuant to Rule 3A.23 of the Listing
Rules, the compliance adviser will advise our Company, among others, in the following
circumstances:
(a) before the publication of any regulatory announcement, circular, or financial
report;
(b) where a transaction, which might be a notifiable or connected transaction, is
contemplated, including share issues and share repurchases;
(c) where we propose to use the proceeds of the Global Offering in a manner
different from that detailed in this prospectus or where the business activities,
development or results of our Group deviate from any forecast, estimate or
other information in this prospectus; and
(d) where the Hong Kong Stock Exchange makes an inquiry to our Company
regarding unusual movements in the price or trading volume of its listed
securities or any other matters in accordance with Rule 13.10 of the Listing
Rules.
The term of appointment of the compliance adviser shall commence on the Listing
Date and is expected to end on the date on which we comply with Rule 13.46 of the Listing
Rules in respect of our financial results for the first full financial year commencing after
the Listing Date and such appointment may be subject to extension by mutual agreement.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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OUR CONTROLLING SHAREHOLDERS GROUP
As of the Latest Practicable Date, our Controlling Shareholders Group, comprising
Mr. Zhang Daocai, Ms. Yu Qingjuan, Mr. Zhang Yabo, Mr. Zhang Shaobo, Xinchang
Huaqing Investment, Xinchang Huaxin Industrial, Zhejiang Huateng Industrial, Sanhua
Holding, Hield International, Wealth Info and Sanhua Green Energy, collectively
controlled approximately 44.62% of our total share capital. See “History and Corporate
Structure — The Concert Parties” and “History and Corporate Structure — Our
Shareholding and Corporate Structure” in this prospectus for details.
Immediately following the completion of the Global Offering (assuming the Offer
Size Adjustment and the Over-allotment Option are not exercised), the Controlling
Shareholders Group will continue to hold in aggregate approximately 40.69% of our total
share capital. Therefore, they will remain as our Controlling Shareholders Group.
NON-COMPETITION UNDERTAKING
On September 18, 2017, Mr. Zhang Yabo, Mr. Zhang Daocai, Mr. Zhang Shaobo and
Sanhua Holding, together with Sanhua Green Energy, a substantial shareholder of our
Company, each provided a long-term non-compete undertaking to our Company,
pursuant to which they undertakes, among others, that:
(1) they will not directly or indirectly engage in or participate in any business
that may constitute potential direct or indirect competition with our Group
and to take legal and effective measures to procure other entities controlled by
each of them not to engage in or participate in any business that is competitive
with our Group;
(2) if our Group further expands business scope, they and the entities controlled
by them will not compete with our Group; if there may be potential
competition with our Group, they and the entities controlled by them will
withdraw from the competition in the following ways: A. cease the businesses
that compete or may compete with our Group; B. inject the competitive
business into our Group; or, C. transfer the competitive business to an
unrelated third party;
(3) if they or any other controlled entity of them have any business opportunities
to engage in and participate in any activities that may compete with our
Group, they shall immediately notify our Group of the above business
opportunities. If our Group makes an affirmative reply to take advantage of
the business opportunity within a reasonable period specified in the notice,
they will use best effort to give the business opportunity to our Group; and
(4) if any of them violates the above undertakings, as a result of which our
Company suffers a loss, they will be liable for all direct and indirect damages
suffered by our Company.
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INDEPENDENCE FROM OUR CONTROLLING SHAREHOLDERS GROUP
Our Directors consider that we are capable of carrying on our business
independently from our Controlling Shareholders and their respective close associates
after the Listing, taking into consideration the factors below.
Management Independence
Our Board consists of ten Directors, including four Executive Directors, two
Non-executive Directors and four Independent Non-executive Directors upon listing.
Save as disclosed below, none of our Directors, Supervisors or members of our
senior management holds a directorship or other position in our corporate Controlling
Shareholders and their close associates:
Name
Position in our
Company
Name of the Corporate Controlling
Shareholders and Their Close Associates Position
Mr. Zhang Yabo Executive Director,
Chairman of the
Board and Chief
Executive Officer
Sanhua Holding Director with no
management role
and vice chairman
of the board of
directors
Xinchang Huaxin Industrial Co., Ltd.
(ʮ̡ )
Chairman of the board
of directors
Hangzhou Sanhua Research Institute
Co., Ltd. (ʮ̡ )
Chairman of the board
of directors
Sanhua Trading Singapore Pte. Ltd.
(ʮ̡ )
Director
Zhejiang Haoyuan Technology Co., Ltd.
(ʮ̡ )
Director
Wuhu Aierda Technology Co., Ltd.
(ப΂ʮ̡ )
Director
Mr. Wang
Dayong
Executive Director
and President
Sanhua Holding Director with no
management role
Zhejiang Sanhua Industrial Automation
Co., Ltd. (ʮ̡ )
Executive Director
Ningbo Jiaerling Pneumatic Machinery
Co., Ltd. (ʮ̡ )
Director
Mr. Ni
Xiaoming
Executive Director Sanhua Holding Director with no
management role
Mr. Chen
Yuzhong
Executive Director
and Chief Engineer
Sanhua Holding Director with no
management role
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Name
Position in our
Company
Name of the Corporate Controlling
Shareholders and Their Close Associates Position
Mr. Zhang
Shaobo
Non-executive
Director
Sanhua Holding Director
Zhejiang Huateng Industrial Co., Ltd.
(ʮ̡ )
Chairman of the board
of directors
Ningbo Fuerda Intelligent Technology Co.,
Ltd. (ʮ̡ )
Director
Inner Mongolia Xiqi Mining Co., Ltd.
(ʮ̡ )
Supervisor
Zhejiang Sanhua Ecological Agriculture
Co., Ltd. (ʮ̡ )
Executive Director
and Manager
Hangzhou Kaisida Technology Co., Ltd.
(ʮ̡ )
Executive Director
Hangzhou Sanhua International Building
Co., Ltd. (ʮ̡ )
Executive Director
and General
Manager
Tianjin Sanhua Industrial Park
Management Co., Ltd.
(ʮ̡ )
Executive Director
and Manager
Xinchang Zhonghe Enterprise Management
Consulting Co., Ltd.
(ʮ̡ )
Director
Hangzhou Fuxiang Property Management
Co., Ltd. (ʮ̡ )
Chairman of the board
of directors
Shaoxing Sanhua Zhiyue Real Estate
Development Co., Ltd.
(ʮ̡ )
Executive Director
and Manager
Shanghai Sanhua Electric Co., Ltd.
(ʮ̡ )
Executive Director,
General Manager
Xinchang Sanhua Property Management
Co., Ltd. (ʮ̡ )
Chairman of the board
of directors
Xinchang Sanhua Hongdao Venture Capital
Partnership (Limited Partnership)
(̾༸௴ุҳ༟ΥྫΆุ
Υྫ)
General partner
Hangzhou Sanhua Hongdao Venture
Capital Partnership (Limited Partnership)
(̾༸௴ุҳ༟ΥྫΆุ
Υྫ)
General partner
Zhejiang Sanhua Zhiyuan Real Estate
Co., Ltd. (ʮ̡ )
Chairman of the board
of directors
Zhejiang Sanhua Green Energy Industrial
Group Co., Ltd. (ၠঐྼุණྠϞ
ʮ̡)
Chairman of the board
of directors
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS GROUP
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Name
Position in our
Company
Name of the Corporate Controlling
Shareholders and Their Close Associates Position
Mr. Ren Jintu Non-executive
Director
Sanhua Holding Director
Ningbo Fuerda Intelligent Technology Co.,
Ltd. (ʮ̡ )
Director
Hangzhou Sanhua International Building
Co., Ltd. (ʮ̡ )
Supervisor
Xinchang Zhonghe Enterprise Management
Consulting Co., Ltd. (ጤ଺ΥΆุ၍ଣ
ʮ̡ )
Chairman of the
supervisory
committee
Zhejiang Sanhua Zhiyuan Real Estate Co.,
Ltd. (ʮ̡ )
Director
Zhejiang Sanhua Green Energy Industrial
Group Co., Ltd. (ၠঐྼุණྠϞ
ʮ̡)
Director
Mr. Zhao Yajun Supervisor Sanhua Holding Deputy director of
finance
Xinchang Huaxin Industrial Co., Ltd.
(ʮ̡ )
Director
Ningbo Fuerda Intelligent Technology Co.,
Ltd. (ʮ̡ )
Supervisor
Shanghai Fuyulong Automotive Technology
Co., Ltd. (ʮ̡ )
Supervisor
Xinchang Zhonghe Enterprise Management
Consulting Co., Ltd. (ጤ଺ΥΆุ၍ଣ
ʮ̡ )
Supervisor
Fuerda (Tianjin) Intelligent Technology Co.,
Ltd. (ʮ̡ )
Supervisor
Zhejiang Haoyuan Technology Co., Ltd.
(ʮ̡ )
Supervisor
Hangzhou Tongchan Machinery Co., Ltd.
(ʮ̡ )
Supervisor
Shanghai Sanhua Electric Co., Ltd.
(ʮ̡ )
Supervisor
Wuhu Aierda Technology Co., Ltd.
(ப΂ʮ̡ )
Supervisor
Zhejiang Sanhua Green Energy Industrial
Group Co., Ltd. (ၠঐྼุණྠϞ
ʮ̡)
Supervisor
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS GROUP
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Name
Position in our
Company
Name of the Corporate Controlling
Shareholders and Their Close Associates Position
Mr. Mo Yang Supervisor Sanhua Holding Supervisor and the
person in charge of
the board of
directors office
Mr. Yu Yingkui Vice President and
Chief Financial
Officer
Zhejiang Huateng Industrial Co., Ltd.
(ʮ̡ )
Director
Xinchang Zhonghe Enterprise Management
Consulting Co., Ltd. (ጤ଺ΥΆุ၍ଣ
ʮ̡ )
Director
Sanhua Trading Singapore Pte. Ltd.
(ʮ̡ )
Director
Notwithstanding the fact that four Executive Directors, namely Mr. Zhang Yabo, Mr.
Wang Dayong, Mr. Ni Xiaoming and Mr. Chen Yuzhong, and two Non-executive Directors,
namely Mr. Ren Jintu and Mr. Zhang Shaobo, collectively, the “ Overlapping Directors ”),
hold overlapping directorship or other positions in Sanhua Holding, we are of the view
that our Company and Sanhua Holding can be managed independently for the following
reasons:
1. Mr. Ren Jintu and Mr. Zhang Shaobo are Non-executive Directors of our
Company, and Mr. Zhao Yajun and Mr. Mo Yang are Supervisors of our
Company, all of whom will be mainly responsible for providing guidance or
supervision for the overall management and development of our Company
and will not be involved in the day-to-day operation and management of our
Company. The day-to-day management and operations of our Company will
be dealt with by a team of full-time management members who have been
serving our Group for a long time and are familiar with our business;
2. Mr. Zhang Yabo, Mr. Wang Dayong, Mr. Ni Xiaoming and Mr. Chen Yuzhong
are not acting as directors with management role of Sanhua Holding and are
not involved in the day-to-day management and operations of Sanhua
Holding Group and are not receiving remuneration from Sanhua Holding
Group;
3. our daily management and operations are carried out independently by our
senior management team, all of whom have substantial experience in the
industry in which our Company is engaged, and will therefore be able to make
business decisions that are in the best interests of our Company. For details of
the industry experience of our senior management team, please refer to the
section headed “Directors, Supervisors and Senior Management” in this
prospectus;
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS GROUP
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4. each Director is aware of his/her fiduciary duties as a director which require,
among other things, that he/she acts for the benefit and in the interest of our
Company and does not allow any conflict between his/her duties as a
Director and his/her personal interests;
5. in the event that there is a potential conflict of interest arising out of any
transaction to be entered into between our Company and a Director and/or
his/her associate, he/she shall abstain from voting and shall not be counted
towards the quorum for the voting. Hence, no Director will be able to
influence our Board in making decisions on matters in which he or she is, or
may be interested; and
6. we have four Independent Non-executive Directors and certain matters of our
Company, including continuing connected transactions, must always be
referred to the Independent Non-executive Directors for review. We have
adopted a series of corporate governance measures to manage conflicts of
interest, if any, between our Company and our Controlling Shareholders
which would support our independent management. We have adopted
corporate governance measures, including but not limited to establishment of
special Board committees, to manage potential conflicts of Director’s interests
after completion of the Listing, including potential conflicts of interest that
may arise in respect of the Overlapping Directors, in accordance with the
requirements of the Articles of Association, relevant corporate governance
policies, the Listing Rules and other applicable regulations. For matters where
any Director may have an actual or potential conflict of interest, such actual or
potential conflict of interest will be addressed in accordance with the Articles
of Association, relevant corporate governance policies and the applicable
requirements of the Listing Rules. The following corporate governance
measures will be in place to mitigate any actual or potential conflict of
interests:
a) in the event of any actual or potential conflict of interest between our
Group and our Controlling Shareholders, our Directors shall report
such conflict of interest to the Independent Non-executive Directors as
soon as practicable upon becoming aware of it, where applicable,
convene a Board meeting to review and evaluate the implications and
risk exposure of such conflict, and monitor any material irregular
business activities;
b) the Nomination Committee of our Company will from time to time
review the independence of our Directors in terms of the performance of
their duties as Directors to ensure effective management of potential
conflict of interest;
c) our Directors, including our Independent Non-executive Directors, are
entitled to seek independent professional advice from external parties
in appropriate circumstances at our Company’s expense; and
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS GROUP
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d) as an A-share listed company, we have formulated and adopted a
comprehensive internal control and management system in compliance
with the relevant requirements of the rules of the Shenzhen Stock
Exchange. The Articles of Association has also included relevant
provisions to manage conflict of interest, pursuant to which our
Directors are prohibited from voting in any Board resolution approving
any contract or arrangement or any other proposal in which he/she or
any of his/her close associates has a material interest, and shall not be
counted in the quorum present at the particular Board meeting.
For details, see “— Corporate Governance” in this section.
Based on the above, our Directors believe that our Board as a whole and together
with our senior management are able to perform the managerial role in our Company
independently from our Controlling Shareholders and their respective close associates
after the Listing.
Operational Independence
We do not rely on our Controlling Shareholders and their respective close associates
for our business development, staffing, logistics, administration, finance, internal audit,
IT, sales and marketing, or company secretarial functions. We have our own departments
specializing in these respective areas which have been in operation and are expected to
continue to operate separately and independently from our Controlling Shareholders and
their respective close associates. In addition, we have our own headcount of employees
for our operations and management for human resources.
We have independent access to suppliers and customers. We are in possession of all
relevant licenses, certificates, facilities and IP rights necessary to carry on and operate our
principal businesses and we have sufficient operational capacity in terms of capital and
employees to operate independently.
We have entered into a number of transactions with Sanhua Holding. See
“Connected Transactions” in this prospectus for further details of, and the reasons for
entering into, these transactions. Considering that the amount of the relevant transactions
during the Track Record Period are not significant to our Group, our Directors believe that
such transactions will not have any impact on the operational independence of our Group.
Based on the above, our Directors believe that we are able to operate independently
of our Controlling Shareholders and their respective close associates.
Financial Independence
We have an independent financial system and make financial decisions according to
our Company’s own business needs. We have our own internal control and accounting
systems and an independent finance department for discharging the treasury function
and independent access to third party financing. We do not expect to rely on our
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS GROUP
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Controlling Shareholders or their respective close associates for financing after the Listing
as we expect that our working capital will be funded by cash flows generated from
operating activities, the cash and cash equivalent on hand and internally generated funds.
In addition, we are capable of obtaining financing from independent third parties
without relying on any guarantee or security provided by our Controlling Shareholders or
their respective associates. As of the Latest Practicable Date, we did not have any
outstanding loans or guarantees provided by or granted to, nor any non-trade balances
due to or due from, our Controlling Shareholders or their respective associates.
Based on the above, our Directors believe that we are capable of carrying on our
business independently of, and do not place undue reliance on our Controlling
Shareholders after the Listing.
INTERESTS OF OUR CONTROLLING SHAREHOLDERS GROUP IN OTHER
BUSINESSES
Each of our Controlling Shareholders confirmed that as of the Latest Practicable
Date, apart from the business of our Company, it/he/she did not have any interest in
other business, which competes or is likely to compete, directly or indirectly, with our
business, which would require disclosure under Rule 8.10 of the Listing Rules.
Sanhua Holding is primarily engaged in industrial investment. Aside from the
business operated by our Group, Sanhua Holding, through Hield International, Wealth
Info and Sanhua Green Energy, mainly engages in operations in fields of property
development and management, sports events management, equity investment, power
management, bulk trading and industrial automation. Xinchang Huaqing Investment,
Xinchang Huaxin Industrial and Zhejiang Huateng Industrial are investment holding
companies and held no interest in other companies aside from interests in Sanhua Holding
as of the Latest Practicable Date.
As of the Latest Practicable Date, Sanhua Holding held as to approximately 51% of
the interest in Ningbo Fuerda Intelligent Technology Co., Ltd. (΅Ϟ
ʮ̡,“ Ningbo Fuerda ”). Ningbo Fuerda is an entity engaging in the R&D, design, and
manufacture of automobile components. The business of Ningbo Fuerda is distinctive and
separate from that of the Group and therefore there is clear business delineation between
the Group and Sanhua Holding based on the following reasons:
• different product types, application areas, and functions
o the products of Ningbo Fuerda are categorized into two main series:
intelligent optoelectronic systems (including exterior lights, interior
lights, Bluetooth virtual keys, air conditioning control panels, etc.) and
seat functional components (such as air outlet assemblies, battery boxes,
glove compartments, etc.). These products are visible or touchable
within and outside the vehicle cabin, serving functions such as lighting,
visual effects, and intelligent control;
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS GROUP
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o in contrast, the Group’s main products in automotive components
include electronic expansion valves, battery coolers, and integrated
modules. These thermal management modules are predominantly
located in the engine compartment and/or battery module and are not
visible or touchable within or outside the vehicle cabin. Their function
is to achieve temperature management by controlling the flow of
refrigerants.
• different raw materials
o Ningbo Fuerda primarily utilizes electronic components, custom plastic
parts, surface-treated parts, and printed circuit board assembly boards,
with a minor inclusion of metal hardware. The manufacturing processes
include injection molding, surface mount technology, spraying, and
assembly.
o In contrast, the Group primarily employs metal products, aluminum
materials, rubber and plastic products, and electrical components in
manufacturing. The manufacturing processes include machining,
brazing, extrusion, stamping, and assembly.
Sanhua Holding Group purchased and expects to keep purchasing filters, molds,
valve products, heat exchangers from our Group to manufacture products including
pneumatic solenoid valves and textile machine solenoid valves, as well as their
assemblies. See “Connected Transactions — Partially-exempt Continuing Connected
Transaction — 5. Provision of Products Framework Agreement.” These pneumatic
solenoid valves and textile machine solenoid valves are different from the valves
produced by our Group in its functions and applications. Pneumatic solenoid valves
manufactured by Sanhua Holding Group are used for air suspension system in
automobiles that adjusts a vehicle’s suspension using air springs and an air compressor
and textile machine solenoid valves are used for air-jet looms in the textile industry. Those
products are different from the main products of our Group as our products, including
valves, are for thermal management in automotive operations and air-conditioning.
CORPORATE GOVERNANCE
Our Company will comply with the provisions of the Corporate Governance Code
in Appendix C1 to the Listing Rules (the “ Corporate Governance Code ”), which sets out
principles of good corporate governance.
Our Directors recognize the importance of good corporate governance in protection
of our Shareholders’ interests. We would adopt the following measures to safeguard good
corporate governance standards and to avoid potential conflict of interests between our
Company and our Controlling Shareholders Group:
(a) where a Board meeting is held for the matters in which any Director or his/her
associates have a material interest, such Director(s) shall abstain from voting
on the relevant resolutions and shall not be counted in the quorum for the
voting;
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS GROUP
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--- page 289 ---
(b) where a Shareholders’ meeting is to be held for considering proposed
transactions in which any of our Controlling Shareholders or any of their
respective associates has a material interest, such Controlling Shareholders
and their respective associates will not vote on the resolutions and shall not be
counted in the quorum in the voting;
(c) as part of our preparation for the Global Offering, we have amended our
Articles of Association to comply with the Listing Rules which will become
effective upon Listing. In particular, our Articles of Association provides that,
a Director shall be abstained from voting on any resolution approving any
contract, transaction or arrangement in which such Director or any of his/her
associates has a material interest nor shall such Director be counted in the
quorum present at the Board meeting;
(d) our Company has established internal control mechanisms to identify
connected transactions. Upon the Listing, if our Company enters into
connected transactions with any of our Controlling Shareholders or any of
their respective associates, our Company will comply with the applicable
Listing Rules;
(e) we are committed that our Board shall include a balanced composition of
Executive Director and Non-executive Directors (including Independent
Non-executive Directors). We have appointed four Independent
Non-executive Directors, and we believe our Independent Non-executive
Directors (i) possess sufficient experiences, (ii) are free of any business or
other relationship which could interfere in any material manner with the
exercise of their independent judgment, and (iii) will be able to provide an
impartial and external opinion to protect the interests of our Shareholders as a
whole. For details of the Independent Non-executive Directors, see
“Directors, Supervisors and Senior Management”;
(f) where our Directors reasonably request the advice of independent
professionals, such as financial advisers, the appointment of such
independent professionals will be made at our Company’s expenses; and
(g) we have appointed Huatai Financial Holdings (Hong Kong) Limited as our
Compliance Adviser to provide advice and guidance to us in respect of
compliance with the Listing Rules, including various requirements relating to
corporate governance.
Based on the above, our Directors are satisfied that sufficient corporate governance
measures have been put in place to manage conflicts of interest between our Company and
our Controlling Shareholders Group, and to protect minority Shareholders’ interests after
the Listing.
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS GROUP
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Upon Listing, certain transactions between us and our connected persons will
constitute continuing connected transactions under Chapter 14A of the Listing Rules.
OUR CONNECTED PERSON
We have entered into certain transactions in the ordinary and normal course of our
business with the following connected person, which will constitute continuing connected
transactions upon the Listing:
Names of our connected person Connected Relationship
Sanhua Holding (together with its
subsidiaries and associates,
excluding our Group,
the “Sanhua Holding Group ”)
As of the Latest Practicable Date,
Sanhua Holding is a member of our
Controlling Shareholders Group.
SUMMARY OF OUR CONNECTED TRANSACTIONS
Transaction Counterparty
Category of
continuing
connected
transaction
Applicable
Listing Rules
Waiver
sought
Proposed
annual cap
for the years
ending
December
31, 2025
(RMB in
million)
Fully-exempt Connected Transactions
1. Procurement of
Services
Framework
Agreement
Sanhua
Holding
Group
Fully
exempt
14A.34
14A.76(1)
N/A N/A
2. Short-term
Property
Leasing
Framework
Agreement
Sanhua
Holding
Group
Fully
exempt
14A.34
14A.76(1)
N/A N/A
3. Property
Leasing
Framework
Agreement
Sanhua
Holding
Group
Fully
exempt
14A.34
14A.76(1)
N/A N/A
4. Provision of
Services
Framework
Agreement
Sanhua
Holding
Group
Fully
exempt
14A.34
14A.76(1)
N/A N/A
CONNECTED TRANSACTIONS
– 280 –


--- page 291 ---
Transaction Counterparty
Category of
continuing
connected
transaction
Applicable
Listing Rules
Waiver
sought
Proposed
annual cap
for the years
ending
December
31, 2025
(RMB in
million)
Partially-exempt Connected Transactions
5. Provision of
Products
Framework
Agreement
Sanhua
Holding
Group
Partially
exempt
14A.76(2)
14A.105
Announcement 70.79
6. Procurement of
Materials
Framework
Agreement
Sanhua
Holding
Group
Partially
exempt
14A.76(2)
14A.105
Announcement 107.37
FULLY-EXEMPT CONTINUING CONNECTED TRANSACTIONS
1. Procurement of Services Framework Agreement
On June 10, 2025, our Company, for itself and on behalf of its subsidiaries, entered
into a framework agreement (the “ Procurement of Services Framework Agreement ”)
with Sanhua Holding, for itself and on behalf of Sanhua Holding Group, pursuant to
which we will procure various services, including but not limited to usage of operation
vehicles, property management services, development and ad hoc services related to
development and testing of software for the Group’s use. Pursuant to the Procurement of
Services Framework Agreement, we will procure certain services from Sanhua Holding
Group according to the separate agreements in respect of each of the transactions to be
entered into by the relevant members of our Group with the relevant members of Sanhua
Holding Group from time to time. The pricing of such services is to be determined by our
Group and Sanhua Holding Group on normal commercial terms, negotiated on arm’s
length basis, subject to applicable laws and regulations and with reference to, among
others, the costs, the quantities, quality and reliability of the services, the prevailing
market conditions and the principle of fairness. The initial term of the Procurement of
Services Framework Agreement will commence on the Listing Date and end on December
31, 2025 (both days inclusive), subject to renewal upon the mutual consent of both parties
and compliance with the requirements of the Listing Rules and applicable laws and
regulations.
As the applicable percentage ratios calculated under Chapter 14A of the Listing
Rules will be less than 0.1%, the Procurement of Services Framework Agreement will be
fully exempt from all of the reporting, annual review, announcement, circular and
independent shareholders’ approval requirements under Chapter 14A of the Listing Rules
pursuant to Rule 14A.76(1) of the Listing Rules.
CONNECTED TRANSACTIONS
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2. Short-term Property Leasing Framework Agreement
On June 10, 2025, our Company, for itself and on behalf of its subsidiaries, entered
into a framework agreement (the “ Short-termPropertyLeasingFrameworkAgreement ”)
with Sanhua Holding, for itself and on behalf of Sanhua Holding Group, pursuant to
which, our Group will lease certain properties from Sanhua Holding Group. The rents
during the leasing term shall be determined on normal commercial terms after arm’s
length negotiations between the relevant parties and with reference to: (i) the prevailing
market rents of similar properties in the same or nearby area or similar locations in the
PRC; (ii) the conditions of the property, including but not limited to its location and the
facilities associated with the property; and (iii) the estimated utility costs the lessee
expects to consume during the leasing term. The rents shall be in line with no more than
the market rates of properties of comparable size and quality situated in the same locality,
which shall be in the best interests of our Company and our Shareholders as a whole. The
initial term of the Short-term Property Leasing Framework Agreement will commence on
the Listing Date and end on December 31, 2025, subject to renewal upon the mutual
consent of both parties and compliance with the requirements of the Listing Rules and
applicable laws and regulations. Both parties or their respective subsidiaries will enter
into separate underlying agreements which will set out the specific terms and conditions
according to the principles provided in the Short-term Property Leasing Framework
Agreement.
As the applicable percentage ratios calculated under Chapter 14A of the Listing
Rules will be less than 0.1%, the Short-term Property Leasing Framework Agreement will
be fully exempt from all of the reporting, annual review, announcement, circular and
independent shareholders’ approval requirements under Chapter 14A of the Listing Rules
pursuant to Rule 14A.76(1) of the Listing Rules.
3. Property Leasing Framework Agreement
On June 10, 2025, our Company, for itself and on behalf of its subsidiaries, entered
into a framework agreement (the “ Property Leasing Framework Agreement ”) with
Sanhua Holding, for itself and on behalf of Sanhua Holding Group, pursuant to which,
our Group will lease certain properties to Sanhua Holding Group. The monthly rents
charged by our Group during the leasing term are determined based on normal
commercial terms after arm’s length negotiations between the relevant parties, and the
leasing shall be equivalent to the prevailing market rates of properties of comparable size
and quality situated in the same locality available to or offered by Independent Third
Parties, which are in the best interests of our Company and our Shareholders as a whole.
The initial term of the Property Leasing Framework Agreement will commence on the
Listing Date and end on December 31, 2025, subject to renewal upon the mutual consent of
both parties and compliance with the requirements of the Listing Rules and applicable
laws and regulations. Both parties or their respective subsidiaries will enter into separate
underlying agreements which will set out the specific terms and conditions according to
the principles provided in the Property Leasing Framework Agreement.
CONNECTED TRANSACTIONS
– 282 –


--- page 293 ---
As the applicable percentage ratios calculated under Chapter 14A of the Listing
Rules will be less than 0.1%, the Property Leasing Framework Agreement will be fully
exempt from all of the reporting, annual review, announcement, circular and independent
shareholders’ approval requirements under Chapter 14A of the Listing Rules pursuant to
Rule 14A.76(1) of the Listing Rules.
4. Provision of Services Framework Agreement
On June 10, 2025, our Company, for itself and on behalf of its subsidiaries, entered
into a framework agreement (the “ Provision of Services Framework Agreement ”) with
Sanhua Holding, for itself and on behalf of Sanhua Holding Group, pursuant to which,
our Group will supply to Sanhua Holding Group testing services, including testing of the
metallography, testing of the microstructure of metals using various techniques, type
testing to ensure the products meet certain standards and requirements and functions
testing to assess if the products work properly. The prices of the services are determined
based on normal commercial terms after arm’s length negotiations between the relevant
parties, with reference to, among others, the costs, the quantities, the quality and
reliability of the testing services and the prevailing market conditions. The initial term of
the Provision of Services Framework Agreement will commence on the Listing Date and
end on December 31, 2025, subject to renewal upon the mutual consent of both parties and
compliance with the requirements of the Listing Rules and applicable laws and
regulations. Both parties or their respective subsidiaries will enter into separate
underlying agreements which will set out the specific terms and conditions according to
the principles provided in the Provision of Services Framework Agreement.
As the applicable percentage ratios calculated under Chapter 14A of the Listing
Rules will be less than 0.1%, the Provision of Services Framework Agreement will be fully
exempt from all of the reporting, annual review, announcement, circular and independent
shareholders’ approval requirements under Chapter 14A of the Listing Rules pursuant to
Rule 14A.76(1) of the Listing Rules.
PARTIALLY-EXEMPT CONTINUING CONNECTED TRANSACTION
5. Provision of Products Framework Agreement
Principle Terms
On June 10, 2025, our Company, for itself and on behalf of its subsidiaries,
entered into a framework agreement (the “ Provision of Products Framework
Agreement ”) with Sanhua Holding, for itself and on behalf of Sanhua Holding
Group, pursuant to which, our Group will supply to Sanhua Holding Group
manufactured products including but not limited to power, filters, molds, valve
products, heat exchangers and home appliances (the “ Component Products ”). The
filters, molds, valve products, heat exchangers are procured by Sanhua Holding
Group to manufacture products including pneumatic solenoid valves and textile
machine solenoid valves, as well as their assemblies.
The initial term of the Provision of Products Framework Agreement will
commence on the Listing Date and end on December 31, 2025. Both parties or their
respective subsidiaries will enter into separate underlying agreements which will
set out the specific terms and conditions according to the principles provided in the
Provision of Products Framework Agreement.
CONNECTED TRANSACTIONS
– 283 –


--- page 294 ---
Pricing Policy
The amount to be paid by Sanhua Holding Group to our Group under the
Provision of Products Framework Agreement generally adopt a cost-plus method
and will be determined through fair negotiations, taking into account the factors
including (i) the market price of the relevant products; (ii) the costs and profit
margins of our Group; and (iii) the prices offered by our Group to other customers
purchasing similar products.
Reasons for the Transaction
During the Track Record Period, we have supplied the Component Products
to Sanhua Holding Group and we expect that we will continue to provide the
products after the Listing. Our Group has a long-term and stable business
relationship with Sanhua Holding Group. Sanhua Holding Group is familiar with
the products the Group manufactured and procures these products for its research
and development, testing and employee benefits purposes. We are not and will not
be bound to collaborate with Sanhua Holding Group, and we will only manufacture
and provide the required products to Sanhua Holding Group if we consider it is in
the interests of our Company and Shareholders as a whole. Such coloration with
Sanhua Holding Group not only brings our Group additional sales but also the
opportunities to expand our reach and further promote our offerings.
Consideration and Pricing Policies
The product fee charged by us shall be determined through arm’s length
negotiations between the relevant parties and with reference to: (i) the market price
of relevant products; (ii) our cost and profit margin; and (iii) the price offered by us
to our other customers purchasing similar products. The pricing terms under the
Provision of Products Framework Agreement shall be in the best interests of our
Company and our Shareholders as a whole.
Historical Amounts
For the years ended December 31, 2022, 2023 and 2024, the historical
transaction amounts with respect to our provision of the above products were
approximately RMB6.50 million, RMB24.81 million and RMB31.97 million,
accounting for approximately 0.03%, 0.10% and 0.11% of the revenue, respectively.
The increases in the sales amount from Sanhua Holding Group during the
Track Record Period were mainly due to the increased amount of electricity sold to
Sanhua Holding Group. During the Track Record Period, we procured increased
amount of steam from Sanhua Holding Group for our manufacturing purposes. At
the same time, as the by-product we sold the electricity generated during the
manufacturing process to Sanhua Holding Group.
CONNECTED TRANSACTIONS
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--- page 295 ---
Annual Caps
The following table sets forth the proposed annual caps for the annual
transaction amounts to be paid to us by Sanhua Holding Group and its associates
under the Provision of Products Framework Agreement:
For the
years ending
December 31,
2025
(RMB in million)
Total fees to be paid by Sanhua Holding Group 70.79
The proposed annual caps are determined based on:
(i) the historical amounts of the transactions between the Group and
Sanhua Holding Group during the Track Record Period in respect of the
provision of such products;
(ii) the existing orders we have at hand that reflect a strong customer
demand and the expected increasing demand of Sanhua Holding Group
for such products, considering the business expansion of Sanhua
Holding Group in 2025. As of March 31, 2025, the transaction amount
with Sanhua Holding Group for our product sales totaled RMB9.99
million. Due to anticipated seasonal fluctuations in both purchase
quantities and pricing, we expect increased sales in the subsequent
quarters of 2025; and
(iii) other factors including but not limited to the expected market price of
the similar products on normal commercial terms.
In addition, based our ongoing collaboration and negotiations with Sanhua
Holding Group, we have gained insights into their latest market analysis and
business development strategies, based on which Sanhua Holding Group foresees
an increase in the demand for our Company’s products (mainly as components of
the products of Sanhua Holding Group). This anticipated growth in business
volume indicates an increase in demand on our products to meet their evolving
needs.
Listing Rules Implications
As the highest applicable percentage ratio of the transactions under the
Provision of Products Framework Agreement for the year ending December 31, 2025
calculated for the purpose of Chapter 14A of the Listing Rules is higher than 0.1%
but below 5% on an annual basis, such transactions will, upon Listing, constitute
continuing connected transactions of our Company subject to the annual reporting
requirement under Rules 14A.49 and 14A.71 of the Listing Rules and the
CONNECTED TRANSACTIONS
– 285 –


--- page 296 ---
announcement requirement under Rule 14A.35 of the Listing Rules but exempt from
the independent Shareholders’ approval requirements under Rule 14A.36 of the
Listing Rules.
6. Procurement of Materials Framework Agreement
Principle Terms
On June 10, 2025, our Company, for itself and on behalf of its subsidiaries,
entered into a framework agreement (the “ Procurement of Materials Framework
Agreement ”) with Sanhua Holding, for itself and on behalf of Sanhua Holding
Group, pursuant to which, our Group will procure various materials, powers and
supplies from relevant members of Sanhua Holding Group (“ Products Providers ”).
The initial term of the Procurement of Materials Framework Agreement will
commence on the Listing Date and end on December 31, 2025. Both parties or their
respective subsidiaries will enter into separate underlying agreements which will
set out the specific terms and conditions for the procurement of materials and
powers according to the principles provided in the Procurement of Materials
Framework Agreement.
Pricing Policy
The amount to be paid by us to Sanhua Holding Group under the Procurement
of Materials Framework Agreement generally adopt a cost-plus method and will be
determined through fair negotiations, taking into account the factors including the
type of materials and the transaction volume and the prices at which our Group
procures similar materials of the same nature, type, and quantity from other
independent third parties.
Reasons for the Transaction
Our Group has been purchasing such materials and powers from the Products
Providers during the Track Record Period in the ordinary and usual course of our
business. Our Group and Sanhua Holding Group has established a long-term and
stable business relationship, and these Products Providers have acquired a
comprehensive understanding of our business and operational requirements of the
materials and powers that we need. In relation to procurement of powers, our Group
has leased several properties from Sanhua Holding Group for manufacturing and
production, according to local governmental regulations on public utilities supply,
the powers we used for manufacturing and production, including electricity, water
and gas, to be used by our Group will be recorded under Sanhua Holding Group’s
account registered with the local power providers, our Group therefore needs to pay
for these powers through Sanhua Holding Group.
CONNECTED TRANSACTIONS
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--- page 297 ---
Therefore, we believe it is in the best interest of the Group and our
Shareholders as a whole to continue to procure such materials and powers from
these Products Providers who are capable of fulfilling our demands with a stable
and high-quality supply of materials and powers on terms which are similar to or
better than those offered by Independent Third Parties.
Consideration and Pricing Policies
The fee to be charged by Sanhua Holding Group for the materials and powers
to be supplied to our Group pursuant to the Procurement of Materials Framework
Agreement shall be determined by commercial negotiation between the parties
according to the principles of fairness and reasonableness, taking into account
various factors including but not limited to the type of materials, transaction
volume and the prices for the procurement of materials of similar nature, type and
quantity by our Group to other Independent Third Parties in the market.
Historical Amounts
For the years ended December 31, 2022, 2023 and 2024, the historical
transaction amounts with respect to our procurement of the materials and powers
were approximately RMB47.81 million, RMB40.71 million and RMB50.24 million,
respectively, representing 0.39%, 0.30% and 0.31% of the total purchase amount,
respectively.
The increases in the purchase amount from Sanhua Holding Group during the
Track Record Period were mainly due to the increased amount of public utilities,
such as steam, procured from Sanhua Holding Group as a result of the increased
needs of the Company for manufacturing.
Annual Caps
The following table sets forth the proposed annual caps for the annual
transaction amounts to be paid by us to Sanhua Holding Group under the
Procurement of Materials Framework Agreement:
For the
years ending
December 31,
2025
(RMB in million)
Total fees to be paid by us to Sanhua Holding Group 107.37
The proposed annual caps are determined based on:
(i) the historical amounts of the transactions between our Group and
Sanhua Holding Group during the Track Record Period in respect of the
procurement of the above materials;
CONNECTED TRANSACTIONS
– 287 –


--- page 298 ---
(ii) the existing orders we made and the expected demand of our Group for
such materials and powers due to our plan for business expansion,
increasing market opportunities and consumer spending. As of March
31, 2025, the transaction amount with Sanhua Holding Group for our
procurement of materials and power totaled RMB17.38 million. Due to
anticipated seasonal fluctuations in both purchase quantities and
pricing, we expect increased procurement in the subsequent quarters of
2025; and
(iii) other factors including but not limited to the expected market price of
such materials and the expected market trend.
In addition, based on our recent business development outlook, we anticipate
an increased need to procure materials and powers from Sanhua Holding Group to
support our own business growth. This projection also takes into account the
volume and value of existing orders we have from some of our customers. To ensure
we can promptly seize market opportunities and fulfill our customers’ orders, we
have agreed with Sanhua Holding Group on a higher annual cap to secure a stable
supply of materials and energy as compared to historical transaction amount.
Listing Rules Implications
As the highest applicable percentage ratio of the transactions under the
Procurement of Materials Framework Agreement for the year ending December 31,
2025 calculated for the purpose of Chapter 14A of the Listing Rules is higher than
0.1% but below 5% on an annual basis, such transactions will, upon Listing,
constitute continuing connected transactions of our Company subject to the annual
reporting requirement under Rules 14A.49 and 14A.71 of the Listing Rules and the
announcement requirement under Rule 14A.35 of the Listing Rules but exempt from
the independent Shareholders’ approval requirements under Rule 14A.36 of the
Listing Rules.
INTERNAL CONTROL PROCEDURES ADOPTED BY THE COMPANY IN RESPECT
OF THE IMPLEMENTATION OF CONTINUING CONNECTED TRANSACTION
FRAMEWORK AGREEMENTS
Our Group adopts the following internal control measures to ensure that the
transactions will be carried out in accordance with the terms of the Provision of Products
Framework Agreement and Procurement of Materials Framework Agreement, including
the pricing policies, and in compliance with all the applicable requirements under the
Listing Rules:
• we have adopted a connected transactions management policy for the
purpose of ensuring that connected transactions under the Provision of
Products Framework Agreement and Procurement of Materials Framework
Agreement will be conducted in a fair manner, on normal commercial terms
and in the interests of our Company and our Shareholders as a whole;
CONNECTED TRANSACTIONS
– 288 –


--- page 299 ---
• prior to the execution of the underlying agreements under the Provision of
Products Framework Agreement and Procurement of Materials Framework
Agreement, the operation department of the relevant business sector of our
Group will compare the terms of the proposed transactions (including pricing
and other contractual terms) with those similar transactions entered with
Independent Third Parties or the terms offered to or by Independent Third
Parties (as the case may be) to ensure that the terms of agreements under the
Provision of Products Framework Agreement and Procurement of Materials
Framework Agreement shall be no less favourable to our Group than terms
between our Group and the Independent Third Parties;
• the finance team of our Group shall regularly examine the pricing of the
transactions under the Provision of Products Framework Agreement and
Procurement of Materials Framework Agreement to ensure that those
transactions are conducted in accordance with the pricing terms therein;
• the internal control team of our Group shall periodically review the pricing of
the transactions under the Provision of Products Framework Agreement and
Procurement of Materials Framework Agreement against the prices
negotiated between our Group and Independent Third Parties for similar
products, to ensure that the terms of the agreements under the Provision of
Products Framework Agreement and Procurement of Materials Framework
Agreement are not less favourable to our Group than terms between our
Group and the Independent Third Parties;
• the finance and business teams of our Group shall periodically monitor the
transaction amount under the Provision of Products Framework Agreement
and Procurement of Materials Framework Agreement and, when it is expected
that the transaction amount might exceed the annual cap, promptly report in
accordance with our Group’s connected transactions management policy to
ensure that the Company complies with all the applicable requirements under
the Listing Rules, including to revise the relevant annual cap when
appropriate;
• the legal team of our Group has reviewed the terms of the Provision of
Products Framework Agreement and Procurement of Materials Framework
Agreement and shall in case of any proposed change to the major terms of the
transactions, ensure that the Company complies with all the applicable
requirements under the Listing Rules, including but not limited to publishing
an announcement; and
• our Independent Non-executive Directors and auditors will conduct annual
review of the continuing connected transactions under the framework
agreements and provide annual confirmations in accordance with Rules
14A.55 and 14A.56 of the Listing Rules.
CONNECTED TRANSACTIONS
– 289 –


--- page 300 ---
WAIVER
In respect of the transactions as contemplated under the Provision of Products
Framework Agreement and Procurement of Materials Framework Agreement as described
above, we have applied for, and the Stock Exchange has granted us, a waiver from strict
compliance with the announcement requirements under the Listing Rules pursuant to
Rule 14A.105 of the Listing Rules.
DIRECTORS’CONFIRMATION
Our Directors (including Independent Non-executive Directors) are of the view
that: (i) the continuing connected transactions set out above have been and will be entered
into in our ordinary and usual course of business on normal commercial terms or better,
on terms that are fair and reasonable, and in the interests of our Company and our
Shareholders as a whole, (ii) the proposed annual caps for these transactions are fair and
reasonable and in the interests of our Company and the Shareholders as a whole, and (iii)
the Company will comply with the relevant requirement under Chapter 14A of the Listing
Rules apart from the announcement requirement for which a waiver is sought under Rule
14A.105.
JOINT SPONSORS’CONFIRMATION
The Joint Sponsors have (i) reviewed the relevant documents and information
provided by our Company in relation to the above partially-exempt continuing connected
transactions; (ii) obtained necessary representations and confirmations from our
Company and the Directors, and (iii) participated in the due diligence and discussions
with the management of our Group.
Based on the above, the Joint Sponsors are of the view that the aforesaid
partially-exempt continuing connected transactions, for which a waiver has been sought,
has been entered into in the ordinary and usual course of our business on normal
commercial terms or better terms, are fair and reasonable and in the interests of our
Company and our Shareholders as a whole, and that the proposed annual caps in respect
of the partially-exempt continuing connected transactions are fair and reasonable and in
the interests of our Company and our Shareholders as a whole.
CONNECTED TRANSACTIONS
– 290 –


--- page 301 ---
SUBSTANTIAL SHAREHOLDERS
So far as our Directors are aware, immediately following completion of the Global
Offering and no other changes are made to the issued share capital of our Company
between the Latest Practicable Date and Listing, the following persons will have an
interest or short position (as applicable) in our Shares or underlying Shares which would
fall to be disclosed to us under the provisions of Divisions 2 and 3 of Part XV of the SFO,
or, will be, directly or indirectly, interested in 10% or more of the issued voting shares of
our Company or any other member of our Group:
Assuming the Offer Size
Adjustment Option and
the Over­allotment Option
are not exercised
Assuming the Offer Size
Adjustment Option and
the Over­allotment Option
are fully exercised
Shareholder Nature of interest
Description
of Shares
Number of
Shares
directly or
indirectly
held
Approximate
%o f
shareholding
in our A
Shares
immediately
after the
Global
Offering (3)
Approximate
%o f
shareholding
in the total
share capital
of our
Company
immediately
after the
Global
Offering (3)
Approximate
%o f
shareholding
in our A
Shares
immediately
after the
Global
Offering (3)
Approximate
%o f
shareholding
in the total
share capital
of our
Company
immediately
after the
Global
Offering (3)
Mr. Zhang Daocai Interest in controlled
corporation (1)(2)
A Shares 1,629,046,278 43.65% 39.80% 43.65% 38.70%
Interest held jointly with
other persons (1)
A Shares 39,024,200 1.05% 0.95% 1.05% 0.93%
Ms. Yu Qingjuan Interest in controlled
corporation (1)(2)
A Shares 1,629,046,278 43.65% 39.80% 43.65% 38.70%
Interest held jointly with
other persons (1)
A Shares 39,024,200 1.05% 0.95% 1.05% 0.93%
Mr. Zhang Yabo Interest in controlled
corporation (1)(2)
A Shares 1,629,046,278 43.65% 39.80% 43.65% 38.70%
Beneficial owner A Shares 39,024,200 1.05% 0.95% 1.05% 0.93%
Mr. Zhang Shaobo Interest in controlled
corporation (1)(2)
A Shares 1,629,046,278 43.65% 39.80% 43.65% 38.70%
Interest held jointly with
other persons (1)
A Shares 39,024,200 1.05% 0.95% 1.05% 0.93%
SUBSTANTIAL SHAREHOLDERS
– 291 –


--- page 302 ---
Assuming the Offer Size
Adjustment Option and
the Over­allotment Option
are not exercised
Assuming the Offer Size
Adjustment Option and
the Over­allotment Option
are fully exercised
Shareholder Nature of interest
Description
of Shares
Number of
Shares
directly or
indirectly
held
Approximate
%o f
shareholding
in our A
Shares
immediately
after the
Global
Offering (3)
Approximate
%o f
shareholding
in the total
share capital
of our
Company
immediately
after the
Global
Offering (3)
Approximate
%o f
shareholding
in our A
Shares
immediately
after the
Global
Offering (3)
Approximate
%o f
shareholding
in the total
share capital
of our
Company
immediately
after the
Global
Offering (3)
Sanhua Holding Beneficial owner A Shares 948,487,077 25.41% 23.17% 25.41% 22.54%
Interest in controlled
corporation (2)
A Shares 680,559,201 18.23% 16.63% 18.23% 16.17%
Sanhua Green Energy Beneficial owner (2) A Shares 677,851,480 18.16% 16.56% 18.16% 16.11%
Notes:
(1) As of the Latest Practicable Date, Mr. Zhang Yabo directly held 39,024,200 A Shares in our Company. Mr.
Zhang Daocai, Mr. Zhang Yabo and Mr. Zhang Shaobo are parties acting in concert in respect of their
shareholding interests in the Company. Therefore, each of Mr. Zhang Daocai, Mr. Zhang Yabo and Mr.
Zhang Shaobo is deemed to be interested in the interest of each other under the SFO. As of the Latest
Practicable Date, Sanhua Holding was held as to (i) 28.77% by Xinchang Huaqing Investment, which was
held as to 51% by Mr. Zhang Daocai, 6% by Ms. Yu Qingjuan, who is the spouse of Mr. Zhang Daocai, 22%
by Mr. Zhang Yabo, and 21% by Mr. Zhang Shaobo, (ii) 11.78% by Mr. Zhang Yabo, (iii) 10.04% by Mr.
Zhang Shaobo, (iv) 12.35% by Xinchang Huaxin Industrial, which was held as to 38.84% by Mr. Zhang
Yabo, and (v) 9.04% by Zhejiang Huateng Industrial, which was held as to 45.45% by Mr. Zhang Shaobo.
Mr. Zhang Daocai is the father to Mr. Zhang Yabo and Mr. Zhang Shaobo. Therefore, the A Shares held by
Sanhua Holding are deemed to be held by Mr. Zhang Daocai, Mr. Zhang Yabo and Mr. Zhang Shaobo.
(2) As of the Latest Practicable Date, Sanhua Green Energy is held as to 46.22% by Sanhua Holding, 28.20%
by Wealth Info, which is ultimately wholly-owned by Sanhua Holding through Hield International.
Therefore, Sanhua Holding is deemed to be interested in all the A Shares held by Sanhua Green Energy
under the SFO. Interest in controlled corporation also includes the 2,707,721 A Shares repurchased by our
Company as treasury shares as of the Latest Practicable Date.
As of the Latest Practicable Date, out of the 677,851,480 A Shares held by Sanhua Green Energy,
155,103,526 A Shares of Sanhua Green Energy were pledged and placed in a security and trust account
maintained in respect of the Sanhua Green Energy Exchangeable Bonds. See “History and Corporate
Structure — Our Shareholding and Corporate Structure”.
(3) The calculation of the percentage includes 2,707,721 A Shares being held as treasure Shares repurchased
by our Company pursuant to the repurchase mandates approved by Shareholders, accounting for
approximately 0.075% of the total number of A Shares in issue as of the Latest Practicable Date.
For further information on any other person who will be, immediately following
completion of the Global Offering, directly or indirectly, interested in 10% or more of the
issued voting shares of any other member of our Group, see section headed “Appendix IV
— Statutory and General Information — 3. Further Information About Our Directors and
Supervisors — C. Disclosure of Interests — (iii) Interests of Substantial Shareholders in
Members of Our Group (excluding our Company)” in this prospectus.
SUBSTANTIAL SHAREHOLDERS
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--- page 303 ---
BEFORE THE GLOBAL OFFERING
As of the Latest Practicable Date, the total issued share capital of our Company was
3,732,389,535 A Shares of nominal value of RMB1.00 each, which are all listed on the main
board of the Shenzhen Stock Exchange.
Description of Shares
Number of
Shares
Approximate
% of issued
share capital
A Shares in issue* 3,732,389,535 100.0%
Note:
* Including 2,707,721 A Shares being held as treasury Shares repurchased by our Company pursuant to the
repurchase mandates approved by Shareholders, accounting for approximately 0.0725% of the total
number of A Shares in issue as of the Latest Practicable Date.
UPON COMPLETION OF THE GLOBAL OFFERING
Immediately following the completion of the Global Offering, assuming that the
Offer Size Adjustment Option and the Over-allotment Option are not exercised, the share
capital of our Company will be as follows.
Description of Shares
Number of
Shares
Approximate
%o ft h e
enlarged
issued share
capital
A Shares in issue* 3,732,389,535 91.2%
H Shares to be issued pursuant to the Global
Offering 360,330,000 8.8%
Total 4,092,719,535 100.0%
Note:
* Including 2,707,721 A Shares being held as treasury Shares repurchased by our Company pursuant to the
repurchase mandates approved by Shareholders, accounting for approximately 0.0725% of the total
number of A Shares in issue as of the Latest Practicable Date.
Immediately following the completion of the Global Offering, assuming that the
Offer Size Adjustment Option is fully exercised but the Over-allotment Option is not
exercised the share capital of our Company will be as follows.
SHARE CAPITAL
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--- page 304 ---
Description of share
Number of
Shares
Approximate
% of enlarger
issued share
capital
A Shares in issue* 3,732,389,535 90.0%
H Shares to be issued pursuant to the Global
Offering 414,379,500 10.0%
Total 4,146,769,035 100.0%
Note:
* Including 2,707,721 A Shares being held as treasury Shares repurchased by our Company pursuant to the
repurchase mandates approved by Shareholders, accounting for approximately 0.075% of the total
number of A Shares in issue as of the Latest Practicable Date.
Immediately following the completion of the Global Offering, assuming that the
Over-allotment Option is fully exercised but the Offer Size Adjustment is not exercised,
the share capital of our Company will be as follows.
Description of share
Number of
Shares
Approximate
% of enlarger
issued share
capital
A Shares in issue* 3,732,389,535 90.0%
H Shares to be issued pursuant to the Global
Offering 414,379,500 10.0%
Total 4,146,769,035 100.0%
Note:
* Including 2,707,721 A Shares being held as treasury Shares repurchased by our Company pursuant to the
repurchase mandates approved by Shareholders, accounting for approximately 0.075% of the total
number of A Shares in issue as of the Latest Practicable Date.
SHARE CAPITAL
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--- page 305 ---
Immediately following the completion of the Global Offering, assuming that the
Offer Size Adjustment Option and the Over-allotment Option are fully exercised, the share
capital of our Company will be as follows.
Description of Shares
Number of
Shares
Approximate
%o ft h e
enlarged
issued share
capital
A Shares in issue* 3,732,389,535 88.7%
H Shares to be issued pursuant to the Global
Offering 476,536,400 11.3%
Total 4,208,925,935 100.0%
Note:
* Including 2,707,721 A Shares being held as treasury Shares repurchased by our Company pursuant to the
repurchase mandates approved by Shareholders, accounting for approximately 0.075% of the total
number of A Shares in issue as of the Latest Practicable Date.
OUR SHARES
Our H Shares in issue upon completion of the Global Offering, and our A Shares, are
ordinary Shares in our share capital and are considered as one class of Shares.
Shenzhen-Hong Kong Stock Connect has established a stock connect mechanism between
mainland China and Hong Kong. Our A Shares can be subscribed for and traded by
mainland Chinese investors, qualified foreign institutional investors or qualified foreign
strategic investors and must be traded in Renminbi. As our A Shares are eligible securities
under the Northbound Trading Link, they can also be subscribed for and traded by Hong
Kong and other overseas investors pursuant to the rules and limits of Shenzhen-Hong
Kong Stock Connect. Our H Shares can be subscribed for or traded by Hong Kong and
other overseas investors and qualified domestic institutional investors. If our H Shares are
eligible securities under the Southbound Trading Link, they can also be subscribed for and
traded by mainland Chinese investors in accordance with the rules and limits of
Shanghai-Hong Kong Stock Connect or Shenzhen-Hong Kong Stock Connect.
RANKING
Our H Shares and our A Shares are regarded as one class of Shares under our
Articles of Association and will rank pari passu with each other in all other respects and, in
particular, will rank equally for all dividends or distributions declared, paid or made after
the date of this prospectus. All dividends in respect of our H Shares are to be paid by us in
Hong Kong dollars whereas all dividends in respect of our A Shares are to be paid by us in
Renminbi. In addition to cash, dividends may also be distributed in the form of Shares.
Holders of our H Shares will receive share dividends in the form of H Shares, and holders
of our A Shares will receive share dividends in the form of A Shares.
SHARE CAPITAL
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--- page 306 ---
NO CONVERSION OF OUR A SHARES INTO H SHARES FOR LISTING AND
TRADING ON THE HONG KONG STOCK EXCHANGE
Our A Shares and our H Shares are generally neither interchangeable nor fungible,
and the market prices of our A Shares and our H Shares may be different after the Global
Offering. The Guidelines on Application for “Full Circulation” of Domestic Unlisted
Shares of H-share Companies ( H΅͡ሗ “ஷ ”ˏ)
announced by the CSRC are not applicable to companies dual listed in the PRC and on the
Hong Kong Stock Exchange. As of the Latest Practicable Date, there were no relevant rules
or guidelines from the CSRC providing that A Shareholders may convert A shares held by
them into H shares for listing and trading on the Hong Kong Stock Exchange.
APPROVALFROMHOLDERSOFASHARESREGARDINGTHEGLOBALOFFERING
Approval from holders of A Shares is required for our Company to issue H Shares
and seek the listing of H Shares on the Hong Kong Stock Exchange. Such approval was
obtained by us at the shareholders’ general meeting of our Company held on December
30, 2024 and is subject to the following conditions:
(i) Size of the offer. The proposed number of H Shares to be offered shall not
exceed 10% of the total issued share capital enlarged by the H Shares to be
issued pursuant to the Global Offering (before the exercise of the
Over-allotment Option). The number of H Shares to be issued pursuant to the
full exercise of the Over-allotment Option shall not exceed 15% of the total
number of H Shares to be offered initially under the Global Offering.
(ii) Method of offering. The method of offering shall be by way of an international
offering to institutional investors and a public offer for subscription in Hong
Kong.
(iii) Target investors. The H Shares shall be issued to public investors in Hong Kong
under the Hong Kong Public Offering and international investors, qualified
domestic institutional investors in mainland China and other investors who
are approved by mainland Chinese regulatory bodies to invest abroad in
International Offering.
(iv) Price determination basis. The issue price of the H Shares will be determined,
among others, after due consideration of the interests of existing Shareholders
of our Company, acceptance of investors and the risks related to the offering,
according to international practice, through the demands for orders and book
building process, subject to the domestic and overseas capital market
conditions and by reference to the valuation level of comparable companies in
domestic and overseas markets.
(v) Validity period. The issue of H Shares and listing of H Shares on the Hong Kong
Stock Exchange shall be completed within 18 months from the date when the
shareholders’ meeting was held on December 30, 2024.
There are no other approved offering plans for our Shares except the Global
Offering.
SHARE CAPITAL
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--- page 307 ---
SHAREHOLDERS’GENERAL MEETINGS
For details of circumstance under which our shareholders’ general meeting is
required, see “Summary of Articles of Association — Shareholders and Shareholders’
General Meetings” in Appendix III to this prospectus.
SHARES SCHEMES
Certain employees of our Company and our subsidiaries are eligible for interests of
our Shares through the incentive schemes of our Company. For details, see “Appendix IV
— Statutory and General Information — 4. Our Incentive Schemes” in this prospectus.
SHARE CAPITAL
– 297 –


--- page 308 ---
You should read the following discussion and analysis in conjunction with our audited
consolidated financial statements included in the Accountant’s Report set out in Appendix I to
this prospectus, together with the accompanying notes. Our financial information has been
prepared in accordance with IFRS Accounting Standards, which may differ in material aspects
from generally accepted accounting principles in other jurisdictions.
The following discussion and analysis contain forward-looking statements that reflect
our current views with respect to future events and financial performance that involve risks
and uncertainties. These statements are based on assumptions and analysis made by us in light
of our experience and perception of historical events, current conditions and expected future
developments, as well as other factors we believe are appropriate under the circumstances.
However, whether actual outcomes and developments will meet our expectations and
predictions depends on a number of risks and uncertainties, many of which we cannot control
or foresee. In evaluating our business, you should carefully consider all of the information
provided in this prospectus, including the sections headed “Risk Factors” and “Business.”
Unless the context otherwise requires, financial information described in this section is
described on a consolidated basis.
OVERVIEW
We are the world’s largest manufacturer of refrigeration and air-conditioning
control components and a global leader in automotive thermal management system
components in terms of revenue in 2024, according to Frost & Sullivan. Our market share
in the global refrigeration and air-conditioning control component market was
approximately 45.5% in terms of revenue in 2024, according to Frost & Sullivan. In the
global automotive thermal management system component market, we held a market
share of approximately 4.1% in terms of revenue in 2024, ranking fifth globally, according
to Frost & Sullivan. In line with our mission to develop an intelligent, low-carbon
economy and create a sustainable, quality living environment, we have been dedicated to
the R&D, promotion and adoption of thermal management technology, providing
customers across the globe with energy-efficient solutions through our industry-leading
products of high quality.
With a global perspective, we have established a business that spans two major
sectors: refrigeration and air-conditioning product components and automotive
components. We are a key supplier of refrigeration and air-conditioning control
components, which span valves, heat exchangers, pumps and controllers, among others,
serving the global market for residential and commercial air-conditioning, commercial
and industrial refrigeration and small household appliances, among others. Our key
products in this business sector comprise a variety of valve products, including electronic
expansion valves, four-way reversing valves, service valves, solenoid valves and ball
valves. We also offer heat exchanger products, specifically micro-channel heat exchangers,
pump products such as Omega pumps, and controller products, including inverter
controllers and pressure sensors. Under our automotive component business, we offer a
substantial range of products, including valve products, such as automotive electronic
expansion valves, pump products, such as automotive electronic water pumps, heat
FINANCIAL INFORMATION
– 298 –


--- page 309 ---
exchanger products, such as battery coolers, and various types of integrated modules,
among others. In 2024, our global market share of refrigeration and air-conditioning
control components, measured by revenue, reached approximately 45.5%, surpassing the
combined market share of the second and third largest manufacturers. In the same year,
our automotive electronic expansion valves and integrated modules ranked first in their
respective global markets in terms of revenue, with market shares of 48.9% and 64.6%,
respectively. In addition, in the same year, our battery coolers and automotive electronic
water pumps ranked third and fourth in their respective global markets in terms of
revenue, with market shares of 5.9% and 5.5% respectively.
We achieved sustained growth in our revenue and profit during the Track Record
Period. Our revenue increased by 15.0% from RMB21,347.6 million in 2022 to RMB24,557.8
million in 2023. Our revenue increased by 13.8% from RMB24,557.8 million in 2023 to
RMB27,947.2 million in 2024. Our gross profit increased by 23.3% from RMB5,461.6
million in 2022 to RMB6,735.5 million in 2023. Our gross profit increased by 13.1% from
RMB6,735.5 million in 2023 to RMB7,620.8 million in 2024. Our gross profit margin
increased from 25.6% in 2022 to 27.4% in 2023 and remained relatively stable at 27.3% in
2024. In 2022, 2023 and 2024, our net profit amounted to RMB2,608.1 million, RMB2,933.7
million and RMB3,111.7 million, respectively, and during the same period, our net profit
margin remained at a level of above 11.1%.
BASIS OF PREPARATION
Our Historical Financial Information has been prepared in accordance with all
applicable International Financial Reporting Standards (“ IFRS Accounting Standards ”)
issued by the International Accounting Standards Board (“ IASB ”). The Historical
Financial Information has been prepared under the historical cost convention, as modified
by the revaluation of financial assets and financial liabilities at fair value through profit or
loss (“ FVPL ”).
The preparation of the Historical Financial Information in conformity with IFRS
Accounting Standards requires the use of certain critical accounting estimates. It also
requires management to exercise its judgment in the process of applying our accounting
policies. The areas involving a higher degree of judgment or complexity, or areas where
assumptions and estimates are significant to the Historical Financial Information, are
disclosed in Note 4 of the Accountant’s Report in Appendix I to this prospectus.
New standards, amendments and interpretations to the existing standards that are
effective during the Track Record Period have been adopted by us consistently throughout
the years/periods presented, unless prohibited by the relevant standard to apply
retrospectively.
Other than the material accounting policies information as disclosed elsewhere in
this Historical Financial Information, a summary of the other accounting policies
information has been set out in Note 39 of the Accountant’s Report in Appendix I to this
prospectus.
FINANCIAL INFORMATION
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--- page 310 ---
KEY FACTORS AFFECTING OUR RESULTS OF OPERATIONS
Our results of operations and financial condition have been, and will continue to be,
materially affected by a number of factors, some of which are outside our control,
including:
General Factors
Our results of operations have been, and are expected to continue to be, materially
affected by a number of factors, many of which are beyond our control, including the
following:
• development of macroeconomic conditions;
• government policies and regulations in relation to the refrigeration and
air-conditioning product industry and the automotive industry;
• international trade policies, geopolitics and trade protection measures, export
control and economic or trade sanctions;
• evolving consumption patterns and habits in China and globally;
• continuous growth and evolving competitive landscape of the refrigeration
and air-conditioning product component industry and automotive
component industries; and
• weather, natural disasters and climate change.
Specific Factors
The Development of the Industries Where We Operate
Our business focuses on the R&D, production and sales of refrigeration and
air-conditioning product components and automotive components, which are widely
used in the global market for residential and commercial air-conditioning, commercial
and industrial refrigeration and small household appliances, among others and the
automotive market, including both NEVs and ICEVs. Accordingly, our business is affected
by changes in the demands and the performance of those markets.
According to Frost & Sullivan, the global market size of refrigeration and
air-conditioning control components in terms of revenue increased from RMB27.5 billion
in 2020 to RMB36.4 billion in 2024, with a CAGR of 7.4%. With the increasing demand for
refrigeration and air-conditioning, the global market size of refrigeration and
air-conditioning control components in terms of revenue is expected to reach RMB51.6
billion in 2029, representing a CAGR of 7.2% from 2024 to 2029.
FINANCIAL INFORMATION
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--- page 311 ---
The recent trend in the automotive market towards NEVs has also led to a sustained
and substantial increase in the market demand for automotive thermal management
systems. According to Frost & Sullivan, the global sales volume of NEVs reached 21.4
million units in 2024, and is expected to increase to 47.2 million units by 2029,
representing a CAGR of 17.2% between 2024 and 2029. NEVs need more advanced thermal
management systems than ICEVs to ensure the efficiency and safety of their batteries and
motors. Consequently, the market size for automotive thermal management system
components has correspondingly grown rapidly in line with the growth of NEV sales.
According to the same source, the global sales volume of automotive electronic expansion
valve, which is a key component within the automotive thermal management system,
increased from 7.5 million units in 2020 to 38.5 million units in 2024, representing a CAGR
of approximately 50.4%, and is further expected to reach 98.2 million units in 2029,
representing a CAGR of 20.6% between 2024 and 2029. The global sales volume of
integrated modules increased from 0.6 million units in 2020 to 5.2 million units in 2024,
with a CAGR of 74.2%, and is expected to reach 18.9 million units in 2029, with a CAGR of
29.5%. The increased demand for NEVs drives technological advancements in thermal
management systems and the growth in the market for automotive thermal management
components.
Our revenue has consistently increased over the past several years and increased
from RMB21,347.6 million in 2022 to RMB24,557.8 million in 2023 and further to
RMB27,947.2 million in 2024, benefited from the growing demand in the refrigeration and
air-conditioning product market and automotive market. In 2024, our four-way reversing
valves, electronic expansion valves, micro-channel heat exchangers, service valves,
solenoid valves, Omega pumps and ball valves ranked first in their respective global
markets in terms of revenue, with market shares of 54.6%, 51.0%, 40.2%, 34.4%, 52.5%,
51.0% and 32.2%, respectively. In the same year, our pressure sensors ranked second in the
global sensors market in terms of revenue, with a market share of 13.6%. In addition, in
the same year, our automotive electronic expansion valves and integrated modules ranked
first in their respective global markets in terms of revenue, with market shares of 48.9%
and 64.6%, respectively. In addition, in the same year, our battery coolers and automotive
electronic water pumps ranked third and fourth in their respective global markets in
terms of revenue, with market shares of 6.9% and 4.7% respectively. We value R&D and
innovation in technology and production processes, enabling us to continuously
introduce new products and iterate existing ones, and to reliably offer customers
high-quality products and solutions, forming a core component of our competitive
advantages. Meanwhile, we maintain a robust global network encompassing R&D centers,
production bases as well as sales offices, which is essential for securing and expanding
our presence in international markets. We have stable partnerships with many
internationally renowned enterprises. As a result, we are well-positioned to reinforce our
market leadership and capitalize on emerging business opportunities by leveraging our
strong brand recognition, diverse product mix, advanced technology, lean production and
high-quality customer base.
FINANCIAL INFORMATION
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--- page 312 ---
Product Mix
During the Track Record Period, we have been dedicated to satisfying evolving
market needs, sustaining product competitiveness and ensuring solid profitability
through technological and product innovation as well as product mix optimization. We
have a diverse product mix of products in two categories (i) refrigeration and
air-conditioning product components and (ii) automotive components.
Our refrigeration and air-conditioning product components include a wide range of
products such as electronic expansion valves, four-way reversing valve, solenoid valve,
service valve and micro-channel heat exchanger. In 2022, 2023 and 2024, our revenue
generated from sales of refrigeration and air-conditioning product components was
RMB13,833.8 million, RMB14,644.1 million and RMB16,560.6 million, respectively,
representing 64.8%, 59.6% and 59.3% of our total revenue, respectively, with gross profit
margin of 25.7%, 27.0% and 27.1% for the same periods. Our automotive component
products mainly include automotive electronic expansion valve, automotive electronic
water pump, battery cooler and integrated modules. In 2022, 2023 and 2024, our revenue
generated from sales of automotive components was RMB7,513.8 million, RMB9,913.7
million and RMB11,386.6 million, respectively, representing 35.2%, 40.4% and 40.7%, of
our total revenue, respectively, with gross profit margin of 25.4%, 28.0% and 27.6% for the
same periods.
The breadth and depth of our product mix enable us to offer our customers a variety
of options to meet their various needs. The product upgrades and iterations also affect our
results of operations. For instance, our integrated modules of automotive components
have consistently gained market recognition and considerable market share through
enhanced and diversified integration capabilities, significantly contributing to the growth
of our automotive component business. During the Track Record Period, we have
consistently diversified our product mix to form a comprehensive product matrix that
provides our customers with one-stop service products. In addition, leveraging our
extensive technological expertise and innovation in R&D, we are actively broadening our
business boundaries into emerging fields, such as bionic robot electromechanical
actuators. Our profitability has been and will continue to be affected by our product mix.
The improvement and diversification of our product mix has resulted in more balanced
growth of our business and revenue, and reduced the risk of our dependence on any
individual product type.
Our Ability to Reinforce Product Competitiveness through Relentless Innovation,
Effective Supply Chain Management and Continuous Productivity Enhancement
Our long-term and stable profitability relies on our ability to drive product
competitiveness through relentless innovation, effective supply chain management and
continuous productivity enhancement.
We consistently upgrade and iterate our products by incorporating innovative
designs and utilizing new raw materials to enhance both performance and cost-efficiency,
ensuring that our customers receive high-quality and competitively priced products.
FINANCIAL INFORMATION
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--- page 313 ---
Effective management of supply chain also contribute to our success. In 2022, 2023
and 2024, we incurred cost of revenue of RMB15,885.9 million, RMB17,822.3 million and
RMB20,326.3 million, respectively, representing 74.4%, 72.6% and 72.7% of our revenue in
the same periods. The majority of our cost of revenue is raw materials and consumables
used, which primarily include copper and aluminum. Our cost of revenue is subject to
fluctuations in the prices of raw materials and consumables used and the stability of the
supply chain. To mitigate the impact of price fluctuation of raw materials and
consumables used, we have employed a comprehensive risk management strategy,
including our one-time pricing model or raw material price linkage mechanism in
negotiations with our customers or suppliers, and our futures management process.
Meanwhile, we persistently conduct R&D on new materials and develop new suppliers to
maintain the flexibility to switch to alternative materials or suppliers in the event of
severe shortages or price volatility of certain raw materials. To maintain the stability of
our supply chain, we have established stable cooperation with various suppliers
worldwide, ensuring that we can respond quickly to market demand and complete timely
delivery of various large orders.
Efficient and stable production is crucial to our product quality and profitability. As
of December 31, 2024, we had a total of 48 factories worldwide, including 13 overseas
factories in the United States, Poland, Mexico, Turkey, Austria, Vietnam, Thailand and
India. We coordinate and manage our global production bases and factories in a unified
manner, providing the flexibility to swiftly respond to and meet the diverse needs of
customers in different regions. In addition, we employ lean production methodologies
and standardization to achieve high production volume, low consumption and seamless
transitions. While ensuring efficient production, quality control is equally important for
maintaining the safety and reliability of our products, as well as fostering customer trust
and loyalty in our brand. As we continue to expand our production capacity, we will
maintain our unified, lean production and strict quality control to deliver high-quality
products to our customers and solidify our industry-leading position.
As we further expand our production, we will continue to iterate and upgrade our
products through R&D, implement various cost control measures and maintain supply
chain stability. We will also actively leverage synergies between different products to
achieve centralized purchasing and further unleash economies of scale, thereby
sustaining high revenue growth.
Our Continual Investment in R&D and Talent
The growth of our revenue depends on our ability to make technological
advancements and develop products and solutions that meet the evolving needs of our
customers. In 2022, 2023 and 2024, our R&D expenses amounted to RMB989.0 million,
RMB1,096.8 million and RMB1,351.8 million, respectively, accounting for 4.6%, 4.5% and
4.8% of our revenue for the same periods, respectively. We have made, and will continue
to make, significant investments in people, technology and R&D, to reinforce the
leadership in our technology and gross profit margin, thereby solidifying our market
leadership and providing great customer experience. We have established a
comprehensive global R&D system, which we consider the key driver of our sales and
profitability. Our R&D system consists of (i) one Research Center that focuses on strategic
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R&D, (ii) six R&D bases that lead the innovation of applied R&D and (iii) technology
departments that focus on the improvement on product performance and production
efficiency. Our comprehensive and multi-level R&D system ensures full coverage of basic
research, applied science and production technology. As of December 31, 2024, we
employed over 3,500 R&D personnel, including global leading industry experts, and
among which over 700 individuals held master’s degrees or above. Through years of
dedicated R&D, we have successfully transformed our R&D results into a series of
proprietary technologies, including chain structure motor technology and full-stroke
coaxiality technology, among others, which enables us to compete effectively. As of
December 31, 2024, our R&D efforts had accumulated over 3,300 patents in China and over
800 patents in overseas jurisdictions. In addition, we had over 100 valid applications
under the PCT. Going forward, we expect to continue to invest in R&D and recruit top
technical talent, focusing on innovation strategies and emerging fields to enhance our
competitiveness and deliver superior products and experiences to our customers.
Inventory Management
Effective inventory management is essential for maintaining the sustainability and
flexibility of our production, as well as enabling us to swiftly respond to fluctuations in
market demand. We formulate procurement strategies based on supply forecasts, market
analysis, and the estimates of fluctuations in procurement periods and prices, and
regularly monitor the inventory balance and consumption, enabling us to maintain a
reasonable and safe inventory level to respond to changes in customer demand and raw
material price fluctuations. In addition, the globalization of our supply chain, production
bases and warehouses allow us to manage our inventory with flexibility and adaptability,
thereby reducing overstocking costs and enhancing the efficiency of inventory
management, which in turn enables us to respond swiftly to the needs of customers in
different countries and regions. Our inventory turnover days in 2022, 2023 and 2024 was
92 days, 92 days and 89 days, respectively.
Our Management of Trade and Notes Receivables
Our capability to manage the level of trade and notes receivables will affect our cash
level and liquidity as well as our financial condition. We value the managing of
receivables and have established a comprehensive and effective system for management
and tracking our trade and notes receivables, along with a corresponding customer credit
management and assessment regime. For example, our senior management regularly
reviews the recoverability of our outstanding balances, and we have a dedicated
department responsible for continually monitoring the credit profiles as well as operating
and financial condition of our customers. Over the years of operation, we have established
deep trusted partnerships with various industry-leading customers by consistently
exceeding their expectations for product quality, cost, delivery efficiency, as well as design
and technological advancement, among others. As of December 31, 2024, we have
established business relationships with all top ten largest refrigeration and
air-conditioning manufacturers and automotive manufacturers in terms of revenue in
2023. We believe that as we continue to strengthen our customer partnerships and enhance
our receivables management mechanisms, we will maintain efficient receivables
management, thereby supporting our business liquidity.
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Foreign Currency Fluctuations
To quickly meet local customer needs and gain deeper insight into different
markets, we operate several production bases, factories, R&D bases and selling companies
overseas. In 2022, 2023 and 2024, 46.5%, 45.4% and 44.7% of our revenue were generated
from overseas. Due to our global presence, our operational results are influenced by
foreign exchange rate movements on both translational and transactional bases.
Translational effects occur mainly because our subsidiaries’ financial results are measured
in their respective local currencies and then translated into Renminbi for our consolidated
financial statements, which will cause fluctuations in the Renminbi value of our
non-Renminbi assets, liabilities, revenues and costs. Transactional effects arise when
subsidiaries conduct transactions in currencies other than their local currencies. To
manage these risks, our finance team uses hedging, asset-liability matching and foreign
exchange block trade, while controlling the scale of foreign currency assets and liabilities.
In 2022 and 2023, we had gains from hedging operations of RMB30.6 million and RMB43.6
million, respectively, and in 2024, we had losses from hedging operations of RMB51.2
million. Such historical performance may not be indicative of the future performance of
our hedging operations, as market conditions and regulatory environments may change.
There may also be a limited range of hedging instruments available to reduce our
exposure to exchange rate fluctuations. The cost of these foreign exchange hedging
instruments can vary significantly over time and may outweigh the potential benefits of
reduced currency volatility. See “Risk Factors — Risks Relating to Our Business and
Industry — Any hedging strategy may not adequately protect us from commodity price,
foreign exchange rate and interest rate risks, and fluctuations in exchange rates could
result in foreign currency exchange losses.” In addition, we have established exchange
rate settlement linkage mechanism with our suppliers and customers, such as foreign
currency and futures contracts, to minimize the impact of fluctuations in foreign exchange
rates on our business, financial condition and results of operations. See Note 3 of the
Accountant’s Report in Appendix I to this prospectus.
MATERIAL ACCOUNTING POLICIES AND CRITICAL ACCOUNTING ESTIMATES
AND JUDGMENTS
Revenue Recognition
We recognize revenue when (or as) a performance obligation is satisfied, i.e., when
control of the goods or services underlying the particular performance obligation is
transferred to the customer.
If control of the goods and services transfers over time, revenue is recognized over
the period of the contract by reference to the progress towards complete satisfaction of
that performance obligation. Otherwise, revenue is recognized at a point in time when the
customer obtains control of the goods and services.
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When the consideration in a contract includes a variable amount, the amount of
consideration is estimated to that which we will be entitled in exchange for transferring
the goods or services to the customer. The variable consideration is estimated at contract
inception and constrained until it is highly probable that a significant revenue reversal in
the amount of cumulative revenue recognized will not occur when the associated
uncertainty with the variable consideration is subsequently resolved.
If a customer pays consideration or we have a right to an amount of consideration
that is unconditional, before we transfer a good or service to the customer, we present the
contract liability when the payment is made. A contract liability is our obligation to
transfer goods or services to a customer for which we have received consideration (or an
amount of consideration is due) from the customer.
Sales of Goods
We are principally engaged in the R&D, production and sales, of refrigeration and
air-conditioning product components and automotive components, which are widely
used in the refrigeration and air-conditioning product market and the automotive market,
including both NEVs and ICEVs.
Revenue from domestic sales of products shall be recognized based on the sales
contracts, settlement vouchers and other documents upon completion of product delivery
and the buyer’s confirmation of the acceptance of the products. Upon confirming the
acceptance, the buyer has the right to sell the products at its discretion, and takes the risks
of any price fluctuation and obsolescence and loss of the products.
Revenue from overseas sales of products shall be recognized based on the sales
contracts, customs declaration form, bill of lading and other documents upon completion
of customs declaration or shipping out of the port and arriving at the named port or place
of destination. Upon the completion of customs declaration or arrival at the named port or
place of destination, the buyer has the right to sell the products at its discretion, and takes
the risks of any price fluctuation and obsolescence and loss of the products.
Inventories
Raw materials, work in progress and finished goods are stated at the lower of cost
and net realizable value. For inventory valued at actual cost, the month-end weighted
average method or individual valuation method shall be used for issuing inventory. If
priced according to planned costs, cost differences will be carried forward at the end of the
month. Cost comprises direct materials, direct labor and an appropriate proportion of
variable and fixed overhead expenditure, the latter being allocated on the basis of normal
operating capacity. Costs of purchased inventory are determined after deducting rebates
and discounts.
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Estimated Net Realizable Value of Inventories
In accordance with our accounting policy, we estimate net realizable value of
inventories based on specific facts and circumstances. For different types of inventories, it
requires the estimation of selling prices, costs of conversion, selling expenses and the
related tax expense to calculate the net realizable amount of inventories. For inventories
held for executed sales contracts, management estimates the net realizable amount based
on the contracted price. For raw materials and work in progress, management has
established a model in estimating the net realizable amount at which the inventories can
be realized in the normal course of business after considering the manufacturing cycles,
production capacity and forecasts, estimated future conversion costs and selling prices.
Management also takes into account the price or cost fluctuations and other related
matters occurring after the end of the year which reflect conditions that existed at the end
of each year.
It is reasonably possible that if there is a significant change in circumstances
including our business and the external environment, outcomes would be significantly
affected.
Allowance for Expected Credit Loss of Receivables
The loss allowances for receivables are based on assumptions about risk of default
and expected loss rates to determine the expected loss. We use judgment in making these
assumptions and selecting the inputs to the impairment calculation. The historical loss
rates are adjusted to reflect the forward-looking information on macroeconomic factors as
well as the credit rating analysis of respective customers and other external data which
have impacts on the ability of the customers to settle the receivables.
We take into account different macroeconomic scenarios in considering
forward-looking information in China and overseas. We regularly monitor and review the
key macroeconomic assumptions and parameters related to the calculation of expected
credit losses. We have identified the Gross Domestic Product (“ GDP”) of the countries in
which we sell our goods to be the most relevant factor, and accordingly adjust the
historical loss rates based on expected changes in this factor.
Property, Plant and Equipment and Intangible Assets — Estimated Useful Lives and
Residual Values
We determine the estimated useful lives and residual values (if applicable) and
consequently the related depreciation/amortization charges for our property, plant and
equipment and intangible assets. These estimates are based on the historical experience,
anticipated change of technology, market conditions and the actual consumption of
related assets. The depreciation/amortization charge will increase when useful lives are
less than previously estimated. In addition, technically obsolete or non-strategic assets
that have been abandoned or sold will be written off or written down.
Actual economic lives may differ from estimated useful lives and actual residual
values may differ from estimated residual values. Periodic review could result in change
in useful lives and residual values and, therefore, change in depreciation/amortization
expense in future periods.
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Income Tax
We estimate our income tax provision and deferred taxation in accordance with the
prevailing tax rules and regulations, taking into account any special approvals obtained
from the relevant tax authorities and any preferential tax treatment to which we are
entitled in each location or jurisdiction in which we operate. There are many transactions
and calculations for which the ultimate tax determination is uncertain during the ordinary
course of business. We recognize liabilities for anticipated tax audit issues based on
estimates of whether additional taxes will be due. Where the final tax outcome of these
matters is different from the amounts that were initially recorded, the differences will
impact on our income tax and deferred tax provisions in the period in which the
determination is made.
Deferred tax assets are recognized for unused tax losses and deductible temporary
differences, such as the provision for impairment of receivables, inventories and property,
plant and equipment and accruals of expenses not yet deductible for tax purposes, to the
extent that it is probable that taxable profits will be available against which the tax losses
and deductible temporary difference can be utilized. Significant estimation is required in
determining the recoverability of deferred tax assets.
In the event that future tax rules and regulations or related circumstances change,
adjustments to current and deferred taxation may be necessary which would impact on
our results or financial position.
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 our transactions settled through the payment of shares.
Equity-settled share-based payments made in exchange for services rendered by
employees are measured at the fair value of equity instruments granted to employees.
Instruments of which vesting is conditional upon completion of services or fulfillment of
performance conditions are measured by recognizing services rendered during the period
in relevant costs or expenses and crediting the capital reserve accordingly at the fair value
on the date of grant according to the best estimates conducted by us at each date of the end
of the reporting period during the Track Record Period. The fair value of the shares was
determined on the basis of the single-day closing price of the circulating shares on the date
when the equity instruments are granted, less the exercise price. See Note 32 of the
Accountant’s Report in Appendix I to this prospectus.
No expense is recognized for awards that do not ultimately vest due to
non-fulfillment of non-market conditions and/or vesting conditions. For the market or
non-vesting condition under the share-based payments agreement, it should be treated as
vesting irrespective of whether or not the market or non-vesting condition is satisfied,
provided that other performance condition and/or vesting conditions are satisfied.
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Where the terms of an equity-settled share-based payment are modified, as a
minimum, services obtained are recognized as if the terms had not been modified. In
addition, an expense is recognized for any modification which increases the total fair
value of the instrument ranted or is otherwise beneficial to the employee as measured at
the date of modification.
DESCRIPTION OF MAJOR COMPONENTS OF OUR RESULTS OF OPERATIONS
The following table sets forth our consolidated statements of profit or loss with line
items in absolute amounts and as percentages of our revenue for the period indicated.
This information should be read together with our consolidated financial statements and
related notes included in the Accountant’s Report set out in the Accountant’s Report in
Appendix I to this prospectus. The results of operations in any period are not necessarily
indicative of the results that may be expected for any future period.
Year ended December 31,
2022 2023 2024
Amount % Amount % Amount %
(RMB in thousands, except for percentage of revenue)
Revenue 21,347,550 100.0 24,557,802 100.0 27,947,165 100.0
Cost of revenue (15,885,938) (74.4) (17,822,314) (72.6) (20,326,346) (72.7)
Gross profit 5,461,612 25.6 6,735,488 27.4 7,620,819 27.3
General and administrative expenses (1,383,996) (6.5) (1,621,891) (6.6) (1,946,785) (7.0)
Selling and marketing expenses (496,334) (2.3) (601,409) (2.4) (726,437) (2.6)
Research and development expenses (988,954) (4.6) (1,096,834) (4.5) (1,351,799) (4.8)
Net impairment losses on financial
assets (97,762) (0.5) (51,478) (0.2) (56,379) (0.2)
Other income 260,185 1.2 291,162 1.2 292,301 1.0
Other gains/(losses), net 471,310 2.2 63,585 0.3 (83,795) (0.3)
Operating profit 3,226,061 15.1 3,718,623 15.1 3,747,925 13.4
Finance income 53,136 0.2 56,238 0.2 67,221 0.2
Finance costs (235,671) (1.1) (229,583) (0.9) (132,384) (0.5)
Finance costs, net (182,535) (0.9) (173,345) (0.7) (65,163) (0.2)
Share of profit or loss of investments
accounted for using the equity
method 7,732 0.0 7,986 0.0 8,925 0.0
Profit before income tax 3,051,258 14.3 3,553,264 14.5 3,691,687 13.2
Income tax expenses (443,206) (2.1) (619,549) (2.5) (579,961) (2.1)
Profit for the year 2,608,052 12.2 2,933,715 11.9 3,111,726 11.1
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Revenue
During the Track Record Period, our revenue was derived from the sales of (i)
refrigeration and air-conditioning product components and (ii) automotive components.
We experienced a steady revenue growth during the Track Record Period. In 2022, 2023
and 2024, our revenue was RMB21,347.6 million, RMB24,557.8 million and RMB27,947.2
million, respectively.
Revenue by Product Category
The following table sets forth a breakdown of our revenue by major product types
under our two product categories for the periods indicated:
Year ended December 31,
2022 2023 2024
Amount % Amount % Amount %
(RMB in thousands, except for percentage)
Refrigeration and air-conditioning
product components
Valves 8,812,275 41.3 9,834,606 40.0 10,702,920 38.3
Heat exchangers 2,057,745 9.6 2,121,123 8.6 2,693,826 9.6
Controllers 566,126 2.7 704,243 2.9 875,632 3.1
Pumps 580,250 2.7 514,399 2.1 554,762 2.0
Others
(1) 1,817,390 8.5 1,469,764 6.0 1,733,465 6.2
Sub-total 13,833,786 64.8 14,644,135 59.6 16,560,605 59.3
Automotive components
Integrated modules 2,362,963 11.1 3,361,041 13.7 4,262,920 15.3
Automotive valves 2,031,171 9.5 2,913,949 11.9 2,635,135 9.4
Automotive heat exchangers 1,187,226 5.6 1,554,219 6.3 1,670,952 6.0
Automotive pumps 1,128,587 5.3 1,413,572 5.8 1,622,634 5.8
Others
(2) 803,817 3.8 670,886 2.7 1,194,919 4.3
Sub-total 7,513,764 35.2 9,913,667 40.4 11,386,560 40.7
Total 21,347,550 100.0 24,557,802 100.0 27,947,165 100.0
Notes:
(1) Others primarily include containers, filters, plastic components, heater components, motorized dampers,
sight glasses, copper connectors, level switches, superconductive plates and pressure switches, among
others.
(2) Others primarily include blocks, liquid receivers, resolvers and energy storage products, among others.
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During the Track Record Period, our revenue growth was driven by sales of
refrigeration and air-conditioning product components and automotive components.
• Our revenue generated from sales of refrigeration and air-conditioning
product components was RMB13,833.8 million in 2022 and RMB14,644.1
million in 2023, with a year-on-year growth of 5.9%. Our revenue generated
from sales of refrigeration and air-conditioning product components further
increased by 13.1% from RMB14,644.1 million in 2023 to RMB16,560.6 million
in 2024.
• Our revenue generated from sales of automotive components was RMB7,513.8
million in 2022 and RMB9,913.7 million in 2023, with a year-on-year growth of
31.9%. Following a rapid growth period, our automotive component business
has entered a relatively stable development period with a slowing down
growth rate. Our revenue generated from sales of automotive components
increased by 14.9% from RMB9,913.7 million in 2023 to RMB11,386.6 million in
2024.
Revenue by Geographic Location
The following table sets forth our revenue by geographic location for the periods
indicated:
Year ended December 31,
2022 2023 2024
Amount % Amount % Amount %
(RMB in thousands, except for percentage)
China 11,415,857 53.5 13,403,443 54.6 15,446,506 55.3
North America 5,703,859 26.7 6,301,569 25.7 7,094,512 25.4
Europe 1,985,305 9.3 2,442,768 9.9 2,623,526 9.4
Asia (excluding China) 2,153,219 10.1 2,331,241 9.5 2,653,978 9.5
Others
(1) 89,310 0.4 78,781 0.3 128,643 0.5
Total 21,347,550 100.0 24,557,802 100.0 27,947,165 100.0
Note:
(1) Others comprise South America, Oceania and Africa.
We recorded revenue from China and overseas. Throughout the Track Record
Period, our revenue from both China and overseas has consistently increased, primarily
due to our continuous penetration in the market in China and ongoing expansion of our
global footprint.
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Cost of Revenue
Our cost of revenue consists of (i) raw materials and consumables used, mainly
including copper and aluminum, (ii) employee benefit expenses, (iii) depreciation and
amortization, (iv) utility costs, (v) impairment losses on inventories, (vi) transportation
and storage charges and (vii) other expenses. During the Track Record Period, our cost of
revenue grew in line with our revenue. The following table sets forth our cost of revenue
by nature for the periods indicated:
Year ended December 31,
2022 2023 2024
Amount % Amount % Amount %
(RMB in thousands, except for percentages)
Raw materials and consumables used 11,758,388 74.0 13,115,132 73.6 14,979,789 73.7
Employee benefit expenses 2,219,140 14.0 2,523,257 14.2 2,812,304 13.8
Depreciation and amortization 510,513 3.2 646,596 3.6 780,845 3.8
Transportation and storage charges 545,402 3.4 573,974 3.2 664,725 3.3
Utility costs 445,207 2.8 522,993 2.9 555,660 2.7
Impairment losses on inventories 93,592 0.6 41,206 0.2 35,254 0.2
Other expenses
(1) 313,696 2.0 399,156 2.2 497,769 2.5
Total 15,885,938 100.0 17,822,314 100.0 20,326,346 100.0
Note:
(1) Other expenses primarily consist of piping and equipment maintenance costs.
During the Track Record Period, the proportion and fluctuation trends of our cost of
revenue by product category were in line with the breakdown of revenue by product
category. The following table sets forth our cost of revenue by product category for the
periods indicated:
Year ended December 31,
2022 2023 2024
Amount % Amount % Amount %
(RMB in thousands, except for percentages)
Refrigeration and air-conditioning
product components 10,283,327 64.7 10,683,415 59.9 12,078,850 59.4
Automotive components 5,602,611 35.3 7,138,899 40.1 8,247,496 40.6
Total 15,885,938 100.0 17,822,314 100.0 20,326,346 100.0
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Gross Profit and Gross Profit Margin
Our gross profit was RMB5,461.6 million, RMB6,735.5 million and RMB7,620.8
million in 2022, 2023 and 2024, respectively. Our gross profit margin was 25.6%, 27.4% and
27.3% in 2022, 2023 and 2024, respectively. For details of the changes in our gross profit
and gross profit margin during the Track Record Period, see “— Results of Operations.”
The following table sets forth a breakdown of our gross profit and gross profit
margin by product category for the periods indicated:
Year ended December 31,
2022 2023 2024
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
(RMB in thousands, except for percentages)
Refrigeration and air-conditioning
product components 3,550,459 25.7 3,960,720 27.0 4,481,755 27.1
Automotive components 1,911,153 25.4 2,774,768 28.0 3,139,064 27.6
Total 5,461,612 25.6 6,735,488 27.4 7,620,819 27.3
In 2022, 2023 and 2024, we recorded gross profit of RMB3,550.5 million, RMB3,960.7
million and RMB4,481.8 million, respectively, for our refrigeration and air-conditioning
product components, with gross profit margin of 25.7%, 27.0% and 27.1% for the same
periods.
In 2022, 2023 and 2024, we recorded gross profit of RMB1,911.2 million, RMB2,774.8
million and RMB3,139.1 million, respectively, for our automotive components, with gross
profit margin of 25.4%, 28.0% and 27.6% for the same periods.
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General and Administrative Expenses
Our general and administrative expenses include (i) employee benefit expenses, (ii)
office expenses, (iii) depreciation and amortization, (iv) tax and surcharges, (v)
professional services and other consulting fees, (vi) conference, business development
and traveling expenses, (vii) listing expenses and (viii) other expenses. In 2022, 2023 and
2024, our general and administrative expenses amounted to RMB1,384.0 million,
RMB1,621.9 million and RMB1,946.8 million, respectively, accounting for 6.5%, 6.6% and
7.0% of our revenue for the same periods. The following table sets forth a breakdown of
our general and administrative expenses by nature for the periods indicated:
Year ended December 31,
2022 2023 2024
Amount % Amount % Amount %
(RMB in thousands, except for percentages)
Employee benefit expenses 786,531 56.8 935,312 57.7 1,084,797 55.7
Office expenses 144,353 10.4 163,045 10.1 185,452 9.5
Depreciation and amortization 90,505 6.5 120,114 7.4 175,024 9.0
Taxes and surcharges 110,068 8.0 139,816 8.6 171,277 8.8
Professional services and other
consulting fees 89,347 6.5 92,177 5.7 111,425 5.7
Conference, business development
and traveling expenses 30,081 2.2 65,274 4.0 49,986 2.6
Listing expenses – – – – 1,311 0.1
Other expenses
(1) 133,111 9.6 106,153 6.5 167,513 8.6
Total 1,383,996 100.0 1,621,891 100.0 1,946,785 100.0
Note:
(1) Other expenses primarily consist of utility costs, vehicle usage expenses and low-value consumables.
Employee benefit expenses primarily include salaries, pension scheme
contributions and other social welfare payments for our administrative staff. Depreciation
and amortization primarily include depreciation of office buildings and office equipment.
Taxes and surcharges primarily include city maintenance and construction tax, building
tax, stamp tax and education surcharge. Professional services and other consulting fees
primarily include consulting and professional services in relation to our financing
activities.
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Selling and Marketing Expenses
Our selling and marketing expenses include (i) employee benefit expenses, (ii)
transportation and storage charges, (iii) marketing and traveling expenses, (iv) business
development expenses and (v) other expenses. In 2022, 2023 and 2024, our selling and
marketing expenses amounted to RMB496.3 million, RMB601.4 million and RMB726.4
million, respectively, accounting for 2.3%, 2.4% and 2.6% of our revenue for the same
periods. The following table sets forth a breakdown of our selling and marketing expenses
by nature for the periods indicated:
Year ended December 31,
2022 2023 2024
Amount % Amount % Amount %
(RMB in thousands, except for percentages)
Employee benefit expenses 269,412 54.3 331,565 55.1 410,977 56.6
Transportation and storage charges 96,810 19.5 101,518 16.9 101,491 14.0
Marketing and traveling expenses 48,028 9.7 67,991 11.3 79,631 11.0
Business development expenses 52,944 10.7 62,369 10.4 69,550 9.6
Other expenses
(1) 29,140 5.9 37,966 6.3 64,788 8.9
Total 496,334 100.0 601,409 100.0 726,437 100.0
Note:
(1) Other expenses primarily consist of consulting and office expenses.
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Research and Development Expenses
Our research and development (“ R&D”) expenses include (i) employee benefit
expenses, (ii) raw materials and consumables used, (iii) professional services and other
consulting fees, (iv) depreciation and amortization and (v) other expenses. In 2022, 2023
and 2024, our R&D expenses amounted to RMB989.0 million, RMB1,096.8 million and
RMB1,351.8 million, respectively, accounting for 4.6%, 4.5% and 4.8% of our revenue for
the same periods. The following table sets forth a breakdown of our R&D expenses by
nature for the periods indicated:
Year ended December 31,
2022 2023 2024
Amount % Amount % Amount %
(RMB in thousands, except for percentages)
Employee benefit expenses 498,866 50.5 586,262 53.5 810,180 59.9
Raw materials and consumables used 352,329 35.6 345,458 31.5 343,893 25.4
Professional services and other
consulting fees 52,347 5.3 60,300 5.5 65,733 4.9
Depreciation and amortization 39,472 4.0 42,223 3.8 50,675 3.7
Other expenses
(1) 45,940 4.6 62,591 5.7 81,318 6.0
Total 988,954 100.0 1,096,834 100.0 1,351,799 100.0
Note:
(1) Other expenses primarily consist of utility costs, office expenses and traveling expenses.
Net Impairment Losses on Financial Assets
Our net impairment losses on financial assets mainly include impairment losses for
movement in loss allowance for trade and notes receivables at amortized cost, and
movement in loss allowance for other receivables. In 2022, 2023 and 2024, our net
impairment losses on financial assets amounted to RMB97.8 million, RMB51.5 million and
RMB56.4 million, respectively.
FINANCIAL INFORMATION
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Other Income
Our other income includes (i) government grants, (ii) interest income, (iii)
additional deduction for VAT and (iv) others. In 2022, 2023 and 2024, our other income
amounted to RMB260.2 million, RMB291.2 million and RMB292.3 million, respectively.
The following table sets forth a breakdown of our other income by nature for the periods
indicated:
Year ended December 31,
2022 2023 2024
Amount % Amount % Amount %
(RMB in thousands, except for percentages)
Government grants 123,748 47.6 149,108 51.2 205,283 70.2
Interest income 134,992 51.9 102,907 35.4 63,095 21.6
Additional deduction
for VAT – – 37,270 12.8 21,948 7.5
Others 1,445 0.5 1,877 0.6 1,975 0.7
Total 260,185 100.0 291,162 100.0 292,301 100.0
Government grants mainly comprise (i) various forms of VAT refunds, (ii) R&D
rewards, (iii) subsidies related to foreign trade policies and (iv) subsidies related to talent
recruitment initiatives. The majority of these subsidies are recurring in nature.
Interest income mainly comprises interest income on our term deposits classified as
financial assets at amortized cost calculated using the effective interest method.
Additional deduction for VAT represents the additional VAT deduction certain of
our subsidiaries are entitled to. Pursuant to the relevant rules issued in 2023 by the
competent authorities, advanced manufacturing enterprises such as us are eligible for a
5% additional VAT deduction based on deductible input VAT in the current year from
January 1, 2023 to December 31, 2027.
FINANCIAL INFORMATION
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Other Gains/(Losses), Net
Our other gains/(losses), net include (i) net losses on disposal of financial
instruments, primarily comprising foreign exchange derivatives and futures derivatives
(ii) net foreign exchange differences, (iii) fair value changes on derivative financial
instruments, primarily representing changes of gains or losses on foreign exchange
derivatives and futures derivatives, driven by fluctuations in exchange rates and futures
prices, (iv) net gains/(losses) on disposal of property, plant and equipment and other
long-term assets and (v) others. In 2022 and 2023, our other gain, net amounted to
RMB471.3 million and RMB63.6 million, respectively. In 2024, our other losses, net
amounted to RMB83.8 million. The following table sets forth a breakdown of our other
gains/(losses), net by nature for the periods indicated:
Year ended December 31,
2022 2023 2024
(RMB in thousands)
Net losses on disposal of financial
instruments (90,583) (136,272) (38,483)
Net foreign exchange differences 230,937 149,886 62,261
Fair value changes on derivative financial
instruments (107,344) 48,124 (90,734)
Net gains/(losses) on disposal of property,
plant and equipment and other long-term
assets 445,368 (1,157) (14,595)
Others (7,068) 3,004 (2,244)
Total 471,310 63,585 (83,795)
FINANCIAL INFORMATION
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Finance Costs, Net
Our finance costs, net consists of (i) interest income from financial assets held for
cash management purposes, (ii) interest expenses on borrowings, (iii) net exchange losses
on foreign currency borrowings and (iv) interest expenses on lease liabilities. The
following table sets forth a breakdown of our financial costs, net by nature for the periods
indicated:
Year ended December 31,
2022 2023 2024
Amount % Amount % Amount %
(RMB in thousands, except for percentages)
Finance income
Interest income from financial assets
held for cash management
purposes
(1) 53,136 (29.1) 56,238 (32.4) 67,221 (103.2)
Finance costs
Interest expenses on borrowings (231,878) 127.0 (206,954) 119.3 (133,563) 205.0
Net exchange (losses)/gains on
foreign currency borrowings (2,459) 1.3 (17,502) 10.1 19,883 (30.5)
Interest expenses on
lease liabilities (1,334) 0.8 (5,127) 3.0 (18,704) 28.7
Finance costs, net (182,535) 100.0 (173,345) 100.0 (65,163) 100.0
Note:
(1) Interest income from financial assets held for cash management purposes mainly represents interest
income from demand deposit and short-term deposits.
Share of Profit or Loss of Investments Accounted for Using the Equity Method
Our share of profit or loss of investments accounted for using the equity method
mainly includes our interests in a number of individually immaterial associates that are
accounted for using the equity method. In 2022, 2023 and 2024, our share of profit or loss
of investments accounted for using the equity method amounted to RMB7.7 million,
RMB8.0 million and RMB8.9 million, respectively.
Income Tax Expenses
Our income tax expenses comprise current income tax and deferred income tax. In
2022, 2023 and 2024, our income tax expenses amounted to RMB443.2 million, RMB619.5
million and RMB580.0 million, respectively. We are subject to varying tax rates in different
jurisdictions. See Note 11 of the Accountant’s Report in Appendix I to this prospectus.
We are subject to income tax on an entity basis on profits arising in or derived from
the jurisdictions in which our members are domiciled and operate.
FINANCIAL INFORMATION
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PRC Corporate Income Tax
During the Track Record Period, certain of our subsidiaries have obtained High and
New Technology Enterprises certification (“ HNTE ”) and hence they are entitled to a
preferential corporate income tax rate of 15% for a valid period of three years. Other
subsidiaries established and operated in China are subject to the PRC corporate income
tax at the rate of 25% for the years ended December 31, 2022, 2023 and 2024.
According to the relevant laws and regulations promulgated by the State Taxation
Administration of the PRC, enterprises engaging in research and development activities
are entitled to claim 175% from 2018 onwards (subsequently raised to 200% from 2022
onwards) of their research and development expenses incurred as tax-deductible expenses
when determining their assessable profits for that year (the “ Super Deduction ”).
In 2022, 2023 and 2024, our weighted average effective tax rate in China were 11.6%,
13.2% and 11.3%, respectively. The weighted average effective tax rate is calculated by
dividing the sum of the income tax expenses of our Company and its subsidiaries in China
by the sum of their profit before income tax during the respective periods.
US Corporate Income Tax
The applicable income tax rate of the United States where our subsidiaries have
significant operations for the years ended December 31, 2022, 2023 and 2024 ranges from
nil to 10% and 21%, which is a blended state and federal rate, respectively.
In 2022, 2023 and 2024, our weighted average effective tax rate were 17.0%, 12.8%
and 16.9%, respectively. The weighted average effective tax rate is calculated by dividing
the sum of the income tax expenses of each of our Company’s subsidiaries in the United
States by the sum of their respective profit before income tax during the respective
periods.
Corporate Income Tax in Other Jurisdictions
The income tax rates of our subsidiaries in other jurisdictions, including Germany,
Singapore, Mexico and Japan, had been calculated on the estimated assessable profit for
the Track Record Period and the year ended December 31, 2023 and 2024 at the respective
rates prevailing in the relevant jurisdictions.
OECD Pillar Two Model Rules
We are within the scope of the Global Anti-Base Erosion (GloBE) model rules
(hereinafter referred to as “ the Pillar Two model rules”). We have temporarily exempted
the recognition and disclosure of deferred tax assets and liabilities arising from Pillar Two
income taxes, and will account for the Pillar Two income taxes as current tax when
incurred. As of December 31, 2024, Pillar Two legislation has been enacted or
substantively enacted and has taken effect from January 1, 2024, in nine jurisdictions
where we operate.
FINANCIAL INFORMATION
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We have evaluated our potential exposure based on the financial performance
information. According to the assessment result, we expect to benefit from the transitional
Country-by-Country Reporting (CbCR) safe harbour in the above nine jurisdictions where
Pillar Two legislation has been enacted for 2024, with no top-up tax liabilities arising.
Given that more jurisdictions are expected to enact or implement Pillar Two legislation in
2025 and beyond, we will continue to monitor relevant legislative developments in our
operating jurisdictions to evaluate the potential future impact on our financial statements.
RESULTS OF OPERATIONS
Comparisons Between 2024 and 2023
Revenue
Our revenue increased by 13.8% from RMB24,557.8 million in 2023 to RMB27,947.2
million in 2024.
Our revenue from refrigeration and air-conditioning product components increased
by 13.1% from RMB14,644.1 million in 2023 to RMB16,560.6 million in 2024, primarily due
to (i) our continual product innovation and iteration, such as electronic expansion valves,
driven by our initiatives to address strong consumer demand for upgrading to more
energy-efficient products and (ii) our enhanced cooperation with existing customers.
Our revenue from automotive components increased by 14.9% from RMB9,913.7
million in 2023 to RMB11,386.6 million in 2024, mainly due to (i) our deeper penetration
into the NEV market and continual expansion of customer base, driven by the growth of
the NEV market and increasing demand for advanced thermal management systems, (ii)
our continual product innovation and upgrading, such as integrated modules with more
comprehensive features and better performance and (iii) our strengthened cooperation
with existing customers through participation in the early development stages, such as
design and R&D of thermal management system for their vehicle models.
Cost of Revenue
Our cost of revenue increased by 14.0% from RMB17,822.3 million in 2023 to
RMB20,326.3 million in 2024, which was generally in line with our growth in revenue.
Gross Profit and Gross Profit Margin
As a result of the foregoing, our gross profit increased by 13.1% from RMB6,735.5
million in 2023 to RMB7,620.8 million in 2024. Our gross profit margin remained relatively
stable at 27.4% in 2023 and 27.3% in 2024.
FINANCIAL INFORMATION
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In particular:
• the gross profit margin of our refrigeration and air-conditioning product
components remained relatively stable at 27.0% and 27.1% in 2023 and 2024,
mainly due to (i) our diversified product mix, including continual iteration
and upgrading of existing products and introduction of new products, (ii)
effective cost control through our product design optimization and supply
chain management and (iii) higher production efficiency resulting from (a)
our efforts in improving production techniques and deepening the
implementation of lean production management throughout our production
network and (b) economies of scale brought by our consistent expansion
efforts; and
• the gross profit margin of our automotive components remained relatively
stable at 28.0% and 27.6% in 2023 and 2024, mainly due to (i) our diversified
product mix, including continual introduction of competitive products and
iteration and upgrading of existing products to enhance performance, thereby
maintaining the attractiveness of our offerings to customers and customer
loyalty, (ii) effective cost control through our product design optimization and
supply chain management and (iii) higher production efficiency resulting
from (a) our efforts in improving production techniques and deepening the
implementation of lean production management throughout our production
network and (b) economies of scale brought by our consistent expansion
efforts.
General and Administrative Expenses
Our general and administrative expenses increased by 20.0% from RMB1,621.9
million in 2023 to RMB1,946.8 million in 2024, primarily due to (i) the increase in
employee benefit expenses resulting from the increase in the number of administrative
staff driven by our business expansion and (ii) the increase in depreciation and
amortization driven by our new production facilities at our Mexico and Shaoxing Binhai
production bases, reflecting our business expansion.
Selling and Marketing Expenses
Our selling and marketing expenses increased by 20.8% from RMB601.4 million in
2023 to RMB726.4 million in 2024, primarily due to the increase in employee benefit
expenses resulting from the increase in the number of the sales staff driven by our
expanding business scale, promoting the growth of our sales team.
R&D Expenses
Our R&D expenses increased by 23.2% from RMB1,096.8 million in 2023 to
RMB1,351.8 million in 2024, primarily due to the increase in the number of R&D staff to
support our R&D activities, demonstrating our consistent and dedicated R&D efforts that
support the expansion and innovation of product offerings and enhancement of product
performance.
FINANCIAL INFORMATION
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Other Income
Our other income remained relatively stable at RMB291.2 million and RMB292.3
million in 2023 and 2024, respectively, mainly due to the increase in government grants in
relation to VAT refunds resulting from excess tax on certain products, partially offset by
the decrease in interest income mainly resulting from the redemption of our deposit.
Other Gains/(Losses), Net
We recorded other gains, net of RMB63.6 million in 2023 and other losses, net of
RMB83.8 million in 2024, mainly due to a decrease in forward settlement amounts and net
exchange differences, resulting from more moderate exchange rate fluctuations.
Finance Costs, Net
Our finance costs, net decreased by 62.4% from RMB173.3 million in 2023 to
RMB65.2 million in 2024, mainly due to the decrease in interest expenses on borrowings
resulting from a lower average balance of borrowings as a result of the redemption of our
convertible bonds in August 2023.
Income Tax Expense
Our income tax expense decreased by 6.4% from RMB619.5 million in 2023 to
RMB580.0 million in 2024. Our income tax expense as a percentage of our profit before
income tax decreased from 17.4% in 2023 to 15.7% in 2024.
Profit for the Year
As a result of the foregoing, our net profit increased by 6.1% from RMB2,933.7
million in 2023 to RMB3,111.7 million in 2024.
Comparisons Between 2023 and 2022
Revenue
Our revenue increased by 15.0% from RMB21,347.6 million in 2022 to RMB24,557.8
million in 2023.
Our revenue from refrigeration and air-conditioning product components increased
by 5.9% from RMB13,833.8 million in 2022 to RMB14,644.1 million in 2023, primarily as a
result of the increase in sales volume resulting from (i) our continual product innovation
and iteration, such as electronic expansion valves, driven by our initiatives to address
strong consumer demand for upgrading to more energy-efficient products and (ii) our
enhanced cooperation with existing customers.
FINANCIAL INFORMATION
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Our revenue from automotive components increased by 31.9% from RMB7,513.8
million in 2022 to RMB9,913.7 million in 2023, mainly due to the increase in sales volume
resulting from (i) strong market demand for thermal management systems, driven by the
robust performance of the NEV market and (ii) our continual expansion of customer base
and enhancement of customer loyalty as more automobile companies recognize our brand
and products.
Cost of Revenue
Our cost of revenue increased by 12.2% from RMB15,885.9 million in 2022 to
RMB17,822.3 million in 2023, which was generally in line with our growth in revenue.
Gross Profit and Gross Profit Margin
As a result of the foregoing, our gross profit increased by 23.3% from RMB5,461.6
million in 2022 to gross profit of RMB6,735.5 million in 2023. Our gross profit margin
increased from 25.6% in 2022 to 27.4% in 2023.
In particular:
• the gross profit margin of our refrigeration and air-conditioning product
components increased from 25.7% in 2022 to 27.0% in 2023, mainly due to (i)
our diversified product mix, including continual iteration and upgrading of
existing products and introduction of new products, (ii) effective cost control
through our product design optimization and supply chain management, (iii)
higher production efficiency resulting from (a) our efforts in improving
production techniques and deepening the implementation of lean production
management throughout our production network and (b) economies of scale
brought by our consistent expansion efforts and (iv) a decrease in average
logistics costs, mainly benefited from the gradual normalization of the
logistics industry, following the gradual lifting of restrictions measures on
COVID-19 pandemic both domestically and globally; and
• the gross profit margin of our automotive components increased from 25.4%
in 2022 to 28.0% in 2023, mainly due to (i) our diversified product, including
the continual introduction of more competitive products and the upgrading of
our existing products to enhance performance, thereby maintaining the
attractiveness of our offerings to customers and customer loyalty, (ii) effective
cost control through our product design optimization and supply chain
management and (iii) higher production efficiency resulting from (a) our
efforts in improving production techniques and deepening the
implementation of lean production management throughout our production
network and (b) economies of scale brought by our consistent expansion
efforts.
FINANCIAL INFORMATION
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General and Administrative Expenses
Our general and administrative expenses increased by 17.2% from RMB1,384.0
million in 2022 to RMB1,621.9 million in 2023, primarily due to (i) the increase in
employee benefit expenses resulting from the increase in the number of administrative
staff to support our business expansion, and (ii) the increase in depreciation and
amortization driven by our new production facilities at our Xinchang production base.
Our general and administrative expenses as a percentage of revenue remained relatively
stable at 6.5% and 6.6% in 2022 and 2023, respectively.
Selling and Marketing Expenses
Our selling and marketing expenses increased by 21.2% from RMB496.3 million in
2022 to RMB601.4 million in 2023, primarily due to the increases in employee benefit
expenses and conference and traveling expenses, both driven by our expanding business
scale, promoting the growth of our sales team and increase in sales and marketing
activities.
R&D Expenses
Our R&D expenses increased by 10.9% from RMB989.0 million in 2022 to
RMB1,096.8 million in 2023, mainly due to the increase in employee benefits expenses
resulting from the increase in the number of R&D staff to support our R&D activities,
demonstrating our consistent and dedicated R&D efforts that support the expansion and
innovation of product offerings and enhancement of product performance.
Other Income
Our other income increased by 11.9% from RMB260.2 million in 2022 to RMB291.2
million in 2023, primarily due to the increase in addition deduction for VAT resulting from
taxation rules issued in 2023. Pursuant to the relevant rules issued in 2023 by the
competent authorities, advanced manufacturing enterprises such as us are eligible for a
5% additional VAT deduction based on deductible input VAT in the current year from
January 1, 2023 to December 31, 2027.
Other Gains, Net
Our other gains, net decreased by 86.5% from RMB471.3 million in 2022 to RMB63.6
million in 2023, mainly due to relatively higher net gains of RMB445.4 million recorded in
2022 from the disposal of property, plant and equipment and other long-term assets,
resulting from compensation for the transfer of a land use right owned by us, which was
one-off in nature.
Finance Costs, Net
Our finance costs, net remained relatively stable at RMB182.5 million in 2022 and
RMB173.3 million in 2023.
FINANCIAL INFORMATION
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Income Tax Expense
Our income tax expense amounted to RMB443.2 million in 2022 and RMB619.5
million in 2023. Our income tax expense as a percentage of our profit before income tax
increased from 14.5% in 2022 to 17.4% in 2023, mainly due to the increase in profit
contribution from subsidiaries subject to higher income tax rates.
Profit for the Year
As a result of the foregoing, our net profit increased by 12.5% from RMB2,608.1
million in 2022 to RMB2,933.7 million in 2023.
DISCUSSION OF CERTAIN COMPONENTS OF CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION
Non-current Assets and Non-current Liabilities
The following table sets forth the components of our non-current assets and
non-current liabilities as of the dates indicated:
As of December 31,
2022 2023 2024
(RMB in thousands)
Non-current assets
Property, plant and equipment 7,532,216 9,944,907 12,274,558
Right-of-use assets 894,163 1,023,826 1,205,311
Intangible assets 45,826 52,954 36,520
Investment properties 8,204 8,166 7,053
Deferred tax assets 221,159 156,432 112,699
Investments accounted for
using the equity method 32,438 37,924 40,600
Other non-current assets 471,504 594,836 376,825
Total non-current assets 9,205,510 11,819,045 14,053,586
Non-current liabilities
Borrowings 4,578,338 1,030,801 2,045,773
Lease liabilities 202,028 221,295 237,913
Deferred tax liabilities 288,758 307,511 258,264
Other non-current liabilities 316,866 448,425 659,851
Total non-current liabilities 5,385,990 2,008,032 3,201,801
FINANCIAL INFORMATION
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Property, Plant and Equipment
Our property, plant and equipment consist of (i) machinery and equipment, (ii)
buildings, (iii) construction in progress, (iv) office equipment, (v) freehold land, (vi)
leasehold improvement and (vii) motor vehicles. The following table sets forth a
breakdown of our property, plant and equipment as of the dates indicated:
As of December 31,
2022 2023 2024
(RMB in thousands)
Machinery and equipment 3,505,259 4,279,127 5,540,560
Buildings 2,744,652 3,290,904 4,086,238
Construction in progress 1,032,506 2,036,327 2,171,985
Office equipment 113,403 143,248 146,517
Freehold land 77,698 85,789 169,245
Leasehold improvement 45,671 91,089 138,873
Motor vehicles 13,027 18,423 21,140
Total 7,532,216 9,944,907 12,274,558
Our property, plant and equipment increased from RMB7,532.2 million as of
December 31, 2022 to RMB9,944.9 million as of December 31, 2023, and further increased
from RMB9,944.9 million as of December 31, 2023 to RMB12,274.6 million as of December
31, 2024, primarily due to the increase in construction in progress, machinery and
equipment and buildings resulting from continuous business expansion.
FINANCIAL INFORMATION
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Net Current Assets
As of December 31,
As of
April 30,
2022 2023 2024 2025
(RMB in thousands)
(unaudited)
Current assets
Inventories 4,334,875 4,600,729 5,280,442 5,118,750
Trade and notes receivables 7,432,066 8,250,831 9,628,337 11,077,093
Prepayments and other
receivables 844,529 361,586 417,039 302,102
Financial assets at fair value
through
profit or loss 108,965 22,636 6,237 4,541
Term deposits and
restricted cash 3,827,915 2,959,729 1,805,065 1,844,604
Cash and cash equivalents 2,050,329 3,624,955 3,443,503 2,998,600
Other current assets 157,025 251,074 1,720,540 2,008,084
Total current assets 18,755,704 20,071,540 22,301,163 23,353,774
Current liabilities
Borrowings 1,794,549 2,583,346 2,053,766 2,502,715
Trade and notes payables 6,464,878 7,866,652 9,777,262 9,921,672
Contract liabilities 57,955 51,789 49,462 55,656
Lease liabilities 67,661 68,898 90,574 93,572
Current income tax liabilities 115,276 262,732 174,168 100,228
Financial liabilities at fair value
through profit or loss 48,671 14,219 79,678 33,675
Accrual and other payables 904,926 969,109 1,407,120 1,192,887
Other current liabilities 2,008 2,100 1,274 1,284
Total current liabilities 9,455,924 11,818,845 13,633,304 13,901,689
Net current assets 9,299,780 8,252,695 8,667,859 9,452,085
We had net current assets positions as of December 31, 2022, 2023, 2024 and April 30,
2025.
FINANCIAL INFORMATION
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Our net current assets increased from RMB8,667.9 million as of December 31, 2024 to
RMB9,452.1 million as of April 30, 2025, primarily due to (i) an increase of RMB1,448.8
million in trade and notes receivables reflecting our revenue growth and business
expansion, and (ii) a decrease of RMB214.2 million in accruals and other payables as
bonuses for the prior year were paid to employees before April 30, 2025, partially offset by
(i) an increase of RMB448.9 million in borrowings and (ii) a decrease of RMB444.9 million
in cash and cash equivalents.
Our net current assets increased from RMB8,252.7 million as of December 31, 2023 to
RMB8,667.9 million as of December 31, 2024, primarily due to (i) an increase of
RMB1,469.5 million in other currents assets, which is primarily attributable to our
purchase of wealth management products mainly consisting of the principal- and
interest-guaranteed income vouchers issued by the securities companies and reverse
repurchase of government bond, and (ii) an increase of RMB1,377.5 million in trade and
notes receivables reflecting our revenue growth and business expansion and the
adjustments to credit policies for certain quality customers, partially off set by (i) an
increase of RMB1,910.6 million in trade and notes payables reflecting our business
expansion, and (ii) a decrease of RMB1,154.7 million in term deposits and restricted cash
mainly resulting from maturity of term deposits and our liquidity management.
Our net current assets decreased from RMB9,299.8 million as of December 31, 2022
to RMB8,252.7 million as of December 31, 2023, primarily due to (i) an increase of
RMB1,401.8 million in trade and notes payables reflecting our business expansion, (ii) a
decrease of RMB868.2 million in term deposits and restricted cash mainly resulting from
maturity of term deposits and our liquidity management and (iii) an increase of RMB788.8
million in borrowings, partially offset by (i) an increase of RMB1,574.6 million in cash and
cash equivalents mainly resulting from an increase in net cash generated from operating
activities and (ii) an increase of RMB818.8 million in trade and notes receivables, both
reflecting our revenue growth and business expansion.
Inventories
Our inventories primarily consist of (i) finished goods, (ii) raw material, (iii) work
in progress and (iv) contract fulfillment cost. The following table sets forth a breakdown
of our inventories as of the dates indicated:
As of December 31,
2022 2023 2024
(RMB in thousands)
Finished goods 2,696,034 3,179,557 3,833,666
Raw material 1,050,007 932,170 774,517
Work in progress 711,593 596,410 787,733
Contract fulfillment cost 4,886 6,872 10,127
Less: provision for impairment (127,645) (114,280) (125,601)
Total 4,334,875 4,600,729 5,280,442
FINANCIAL INFORMATION
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Our inventories increased by 6.1% from RMB4,334.9 million as of December 31,
2022, to RMB4,600.7 million as of December 31, 2023, and further increased by 14.8% to
RMB5,280.4 million as of December 31, 2024, primarily due to an increase in finished
goods resulting from business growth.
During the Track Record Period, over 90% of our inventories were less than six
months. The following is an aging analysis of our inventories:
As of December 31,
2022 2023 2024
(RMB in thousands)
Within 6 months 4,209,723 4,343,456 5,101,736
Between 6 months and 1 year 166,846 254,412 113,250
Between 1 and 2 years 50,763 89,293 138,045
Over 2 years 35,188 27,849 53,012
Total 4,462,520 4,715,009 5,406,043
We believe we have a comprehensive and adequate system in place for identifying
and accounting for inventory risks and impairment provisions. We regularly review our
inventories and recoverability to identify items with low sales or usage value and make
impairment provisions accordingly. We further assess inventories based on the lower of
cost or net realizable value to make any additional impairment provisions. In accordance
with our accounting policy, we estimate net realizable value of inventories based on
specific facts and circumstances. For different types of inventories, we require the
estimation on selling prices, costs of conversion, selling expenses and the related tax
expense to calculate the net realizable amount of inventories. For inventories held for
executed sales contracts, we estimate the net realizable amount based on the contracted
price. For raw materials and work in progress, we have established a model in estimating
the net realizable amount at which the inventories can be realizable in the normal course
of business after considering the manufacturing cycles, production capacity and forecasts,
estimated future conversion costs and selling prices. We also take into account the price or
cost fluctuations and other related matters occurring after the end of the year which reflect
conditions that existed at the end of each year.
Our Directors are of the view that we have made sufficient impairment provision for
inventories during the Track Record Period and we did not identify any material
recoverability issue in respect of our inventories aged over one year, for the following
reasons, (i) our inventories aged over one year mainly consist of metal products, including
copper and aluminum, such as expansion valves and mainfold, which are highly stable,
resistant to oxidation and deterioration, and have no shelf-life limitations, (ii) as of April
30, 2025, RMB45.9 million, or 24.0% of inventories aged over one year as of December 31,
2024, had been used, consumed or sold, and RMB51.8 million, or 27.1% of inventories aged
over one year as of December 31, 2024, had been allocated to sales orders, (iii) we have
implemented a robust inventory monitoring system involving regular inventory
screening and inventory risk assessments, to ensure that our inventory level is properly
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managed, and (iv) we have established comprehensive inventory provision policies and
have made sufficient provisions for any slow-moving or at-risk inventories identified
under our inventory monitoring system.
The following table sets forth our inventory turnover days for the periods indicated:
Year ended December 31,
2022 2023 2024
Inventory turnover days
(1) 92 92 89
Note:
(1) Inventory turnover days are calculated using the average of opening balance and closing balance of
inventories for a year divided by cost of revenue for the relevant year and multiplied by 365 days.
Our inventory turnover days remained relatively stable at 92 days, 92 days and 89
days in 2022, 2023 and 2024, reflecting our operational stability.
As of April 30, 2025, RMB5,050.9 million, or 93.4% of inventories as of December 31,
2024, had been used, consumed or sold.
Trade and Notes Receivables
The following table sets forth a breakdown of our trade and notes receivables as of
the dates indicated:
As of December 31,
2022 2023 2024
(RMB in thousands)
Trade receivables 5,508,846 6,085,908 7,317,720
Notes receivables 2,204,582 2,484,458 2,685,890
Less: credit loss allowance (281,362) (319,535) (375,273)
Total 7,432,066 8,250,831 9,628,337
Our trade receivables and notes receivables mainly refer to outstanding amounts
due from our customers and related parties for the purchase of goods we sold in the
ordinary course of business, less credit loss allowance. Our notes receivables mainly
represent bank acceptance notes from customers of refrigeration and air-conditioning
product components and automotive components in China. Our trade and notes
receivables increased by 11.0% from RMB7,432.1 million as of December 31, 2022 to
RMB8,250.8 million as of December 31, 2023, and further increased by 16.7% to
RMB9,628.4 million as of December 31, 2024, primarily reflecting (i) our revenue growth
and business expansion and (ii) the adjustments to credit policies for certain quality
customers. These adjustments were driven by the introduction of supply chain finance
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products by certain of our quality customers as part of their supply chain management
optimization efforts, which to some extent, has extended their payment cycles to their
suppliers.
We generally grant credit terms ranging from 60 days to 120 days to our customers.
During the Track Record Period, the majority of our trade receivables were outstanding
for less than three months. The following table sets forth an aging analysis of our trade
receivables as of the dates indicated:
As of December 31,
2022 2023 2024
(RMB in thousands)
Up to 3 months 4,146,495 4,242,921 5,800,080
3 to 6 months 1,084,733 1,003,798 784,254
6 to 12 months 266,034 792,882 697,599
1 to 2 years 7,808 45,653 26,881
2 to 3 years 2,798 388 8,523
Over 3 years 978 266 383
Total 5,508,846 6,085,908 7,317,720
We seek to maintain strict control over our outstanding receivables. Our credit
control department is responsible for minimizing credit risks. Our senior management
regularly reviews the recoverability of our outstanding balances and, when appropriate,
provides for impairment of these trade receivables. We apply the IFRS 9 simplified
approach to measure expected credit losses (“ ECL”) which uses a lifetime expected loss
allowance for all trade receivables. To measure the ECL, trade receivables have been
grouped based on shared credit risk characteristics and aging. We also made individual
assessment on the recoverability of our trade receivables for certain customers based on
historical settlement record. Trade receivables are written off when there is no reasonable
expectation of recovery. Indicators that there is no reasonable expectation of recovery
include the failure of a debtor to engage in a repayment plan with us and other indicators
of severe financial difficulties.
We believe there is no recoverability issue for our trade receivables aged over one
year, and we have made sufficient credit loss allowances, based on (i) our robust credit
risk management system, which includes credit evaluations and tailored credit policies,
(ii) stringent internal measures that enhance the collection and management of trade
receivables. For example, the collection of trade receivables is factored in the monthly
performance appraisal of our sales team and relevant management members, (iii) the
reliability and track record of settlement from our customers, who are primarily
well-known companies in the industry with long-standing and stable relationships with
us, (iv) the fact that as of April 30, 2025, approximately RMB31.9 million or 89.1% of the
trade receivables aged over one year as of December 31, 2024 had been settled, and (v) our
strong customer relationships and the consistent payments we received from customers.
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The following table sets forth our trade receivables turnover days for the periods
indicated:
Year ended December 31,
2022 2023 2024
Trade receivables turnover
days (1) 79 86 88
Note:
(1) Trade receivables turnover days are calculated using the average of opening balance and closing balance
of trade receivables (excluding credit loss allowance) for a year divided by revenue for the relevant year
and multiplied by 365 days.
Our trade receivables turnover days increased from 79 days in 2022 to 86 days in
2023 and further increased to 88 days in 2024, primarily due to the higher revenue
contribution from certain quality customers and the adjustments to credit policies for such
customers.
As of April 30, 2025, RMB7,280.1 million, or 99.4% of our trade receivables as of
December 31, 2024, had been settled.
Prepayments and Other Receivables
Our prepayments and other receivables consist of (i) prepayments for materials, (ii)
tax refund receivables, (iii) deposits and warranties, (iv) others and (v) other receivables
in relation to our land reserves. The following table sets forth a breakdown of our
prepayments and other receivables as of the dates indicated:
As of December 31,
2022 2023 2024
(RMB in thousands)
Prepayments:
Prepayments for materials 117,887 133,793 158,980
Other receivables:
Tax refund receivables 123,916 164,713 172,315
Deposits and warranty 36,247 45,695 58,761
Others 25,468 25,466 35,318
Other receivables in relation to
our land reserves 546,217 – –
Less: provision for impairment (5,206) (8,081) (8,335)
Total 844,529 361,586 417,039
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Our prepayments and other receivables decreased by 57.2% from RMB844.5 million
as of December 31, 2022, to RMB361.6 million as of December 31, 2023, primarily due to
other receivables in relation to our land reserves recorded in 2022 in relation to the
compensation for the transfer of a land use right owned by us, which was one-off in
nature. Our prepayments and other receivables increased by 15.3% from RMB361.6
million as of December 31, 2023 to RMB417.0 million as of December 31, 2024, primarily
due to (i) the increase in prepayments for materials mainly resulting from revenue growth
and business expansion and (ii) the increase in deposits and warranty mainly resulting
from our business expansion.
As of April 30, 2025, RMB298.1 million, or 70.1% of our prepayments and other
receivables as of December 31, 2024, had been settled.
Financial Assets at Fair Value through Profit or Loss
Our financial assets at fair value through profit or loss consist of derivative financial
assets and wealth management products issued by the banks during the Track Record
Period. We recorded RMB109.0 million, RMB22.6 million and RMB6.2 million of financial
assets at fair value through profit or loss as of December 31, 2022, 2023 and 2024. The
generally decrease from RMB109.0 million as of December 31, 2022 to RMB6.2 million as of
December 31, 2024 primarily due to our redemption of wealth management products
issued by the banks.
We engage in derivative transactions to mitigate the risks arising from fluctuations
in foreign exchange rates and raw material prices and purchase wealth management
products with high liquidity and low risk to increase the return of idle cash and bank
balances. To monitor and control the risks associated with our financial assets, we have
adopted a comprehensive set of internal policies and procedures that regulate our
investment operations, particularly hedging activities. Our finance department is
responsible for the overall management of our investment and hedging activities, which
primarily encompasses proposing, analyzing and evaluating potential investments. All
investment operations are subject to the supervision of our audit department. To further
strengthen our management of hedging activities, enhance and optimize the operational
procedures of forward contracts and other derivative products, and ensure the
achievement of our production and operational objectives, we have set up a leading
group, primarily comprising of our chairman of the board, chief financial officer and
minister of audit department to regularly monitor and oversee our hedging operations.
Any material investment decision is subject to the review and approval of our board and
shareholders’ meeting. Our management, including our finance department and audit
department, have extensive experience in managing financial aspects of an enterprise’s
operations.
Our investment decisions are made after thorough consideration of a number of
factors, which include but are not limited to, macro-economic environment, general
market conditions, risk control and credit of issuing financial institutions, our own
working capital conditions and the expected profit or potential loss of the investment. We
endeavor to further reduce risks and enhance compliance associated with investments, by,
for example, (i) controlling the amount and scale of investments, (ii) ensuring investments
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are closely related to our business operations and financial needs and (iii) prohibiting
hedging for speculative purposes, among others.
Upon Listing, we intend to continue our investments strictly in accordance with our
internal policies and procedures, Articles of Association and compliance requirements
under Chapter 14 of the Listing Rules.
Trade and Notes Payables
Our trade and notes payables consist of trade payables and notes payables,
primarily representing payables to our suppliers for raw materials. The following table
sets forth a breakdown of our trade payables and notes payables as of the dates indicated:
As of December 31,
2022 2023 2024
(RMB in thousands)
Trade payables 3,884,603 4,449,940 5,985,427
Notes payables 2,580,275 3,416,712 3,791,835
Total 6,464,878 7,866,652 9,777,262
Our trade payables and notes payables increased by 21.7% from RMB6,464.9 million
as of December 31, 2022 to RMB7,866.7 million as of December 31, 2023, and further
increased by 24.3% to RMB9,777.2 million as of December 31, 2024, primarily reflecting an
increase in our payables for raw materials and equipment which was in line with our
business expansion.
The trade payables are normally settled within three months. The following table
sets forth an aging analysis of our trade payables as of the dates indicated:
As of December 31,
2022 2023 2024
(RMB in thousands)
Below 3 months 3,583,659 4,024,590 5,516,132
Between 3 and 6 months 185,067 259,112 137,789
Between 6 months and 1 year 82,957 121,525 225,306
Over 1 year 32,920 44,713 106,200
Total 3,884,603 4,449,940 5,985,427
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The following table sets forth our trade payables turnover days for the Track Record
Period:
Year ended December 31,
2022 2023 2024
Trade payables turnover days (1) 82 85 94
Note:
(1) Trade payables turnover days are calculated using the average of opening balance and closing balance of
trade payables for a year divided by cost of revenue used for the relevant year and multiplied by 365
days.
Our trade payables turnover days increased from 82 days in 2022 to 85 days in 2023
and further increase to 94 days in 2024, reflecting our effective cash flow management and
stable supplier partnerships.
As of April 30, 2025, RMB5,279.1 million, or 88.2% of our trade payables as of
December 31, 2024, had been settled.
Accruals and Other Payables
Our other payables and accruals primarily consist of (i) salaries, wages and benefits,
(ii) restricted share repurchase obligation, (iii) dividend payables, (iv) taxes other than
income tax payables, (v) deposits payables, (vi) warranty provisions, (vii) other accruals
and (vii) accrued listing expenses. The following table sets forth a breakdown of our other
payables and accruals as of the dates indicated:
As of December 31,
2022 2023 2024
(RMB in thousands)
Salaries, wages and benefits 475,157 598,801 726,001
Restricted shares repurchase
obligation 214,660 118,010 354,074
Dividend payables – – 2,528
Taxes other than income tax
payables 75,514 119,665 135,706
Deposits payables 13,673 41,717 40,069
Warranty provisions 15,271 19,371 22,692
Other accruals 110,651 71,545 116,808
Accrued listing expenses – – 9,242
Total 904,926 969,109 1,407,120
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Our accruals and other payables remained relatively stable at RMB904.9 million as
of December 31, 2022 and RMB969.1 million as of December 31, 2023. Our accruals and
other payables increased by 45.2% to RMB1,407.1 million as of December 31, 2024,
primarily due to (i) an increase in restricted shares repurchase obligation resulting from
our restricted share incentive plan adopted in the first half of 2024 and (ii) an increase in
salaries, wages and benefits, primarily due to growth in headcount and increased
compensation level.
As of April 30, 2025, RMB998.5 million, or 71.0% of our accruals and other payables
as of December 31, 2024, had been settled.
LIQUIDITY AND CAPITAL RESOURCES
During the Track Record Period and up to the Latest Practicable Date, we have
historically funded our cash requirements principally from proceeds from our business
operations, capital contributions from shareholders and bank borrowings. After the
Global Offering, we intend to finance our future capital requirements through cash
generated from our business operations and the net proceeds from the Global Offering.
We do not anticipate any changes in the availability of financing to fund our operations in
the future.
Cash Flow
The following table sets forth a summary of our cash flows for the periods indicated:
Year ended December 31,
2022 2023 2024
(RMB in thousands)
Net cash generated from
operating activities 2,366,052 3,560,363 4,026,185
Net cash used in investing
activities (2,527,699) (1,045,679) (3,171,091)
Net cash used in financing
activities (596,874) (1,091,850) (955,299)
Cash and cash equivalents at
beginning of year 2,690,002 2,050,329 3,624,955
Effect of exchange rate changes 118,848 151,792 (81,247)
Cash and cash equivalents at
end of year 2,050,329 3,624,955 3,443,503
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Net Cash Flows Generated from Operating Activities
Our cash flows generated from operating activities reflect our profit before taxation
adjusted for: (i) non-cash and non-operating items (such as depreciation of non-current
assets and interest income); (ii) the effects of movement in working capital (such as
inventories, receivables and payables); and (iii) other cash items (such as income taxes
paid).
In 2024, we had net cash generated from operating activities of RMB4,026.2 million,
which mainly represents profit before income tax of RMB3,691.7 million, as adjusted by (i)
non-cash and non-operating items, which primarily consist of depreciation and
amortization of non-current assets of RMB1,013.5 million and (ii) movements in working
capital, mainly consisting of an increase in payables of RMB1,908.1 million, partially offset
by an increase in receivables of RMB1,554.4 million.
In 2023, we had net cash generated from operating activities of RMB3,560.4 million,
which mainly represents profit before income tax of RMB3,553.3 million, as adjusted by (i)
non-cash and non-operating items, which primarily consist of depreciation and
amortization of non-current assets of RMB810.0 million and (ii) movements in working
capital, mainly consisting of an increase in payables of RMB1,037.9 million, partially offset
by an increase in receivables of RMB1,381.8 million.
In 2022, we had net cash generated from operating activities of RMB2,366.1 million,
which mainly represents profit before income tax of RMB3,051.3 million, as adjusted by (i)
non-cash and non-operating items, which primarily consist of depreciation and
amortization of non-current assets of RMB641.4 million and net losses on disposal of
property, plant and equipment and other non-current assets of RMB445.4 million and (ii)
movements in working capital, mainly consisting of an increase in payables of RMB1,616.3
million, partially offset by an increase in receivables of RMB1,663.7 million and an
increase in inventories of RMB790.7 million.
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Net Cash Flows Used in Investing Activities
In 2024, our net cash flow used in investing activities was RMB3,171.1 million,
which was primarily attributable to (i) placement of term deposits and wealth
management products of RMB7,131.7 million and (ii) payments for purchase of property,
plant and equipment, intangible assets and other non-current assets of RMB3,290.1
million, partially offset by withdrawal of term deposits and wealth management products
of RMB6,907.4 million.
In 2023, our net cash flow used in investing activities was RMB1,045.7 million,
which was primarily attributable to payments for purchase of property, plant and
equipment, intangible assets and other non-current assets of RMB2,745.5 million, partially
offset by (i) withdrawal of term deposits and wealth management products of RMB1,212.0
million and (ii) proceeds from disposal of property, plant and equipment, intangible assets
and other non-current assets of RMB591.1 million.
In 2022, our net cash flow used in investing activities was RMB2,527.7 million,
which was primarily attributable to payments for purchase of property, plant and
equipment, intangible assets and other non-current assets of RMB2,941.8 million, partially
offset by withdrawal of term deposits and wealth management products of RMB679.7
million.
Net Cash Flows Used in Financing Activities
In 2024, our net cash flow used in financing activities was RMB955.3 million,
primarily attributable to (i) repayments of borrowings of RMB1,852.9 million and (ii)
dividends paid to the Company’s shareholders of RMB1,299.7 million, partially offset by
proceeds from borrowings of RMB2,390.7 million.
In 2023, our net cash flow used in financing activities was RMB1,091.9 million,
primarily attributable to repayment of borrowings of RMB1,308.5 million and dividends
paid to our Shareholders of RMB903.0 million, partially offset by proceeds from
borrowings of RMB1,584.1 million.
In 2022, our net cash flow used in financing activities was RMB596.9 million,
primarily attributable to repayment of borrowings of RMB2,670.2 million and dividends
paid to our Shareholders of RMB894.0 million, partially offset by proceeds from
borrowings of RMB3,001.2 million.
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INDEBTEDNESS
As of December 31, 2022, 2023, 2024 and April 30, 2025, our indebtedness included
borrowings and lease liabilities. The following table sets forth the breakdown of our
indebtedness as of the dates indicated:
As of December 31,
As of
April 30,
2022 2023 2024 2025
(unaudited)
(RMB in thousands)
Current
Borrowings 1,794,549 2,583,346 2,053,766 2,502,715
Lease liabilities 67,661 68,898 90,574 93,572
Sub-total 1,862,210 2,652,244 2,144,340 2,596,287
Non-current
Borrowings 4,578,338 1,030,801 2,045,773 1,779,000
Lease liabilities 202,028 221,295 237,913 207,418
Sub-total 4,780,366 1,252,096 2,283,686 1,986,418
Total 6,642,576 3,904,340 4,428,026 4,582,705
Except for our indebtedness as disclosed above as of December 31, 2022, 2023 and
2024 and April 30, 2025, we did not have any material mortgages, charges, debentures,
loan capital, debt securities, loans, bank overdrafts or other similar indebtedness, finance
lease or hire purchase commitments, liabilities under acceptances (other than normal
trade bills) or acceptance credits which were either guaranteed or unguaranteed, secured
or unsecured.
As of the Latest Practicable Date, there was no restrictive covenant in our
indebtedness which could significantly limit our ability to obtain future financing, nor
was there any default on our indebtedness or breach of covenant during the Track Record
Period and up to the Latest Practicable Date. Our Directors confirm that we did not
experience any difficulty in obtaining bank loans and other borrowings, default in
payment of bank loans and other borrowings or breach of covenants during the Track
Record Period and up to the Latest Practicable Date. Our Directors further confirm that
there has not been any material change in our indebtedness since April 30, 2025 and up to
the date of this prospectus.
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Borrowings
As of December 31, 2022, 2023 and 2024 and April 30, 2025, we had borrowings
(including current and non-current portions) of RMB6,372.9 million, RMB3,614.1 million,
RMB4,099.5 million and RMB4,281.7 million, respectively, mainly representing (i) our
convertible bonds, which were converted and redeemed in full as of December 31, 2023,
and as of the same date, the carrying value of our convertible bonds is nil, and (ii) secured
and unsecured bank loans primarily to supplement our working capital. Our borrowings
are primarily denominated in Renminbi. The effective interest rate on our bank loans
ranged from 2.0% to 6.3% during the Track Record Period. See Note 26 of the Accountant’s
Report in Appendix I to this prospectus. As of the Latest Practicable Date, our unutilized
banking facilities amounted to RMB7,335.0 million.
Lease Liabilities
As of December 31, 2022 and 2023, our total lease liabilities (including current and
non-current portions) amounted to RMB269.7 million and RMB290.2 million, respectively,
which remained relatively stable and mainly represented our leases for our
manufacturing facilities, offices, warehouses, staff apartments and vehicles. Our lease
liabilities increased from RMB290.2 million as of December 31, 2023 to RMB328.5 million
as of December 31, 2024, primarily due to the increase in non-current lease liabilities
mainly resulting from the increase in the number of our leased factories overseas. Our
lease liabilities decreased from RMB328.5 million as of December 31, 2024 to RMB301.0
million as of April 30, 2025, primarily due to the decrease in non-current lease liabilities
mainly following our rental payments for the first quarter of 2025.
CONTINGENT LIABILITIES
As of December 31, 2024, we did not have any material contingent liabilities.
KEY FINANCIAL RATIOS
The following table sets forth our key financial ratios for the periods indicated:
As of/Year ended
December 31,
2022 2023 2024
Gross profit margin
(1) 25.6% 27.4% 27.3%
Net profit margin (2) 12.2% 11.9% 11.1%
Gearing ratio (3) 48.6% 20.0% 21.0%
Notes:
(1) Gross profit margin equals gross profit for the year divided by revenue for the year and multiplied by
100%.
(2) Net profit margin equals net profit for the year divided by revenue for the year and multiplied by 100%.
(3) Gearing ratio equals total debt, including its total borrowings, for the year divided by total equity for the
year and multiplied by 100%.
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Gross Profit Margin
See “— Results of Operations” for a discussion of the factors affecting our gross
profit margin during the Track Record Period.
Net Profit Margin
See “— Results of Operations” for a discussion of the factors affecting our net profit
margin during the Track Record Period.
Gearing ratio
Our gearing ratio remained relatively stable at 20.0% and 21.0% in 2023 and 2024,
after decreasing from 48.6% in 2022. The decrease of gearing ratio from 2022 to 2023 was
primarily due to a decrease in total debt of approximately RMB2,758.7 million, which was
primarily attributable to a decrease of our non-current borrowings resulting from the
redemption of our convertible bonds in August 2023, alongside an increase in total equity
of approximately RMB4,944.4 million.
CAPITAL EXPENDITURES
During the Track Record Period, our capital expenditures consisted of (i)
construction in progress, (ii) freehold land, (iii) machinery and equipment, (iv) leasehold
improvement, (v) building, (vi) office equipment, (vii) motor vehicles and (viii) land use
right. The table below sets forth our capital expenditures for the periods indicated:
Year ended December 31,
2022 2023 2024
(RMB in thousands)
Construction in progress 1,837,241 2,572,024 3,541,790
Freehold land 14,369 3,275 94,965
Machinery and equipment 548,309 444,814 207,512
Leasehold improvement 24,626 56,088 81,084
Building – – 1,899
Office equipment 33,516 45,554 5,522
Motor vehicles 9,528 9,446 3,497
Land use right 67,496 117,870 178,711
Total 2,535,085 3,249,071 4,114,980
In 2022, 2023, 2024, our capital expenditures were RMB2,535.1 million, RMB3,249.1
million and RMB4,115.0 million, respectively. We funded these expenditures mainly with
cash generated from our business operations.
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Following the Global Offering, we will continue to incur capital expenditures to
grow our business. We plan to fund our planned capital expenditures primarily with cash
flows generated from our operations and the net proceeds from the Global Offering. See
“Future Plans and Use of Proceeds.” We may adjust our capital expenditures for any given
year according to our development plans or in light of market conditions and other factors
we believe to be appropriate.
CAPITAL COMMITMENTS
The following table sets forth details of our capital commitments as of the dates
indicated:
As of December 31,
2022 2023 2024
(RMB in thousands)
Property and equipment
commitments
Contracted, but not provided for 752,899 1,457,415 1,525,863
Authorized, but not contracted 2,354,399 5,652,048 5,457,978
Total 3,107,298 7,109,463 6,983,841
The contracted commitments increased from RMB752.9 million as of December 31,
2022 to RMB1,457.4 million as of December 31, 2023 and RMB1,525.9 million as of
December 31, 2024, primarily reflecting our ongoing construction of factories and R&D
center in Zhongshan and Hangzhou.
The authorized, but not contracted commitments increased from RMB2,354.4
million as of December 31, 2022 to RMB5,652.0 million as of December 31, 2023 and
RMB5,458.0 million as of December 31, 2024, primarily reflecting our ongoing
construction plans of factories for automotive components, in particular, for NEVs, in
Shaoxing, Zhongshan and Mexico.
RELATED PARTY TRANSACTIONS
For details about our related party transactions during the Track Record Period, see
Note 37 of the Accountant’s Report in Appendix I to this prospectus.
Our Directors are of the view that each of the related party transactions set out in
Note 37 of the Accountant’s Report in Appendix I to this prospectus was conducted in the
ordinary course of business on an arm’s-length basis and with normal commercial terms
between the relevant parties. Our Directors are also of the view that our related party
transactions during the Track Record Period would not distort our track record results or
make our historical results not reflective of our future performance.
FINANCIAL INFORMATION
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OFF-BALANCE SHEET COMMITMENTS AND ARRANGEMENTS
As of the Latest Practicable Date, we had not entered into any off-balance sheet
arrangements.
TRANSFER PRICING ARRANGEMENT
We carry out intra-Group transactions among our subsidiaries in the PRC and
overseas. We have engaged transfer pricing advisors to perform transfer pricing review on
our cross-border intra-Group transactions during the Track Record Period to conduct
benchmarking studies on the intra-Group transactions and ensure compliance with the
relevant transfer pricing regulations and guidelines. To the best knowledge of our
Directors, and based on the advice of our transfer pricing advisors, our Directors are of the
view that we complied with the relevant transfer pricing regulations and guidelines
during the Track Record Period and up to the Latest Practicable Date.
FINANCIAL RISKS DISCLOSURE
Our activities expose us to a variety of financial risks: market risk (including foreign
exchange risk and interest rate risk), credit risk and liquidity risk. Our overall risk
management focuses on the unpredictability of financial markets, seeks a balance between
risk and return and minimizes the adverse impact of risk on our finance performance.
Based on this risk management objective, the basic strategy of our risk management is to
identify and analyze the various risks faced by us, establish appropriate risk tolerance
thresholds and timely and reliably supervise various risks to control them within a limited
range.
Market Risk
Foreign Exchange Risk
Foreign exchange risk arises when future commercial transactions or recognized
assets and liabilities are denominated in a currency that is not the respective functional
currency of our subsidiaries. The functional currencies of us and our subsidiaries outside
China are United States Dollar (“ USD ”) and Euro (“ EUR ”), whereas the functional
currency of our subsidiaries that operate in China is RMB. We manage our foreign
exchange risk by performing regular reviews of our net foreign exchange exposures and
try to minimize these exposures through natural hedges, wherever possible.
FINANCIAL INFORMATION
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--- page 355 ---
As of December 31, 2022, 2023 and 2024, our major monetary assets/liabilities
exposed to foreign exchange risk, representing those monetary assets/liabilities
denominated in USD and EUR and included in a group entity with a different functional
currency were as set forth below:
As of December 31,
2022 2023 2024
(RMB in thousands)
Financial assets denominated in:
USD 2,028,058 1,903,309 2,756,203
EUR 643,364 761,423 562,268
Others 212,795 289,499 368,463
As of December 31,
2022 2023 2024
(RMB in thousands)
Financial liabilities denominated
in:
USD 736,187 570,284 757,069
EUR 678,887 1,190,444 831,178
Others 50,510 163,089 202,581
As shown in the table above, we are primarily exposed to changes in USD and EUR
exchange rates. The sensitivity of profit or loss to changes in the exchange rates arises
mainly from USD and EUR-denominated financial instruments is set forth below:
Year ended December 31,
2022 2023 2024
(RMB in thousands)
USD exchange rate –
Increase 5% 64,594 66,651 99,957
Decrease 5% (64,594) (66,651) (99,957)
EUR exchange rate –
Increase 5% (1,776) (21,451) (13,446)
Decrease 5% 1,776 21,451 13,446
Changes in other foreign currencies have no significant impact on foreign exchange
risk.
FINANCIAL INFORMATION
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--- page 356 ---
Interest Rate Risk
Our interest rate risk primarily arises from interest-bearing borrowings and bonds.
Borrowings issued at floating rates expose us to cash flow interest rate risk. Borrowings
and bonds issued at fixed rates expose us to fair value interest rate risk. We determine the
proportion of borrowings and bonds issued at floating rates and fixed rates based on the
market environment.
As of December 31, 2022, 2023 and 2024, our total borrowings which were at floating
rates amounted to approximately RMB2,665,903,000, RMB2,584,126,000 and
RMB2,048,388,000, respectively.
If the interest rate had been 50 basis points higher or lower with all other variables
held constant, the profit before tax would decrease/increase approximately
RMB13,330,000, RMB12,921,000 and RMB10,242,000, for the years ended December 31,
2022, 2023 and 2024, respectively.
Considering the repricing or maturity date, the fair value interest rate risk arises
from borrowings and bonds and bank balances carried at fixed rates is not significant for
us.
Credit Risk
Credit risk arises from cash and cash equivalents, restricted cash and term deposits,
as well as trade and notes receivables and other receivables. The carrying amount of each
class of the above financial assets represents our maximum exposure to credit risk in
relation to the corresponding class of financial assets.
Credit Risk of Cash and Cash Equivalents, Restricted Cash and Term Deposits
Cash and cash equivalents, restricted cash and term deposits are mainly placed with
reputable Chinese and international financial institutions. There has been no recent
history of default in relation to these financial institutions. The expected credit loss was
immaterial as of December 31, 2022, 2023 and 2024.
(i) Trade Receivables
We apply the IFRS 9 simplified approach to measure expected credit losses (“ ECL”)
which uses a lifetime expected loss allowance for all trade receivables.
To measure the ECL, trade receivables have been grouped based on shared credit
risk characteristics and aging. We also made individual assessment on the recoverability
of our trade receivables for certain customers based on historical settlement records.
The historical loss rates are calculated based on the historical payment profiles of
sales and the corresponding historical incurred credit losses. The historical loss rates are
adjusted to reflect the forward-looking information on macroeconomic factors as well as
the credit rating analysis of respective customers and other external data which have
FINANCIAL INFORMATION
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--- page 357 ---
impacts on the ability of customers to settle the receivables. We have identified the Gross
Domestic Product (“ GDP”) of the countries in which we sell our goods to be the most
relevant factor, and accordingly adjust the historical loss rates based on expected changes
in this factor.
Trade receivables are written off when there is no reasonable expectation of
recovery. Indicators that there is no reasonable expectation of recovery include the failure
of a debtor to engage in a repayment plan with us and other indicators of severe financial
difficulties.
(ii) Notes Receivables
We measured provisions for impairment of notes receivables based on the lifetime
ECL, and assessed that there was no significant credit risk associated with our bank
acceptance notes as we did not expect that there would be any significant losses from
non-performance by these reputable banks. For the commercial acceptance notes and
finance company acceptance notes, which are usually settled within six months to one
year from the respective issuance date, we provided for expected credit loss as of
December 31, 2022, 2023 and 2024 amounting to RMB633,000, RMB7,619,000 and
RMB8,620,000, respectively.
(iii) Other Receivables and other non-current assets
Other receivables and other no-current assets subject to credit risks at the end of
each of the periods mainly comprise rental and other deposits, tax refund receivables and
others. We consider the probability of default upon initial recognition of the assets and
whether there has been significant increase in credit risk on an ongoing basis throughout
each of the periods. To assess whether there is a significant increase in credit risk, we
compare the risk of a default occurring on the assets as of the reporting date with the risk
of default as of the date of initial recognition. Especially, the following indicators are
incorporated:
• actual or expected significant adverse changes in business, financial or
economic conditions that are expected to cause a significant change to the
debtor’s ability to meet its obligations;
• external credit rating of the counterparty;
• actual or expected significant changes in the operating results of the debtor;
and
• significant changes in the expected performance and behavior of the debtor,
including changes in the payment status of the debtor.
Regardless of the analysis above, a significant increase in credit risk is presumed if a
debtor is more than 365 days past due in making a contractual payment.
FINANCIAL INFORMATION
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--- page 358 ---
Liquidity Risk
We intend to maintain sufficient cash and cash equivalents. Due to the dynamic
nature of the underlying business, our policy is to regularly monitor our liquidity risk and
to maintain adequate liquid assets such as cash and cash equivalents and term deposits or
to retain adequate financing arrangements to meet our liquidity requirements.
The tables below analyze our non-derivative financial liabilities that will be settled
into relevant maturity groupings based on the remaining period at each balance sheet date
to their contractual maturity date. The amounts disclosed in the table are the contractual
undiscounted cash flows. Balances due within 12 months equal their carrying balances as
the impact of discounting is not significant.
Less than
1 year
Between
1 and
2 years
Between
2 and
5 years
Over
5 years Total
(RMB in thousands)
As of December 31, 2022
Trade and notes payables 6,464,878 – – – 6,464,878
Accrual and other payables
(excluding non-financial liabilities) 354,255 – – – 354,255
Lease liabilities 69,566 54,385 95,795 55,281 275,027
Other current liabilities
(excluding non-financial liabilities) 48,671 – – – 48,671
Borrowings 1,839,750 1,449,895 3,826,171 – 7,115,816
Other non-current liabilities
(excluding non-financial liabilities) – 2,898 1,933 – 4,831
8,777,120 1,507,178 3,923,899 55,281 14,263,478
FINANCIAL INFORMATION
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--- page 359 ---
Less than
1 year
Between
1 and
2 years
Between
2 and
5 years
Over
5 years Total
(RMB in thousands)
As of December 31, 2023
Trade and notes payables 7,866,652 – – – 7,866,652
Accrual and other payables
(excluding non-financial liabilities) 250,643 – – – 250,643
Lease liabilities 81,555 47,143 112,002 57,439 298,139
Other current liabilities
(excluding non-financial liabilities) 14,219 – – – 14,219
Borrowings 2,603,097 445,309 646,132 – 3,694,538
Other non-current liabilities
(excluding non-financial liabilities) – 11,291 – – 11,291
10,816,166 503,743 758,134 57,439 12,135,482
Less than
1 year
Between
1 and
2 years
Between
2 and
5 years
Over
5 years Total
(RMB in thousands)
As of December 31, 2024
Trade and notes payables 9,777,262 – – – 9,777,262
Accrual and other payables
(excluding non-financial liabilities) 545,413 – – – 545,413
Lease liabilities 99,889 76,905 159,312 18,637 354,743
Borrowings 2,081,072 1,456,197 689,987 – 4,227,256
12,503,636 1,533,102 849,299 18,637 14,904,674
DIVIDENDS AND DIVIDEND POLICY
Pursuant to our Articles of Association, in principle, we distribute cash dividends
once a year. Within any three consecutive years, our distributed cumulative profits in cash
shall not be less than 30% of the average distributable profits realized in the latest three
years. The specific dividend ratios shall be determined by our Board according to relevant
regulations and our operating conditions, and shall be considered and resolved at our
general meeting.
FINANCIAL INFORMATION
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--- page 360 ---
Future profit distributions may be paid in the form of cash dividends or stock
dividends or a combination of cash dividends and stock dividends or other methods
permitted by laws and regulations. We preferentially adopt the method of cash dividends.
We shall adopt cash dividends for profit distribution provided that the conditions for cash
distribution are satisfied. When distributing profits in the form of stock dividends, we
will consider true and reasonable factors such as the growth of our Company and the
dilution to net assets per share.
During the Track Record Period, we declared cash dividends to our Shareholders as
follows:
Year ended December 31,
2022 2023 2024
(RMB in thousands)
Final dividends in respect of the
previous year, declared and
paid during the year 535,335 716,973 926,626
Interim dividends in respect of
current year, declared and paid
during the year 358,624 186,023 373,119
Total 893,959 902,996 1,299,745
See Note 12 of the Accountant’s Report in Appendix I to this prospectus.
On March 25, 2025, the Board of Directors proposed a final dividend of RMB2.5 per
10 shares (tax inclusive), totaling RMB932.75 million, in respect of the year ended
December 31, 2024. On April 16, 2025, the Shareholders' meeting approved the proposed
final dividend for 2024. As of May 22, 2025, the dividends for the year ended December 31,
2024 have been fully paid to our Shareholders.
WORKING CAPITAL CONFIRMATION
Taking into account the financial resources available to us, including our cash and
cash equivalents on hand, operating cash flows, available financing facilities and the
estimated net proceeds from the Global Offering, our Directors are of the view that we
have sufficient working capital to meet our present requirements and for at least the next
12 months from the date of this prospectus.
DISTRIBUTABLE RESERVES
As of December 31, 2024, we had approximately RMB11,650.3 million of retained
earnings available for distribution to our Shareholders.
FINANCIAL INFORMATION
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--- page 361 ---
LISTING EXPENSES
Listing expenses represent professional fees, underwriting commissions and other
fees incurred in connection with the Global Offering. We estimate that our listing expenses
will be approximately HK$139.8 million (assuming an Offer Price of HK$21.87 per Offer
Share (being the mid-point of the indicative Offer Price range) and no exercise of the Offer
Size Adjustment Option and the Over-allotment Option), representing 1.8% of the gross
proceeds (based on the mid-point of our indicative price range for the Global Offering and
assuming that the Offer Size Adjustment Option and the Over-allotment Option are not
exercised) of the Global Offering. During the Track Record Period, we incurred listing
expenses of RMB10.0 million, of which RMB1.3 million was charged to the consolidated
statements of profit or loss as general and administrative expenses, and RMB8.7 million
will be deducted from equity. We expect to incur listing expenses of approximately
HK$139.8 million, of which approximately HK$9.4 million is expected to be recognized in
the consolidated statements of profit or loss as general and administrative expenses and
approximately HK$130.4 million is expected to be recognized as a deduction in equity
directly upon the Listing. Our Directors do not expect such expenses to materially impact
our results of operations in 2025. By nature, our listing expenses are composed of (i)
underwriting commission of approximately HK$104.1 million and (ii) non-underwriting
related expenses of approximately HK$35.7 million, which consist of fees and expenses of
legal advisors and the Reporting Accountant of approximately HK$23.0 million and other
fees and expenses of approximately HK$12.7 million.
UNAUDITED PRO FORMA ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS
See “Appendix II — Unaudited Pro Forma Financial Information.”
RECENT DEVELOPMENT AND NO MATERIAL ADVERSE CHANGE
No Material Adverse Change
Our Directors have confirmed that up to the date of this prospectus there has been
no material adverse change in our financial or trading position or prospects since
December 31, 2024, being the end date of the periods reported in the Accountant’s Report
in Appendix I to this prospectus, and there is no event since December 31, 2024 that would
materially affect the information as set out in the Accountant’s Report in Appendix I to
this prospectus.
Summary of Unaudited Financial Information for the three months ended March 31,
2025
As required by the Shenzhen Stock Exchange Listing Rules, we published our
quarterly report on April 30, 2025, containing our unaudited consolidated financial
statements as of and for the three months ended March 31, 2025 prepared under PRC
GAAP . We have included our unaudited consolidated financial statements prepared in
accordance with IAS 34 as of and for the three months ended March 31, 2025, in condensed
form, in the unaudited interim financial report set forth in Appendix IA to this Listing
Document. Our unaudited condensed consolidated financial statements have been
reviewed by our reporting accountant in accordance with Hong Kong Standard on Review
Engagements 2410. See “Appendix IA — Unaudited Interim Condensed Consolidated
Financial Information.”
FINANCIAL INFORMATION
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--- page 362 ---
Summary of Consolidated Statements of Profit or Loss
The following table sets forth our consolidated statements of profit or loss with line
items in absolute amounts and as percentages of our revenue for the periods indicated:
Three months ended March 31,
2024 2025
Amount % Amount %
(RMB in thousands, except for percentage)
(Unaudited)
Revenue 6,439,559 100.0 7,669,450 100.0
Cost of revenue (4,698,917) (73.0) (5,614,188) (73.2)
Gross profit 1,740,642 27.0 2,055,262 26.8
General and administrative expenses (457,175) (7.1) (504,010) (6.6)
Selling and marketing expenses (127,299) (2.0) (143,037) (1.9)
Research and development expenses (317,015) (4.9) (359,855) (4.7)
Net impairment losses on financial assets (48,569) (0.8) (46,316) (0.6)
Other income 65,587 1.0 77,685 (1.0)
Other gains/(losses), net (39,390) (0.6) 54,665 (0.7)
Operating profit 816,781 12.7 1,134,394 14.8
Finance income 17,495 0.3 8,503 0.1
Finance costs (34,676) (0.5) (37,252) (0.5)
Finance costs, net (17,181) (0.3) (28,749) (0.4)
Share of profit or loss of investments
accounted for using the equity method 1,252 0.0 2,414 0.0
Profit before income tax 800,852 12.4 1,108,059 14.4
Income tax expenses (154,698) (2.4) (184,589) (2.4)
Profit for the period 646,154 10.0 923,470 12.0
Attributable to:
– Owners of the Company 647,743 10.1 903,416 11.8
– Non-controlling interests (1,589) (0.0) 20,054 0.3
646,154 10.0 923,470 12.0
FINANCIAL INFORMATION
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--- page 363 ---
Revenue
Our revenue increased by 19.1% from RMB6,439.6 million for the three months
ended March 31, 2024 to RMB7,669.5 million for the three months ended March 31, 2025.
Specifically:
• our revenue from refrigeration and air-conditioning product components
increased by 28.2% from RMB3,868.7 million for the three months ended
March 31, 2024 to RMB4,960.1 million for the three months ended March 31,
2025, primarily due to (i) our continual product innovation and iteration, such
as heat exchangers, driven by our initiatives to address strong consumer
demand for upgrading to more energy-efficient products and (ii) our
enhanced cooperation with existing customers.
• our revenue from automotive components increased by 5.4% from RMB2,570.8
million for the three months ended March 31, 2024 to RMB2,709.4 million for
the three months ended March 31, 2025, primarily due to (i) our deeper
penetration into the NEV market and continual expansion of customer base,
driven by the growth of the NEV market and increasing demand for advanced
thermal management systems, (ii) our continual product innovation and
upgrading, such as integrated modules with more comprehensive features
and better performance and (iii) our strengthened cooperation with existing
customers through participation in the early development stages, such as
design and R&D of thermal management system for their vehicle models.
Cost of Revenue
Our cost of revenue increased by 19.5% from RMB4,698.9 million for the three
months ended March 31, 2024 to RMB5,614.2 million for the three months ended March 31,
2025, which was generally in line with our growth in the revenue.
Gross Profit and Gross Profit Margin
Our gross profit increased by 18.1% from RMB1,740.6 million for the three months
ended March 31, 2024 to RMB2,055.3 million for the three months ended March 31, 2025.
Our gross profit margin remained relatively stable at 27.0% and 26.8%, respectively, for
the three months ended March 31, 2024 and 2025. Specifically:
• our gross profit margin of refrigeration and air-conditioning product
components remained relatively stable at 26.9% and 26.5%, respectively, for
the three months ended March 31, 2024 and 2025, mainly due to (i) our
diversified product mix, including continual iteration and upgrading of
existing products and introduction of new products, (ii) effective cost control
through our product design optimization and supply chain management and
(iii) higher production efficiency resulting from (a) our efforts in improving
production techniques and deepening the implementation of lean production
management throughout our production network and (b) economies of scale
brought by our consistent expansion efforts; and
FINANCIAL INFORMATION
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--- page 364 ---
• our gross profit margin of automotive components remained relatively stable
at 27.3% and 27.4%, respectively, for the three months ended March 31, 2024
and 2025, mainly due to (i) our diversified product mix, including continual
introduction of competitive products and iteration and upgrading of existing
products to enhance performance, thereby maintaining the attractiveness of
our offerings to customers and customer loyalty, (ii) effective cost control
through our product design optimization and supply chain management and
(iii) higher production efficiency resulting from (a) our efforts in improving
production techniques and deepening the implementation of lean production
management throughout our production network and (b) economies of scale
brought by our consistent expansion efforts.
General and Administrative Expenses
Our general and administrative expenses increased by 10.2% from RMB457.2
million for the three months ended March 31, 2024 to RMB504.0 million for the three
months ended March 31, 2025, primarily due to the increase in the number of
administrative staff driven by our business expansion.
Selling and Marketing Expenses
Our selling and marketing expenses increased by 12.4% from RMB127.3 million for
the three months ended March 31, 2024 to RMB143.0 million for the three months ended
March 31, 2025, primarily due to the increase in employee benefit expenses resulting from
the increase in the number of the sales staff driven by our expanding business scale,
promoting the growth of our sales team.
Research and Development Expenses
Our research and development expenses increased by 13.5% from RMB317.0 million
for the three months ended March 31, 2024 to RMB359.9 million for the three months
ended March 31, 2025, primarily due to our expansion of R&D team and our continuous
R&D efforts to upgrade the production techniques, partially offset by the decrease of raw
materials and consumables used resulting from the optimization of R&D processes.
Profit for the Period
As a result of the foregoing, our profit for the period increased by 42.9% from
RMB646.2 million for the three months ended March 31, 2024 to RMB923.5 million for the
three months ended March 31, 2025.
FINANCIAL INFORMATION
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--- page 365 ---
Summary of Consolidated Statements of Financial Position
The following table sets forth summary information from our consolidated
statements of financial position as at the dates indicated:
As of
December 31,
2024
As of
March 31,
2025
(RMB in thousands)
(unaudited)
Total non-current assets 14,053,586 14,480,334
Total current assets 22,301,163 22,680,390
Total assets 36,354,749 37,160,724
Total non-current liabilities 3,201,801 2,940,383
Total current liabilities 13,633,304 13,746,866
Total liabilities 16,835,105 16,687,249
Net current assets 8,667,859 8,933,524
Total equity 19,519,644 20,473,475
Our net current assets increased from RMB8,667.9 million as of December 31, 2024 to
RMB8,933.5 million as of March 31, 2025, mainly due to (i) an increase of RMB908.1 million
in trade and notes receivables reflecting our revenue growth and business expansion, and
(ii) a decrease of RMB313.6 million in accrual and other payables as bonuses for the prior
year were paid to employees before March 31, 2025, partially offset by (i) an increase of
RMB412.6 million in borrowings and (ii) a decrease of RMB340.2 million in cash and cash
equivalents.
Our total equity increased from RMB19,519.6 million as of December 31, 2024 to
RMB20,473.5 million as of March 31, 2025, mainly due to our profit of RMB923.5 million
for the three months ended March 31, 2025.
FINANCIAL INFORMATION
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--- page 366 ---
Summary of Consolidated Statements of Cash Flows
The following table sets forth a summary of our consolidated statements of cash
flows for the periods indicated:
Three months ended March 31,
2024 2025
(RMB in thousands)
(unaudited)
Net cash generated from operating activities 76,343 411,936
Net cash used in investing activities (630,737) (787,132)
Net cash generated from/(used in) financing activities (147,284) 48,560
Cash and cash equivalents at beginning of the period 3,624,955 3,443,503
Exchange losses on cash and cash equivalents (6,846) (13,539)
Cash and cash equivalents at end of the period 2,916,431 3,103,328
We recorded net cash generated from operating activities of RMB411.9 million for
the three months ended March 31, 2025, which primarily represents profit before income
tax of RMB1,108.1 million, as adjusted by (i) non-cash and non-operating items, which
primarily consist of depreciation and amortization of non-current assets of RMB291.7
million and (ii) movements in working capital mainly consisting of a decrease of
RMB201.2 million in inventories, partially offset by an increase in receivables of RMB685.7
million and a decrease in payables of RMB397.1 million.
In the three months ended March 31, 2025, our net cash used in investing activities
was RMB787.1 million, which was primarily attributable to (i) payments for purchase of
property, plant and equipment, intangible assets and other non-current assets of
RMB752.1 million and (ii) placement of term deposits and wealth management products
of RMB675.5 million, partially offset by withdraw of term deposits and wealth
management products of RMB591.3 million.
In the three months ended March 31, 2025, our net cash generated from financing
activities was RMB48.6 million, primarily attributable to proceeds from borrowings of
RMB958.8 million, partially offset by repayments of borrowings of RMB829.1 million.
DISCLOSURE REQUIRED UNDER THE LISTING RULES
Our Directors confirm that, as of the Latest Practicable Date, there was no
circumstance that would give rise to a disclosure requirement under Rules 13.13 to 13.19
of the Listing Rules.
FINANCIAL INFORMATION
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--- page 367 ---
THE CORNERSTONE PLACING
We have entered into cornerstone investment agreements (each a “ Cornerstone
Investment Agreement ”, and together the “ Cornerstone Investment Agreements ”) with
the cornerstone investors set out below (each a “ Cornerstone Investor ”, and together the
“Cornerstone Investors ”), pursuant to which the Cornerstone Investors have agreed to,
subject to certain conditions, subscribe, or cause their designated entities to subscribe, at
the Offer Price for such number of Offer Shares (rounded down to the nearest whole board
lot of 100 H Shares) that may be purchased for an aggregate amount of approximately
US$562.0 million (or approximately HK$4,408.8 million, calculated based on an exchange
rate of US$1.00 to HK$7.8448) exclusive of brokerage fee, the SFC transaction levy, the
AFRC transaction levy and the Stock Exchange trading fee) (the “ Cornerstone Placing ”).
Based on the Offer Price of HK$22.53 per Offer Share, being the high-end of the
indicative Offer Price range set out in this prospectus, the total number of Offer Shares to
be subscribed for by the Cornerstone Investors would be 195,684,000. The table below
reflects the shareholding percentage immediately after the completion of the Global
Offering.
Assuming the Offer Size Adjustment Option is
not exercised
Assuming the Offer Size Adjustment Option is
exercised in full
Assuming the
Over-allotment Option is
not exercised
Assuming the
Over-allotment Option is
exercised in full
Assuming the
Over-allotment Option is
not exercised
Assuming the
Over-allotment Option is
exercised in full
Approximate
%o ft h e
Offer
Shares
Approximate
%o ft h e
total issued
share
capital
Approximate
%o ft h e
Offer
Shares
Approximate
%o ft h e
total issued
share
capital
Approximate
%o ft h e
Offer
Shares
Approximate
%o ft h e
total issued
share
capital
Approximate
%o ft h e
Offer
Shares
Approximate
%o ft h e
total issued
share
capital
54.31 4.78 47.22 4.72 47.22 4.72 41.06 4.65
Based on the Offer Price of HK$21.87 per Offer Share, being the mid-point of the
indicative Offer Price range set out in this prospectus, the total number of Offer Shares to
be subscribed for by the Cornerstone Investors would be 201,589,900. The table below
reflects the shareholding percentage immediately after the completion of the Global
Offering.
CORNERSTONE INVESTORS
– 357 –


--- page 368 ---
Assuming the Offer Size Adjustment Option is
not exercised
Assuming the Offer Size Adjustment Option is
exercised in full
Assuming the
Over-allotment Option is
not exercised
Assuming the
Over-allotment Option is
exercised in full
Assuming the
Over-allotment Option is
not exercised
Assuming the
Over-allotment Option is
exercised in full
Approximate
%o ft h e
Offer
Shares
Approximate
%o ft h e
total issued
share
capital
Approximate
%o ft h e
Offer
Shares
Approximate
%o ft h e
total issued
share
capital
Approximate
%o ft h e
Offer
Shares
Approximate
%o ft h e
total issued
share
capital
Approximate
%o ft h e
Offer
Shares
Approximate
%o ft h e
total issued
share
capital
55.95 4.93 48.65 4.86 48.65 4.86 42.30 4.79
Based on the Offer Price of HK$21.21 per Offer Share, being the low-end of the
indicative Offer Price range set out in this prospectus, the total number of Offer Shares to
be subscribed for by the Cornerstone Investors would be 207,862,500. The table below
reflects the shareholding percentage immediately after the completion of the Global
Offering.
Assuming the Offer Size Adjustment Option is
not exercised
Assuming the Offer Size Adjustment Option is
exercised in full
Assuming the
Over-allotment Option is
not exercised
Assuming the
Over-allotment Option is
exercised in full
Assuming the
Over-allotment Option is
not exercised
Assuming the
Over-allotment Option is
exercised in full
Approximate
%o ft h e
Offer
Shares
Approximate
%o ft h e
total issued
share
capital
Approximate
%o ft h e
Offer
Shares
Approximate
%o ft h e
total issued
share
capital
Approximate
%o ft h e
Offer
Shares
Approximate
%o ft h e
total issued
share
capital
Approximate
%o ft h e
Offer
Shares
Approximate
%o ft h e
total issued
share
capital
57.69 5.08 50.16 5.01 50.16 5.01 43.62 4.94
We believe that the Cornerstone Placing demonstrates our Cornerstone Investors’
confidence in our Company and its business prospect, and that leveraging on the
Cornerstone Investors’ investment or industry experience, the Cornerstone Placing will
help to raise the profile of our Company. Our Company became acquainted with each of
the Cornerstone Investors in its ordinary course of operation through the Group’s
business network or through introduction by the Company’s Overall Coordinators.
The Cornerstone Placing will form part of the International Offering, and, save as
otherwise obtained consent from the Stock Exchange, the Cornerstone Investors (and, for
Cornerstone Investors who will subscribe for our Offer Shares through qualified domestic
institutional investor (“ QDII ”), the QDIIs) and their respective close associates will not
subscribe for any Offer Shares under the Global Offering (other than pursuant to the
Cornerstone Investment Agreements). The Offer Shares to be subscribed by the
Cornerstone Investors (and, for Cornerstone Investors who will subscribe for our Offer
Shares through QDII, the QDIIs) will rank pari passu in all respects with the fully paid H
CORNERSTONE INVESTORS
– 358 –


--- page 369 ---
Shares in issue following the Global Offering of the Company and will be counted towards
the public float of our Company under Rule 8.08 of the Listing Rules. Immediately
following the completion of the Global Offering, the Cornerstone Investors or their close
associates will not, by virtue of their cornerstone investments, have any Board
representation in our Company; and none of the Cornerstone Investors and their close
associates will become a substantial Shareholder of our Company. Other than a
guaranteed allocation of the relevant Offer Shares at the final Offer Price, the Cornerstone
Investors do not have any preferential rights under each of their respective Cornerstone
Investment Agreements, as compared with other public Shareholders. There are no side
arrangements or agreements between our Company and the Cornerstone Investors or any
benefit, direct or indirect, conferred on the Cornerstone Investors by virtue of or in
relation to the Listing, other than a guaranteed allocation of the relevant Offer Shares at
the final Offer Price, following the principles as set out in Chapter 4.15 of the Guide for
New Listing Applicants.
To the best knowledge of the Company, among the Cornerstone Investors,
Schroders, GIC, MSIP , Jane Street and Mega Prime are either existing minority
Shareholders or their respective close associates. The Stock Exchange has granted a waiver
from strict compliance with the requirements under Rule 10.04 and consent under
Paragraph 5(2) of Appendix F1 to the Listing Rules and paragraph 17 of Chapter 4.15 of
the Guide for New Listing Applicants to permit H Shares in the International Offering to
be placed to certain existing minority Shareholders. For further details, see “Waivers from
Strict Compliance with the Listing Rules — Allocation of H Shares to Existing Minority
Shareholders and/or Their Close Associates”.
Save for certain Cornerstone Investors who are either existing minority
Shareholders or their respective close associates, to the best knowledge of our Company,
each of the Cornerstone Investors (and, for Cornerstone Investors who will subscribe for
our Offer Shares through a QDII, each of such QDIIs) is (i) not accustomed to take
instructions from our Company or any of our Directors, Supervisors, chief executive, our
Controlling Shareholders, substantial Shareholders or existing Shareholders or any of its
subsidiaries or their respective close associates in relation to the acquisition, disposal,
voting or other disposition of the Shares registered in their name or otherwise held by
them; (ii) not financed by our Company or any of our Directors, Supervisors, chief
executive of our Company, our Controlling Shareholders, substantial Shareholders,
existing Shareholders or any of its subsidiaries or their respective close associates; and
(iii) independent of the other Cornerstone Investors, our Group, our connected persons
and their respective associates, and is not an existing Shareholder or a close associate of
our Group.
CORNERSTONE INVESTORS
– 359 –


--- page 370 ---
To the best knowledge of the Company and Overall Coordinators, and based on the
indicative interest of investment of the Cornerstone Investors and/or their close
associates as of the date of this prospectus, certain Cornerstone Investors and/or their
close associates may participate in the International Offering as placees and subscribe for
further Offer Shares in the Global Offering. The Company will seek the Stock Exchange’s
consent and/or waiver to allow the Cornerstone Investors and/or their close associates to
participate in the International Offering as placees pursuant to Chapter 4.15 of the Guide
for New Listing Applicants. Whether such Cornerstone Investors and/or their close
associates will place orders in the International Offering are uncertain and will be subject
to the final investment decisions of such investors and the terms and conditions of the
Global Offering.
To the best knowledge of our Company and as confirmed by each of the Cornerstone
Investors, each of the Cornerstone Investors is independent from each other and make
independent investment decisions, and their subscription under the Cornerstone Placing
would be financed by its own internal financial resources or the assets managed for its
investors (in the case of Cornerstone Investors which are funds or investment managers)
and/or external financing (as applicable) and it has sufficient funds to settle its respective
investment under the Cornerstone Placing. Each of the Cornerstone Investors has
confirmed that all necessary approvals have been obtained with respect to the
Cornerstone Placing and that no specific approval from any stock exchange (if relevant) is
required for the relevant Cornerstone Placing.
The Cornerstone Investors have agreed to pay for the relevant Offer Shares that they
have subscribed before dealings in the Company’s H Shares commence on the Stock
Exchange. Some of the Cornerstone Investor have agreed that our Company and Overall
Coordinators in their sole discretion may defer the delivery of all or part of the Offer
Shares such Cornerstone Investors will subscribe to on a date later than the Listing Date.
Where delayed delivery takes place, each of such Cornerstone Investors that may be
affected by such delayed delivery has agreed that it shall nevertheless pay for the relevant
Offer Shares before the Listing.
The total number of Offer Shares to be subscribed by the Cornerstone Investors
(and, for Cornerstone Investors who will subscribe for our Offer Shares through QDII, the
QDIIs) may be affected by reallocation of the Offer Shares between the International
Offering and the Hong Kong Public Offering. If the total demand for H shares in the Hong
Kong Public Offering falls within the circumstance as set out in the section headed
“Structure of the Global Offering — The Hong Kong Public Offering — Reallocation” in
this prospectus, our Company and Overall Coordinators have the absolute discretion, but
not obliged, to deduct the number of Offer Shares to be subscribed by the Cornerstone
Investors on a pro rata basis under the Hong Kong Public Offering pursuant to Practice
Note 18 of the Listing Rules. Details of the actual number of Offer Shares to be allocated to
the Cornerstone Investors will be disclosed in the allotment results announcement of our
Company to be published on or around June 20, 2025.
CORNERSTONE INVESTORS
– 360 –


--- page 371 ---
THE CORNERSTONE INVESTORS
The table below sets forth details of the Cornerstone Placing:
Assuming an Offer Price of HK$21.21 per H Share (being the low-end of the Offer Price range)
Assuming the Offer Size Adjustment Option is
not exercised
Assuming the Offer Size Adjustment Option is
exercised in full
Cornerstone
Investor
Subscription
amount(1)
Number
of Offer
Shares(2)
Assuming the
Over-allotment Option is
not exercised
Assuming the
Over-allotment Option is
exercised in full
Assuming the
Over-allotment Option is
not exercised
Assuming the
Over-allotment Option is
exercised in full
Approximate
% of the
Offer Shares
Approximate
% of the
issued share
capital (3)
Approximate
%o ft h e
Offer Shares
Approximate
% of the
issued share
capital (3)
Approximate
%o ft h e
Offer Shares
Approximate
% of the
issued share
capital (3)
Approximate
% of the
Offer Shares
Approximate
%o ft h e
issued share
capital (3)
(USD in
millions)
Schroders 142.00 52,520,700 14.58 1.28 12.67 1.27 12.67 1.27 11.02 1.25
GIC 90.00 33,287,700 9.24 0.81 8.03 0.80 8.03 0.80 6.99 0.79
HK Greenwoods 20.00 7,397,200 2.05 0.18 1.79 0.18 1.79 0.18 1.55 0.18
Shanghai
Greenwoods and
HTCI (in
connection with
the Greenwoods
OTC Swaps) 20.00 7,397,200 2.05 0.18 1.79 0.18 1.79 0.18 1.55 0.18
Green Better 30.00 11,095,900 3.08 0.27 2.68 0.27 2.68 0.27 2.33 0.26
Verition 30.00 11,095,900 3.08 0.27 2.68 0.27 2.68 0.27 2.33 0.26
Eastern Bell Capital
VIII 30.00 11,095,900 3.08 0.27 2.68 0.27 2.68 0.27 2.33 0.26
Mirae Securities 20.00 7,397,200 2.05 0.18 1.79 0.18 1.79 0.18 1.55 0.18
ICBC Wealth 20.00 7,397,200 2.05 0.18 1.79 0.18 1.79 0.18 1.55 0.18
PSBC Wealth 20.00 7,397,200 2.05 0.18 1.79 0.18 1.79 0.18 1.55 0.18
Taikang Life 20.00 7,397,200 2.05 0.18 1.79 0.18 1.79 0.18 1.55 0.18
Mega Prime 20.00 7,397,200 2.05 0.18 1.79 0.18 1.79 0.18 1.55 0.18
Wind Sabre 20.00 7,397,200 2.05 0.18 1.79 0.18 1.79 0.18 1.55 0.18
Martis Fund 20.00 7,397,200 2.05 0.18 1.79 0.18 1.79 0.18 1.55 0.18
MSIP 20.00 7,397,200 2.05 0.18 1.79 0.18 1.79 0.18 1.55 0.18
Jane Street 20.00 7,397,200 2.05 0.18 1.79 0.18 1.79 0.18 1.55 0.18
3W Fund 20.00 7,397,200 2.05 0.18 1.79 0.18 1.79 0.18 1.55 0.18
CORNERSTONE INVESTORS
– 361 –


--- page 372 ---
Assuming an Offer Price of HK$21.87 per H Share (being the mid-point of the Offer Price range)
Assuming the Offer Size Adjustment Option is
not exercised
Assuming the Offer Size Adjustment Option is
exercised in full
Cornerstone
Investor
Subscription
amount(1)
Number
of Offer
Shares(2)
Assuming the
Over-allotment Option is
not exercised
Assuming the
Over-allotment Option is
exercised in full
Assuming the
Over-allotment Option is
not exercised
Assuming the
Over-allotment Option is
exercised in full
Approximate
% of the
Offer Shares
Approximate
% of the
issued share
capital (3)
Approximate
%o ft h e
Offer Shares
Approximate
% of the
issued share
capital (3)
Approximate
%o ft h e
Offer Shares
Approximate
% of the
issued share
capital (3)
Approximate
% of the
Offer Shares
Approximate
%o ft h e
issued share
capital (3)
(USD in
millions)
Schroders 142.00 50,935,700 14.14 1.24 12.29 1.23 12.29 1.23 10.69 1.21
GIC 90.00 32,283,200 8.96 0.79 7.79 0.78 7.79 0.78 6.77 0.77
HK Greenwoods 20.00 7,174,000 1.99 0.18 1.73 0.17 1.73 0.17 1.51 0.17
Shanghai
Greenwoods and
HTCI (in
connection with
the Greenwoods
OTC Swaps) 20.00 7,174,000 1.99 0.18 1.73 0.17 1.73 0.17 1.51 0.17
Green Better 30.00 10,761,000 2.99 0.26 2.60 0.26 2.60 0.26 2.26 0.26
Verition 30.00 10,761,000 2.99 0.26 2.60 0.26 2.60 0.26 2.26 0.26
Eastern Bell Capital
VIII 30.00 10,761,000 2.99 0.26 2.60 0.26 2.60 0.26 2.26 0.26
Mirae Securities 20.00 7,174,000 1.99 0.18 1.73 0.17 1.73 0.17 1.51 0.17
ICBC Wealth 20.00 7,174,000 1.99 0.18 1.73 0.17 1.73 0.17 1.51 0.17
PSBC Wealth 20.00 7,174,000 1.99 0.18 1.73 0.17 1.73 0.17 1.51 0.17
Taikang Life 20.00 7,174,000 1.99 0.18 1.73 0.17 1.73 0.17 1.51 0.17
Mega Prime 20.00 7,174,000 1.99 0.18 1.73 0.17 1.73 0.17 1.51 0.17
Wind Sabre 20.00 7,174,000 1.99 0.18 1.73 0.17 1.73 0.17 1.51 0.17
Martis Fund 20.00 7,174,000 1.99 0.18 1.73 0.17 1.73 0.17 1.51 0.17
MSIP 20.00 7,174,000 1.99 0.18 1.73 0.17 1.73 0.17 1.51 0.17
Jane Street 20.00 7,174,000 1.99 0.18 1.73 0.17 1.73 0.17 1.51 0.17
3W Fund 20.00 7,174,000 1.99 0.18 1.73 0.17 1.73 0.17 1.51 0.17
CORNERSTONE INVESTORS
– 362 –


--- page 373 ---
Assuming an Offer Price of HK$22.53 per H Share (being the high-end of the Offer Price range)
Assuming the Offer Size Adjustment Option is
not exercised
Assuming the Offer Size Adjustment Option is
exercised in full
Cornerstone
Investor
Subscription
amount(1)
Number
of Offer
Shares(2)
Assuming the
Over-allotment Option is
not exercised
Assuming the
Over-allotment Option is
exercised in full
Assuming the
Over-allotment Option is
not exercised
Assuming the
Over-allotment Option is
exercised in full
Approximate
% of the
Offer Shares
Approximate
% of the
issued share
capital (3)
Approximate
%o ft h e
Offer Shares
Approximate
% of the
issued share
capital (3)
Approximate
%o ft h e
Offer Shares
Approximate
% of the
issued share
capital (3)
Approximate
% of the
Offer Shares
Approximate
%o ft h e
issued share
capital (3)
(USD in
millions)
Schroders 142.00 49,443,600 13.72 1.21 11.93 1.19 11.93 1.19 10.38 1.17
GIC 90.00 31,337,400 8.70 0.77 7.56 0.76 7.56 0.76 6.58 0.74
HK Greenwoods 20.00 6,963,800 1.93 0.17 1.68 0.17 1.68 0.17 1.46 0.17
Shanghai
Greenwoods and
HTCI (in
connection with
the Greenwoods
OTC Swaps) 20.00 6,963,800 1.93 0.17 1.68 0.17 1.68 0.17 1.46 0.17
Green Better 30.00 10,445,800 2.90 0.26 2.52 0.25 2.52 0.25 2.19 0.25
Verition 30.00 10,445,800 2.90 0.26 2.52 0.25 2.52 0.25 2.19 0.25
Eastern Bell Capital
VIII 30.00 10,445,800 2.90 0.26 2.52 0.25 2.52 0.25 2.19 0.25
Mirae Securities 20.00 6,963,800 1.93 0.17 1.68 0.17 1.68 0.17 1.46 0.17
ICBC Wealth 20.00 6,963,800 1.93 0.17 1.68 0.17 1.68 0.17 1.46 0.17
PSBC Wealth 20.00 6,963,800 1.93 0.17 1.68 0.17 1.68 0.17 1.46 0.17
Taikang Life 20.00 6,963,800 1.93 0.17 1.68 0.17 1.68 0.17 1.46 0.17
Mega Prime 20.00 6,963,800 1.93 0.17 1.68 0.17 1.68 0.17 1.46 0.17
Wind Sabre 20.00 6,963,800 1.93 0.17 1.68 0.17 1.68 0.17 1.46 0.17
Martis Fund 20.00 6,963,800 1.93 0.17 1.68 0.17 1.68 0.17 1.46 0.17
MSIP 20.00 6,963,800 1.93 0.17 1.68 0.17 1.68 0.17 1.46 0.17
Jane Street 20.00 6,963,800 1.93 0.17 1.68 0.17 1.68 0.17 1.46 0.17
3W Fund 20.00 6,963,800 1.93 0.17 1.68 0.17 1.68 0.17 1.46 0.17
Notes:
(1) Exclusive of brokerage, the SFC transaction levy, the Stock Exchange trading fee and the AFRC
transaction levy, and to be converted to Hong Kong dollars based on the exchange rate as disclosed in this
prospectus;
(2) Subject to rounding down to the nearest whole board lot of 100 Offer Shares. Calculated based on the
exchange rate set out in the section headed “Information about this Prospectus and the Global Offering —
Currency Translations”.
(3) The calculation of the percentage includes 2,707,721 A Shares being held as treasury Shares repurchased
by our Company pursuant to the repurchase mandates approved by Shareholders, accounting for
approximately 0.075% of the total number of A Shares in issue as of the Latest Practicable Date.
The information about our Cornerstone Investors set forth below has been provided
by the Cornerstone Investors in connection with the Cornerstone Placing.
CORNERSTONE INVESTORS
– 363 –


--- page 374 ---
Schroders
Schroder Investment Management Limited (“ SIML ”), Schroder Investment
Management (Singapore) Ltd (“ SIMSL ”) and Schroder Investment Management (Hong
Kong) Limited (“ SIMHK ”), each acting as a discretionary investment manager for and on
behalf of a total of 28 funds and/or segregated accounts focusing on areas including but
not limited to global emerging markets and asian equities, have entered into the
cornerstone investment agreement with the Company. To the best of Schroders’
knowledge, no single ultimate beneficial owner holds 30% or more interest in the
participating accounts of such funds/accounts, and each of such fund/account is an
Independent Third Party.
SIML is a company incorporated in England and Wales. SIMSL is a company
incorporated in Singapore. SIMHK is a company incorporated in Hong Kong. Each of
SIML, SIMSL and SIMHK is ultimately wholly owned by Schroders plc, whose ordinary
shares are listed on the London Stock Exchange (LON: SDR).
There is no individual person who is the “ultimate controlling shareholder” of
Schroders plc. The interests of some members of the Schroder family, are spread across a
number of parties, who are collectively known as the Principal Shareholder Group (PSG).
GIC
GIC Private Limited (“ GIC”) is a leading global investment firm established in 1981
to secure Singapore’s financial future. As the manager of Singapore’s foreign reserves,
GIC takes a long-term, disciplined approach to investing, and are uniquely positioned
across a wide range of asset classes and active strategies globally. These include equities,
fixed income, real estate, private equity, venture capital, and infrastructure. GIC’s
long-term approach, multi-asset capabilities, and global connectivity enable us to be an
investor of choice. GIC seeks to add meaningful value to its investments. Headquartered
in Singapore, GIC has a global talent force of over 2,300 people in 11 key financial cities
and have investments in over 40 countries.
HK Greenwoods
Greenwoods Asset Management Hong Kong Limited (“ HK Greenwoods ”) is a
private fund management company incorporated in Hong Kong with limited liability.
Established in 2005, Greenwoods is one of the largest and earliest China-focused asset
managers mainly specializing in investing into companies in the Greater China region.
HK Greenwoods focuses on fundamental research, value investments, and local due
diligence. Investors of funds and accounts managed by HK Greenwoods includes
institutional investors and high-net-worth individuals professional investors. Mr. Jiang
Jinzhi is the chairman, a major shareholder and an ultimate beneficial owner of HK
Greenwoods. As confirmed by HK Greenwoods, the subscription of the Offer Shares as a
cornerstone investor will be made by HK Greenwoods in its capacity as the investment
manager of Golden China Master Fund and no single ultimate beneficial owner holds 30%
or more interests in Golden China Master Fund. HK Greenwoods and Shanghai
Greenwoods are affiliate of each other.
CORNERSTONE INVESTORS
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--- page 375 ---
Shanghai Greenwoods and HTCI (in connection with the Greenwoods OTC Swaps)
Huatai Capital Investment Limited (“ HTCI ”) and Huatai Securities Company
Limited (“ HTSC ”) will enter into a series of cross border delta-one OTC swap transactions
(collectively, the “ Greenwoods OTC Swaps ”) with each other and their ultimate clients
(the “ HTCI Ultimate Clients (Greenwoods) ”), pursuant to which HTCI will hold the
Offer Shares on a non-discretionary basis to hedge the Greenwoods OTC Swaps while the
economic risks and returns of the underlying Offer Shares are passed to the HTCI Ultimate
Clients (Greenwoods), subject to customary fees and commissions. The Greenwoods OTC
Swaps will be fully funded by the HTCI Ultimate Clients (Greenwoods). During the terms
of the Greenwoods OTC Swaps, all economic returns of the Offer Shares subscribed by
HTCI will be passed to the HTCI Ultimate Clients (Greenwoods) and all economic loss
shall be borne by the HTCI Ultimate Clients (Greenwoods) through the Greenwoods OTC
Swaps, and HTCI will not take part in any economic return or bear any economic loss in
relation to the Offer Shares. The Greenwoods OTC Swaps are linked to the Offer Shares
and the HTCI Ultimate Clients (Greenwoods) may, after expiration of the lock-up period
beginning from the date of the cornerstone agreement entered into between HTCI and the
Company and ending on the date which is six months from the Listing Date, request to
early terminate the Greenwoods OTC Swaps at their own discretions, upon which HTCI
may dispose of the Offer Shares and settle the Greenwoods OTC Swaps in cash in
accordance with the terms and conditions of the Greenwoods OTC Swaps. Despite that
HTCI will hold the legal title of the Offer Shares by itself, it will not exercise the voting
rights attaching to the relevant Offer Shares during the terms of the Greenwoods OTC
Swaps according to its internal policy. To the best of HTCI’s knowledge having made all
reasonable inquiries, each of the HTCI Ultimate Clients (Greenwoods) is an independent
third party of HTCI, Huatai and the companies which are members of the same group of
Huatai Financial Holdings (Hong Kong) Limited (“ Huatai ”), and no single ultimate
beneficial owner holds 30% or more interests in each of the HTCI Ultimate Clients
(Greenwoods).
Both HTCI and Huatai, one of the Joint Sponsors, Overall Coordinators and
Underwriters of the Global Offering , are indirect wholly-owned subsidiaries of HTSC, the
A shares of which are listed on the Shanghai Stock Exchange (stock code: 601688), the H
shares of which are listed on the Stock Exchange (stock code: 6886), and the global
depositary receipts of which are listed on the London Stock Exchange (LON: HTSC). HTCI
is a connected client (as defined under Appendix F1 to the Listing Rules) of Huatai,
holding securities on a non-discretionary basis on behalf of independent third parties. The
Company has applied to the Stock Exchange for, and the Stock Exchange has granted, its
consent under paragraph 5(1) of Appendix F1 to the Listing Rules to permit us to allocate
the Offer Shares to HTCI. See “Waivers from Strict Compliance with the Listing Rules —
Waiver in relation to Allocation of Offer Shares to a Connected Client”.
The HTCI Ultimate Clients (Greenwoods) are certain domestic private funds
(including a total of no more than four funds) managed by Shanghai Greenwoods Asset
Management Co., Ltd (ʮ̡ )( “ Shanghai Greenwoods ”) in its
capacity as fund manager. Shanghai Greenwoods is a private fund management company
with the registration under the Asset Management Association of China (AMAC).
Shanghai Greenwoods is one of the largest and earliest PRC domestic asset managers
CORNERSTONE INVESTORS
– 365 –


--- page 376 ---
mainly specializing in investing into companies in the Greater China region. Shanghai
Greenwoods focuses on fundamental research, value investments, and local due
diligence. Investors of funds managed by Shanghai Greenwoods include institutional
investors and high-net-worth individuals professional investors. Mr. Jiang Jinzhi is the
chairman, a major shareholder and an ultimate beneficial owner of Shanghai Greenwoods.
No other shareholder holds 30% or more interest in Shanghai Greenwoods. As confirmed
by Shanghai Greenwoods, the subscription of the Offer Shares as cornerstone investor will
be made by Shanghai Greenwoods in its capacity as the fund manager of domestic private
funds through total return swap mechanism.
According to our PRC Legal Advisors, the aforementioned transaction structure
does not violate the PRC laws and regulations.
Green Better
Green Better Limited (“ Green Better ”) is an investment company incorporated in
the British Virgin Islands. Green Better is a wholly-owned subsidiary of Xiaomi
Corporation, a company listed on the Stock Exchange (stock code: 1810). Xiaomi
Corporation is an investment holding company principally engaged in the research,
development and sales of smartphones, Internet of things and lifestyle products, the
provision of Internet services, the development, manufacturing and sales of smart electric
vehicles and investment business in China and other countries or regions.
Verition
Verition Multi-Strategy Master Fund Ltd. is managed by Verition Fund Management
LLC (“ Verition ”), an investment firm incorporated in 2008. Verition is a subsidiary of
Verition Fund Management NY, Inc., which owns the majority of Verition’s equity interest
and is owned by Mr. Nicholas Maounis and related entities. Verition manages a
multi-strategy, multi-manager hedge fund focused on global investment strategies
including Credit, Fixed Income & Macro, Convertible & Volatility Arbitrage,
Event-Driven, Equity Long/Short & Capital Markets Trading, and Quantitative
Strategies. As part of its investment activities, Verition seeks to construct a diversified
portfolio with low correlation to traditional and alternative asset classes and consistently
attractive risk adjusted returns. Capital is allocated dynamically across the strategies
based on the market view and opportunity set for each individual investment team. As of
April 1, 2025, the assets under management of Verition and its affiliates is approximately
US$12.6 billion. Verition employs approximately 700 people and has offices in New York,
Greenwich, Norwalk, London, Singapore, Hong Kong and Dubai. Verition Multi-Strategy
Master Fund Ltd. has two feeder funds, Verition International Multi-Strategy Fund Ltd.
and Verition Multi-Strategy Fund LLC. As of the date of this prospectus, there is no
natural person who is an ultimate beneficial owner who owns more than 30% of Verition
Multi-Strategy Master Fund Ltd.
Eastern Bell Capital VIII
Eastern Bell Capital VIII Investment Limited (“ Eastern Bell Capital VIII ”) is a
company incorporated in Hong Kong. Eastern Bell Capital VIII is a wholly owned
CORNERSTONE INVESTORS
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--- page 377 ---
subsidiary of Eastern Bell Capital Fund II, LP , a limited partnership formed under the
laws of the Cayman Islands (“ Eastern Bell Capital Fund II ”). The general partner of
Eastern Bell Capital Fund II is Eastern Bell Capital II Limited (“ Eastern Bell Capital II ”).
Eastern Bell Capital II is a leading investor focusing on early and growth stage
investments and manages US$800 million. There is no individual limited partner investor
who holds an economic interest or limited partnership interest of 30% or more in Eastern
Bell Capital Fund II.
Mirae Securities
Mirae Asset Securities Co., Ltd (“ Mirae Securities ”) is one of the largest investment
banks incorporated in the Republic of Korea, providing a comprehensive range of
financial services including brokerage, wealth management, investment banking, sales &
trading, and principle investments. The company is ultimately controlled by Mirae Asset
Capital Co., Ltd., a financial investment company incorporated in the Republic of Korea.
The company engages primarily in corporate lending, structured finance, and strategic
investments to support the broader Mirae Asset Financial Group. Mirae Securities is listed
on the Korea Exchange under stock code 006800.KS.
ICBC Wealth
ICBC Wealth Management Co., Ltd. (“ ICBC Wealth ”) was established in May 2019
in Beijing, with a registered capital of RMB16 billion. It is a wholly-owned subsidiary of
Industrial and Commercial Bank of China Limited, a company listed on the Shanghai
Stock Exchange (stock code: 601398) and the Stock Exchange (stock code: 1398). The
business scope of ICBC Wealth is public issuance of wealth management products to the
general public, investment and management of entrusted assets for investors; non-public
issuance of wealth management products to qualified investors, investment and
management of entrusted assets for investors; wealth management advisory and
consulting services; and other businesses as approved by the banking regulatory
authority under the State Council.
PSBC Wealth
PSBC Wealth Management Co., Ltd. (“ PSBC Wealth”) was established on December
18, 2019, with a registered capital of RMB8.0 billion, in which Postal Savings Bank of
China Co., Ltd. (stock code: 1658) holds a 100% stake and is ultimately controlled by China
Post Group Corporation Limited. Its business scope is public issuance of wealth
management products to the general public, investment and management of entrusted
assets for investors; non-public issuance of wealth management products to eligible
investors, investment and management of entrusted assets for investors; financial
advisory and consulting services, etc. PSBC Wealth remained firmly committed to
balanced development of scale, quality and profitability, aimed at fostering core
competitiveness, deepened investment analysis, marketing, internal control, operational
reforms and digital transformation, and continued to improve the rule-based, specialized
and market-oriented development of wealth management business.
CORNERSTONE INVESTORS
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Taikang Life
Taikang Life Insurance Co., Ltd, (“ Taikang Life ”), a company incorporated in
China, is a wholly owned subsidiary of Taikang Insurance Group Inc. There is no
shareholder holding 30% or more in Taikang Insurance Group Inc. Taikang Life provides a
full range of personal security and investment and wealth management products and
services for individuals and families. The products on offer correspond to the different
requirements of customers in terms of market segments such as the children and
teenagers, females and high-income population groups. They also meet multidimensional
demands regarding health care and accident cover, pensions and wealth management,
among others. Taikang Insurance Group Inc is an insurance and financial service
conglomerate focused on insurance, asset management and health and elderly care as
main businesses. The Beijing-headquartered company consists of several subsidiaries
including Taikang Life, Taikang AMC, Taikang Pension, Taikang Healthcare, Taikang
Health, Taikang Dental, and TK.CN. Its product offering covers life insurance, internet
based financial insurance, enterprise annuity, asset management, health and elderly care,
health management and commercial real estate, among others.
Mega Prime
Mega Prime Development Limited (“ Mega Prime ”) is a company incorporated in
the British Virgin Islands with limited liability and is a wholly-owned subsidiary of GBA
Homeland Limited, which in turn is wholly owned by Greater Bay Area Homeland
Investments Limited (“ GBAHIL ”). GBAHIL is a company incorporated in Hong Kong
with limited liability and is jointly owned by a number of international large-scale
industrial institutions, financial institutions and new economic enterprises, each of which
holds less than 15% equity interest therein.
GBAHIL’s business encompasses investment, investment holding and the
establishment or management of private equity funds through its subsidiaries to grasp the
historical opportunities of the development of Guangdong-Hong Kong-Macao Greater
Bay Area, and the construction of an international innovation and technology hub,
focusing on technological innovation, industrial upgrading, quality of life, smart city and
all other related industries. Mega Prime subscribes for the Offer Shares through the
account managed by Greater Bay Area Development Fund Management Limited ( ɽᝄਜ೯
ʮ̡ ), a company wholly owned by GBAHIL and licensed under the SFO to
conduct type 1 (dealing in securities), type 4 (advising on securities) and type 9 (asset
management) regulated activities in Hong Kong.
CORNERSTONE INVESTORS
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Wind Sabre
Wind Sabre Fund SPC on behalf of Wind Sabre Opportunities Fund SP (“ Wind
Sabre ”) is a fund established in the Cayman Islands. Wind Sabre Fund SPC is a Segregated
Portfolio Company incorporated in the Cayman Islands with limited liabilities and is an
independent third party, and Wind Sabre Opportunities Fund SP is a segregated portfolio
of Wind Sabre Fund SPC. Wind Sabre Fund SPC is controlled by Wind Sabre Capital
Limited as the investment manager, which is a company incorporated in Hong Kong and
licensed to carry out type 9 (asset management) regulated activities under the SFO in
Hong Kong by the SFC. Well Smart Developments Limited, which is wholly owned by
Chow Tai Fook (Nominee) Limited, an Independent Third Party, is the only investor who
holds over 30% interest in the fund. No single ultimate beneficial owner holds 30% or
more interest in Chow Tai Fook (Nominee) Limited.
Wind Sabre may obtain external financing from a prime broker to finance its
subscription of H Shares. The loan(s), if obtained, will be on normal commercial terms
after arm’s length negotiations. The H Shares to be subscribed for by Wind Sabre will not
be charged to such prime broker as security for such loan(s).
Martis Fund
Martis Fund, L.P . (“ Martis Fund ”) is an exempted limited partnership registered
under the laws of Cayman Islands, focusing on healthcare, telecommunication, media,
technology and consumer industries investment. The general partner of Martis Fund is
Pulsating Star GP Limited, which is 100% ultimately controlled by Eric Li. No limited
partner holds more than 30% partnership interest in Martis Fund.
MSIP
Morgan Stanley & Co. International plc (“ MSIP ”) is a company incorporated in the
United Kingdom. The ultimate parent undertaking and controlling entity is Morgan
Stanley. Morgan Stanley together with its subsidiary undertakings forms the “Morgan
Stanley Group”. Morgan Stanley is a global financial services firm authorized as a
Financial Holding Company and regulated by the Board of Governors of the Federal
Reserve System in the United States of America. The Morgan Stanley Group operates
within the financial services industry and is subject to extensive supervision and
regulation.
The principal activity of the Morgan Stanley Group is the provision of financial
services to a global client base consisting of corporations, governments and financial
institutions. Financial services include investment banking, sales and trading, and other
services to clients.
Jane Street
Jane Street Asia Trading Limited (“ Jane Street ”) is incorporated in Hong Kong with
limited liability and engages in securities investment and trading activities. It is wholly
owned by Jane Street Group, LLC, a limited liability company formed in the State of
Delaware of the U.S. There is no single investor who holds 30% or more in Jane Street from
a beneficial ownership perspective.
CORNERSTONE INVESTORS
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3W Fund
3W Fund Management Limited (“ 3W Fund ”) is incorporated in Hong Kong with
limited liability and licensed by the Hong Kong SFC to carry out type 9 (asset
management) regulated activity. 3W Fund is wholly owned by Mr. Weiwei WU, an
Independent Third Party. 3W Fund has agreed to procure the Investor Fund, namely 3W
Global Fund, over which 3W Fund has discretionary investment management power, to
subscribe for such number of the Investor Shares. The Investor Fund pursues to maximize
absolute return and seek long-term capital growth primarily through fundamental
investment principle with value approach.
CLOSING CONDITIONS
The obligation of each Cornerstone Investor or each QDII (as applicable) to
subscribe for the Offer Shares under the respective Cornerstone Investment Agreement is
subject to, among other things and as applicable, the following closing conditions:
(a) the Underwriting Agreements for the Hong Kong Public Offering and the
International Offering being entered into and having become effective and
unconditional (in accordance with their respective original terms or as
subsequently waived or varied by agreement of the parties thereto) by no later
than the time and date as specified in the Underwriting Agreements, and
neither of the aforesaid Underwriting Agreements having been terminated;
(b) the Offer Price having been agreed upon between our Company and Overall
Coordinators (for themselves and on behalf of the underwriters of the Global
Offering);
(c) the Listing Committee of the Stock Exchange having granted the approval for
the listing of, and permission to deal in, the H Shares (including the H Shares
subscribed for by the Cornerstone Investors) as well as other applicable
waivers and approvals, and such approval, permission or waiver having not
been revoked prior to the commencement of dealings in the H Shares on the
Stock Exchange;
(d) no laws shall have been enacted or promulgated by any governmental
authority which prohibits the consummation of the transactions contemplated
in the Global Offering or in the respective Cornerstone Investment
Agreements and there shall be no orders or injunctions from a court of
competent jurisdiction in effect precluding or prohibiting consummation of
such transactions; and
(e) the respective acknowledgements, representations, warranties, undertakings
and confirmations of relevant Cornerstone Investor under the respective
Cornerstone Investment Agreement are accurate and true in all respects and
not misleading and that there is no breach of the Cornerstone Investment
Agreement on the part of the relevant Cornerstone Investor.
CORNERSTONE INVESTORS
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RESTRICTIONS ON THE CORNERSTONE INVESTORS
Each Cornerstone Investor has agreed that it will not, and will cause its affiliates not
to, whether directly or indirectly, at any time during the period of six months from (and
inclusive of) the Listing Date (the “ Lock-up Period ”), dispose of, in any way, any of the
Offer Shares or any interest in any company or entity holding such Offer Shares that they
have purchased pursuant to the relevant Cornerstone Investment Agreement, save for
certain limited circumstances, such as transfers to any of its wholly-owned subsidiaries
who will be bound by the same obligations of such Cornerstone Investor, including the
Lock-up Period restriction.
CORNERSTONE INVESTORS
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FUTURE PLANS
See “Business — Our Strategies” in this prospectus for a detailed description of our
future plans.
USE OF PROCEEDS
Assuming that the Offer Size Adjustment and the Over-allotment Option are not
exercised, after deducting the underwriting commissions and other estimated offering
expenses payable by us in connection with the Global Offering, and assuming an Offer
Price of HK$21.87 per Share (being the mid-point of the indicative Offer Price range of
HK$21.21 and HK$22.53), we estimate that we will receive net proceeds of approximately
HK$7,740.6 million from the Global Offering. We intend to use the proceeds from the
Global Offering for the purposes and in the amounts set forth below:
• approximately 30% of the net proceeds, or HK$2,322.2 million, will be used for
continuous global R&D and innovation of our product mix, including our
technologies, our existing products, new products and emerging business, to
consolidate our existing strength and achieve consistent growth over the next
three years. We will expand our R&D team around the world, mainly in China,
the United States and Germany, as well as the R&D teams at our various
factories. We plan to attract and retain R&D talents with excellent academic
backgrounds and extensive industry experience by offering competitive
compensation packages.
o approximately 20% of the net proceeds, or HK$1,548.1 million, will be
used for (i) the R&D of technologies, and the iteration and upgrading of
our existing products across Eight Key Dimensions to consolidate our
existing strength, see “Business — Our Strategies”, (ii) the R&D of new
materials to further enhance product performance and reduce costs and
(iii) the R&D of new products and technologies to create products that
embody energy saving, environmental protection and intelligent
control. In particular, we plan to recruit approximately 500 R&D talents
by 2028, of whom over 330 are expected to have master’s or above
degrees. We plan to allocate approximately HK$232.2 million, HK$464.4
million, HK$464.4 million and HK$387.0 million, respectively, in the
second-half of 2025 and each year in 2026, 2027 and 2028, of the net
proceeds for such purpose; and
o approximately 10% of the net proceeds, or HK$774.1 million, will be
used for technological R&D in bionic robots and its related segments. To
seize emerging business opportunities in bionic robot industry, we plan
to invest in R&D of key components of bionic robots such as
electromechanical actuators. In particular, we plan to recruit
approximately 200 R&D talents by 2028, of whom around 170 are
expected to have master’s or above degrees. We plan to allocate
approximately HK$270.9 million, HK$270.9 million, HK$116.1 million
and HK$116.1 million, respectively, in the second-half of 2025 and each
year in 2026, 2027 and 2028, of the net proceeds for such purpose.
FUTURE PLANS AND USE OF PROCEEDS
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• approximately 30% of the net proceeds, or HK$2,322.2 million, will be used to
further enhance our production capabilities and efficiencies, through
expanding and establishing production facilities and increasing the
production automation level in China over the next three years. We plan to (i)
expand and establish five to seven factories and (ii) upgrade our automated
production equipment to increase our annual production capacity in China
for automotive components and refrigeration and air-conditioning product
components by approximately 19 million pieces and 56 million pieces,
respectively, by the end of 2028. The expansion is expected to incur capital
expenditures of approximately RMB2,100 million, RMB2,000 million and
RMB1,800 million in 2026, 2027 and 2028, respectively. Other than net
proceeds, we will raise funds from other sources, including banking facilities
and operating cash flow.
o approximately 25% of the net proceeds, or HK$1,935.2 million, will be
used to expand and upgrade our factories and automated production
equipment for automotive components. Driven by the rapid
development of the NEV industry, the sales volume of automotive
components in China, such as automotive electronic expansion valves
and integrated modules, is expected to sustain rapid growth from 2024
to 2029. In response to the growing demand in such markets, we plan to
further expand our production capacities prudently and efficiently. In
particular, we plan to:
■ expand or establish factories in Hangzhou, Shaoxing, Shenyang,
Zhongshan and Tianjin, allowing us to improve operation
efficiency and increase production capacities of automotive
components, and recruit approximately 1,400 employees by 2028,
including around 1,100 manufacturing personnel with mechanical
operations skills; and
■ purchase and upgrade equipment and machinery for the
improvement of automated production lines at our factories, such
as welding equipment, automated assembly equipment and
testing equipment.
o approximately 5% of the net proceeds, or HK$387.0 million, will be used
to expand and upgrade our factories and automated production
equipment for our refrigeration and air-conditioning product
components. Driven by increasing demands for enhanced product
performance, the sales volume of refrigeration and air-conditioning
product components in China is expected to grow steadily from 2024 to
2029. In response to the growing demand in such markets, we plan to
further expand our production capacities prudently and efficiently. In
particular, we plan to:
■ expand our existing factories and establish new factories in
Shaoxing for increasing our production capacities of refrigeration
and air-conditioning product components, and recruit
approximately 400 employees by 2028, including around 380
manufacturing personnel with mechanical operations skills; and
FUTURE PLANS AND USE OF PROCEEDS
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--- page 384 ---
■ purchase and upgrade equipment and machinery for the
improvement of automated production lines at our factories, such
as welding equipment, automated assembly equipment and
testing equipment.
The table below sets forth details of our proposed allocation of net proceeds
for the expansion of our production capacity in China:
Intended allocation of net proceeds
from the Global Offering Total
2025H2 2026 2027 2028
(HK$ in millions)
Automotive
components 483.8 774.1 483.8 193.5 1,935.2
Refrigeration and
air-conditioning
product components 96.8 154.8 96.8 38.7 387.0
Total 580.5 928.9 580.5 232.2 2,322.2
• approximately 25% of the net proceeds, or HK$1,935.2 million, will be used to
deepen our global layout by expanding our overseas production capabilities,
which is expected to enable us to seize emerging business opportunities
globally and deepen the implementation of supply chain localization
strategies over the next three years. We plan to (i) expand and establish five to
six factories and (ii) upgrade our automated production equipment to
increase our overseas annual production capacity for automotive components
and refrigeration and air-conditioning product components by approximately
15 million pieces and 25 million pieces, respectively, by the end of 2028. The
expansion is expected to incur capital expenditures of approximately
RMB1,000 million, RMB1,000 million and RMB800 million in 2026, 2027 and
2028, respectively. Other than net proceeds, we will raise funds from other
sources, including banking facilities and operating cash flow.
o approximately 20% of the net proceeds, or HK$1,548.1 million, will be
used to increase the production capacities of our production bases in
emerging markets where we currently have operation, such as Thailand
and Vietnam, to strengthen our global presence. In particular, we plan to
(i) establish new factories, (ii) expand our existing factories, (iii) recruit
approximately 440 employees by 2028, including around 360
manufacturing personnel with mechanical operations skills, and (iv)
purchase and upgrade equipment and machinery for the improvement
of automated production lines at our factories, such as welding
equipment, automated assembly equipment and testing equipment; and
FUTURE PLANS AND USE OF PROCEEDS
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--- page 385 ---
o approximately 5% of the net proceeds, or HK$387.0 million, will be used
to increase the production capacities, mainly for automotive
components, of our production bases in Europe and North America
where we currently have operation, such as Poland and Mexico. We
believe these initiatives would allow us to swiftly respond to and better
serve the requests of customers across America and Europe and other
international markets while also enhancing our resilience to
geopolitical challenges. In particular, we plan to (i) expand our existing
factories, (ii) establish new factories, (iii) recruit approximately 190
employees by 2028, including around 140 manufacturing personnel
with mechanical operations skills, and (iv) purchase and upgrade
equipment and machinery for the improvement of automated
production lines at our factories, such as welding equipment,
automated assembly equipment and testing equipment.
The table below sets forth details of our proposed allocation of net proceeds
for the expansion of our production capacity overseas:
Intended allocation of net proceeds
from the Global Offering Total
2025H2 2026 2027 2028
(HK$ in millions)
In emerging markets,
such as Thailand and
Vietnam 309.6 464.4 464.4 309.6 1,548.1
In Europe and the
America, such as
Mexico and Poland 116.1 154.8 77.4 38.7 387.0
Total 425.7 619.2 541.8 348.3 1,935.2
• approximately 5% of the net proceeds, or HK$387.0 million, will be used to
enhance our digital intelligence infrastructure over the next three years,
improving our digitalization capabilities across various business processes
such as supply chain management, R&D, production, quality control, sales
and operations. We believe this initiative will allow us to improve production
efficiency, rigorously control product quality and boost operational efficiency.
For instance, we will (i) continue to advance the application of the smart
energy IoT platform to enhance energy utilization, thereby promoting
environmental sustainability and (ii) extend our SRM System to more
suppliers to facilitate better collaboration along the supply chain, optimize
procurement processes and reduce procurement costs. In particular, we plan
to (i) purchase hardware equipment, (ii) develop or purchase software
systems and (iii) recruit and train specialist personnel; and
FUTURE PLANS AND USE OF PROCEEDS
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--- page 386 ---
• approximately 10% of the net proceeds, or HK$774.1 million, will be used as
working capital and for general corporate uses.
The above allocation of the net proceeds from the Global Offering will be adjusted
on a pro rata basis in the event that the Offer Price is fixed at a higher or lower level
compared to the mid-point of the indicative Offer Price range stated in this prospectus.
If the Offer Size Adjustment Option and the Over-allotment Option are exercised in
full, the net proceeds that we will receive will be approximately HK$10,248.3 million,
assuming an Offer Price of HK$21.87 per Share (being the mid-point of the indicative
Offer Price range). In the event that the Offer Size Adjustment Option and the
Over-allotment Option are exercised in full, we intent to apply the additional net proceeds
to the above purposes in the proportions stated above.
To the extent that the net proceeds of the Global Offering are not immediately used
for the above purposes or if we are unable to effect any part of our future development
plans as intended, we may deposit such funds into short-term interest-bearing accounts at
licensed commercial banks and/or other authorized financial institutions (as defined
under the Securities and Futures Ordinance or the applicable laws and regulations in
other jurisdictions) for so long as it is deemed to be in the best interests of the Company. In
such event, we will comply with the appropriate disclosure requirements under the
Listing Rules.
If any part of our development plan does not proceed as planned for reasons such as
changes in government policies that would hinder the development of any of our projects,
or the occurrence of force majeure events, the Directors will carefully evaluate the
situation and may reallocate the net proceeds from the Global Offering.
FUTURE PLANS AND USE OF PROCEEDS
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--- page 387 ---
HONG KONG UNDERWRITERS
China International Capital Corporation Hong Kong Securities Limited
Huatai Financial Holdings (Hong Kong) Limited
ABCI Securities Company Limited
BOCI Asia Limited
Caitong International Securities Co., Limited
GF Securities (Hong Kong) Brokerage Limited
Zheshang International Financial Holdings Co., Limited
UNDERWRITING
This prospectus is published solely in connection with the Hong Kong Public
Offering. The Hong Kong Public Offering is fully underwritten by the Hong Kong
Underwriters on a conditional basis. The International Offering is expected to be fully
underwritten by the International Underwriters.
The Global Offering comprises the Hong Kong Public Offering of initially 25,223,100
Hong Kong Offer Shares and the International Offering of initially 335,106,900
International Offer Shares, subject to, in each case, reallocation on the basis as described in
the section headed “Structure of the Global Offering” as well as the Offer Size Adjustment
Option and the Over-allotment Option (applicable only to the International Offering).
UNDERWRITING ARRANGEMENTS
Hong Kong Public Offering
Hong Kong Underwriting Agreement
We have entered into the Hong Kong Underwriting Agreement with, among others,
the Hong Kong Underwriters on June 12, 2025. Pursuant to the Hong Kong Underwriting
Agreement, we are offering the Hong Kong Offer Shares for subscription by the public in
Hong Kong at the Offer Price on, and subject to, the terms and conditions set out in this
prospectus, the Hong Kong Underwriting Agreement and on the designated website at
www.eipo.com.hk .
UNDERWRITING
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--- page 388 ---
Subject to (a) the Listing Committee granting listing of, and permission to deal in,
our H Shares in issue and to be issued pursuant to the Global Offering (including
additional H Shares which may be issued pursuant to the exercise of the Offer Size
Adjustment Option and the Over-allotment Option) and the listing and permission not
having been revoked; and (b) certain other conditions set out in the Hong Kong
Underwriting Agreement, the Hong Kong Underwriters have agreed severally (but not
jointly) to subscribe for, or procure subscribers for, their respective applicable proportions
of the Hong Kong Offer Shares being offered but which are not taken up under the Hong
Kong Public Offering, on the terms and conditions set out in this prospectus, the Hong
Kong Underwriting Agreement and on the designated website at www.eipo.com.hk .
If, for any reason, the Offer Price is not agreed between us and the Overall
Coordinators (on behalf of the Underwriters) by 12:00 noon on Thursday, June 19, 2025,
the Global Offering will not proceed.
The Hong Kong Underwriting Agreement is conditional upon and subject to, among
other things, the International Underwriting Agreement having been entered into,
becoming unconditional and not having been terminated.
Grounds for Termination
The Overall Coordinators (for themselves and on behalf of the Hong Kong
Underwriters) may, in their sole and absolute discretion and upon giving notice in writing
to our Company, the Hong Kong Underwriting Agreement with immediate effect if at any
time prior to 8:00 a.m. on the Listing Date:
(i) there develops, occurs, exists or comes into force:
(a) any event, or series of events, in the nature of force majeure (including,
without limitation, any acts of government, declaration of a local,
national, regional or international emergency or war, calamity, crisis,
political change, industry action, epidemic, pandemic, outbreaks,
escalation, adverse mutation or aggravation of diseases (including,
without limitation, COVID-19, Severe Acute Respiratory Syndrome
(SARS), swine or avian flu, H5N1, H1N1, H7N9, Ebola virus, Middle
East respiratory syndrome and such related/mutated forms),
comprehensive sanctions, economic sanctions, strikes, labour disputes,
lock outs, other industrial actions, fire, explosion, flooding, earthquake,
tsunami, volcanic eruption, civil commotion, rebellion, riots, public
disorder, acts of war, outbreak or escalation of hostilities (whether or
not war is declared), acts of God, acts of terrorism (whether or not
responsibility has been claimed), paralysis in government operations,
interruptions or delay in transportation) in or affecting Hong Kong, the
PRC, the United States, the United Kingdom, the European Union (or
any member thereof) or any other jurisdiction relevant to our Group
(each a “ Relevant Jurisdiction ” and collectively, the “ Relevant
Jurisdictions ”);
UNDERWRITING
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--- page 389 ---
(b) any change or development involving a prospective change, or any
event or circumstances or series of events likely to result in any change
or development involving a prospective change, in any local, national,
regional or international financial, economic, political, military,
industrial, legal, fiscal, regulatory, currency, credit or market matters or
conditions, equity securities or exchange control or any monetary or
trading settlement system or other financial markets (including,
without limitation, conditions in the stock and bond markets, money
and foreign exchange markets, interbank markets and credit markets),
in or affecting any of the Relevant Jurisdictions;
(c) any moratorium, suspension or restriction (including, without
limitation, any imposition of or requirement for any minimum or
maximum price limit or price range) in or on trading in securities
generally on the Stock Exchange, the New York Stock Exchange, the
NASDAQ Global Market, the London Stock Exchange, the Shanghai
Stock Exchange or the Shenzhen Stock Exchange;
(d) any general moratorium on commercial banking activities in the PRC
(imposed by the People’s Bank of China), Hong Kong (imposed by the
Financial Secretary or the Hong Kong Monetary Authority or other
competent authority), New York (imposed at the U.S. Federal or New
York State level or by any other Authority), London, the European
Union (or any member thereof) or any of the other Relevant
Jurisdictions (declared by any relevant competent authority) or any
disruption in commercial banking or foreign exchange trading or
securities settlement or clearance services, procedures or matters in or
affecting any of the Relevant Jurisdictions;
(e) any new law or regulation or any change or development involving a
prospective change in existing Laws or regulations or any change or
development involving a prospective change in the interpretation or
application thereof by any court or any other Authority in or affecting
any of the Relevant Jurisdictions;
(f) the imposition of sanctions under any sanctions laws or regulations, in
whatever form, directly or indirectly, by or for any of the Relevant
Jurisdictions or relevant to the business operations of our Company or
any member of our Group;
UNDERWRITING
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--- page 390 ---
(g) any change or development involving a prospective change or
amendment in or affecting taxation or foreign exchange control,
currency exchange rates or foreign investment regulations (including,
without limitation, a devaluation of the United States dollar, the Hong
Kong dollar or RMB against any foreign currencies or a change in the
system under which the value of the Hong Kong dollar is linked to that
of the United States dollar or RMB is linked to any foreign currency or
currencies), or the implementation of any exchange control, in any of
the Relevant Jurisdictions or affecting an investment in the Offer Shares;
(h) other than with the prior written consent of the Overall Coordinators,
the issue or requirement to issue by our Company of a supplement or
amendment to this prospectus, the offering circular, the CSRC filings or
other documents in connection with the offer and sale of the Offer
Shares pursuant to the Companies (Winding up and Miscellaneous
Provisions) Ordinance or the Listing Rules or upon any requirement or
request of the Stock Exchange and/or the SFC;
(i) any demand by creditors for repayment of indebtedness or an order or
petition for the winding up or liquidation of any Major Subsidiary of
our Company or any composition or arrangement made by any Major
Subsidiary of our Company with its creditors or a scheme of
arrangement entered into by any Major Subsidiary of our Company or
any resolution for the winding-up of any Major Subsidiary of our
Company or the appointment of a provisional liquidator, receiver or
manager over all or part of the assets or undertaking of any Major
Subsidiary of our Company or anything analogous thereto occurring in
respect of any Major Subsidiary of our Company;
(j) any chief executive officer, chief financial officer, any Director,
Supervisors or any member of the senior management of our Company
is vacating his or her office;
(k) any litigation, dispute, proceeding, legal action or claim or regulatory or
administrative investigation or action being threatened, instigated or
announced against any Major Subsidiary, any Director, Supervisor or
any member of the senior management of our Company;
(l) any contravention by any Major Subsidiary or any Director or any
member of the senior management of our Company of any applicable
laws and regulations, including the Listing Rules, the Companies
Ordinance, the Companies (WUMP) Ordinance and the PRC Company
Law; or
UNDERWRITING
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--- page 391 ---
(m) any non-compliance of this prospectus or the CSRC filings (or any other
documents used in connection with the contemplated subscription and
sale of the Offer Shares or any aspect of the Global Offering) with the
Listing Rules or any other applicable laws and regulations (including,
without limitation, the Listing Rules, the Companies Ordinance, the
Companies (WUMP) Ordinance and the relevant rules of the CSRC);
which, in any such case individually or in the aggregate, in the sole and
absolute opinion of the Joint Sponsors and the Overall Coordinators (for
themselves and on behalf of the Hong Kong Underwriters):
1) has or will have or is likely to have a material adverse effect;
2) has or will have or is likely to have a material adverse effect on the
success or marketability of the Global Offering or the level of
applications for or the distribution of the Offer Shares under the Hong
Kong Public Offering or the level of indications of interest under the
International Offering;
3) makes or will make or is likely to make it inadvisable, inexpedient,
impracticable or incapable for the Hong Kong Public Offering and/or
the Global Offering to proceed, or to market the Global Offering or the
delivery or distribution of the Offer Shares on the terms and in the
manner contemplated by the Global Offering Documents;
4) has or will or is likely to have the effect of making any part of the Hong
Kong Underwriting Agreement (including underwriting the Hong Kong
Public Offering) incapable or impracticable of performance in
accordance with its terms or preventing or delaying the processing of
applications and/or payments pursuant to the Global Offering or
pursuant to the underwriting thereof; or
(ii) there has come to the notice of the Joint Sponsors and the Overall
Coordinators that
(a) any statement contained in any of this prospectus, the formal notice, the
post hearing information pack, the Disclosure Package (as defined in
the International Underwriting Agreement), the preliminary offering
circular, the final offering circular and any other announcement,
document, materials, communications or information made, issued,
given, released, arising out of or used in connection with or in relation
to the contemplated offering and sale of the Offer Shares or otherwise in
connection with the Global Offering (the “ Offering Documents ”), the
CSRC filings and/or any notices, announcements, advertisements,
communications or other documents (including any announcement,
circular, document or other communication pursuant to the Hong Kong
Underwriting Agreement) issued or used by or on behalf of our
UNDERWRITING
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--- page 392 ---
Company in connection with the Global Offering (including any
supplement or amendment thereto) (the “ Global Offering
Documents ”) was, when it was issued, or has become, untrue, incorrect,
inaccurate or incomplete in any material respect or misleading or
deceptive, or that any estimate, forecast, expression of opinion,
intention or expectation contained in any such documents, was,
(including any supplement or amendment thereto) was, when it was
issued, or has become, not fair and honest or not based on reasonable
assumptions with reference to the facts and circumstances then
subsisting;
(b) any matter has arisen or has been discovered which would, had it arisen
or been discovered immediately before the date of this prospectus,
constitute a material misstatement in, or omission from, any Global
Offering Document;
(c) there is a breach of, or any event or circumstance rendering untrue,
incorrect, incomplete or misleading in any respect, any of the
representations or warranties given by our Company in the Hong Kong
Underwriting Agreement or the International Underwriting Agreement
(including any supplement or amendment thereto), as applicable;
(d) there is a material breach of any of the obligations imposed upon our
Company under the Hong Kong Underwriting Agreement or the
International Underwriting Agreement (including any supplement or
amendment thereto);
(e) there is an event, act or omission which gives rise or is likely to give rise
to any liability of any of the Indemnifying Parties pursuant to the
indemnities given by the Indemnifying Parties in the Hong Kong
Underwriting Agreement or the International Underwriting Agreement
(including any supplement or amendment thereto);
(f) there is any material adverse effect;
(g) that the approval by the listing committee of the Stock Exchange of the
listing of, and permission to deal in, the H Shares in issue and to be
issued pursuant to the Global Offering (including pursuant to any
exercise of the Offer Size Adjustment Option and the Over-allotment
Option), other than subject to any applicable conditions, is refused or
not granted on or before the Listing Date, or if granted, the approval is
subsequently withdrawn, cancelled, revoked or withheld;
UNDERWRITING
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--- page 393 ---
(h) (A) the notice of acceptance of the CSRC filings issued by the CSRC
and/or the results of the CSRC filings published on the website of the
CSRC is rejected, withdrawn, revoked or invalidated; or (B) other than
with the prior written consent of the Overall Coordinators, the issue or
requirement to issue by our Company of a supplement or amendment to
the CSRC filings pursuant to the Trial Administrative Measures of
Overseas Securities Offering and Listing by Domestic Companies ( ྤʫ
جand supporting guidelines
issued by the CSRC or the Provisions on Strengthening Confidentiality
and Archives Administration of Overseas Securities Offering and
Listing by Domestic Companies (̋੶ྤʫΆุྤ̮೯БᗇՎձɪ̹
֛the “ CSRC Rules ”) or upon any
requirement or request of the CSRC; or (C) any non-compliance of the
CSRC filings with the CSRC Rules or any other applicable laws;
(i) any person (other than any of the Joint Sponsors) has withdrawn its
consent to the issue of this prospectus with the inclusion of its reports,
letters and/or legal opinions (as the case may be) and references to its
name included in the form and context in which it respectively appears;
(j) our Company withdraws this prospectus (and/or any other documents
used in connection with the Global Offering) or the Global Offering;
(k) there is a prohibition on our Company for whatever reason from
offering, allotting, issuing or selling any of the Offer Shares (including
pursuant to any exercise of the Offer Size Adjustment Option and the
Over-Allotment Option) pursuant to the terms of the Global Offering;
(l) any Director, Supervisor or member of senior management of our
Company is being charged with an indictable offence or is prohibited by
operation of law or otherwise disqualified from taking part in the
management of a company or taking a directorship of a company, or
there is a commencement by any Authority of any investigation or other
action against any Director, Supervisor or member of senior
management of our Company in his or her capacity as such or any
member of our Group or an announcement by any Authority that it
intends to commence any such investigation or take any such action; or
UNDERWRITING
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--- page 394 ---
(m) there is an order or petition for the winding-up of any major subsidiary
of our Group or any composition or arrangement made by any Major
Subsidiary of our Group with its creditors or a scheme of arrangement
entered into by any Major Subsidiary of our Group or any resolution for
the winding-up of any Major Subsidiary of our Group or the
appointment of a provisional liquidator, receiver or manager over all or
part of the assets or undertaking of any Major Subsidiary of our Group
or anything analogous thereto occurring in respect of any Major
Subsidiary of our Group,
then, in each case, the Overall Coordinators (for themselves and on behalf of
the Hong Kong Underwriters) may, in their sole and absolute discretion and
upon giving notice in writing to our Company, terminate the Hong Kong
Underwriting Agreement with immediate effect.
Indemnity
We have agreed to indemnify the Hong Kong Underwriters for certain losses which
they may suffer or incur, including losses arising from their performance of their
obligations under the Hong Kong Underwriting Agreement and any breach by us of the
Hong Kong Underwriting Agreement.
The Hong Kong Underwriters’Interests in Us
Save for their respective obligations under the Hong Kong Underwriting
Agreement, as of the Latest Practicable Date, none of the Hong Kong Underwriters was
interested directly or indirectly in any Shares or any securities of any member of our
Group or had any right or option (whether legally enforceable or not) to subscribe for or
purchase, or to nominate persons to subscribe for or purchase, any Shares or any securities
of any member of our Group.
The Hong Kong Underwriters and their affiliates may, subject to applicable laws
and regulations and in their ordinary and usual course of business, (i) provide financing
in connection with the subscription for, or purchase of, our securities with security
interests over all or part of such securities subscribed or purchased, and/or (ii) participate
in or facilitate the subscription for, or purchase of, our securities.
UNDERWRITING
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--- page 395 ---
Lock up Arrangement
Undertakings to the Hong Kong Stock Exchange pursuant to the Listing Rules
Undertakings by Our Controlling Shareholders
Pursuant to Rule 10.07 of the Listing Rules, each of our controlling shareholders has
undertaken to the Hong Kong Stock Exchange and us that, except pursuant to the Global
Offering or the Sanhua Green Energy Exchangeable Bonds, the shareholder will not and
will procure that the relevant registered holder(s) will not (without the prior written
consent of the Hong Kong Stock Exchange or unless otherwise in compliance with the
applicable requirements of the Listing Rules):
(i) in the period commencing on the date by reference to which disclosure of the
shareholder’s holding of Shares is made in this prospectus and ending on the
date which is six months from the Listing Date (the “ First Six-month
Period ”), directly or indirectly dispose of, nor enter into any agreement to
dispose of or otherwise create any options, rights, interests or encumbrances
in respect of, any of our Shares (or our other securities) in respect of which the
shareholder is shown in this prospectus to be the beneficial owner; or
(ii) in the period of six months from the expiry of the First Six-month Period (the
“Second Six-month Period ”), directly or indirectly, dispose of, nor enter into
any agreement to dispose of or otherwise create any options, rights, interests
or encumbrances in respect of, any of the Shares or securities referred to in (i)
above if, immediately following the disposal or upon the exercise or
enforcement of the options, rights, interests or encumbrances, the shareholder
would cease to be our controlling shareholder.
In addition, pursuant to Note 3 to Rule 10.07(2) of the Listing Rules, each of our
controlling shareholders has undertaken to the Hong Kong Stock Exchange and us that,
within the period commencing on the date by reference to which disclosure of the
shareholder holding of our Shares is made in this prospectus and ending on the date
which is 12 months from the Listing Date, the shareholder will and will procure that the
relevant registered holder(s) will:
(i) when the shareholder pledges or charges any Shares (or our other securities)
beneficially owned by the shareholder in favor of an authorized institution (as
defined in the Banking Ordinance (Chapter 155 of the Laws of Hong Kong))
for a bona fide commercial loan, immediately inform us of such pledge or
charge together with the number of Shares (or our other securities) so pledged
or charged; and
(ii) when the shareholder receives indications, either verbal or written, from the
pledgee or chargee of Shares (or our other securities) that those pledged or
charged Shares (or our other securities) will be disposed of (including the A
Shares pledged to the pledge agent pursuant to the Sanhua Green Energy
Exchangeable Bonds), immediately inform us of the indications.
UNDERWRITING
– 385 –


--- page 396 ---
We will inform the Hong Kong Stock Exchange as soon as we have been informed of
the above matters by any of our controlling shareholders and disclose those matters by
way of an announcement as required under the Listing Rules.
Undertakings Pursuant to the Hong Kong Underwriting Agreement
Undertaking by us
Pursuant to the Hong Kong Underwriting Agreement, our Company hereby
undertakes to each of the Joint Sponsors, the Overall Coordinators, the Joint Global
Coordinators, the Capital Market Intermediaries, the Joint Bookrunners, the Joint Lead
Managers and the Hong Kong Underwriters that, except pursuant to the Global Offering
(including pursuant to the Offer Size Adjustment Options and the Over-allotment Option)
and the employee incentive plans of our Company which are disclosed in this prospectus,
at any time after the date of the Hong Kong Underwriting Agreement up to and including
the date falling six months after the Listing Date (the “ First Six Month Period ”), it will
not, without the prior written consent of the Joint Sponsors and the Overall Coordinators
(for themselves and on behalf of the Hong Kong Underwriters) and unless in compliance
with the requirements of the Listing Rules (including pursuant to the exceptions set out in
Rule 10.08 of the Listing Rules):
(a) allot, issue, sell, accept subscription for, offer to allot, issue or sell, contract or
agree to allot, issue or sell, assign, mortgage, charge, pledge, hypothecate,
lend, grant or sell any option, warrant, contract or right to subscribe for or
purchase, grant or purchase any option, warrant, contract or right to allot,
issue or sell, or otherwise transfer or dispose of or create an encumbrance
over, or agree to transfer or dispose of or create an encumbrance over, either
directly or indirectly, conditionally or unconditionally, or any legal or
beneficial interest in the H Shares or any other equity securities of our
Company, or any interest in any of the foregoing (including, without
limitation, any equity securities convertible into or exchangeable or
exercisable for or that represent the right to receive, or any warrants or other
rights to purchase any H Shares or other equity securities of our Company, or
any interest in any of the foregoing, as applicable), or deposit any H Shares or
other equity securities of our Company, as applicable, with a depositary in
connection with the issue of depositary receipts;
(b) enter into any swap or other arrangement that transfers to another, in whole
or in part, any of the economic consequences of subscription or ownership
(legal or beneficial) of the H Shares or any other equity securities of our
Company, or any interest in any of the foregoing (including, without
limitation, any equity securities which are convertible into or exchangeable or
exercisable for, or that represent the right to receive, or any warrants or other
rights to purchase, any H Shares or other equity securities of our Company, or
any interest in any of the foregoing);
(c) enter into any transaction with the same economic effect as any transaction
described in paragraph (a) or (b) above; or
UNDERWRITING
– 386 –


--- page 397 ---
(d) offer to or contract to or agree to announce, or publicly disclose that our
Company will or may enter into any transaction described in paragraph (a),
(b) or (c) above,
in each case, whether any of the transactions described in paragraph (a), (b) or (c)
above is to be settled by delivery of H Shares or such other equity securities of our
Company, in cash or otherwise (whether or not the issue of such H shares or other
equity securities will be completed within the First Six Month Period).
Our Company further agrees that, in the event our Company is allowed to enter into
any of the transactions described in paragraph (a), (b) or (c) above or offers to or agrees to
or announces any intention to effect any such transaction during the period of six months
commencing on the date on which the First Six Month Period expires (the “ Second Six
Month Period ”), it will take all reasonable steps to ensure that such an issue or disposal
will not, and no other act of our Company will, create a disorderly or false market for any
Shares or other securities of our Company.
International Offering
International Underwriting Agreement
In connection with the International Offering, we expect to enter into the
International Underwriting Agreement with, among others, the International
Underwriters on the Price Determination Date. Under the International Underwriting
Agreement and subject to the Offer Size Adjustment Option and the Over-allotment
Option, the International Underwriters would, subject to certain conditions, severally
(but not jointly) agree to purchase or procure purchasers for the International Offer Shares
initially offered pursuant to the International Offering. It is expected that the
International Underwriting Agreement may be terminated on grounds similar to those
contained in the Hong Kong Underwriting Agreement. See the subsection headed
“Structure of the Global Offering — The International Offering” for further details.
Over-allotment Option
We intend to grant to the International Underwriters the Over-allotment Option,
exercisable in whole or in part, at the sole and absolute discretion of the Overall
Coordinators on behalf of the International Underwriters from the Listing Date until 30
days from the last day permitted for the making of applications under the Hong Kong
Public Offering, pursuant to which our Company may be required to issue up to an
aggregate of 54,049,500 H Shares, representing not more than 15.0% of the number of Offer
Shares initially available under the Global Offering (assuming the Offer Size adjustment
Option is not exercised at all) or up to an aggregate of 62,156,900 H Shares, representing
not more than 15.0% of the number of Offer Shares available under the Global Offering
(assuming the Offer Size Adjustment Option is exercised in full), at the Offer Price to cover
over-allocations in the International Offering, if any. See the subsection headed “Structure
of the Global Offering — Over-allotment Option” for details.
UNDERWRITING
– 387 –


--- page 398 ---
Offer Size Adjustment Option
The Company has an Offer Size Adjustment Option under the Hong Kong
Underwriting Agreement, exercisable by the Company with the prior written agreement
between the Company and the Overall Coordinators (for themselves and on behalf of the
Underwriters) on or before the time of execution of the Price Determination Agreement
and will lapse immediately thereafter. Upon the exercise of the Offer Size Adjustment
Option, the Company may issue up to 54,049,500 additional Offer Shares (being 15.0% of
the Offer Shares initially available under the Global Offering) at the Offer Price. The Offer
Size Adjustment Option provides flexibility to increase the number of Offer Shares
available for purchase under the Global Offering to cover additional market demand.
The exercise of the Offer Size Adjustment Option is also subject to the reallocation
arrangement as described in “Structure of the Global Offering — The Hong Kong Public
Offering — Reallocation.”
COMMISSION AND EXPENSES
The Capital Market Intermediaries will receive an underwriting commission of 0.8%
of the aggregate Offer Price of all the Offer Shares (including any Offer Shares to be issued
pursuant to the exercise of the Offer Size Adjustment Option and the Over-allotment
Option). The Capital Market Intermediaries may receive a discretionary incentive fee of
up to 0.6% of the aggregate Offer Price of all the Offer Shares (including any Offer Shares
to be issued pursuant to the exercise of the Offer Size Adjustment Option and the
Over-allotment Option). For unsubscribed Hong Kong Offer Shares reallocated to the
International Offering, the underwriting commission will not be paid to the Hong Kong
Underwriters but will instead be paid to the International Underwriters.
Assuming full payment of the discretionary incentive fee, the fixed fees and the
discretionary fees payable to the Underwriters represent approximately 34.3% and 65.7%,
respectively, of the aggregate fees payable to the Capital Market Intermediaries in total in
connection with the Global Offering.
Assuming the Offer Size Adjustment Option and the Over-allotment Option are not
exercised at all, and based on an Offer Price of HK$21.87 per H Share (being the mid-point
of the indicative Offer Price Range), the aggregate commissions and fees (exclusive of any
discretionary incentive fee), together with the Stock Exchange listing fees, the SFC
transaction levy, the AFRC transaction levy, the Hong Kong Stock Exchange trading fee,
legal and other professional fees and printing and other expenses relating to the Global
Offering to be borne by the Company are estimated to amount to approximately HK$139.8
million in aggregate.
JOINT SPONSOR’S FEE
A fee of USD400,000 is payable by the Company as sponsor fees to each Joint
Sponsor.
UNDERWRITING
– 388 –


--- page 399 ---
JOINT SPONSOR’S INDEPENDENCE
Each Joint Sponsor satisfies the independence criteria set out in Rule 3A.07 of the
Listing Rules.
ACTIVITIES BY UNDERWRITERS
Each of the Underwriters and their respective affiliates may individually undertake
a variety of activities which do not form part of the underwriting or stabilizing process.
The Underwriters and their respective affiliates are diversified financial institutions
with relationships in countries around the world. These entities engage in a wide range of
commercial and investment banking, brokerage, funds management, trading, hedging,
investing and other activities for their own account and for the account of others. In the
ordinary course of their business activities, the Underwriters and their respective
affiliates may purchase, sell or hold a broad array of investments and actively trade
securities, derivatives, loans, commodities, currencies, credit default swaps and other
financial instruments for their own account and for the accounts of their customers. These
investment and trading activities may involve or relate to our assets, securities and/or
instruments and/or persons and entities with relationships with us and may also include
swaps and other financial instruments entered into for hedging purposes in connection
with our loans and other debt.
In relation to our H Shares, the activities of the Underwriters and their respective
affiliates may include acting as agent for buyers and sellers of our H Shares, entering into
transactions with those buyers and sellers in a principal capacity, including as a lender to
initial purchasers of our H Shares (whose financing may be secured by our H Shares) in
the Global Offering, proprietary trading in our H Shares, and entering into over the
counter or listed derivative transactions or listed or unlisted securities transactions
(including issuing securities such as derivative warrants listed on a stock exchange)
which have as their underlying assets, assets including our H Shares. Such transactions
may be carried out as bilateral agreements or trades with selected counterparties. Those
activities may require hedging activity by those entities involving, directly or indirectly,
the buying and selling of our H Shares, which may have a negative impact on the trading
price of our H Shares. All such activities may take place in Hong Kong and elsewhere in
the world and may result in the Underwriters and their respective affiliates holding long
and/or short positions in our H Shares, in baskets of securities or indices including our H
Shares, in units of funds that may purchase our H Shares, or in derivatives related to any
of the foregoing.
In relation to issues by the Underwriters or their respective affiliates of any listed
securities having our H Shares as their underlying securities, whether on the Hong Kong
Stock Exchange or on any other stock exchange, the rules of the stock exchange may
require the issuer of those securities (or one of its affiliates or agents) to act as a market
maker or liquidity provider in the security, and this will also result in hedging activity in
our H Shares in most cases.
UNDERWRITING
– 389 –


--- page 400 ---
All these activities may occur both during and after the end of the stabilizing period
described in the section headed “Structure of the Global Offering”. Such activities may
affect the market price or value of our H Shares, the liquidity or trading volume in our H
Shares and the volatility of the price of our H Shares, and the extent to which this occurs
from day to day cannot be estimated.
It should be noted that when engaging in any of these activities, the Underwriters
and their respective affiliates will be subject to certain restrictions, including the
following:
(a) the Underwriters and their respective affiliates (other than the Stabilizing
Manager or any person acting for it) must not, in connection with the
distribution of the Offer Shares, effect any transactions (including issuing or
entering into any option or other derivative transactions relating to the Offer
Shares), whether in the open market or otherwise, with a view to stabilizing or
maintaining the market price of any of the Offer Shares at levels other than
those which might otherwise prevail in the open market; and
(b) the Underwriters and their respective affiliates must comply with all
applicable laws and regulations, including the market misconduct provisions
of the SFO, including the provisions prohibiting insider dealing, false trading,
price rigging and stock market manipulation.
Some of the Underwriters or their respective affiliates have provided from time to
time and are expected to provide to our Group investment banking and other services in
the future for which the Underwriters or their respective affiliates have received or will
receive customary fees and commissions.
In addition, the Underwriters or their respective affiliates may provide financing to
investors to finance their subscriptions of Offer Shares in the Global Offering.
UNDERWRITING
– 390 –


--- page 401 ---
THE GLOBAL OFFERING
The Global Offering consists of (subject to reallocation, Offer Size Adjustment
Option and the Over-allotment Option as described below):
(a) the Hong Kong Public Offering of initially 25,223,100 H Shares (subject to
reallocation and the Offer Size Adjustment Option) as described below under
“— The Hong Kong Public Offering”; and
(b) the International Offering of initially 335,106,900 H Shares (subject to
reallocation, the Offer Size Adjustment Option and the Over-allotment
Option) outside the United States (including to professional and institutional
investors in Hong Kong) in offshore transactions in reliance on Regulation S
and in the United States solely to QIBs in reliance on Rule 144A or another
exemption from, or in a transaction not subject to, the registration
requirements of the U.S. Securities Act, as described below under the
subsection headed “— The International Offering”.
Investors may either apply for our H Shares under the Hong Kong Public Offering;
or apply for or indicate an interest, if qualified to do so, for our H Shares under the
International Offering, but may not do both.
The Offer Shares will represent approximately 8.81% of the total Shares in issue
immediately following the completion of the Global Offering (assuming that the Offer
Size Adjustment Option and the Over-allotment Option are not exercised). If the
Over-allotment Option is exercised in full, the Offer Shares will represent approximately
10.0% of the enlarged issued share capital of our Company (assuming the Offer Size
Adjustment Option is not exercised at all) or approximately 11.3% of the enlarged issued
share capital of our Company (assuming the Offer Size Adjustment option is exercised in
full) immediately following the completion of the Global Offering.
References in this prospectus to applications, application monies or the procedure
for application relate solely to the Hong Kong Public Offering.
The number of Offer Shares to be offered under the Hong Kong Public Offering and
the International Offering, respectively, may be subject to reallocation as described in “—
The Hong Kong Public Offering — Reallocation” below.
UNDERWRITING ARRANGEMENTS
The Hong Kong Public Offering is fully underwritten by the Hong Kong
Underwriters under the terms of the Hong Kong Underwriting Agreement, subject to
agreement on the Offer Price between us and the Overall Coordinators (on behalf of the
Underwriters) on or around the Price Determination Date and subject to the other
conditions set out in the subsection headed “— Conditions of the Global Offering”.
We expect to enter into the International Underwriting Agreement relating to the
International Offering on or about the Price Determination Date.
STRUCTURE OF THE GLOBAL OFFERING
– 391 –


--- page 402 ---
The underwriting arrangements, the Hong Kong Underwriting Agreement and the
International Underwriting Agreement are summarized in the section headed
“Underwriting”.
THE HONG KONG PUBLIC OFFERING
Number of H Shares Initially Offered
We are initially offering 25,223,100 H Shares at the Offer Price for subscription by
the public in Hong Kong, representing approximately (i) 7.0% of the 360,330,000 H Shares
initially made available under the Global Offering and (ii) 0.62% of the total Shares in
issue immediately following the completion of the Global Offering (in each case, subject to
the reallocation of Offer Shares between the International Offering and the Hong Kong
Public Offering and assuming the Offer Size Adjustment Option and the Over-allotment
Option are not exercised).
The Hong Kong Public Offering is open to members of the public in Hong Kong as
well as to institutional and professional investors. Professional investors generally
include brokers, dealers, and companies (including fund managers) whose ordinary
business involves dealing in shares and other securities, and corporate entities which
regularly invest in shares and other securities.
Completion of the Hong Kong Public Offering is subject to the conditions as set
forth in “— Conditions of the Global Offering” below.
Allocation
Allocation of H Shares to investors under the Hong Kong Public Offering will be
based solely on the level of valid applications received under the Hong Kong Public
Offering. The basis of allocation may vary, depending on the number of Hong Kong Offer
Shares validly applied for by applicants. The allocation of Hong Kong Offer Shares could,
where appropriate, consist of balloting, which would mean that some applicants may
receive a higher allocation than others who have applied for the same number of Hong
Kong Offer Shares, and those applicants who are not successful in the ballot may not
receive any Hong Kong Offer Shares.
For allocation purposes only, the total number of Hong Kong Offer Shares available
under the Hong Kong Public Offering (after taking into account any reallocation referred
to below) will be divided equally (to the nearest board lot) into two pools: Pool A and Pool
B (with any odd lots being allocated to pool A).
• Pool A : The Hong Kong Offer Shares in Pool A will be allocated on an
equitable basis to applicants who have applied for Hong Kong Offer Shares
with a total price of HK$5 million or less (excluding the brokerage fee, the SFC
transaction levy, the AFRC transaction levy and the Hong Kong Stock
Exchange trading fee).
STRUCTURE OF THE GLOBAL OFFERING
– 392 –


--- page 403 ---
• Pool B : The Hong Kong Offer Shares in Pool B will be allocated on an
equitable basis to applicants who have applied for Hong Kong Offer Shares
with a total price of more than HK$5 million and up to the total value of Pool
B (excluding the brokerage fee, the SFC transaction levy, the AFRC transaction
levy and the Hong Kong Stock Exchange trading fee).
For the purpose of the immediately preceding paragraph only, the “price” for the
Hong Kong Offer Shares means the price payable on application. See the subsection
headed “— Pricing — Price Payable on Application”.
Applicants should be aware that applications in Pool A and Pool B are likely to
receive different allocation ratios. If Hong Kong Offer Shares in one pool (but not both
pools) are undersubscribed, the unsubscribed Hong Kong Offer Shares will be transferred
to the other pool to satisfy demand in that other pool and be allocated accordingly.
Applicants can only receive an allocation of Hong Kong Offer Shares from either
Pool A or Pool B but not from both pools. Multiple or suspected multiple applications and
any application for more than 12,611,500 Hong Kong Offer Shares (being 50% of the H
Shares initially made available under the Hong Kong Public Offering assuming the Offer
Size Adjustment Option is not exercised) will be rejected.
Reallocation
The allocation of the Offer Shares between the Hong Kong Public Offering and the
International Offering is subject to reallocation under the Listing Rules. Paragraph 4.2 of
Practice Note 18 of the Listing Rules requires a clawback mechanism to be put in place
which would have the effect of increasing the number of Hong Kong Offer Shares to a
certain percentage of the total number of Offer Shares offered under the Global Offering
when certain prescribed total demand levels are reached under the Hong Kong Public
Offering.
We have applied for, and the Stock Exchange has granted us, a waiver from strict
compliance with paragraph 4.2 of Practice Note 18 of the Listing Rules to the effect as
further described below.
25,223,100 Offer Shares are initially available in the Hong Kong Public Offering,
representing approximately 7.0% of the Offer Shares initially available for subscription
under the Global Offering. If the number of Offer Shares validly applied for under the
Hong Kong Public Offering represents (a) 14 times or more but less than 46 times, (b) 46
times or more but less than 93 times and (c) 93 times or more of the number of Offer Shares
initially available under the Hong Kong Public Offering, then Offer Shares will be
reallocated to the Hong Kong Public Offering from the International Offering. As a result
of the reallocation, the total number of Offer Shares available under the Hong Kong Public
Offering will be increased to 36,033,000 Offer Shares (approximately 10.0% in the case of
(a)), 48,644,600 Offer Shares (approximately 13.5% in the case of (b)) and 95,487,500 Offer
Shares (approximately 26.5% in the case of (c)) (of the total number of Offer Shares
initially available under the Global Offering (before any exercise of the Offer Size
STRUCTURE OF THE GLOBAL OFFERING
– 393 –


--- page 404 ---
Adjustment Option and the Over-allotment Option)). In each case, the number of Offer
Shares to be allocated to the International Offering will be correspondingly reduced and
the additional Offer Shares will be allocated between Pool A and Pool B in such manner as
the Overall Coordinators deems appropriate.
The Overall Coordinators may, at its discretion, reallocate Offer Shares initially
allocated for the International Offering to the Hong Kong Public Offering to satisfy valid
applications in Pool A and Pool B in accordance with the guidance in Chapter 4.14 of the
Guide for New Listing Applicants as follows:
If: (i) the International Offer Shares are undersubscribed and the Hong Kong Offer
Shares are fully subscribed or oversubscribed irrespective of the number of times; or (ii)
the International Offer Shares are fully subscribed or oversubscribed and the Hong Kong
Offer Shares are oversubscribed by less than 14 times of the number of Hong Kong Offer
Shares initially available under the Hong Kong Public Offering, provided that the Offer
Price would be set at (or no higher than) the minimum Offer Price, up to 25,223,100 Offer
Shares may be reallocated to the Hong Kong Public Offering from the International
Offering, so that the total number of the Offer Shares available under the Hong Kong
Public Offering following such reallocation will be increased to 50,446,200 Offer Shares,
representing twice the number of the Offer Shares initially available under the Hong Kong
Public Offering (before any exercise of the Offer Size Adjustment Option and the
Over-allotment Option).
In addition, the Overall Coordinators may reallocate Offer Shares from the
International Offering to the Hong Kong Public Offering to satisfy valid applications
under the Hong Kong Public Offering, in such proportions as the Overall Coordinators
may, in its sole and absolute discretion, determine.
If the Hong Kong Public Offering is not fully subscribed, the Overall Coordinators
may reallocate all or some unsubscribed Hong Kong Offer Shares to the International
Offering, in such proportions as the Overall Coordinators may, in its sole and absolute
discretion, determine.
Applications
Each applicant under the Hong Kong Public Offering must give an undertaking and
confirmation in the application submitted by that applicant that he/she/it and any
person(s) for whose benefit the applicant is making the application have not applied for or
taken up, or indicated an interest for, and will not apply for or take up, or indicate an
interest for, any International Offer Shares under the International Offering, and that
applicant’s application is liable to be rejected if either or both of the undertaking and
confirmation are breached or untrue (as the case may be) or the applicant has been or will
be placed or allocated International Offer Shares under the International Offering.
STRUCTURE OF THE GLOBAL OFFERING
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--- page 405 ---
THE INTERNATIONAL OFFERING
Number of H Shares Initially Offered
We are initially offering 335,106,900 H Shares at the Offer Price for subscription or
sale under the International Offering (subject to reallocation, the Offer Size Adjustment
Option and the Over-allotment Option), representing approximately 93.0% of the
360,330,000 H Shares initially made available under the Global Offering. Subject to the
reallocation of the Offer Shares between the International Offering and the Hong Kong
Public Offering, the number of H Shares initially offered under the International Offering
will represent approximately 8.2 % of the total Shares in issue immediately following the
completion of the Global Offering (assuming the Offer Size Adjustment Option and the
Over-allotment Option are not exercised).
Allocation
The International Offering will include selective marketing of Offer Shares to QIBs
in the United States in accordance with Rule 144A as well as institutional and professional
investors and other investors anticipated to have a sizeable demand for the Offer Shares in
Hong Kong and other jurisdictions outside the United States in reliance on Regulation S.
Professional investors generally include brokers, dealers, companies (including fund
managers) whose ordinary business involves dealing in shares and other securities and
corporate entities that regularly invest in shares and other securities.
Allocation of Offer Shares under the International Offering will be effected in
accordance with the “book-building” process described in the subsection headed “—
Pricing — Determining the Offer Price” and based on a number of factors, including the
level and timing of demand, total size of the relevant investor’s invested assets or equity
assets in the relevant sector and whether or not it is expected that that investor is likely to
buy further H Shares, and/or hold or sell its H Shares, after the Listing. This basis of
allocation is intended to result in a distribution of the Offer Shares which is likely to lead
to the establishment of a solid and stable professional and institutional shareholder base
to the benefit of our Group and our Shareholders as a whole.
The Overall Coordinators (on behalf of the Underwriters) may require an investor
who has been offered (or has indicated an interest for) Offer Shares under the
International Offering and who has made an application under the Hong Kong Public
Offering to provide sufficient information to the Overall Coordinators so as to allow it to
identify the relevant applications under the Hong Kong Public Offering and to ensure that
they are excluded from any allocation of Offer Shares under the Hong Kong Public
Offering.
STRUCTURE OF THE GLOBAL OFFERING
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--- page 406 ---
Reallocation
The total number of Offer Shares to be issued or sold pursuant to the International
Offering may change as a result of the clawback arrangement and/or any reallocation of
Offer Shares between the Hong Kong Public Offering and the International Offering as
described in the subsection headed “— The Hong Kong Public Offering — Reallocation”,
and the exercise of the Offer Size Adjustment Option and the Over-allotment Option in
whole or in part as described in the subsections headed “— Offer Size Adjustment Option”
and “— Over-allotment Option”.
PRICING
Offer Price Range
The Offer Price will be not more than HK$22.53 per H Share and is expected to be
not less than HK$21.21 per H Share, unless otherwise announced, as explained below.
Price Payable on Application
Applicants for Hong Kong Offer Shares may be required to pay, on application
(subject to application channel), the maximum Offer Price per Hong Kong Offer Share
plus the brokerage fee of 1.0%, the SFC transaction levy of 0.0027%, the AFRC transaction
levy of 0.00015% and the Hong Kong Stock Exchange trading fee of 0.00565%, amounting
to a total of HK$2,275.72 for one board lot of 100 H Shares. Applicants should be aware
thattheOfferPricetobedeterminedonthePriceDeterminationDatemaybe,butisnot
expected to be, lower than the minimum Offer Price.
If the Offer Price is less than the maximum Offer Price, appropriate refund
payments (including the brokerage fee, the SFC transaction levy, the AFRC transaction
levy and the Hong Kong Stock Exchange trading fee attributable to the surplus
application monies) will be made to successful applicants. See the subsection headed
“How to Apply for the Hong Kong Offer Shares — Despatch/Collection of H Share
Certificates and Refund of Application Monies”.
Determining the Offer Price
The International Underwriters are soliciting from prospective investors indications
of interest in acquiring our H Shares in the International Offering. Prospective investors
will be required to specify the number of International Offer Shares under the
International Offering they would be prepared to acquire either at different prices or at a
particular price. This process, known as “book-building”, is expected to continue up to,
but to cease on or around, the Price Determination Date.
The Offer Price is expected to be fixed by agreement between the Overall
Coordinators (on behalf of the Underwriters) and us, on the Price Determination Date,
when market demand for the Offer Shares will be determined. The Price Determination
Date is expected to be on or before Thursday, June 19, 2025 (Hong Kong time) and, in any
event, not later than 12:00 noon on Thursday, June 19, 2025 (Hong Kong time).
STRUCTURE OF THE GLOBAL OFFERING
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--- page 407 ---
Reduction in Offer Price Range and/or Number of Offer Shares
The Overall Coordinators (on behalf of the Underwriters) may, based on the level of
interest expressed by prospective investors during the book-building process in respect of
the International Offering, and with our consent, reduce the Offer Price Range and/or the
number of Offer Shares below that stated in this prospectus at any time on or before the
morning of the last day for making applications under the Hong Kong Public Offering. In
this case, we will as soon as practicable after the decision to make the reduction (and no
later than the morning of the last day for making applications under the Hong Kong
Public Offering) publish on the website of the Hong Kong Stock Exchange at
www.hkexnews.hk and our website at https://zjshc.com notice of the reduction, the
cancellation of the Global Offering and the relaunch of the Global Offering at the revised
number of Offer Shares and/or the revised Offer Price. This notice will also include
confirmation or revision, as appropriate, of the working capital statement and the Global
Offering statistics as set out in this prospectus, as well as any other financial information
which may change as a result of the reduction.
We will, as soon as practicable following the decision to make the reduction, in
addition to publishing the notice, issue a supplemental prospectus containing details in
relation to the change in the number of Offer Shares being offered and/or the Offer Price
Range. The Global Offering will be canceled and subsequently relaunched on FINI
pursuant to the supplemental prospectus.
Before making applications for the Hong Kong Offer Shares, applicants should have
regard to the possibility that any announcement of a reduction in the indicative Offer
Price Range and/or number of Offer Shares may not be made until the day which is the
last day for making applications under the Hong Kong Public Offering.
In the absence of a notice of reduction, the number of Offer Shares will not be
reduced and the Offer Price, if agreed upon between us and the Overall Coordinators (on
behalf of the Underwriters), will not be set outside the indicative Offer Price Range.
Announcement of the Offer Price and Basis of Allocations
The Offer Price, level of applications in the Hong Kong Public Offering, level of
indications of interest in the International Offering, and basis of allocations of the Hong
Kong Offer Shares are expected to be made available through a variety of channels in the
manner described in the subsection headed “How to Apply for the Hong Kong Offer
Shares — Publication of Results”.
STRUCTURE OF THE GLOBAL OFFERING
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--- page 408 ---
OFFER SIZE ADJUSTMENT OPTION
In order to provide the Company with the flexibility to increase the number of Offer
Shares available under the Global Offering to cover additional demand, the Company has
an Offer Size Adjustment Option which will allow the Company to issue up to 54,049,500
additional Offer Shares (representing 15.0% of the Offer Shares initially being offered
under the Global Offering) (the “ Offer Size Adjustment Option Shares ”) at the Offer
Price.
The Offer Size Adjustment Option is contained in the Hong Kong Underwriting
Agreement and is exercisable by the Company with the prior written agreement between
the Company and the Overall Coordinators (for themselves and on behalf of the
Underwriters) on or before the time of the execution of the Price Determination
Agreement. If it is not exercised by such time, then the Offer Size Adjustment Option will
lapse. In considering whether to exercise the Offer Size Adjustment Option, the Company
and the Overall Coordinators will take into account a number of factors, including, among
other things:
i. whether the level of interest expressed by prospective professional and
institutional investors during the book-building process under the
International Offering is sufficient to cover:
a. the total number of Offer Shares, which represents the aggregate of the
Offer Shares initially available under the Global Offering and the
additional Offer Shares upon any exercise of the Offer Size Adjustment
Option; and
b. the corresponding number of H Shares under the Over-allotment
Option;
ii. the prices at which prospective professional and institutional investors have
indicated they would be prepared to acquire the Offer Shares in the course of
the book-building process;
iii. the quality of investors, with a view to establishing a solid professional
institutional and investor shareholder base to the benefit of the Company and
its Shareholders as a whole;
iv. the level of subscriptions by the valid applications in the Hong Kong Public
Offering; and
v. general market conditions.
STRUCTURE OF THE GLOBAL OFFERING
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--- page 409 ---
These Offer Size Adjustment Option Shares, if any, will be allocated in such manner
as closely as practicable to maintain the proportionality between the Hong Kong Public
Offering and the International Offering, and the Overall Coordinators shall allocate
additional H Shares to be offered by our Company pursuant to the International Offering
to the Hong Kong Public Offering in order to maintain such proportionality and the
relevant number of Offer Size Adjustment Option Shares shall be allocated to the
International Offering to maintain such proportionality, i.e., the initial proportion of
7.0%:93.0% between the Hong Kong Public Offering and the International Offering, except
for the scenario where excess additional Offer Shares are not taken up by retail investors
under the Hong Kong Public Offering and will then be reallocated to International
Offering to satisfy excess demand in the International Offering as described in details
below, in which case the final allocation of Offer Shares to the Hong Kong Public Offering
will be less than 7.0% of the total number of Offer Shares in the Global Offering after the
exercise of the Offer Size Adjustment Option.
Furthermore, the Company and the Overall Coordinators will only exercise the
Offer Size Adjustment Option to the extent that the Offer Size Adjustment Option Shares
to be allocated to the International Offering in order to maintain the initial proportionality
between the Hong Kong Public Offering and the International Offering will be fully
subscribed to ensure no Offer Size Adjustment Option Shares allocated to the
International Offering will be reallocated to the Hong Kong Public Offering.
In the event that the Offer Size Adjustment Option is exercised in full:
a. if the Hong Kong Public Offering is oversubscribed by at least 0.15 time (being
the percentage which the additional Offer Shares issued pursuant to the Offer
Size Adjustment Option represent as a percentage to the number of the initial
Offer Shares), the additional Offer Shares will be allocated so as to maintain
the initial proportionality between the Hong Kong Public Offering and the
International Offering;
b. if the Hong Kong Public Offering is oversubscribed by less than 0.15 time, the
additional Offer Shares will first be allocated to maintain, to the extent
possible, the initial proportion of 7.0%:93.0% between the Hong Kong Public
Offering and the International Offering. Any excess additional Offer Shares
not taken up by retail investors under the Hong Kong Public Offering will
then be reallocated to International Offering to satisfy excess demand in the
International Offering. In such a case, the final allocation of Offer Shares to the
Hong Kong Public Offering will be less than 7.0% of the total number of Offer
Shares in the Global Offering after the exercise of the Offer Size Adjustment
Option.
STRUCTURE OF THE GLOBAL OFFERING
– 399 –


--- page 410 ---
In the event that the Offer Size Adjustment Option is exercised in part:
a. if the Hong Kong Public Offering is oversubscribed by at least the relevant
multiple (being the percentage which the additional Offer Shares issued
pursuant to the Offer Size Adjustment Option represent as a percentage to the
number of the initial Offer Shares), the additional Offer Shares will be
allocated so as to maintain the initial proportionality between the Hong Kong
Public Offering and the International Offering;
b. if the Hong Kong Public Offering is oversubscribed by less than the relevant
multiple (being the percentage which the additional Offer Shares issued
pursuant to the Offer Size Adjustment Option represent as a percentage to the
number of the initial Offer Shares), the additional Offer Shares will first be
allocated to maintain, to the extent possible, the initial proportion of
7.0%:93.0% between the Hong Kong Public Offering and the International
Offering. Any excess additional Offer Shares not taken up by retail investors
under the Hong Kong Public Offering will then be reallocated to International
Offering to satisfy excess demand in the International Offering. In such a case,
the final allocation of Offer Shares to the Hong Kong Public Offering will be
less than 7.0% of the total number of Offer Shares in the Global Offering after
the exercise of the Offer Size Adjustment Option.
In the event that the Hong Kong Public Offering is undersubscribed, all the
additional Offer Shares will be allocated to the International Offering. In such a case, the
final allocation of Offer Shares to the Hong Kong Public Offering will be less than 7.0% of
the total number of Offer Shares in the Global Offering after the exercise of the Offer Size
Adjustment Option.
The table below sets out the final allocation of Offer Shares between the Hong Kong
Public Offering and the International Offering for illustration purpose only. The actual
final allocation will depend on the actual additional number of Offer Shares to be issued
upon the exercise of the Offer Size Adjustment Option.
STRUCTURE OF THE GLOBAL OFFERING
– 400 –


--- page 411 ---
In the event that the Offer Size Adjustment Option is exercised in full, so that
54,049,500 additional Offer Shares (representing in aggregate up to 15.0% of the initial
number of Offer Shares available for subscription under the Global Offering) will be
issued at the Offer Price
(2)
If the Hong Kong
Public Offering is
oversubscribed by At least 14 times
At least 0.15
(1) time
but less than 14 times Less than 0.15 (1) time
The Hong Kong
Public Offering is
undersubscribed
Final allocation of Offer
Shares between
International Offering
and Hong Kong Public
Offering
If the oversubscription is
at least 14 times, the
clawback arrangement
will be triggered. The
additional Offer Shares
to be issued pursuant to
the Offer Size
Adjustment Option will
be allocated between the
International Offering
and the Hong Kong
Public Offering
according to the
applicable clawback ratio
(90.0:10.0 or 86.5:13.5 or
73.5:26.5) as described in
the “— The Hong Kong
Public Offering —
Reallocation.”
If the oversubscription is
less than 14 times, no
clawback arrangement
will be triggered. The
additional Offer Shares
pursuant to the Offer
Size Adjustment Option
will be allocated between
the International
Offering and the Hong
Kong Public Offering
according to the 93.0:7.0
ratio.
(3)
If the oversubscription is
less than 0.15 times, no
clawback arrangement
will be triggered. The
additional Offer Shares
pursuant to the Offer
Size Adjustment Option
will be allocated between
the International
Offering and the Hong
Kong Public Offering
according to the 93.0:7.0
ratio. However, as the
demand in the Hong
Kong Public Offering is
insufficient to take up all
the additional Offer
Shares, the excess
additional Offer Shares
will be reallocated to the
International Offering
only. As a result, the final
allocation of the Offer
Shares to the Hong Kong
Public Offering will be
less than 7.0% of the total
number of Offer Shares.
The unsubscribed Offer
Shares under the Hong
Kong Public Offering
will be reallocated to the
International Offering.
The additional Offer
Shares to be issued
pursuant to the Offer
Size Adjustment Option
will be allocated to the
International Offering
only due to insufficient
demand in the Hong
Kong Public Offering. As
a result, the final
allocation of the Offer
Shares to the Hong Kong
Public Offering will be
less than 7.0% of the total
number of Offer Shares.
If the Hong Kong Public
Offering is fully
subscribed with no
over-subscription, the
additional Offer Shares
pursuant to the Offer
Size Adjustment Option
will all be allocated to
the International offering
due to insufficient
demand in the Hong
Kong Public Offering. As
a result, the final
allocation of the Offer
Shares to the Hong Kong
Public Offering will be
approximately 6.1% of
the total number of Offer
Shares.
STRUCTURE OF THE GLOBAL OFFERING
– 401 –


--- page 412 ---
In the event that the Offer Size Adjustment Option is exercised in half, so that
27,024,750 additional Offer Shares (representing in aggregate up to 7.5% of the initial
number of Offer Shares available for subscription under the Global Offering) will be
issued at the Offer Price
(2)
If the Hong Kong
Public Offering is
oversubscribed by At least 14 times
At least 0.075
(1) time
but less than 14 times Less than 0.075 (1) time
The Hong Kong
Public Offering is
undersubscribed
Final allocation of Offer
Shares between
International Offering
and Hong Kong Public
Offering
If the oversubscription is
at least 14 times, the
clawback arrangement
will be triggered. The
additional Offer Shares
to be issued pursuant to
the Offer Size
Adjustment Option will
be allocated between the
International Offering
and the Hong Kong
Public Offering
according to the
applicable clawback ratio
(90.0:10.0 or 86.5:13.5 or
73.5:26.5) as described in
the “— The Hong Kong
Public Offering —
Reallocation.”
If the oversubscription is
less than 14 times, no
clawback arrangement
will be triggered. The
additional Offer Shares
pursuant to the Offer
Size Adjustment Option
will be allocated between
the International
Offering and the Hong
Kong Public Offering
according to the 93.0:7.0
ratio.
(3)
If the oversubscription is
less than 0.075 times, no
clawback arrangement
will be triggered. The
additional Offer Shares
pursuant to the Offer
Size Adjustment Option
will be allocated between
the International
Offering and the Hong
Kong Public Offering
according to the 93.0:7.0
ratio. However, as the
demand in the Hong
Kong Public Offering is
insufficient to take up all
the additional Offer
Shares, the excess
additional Offer Shares
will be reallocated to the
International Offering
only. As a result, the final
allocation of the Offer
Shares to the Hong Kong
Public Offering will be
less than 7.0% of the total
number of Offer Shares.
The unsubscribed Offer
Shares under the Hong
Kong Public Offering
will be reallocated to the
International Offering.
The additional Offer
Shares to be issued
pursuant to the Offer
Size Adjustment Option
will be allocated to the
International Offering
only due to insufficient
demand in the Hong
Kong Public Offering. As
a result, the final
allocation of the Offer
Shares to the Hong Kong
Public Offering will be
less than 7.0% of the total
number of Offer Shares.
If the Hong Kong Public
Offering is fully
subscribed with no
over-subscription, the
additional Offer Shares
pursuant to the Offer
Size Adjustment Option
will all be allocated to
the International offering
due to insufficient
demand in the Hong
Kong Public Offering. As
a result, the final
allocation of the Offer
Shares to the Hong Kong
Public Offering will be
approximately 6.5% of
the total number of Offer
Shares.
STRUCTURE OF THE GLOBAL OFFERING
– 402 –


--- page 413 ---
Notes:
(1) being the percentage which the additional Offer Shares issued pursuant to the Offer Size
Adjustment Option represent as a percentage to the number of the initial Offer Shares.
(2) assuming the Over-allotment Option is not exercised.
(3) assuming the reallocation pursuant to Chapter 4.14 of the Guide for New Listing Applicants as
described in “— The Hong Kong Public Offering — Reallocation” is not exercised.
If the Offer Size Adjustment Option is exercised in full, the additional Offer Shares
to be issued pursuant thereto will represent approximately 1.30% of our enlarged issued
share capital immediately following the completion of the Global Offering (assuming the
Over-allotment Option is not exercised). The dilution effect of the Offer Size Adjustment
Option (assuming the Over-allotment Option is not exercised) is set out below:
Number of
H Shares issued
under the Global
Offering before
the exercise of the
Offer Size
Adjustment
Option (the
“Original
Subscribers”)
Approximate
percentage of
total issued share
capital held by
the Original
Subscribers
before the
exercise of the
Offer Size
Adjustment
Option
Number of
H Shares issued
under the Global
Offering after the
exercise of the
Offer Size
Adjustment
Option in full
Approximate
percentage of
total issued share
capital held by
the Original
Subscribers after
the exercise of
the Offer Size
Adjustment
Option in full
360,330,000 8.8% 414,379,500 8.7%
The Offer Size Adjustment Option will not be used for price stabilization purposes
and will not be subject to the provisions of the Securities and Futures (Price Stabilizing)
Rules (Chapter 571W of the Laws of Hong Kong). The Offer Size Adjustment Option will
be in addition to the Over-allotment Option.
The Company will disclose in its allotment results announcement if and to what
extent the Offer Size Adjustment Option has been exercised, the final allocation of Offer
Shares between the Hong Kong Public Offering and the International Offering and the use
of the additional proceeds received, or will confirm that if the Offer Size Adjustment
Option has not been exercised by the Price Determination Date, it will lapse and cannot be
exercised at any future date.
OVER-ALLOCATION
Following any over-allocation of H Shares in connection with the Global Offering,
the Stabilizing Manager (or any person acting for it) may cover the over-allocation by
exercising the Over-allotment Option in full or in part, or by using H Shares purchased by
the Stabilizing Manager (or any person acting for it) in the secondary market at prices that
do not exceed the Offer Price or a combination of these means.
STRUCTURE OF THE GLOBAL OFFERING
– 403 –


--- page 414 ---
OVER-ALLOTMENT OPTION
In connection with the Global Offering, we may grant the Over-allotment Option to
the International Underwriters, exercisable by the Overall Coordinators in its sole and
absolute discretion on behalf of the International Underwriters.
Pursuant to the Over-allotment Option (if granted), the International Underwriters
have the right, exercisable by the Overall Coordinators (in its sole and absolute discretion
on behalf of the International Underwriters) at any time from the Listing Date until 30
days from the last day for the making of applications under the Hong Kong Public
Offering (being the last day for the exercise of the Over-allotment Option, which is Friday,
July 18, 2025), to require us to allot and issue up to an aggregate of 54,049,500 H Shares,
representing not more than 15.0% of the number of Offer Shares initially available under
the Global Offering (assuming the Offer Size Adjustment Option is not exercised at all) or
up to an aggregate of 62,156,900 H Shares, representing not more than 15.0% of the
number of Offer Shares available under the Global Offering (assuming the Offer Size
Adjustment Option is exercised in full), at the Offer Price, to cover over-allocations in the
International Offering, if any.
If the Offer Size Adjustment Option is not exercised and the Over-allotment Option
is exercised in full, the additional Offer Shares to be issued pursuant thereto will represent
approximately 1.3% of the enlarged issued share capital of our Company immediately
following the completion of the Global Offering. If the Offer Size Adjustment Option and
the Over-allotment Option are exercised in full, the additional Offer Shares to be issued
pursuant to the Over-allotment Option will represent approximately 1.48% of the
enlarged issued share capital of our Company immediately following the completion of
the Global Offering. If the Over-allotment Option is exercised, an announcement will be
made.
STABILIZATION
Stabilization is a practice used by underwriters in some markets to facilitate the
distribution of securities. To stabilize, the underwriters may bid for, or purchase, the
securities in the secondary market, during a specified period of time, to retard, and if
possible, prevent a decline in the market price of the securities below the Offering Price.
These transactions may be effected in jurisdictions where it is permitted to do so, in each
case in compliance with all applicable laws and regulatory requirements, including those
in Hong Kong. In Hong Kong, the price at which stabilization is effected cannot exceed the
offer price of shares.
In connection with the Global Offering, the Stabilizing Manager (or any person
acting for it), on behalf of the Underwriters, may over-allocate or effect short sales or any
other stabilizing transactions with a view to stabilizing or maintaining the market price of
our H Shares at a level higher than that which might otherwise prevail in the open market.
However, there is no obligation on the Stabilizing Manager to conduct any stabilizing
activity. Stabilizing actions, if taken, (a) will be conducted at the absolute discretion of the
Stabilizing Manager (or any person acting for it) and in what the Stabilizing Manager
reasonably regards as being in our best interest, (b) may be discontinued at any time and
(c) is required to end within 30 days of the last day for making applications under the
Hong Kong Public Offering.
STRUCTURE OF THE GLOBAL OFFERING
– 404 –


--- page 415 ---
Stabilizing activities permitted in Hong Kong pursuant to the Securities and Futures
(Price Stabilizing) Rules (Chapter 571W of the Laws of Hong Kong) include (a)
over-allocation for the purpose of preventing or minimizing any reduction in the market
price of our H Shares, (b) selling or agreeing to sell our H Shares so as to establish a short
position in them for the purpose of preventing or minimizing any reduction in the market
price of our H Shares, (c) subscribing, or agreeing to subscribe, for our H Shares pursuant
to the Over-allotment Option in order to close out any position established under (a) or
(b), (d) purchasing, or agreeing to purchase, our H Shares for the sole purpose of
preventing or minimizing any reduction in the market price of our H Shares, (e) selling or
agreeing to sell our H Shares to liquidate a long position held as a result of those
purchases and (f) offering or attempting to do anything described in (b), (c), (d) or (e).
Specifically, applicants for and investors in the Offer Shares should note that:
(a) as a result of effecting transactions to stabilize or maintain the market price of
our H Shares, the Stabilizing Manager (or any person acting for it) may
maintain a long position in our H Shares;
(b) the size of the long position, and the period for which the Stabilizing Manager
(or any person acting for it) will maintain the long position is at the discretion
of the Stabilizing Manager and is uncertain;
(c) liquidation of any long position by the Stabilizing Manager (or any person
acting for it) and selling in the open market may have an adverse impact on
the market price of our H Shares;
(d) stabilizing action by the Stabilizing Manager (or any person acting for it) is
not permitted to support the price of our H Shares for longer than the
stabilizing period, which begins on the Listing Day and ends on Friday, July
18, 2025 (being the 30th day after the last day for making applications under
the Hong Kong Public Offering). As a result, demand for our H Shares, and
their market price, may fall after the end of the stabilizing period;
(e) stabilizing activities by the Stabilizing Manager (or any person acting for it)
may stabilize, maintain or otherwise affect the market price of our H Shares.
This means the price of our H Shares may be higher than the price that
otherwise might exist in the open market;
(f) there is no assurance that the price of our H Shares can stay at or above the
Offer Price by the taking of any stabilizing action either during or after the
stabilizing period; and
(g) bids for or market purchases of our H Shares by the Stabilizing Manager (or
any person acting for it) may be made at a price at or below the Offer Price and
therefore at or below the price paid for our H Shares by purchasers.
STRUCTURE OF THE GLOBAL OFFERING
– 405 –


--- page 416 ---
In order to effect stabilization actions, the Stabilizing Manager will arrange cover of
up to an aggregate of 54,049,500 H Shares, representing not more than 15.0% of the
number of Offer Shares initially available under the Global Offering (assuming the Offer
Size Adjustment Option is not exercised at all) or up to an aggregate of 62,156,900 H
Shares, representing not more than 15.0% of the number of Offer Shares available under
the Global Offering (assuming the Offer Size Adjustment Option is exercised in full),
through delayed delivery arrangements with investors who have been allocated Offer
Shares in the International Offering. The delayed delivery arrangements (if specifically
agreed by an investor) relate only to the delay in the delivery of the Offer Shares to such
investor and the Offer Price for the Offer Shares allocated to such investor will be paid on
the Listing Date. Both the size of such cover and the extent to which the Over-allotment
Option can be exercised will depend on whether arrangements can be made with investors
such that a sufficient number of H Shares can be delivered on a delayed basis. If no
investor in the International Offering agrees to the delayed delivery arrangements, no
stabilizing actions will be undertaken by the Stabilizing Manager and the Over-allotment
Option will not be exercised.
We will make an announcement in compliance with the Securities and Futures (Price
Stabilizing) Rules (Chapter 571W of the Laws of Hong Kong) within seven days of the
expiration of the stabilizing period.
CONDITIONS OF THE GLOBAL OFFERING
Acceptance of applications for the Hong Kong Offer Shares will be conditional on:
(a) the Listing Committee granting approval for the listing of, and permission to
deal in, our H Shares in issue and to be issued pursuant to the Global Offering
(including any additional H Shares which may be issued pursuant to the
exercise of the Offer Size Adjustment Option and the Over-allotment Option)
as described in this prospectus and the approval not having been revoked;
(b) the execution and delivery of the International Underwriting Agreement on or
around the Price Determination Date;
(c) the Offer Price having been agreed between us and the Overall Coordinators
(on behalf of the Underwriters); and
(d) the obligations of the Underwriters under both the Hong Kong Underwriting
Agreement and the International Underwriting Agreement having become
unconditional and not having been terminated in accordance with their
respective terms,
in each case on or before the dates and times specified in the respective
Underwriting Agreements (unless and to the extent such conditions are waived on or
before such dates and times) and in any event not later than Monday, June 23, 2025.
STRUCTURE OF THE GLOBAL OFFERING
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--- page 417 ---
The consummation of each of the Hong Kong Public Offering and the International
Offering is conditional upon, among others, the other becoming unconditional and not
having been terminated in accordance with its terms.
If the above conditions are not fulfilled or waived before the dates and times
specified, the Global Offering will not proceed and will lapse, and the Hong Kong Stock
Exchange will be notified immediately. We will publish a notice of the lapse of the Hong
Kong Public Offering on the website of the Hong Kong Stock Exchange at
www.hkexnews.hk and our website at https://zjshc.com on the next Business Day
following the lapse. In this case, all application monies will be returned, without interest,
on the terms set out in the subsection headed “How to Apply for the Hong Kong Offer
Shares — Despatch/Collection of H Share Certificates and Refund of Application
Monies”. In the meantime, the application monies will be held in separate accounts with
the receiving banks or other bank(s) in Hong Kong licensed under the Banking Ordinance
(Chapter 155 of the Laws of Hong Kong).
If, for any reason, we and the Overall Coordinators (on behalf of the Underwriters)
are unable to reach agreement on the Offer Price by 12:00 noon on the Price Determination
Date, the Global Offering will not proceed and will lapse.
H Share certificates for the Offer Shares are expected to be issued on Friday, June 20,
2025, but they will only become valid evidence of title at 8:00 a.m. on Monday, June 23,
2025, provided the Global Offering has become unconditional in all respects at or before
that time.
DEALING ARRANGEMENTS
Assuming that the Hong Kong Public Offering becomes unconditional at or before
8:00 a.m. in Hong Kong on Monday, June 23, 2025, it is expected that dealings in our H
Shares on the Hong Kong Stock Exchange will commence at 9:00 a.m. on Monday, June 23,
2025.
Our H Shares will be traded in board lots of 100 H Shares each and the stock code of
our H Shares will be 2050.
STRUCTURE OF THE GLOBAL OFFERING
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--- page 418 ---
IMPORTANT NOTICE TO INVESTORS OF HONG KONG OFFER SHARES
FULLY ELECTRONIC APPLICATION PROCESS
We have adopted a fully electronic application process for the Hong Kong
Public Offering and below are the procedures for application.
This prospectus is available at the website of the Hong Kong Stock Exchange
at www.hkexnews.hk under the “ HKEXnews > New Listings > New Listing
Information” section, and our website at https://zjshc.com.
The contents of this prospectus are identical to the prospectus as registered with
the Registrar of Companies in Hong Kong pursuant to Section 342C of the Companies
(Winding Up and Miscellaneous Provisions) Ordinance.
APPLICATIONS FOR THE HONG KONG OFFER SHARES
1. Who Can Apply
You can apply for Hong Kong Offer Shares if you or the person(s) for whose benefit
you are applying:
• are 18 years of age or older;
• have a Hong Kong address (for the White Form eIPO service only);
• are outside the United States (within the meaning of Regulation S), and are a
person described in paragraph (h)(3) of Rule 902 of Regulation S; and
• are not a legal or natural person (except qualified domestic institutional
investors) of the People’s Republic of China.
Unless permitted by the Listing Rules, you cannot apply for any Hong Kong Offer
Shares if you or the person(s) for whose benefit you are applying for:
• are an existing holder or beneficial owner of our Shares and/or a substantial
shareholder of any of our subsidiaries;
• are our director, supervisor or chief executive officer of ours and/or any of
our subsidiaries;
• are a close associate of any of the above persons;
• are our connected person or will become our connected person immediately
upon completion of the Global Offering; or
• have been allocated or have applied for any International Offer Shares or
otherwise participate in the International Offering.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 419 ---
2. Application Channels
The Hong Kong Public Offering period will begin at 9:00 a.m. on Friday, June 13,
2025 and end at 12:00 noon on Wednesday, June 18, 2025 (Hong Kong time).
To apply for Hong Kong Offer Shares, you may use one of the following application
channels:
Application
Channel Platform Target Investors Application Time
White Form eIPO
service
www.eipo.com.hk Investors who would
like to receive a
physical Share
certificate. Hong
Kong Offer Shares
successfully
applied for will be
allotted and issued
in your own name.
From 9:00 a.m. on
Friday, June 13,
2025 to 11:30 a.m.,
Wednesday,
June 18, 2025,
Hong Kong time.
The latest time for
completing full
payment of
application monies
will be 12:00 noon
on Wednesday,
June 18, 2025,
Hong Kong time.
HKSCC EIPO
channel
Your broker or
custodian who is
an HKSCC
Participant will
submit electronic
application
instructions on
your behalf
through HKSCC’s
FINI system in
accordance with
your instruction
Investors who would
not like to receive a
physical Share
certificate. Hong
Kong Offer Shares
successfully
applied for will be
allotted and issued
in the name of
HKSCC Nominees,
deposited directly
into CCASS and
credited to your
designated HKSCC
Participant’s stock
account.
Contact your broker
or custodian for the
earliest and latest
time for giving
such instructions,
as this may vary by
broker or
custodian.
The White Form eIPO service and the HKSCC EIPO channel are facilities subject to
capacity limitations and potential service interruptions and you are advised not to wait
until the last day of the application period to apply for Hong Kong Offer Shares.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 420 ---
For those applying through the White Form eIPO service, once you complete
payment in respect of any application instructions given by you or for your benefit
through the WhiteFormeIPO service to make an application for Hong Kong Offer Shares,
an actual application shall be deemed to have been made. If you are a person for whose
benefit the electronic application instructions are given, you shall be deemed to have
declared that only one set of electronic application instructions has been given for your
benefit. If you are an agent for another person, you shall be deemed to have declared that
you have only given one set of electronic application instructions for the benefit of the
person for whom you are an agent and that you are duly authorized to give those
instructions as an agent.
For the avoidance of doubt, giving an application instruction under the White Form
eIPO service more than once and obtaining different application reference numbers
without effecting full payment in respect of a particular reference number will not
constitute an actual application.
If you apply through the White Form eIPO service, you are deemed to have
authorized the WhiteFormeIPO Service Provider to apply on the terms and conditions in
this prospectus, as supplemented and amended by the terms and conditions of the White
Form eIPO service.
By instructing your broker or custodian to apply for the Hong Kong Offer Shares on
your behalf through the HKSCC EIPO channel, you (and, if you are joint applicants, each
of you jointly and severally) are deemed to have instructed and authorized HKSCC to
cause HKSCC Nominees (acting as nominee for the relevant HKSCC Participants) to apply
for Hong Kong Offer Shares on your behalf and to do on your behalf all the things stated
in this prospectus and any supplement to it.
For those applying through HKSCC EIPO channel, an actual application will be
deemed to have been made for any application instructions given by you or for your
benefit to HKSCC (in which case an application will be made by HKSCC Nominees on
your behalf) provided such application instruction has not been withdrawn or otherwise
invalidated before the closing time of the Hong Kong Public Offering.
HKSCC Nominees will only be acting as a nominee for you and neither HKSCC nor
HKSCC Nominees shall be liable to you or any other person in respect of any actions taken
by HKSCC or HKSCC Nominees on your behalf to apply for Hong Kong Offer Shares or
for any breach of the terms and conditions of this prospectus.
Only one application may be made for the benefit of any person. If you are
suspected of making more than one application through the White Form eIPO service or
any other channel, all of your applications are liable to be rejected.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 421 ---
3. Information Required to Apply
You must provide the following information with your application:
For Individual/Joint Applicants For Corporate Applicants
• Full name(s) (2) as shown on your
identity document
• Full name(s) (2) as shown on your
identity document
• Identity document’s issuing country
or jurisdiction
• Identity document’s issuing country
or jurisdiction
• Identity document type, with order
of priority:
• Identity document type, with order
of priority:
i. HKID card; or i. LEI registration document; or
ii. National identification
document; or
ii. Certificate of incorporation; or
iii. Passport; and iii. Business registration certificate;
or
• Identity document number iv. Other equivalent document; and
• Identity document number
Notes:
(1) If you are applying through the White Form eIPO service, you are required to provide a valid
e-mail address, a contact telephone number and a Hong Kong address. You are also required to
declare that the identity information provided by you follows the requirements as described in
Note 2 below. In particular, where you cannot provide a HKID number, you must confirm that you
do not hold a HKID card.
(2) The applicant’s full name as shown on their identity document must be used and the surname,
given name, middle and other names (if any) must be input in the same order as shown on the
identity document. If an applicant’s identity document contains both an English and Chinese
name, both English and Chinese names must be used. Otherwise, either English or Chinese names
will be accepted. The order of priority of the applicant’s identity document type must be strictly
followed and where an individual applicant has a valid HKID card (including both Hong Kong
Residents and Hong Kong Permanent Residents), the HKID number must be used when making
an application to subscribe for shares in a public offer. Similarly for corporate applicants, a LEI
number must be used if an entity has a LEI certificate.
(3) If the applicant is a trustee, the client identification data (“ CID”) of the trustee, as set out above,
will be required. If the applicant is an investment fund (i.e. a collective investment scheme, or
CIS), the CID of the asset management company or the individual fund, as appropriate, which has
opened a trading account with the broker will be required, as above.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 422 ---
(4) The maximum number of joint applicants on FINI is capped at four in accordance with market
practice.
(5) If you are applying as a nominee, you must provide: (i) the full name (as shown on the identity
document), the identity document’s issuing country or jurisdiction, the identity document type;
and (ii), the identity document number, for each of the beneficial owners or, in the case(s) of joint
beneficial owners, for each joint beneficial owner. If you do not include this information, the
application will be treated as being made for your benefit.
(6) If you are applying as an unlisted company and (i) the principal business of that company is
dealing in securities; and (ii) you exercise statutory control over that company, then the
application will be treated as being for your benefit and you should provide the required
information in your application as stated above.
“Unlisted company ” means a company with no equity securities listed on the Stock Exchange or
any other stock exchange.
“Statutory control ” means you:
• control the composition of the board of directors of the company;
• control more than half of the voting power of the company; or
• hold more than half of the issued share capital of the company (not counting any part of it
which carries no right to participate beyond a specified amount in a distribution of either
profits or capital).
For those applying through HKSCC EIPO channel, and making an application under
a power of attorney, we and the Overall Coordinators, as our agent, have discretion to
consider whether to accept it on any conditions we think fit, including evidence of the
attorney’s authority.
Failing to provide any required information may result in your application being
rejected.
4. Permitted Number of Hong Kong Offer Shares for Application
Board lot size : 100 H Shares
Permitted Number of Hong
Kong Offer Shares for
application and amount
payable on
application/successful
allotment
: Hong Kong Offer Shares are available for
application in specified board lot sizes
only. Please refer to the amount payable
associated with each specified board lot
size in the table below.
The maximum Offer Price is HK$22.53 per
H Share.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 423 ---
If you are applying through the HKSCC
EIPO channel, you are required to
pre-fund your application based on the
amount specified by your broker or
custodian, as determined based on the
applicable laws and regulations in Hong
Kong.
By instructing your broker or custodian to
apply for the Hong Kong Offer Shares on
your behalf through the HKSCC EIPO
channel, you (and, if you are joint
applicants, each of you jointly and
severally) are deemed to have instructed
and authorized HKSCC to cause HKSCC
Nominees (acting as nominee for the
relevant HKSCC Participants) to arrange
payment of the final Offer Price,
brokerage, SFC transaction levy, the Hong
Kong Stock Exchange trading fee and the
AFRC transaction levy by debiting the
relevant nominee bank account at the
designated bank for your broker or
custodian.
If you are applying through the White
Form eIPO service, you may refer to the
table below for the amount payable for
the number of H Shares you have
selected. You must pay the respective
amount payable on application in full
upon application for Hong Kong Offer
Shares.
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 413 –


--- page 424 ---
No. of
Hong Kong
Offer Shares
applied for
Amount
payable (2) on
application
No. of
Hong Kong
Offer Shares
applied for
Amount
payable (2) on
application
No. of
Hong Kong
Offer Shares
applied for
Amount
payable (2) on
application
No. of
Hong Kong
Offer Shares
applied for
Amount
payable (2) on
application
HK$ HK$ HK$ HK$
100 2,275.72 4,000 91,028.86 150,000 3,413,582.26 2,000,000 45,514,430.10
200 4,551.44 5,000 113,786.07 200,000 4,551,443.01 3,000,000 68,271,645.16
300 6,827.16 6,000 136,543.29 250,000 5,689,303.77 4,000,000 91,028,860.20
400 9,102.88 7,000 159,300.51 300,000 6,827,164.51 5,000,000 113,786,075.26
500 11,378.61 8,000 182,057.72 350,000 7,965,025.27 6,000,000 136,543,290.30
600 13,654.32 9,000 204,814.93 400,000 9,102,886.02 7,000,000 159,300,505.36
700 15,930.05 10,000 227,572.15 450,000 10,240,746.78 8,000,000 182,057,720.40
800 18,205.78 20,000 455,144.31 500,000 11,378,607.53 9,000,000 204,814,935.46
900 20,481.50 30,000 682,716.45 750,000 17,067,911.29 10,000,000 227,572,150.50
1,000 22,757.21 40,000 910,288.60 1,000,000 22,757,215.06 12,611,500
(1) 287,002,617.61
2,000 45,514.44 50,000 1,137,860.76 1,250,000 28,446,518.81
3,000 68,271.64 100,000 2,275,721.50 1,500,000 34,135,822.58
Notes:
(1) Maximum number of Hong Kong Offer Share you may apply for.
(2) The amount payable is inclusive of brokerage, SFC transaction levy, the Stock Exchange trading fee and
AFRC transaction levy. If your application is successful, brokerage will be paid to the Exchange
Participants (as defined in the Listing Rules) and the SFC transaction levy, the Stock Exchange trading fee
and AFRC transaction levy are paid to the Stock Exchange (in the case of the SFC transaction levy,
collected by the Stock Exchange on behalf of the SFC; and in the case of the AFRC transaction levy,
collected by the Stock Exchange on behalf of the AFRC).
No application for any other number of the Hong Kong Offer Shares will be
considered and any such application is liable to be rejected.
5. Multiple Applications Prohibited
You or your joint applicant(s) shall not make more than one application for your
own benefit, except where you are a nominee and provide the information of the
underlying investor in your application as required under the paragraph headed “—
Applications for Hong Kong Offer Shares — Information Required to Apply” in this
section. If you are suspected of submitting or cause to submit more than one application,
all of your applications will be rejected.
Multiple applications made either through (i) the White Form eIPO service, (ii)
HKSCC EIPO channel, or (iii) both channels concurrently are prohibited and will be
rejected. If you have made an application through the WhiteFormeIPO service or HKSCC
EIPO channel, you or the person(s) for whose benefit you have made the application shall
not apply for any International Offer Shares.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 425 ---
6. Terms and Conditions of an Application
By applying for Hong Kong Offer Shares through the White Form eIPO service or
HKSCC EIPO channel, you (or as the case may be, HKSCC Nominees will do the following
things on your behalf):
(a) undertake to execute all relevant documents and instruct and authorize us
and/or the Overall Coordinators (or its agents or nominees), as our agent, to
execute any documents for you and to do on your behalf all things necessary
to register any Hong Kong Offer Shares allocated to you in your name or in the
name of HKSCC Nominees as required by the Articles of Association, and (if
you are applying through the HKSCC EIPO channel) to deposit the allotted
Hong Kong Offer Shares directly into CCASS for the credit of your designated
HKSCC Participant’s stock account on your behalf;
(b) confirm that you have read and understand the terms and conditions and
application procedures set out in this prospectus and the designated website
of the White Form eIPO Service Provider (or as the case may be, the
agreement you entered into with your broker or custodian), and agree to be
bound by them;
(c) (if you are applying through the HKSCC EIPO channel) agree to the
arrangements, undertakings and warranties under the participant agreement
between your broker or custodian and HKSCC and observe the General Rules
of HKSCC and the HKSCC Operational Procedures for giving application
instructions to apply for Hong Kong Offer Shares;
(d) confirm that you are aware of the restrictions on offers and sales of shares set
out in this prospectus and they do not apply to you, or the person(s) for whose
benefit you have made the application;
(e) confirm that you have read this prospectus and any supplement to it and have
only relied on the information and representations contained therein in
making your application (or as the case may be, causing your application to be
made), and will not rely on any other information or representations, except
those contained in any supplement to this prospectus;
(f) agree that none of us, the Relevant Persons, the H Share Registrar and HKSCC
is or will be liable for any information and representations not contained in
this prospectus (and any supplement to it);
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 426 ---
(g) agree to disclose the details of your application and your personal data and
any other personal data which may be required about you and the person(s)
for whose benefit you have made the application to us, the Relevant Persons,
receiving bank(s), the H Share Registrar, HKSCC, HKSCC Nominees, the
Hong Kong Stock Exchange, the SFC and any other statutory regulatory or
governmental bodies or otherwise as required by laws, rules or regulations,
for the purposes under the paragraph headed “— Personal Data — Purposes”
and “— Personal Data — Transfer of personal data” in this section;
(h) agree (without prejudice to any other rights which you may have once your
application (or as the case may be, HKSCC Nominees’ application) has been
accepted) that you will not rescind it because of an innocent
misrepresentation;
(i) agree that subject to Section 44A(6) of the Companies (Winding Up and
Miscellaneous Provisions) Ordinance, any application made by you or
HKSCC Nominees on your behalf cannot be revoked once it is accepted, which
will be evidenced by the notification of the result of the ballot by the H Share
Registrar by way of publication of the results at the time and in the manner as
specified in the paragraph headed “— Publication of Results” in this section;
(j) confirm that you are aware of the situations specified in the paragraph headed
“— Circumstances in which You Will Not Be Allocated Hong Kong Offer
Shares” in this section;
(k) agree that your application or HKSCC Nominees’ application, any acceptance
of it and the resulting contract will be governed by and construed in
accordance with the laws of Hong Kong;
(l) agree to comply with the Companies Ordinance, Companies (Winding Up and
Miscellaneous Provisions) Ordinance, the Articles of Association, the PRC
Companies Law and laws of any other place that apply to your application,
and that neither we nor the Relevant Persons will breach any law inside
and/or outside Hong Kong as a result of the acceptance of your offer to
purchase, or any action arising from your rights and obligations under the
terms and conditions contained in this prospectus;
(m) confirm that (a) your application or HKSCC Nominees’ application on your
behalf is not financed directly or indirectly by the Company, any of the
directors, chief executives, substantial Shareholder(s) or existing
shareholder(s) of the Company or any of its subsidiaries or any of their
respective close associates; and (b) you are not accustomed or will not be
accustomed to taking instructions from the Company, any of the directors,
chief executives, substantial shareholder(s) or existing shareholder(s) of the
Company or any of its subsidiaries or any of their respective close associates
in relation to the acquisition, disposal, voting or other disposition of the H
Shares registered in your name or otherwise held by you;
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 427 ---
(n) warrant that the information you have provided is true and accurate;
(o) confirm that you understand that we, our Directors and the Overall
Coordinators will rely on your declarations and representations in deciding
whether or not to make any allotment of any of the Hong Kong Offer Shares to
you and that you may be prosecuted for making a false declaration;
(p) agree to accept the Hong Kong Offer Shares applied for, or any lesser number
allocated to you under the application;
(q) declare and represent that this is the only application made and the only
application intended by you to be made to benefit you or the person for whose
benefit you are applying;
(r) represent, warrant and undertake that (i) you understand that the Hong Kong
Offer Shares have not been and will not be registered under the U.S. Securities
Act; and (ii) you and any person for whose benefit you are applying for the
Hong Kong Offer Shares are outside the United States (as defined in
Regulation S) or are a person described in paragraph (h)(3) of Rule 902 of
Regulation S;
(s) undertake and confirm that you or the person(s) for whose benefit you have
made the application have not applied for or taken up, or indicated an interest
for, and will not apply for or take up, or indicate an interest for, any
International Offer Shares nor have participated in the International Offering;
(t) confirm that you are aware of the restrictions on the Global Offering set out in
this prospectus;
(u) (if you are making the application for your own benefit) warrant that no other
application has been or will be made for your benefit by giving electronic
application instructions to HKSCC directly or through the White Form eIPO
service or by any one as your agent or by any other person;
(v) (if you are making the application as an agent for the benefit of another
person) warrant that: (i) no other application has been or will be made by you
as agent for or for the benefit of that person or by that person or by any other
person as agent for that person by giving application instructions to HKSCC;
and (ii) you have due authority to give electronic application instructions on
behalf of that other person as its agent; and
(w) if the laws of any place outside Hong Kong apply to your application, agree
and warrant that you have complied with all these laws and none of us nor
any Relevant Person will breach any of these laws as a result of the acceptance
of your offer to purchase, or any action arising from your rights and
obligations under the terms and conditions contained in this prospectus.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 428 ---
PUBLICATION OF RESULTS
Results of Allocation
You can check whether you are successfully allocated any Hong Kong Offer Shares
through:
Platform Date/Time
Applying through White Form eIPO service or
HKSCC EIPO channel:
Website The designated results of allocation at
www.iporesults.com.hk
(alternatively:
www.eipo.com.hk/eIPOAllotment )
with a “search by ID” function.
The full list of (i) wholly or partially
successful applicants using the White
Form eIPO service and HKSCC EIPO
channel, and (ii) the number of Hong
Kong Offer Shares conditionally
allotted to them, among other things,
will be displayed on the “Allotment
Results” page of the White Form eIPO
service at www.iporesults.com.hk
(alternatively:
www.eipo.com.hk/eIPOAllotment ).
24 hours, from 11:00 p.m.,
Friday, June 20, 2025 to
12:00 midnight,
Thursday, June 26, 2025
(Hong Kong time)
The Hong Kong Stock Exchange’s
website at www.hkexnews.hk and our
website at https://zjshc.com which
will provide links to the above
mentioned web sites of the H Share
Registrar.
No later than 11:00 p.m.
on Friday, June 20, 2025
(Hong Kong time).
Telephone +852 2862 8555 — the allocation results
telephone enquiry line provided by the
H Share Registrar
Between 9:00 a.m. and
6:00 p.m., from Monday,
June 23, 2025 to
Thursday, June 26, 2025
(Hong Kong time) on a
business day
For those applying through HKSCC EIPO channel, you may also check with your
broker or custodian from 6:00 p.m., Thursday, June 19, 2025 (Hong Kong time).
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 429 ---
HKSCC Participants can log into FINI and review the allotment result from 6:00
p.m., Thursday, June 19, 2025 (Hong Kong time) on a 24-hour basis and should report any
discrepancies on allotments to HKSCC as soon as practicable.
Allocation Announcement
We expect to announce the results of the final Offer Price, the level of indications of
interest in the International Offering, the level of applications in the Hong Kong Public
Offering and the basis of allocations of Hong Kong Offer Shares on the Hong Kong Stock
Exchange’s website at www.hkexnews.hk and our website at https://zjshc.com by no later
than 11:00 p.m. on Friday, June 20, 2025 (Hong Kong time).
CIRCUMSTANCES IN WHICH YOU WILL NOT BE ALLOCATED HONG KONG
OFFER SHARES
You should note the following situations in which no Hong Kong Offer Shares will
be allocated to you or the person(s) for whose benefit you are applying for:
1. If your application is revoked:
Your application or the application made by HKSCC Nominees on your behalf
may be revoked pursuant to Section 44A(6) of the Companies (Winding Up and
Miscellaneous Provisions) Ordinance.
2. If we or our agents exercise discretion to reject your application:
We, the Overall Coordinators, the H Share Registrar and our/their respective
agents and nominees have full discretion to reject or accept any application, or to
accept only part of any application, without giving any reasons.
3. If the allocation of Hong Kong Offer Shares is void:
The allocation of Hong Kong Offer Shares will be void if the Hong Kong Stock
Exchange does not grant permission to list our Shares either:
• within three weeks from the closing date of the application lists; or
• within a longer period of up to six weeks if the Hong Kong Stock
Exchange notifies us of that longer period within three weeks of the
closing date of the application lists.
4. If:
• you make multiple applications or suspected multiple applications. You
may refer to the paragraph headed “— Applications for the Hong Kong
Offer Shares — 5. Multiple Applications Prohibited” in this section on
what constitutes multiple applications;
• your application instruction is incomplete;
HOW TO APPLY FOR HONG KONG OFFER SHARES
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• your payment (or confirmation of funds, as the case may be) is not made
correctly;
• the Underwriting Agreements do not become unconditional or are
terminated; or
• we or the Overall Coordinators believe that by accepting your
application, we or they would violate applicable securities or other
laws, rules or regulations.
5. If there is money settlement failure for allotted H Shares:
Based on the arrangements between HKSCC Participants and HKSCC,
HKSCC Participants will be required to hold sufficient application funds on deposit
with their designated bank before balloting. After balloting of Hong Kong Offer
Shares, the Receiving Bank will collect the portion of these funds required to settle
each HKSCC Participant’s actual Hong Kong Offer Share allotment from their
designated bank.
There is a risk of money settlement failure. In the extreme event of money
settlement failure by a HKSCC Participant (or its designated bank), who is acting on
your behalf in settling payment for your allotted shares, HKSCC will contact the
defaulting HKSCC Participant and its designated bank to determine the cause of
failure and request such defaulting HKSCC Participant to rectify or procure to
rectify the failure.
However, if it is determined that such settlement obligation cannot be met, the
affected Hong Kong Offer Shares will be reallocated to the International Offering.
Hong Kong Offer Shares applied for by you through the broker or custodian may be
affected to the extent of the settlement failure. In the extreme case, you will not be
allocated any Hong Kong Offer Shares due to the money settlement failure by such
HKSCC Participant. None of us, the Relevant Persons, the H Share Registrar and
HKSCC is or will be liable if Hong Kong Offer Shares are not allocated to you due to
the money settlement failure.
DESPATCH/COLLECTION OF H SHARE CERTIFICATES AND REFUND OF
APPLICATION MONIES
You will receive one H Share certificate for all Hong Kong Offer Shares allocated to
you under the Hong Kong Public Offering (except pursuant to applications made through
the HKSCC EIPO channel where the H Share certificate will be deposited into CCASS as
described below).
We will not issue: (i) temporary document of title in respect of our H Shares; or (ii)
receipt for sums paid on application.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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H Share certificates will only become valid evidence of title at 8:00 a.m. on Monday,
June 23, 2025 (Hong Kong time), provided that the Global Offering has become
unconditional and the right of termination described in the section headed
“Underwriting” has not been exercised. Investors who trade H Shares prior to the receipt
of H Share certificates or the H Share certificates becoming valid evidence of title do so
entirely at their own risk.
The right is reserved to retain any H Share certificate(s) and (if applicable) any
surplus application monies pending clearance of application monies.
The following sets out the relevant procedures and time:
White Form eIPO service HKSCC EIPO channel
Despatch/collection of H Share certificate
For physical share
certificates of
1,000,000 or more
Offer Shares issued
under your own
name
Collection in person from our H
Share Registrar at Shops 1712-1716,
17th Floor, Hopewell Centre, 183
Queen’s Road East, Wan Chai, Hong
Kong.
Time: from 9:00 a.m. to 1:00 p.m. on
Monday, June 23, 2025 (Hong Kong
time) If you are an individual, you
must not authorize any other person
to collect for you. If you are a
corporate applicant, your authorized
representative must bear a letter of
authorization from your corporation
stamped with your corporation’s
chop.
Both individuals and authorized
representatives must produce, at the
time of collection, evidence of
identity acceptable to the H Share
Registrar.
Note: If you do not collect your
Share certificate(s) personally within
the time above, it/they will be sent
to the address specified in your
application instructions by ordinary
post at your own risk.
H Share certificate(s) will be issued
in the name of HKSCC Nominees,
deposited into CCASS and credited
to your designated HKSCC
Participant’s stock account.
No action by you is required.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 432 ---
White Form eIPO service HKSCC EIPO channel
For physical share
certificates of less
than 1,000,000 Offer
Shares issued under
your own name
Your H Share certificate(s) will be
sent to the address specified in your
application instructions by ordinary
post at your own risk.
Time: Friday, June 20, 2025
Refund mechanism for surplus application monies paid by you
Date Monday, June 23, 2025 Subject to the arrangement between
you and your broker or custodian
Responsible party H Share Registrar Your broker or custodian
Application monies
paid through single
bank account
Any refund will be despatched to the
bank account in the form of White
Form e-Refund payment instructions
Your broker or custodian will
arrange refund to your designated
bank account subject to the
arrangement between you and it.
Application monies
paid through
multiple bank
accounts
Refund cheque(s) will be dispatched
to the address as specified in your
application instructions by ordinary
post at your own risk
Except in the event of any Severe Weather Signals (as defined below) in force in
Hong Kong on the business day before the Listing Date rendering it impossible for the
relevant share certificates to be dispatched to HKSCC in a timely manner, the Company
shall procure the H Share Registrar to arrange for delivery of the supporting documents
and share certificates in accordance with the contingency arrangements as agreed between
them. You may refer to “— Severe Weather Arrangements” in this section.
SEVERE WEATHER ARRANGEMENTS
The Opening and Closing of the Application Lists
The application lists will not open or close on Wednesday, June 18, 2025 if, there is
(are):
• a tropical cyclone warning signal number 8 or above;
• a “black” rainstorm warning; and/or
• an “extreme conditions” announcement issued after a super typhoon
(“Extreme Conditions ”),
(collectively, “ Severe Weather Signals ”)
in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Wednesday,
June 18, 2025.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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Instead they will open between 11:45 a.m. and 12:00 noon and/or close at 12:00 noon
on the next business day which does not have any of those warnings in Hong Kong in
force at any time between 9:00 a.m. and 12:00 noon.
Prospective investors should be aware that a postponement of the opening/closing
of the application lists may result in a delay in the Listing Date. Should there be any
changes to the dates mentioned in the section headed “Expected Timetable” in this
prospectus, an announcement will be made and published on the Hong Kong Stock
Exchange’s website at www.hkexnews.hk and our website at https://zjshc.com of the
revised timetable.
If any of those warnings is hoisted on Friday, June 20, 2025, the H Share Registrar
will make appropriate arrangements for the delivery of the H Share certificates to the
CCASS Depository’s service counter so that they would be available for trading on
Monday, June 23, 2025.
If any of those warnings is hoisted on Friday, June 20, 2025, for physical share
certificates of less than 1,000,000 Hong Kong Offer Shares issued under your own name
which are initially scheduled for despatch on Friday, June 20, 2025, despatch will be made
by ordinary post when the post office re-opens after any of those warnings is lowered or
canceled (e.g. in the afternoon of Friday, June 20, 2025 or Monday, June 23, 2025).
If any of those warnings is hoisted on Monday, June 23, 2025, for physical share
certificates of equal to or more than 1,000,000 Hong Kong Offer Shares issued under your
own name which are initially scheduled for collection at the H Share Registrar’s office
from 9:00 a.m. to 1:00 p.m. on Monday, June 23, 2025, you may pick them up from the H
Share Registrar’s office after any of those warnings is lowered or canceled (e.g. in the
afternoon of Monday, June 23, 2025 or Tuesday, June 24, 2025).
Prospective investors should be aware that if they choose to receive physical
share certificates issued in their own name, there may be a delay in receiving the share
certificates.
ADMISSION OF OUR H SHARES INTO CCASS
If the Hong Kong Stock Exchange grants the listing of, and permission to deal in, our
H Shares and we comply with the stock admission requirements of HKSCC, our H Shares
will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in
CCASS with effect from the Listing Date or any other date HKSCC chooses. Settlement of
transactions between Exchange Participants is required to take place in CCASS on the
second settlement day after any trading day.
All activities under CCASS are subject to the General Rules of HKSCC and HKSCC
Operational Procedures in effect from time to time.
All necessary arrangements have been made enabling the H Shares to be admitted
into CCASS.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 434 ---
You should seek the advice of your broker or other professional advisor for details
of the settlement arrangement as such arrangements may affect your rights and interests.
PERSONAL DATA
The following Personal Information Collection Statement applies to any personal
data collected and held by us, the Relevant Persons, the H Share Registrar and the
receiving bank(s) about you in the same way as it applies to personal data about
applicants other than HKSCC Nominees. This personal data may include client
identifier(s) and your identification information. By giving application instructions to
HKSCC, you acknowledge that you have read, understood and agree to all of the terms of
the Personal Information Collection Statement below.
Personal Information Collection Statement
This Personal Information Collection Statement informs applicant for, and holder
of, Hong Kong Offer Shares, of the policies and practices of ours and the H Share Registrar
in relation to personal data and the Personal Data (Privacy) Ordinance (Chapter 486 of the
Laws of Hong Kong).
Reasons for the Collection of Your Personal Data
It is necessary for applicants and registered holders of Hong Kong Offer Shares to
ensure that personal data supplied to us or our agents and the H Share Registrar is
accurate and up-to-date when applying for Hong Kong Offer Shares or transferring Hong
Kong Offer Shares into or out of their names or in procuring the services of the H Share
Registrar.
Failure to supply the requested data or supplying inaccurate data may result in your
application for the Hong Kong Offer Shares being rejected, or in the delay or the inability
of us or the H Share Registrar to effect transfers or otherwise render their services. It may
also prevent or delay registration or transfers of Hong Kong Offer Shares which you have
successfully applied for and/or the despatch of H Share certificate(s) to which you are
entitled.
It is important that applicants for and holders of Hong Kong Offer Shares inform us
and the H Share Registrar immediately of any inaccuracies in the personal data supplied.
Purposes
Your personal data may be used, held, processed, and/or stored (by whatever
means) for the following purposes:
• processing your application and refund cheque and White Form e-Refund
payment instruction(s), where applicable, verification of compliance with the
terms and application procedures set out in this prospectus and announcing
results of allocation of Hong Kong Offer Shares;
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 435 ---
• compliance with applicable laws and regulations in Hong Kong and
elsewhere;
• registering new issues or transfers into or out of the names of the holders of
our H Shares including, where applicable, HKSCC Nominees;
• maintaining or updating our register of members;
• verifying identities of applicants for and holders of our H Shares and
identifying any duplicate applications for our H Shares;
• facilitating Hong Kong Offer Shares balloting;
• establishing benefit entitlements of holders of our H Shares, such as
dividends, rights issues, bonus issues, etc.;
• distributing communications from us and our subsidiaries;
• compiling statistical information and profiles of the holder of our H Shares;
• disclosing relevant information to facilitate claims on entitlements; and
• any other incidental or associated purposes relating to the above and/or to
enable us and the H Share Registrar to discharge our or their obligations to
applicants and holders of our H Shares and/or regulators and/or any other
purposes to which the applicants and holders of the H Shares may from time
to time agree.
Transfer of Personal Data
Personal data held by us and the H Share Registrar relating to the applicants for and
holders of Hong Kong Offer Shares will be kept confidential, but we and the H Share
Registrar may, to the extent necessary for achieving any of the above purposes, disclose,
obtain or transfer (whether within or outside Hong Kong) the personal data to, from or
with any of the following:
• our appointed agents such as financial advisers, receiving bank(s) and
overseas principal share registrar;
• HKSCC or HKSCC Nominees, who will use the personal data and may
transfer the personal data to the H Share Registrar for the purposes of
providing its services or facilities or performing its functions in accordance
with its rules or procedures and operating FINI and CCASS (including where
applicants for the Hong Kong Offer Shares request a deposit into CCASS);
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 436 ---
• any agents, contractors or third-party service providers who offer
administrative, telecommunications, computer, payment or other services to
us or the H Share Registrar in connection with their respective business
operation;
• the Hong Kong Stock Exchange, the SFC and any other statutory regulatory or
governmental bodies or otherwise as required by laws, rules or regulations
including for the purpose of the Hong Kong Stock Exchange’s administration
of the Listing Rules and the SFC’s performance of its statutory functions; and
• any persons or institutions with which the holders of Hong Kong Offer Shares
have or propose to have dealings, such as their bankers, solicitors,
accountants or stockbrokers, etc.
Retention of Personal Data
We and the H Share Registrar will keep the personal data of the applicants and
holders of Hong Kong Offer Shares for as long as necessary to fulfill the purposes for
which the personal data were collected. Personal data which is no longer required will be
destroyed or dealt with in accordance with the Personal Data (Privacy) Ordinance
(Chapter 486 of the Laws of Hong Kong).
Access to and Correction of Personal Data
Applicants for and holders of Hong Kong Offer Shares have the right to ascertain
whether we or the H Share Registrar hold their personal data, to obtain a copy of that data,
and to correct any data that is inaccurate. We and the H Share Registrar have the right to
charge a reasonable fee for the processing of such requests. All requests for access to data
or correction of data should be addressed to us and the H Share Registrar, at our and their
registered address disclosed in the section headed “Corporate Information” in this
prospectus or as notified from time to time, for the attention of the secretary, or the H
Share Registrar for the attention of the privacy compliance officer.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 437 ---
The following is the text of a report set out on pages I-1 to I-3, received from the Company’s
reporting accountant, Confucius International CP A Limited, Certified Public Accountants, Hong
Kong, for the purpose of incorporation in this prospectus. It is prepared and addressed to the
directors of the Company and to the Joint Sponsors pursuant to the requirements of HKSIR 200,
Accountants’ Reports on Historical Financial Information in Investment Circulars issued by the
Hong Kong Institute of Certified Public Accountants.
ಥᝄ˺୿ɻ౱༸181໮ɽϞɽข15ᅽ1501-1508܃
Rooms 1501-8, 15/F., Tai Yau Building,
181 Johnston Road, Wanchai, Hong Kong
ཥ༑ Tel: (852) 3103 6980
ෂॆ Fax: (852) 3104 0170
ཥඉEmail: info@pccpa.hk
ACCOUNTANT’S REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE
DIRECTORS OF ZHEJIANG SANHUA INTELLIGENT CONTROLS CO., LTD. AND
CHINA INTERNATIONAL CAPITAL CORPORATION HONG KONG SECURITIES
LIMITED AND HUATAI FINANCIAL HOLDINGS (HONG KONG) LIMITED
Introduction
We report on the historical financial information of Zhejiang Sanhua Intelligent
Controls Co., Ltd. (the “ Company ”) and its subsidiaries (together, the “ Group ”) set out on
pages I-4 to I-121, which comprises the consolidated statements of financial position of the
Group and the statements of financial position of the Company as at December 31, 2022,
2023 and 2024, and the consolidated statements of profit or loss, and the consolidated
statements of comprehensive income, the consolidated statements of changes in equity
and the consolidated statements of cash flows for each of the years ended December 31,
2022, 2023 and 2024 (the “ Track Record Period ”) and material accounting policy
information and other explanatory information (together, the “ Historical Financial
Information ”). The Historical Financial Information set out on pages I-4 to I-121 forms an
integral part of this report, which has been prepared for inclusion in the prospectus of the
Company dated 13 June 2025 (the “ Prospectus ”) in connection with the initial listing of H
shares of the Company on the Main Board of The Stock Exchange of Hong Kong Limited.
Directors’Responsibility for the Historical Financial Information
The directors of the Company are responsible for the preparation of Historical
Financial Information that gives a true and fair view in accordance with the basis of
preparation set out in Note 2 to the Historical Financial Information, and for such internal
control as the directors determine is necessary to enable the preparation of Historical
Financial Information that is free from material misstatement, whether due to fraud or
error.
APPENDIX I ACCOUNTANT’S REPORT
– I-1 –


--- page 438 ---
Reporting Accountant’s Responsibility
Our responsibility is to express an opinion on the Historical Financial Information
and to report our opinion to you. We conducted our work in accordance with Hong Kong
Standard on Investment Circular Reporting Engagements 200, Accountants’ Reports on
Historical Financial Information in Investment Circulars issued by the Hong Kong Institute of
Certified Public Accountants (“ HKICPA ”). This standard requires that we comply with
ethical standards and plan and perform our work to obtain reasonable assurance about
whether the Historical Financial Information is free from material misstatement.
Our work involved performing procedures to obtain evidence about the amounts
and disclosures in the Historical Financial Information. The procedures selected depend
on the reporting accountant’s judgment, including the assessment of risks of material
misstatement of the Historical Financial Information, whether due to fraud or error. In
making those risk assessments, the reporting accountant considers internal control
relevant to the entity’s preparation of Historical Financial Information that gives a true
and fair view in accordance with the basis of preparation set out in Note 2 to the Historical
Financial Information in order to design procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
entity’s internal control. Our work also included evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by the
directors, as well as evaluating the overall presentation of the Historical Financial
Information.
We believe that the evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Opinion
In our opinion, the Historical Financial Information gives, for the purposes of the
accountant’s report, a true and fair view of the Company’s and the Group’s financial
position as at December 31, 2022, 2023 and 2024 and of the Group’s financial performance
and cash flows for the Track Record Period in accordance with the basis of preparation set
out in Note 2 to the Historical Financial Information.
APPENDIX I ACCOUNTANT’S REPORT
– I-2 –


--- page 439 ---
Report on Matters under the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited (the “Listing Rules”) and the Companies (Winding Up
and Miscellaneous Provisions) Ordinance
Adjustments
In preparing the Historical Financial Information, no adjustments to the Underlying
Financial Statements as defined on page I-4 have been made.
Dividends
We refer to Note 12 to the Historical Financial Information which contains
information about the dividends paid by the Company in respect of the Track Record
Period.
Confucius International CPA Limited
Certified Public Accountants
Hong Kong
13 June 2025
APPENDIX I ACCOUNTANT’S REPORT
– I-3 –


--- page 440 ---
I. HISTORICAL FINANCIAL INFORMATION OF THE GROUP
Preparation of Historical Financial Information
Set out below is the Historical Financial Information which forms an integral part of
this accountant’s report.
The consolidated financial statements of the Group for the Track Record Period, on
which the Historical Financial Information is based, were audited by Confucius
International CPA Limited in accordance with Hong Kong Standards on Auditing issued
by HKICPA (“ the Underlying Financial Statements ”).
The Historical Financial Information is presented in Renminbi (“ RMB”) and all
values are rounded to the nearest thousand (RMB’000) except when otherwise indicated.
APPENDIX I ACCOUNTANT’S REPORT
– I-4 –


--- page 441 ---
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
Year ended December 31,
Notes 2022 2023 2024
RMB’000 RMB’000 RMB’000
Revenue 5 21,347,550 24,557,802 27,947,165
Cost of revenue 8 (15,885,938) (17,822,314) (20,326,346)
Gross profit 5,461,612 6,735,488 7,620,819
General and administrative expenses 8 (1,383,996) (1,621,891) (1,946,785)
Selling and marketing expenses 8 (496,334) (601,409) (726,437)
Research and development expenses 8 (988,954) (1,096,834) (1,351,799)
Net impairment losses on financial
assets 3.2 (97,762) (51,478) (56,379)
Other income 6 260,185 291,162 292,301
Other gains/(losses), net 7 471,310 63,585 (83,795)
Operating profit 3,226,061 3,718,623 3,747,925
Finance income 10 53,136 56,238 67,221
Finance costs 10 (235,671) (229,583) (132,384)
Finance costs, net (182,535) (173,345) (65,163)
Share of profit or loss of investments
accounted for using the equity
method 14 7,732 7,986 8,925
Profit before income tax 3,051,258 3,553,264 3,691,687
Income tax expenses 11 (443,206) (619,549) (579,961)
Profit for the year 2,608,052 2,933,715 3,111,726
Attributable to:
– Owners of the Company 2,573,344 2,920,993 3,099,165
– Non-controlling interests 34,708 12,722 12,561
2,608,052 2,933,715 3,111,726
Earnings per share for profit
attributable to owners of the
Company (expressed in RMB per
share)
• Basic 13 0.72 0.81 0.84
• Diluted 13 0.72 0.81 0.84
APPENDIX I ACCOUNTANT’S REPORT
– I-5 –


--- page 442 ---
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Year ended December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Profit for the year 2,608,052 2,933,715 3,111,726
Other comprehensive income/(expenses)
Items that may be reclassified to profit or
loss in subsequent periods, net of tax:
– Currency translation differences of
foreign operations 120,868 123,300 (253,120)
Other comprehensive income/(expenses)
for the year, net of tax 120,868 123,300 (253,120)
Total comprehensive income for the year 2,728,920 3,057,015 2,858,606
Attributable to:
– Owners of the Company 2,694,212 3,044,293 2,846,045
– Non-controlling interests 34,708 12,722 12,561
2,728,920 3,057,015 2,858,606
APPENDIX I ACCOUNTANT’S REPORT
– I-6 –


--- page 443 ---
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at December 31,
Notes 2022 2023 2024
RMB’000 RMB’000 RMB’000
ASSETS
Non-current assets
Property, plant and equipment 16 7,532,216 9,944,907 12,274,558
Investment properties 19 8,204 8,166 7,053
Right-of-use assets 17 894,163 1,023,826 1,205,331
Deferred tax assets 21 221,159 156,432 112,699
Intangible assets 18 45,826 52,954 36,520
Investments accounted for using the
equity method 14 32,438 37,924 40,600
Other non-current assets 23 471,504 594,836 376,825
Total non-current assets 9,205,510 11,819,045 14,053,586
Current assets
Inventories 24 4,334,875 4,600,729 5,280,442
Prepayments and other receivables 23 844,529 361,586 417,039
Trade and notes receivables 22 7,432,066 8,250,831 9,628,337
Financial assets at fair value through
profit or loss 3.6 108,965 22,636 6,237
Term deposits and restricted cash 25 3,827,915 2,959,729 1,805,065
Cash and cash equivalents 25 2,050,329 3,624,955 3,443,503
Other current assets 23 157,025 251,074 1,720,540
Total current assets 18,755,704 20,071,540 22,301,163
Total assets 27,961,214 31,890,585 36,354,749
APPENDIX I ACCOUNTANT’S REPORT
– I-7 –


--- page 444 ---
As at December 31,
Notes 2022 2023 2024
RMB’000 RMB’000 RMB’000
LIABILITIES
Non-current liabilities
Borrowings 26 4,578,338 1,030,801 2,045,773
Lease liabilities 17 202,028 221,295 237,913
Deferred tax liabilities 21 288,758 307,511 258,264
Other non-current liabilities 29 316,866 448,425 659,851
Total non-current liabilities 5,385,990 2,008,032 3,201,801
Current liabilities
Borrowings 26 1,794,549 2,583,346 2,053,766
Trade and notes payables 27 6,464,878 7,866,652 9,777,262
Contract liabilities 5 57,955 51,789 49,462
Lease liabilities 17 67,661 68,898 90,574
Current income tax liabilities 115,276 262,732 174,168
Financial liabilities at fair value
through profit or loss 3.6 48,671 14,219 79,678
Accruals and other payables 28 904,926 969,109 1,407,120
Other current liabilities 29 2,008 2,100 1,274
Total current liabilities 9,455,924 11,818,845 13,633,304
Total liabilities 14,841,914 13,826,877 16,835,105
EQUITY
Equity attributable to owner of the
Company
– Share capital 30 3,590,869 3,732,616 3,732,390
– Other reserves 34 1,137,583 4,582,315 4,296,916
– Treasury shares 31 (330,023) (423,469) (381,848)
– Equity reserves –
convertible bonds 26 409,545 – –
– Retained earnings 33 8,133,336 10,002,942 11,650,312
12,941,310 17,894,404 19,297,770
Non-controlling interests 177,990 169,304 221,874
TOTAL EQUITY 13,119,300 18,063,708 19,519,644
TOTAL LIABILITIES AND EQUITY 27,961,214 31,890,585 36,354,749
APPENDIX I ACCOUNTANT’S REPORT
– I-8 –


--- page 445 ---
COMPANY’S STATEMENTS OF FINANCIAL POSITION
As at December 31,
Notes 2022 2023 2024
RMB’000 RMB’000 RMB’000
ASSETS
Non-current assets
Property, plant and equipment 16 1,629,639 1,679,037 1,754,409
Right-of-use assets 17 142,126 136,623 128,793
Deferred tax assets 21 33,318 5,587 –
Intangible assets 18 12,091 14,878 22,812
Investments accounted for using the
equity method 14 28,958 33,316 34,628
Investments in subsidiaries 15 7,513,700 8,846,817 9,121,409
Other non-current assets 23 42,604 114,000 80,435
Total non-current assets 9,402,436 10,830,258 11,142,486
Current assets
Inventories 24 719,679 772,429 1,109,270
Prepayments and other receivables 23 660,263 2,277,093 551,294
Trade and notes receivables 22 1,912,937 1,997,098 1,184,885
Financial assets at fair value through
profit or loss 3.6 103,780 1,463 6,237
Term deposits and restricted cash 25 2,456,612 1,961,904 1,077,255
Cash and cash equivalents 25 996,657 1,793,207 204,567
Other current assets 23 – – 1,318,633
Total current assets 6,849,928 8,803,194 5,452,141
Total assets 16,252,364 19,633,452 16,594,627
APPENDIX I ACCOUNTANT’S REPORT
– I-9 –


--- page 446 ---
As at December 31,
Notes 2022 2023 2024
RMB’000 RMB’000 RMB’000
LIABILITIES
Non-current liabilities
Borrowings 26 4,578,338 1,030,801 2,045,773
Lease liabilities 8,472 5,571 1,719
Deferred tax liabilities 21 85,516 81,604 40,768
Other non-current liabilities 29 49,179 47,332 56,310
Total non-current liabilities 4,721,505 1,165,308 2,144,570
Current liabilities
Borrowings 26 700,209 1,573,580 1,132,674
Trade and notes payables 27 1,895,542 2,024,802 1,768,810
Contract liabilities 155 121 224
Lease liabilities 3,141 2,072 1,613
Current income tax liabilities 23,782 13,501 –
Financial liabilities at fair value
through profit or loss 3.6 12 – 446
Accruals and other payables 28 1,985,681 4,541,608 1,151,050
Total current liabilities 4,608,522 8,155,684 4,054,817
Total liabilities 9,330,027 9,320,992 6,199,387
EQUITY
– Share capital 30 3,590,869 3,732,616 3,732,390
– Other reserves 34 1,916,257 5,235,099 5,207,773
– Treasury shares 31 (330,023) (423,469) (381,848)
– Equity reserves –
convertible bonds 26 409,545 – –
– Retained earnings 33 1,335,689 1,768,214 1,836,925
TOTAL EQUITY 6,922,337 10,312,460 10,395,240
TOTAL LIABILITIES AND EQUITY 16,252,364 19,633,452 16,594,627
APPENDIX I ACCOUNTANT’S REPORT
– I-10 –


--- page 447 ---
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Attributable to owners of the Company
Share
capital
Treasury
shares
Other
reserves
Equity
reserves –
convertible
bonds
Retained
earnings Sub-total
Non-
controlling
interests
Total
equity
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Note 30) (Note 31) (Note 34) (Note 33)
Balance at January 1, 2022 3,591,090 (411,950) 945,793 409,685 6,615,690 11,150,308 102,282 11,252,590
Profit for the year –––– 2 , 5 7 3,344 2,573,344 34,708 2,608,052
Other comprehensive income – – 120,868 – – 120,868 – 120,868
Total comprehensive income for
the year – – 120,868 – 2,573,344 2,694,212 34,708 2,728,920
Capital injection –––––– 4 9 ,000 49,000
Appropriations to statutory reserves – – 161,739 – (161,739) – – –
Conversion of convertible bonds
(Note 26) 48 – 1,021 (140) – 929 – 929
Share-based payment (Note 34) (269) 186,505 (91,838) – – 94,398 – 94,398
Dividends declared (Note 12) –––– (893,959) (893,959) (8,000) (901,959)
Repurchase of shares (Note 31(i)) – (104,578) – – – (104,578) – (104,578)
Balance at December 31, 2022 3,590,869 (330,023) 1,137,583 409,545 8,133,336 12,941,310 177,990 13,119,300
APPENDIX I ACCOUNTANT’S REPORT
– I-11 –


--- page 448 ---
Attributable to owners of the Company
Share
capital
Treasury
shares
Other
reserves
Equity
reserves –
convertible
bonds
Retained
earnings Sub-total
Non-
controlling
interests
Total
equity
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Note 30) (Note 31) (Note 34) (Note 33)
Balance at January 1, 2023 3,590,869 (330,023) 1,137,583 409,545 8,133,336 12,941,310 177,990 13,119,300
Profit for the year –––– 2 , 9 2 0,993 2,920,993 12,722 2,933,715
Other comprehensive income – – 123,300 – – 123,300 – 123,300
Total comprehensive income for
the year – – 123,300 – 2,920,993 3,044,293 12,722 3,057,015
Capital injection –––––– 7 , 0 9 1 7 , 0 9 1
Appropriations to statutory reserves – – 148,391 – (148,391) – – –
Conversion of convertible bonds
(Note 26) 141,926 – 3,104,717 (409,545) – 2,837,098 – 2,837,098
Share-based payment (Note 34) (179) 96,649 68,324 – – 164,794 – 164,794
Dividends declared (Note 12) –––– (902,996) (902,996) (25,692) (928,688)
Repurchase of shares (Note 31(i)) – (190,095) – – – (190,095) (2,807) (192,902)
Balance at December 31, 2023 3,732,616 (423,469) 4,582,315 – 10,002,942 17,894,404 169,304 18,063,708
APPENDIX I ACCOUNTANT’S REPORT
– I-12 –


--- page 449 ---
Attributable to owners of the Company
Share
capital
Treasury
shares
Other
reserves
Retained
earnings Sub-total
Non-
controlling
interests
Total
equity
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Note 30) (Note 31) (Note 34) (Note 33)
Balance at January 1, 2024 3,732,616 (423,469) 4,582,315 10,002,942 17,894,404 169,304 18,063,708
Profit for the year – – – 3,099,165 3,099,165 12,561 3,111,726
Other comprehensive income – – (253,120) – (253,120) – (253,120)
Total comprehensive income for
the year – – (253,120) 3,099,165 2,846,045 12,561 2,858,606
Capital injection – – – – – 50,835 50,835
Appropriations to statutory reserves – – 152,050 (152,050) – – –
Share-based payment (Note 34) (226) 341,599 (179,627) – 161,746 – 161,746
Dividends declared (Note 12) – – – (1,299,745) (1,299,745) (15,528) (1,315,273)
Repurchase of shares (Note 31(i)) – (299,978) – – (299,978) – (299,978)
Transaction with non-controlling interests – – (4,702) – (4,702) 4,702 –
Balance at December 31, 2024 3,732,390 (381,848) 4,296,916 11,650,312 19,297,770 221,874 19,519,644
APPENDIX I ACCOUNTANT’S REPORT
– I-13 –


--- page 450 ---
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
Note 2022 2023 2024
RMB’000 RMB’000 RMB’000
Cash flows from operating activities
Cash generated from operations 35(a) 2,674,147 3,854,532 4,643,925
Interest received 53,136 56,238 67,221
Income tax paid (361,231) (350,407) (684,961)
Net cash generated from operating
activities 2,366,052 3,560,363 4,026,185
Cash flows from investing activities
Proceeds from disposal of
investments in associates 1,250 – –
Proceeds from return on investments 4,682 2,671 13,273
Proceeds from disposal of property,
plant and equipment, intangible
assets and other non-current assets 84,636 591,068 109,300
Withdraw of term deposits and
wealth management products 679,732 1,212,037 6,907,449
Government grant received in relation
to assets 127,123 163,601 277,351
Payments for purchase of investments (5,938) (3,500) (10,382)
Payments for purchase of property,
plant and equipment, intangible
assets and other non-current assets (2,941,807) (2,745,462) (3,290,148)
Placement of term deposits and
wealth management products (370,000) (150,000) (7,131,657)
Payments for settlement of derivative
financial instruments (95,837) (138,025) (43,616)
Others (11,540) 21,931 (2,661)
Net cash used in investing activities (2,527,699) (1,045,679) (3,171,091)
APPENDIX I ACCOUNTANT’S REPORT
– I-14 –


--- page 451 ---
Year ended December 31,
Note 2022 2023 2024
RMB’000 RMB’000 RMB’000
Cash flows from financing activities
Proceeds from share schemes
(Note 31(ii)) 175,850 – 292,693
Capital contributions from the
non-controlling interests 49,000 7,091 44,682
Proceeds from borrowings 3,001,232 1,584,076 2,390,679
Repayments of borrowings (2,670,214) (1,308,453) (1,852,949)
Principal elements of lease payments (62,191) (98,683) (105,305)
Interests paid (120,972) (143,269) (150,575)
Dividends paid to the Company’s
shareholders (893,959) (902,996) (1,299,745)
Dividends paid to the non-controlling
interests (8,000) (25,692) (13,000)
Payments for repurchase of shares (106,447) (191,668) (302,102)
Payments for listing expenses – – (796)
Others 38,827 (12,256) 41,119
Net cash used in financing activities (596,874) (1,091,850) (955,299)
Net (decrease)/increase in cash and
cash equivalents (758,521) 1,422,834 (100,205)
Cash and cash equivalents at
beginning of the year 2,690,002 2,050,329 3,624,955
Effects of exchange rate changes on
cash and cash equivalents 118,848 151,792 (81,247)
Cash and cash equivalents at the end
of the year 25 2,050,329 3,624,955 3,443,503
APPENDIX I ACCOUNTANT’S REPORT
– I-15 –


--- page 452 ---
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION
1. GENERAL INFORMATION
Zhejiang Sanhua Intelligent Controls Co., Ltd. (hereinafter referred to as “ the Company ”) is a joint stock
company with limited liability incorporated in the People’s Republic of China (the “ PRC”). The former
entity of the Company, Sanhua-Fujikoki Co., Ltd., (ʮ̡ ), was incorporated as a
Sino-Japanese joint venture on September 10, 1994. On December 19, 2001, the Company was established
through converting Sanhua-Fujikoki Co., Ltd., to a joint stock company, which later changed its name to
Zhejiang Sanhua Intelligent Controls Co., Ltd. The registered office and principal place of business of the
Company is located at No. 219 Woxi Avenue, Chengtan Street, Xinchang, Shaoxing, Zhejiang Province
PRC. The Company is listed on the Shenzhen Stock Exchange (stock code: 002050) on June 7, 2005. The
parent and the ultimate holding company of the Company is Sanhua Holding Group Co., Ltd. (ٰ
ʮ̡ ) (hereinafter referred to as “ the Holding Company ”), which is also incorporated in the
PRC.
The Company and its subsidiaries (hereinafter collectively referred to as “ the Group ”) are principally
engaged in research and development (“ R&D ”), production and sales of refrigeration and
air-conditioning product components and automotive components, which are widely used in the
refrigeration and air-conditioning product market and the automotive market, including both of new
energy vehicles (“ NEVs ”) and traditional fuel vehicles.
The Company’s principal subsidiaries during the Track Record Period and as at the date of this report are
set out in Note 15.
The Historical Financial Information are presented in Renminbi (“ RMB”), which is also the functional
currency of the Company, and all values are rounded to the nearest thousands (RMB’000) except when
otherwise indicated.
The statutory consolidated financial statements of the Company for the years ended December 31, 2022,
2023 and 2024 prepared in accordance with the relevant accounting principles in the PRC were audited by
Pan-China Certified Public Accountants LLP (౷ஷΥྫ) which was the certified
public accountants registered in the PRC.
2. BASIS OF PREPARATION
The Historical Financial Information of the Group have been prepared in accordance with all applicable
International Financial Reporting Standards (“ IFRS Accounting Standards ”) issued by the International
Accounting Standards Board (“ IASB ”). The Historical Financial Information has been prepared under
the historical cost convention, as modified by the revaluation of financial assets and financial liabilities at
fair value through profit or loss (“ FVPL ”).
The preparation of the Historical Financial Information in conformity with IFRS Accounting Standards
requires the use of certain critical accounting estimates. It also requires management to exercise its
judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree
of judgment or complexity, or areas where assumptions and estimates are significant to the Historical
Financial Information are disclosed in Note 4 below.
New standards, amendments and interpretations to the existing standards that are effective during the
Track Record Period have been adopted by the Group consistently throughout the years presented,
unless prohibited by the relevant standard to apply retrospectively.
Other than those material accounting policies information as disclosed elsewhere in this Historical
Financial Information, a summary of the other accounting policies information has been set out in Note
39 to this Historical Financial Information.
APPENDIX I ACCOUNTANT’S REPORT
– I-16 –


--- page 453 ---
2.1 New Standards and Amendments to Standards Not Yet Adopted
Standards and amendments to standards that have been issued but not yet effective and not been
early adopted by the Group during the Track Record Period are as follows:
Standards and amendments
Effective for accounting
periods beginning on or
after
Amendments to IFRS 10 and IAS 28 ‘Sale or Contribution of
Assets between an Investor and its Associate or Joint Venture’
To be determined
Amendments to IAS 21 ‘Lack of Exchangeability’ January 1, 2025
Amendments to IFRS 9 and IFRS 7 ‘Amendments to the
Classification and Measurement of Financial Instruments’
January 1, 2026
Amendments to IFRS 9 and IFRS 7 ‘Contracts Referencing
Nature-dependent Electricity’
January 1, 2026
Annual Improvements – Volume 11 IFRS accounting standards January 1, 2026
IFRS 18 ‘Presentation and Disclosure in Financial Statements’ January 1, 2027
The Group has already commenced an assessment of the impact of these new standards and
amendments and no significant impact on the financial performance and positions of the Group is
expected when they become effective.
3. FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange
risk and interest rate risk), credit risk, liquidity risk and price risk. The Group’s overall risk management
focuses on the unpredictability of financial markets, seeks a balance between risk and return, and
minimizes the adverse impact of risk on the Group’s financial performance. Based on this risk
management objective, the basic strategy of the Group’s risk management is to identify and analyze the
various risks faced by the Group, establish appropriate risk tolerance thresholds and timely and reliably
supervise various risks to control them within a limited range.
3.1 Market Risk
(a) Foreign Exchange Risk
Foreign exchange risk arises when future commercial transactions or recognized assets
and liabilities are denominated in a currency that is not the respective functional currency
of the Group’s subsidiaries. The functional currencies of the subsidiaries outside
Mainland China are mainly United States Dollar (“ USD”) and Euro (“ EUR”) whereas
functional currency of the subsidiaries operate in Mainland China is RMB. The Group
manages its foreign exchange risk by performing regular reviews of the Group’s net
foreign exchange exposures and tries to minimize these exposures through natural
hedges, wherever possible.
As at December 31, 2022, 2023 and 2024, the Group’s major financial assets/liabilities
exposed to foreign exchange risk, representing those financial assets/liabilities
denominated in USD and EUR and included in a group entity with different functional
currency:
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Financial assets denominated in:
USD 2,028,058 1,903,309 2,756,203
EUR 643,364 761,423 562,268
Others 212,795 289,499 368,463
APPENDIX I ACCOUNTANT’S REPORT
– I-17 –


--- page 454 ---
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Financial liabilities denominated in:
USD 736,187 570,284 757,069
EUR 678,887 1,190,444 831,178
Others 50,510 163,089 202,581
As shown in the table above, the Group is primarily exposed to changes in USD and EUR
exchange rates. The sensitivity of profit or loss to changes in the exchange rates arises
mainly from USD and EUR denominated financial instruments is as below:
Year ended December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
USD/RMB exchange rate –
Increase 5% 64,594 66,651 99,957
Decrease 5% (64,594) (66,651) (99,957)
EUR/RMB exchange rate –
Increase 5% (1,776) (21,451) (13,446)
Decrease 5% 1,776 21,451 13,446
Other foreign currencies of changes have no significant impact on foreign exchange risk.
(b) Interest Rate Risk
The Group’s interest rate risk primarily arises from interest-bearing borrowings and
bonds. Borrowings issued at floating rates expose the Group to cash flow interest rate risk.
Borrowings and bonds issued at fixed rates expose the Group to fair value interest rate
risk. The Group determines the proportion of borrowings and bonds issued at floating
rates and fixed rates based on the market environment.
As at December 31, 2022, 2023 and 2024, total borrowings of the Group which were bearing
at floating rates amounted to approximately RMB2,665,903,000, RMB2,584,126,000 and
RMB2,048,388,000 respectively.
If interest rate had been 50 basis points higher or lower with all other variables held
constant, the profit before tax would decrease/increase approximately RMB13,330,000,
RMB12,921,000 and RMB10,242,000, for the years ended December 31, 2022, 2023 and
2024, respectively.
Considering the repricing or maturity date, the fair value interest rate risk arises from
borrowings, bonds and bank balances carried at fixed rates is not significant for the
Group.
APPENDIX I ACCOUNTANT’S REPORT
– I-18 –


--- page 455 ---
3.2 Credit Risk
Credit risk arises from cash and cash equivalents, restricted cash and term deposits, as well as
trade and notes receivables and other receivables. The carrying amount of each class of the above
financial assets represents the Group’s maximum exposure to credit risk in relation to the
corresponding class of financial assets.
(a) Risk Management
To manage this risk, cash and cash equivalents as well as restricted cash and term deposits
are mainly placed with state-owned or reputable financial institutions which are all
high-credit-quality financial institutions.
To manage risk from trade and notes receivables as well as other receivables, the Group
has policies in place to ensure that credit terms are made to counterparties with an
appropriate credit history and the management performs ongoing credit evaluations of
the counterparties. It also has continuous monitoring procedures to ensure the collection
of the receivables as scheduled and follow up action is taken to recover overdue debts, if
any.
(b) Impairment of Financial Assets
The Group has three types of financial assets that are subject to the expected credit loss
model:
– Cash and cash equivalents, restricted cash and term deposits;
– Trade and notes receivables; and
– Other receivables.
Credit risk of cash and cash equivalents, restricted cash and term deposits
Cash and cash equivalents, restricted cash and term deposits are mainly placed with
reputable Chinese and international financial institutions. There has been no recent
history of default in relation to these financial institutions. The expected credit loss was
immaterial as at December 31, 2022, 2023 and 2024.
Credit risk of trade and notes receivables
(i) Trade Receivables
The Group applies the IFRS 9 simplified approach to measure expected credit loss
(“ECL”) which uses a lifetime expected loss allowance for all trade receivables.
To measure ECL, trade receivables have been grouped based on shared credit risk
characteristics and aging. The Group also made individual assessment on the
recoverability of its trade receivables for certain customers based on historical
settlement record.
The historical loss rates are calculated based on the historical payment profiles of
sales and the corresponding historical incurred credit losses. The historical loss
rates are adjusted to reflect the forward-looking information on macroeconomic
factors as well as the credit rating analysis of respective customers and other
external data which have impacts to the ability of the customers to settle the
receivables. The Group has identified the Gross Domestic Product (“ GDP”) of the
countries in which it sells its goods to be the most relevant factors, and accordingly
adjusts the historical loss rates based on expected changes in these factors.
APPENDIX I ACCOUNTANT’S REPORT
– I-19 –


--- page 456 ---
Trade receivables are written off when there is no reasonable expectation of
recovery. Indicators that there is no reasonable expectation of recovery include the
failure of a debtor to engage in a repayment plan with the Group and other
indicators of severe financial difficulties.
On that basis, the loss allowance as at December 31, 2022, 2023 and 2024 was
determined as follows for trade receivables:
As at December 31, 2022, the loss allowance of individually impaired trade receivables
and grouped trade receivables are determined as follows:
Assess individually:
Trade
receivables ECL rate
Loss
allowance Reason
RMB’000 RMB’000
Trade receivables 4,642 100% 4,642 Financial difficulty
Assessed based on grouping:
Domestic refrigeration and air-conditioning product components grouping
Up to
3 months
3t o
6 months
6t o
12 months
1t o
2 years
2t o
3 years
Over
3 years Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Expected loss rate 2.43% 5.39% 10.78% 31.12% 53.56% 100.00%
Gross carrying
amount 930,885 764,786 212,766 553 9 125 1,909,124
Loss allowance 22,592 41,230 22,941 172 5 125 87,065
Overseas refrigeration and air-conditioning product components grouping
Up to
3 months
3t o
6 months
6t o
12 months
1t o
2 years
2t o
3 years
Over
3 years Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Expected loss rate 4.85% 9.69% 19.38% 31.45% 73.08% 100.00%
Gross carrying
amount 1,344,217 54,753 13,329 104 17 – 1,412,420
Loss allowance 65,136 5,306 2,583 33 12 – 73,070
APPENDIX I ACCOUNTANT’S REPORT
– I-20 –


--- page 457 ---
Domestic automotive components grouping
Up to
3 months
3t o
6 months
6t o
12 months
1t o
2 years
2t o
3 years
Over
3 years Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Expected loss rate 4.12% 8.23% 16.46% 31.12% 53.56% 100.00%
Gross carrying
amount 1,252,571 190,702 10,800 57 225 323 1,454,678
Loss allowance 51,553 15,698 1,778 18 121 323 69,491
Overseas automotive components grouping
Up to
3 months
3t o
6 months
6t o
12 months
1t o
2 years
2t o
3 years
Over
3 years Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Expected loss rate 4.96% 9.92% 19.84% 35.69% 78.55% 100.00%
Gross carrying
amount 618,724 74,460 29,139 4,507 718 434 727,982
Loss allowance 30,688 7,386 5,781 1,608 564 434 46,461
As at December 31, 2023, the loss allowance of individually impaired trade receivables
and grouped trade receivables are determined as follows:
Assess individually:
Trade
receivables ECL rate
Loss
allowance Reason
RMB’000 RMB’000
Trade receivables 5,691 100% 5,691 Financial difficulty
Assessed based on grouping:
Domestic refrigeration and air-conditioning product components grouping
Up to
3 months
3t o
6 months
6t o
12 months
1t o
2 years
2t o
3 years
Over
3 years Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Expected loss rate 2.62% 5.29% 10.57% 31.33% 57.93% 100.00%
Gross carrying
amount 1,007,088 580,785 440,335 2,131 31 129 2,030,499
Loss allowance 26,343 30,703 46,556 668 18 129 104,417
APPENDIX I ACCOUNTANT’S REPORT
– I-21 –


--- page 458 ---
Overseas refrigeration and air-conditioning product components grouping
Up to
3 months
3t o
6 months
6t o
12 months
1t o
2 years
2t o
3 years
Over
3 years Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Expected loss rate 4.01% 8.02% 16.04% 30.80% 78.47% 100.00%
Gross carrying
amount 1,180,447 38,831 8,660 24,864 309 20 1,253,131
Loss allowance 47,323 3,113 1,389 7,659 242 20 59,746
Domestic automotive components grouping
Up to
3 months
3t o
6 months
6t o
12 months
1t o
2 years
2t o
3 years
Over
3 years Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Expected loss rate 3.13% 6.26% 12.52% 31.33% 53.67% 100.00%
Gross carrying
amount 1,449,715 323,432 322,572 827 30 117 2,096,693
Loss allowance 45,370 20,243 40,380 259 16 117 106,385
Overseas automotive components grouping
Up to
3 months
3t o
6 months
6t o
12 months
1t o
2 years
2t o
3 years
Over
3 years Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Expected loss rate 3.93% 7.86% 15.72% 30.78% 53.39% 100.00%
Gross carrying
amount 605,671 60,750 21,315 12,140 18 – 699,894
Loss allowance 23,804 4,775 3,351 3,737 10 – 35,677
As at December 31, 2024, the loss allowance of individually impaired trade receivables
and grouped trade receivables are determined as follows:
Assess individually:
Trade
receivables ECL rate
Loss
allowance Reason
RMB’000 RMB’000
Trade receivables 13,188 39.66% 5,231
Financial difficulty or
delay of payment
APPENDIX I ACCOUNTANT’S REPORT
– I-22 –


--- page 459 ---
Assessed based on grouping:
Domestic refrigeration and air conditioning product components grouping
Up to
3 months
3t o
6 months
6t o
12 months
1t o
2 years
2t o
3 years
Over
3 years Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Expected loss rate 2.38% 5.77% 11.54% 31.24% 63.52% 100.00%
Gross carrying
amount 1,619,360 407,150 417,850 2,558 1,069 146 2,448,133
Loss allowance 38,501 23,486 48,207 799 679 146 111,818
Overseas refrigeration and air conditioning product components grouping
Up to
3 months
3t o
6 months
6t o
12 months
1t o
2 years
2t o
3 years
Over
3 years Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Expected loss rate 3.83% 7.65% 15.30% 30.78% 86.24% 100.00%
Gross carrying
amount 1,480,915 105,472 16,280 16,023 792 126 1,619,608
Loss allowance 56,656 8,070 2,491 4,932 683 126 72,958
Domestic automotive components grouping
Up to
3 months
3t o
6 months
6t o
12 months
1t o
2 years
2t o
3 years
Over
3 years Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Expected loss rate 3.50% 7.01% 14.01% 31.47% 53.55% 100.00%
Gross carrying
amount 1,978,094 222,948 232,781 143 409 98 2,434,473
Loss allowance 69,294 15,620 32,618 45 219 98 117,894
Overseas automotive components grouping
Up to
3 months
3t o
6 months
6t o
12 months
1t o
2 years
2t o
3 years
Over
3 years Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Expected loss rate 6.10% 12.21% 24.42% 30.77% 77.36% 100.00%
Gross carrying
amount 721,249 46,648 28,247 5,684 477 13 802,318
Loss allowance 44,029 5,695 6,897 1,749 369 13 58,752
APPENDIX I ACCOUNTANT’S REPORT
– I-23 –


--- page 460 ---
The loss allowances for trade receivables for the years ended December 31, 2022, 2023 and
2024 reconcile to the opening loss allowances are as follows:
Year ended December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Opening loss allowance 187,394 280,729 311,916
Loss allowance recognized, net 93,612 40,940 54,918
Receivables written off (277) (9,753) (181)
Closing loss allowance 280,729 311,916 366,653
(ii) Notes Receivables
The Group measured provisions for impairment of notes receivables based on the
lifetime ECL and assessed that there was no significant credit risk associated with
its bank acceptance notes as the Group did not expect that there would be any
significant losses from non-performance by these reputable banks. For the
commercial acceptance notes and finance company acceptance notes, which are
usually settled within 6 months to 1 year from the respective issuance date, the
Group provided the expected credit loss as at December 31, 2022, 2023 and 2024
amounting to RMB633,000, RMB7,619,000 and RMB8,620,000, respectively.
Movements on the provision of ECL for notes receivables at amortized cost are as
follows:
Year ended December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Opening loss allowance 689 633 7,619
Loss allowance (reversed)/
recognized, net (56) 6,986 1,001
Closing loss allowance 633 7,619 8,620
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(iii) Other Receivables and other non-current assets
Other receivables and other non-current assets subject to credit risks at the end of
each of the periods are mainly comprised of rental and other deposits, tax refund
receivables and others. The Group considers the probability of default upon initial
recognition of the assets and whether there has been a significant increase in credit
risk on an ongoing basis throughout each of the periods. To assess whether there is
a significant increase in credit risk, the Group compares the risk of a default
occurring on the assets as of the reporting date with the risk of default as of the
date of initial recognition. Especially the following indicators are incorporated:
• actual or expected significant adverse changes in business, financial or
economic conditions that are expected to cause a significant change to the
debtor’s ability to meet its obligations;
• external credit rating of the counterparty;
• actual or expected significant changes in the operating results of the
debtor; and
• significant changes in the expected performance and behavior of the
debtor, including changes in the payment status of debtor.
Regardless of the analysis above, a significant increase in credit risk is presumed if
a debtor is more than 365 days past due in making a contractual payment.
If the credit risk of the asset is in line with original expectations, the Group
categorizes the asset as performing and recognizes 12 months expected credit
losses (Stage 1). If a significant credit risk of the asset has occurred compared to
original expectations or the credit is impaired, the asset is categorized as
underperforming or non-performing and lifetime expected credit losses are
recognized (Stages 2 and 3):
Assessed based on grouping:
Stage 1 Stage 2 Stage 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
December 31, 2022
Expected loss rate 0.24% 10.00% 37.65%
Gross carrying
amount 715,697 9,279 6,872 731,848
Loss allowance 1,691 928 2,587 5,206
December 31, 2023
Expected loss rate 1.06% 10.00% 42.46%
Gross carrying
amount 216,294 7,806 11,774 235,874
Loss allowance 2,301 781 4,999 8,081
December 31, 2024
Expected loss rate 1.14% 10.00% 42.89%
Gross carrying
amount 249,247 10,421 10,845 270,513
Loss allowance 2,848 1,042 4,651 8,541
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The loss allowances for other receivables and other non-current assets subject to
credit risks for the years ended December 31, 2022, 2023 and 2024 reconcile to the
opening loss allowances are as follows:
Year ended December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Opening loss allowance 3,309 5,206 8,081
Loss allowance recognized, net 4,206 3,552 460
Receivables written-off (2,309) (677) –
Closing loss allowance 5,206 8,081 8,541
3.3 Liquidity Risk
The Group intends to maintain sufficient cash and cash equivalents. Due to the dynamic nature of
the underlying business, the policy of the Group is to regularly monitor the Group’s liquidity risk
and to maintain adequate liquid assets such as cash and cash equivalents and term deposits or to
retain adequate financing arrangements to meet the Group’s liquidity requirements.
The tables below analyze the Group’s financial liabilities that will be settled into relevant
maturity groupings based on the remaining period at each balance sheet date to their contractual
maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
Balances due within 12 months equal their carrying balances as the impact of discounting is not
significant.
Less than
1 year
Between
1a n d
2 years
Between
2a n d
5 years
Over
5 years Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
As at December 31, 2022
Trade and notes payables 6,464,878 – – – 6,464,878
Accruals and other payables
(excluding non-financial
liabilities) 354,255 – – – 354,255
Lease liabilities 69,566 54,385 95,795 55,281 275,027
Other current liabilities (excluding
non-financial liabilities) 48,671 – – – 48,671
Borrowings 1,839,750 1,449,895 3,826,171 – 7,115,816
Other non-current liabilities
(excluding non-financial
liabilities) – 2,898 1,933 – 4,831
8,777,120 1,507,178 3,923,899 55,281 14,263,478
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Less than
1 year
Between
1a n d
2 years
Between
2a n d
5 years
Over
5 years Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
As at December 31, 2023
Trade and notes payables 7,866,652 – – – 7,866,652
Accruals and other payables
(excluding non-financial
liabilities) 250,643 – – – 250,643
Lease liabilities 81,555 47,143 112,002 57,439 298,139
Other current liabilities (excluding
non-financial liabilities) 14,219 – – – 14,219
Borrowings 2,603,097 445,309 646,132 – 3,694,538
Other non-current liabilities
(excluding non-financial
liabilities) – 11,291 – – 11,291
10,816,166 503,743 758,134 57,439 12,135,482
Less than
1 year
Between
1a n d
2 years
Between
2a n d
5 years
Over
5 years Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
As at December 31, 2024
Trade and notes payables 9,777,262 – – – 9,777,262
Accruals and other payables
(excluding non-financial
liabilities) 545,413 – – – 545,413
Lease liabilities 99,889 76,905 159,312 18,637 354,743
Borrowings 2,081,072 1,456,197 689,987 – 4,227,256
12,503,636 1,533,102 849,299 18,637 14,904,674
3.4 Price Risk
The Group is exposed to commodity price risk related to price volatility of raw materials. The
Group uses derivative financial instruments, including commodity futures contracts, to manage a
portion of such risk. Based on the dynamic study and judgement of the market, combined with
the resource demand and production and operation plan, the Group evaluates and monitors the
market risk exposure caused by transaction positions, and continuously manages and hedges the
risk of commodity price fluctuation caused by market changes. As at December 31, 2022, 2023 and
2024, the Group had certain commodity contracts. However, the financial impact is not material.
APPENDIX I ACCOUNTANT’S REPORT
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3.5 Capital Management
The primary objectives of the Group’s capital management are to safeguard the Group’s ability to
continue as a going concern and to maintain healthy capital ratios in order to support its business
and maximize shareholders’ value.
The Group manages its capital structure in light of changes in economic conditions and the risk
characteristics of the underlying assets. To maintain or adjust the capital structure, the Group
may adjust the dividend payment to shareholders, return capital to shareholders or issue new
shares. The Group is not subject to any externally imposed capital requirements. No changes were
made in the objectives, policies or processes for managing capital during the years ended
December 31, 2022, 2023 and 2024.
The Group monitors capital on the basis of the debt to asset ratio as at December 31, 2022, 2023
and 2024 are as follows:
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Total assets 27,961,214 31,890,585 36,354,749
Total liabilities 14,841,914 13,826,877 16,835,105
Debt to asset ratio 53.1% 43.4% 46.3%
3.6 Fair Value Estimation
(a) Determination of Fair Value and the Fair Value Hierarchy of Financial Instruments
This note provides information on how the Group determines the fair values of various
financial assets and liabilities.
For financial reporting purposes, fair value measurements are categorized into Level 1, 2
or 3 based on the degree to which the inputs to the fair value measurements are observable
and the significance of the inputs to the fair value measurement in its entirety, which are
described as follows:
• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets
or liabilities that the entity can access at the measurement date;
• Level 2 inputs are inputs, other than quoted prices included within Level 1, that
are observable for the asset or liability, either directly or indirectly; and
• Level 3 inputs are unobservable inputs for the asset or liability.
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The Group
As at December 31, 2022 Level 1 Level 2 Level 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
Financial assets at fair value
through profit or loss
– Derivative financial assets 6,254 2,685 – 8,939
– Wealth management products
issued by the banks – 100,026 – 100,026
6,254 102,711 – 108,965
Financial liabilities at fair value
through profit or loss
– Derivative financial liabilities 461 44,710 – 45,171
– Contingent considerations – – 3,500 3,500
461 44,710 3,500 48,671
As at December 31, 2023 Level 1 Level 2 Level 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
Financial assets at fair value
through profit or loss
– Derivative financial assets 1,757 20,879 – 22,636
Financial liabilities at fair value
through profit or loss
– Derivative financial liabilities – 10,719 – 10,719
– Contingent considerations – – 3,500 3,500
– 10,719 3,500 14,219
As at December 31, 2024 Level 1 Level 2 Level 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
Financial assets at fair value
through profit or loss
– Derivative financial assets 6,237 – – 6,237
Financial liabilities at fair value
through profit or loss
– Derivative financial liabilities 2,819 76,859 – 79,678
The timing of transfers is determined at the date of the event or change in circumstances
that caused the transfers. During the Track Record Period, there was no transfer between
Level 1 and Level 2.
APPENDIX I ACCOUNTANT’S REPORT
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The Company
As at 31 December 2022 Level 1 Level 2 Level 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
Financial assets at fair value
through profit or loss
– Derivative financial assets 3,754 – – 3,754
– Wealth management products
issued by the banks – 100,026 – 100,026
3,754 100,026 – 103,780
Financial liabilities at fair value
through profit or loss
– Derivative financial liabilities 12 – – 12
As at December 31, 2023 Level 1 Level 2 Level 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
Financial assets at fair value
through profit or loss
– Derivative financial assets 1,463 – – 1,463
As at December 31, 2024 Level 1 Level 2 Level 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
Financial assets at fair value
through profit or loss
– Derivative financial assets 6,237 – – 6,237
Financial liabilities at fair value
through profit or loss
– Derivative financial liabilities 446 – – 446
(b) Valuation Inputs and Relationships to Fair Value
The contingent considerations were generated from the business combination of Zhejiang
Sanhua Board Replacement Technology Co., Ltd (ʮ̡ )( “ Sanhua
Board Replacement ”) in 2021. Pursuant to the purchase agreement, if Sanhua Board
Replacement achieved a net profit of RMB6,400,000 in 2022, the Group would need to pay
an additional consideration of RMB3,500,000. If Sanhua Board Replacement achieved a net
profit of RMB8,000,000 in 2023, the Group would need to pay another RMB3,500,000
consideration. Therefore, the fair value of the contingent considerations was estimated
based on the likelihood of the acquiree achieving the profits target.
(c) The Group’s Valuation Process
For the financial assets and financial liabilities, including level 3 fair values, the Group’s
finance department performs the valuations for financial reporting purpose. The finance
department reports the valuation results to the management.
APPENDIX I ACCOUNTANT’S REPORT
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4. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
The Group continually evaluates the critical accounting estimates and key judgments applied based on
historical experience and other factors, including expectations of future events that are believed to be
reasonable.
The critical accounting estimates and key assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities are outlined below:
(a) Allowance for Expected Credit Loss of Receivables
The loss allowances for receivables are based on assumptions about the risk of default and
expected loss rates to determine the expected loss. The Group uses judgment in making these
assumptions and selecting the inputs to the impairment calculation. The historical loss rates are
adjusted to reflect the forward-looking information on macroeconomic factors as well as the
credit rating analysis of respective customers and other external data which have impacts to the
ability of the customers to settle the receivables.
The Group takes into account different macroeconomic scenarios in considering forward looking
information in mainland China and overseas. The Group regularly monitors and reviews the key
macroeconomic assumptions and parameters related to the calculation of expected credit losses.
The Group has identified the Gross Domestic Product (“ GDP”) of the countries in which it sells its
goods to be the most relevant factors, and accordingly adjusts the historical loss rates based on
expected changes in these factors.
(b) Estimated Net Realizable Value of Inventories
In accordance with the Group’s accounting policy, the Group estimates net realizable value of
inventories based on specific facts and circumstances. For different types of inventories, it
requires the estimation on selling prices, costs of conversion, selling expenses and the related tax
expense to calculate the net realizable amount of inventories. For inventories held for executed
sales contracts, management estimates the net realizable amount based on the contracted price.
For raw materials and work in progress, management has established a model in estimating the
net realizable amount at which the inventories can be realizable in the normal course of business
after considering the manufacturing cycles, production capacity and forecasts, estimated future
conversion costs and selling prices. Management also takes into account the price or cost
fluctuations and other related matters occurring after the end of the year which reflect conditions
that existed at the end of each year.
It is reasonably possible that if there is a significant change in circumstances including the
Group’s business and the external environment, outcomes would be significantly affected.
(c) Property, Plant and Equipment and Intangible Assets – Estimated Useful Lives and Residual
Values
The Group determines the estimated useful lives and residual values (if applicable) and
consequently the related depreciation/amortization charges for its property, plant and
equipment and intangible assets (excluding freehold land and goodwill). These estimates are
based on the historical experience, anticipated change of technology, market condition and the
actual consumptions of related assets. The depreciation/amortization charge will increase when
useful lives are less than previously estimated. In addition, technically obsolete or non-strategic
assets that have been abandoned or sold will be written off or written down.
Actual economic lives may differ from estimated useful lives and actual residual values may
differ from estimated residual values. Periodic review could result in change in useful lives and
residual values and therefore change in depreciation/amortization expense in future periods.
APPENDIX I ACCOUNTANT’S REPORT
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(d) Income Tax
The Group estimates its income tax provision and deferred taxation in accordance with the
prevailing tax rules and regulations, taking into account any special approvals obtained from the
relevant tax authorities and any preferential tax treatment to which it is entitled in each location
or jurisdiction in which the Group operates. There are many transactions and calculations for
which the ultimate tax determination is uncertain during the ordinary course of business. The
Group recognizes liabilities for anticipated tax audit issues based on estimates of whether
additional taxes will be due. Where the final tax outcome of these matters is different from the
amounts that were initially recorded, the differences will impact on the income tax and deferred
tax provisions in the period in which the determination is made.
Deferred tax assets are recognized for unused tax losses and deductible temporary differences,
such as the provision for impairment of receivables, inventories and property, plant and
equipment and accruals of expenses not yet deductible for tax purposes, to the extent that it is
probable that taxable profits will be available against which the tax losses and the deductible
temporary differences can be utilized. Significant estimation is required in determining the
recoverability of deferred tax assets.
In the event that future tax rules and regulations or related circumstances change, adjustments to
current and deferred taxation may be necessary which would impact on the Group’s results or
financial position.
5. OPERATING SEGMENT INFORMATION
(a) Description of Segments and Principal Activities
Operating segments are reported in a manner consistent with the internal reporting provided to
the chief operating decision maker (“ CODM ”). The executive directors assess the financial
performance and position of the Group and makes strategic decisions. The executive directors,
which has been identified as being the CODM, consists of the chief executive officer, the chief
financial officer and the managers for each business unit. The CODM review the Group’s internal
reporting in order to assess performance, allocate resources, and determine the operating
segments based on these reports.
As at December 31, 2022, 2023 and 2024, the CODM have identified the following reportable
segments from a product perspective:
• Refrigeration and air-conditioning product component business
• Automotive component business
APPENDIX I ACCOUNTANT’S REPORT
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(b) Segment Information
For the years ended December 31, 2022, 2023 and 2024, the CODM assess the performance of the
operating segments mainly based on segment revenue and gross profit of each operating
segment. The selling and marketing expenses, general and administrative expenses and research
and development expenses are common costs incurred for these operating segments as a whole
and therefore, they are not included in the measure of the segments’ performance which is used
by the CODM as a basis for the purpose of resource allocation and assessment of segment
performance. Net impairment losses on financial assets, other income, other gains/(losses), net,
finance income/(costs), net and income tax expenses are also not allocated to individual
operating segment.
Segment information for the year ended December 31, 2022 is as follows:
Refrigeration
and air-
conditioning
product
components
Automotive
components
Inter
segment
elimination Total
RMB’000 RMB’000 RMB’000 RMB’000
Revenue from contracts with
external customers 13,833,786 7,503,575 – 21,337,361
Inter-segment revenue ––––
Other revenue (i) – 10,189 – 10,189
Operating costs (10,283,327) (5,602,611) – (15,885,938)
Segment profit 3,550,459 1,911,153 – 5,461,612
Other profit or loss (2,410,354)
Total profit before income tax 3,051,258
Total assets 19,362,179 8,599,035 – 27,961,214
Total liabilities 11,042,345 3,799,569 – 14,841,914
Investments in associates 32,438 – – 32,438
Share of profit of associates, net 7,732 – – 7,732
Increase in non-current assets (ii) 1,605,337 1,075,774 – 2,681,111
Net impairment losses on
financial assets 56,960 40,802 – 97,762
Depreciation and amortisation 437,390 204,032 – 641,422
APPENDIX I ACCOUNTANT’S REPORT
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Segment information for the year ended December 31, 2023 is as follows:
Refrigeration
and air-
conditioning
product
components
Automotive
components
Inter
segment
elimination Total
RMB’000 RMB’000 RMB’000 RMB’000
Revenue from contracts with
external customers 14,644,135 9,902,612 – 24,546,747
Inter-segment revenue ––––
Other revenue (i) – 11,055 – 11,055
Operating costs (10,683,415) (7,138,899) – (17,822,314)
Segment profit 3,960,720 2,774,768 6,735,488
Other profit or loss (3,182,224)
Total profit before income tax 3,553,264
Total assets 20,094,614 11,795,971 – 31,890,585
Total liabilities 8,191,365 5,635,512 – 13,826,877
Investments in associates 37,924 – – 37,924
Share of profit of associates, net 7,986 – – 7,986
Increase in non-current assets (ii) 1,643,188 1,726,679 – 3,369,867
Net impairment losses on financial
assets 15,955 35,523 – 51,478
Depreciation and amortization 519,095 290,856 – 809,951
APPENDIX I ACCOUNTANT’S REPORT
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Segment information for the year ended December 31, 2024 is as follows:
Refrigeration
and air-
conditioning
product
components
Automotive
components
Inter
segment
elimination Total
RMB’000 RMB’000 RMB’000 RMB’000
Revenue from contracts with
external customers 16,560,605 11,359,289 – 27,919,894
Inter-segment revenue ––––
Other revenue (i) – 27,271 – 27,271
Operating costs (12,078,850) (8,247,496) – (20,326,346)
Segment profit 4,481,755 3,139,064 – 7,620,819
Other profit or loss (3,929,132)
Total profit before income tax 3,691,687
Total assets 21,845,244 14,509,505 – 36,354,749
Total liabilities 10,033,499 6,801,606 – 16,835,105
Investments in associates 40,600 – – 40,600
Share of profit of associates, net 8,925 – – 8,925
Increase in non-current assets (ii) 1,329,950 2,991,794 – 4,321,744
Net impairment losses on
financial assets 37,554 18,825 – 56,379
Depreciation and amortization 625,367 388,157 – 1,013,524
(i) Other revenue mainly represents lease income.
(ii) Increase in non-current assets excluding long-term investments, goodwill, financial
assets, deferred tax assets and other non-current assets.
The timing of revenue recognition is shown in the table below:
Year ended December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Revenue from contracts with external
customers recognized at a point in time
– Refrigeration and air-conditioning
product components 13,833,786 14,644,135 16,560,605
– Automotive components 7,503,575 9,902,612 11,359,289
21,337,361 24,546,747 27,919,894
APPENDIX I ACCOUNTANT’S REPORT
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The Company is domiciled in Mainland China. The amount of the Group’s revenue from contracts
with external customers by locations is shown in the table below:
Year ended December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Mainland China 11,415,857 13,403,443 15,446,506
Other countries or regions 9,931,693 11,154,359 12,500,659
21,347,550 24,557,802 27,947,165
(c) Revenue from Major Customers
The major customer who contributed 10% or more of the Group’s revenue for the years ended
December 31, 2022, 2023 and 2024 is set out below:
Year ended December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Customer A 2,799,824 3,582,715 3,527,626
All the revenue derived from other single external customers were less than 10% of the Group’s
total revenue for the years ended December 31, 2022, 2023 and 2024.
(d) Contract Liabilities
During the Track Record Period, the additions to the contract liabilities were primarily due to
cash collections in advance of fulfilling performance obligations, while the reductions to the
contract liabilities were primarily due to the recognition of revenues upon fulfillment of
performance obligations.
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Contract liabilities 57,955 51,789 49,462
The following table shows how much of the revenue, which was included in the contract
liabilities at the beginning of the period, recognized during the Track Record Period relates to
carried-forward contract liabilities:
Year ended December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Revenue recognized that was included in the
beginning balance 79,816 57,955 51,789
Management expects that the unsatisfied obligation of RMB57,955,000, RMB51,789,000 and
RMB49,462,000 as at December 31, 2022, 2023 and 2024, respectively, will be recognized as
revenue during the next twelve months.
APPENDIX I ACCOUNTANT’S REPORT
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(e) Accounting Policies and Significant Judgments for Revenue Recognition
The Group recognizes revenue when (or as) a performance obligation is satisfied, i. e., when
control of the goods or services underlying the particular performance obligation is transferred to
the customer.
If control of the goods and services transfers over time, revenue is recognized over the period of
the contract by reference to the progress towards complete satisfaction of that performance
obligation. Otherwise, revenue is recognized at a point in time when the customer obtains control
of the goods and services.
When the consideration in a contract includes a variable amount, the amount of consideration is
estimated to which the Group will be entitled in exchange for transferring the goods or services to
the customer. The variable consideration is estimated at contract inception and constrained until
it is highly probable that a significant revenue reversal in the amount of cumulative revenue
recognized will not occur when the associated uncertainty with the variable consideration is
subsequently resolved.
If a customer pays consideration or the Company has a right to an amount of consideration that is
unconditional, before the Company transfers a good or service to the customer, the Company
presents the contract liability when the payment is made. A contract liability is the Company’s
obligation to transfer goods or services to a customer for which the Company has received
consideration (or an amount of consideration is due) from the customer.
(i) Sales of Goods
The Group are principally engaged in the R&D, production and sales of refrigeration and
air-conditioning product components and automotive components, which are widely
used in the refrigeration and air-conditioning product market and the automotive market,
including both of NEVs and traditional fuel vehicles.
Revenue from domestic sales of products shall be recognized based on the sales contracts,
settlement vouchers and other documents upon completion of product delivery and the
buyer’s confirmation for the acceptance of the products. Upon confirming the acceptance,
the buyer has the right to sell the products at its discretion and takes the risks of any price
fluctuation and obsolescence and loss of the products.
Revenue from oversea sales of products shall be recognized based on the sales contracts,
customs declaration form, bill of lading, and other documents upon completion of
customs declaration or shipping out of the port and arriving to the named port or place of
destination. Upon the completion of customs declaration or arrival to the named port or
place of destination, the buyer has the right to sell the products at its discretion and takes
the risks of any price fluctuation and obsolescence and loss of the products.
Revenue from metal scrap is recognized after weighing and picking up the materials and
obtaining the receipt certificate.
APPENDIX I ACCOUNTANT’S REPORT
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6. OTHER INCOME
Year ended December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Government grants 123,748 149,108 205,283
Additional deduction for VAT (i) – 37,270 21,948
Interest income (ii) 134,992 102,907 63,095
Others 1,445 1,877 1,975
260,185 291,162 292,301
(i) Pursuant to the Announcement [2023] No.43 “Notice on the Additional Value-Added Tax (“ VAT”)
Deduction Policy for Advanced Manufacturing Enterprises (ಯ
ʮѓ)” issued in 2023 by the Ministry of Finance and the State Taxation Administration,
advanced manufacturing enterprises are eligible for a 5% additional VAT deduction based on
deductible input VAT from January 1, 2023 to December 31, 2027.
(ii) The amount mainly comprises interest income on the Group’s term deposits classified as financial
assets at amortized cost calculated using the effective interest method. Interest income from cash
and cash equivalent is included in “Finance costs, net” (Note 10).
7. OTHER GAINS/(LOSSES), NET
Year ended December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Net losses on disposal of financial instruments (90,583) (136,272) (38,483)
Fair value changes on derivative financial
instruments (107,344) 48,124 (90,734)
Net foreign exchange differences 230,937 149,886 62,261
Net gains/(losses) on disposal of property, plant and
equipment and other long-term assets (i) 445,368 (1,157) (14,595)
Others (7,068) 3,004 (2,244)
471,310 63,585 (83,795)
(i) For the year ended December 31, 2022, net gains on disposal of property, plant and equipment and
other long-term assets mainly consists of gains derived from disposal of land to Xinchang Land
Arranging Storage Center (ጤɺή዆ଣᎷ௪ʕː ) amounting to approximately
RMB459,761,000. Total cash consideration of approximately RMB546,217,000 were fully received
for the year ended December 31, 2023.
APPENDIX I ACCOUNTANT’S REPORT
– I-38 –


--- page 475 ---
8. EXPENSE BY NATURE
Expenses included in cost of revenue, general and administrative expenses, selling and marketing
expenses and research and development expenses are analyzed as follows:
Year ended December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Raw materials and consumables used 12,145,341 13,474,795 15,347,151
Employee benefit expenses (Note 9) 3,773,949 4,376,396 5,118,258
Depreciation and amortisation 641,422 809,951 1,013,524
Utility costs 472,280 562,884 595,802
Office expenses 161,071 186,595 283,553
Professional services and other
consulting fees 140,813 156,554 171,141
Surplus taxes 110,068 139,816 171,277
Marketing, conference and
traveling expenses 68,903 125,451 144,873
Impairment losses on inventories 93,592 41,206 35,254
Auditors’ remuneration 2,870 3,392 3,392
Listing expenses – – 1,311
Other expenses 1,144,913 1,265,408 1,465,831
18,755,222 21,142,448 24,351,367
9. EMPLOYEE BENEFIT EXPENSES (INCLUDING DIRECTOR’S REMUNERATION)
Year ended December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Salaries, wages and bonuses 3,288,560 3,793,119 4,283,964
Share-based compensation expenses 72,020 56,698 111,677
Housing fund, medical insurance and other social
insurance 182,229 243,005 331,313
Pension costs (i) 86,092 101,683 147,099
Other employee benefits 145,048 181,891 244,205
3,773,949 4,376,396 5,118,258
(i) The Group is required to make contributions for its employees in the PRC to the state-sponsored
retirement plan at a certain rate based on the qualified salaries of the individual employees. The
PRC government is responsible for the pension liability of the retired employees.
During the year ended December 31, 2022, 2023 and 2024, no forfeited contributions were utilized
by the Group to reduce its contributions for the current year.
The Group’s certain oversea subsidiaries also participated in various defined benefit plans (Note
29).
APPENDIX I ACCOUNTANT’S REPORT
– I-39 –


--- page 476 ---
(a) Directors’and Supervisors’Remuneration
Directors’ and supervisors’ remuneration for the year, disclosed pursuant to the applicable
Listing Rules and the Hong Kong Companies Ordinance, is as follows:
Year ended December 31, 2022
Fees
Salaries,
wages and
bonuses
Retirement
benefits
Housing
fund and
other
benefits
Share-based
compensation
expenses
Total
remuneration
before tax
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Non-executive directors:
Mr. Ren Jintu (ii) ––––––
Mr. Zhang Shaobo (ii) ––––––
Executive directors:
Mr. Zhang Yabo – 2,625 16 41 – 2,682
Mr. Wang Dayong – 3,653 41 14 395 4,103
Mr. Ni Xiaoming – 2,348 31 19 370 2,768
Mr. Chen Yuzhong – 3,714 32 12 395 4,153
Independent
non-executive
directors:
Mr. Yu Shuli (i) 3 3–––– 3 3
Mr. Bao Ensi 10 8–––– 1 0 8
Mr. Shi Jianhui 10 8–––– 1 0 8
Ms. Pan Yalan 10 8–––– 1 0 8
Supervisors:
Mr. Zhao Yajun (ii) ––––––
Mr. Mo Yang (ii) ––––––
Mr. Chen Xiaoming – 425 31 9 – 465
Total 357 12,765 151 95 1,160 14,528
APPENDIX I ACCOUNTANT’S REPORT
– I-40 –


--- page 477 ---
Year ended December 31, 2023
Fees
Salaries,
wages and
bonuses
Retirement
benefits
Housing
fund and
other
benefits
Share-based
compensation
expenses
Total
remuneration
before tax
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Non-executive directors:
Mr. Ren Jintu (ii) ––––––
Mr. Zhang Shaobo (ii) ––––––
Executive directors:
Mr. Zhang Yabo – 2,465 45 21 – 2,531
Mr. Wang Dayong – 4,883 43 21 281 5,228
Mr. Ni Xiaoming – 2,623 31 19 250 2,923
Mr. Chen Yuzhong – 4,027 36 12 281 4,356
Independent
non-executive
directors:
Mr. Bao Ensi 10 8–––– 1 0 8
Mr. Shi Jianhui 10 8–––– 1 0 8
Ms. Pan Yalan 10 8–––– 1 0 8
Supervisors:
Mr. Zhao Yajun (ii) ––––––
Mr. Mo Yang (ii) ––––––
Mr. Chen Xiaoming – 597 41 10 – 648
Total 324 14,595 196 83 812 16,010
Year ended December 31, 2024
Fees
Salaries,
wages and
bonuses
Retirement
benefits
Housing
fund and
other
benefits
Share-based
compensation
expenses
Total
remuneration
before tax
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Non-executive directors:
Mr. Ren Jintu (ii) ––––––
Mr. Zhang Shaobo (ii) ––––––
Executive directors:
Mr. Zhang Yabo – 3,314 50 22 – 3,386
Mr. Wang Dayong – 5,331 48 22 514 5,915
Mr. Ni Xiaoming – 2,648 34 19 420 3,121
Mr. Chen Yuzhong – 5,868 39 12 393 6,312
Independent
non-executive
directors:
Mr. Bao Ensi 10 8–––– 1 0 8
Mr. Shi Jianhui 10 8–––– 1 0 8
Ms. Pan Yalan 10 8–––– 1 0 8
Supervisors:
Mr. Zhao Yajun (ii) ––––––
Mr. Mo Yang (ii) ––––––
Mr. Chen Xiaoming – 547 42 11 – 600
Total 324 17,708 213 86 1,327 19,658
APPENDIX I ACCOUNTANT’S REPORT
– I-41 –


--- page 478 ---
(i) Mr. Yu Shuli resigned as independent non-executed director of the Company in January
2022.
(ii) These non-executive directors and supervisors did not receive any remuneration from the
Group in relation to his services rendered for the Group. The remunerations were borne by
the Holding Company and not allocated to the Group as management of the Company
considers there is no reasonable basis for such allocation during the Track Record Period.
(b) Directors’and Supervisors’Other Benefits
No termination benefits were paid to the directors and supervisors of the Company by the Group
in respect of the director’s services as a director and a supervisor of the Group or other services in
connection with the management of the affairs of the Group during the Track Record Period.
No consideration provided to third parties for making available directors’ and supervisors’
services subsisted at the end of each reporting period or at any time during the Track Record
Period.
There were no loans, quasi-loans or other dealings entered into in favor of directors, controlled
bodies corporate by and connected entities with such directors during the Track Record Period.
Save as disclosed in Note 37, there were no significant transactions, arrangements and contracts
in relation to the Group’s business to which the Company was a party and in which a director and
a supervisor of the Company had a material interest, whether directly or indirectly, subsisted
during the Track Record Period.
(c) Five Highest Paid Individuals
The five individuals whose emoluments were the highest in the Group for the years ended
December 31, 2022, 2023 and 2024 include 3, 2 and 2 directors respectively whose emoluments are
reflected in the analysis shown in Note 9(a) above. The emoluments paid to the remaining 2, 3 and
3 individuals during the years ended December 31, 2022, 2023 and 2024, respectively, are as
follows:
Year ended December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Wages, salaries and bonuses
and benefits in kind
(including contributions to pension plans) 9,050 16,196 21,768
Share-based payments 733 820 1,134
9,783 17,016 22,902
APPENDIX I ACCOUNTANT’S REPORT
– I-42 –


--- page 479 ---
The number of the above individuals other than directors whose remuneration fell within the
following bands is as follows:
Year ended December 31,
2022 2023 2024
HKD3,500,001 to HKD4,000,000 1 1 –
HKD4,500,001 to HKD5,000,000 – 1 –
HKD5,000,001 to HKD5,500,000 – – 1
HKD6,000,001 to HKD6,500,000 – – 1
HKD7,500,001 to HKD8,000,000 1 – –
HKD10,000,001 to HKD10,500,000 – 1 –
HKD13,000,001 to HKD13,500,000 – – 1
233
10. FINANCE COSTS, NET
Year ended December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Finance income:
Interest income from financial assets held for cash
management purposes 53,136 56,238 67,221
Finance costs:
Interest expenses on lease liabilities (1,334) (5,127) (18,704)
Interest expenses on borrowings (231,878) (206,954) (133,563)
Net exchange (losses)/gains on foreign currency
borrowings and others (2,459) (17,502) 19,883
Finance costs total (235,671) (229,583) (132,384)
Finance costs, net (182,535) (173,345) (65,163)
11. INCOME TAX EXPENSES
The income tax expenses of the Group during the Track Record Period are analyzed as follows:
Year ended December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Current income tax 403,142 525,255 579,676
Under-provision from prior year 1,536 12,131 8,763
Deferred income tax 38,528 82,163 (8,478)
443,206 619,549 579,961
The Group is subject to income tax on an entity basis on profits arising in or derived from the
jurisdictions in which members of the Group are domiciled and operate.
APPENDIX I ACCOUNTANT’S REPORT
– I-43 –


--- page 480 ---
(a) PRC Corporate Income Tax
During the Track Record Period, certain subsidiaries of the Group have obtained High and New
Technology Enterprises certification (“ HNTE ”) and hence they are entitled to a preferential
corporate income tax rate of 15% for a valid period of 3 years. Other subsidiaries established and
operated in Mainland China are subject to the PRC corporate income tax at the rate of 25% for the
years ended December 31, 2022, 2023 and 2024.
According to the relevant laws and regulations promulgated by the State Taxation Administration
of the PRC, enterprises engaging in research and development activities are entitled to claim
175% from 2018 onwards (subsequently raised to 200% from 2022 onwards) of their research and
development expenses incurred as tax deductible expenses when determining their assessable
profits for that year (the “ Super Deduction for research and development ”).
(b) US Corporate Income Tax
The applicable income tax rate of United States where the Company’s subsidiaries having
significant operations for the years ended December 31, 2022, 2023 and 2024 is 0%-10% and 21%,
which is a blended state and federal rate respectively.
(c) Corporate Income Tax in Other Jurisdictions
The income tax rates of the subsidiaries from other jurisdictions, including Germany, Singapore,
Mexico and Japan, had been calculated on the estimated assessable profit for the Track Record
Period at the respective rates prevailing in the relevant jurisdictions.
(d) OECD Pillar Two Model Rules
The Group is within the scope of the Global Anti-Base Erosion (GloBE) model rules (hereinafter
referred to as “ the Pillar Two model rules ”). The Group has temporarily exempted the
recognition and disclosure of deferred tax assets and liabilities arising from Pillar Two income
taxes, and will account for the Pillar Two income taxes as current tax when incurred. As at
December 31, 2024, Pillar Two legislation has been enacted or substantively enacted and has taken
effect from January 1, 2024, in nine jurisdictions where the Group operates.
The Group has evaluated its potential exposure based on the financial performance information.
According to the assessment result, the Group expects to benefit from the transitional
Country-by-Country Reporting (CbCR) safe harbour in the above nine jurisdictions where Pillar
Two legislation has been enacted for 2024, with no top-up tax liabilities arising. Given that more
jurisdictions are expected to enact or implement Pillar Two legislation in 2025 and beyond, the
Group will continue to monitor relevant legislative developments in its operating jurisdictions to
evaluate the potential future impact on its financial statements.
APPENDIX I ACCOUNTANT’S REPORT
– I-44 –


--- page 481 ---
The income tax on the Group’s profit before income tax differs from the theoretical amount that
would arise using the enacted tax rate applicable to profits of the subsidiaries as follows:
Year ended December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Profit before income tax 3,051,258 3,553,264 3,691,687
Income tax calculated at the domestic rates
applicable to profits in the country
concerned 973,196 1,031,720 1,029,827
Tax effect of:
Preferential income tax rates applicable to the
subsidiaries (396,877) (330,321) (341,753)
Super deduction for research and
development expenditure (134,810) (160,054) (152,335)
Super deduction for capital expenditures (i) (30,761) – –
Tax losses and other temporary differences
not recognized as deferred tax assets (Note
21) 7,084 39,637 35,735
Non-deductible expenses for tax purposes 19,235 6,335 10,601
Differences between nominal interests and
actual interests for convertible bonds 13,215 27,012 –
The impact of investment income accounted
for using the equity method (1,229) (1,311) (1,475)
Under-provision from prior year 1,536 12,131 8,763
Others (7,383) (5,600) (9,402)
443,206 619,549 579,961
(i) Pursuant to the Announcement [2022] No. 28 issued by the Ministry of Finance, the State
Administration of Taxation and the Ministry of Science and Technology, High and New
Technology Enterprises are eligible for a 100% additional CIT deduction for qualifying
capital expenditure incurred, from October 1, 2022 to December 31, 2022.
12. DIVIDENDS
Year ended December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Final dividends in respect of the previous year,
declared and paid during the year (i) 535,335 716,973 926,626
Interim dividends in respect of current year,
declared and paid during the year (ii) 358,624 186,023 373,119
Total 893,959 902,996 1,299,745
(i) Final dividends attributable to owners of the Company in respect of 2021, 2022 and 2023 of
RMB1.50 yuan per 10 shares (tax inclusive), RMB2.00 yuan per 10 shares (tax inclusive) and
RMB2.50 yuan per 10 shares (tax inclusive), were approved by the shareholder in the Annual
General Meeting, respectively.
APPENDIX I ACCOUNTANT’S REPORT
– I-45 –


--- page 482 ---
(ii) Interim dividends attributable to owners of the Company in respect of 2022, 2023 and 2024 are
RMB1.00 yuan per 10 shares (tax inclusive), RMB0.50 yuan per 10 shares (tax inclusive) and
RMB1.00 yuan per 10 shares (tax inclusive), were approved by the shareholder in the Annual
General Meeting, respectively.
13. EARNINGS PER SHARE
(a) Basic Earnings Per Share
The calculation of basic earnings per share is based on the following:
Year ended December 31,
2022 2023 2024
Profit attributable to ordinary shareholders of
the Company (RMB’000) 2,573,344 2,920,993 3,099,165
Less: Dividends payable to expected
vested restricted shares
(RMB’000) (3,942) (4,128) (6,254)
Profit attributable to ordinary shareholders of
the Company used in calculating basic EPS
(RMB’000) 2,569,402 2,916,865 3,092,911
Weighted average number of ordinary shares
in issue (thousands) 3,561,334 3,615,326 3,698,716
Basic EPS (RMB per share) 0.72 0.81 0.84
(b) Diluted Earnings Per Share
Year ended December 31,
2022 2023 2024
Adjusted profit attributable to owners of the
Company used in calculating diluted EPS
(RMB’000) 2,573,344 2,920,993 3,099,165
Weighted average number of ordinary shares
in issue (thousands) 3,561,334 3,615,326 3,698,716
Adjustments for potential shares arising from
share schemes (thousands) 5,320 6,949 7,962
Weighted average number of ordinary shares
used in calculating diluted EPS (thousands) 3,566,654 3,622,275 3,706,678
Diluted EPS (RMB per share) 0.72 0.81 0.84
APPENDIX I ACCOUNTANT’S REPORT
– I-46 –


--- page 483 ---
14. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
The Group
The amounts of investments accounted for using the equity method recognized in the Historical
Financial Information are as follows:
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Associates 32,438 37,924 40,600
The movements of investments in associates during the Track Record Period are as follows:
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
At the beginning of the year 22,681 32,438 37,924
Additions 5,500 – –
Share of results of associates 7,732 7,986 8,925
Dividends (2,225) (2,500) (6,249)
Disposals (1,250) – –
At the end of the year 32,438 37,924 40,600
The associates of the Group have been accounted based on the financial information prepared under the
accounting policies consistent with the Group.
The Group has interests in a number of individually immaterial associates that are accounted for using
the equity method. The carrying amount and the Group’s share of the results of individually immaterial
associates are shown in aggregate as below:
Reconciliation of the carrying amount of the interests recognized in the Historical Financial Information:
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Aggregate carrying amount of individually
immaterial associates 32,438 37,924 40,600
Aggregate amounts of the Group’s share of:
Profit for the year 7,732 7,986 8,925
Other comprehensive income – – –
Total comprehensive income 7,732 7,986 8,925
APPENDIX I ACCOUNTANT’S REPORT
– I-47 –


--- page 484 ---
The Company
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Associates 28,958 33,316 34,628
The movements of investments in associates during the Track Record Period are as follows:
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
At the beginning of the year 20,390 28,958 33,316
Additions 5,000 – –
Share of results of associates 7,043 6,858 7,561
Dividends (2,225) (2,500) (6,249)
Disposals (1,250) – –
At the end of the year 28,958 33,316 34,628
Reconciliation of the carrying amount of the interests recognized in the Historical Financial Information:
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Aggregate carrying amount of individually
immaterial associates 28,958 33,316 34,628
Aggregate amounts of the Company’s share of:
Profit for the year 7,043 6,858 7,561
Other comprehensive income – – –
Total comprehensive income 7,043 6,858 7,561
APPENDIX I ACCOUNTANT’S REPORT
– I-48 –


--- page 485 ---
15. SUBSIDIARIES
As at the date of this report and during the Track Record Period, the Company’s principal subsidiaries are as follows:
Name of subsidiary
Place of
incorporation
and type of
legal entity
Share capital
registered/
paid-up
capital
Equity interest and voting right
held by the Company
Principal activities
as at December 31,
2022 2023 2024
’000
1 Zhejiang Sanhua Trading Co., Ltd.
(ʮ̡ )
PRC, limited
liability
company
RMB50,000 100% 100% 100% Marketing of refrigeration and A/C
electrical components
2 Zhejiang Sanhua Climate & Appliance
Control Group Co., Ltd. (Ⴁ
ʮ̡ )
PRC, limited
liability
company
RMB250,000 100% 100% 100% Manufacturing and sales of refrigeration
equipment, automatic control
components, mechanical equipment
and household appliances
3 Zhejiang Sanhua Automotive
Components Co., Ltd. (ӛԓ
ʮ̡ )
PRC, limited
liability
company
RMB2,160,000 100% 100% 100% Manufacturing and marketing of
automotive components
4 Sanhua (Hangzhou) Micro Channel
Heat Exchanger Co., Ltd. (ฆ
ʮ̡ )
PRC, limited
liability
company
RMB360,000 100% 100% 100% Development and manufacturing of
microchannel heat exchanger products
and components
5 Shaoxing Sanhua New Energy
Automotive Components Co., Ltd.
(ʮ̡ )
PRC, limited
liability
company
RMB1,250,000 100% 100% 100% Manufacturing, wholesale, retail and
technology development of
automotive components
6 Zhejiang Sanhua Commercial
Refrigeration Co., Ltd. (ਠ͜
ʮ̡ )
PRC, limited
liability
company
RMB1,655,290 100% 100% 100% Manufacturing and marketing of
refrigeration and A/C electrical
components
7 Shaoxing Sanhua New Energy
Automotive Components Co., Ltd.
(ʮ̡ )
PRC, limited
liability
company
RMB1,350,000 100% 100% 100% Manufacturing, wholesale and retail of
automotive components
APPENDIX I ACCOUNTANT’S REPORT
– I-49 –


--- page 486 ---
Name of subsidiary
Place of
incorporation
and type of
legal entity
Share capital
registered/
paid-up
capital
Equity interest and voting right
held by the Company
Principal activities
as at December 31,
2022 2023 2024
’000
8 Zhejiang Sanhua Automotive
Components Trading Co., Ltd. ( एϪ
ʮ̡ )
PRC, limited
liability
company
RMB50,000 100% 100% 100% Wholesale and retail of automotive
components
9 Sanhua International Singapore Pte.
Ltd. (ʮ̡ )
Singapore USD175,150 100% 100% 100% Refrigeration and A/C electrical
components manufacturing,
marketing and investment
management
10 Sanhua International, Inc. (਷ყϞ
ʮ̡)
USA USD37,550 100% 100% 100% Refrigeration and A/C electrical
components manufacturing,
marketing and investment
management
11 Sanhua Singapore Automotive
Investment Pte. Ltd. (อ̋սӛԓ
ʮ̡ )
Singapore USD70,100 100% 100% 100% Manufacturing, sales and development
of automotive components
12 R-Squared Puckett, Inc. (RдतႡி
ʮ̡ )
USA USD1 100% 100% 100% Development and manufacturing and
sales of microchannel heat exchanger
products and components
13 Wuhu Sanhua Auto- Control
Components Co., Ltd. (Іછ
ʮ̡ )
PRC, limited
liability
company
RMB300,000 100% 100% 100% Manufacturing and sales of automatic
control components, refrigeration
equipment, mechanical equipment,
household appliances, testing
equipment, instruments and meters
14 Sanhua Automotive Poland Sp. z o.o.
(ப΂ʮ̡ )
Poland PLN85,465 100% 100% 100% Manufacturing and sales of automotive
components
15 Sanhua Industry (Thailand) Co., Ltd.
(ʮ̡ )
Thailand THB369,185 100% 100% 100% Manufacturing and sales of refrigeration
components
16 Guangdong Sanhua Green Energy Auto
Parts Co., Ltd. (อঐ๕ӛԓ௅
ʮ̡ )
PRC, limited
liability
company
RMB1,000,000 100% 100% 100% Manufacturing, retail and wholesale of
auto parts and sales of new energy
auto electrical accessories
APPENDIX I ACCOUNTANT’S REPORT
– I-50 –


--- page 487 ---
Name of subsidiary
Place of
incorporation
and type of
legal entity
Share capital
registered/
paid-up
capital
Equity interest and voting right
held by the Company
Principal activities
as at December 31,
2022 2023 2024
’000
17 Sanhua Automotive Mexico S. de R.L. de
C.V . (ʮ̡ )
Mexico MXN
1,095,682
100% 100% 100% Manufacturing of automotive
components
18 Sanhua (Vietnam) Co., Ltd.
(ʮ̡ )
Vietnam USD38,500 100% 100% 100% R&D, manufacturing and sales of air
conditioner and refrigerator
refrigeration components
19 AWECO Polska Appliance Sp. z o.o. ( ԭ
ப΂ʮ̡ )
Poland MXN50 100% 100% 100% R&D, manufacturing and sales of
components for coffee machines and
dishwashers
APPENDIX I ACCOUNTANT’S REPORT
– I-51 –


--- page 488 ---
The statutory auditors of the above subsidiaries of the Group during the Track Record Period are set out
below:
Name of statutory auditors
Name of subsidiary 2022 2023 2024
1 Zhejiang Sanhua Trading Co., Ltd.
(ʮ̡ ) (d)
Pan-China Certified
Public Accountants
LLP
Pan-China Certified
Public Accountants
LLP
Pan-China Certified
Public Accountants
LLP
2 Zhejiang Sanhua Climate &
Appliance Control Group
C o . ,L t d .(Ⴁиණྠ
ʮ̡ ) (d)
Pan-China Certified
Public Accountants
LLP
Pan-China Certified
Public Accountants
LLP
Pan-China Certified
Public Accountants
LLP
3 Zhejiang Sanhua Automotive
Components Co., Ltd. (ڀ
ʮ̡ ) (d)
Pan-China Certified
Public Accountants
LLP
Pan-China Certified
Public Accountants
LLP
Pan-China Certified
Public Accountants
LLP
4 Sanhua (Hangzhou) Micro
Channel Heat Exchanger
C o . ,L t d .(ฆஷ༸౬ᆠኜ
ʮ̡ )
Pan-China Certified
Public Accountants
LLP
Pan-China Certified
Public Accountants
LLP
Pan-China Certified
Public Accountants
LLP
5 Shaoxing Sanhua New Energy
Automotive Components Co.,
Ltd. (อঐ๕ӛԓ௅΁Ϟ
ʮ̡)
Pan-China Certified
Public Accountants
LLP
Pan-China Certified
Public Accountants
LLP
Pan-China Certified
Public Accountants
LLP
6 Zhejiang Sanhua Commercial
Refrigeration Co., Ltd.
(ʮ̡ ) (d)
Pan-China Certified
Public Accountants
LLP
Pan-China Certified
Public Accountants
LLP
Pan-China Certified
Public Accountants
LLP
7 Shaoxing Sanhua New Energy
Automotive Components Co.,
Ltd. (Ҧ
ʮ̡ )
Pan-China Certified
Public Accountants
LLP
Pan-China Certified
Public Accountants
LLP
Pan-China Certified
Public Accountants
LLP
8 Zhejiang Sanhua Automotive
Components Trading Co., Ltd.
(ʮ̡ ) (d)
Pan-China Certified
Public Accountants
LLP
Pan-China Certified
Public Accountants
LLP
Pan-China Certified
Public Accountants
LLP
9 Sanhua International Singapore
Pte. Ltd (਷ყอ̋սӷɛ
ʮ̡ )
P .K. Loke & Partners
LLP
P .K. Loke & Partners
LLP
P .K. Loke & Partners
LLP
10 Sanhua International, Inc.
(ʮ̡ )
RSM US LLP RSM US LLP RSM US LLP
11 Sanhua Singapore Automotive
Investment Pte. Ltd. (อ̋ս
ʮ̡ ) (a) (d)
— — RSM SG Assurance
LLP
12 R-Squared Puckett, Inc.
(Rʮ̡ ) (d)
RSM US LLP RSM US LLP RSM US LLP
13 Wuhu Sanhua Auto- Control
Components Co., Ltd.
(ʮ̡ )
Pan-China Certified
Public Accountants
LLP
Pan-China Certified
Public Accountants
LLP
Pan-China Certified
Public Accountants
LLP
14 Sanhua Automotive Poland
S p .zo . o .(ᚆӛԓཧ௅΁
ப΂ʮ̡ ) (b)
— — Nexia Pro Audit
Poland
15 Sanhua Industry (Thailand) Co.,
Ltd. (ʮ̡ ) (c)
— Siriraporn Audit &
Consulting Co.,
Ltd.
SKP Audit Firm Co.,
Ltd.
16 Guangdong Sanhua Green Energy
Auto Parts Co., Ltd. (อ
ʮ̡ ) (c) (d)
— Pan-China Certified
Public Accountants
LLP
Pan-China Certified
Public Accountants
LLP
APPENDIX I ACCOUNTANT’S REPORT
– I-52 –


--- page 489 ---
Name of statutory auditors
Name of subsidiary 2022 2023 2024
17 Sanhua Automotive Mexico S. de
R.L. de C.V . (ӛԓཧ௅΁
ʮ̡ ) (d)
RSM US LLP RSM US LLP RSM US LLP
18 Sanhua (Vietnam) Co., Ltd.
(ʮ̡ )
IPA AUDITING AND
CONSULTING
FIRM
IPA AUDITING AND
CONSULTING
FIRM
IPA AUDITING AND
CONSULTING
FIRM
19 AWECO Polska Appliance
S p .zo . o .(ᚆ
ப΂ʮ̡ )
Nexia Pro Audit
Poland
Nexia Pro Audit
Poland
Nexia Pro Audit
Poland
(a) The entity was established in 2023 and has not appointed an auditor to issue statutory financial
statements for the year ended December 31, 2023.
(b) The entity was established in 2022 and has not appointed an auditor to issue statutory financial
statements for the year ended December 31, 2022 and 2023.
(c) These entities were established in 2023.
(d) For the year ended December 31, 2024, the statutory financial statements of these entities have not
been issued as at the date of this report.
(e) The English names of the Mainland China companies are direct translation or transliteration of
their Chinese registered names.
(f) The above table lists the subsidiaries of the Company which, in the opinion of the directors of the
Company, principally affected the results or assets and liabilities of the Group. To give details of
other subsidiaries would, in the opinion of the directors of the Company, result in particulars of
excessive length.
(g) In the opinion of the directors, no non-controlling interests in subsidiaries are material to the
Group.
The Company
Investments in subsidiaries
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Deemed investments relating to share-based
payments 141,812 163,689 232,983
Investments in subsidiaries 7,371,888 8,683,128 8,888,426
7,513,700 8,846,817 9,121,409
APPENDIX I ACCOUNTANT’S REPORT
– I-53 –


--- page 490 ---
16. PROPERTY, PLANT AND EQUIPMENT
The Group
Buildings
Freehold
land
Machinery
and
equipment
Motor
vehicles
Office
equipment
Construction
in progress
Leasehold
improvement Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At January 1, 2022
Cost 2,262,809 60,398 4,497,788 36,025 253,136 1,343,529 31,560 8,485,245
Accumulated depreciation
and impairment (661,384) (3,774) (1,975,708) (28,168) (150,349) – (4,057) (2,823,440)
Carrying amounts 1,601,425 56,624 2,522,080 7,857 102,787 1,343,529 27,503 5,661,805
Opening carrying amounts 1,601,425 56,624 2,522,080 7,857 102,787 1,343,529 27,503 5,661,805
Additions – 14,369 548,309 9,528 33,516 1,837,241 24,626 2,467,589
Transfers from construction
in progress 1,268,022 – 901,448 14 801 (2,170,285) – –
Transfer out to other assets ––––– (15,860) – (15,860)
Disposals (50,682) – (83,541) (550) (6,685) – – (141,458)
Depreciation charges (92,969) – (421,580) (3,977) (17,853) – (7,673) (544,052)
Currency translation
differences 18,856 6,705 38,543 155 837 37,881 1,215 104,192
Closing carrying amounts 2,744,652 77,698 3,505,259 13,027 113,403 1,032,506 45,671 7,532,216
At December 31, 2022
Cost 3,362,538 81,821 5,836,638 42,330 255,617 1,032,506 47,567 10,659,017
Accumulated depreciation
and impairment (617,886) (4,123) (2,331,379) (29,303) (142,214) – (1,896) (3,126,801)
Carrying amounts 2,744,652 77,698 3,505,259 13,027 113,403 1,032,506 45,671 7,532,216
APPENDIX I ACCOUNTANT’S REPORT
– I-54 –


--- page 491 ---
Buildings
Freehold
land
Machinery
and
equipment
Motor
vehicles
Office
equipment
Construction
in progress
Leasehold
improvement Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At January 1, 2023
Cost 3,362,538 81,821 5,836,638 42,330 255,617 1,032,506 47,567 10,659,017
Accumulated depreciation
and impairment (617,886) (4,123) (2,331,379) (29,303) (142,214) – (1,896) (3,126,801)
Carrying amounts 2,744,652 77,698 3,505,259 13,027 113,403 1,032,506 45,671 7,532,216
Opening carrying amounts 2,744,652 77,698 3,505,259 13,027 113,403 1,032,506 45,671 7,532,216
Additions – 3,275 444,814 9,446 45,554 2,572,024 56,088 3,131,201
Transfers from construction
in progress 644,317 – 869,035 – 6,570 (1,519,922) – –
Transfer out to other assets ––––– (53,780) – (53,780)
Disposals (98) (5,626) (51,069) (382) (2,528) – – (59,703)
Depreciation charges (144,746) – (514,559) (3,738) (23,934) – (11,682) (698,659)
Impairment charges (i) – – (13,333) – (31) – – (13,364)
Currency translation
differences 46,779 10,442 38,980 70 4,214 5,499 1,012 106,996
Closing carrying amounts 3,290,904 85,789 4,279,127 18,423 143,248 2,036,327 91,089 9,944,907
At December 31, 2023
Cost 4,049,448 85,789 7,015,746 48,013 288,533 2,036,327 102,771 13,626,627
Accumulated depreciation
and impairment (758,544) – (2,736,619) (29,590) (145,285) – (11,682) (3,681,720)
Carrying amounts 3,290,904 85,789 4,279,127 18,423 143,248 2,036,327 91,089 9,944,907
APPENDIX I ACCOUNTANT’S REPORT
– I-55 –


--- page 492 ---
Buildings
Freehold
land
Machinery
and
equipment
Motor
vehicles
Office
equipment
Construction
in progress
Leasehold
improvement Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At January 1, 2024
Cost 4,049,448 85,789 7,015,746 48,013 288,533 2,036,327 102,771 13,626,627
Accumulated depreciation
and impairment (758,544) – (2,736,619) (29,590) (145,285) – (11,682) (3,681,720)
Carrying amounts 3,290,904 85,789 4,279,127 18,423 143,248 2,036,327 91,089 9,944,907
Opening carrying amounts 3,290,904 85,789 4,279,127 18,423 143,248 2,036,327 91,089 9,944,907
Additions 1,899 94,965 207,512 3,497 5,522 3,541,790 81,084 3,936,269
Transfers from construction
in progress 993,309 – 1,789,018 4,284 51,662 (2,838,273) – –
Transfer out to other assets ––––– (567,859) – (567,859)
Disposals (5,567) – (67,926) (94) (8,130) – – (81,717)
Depreciation charges (154,574) – (627,188) (4,883) (44,003) – (18,018) (848,666)
Impairment charges (i) – – (20,849) – (33) – – (20,882)
Currency translation
differences (39,733) (11,509) (19,134) (87) (1,749) – (15,282) (87,494)
Closing carrying amounts 4,086,238 169,245 5,540,560 21,140 146,517 2,171,985 138,873 12,274,558
At December 31, 2024
Cost 4,987,327 169,245 8,699,025 53,045 298,477 2,171,985 168,573 16,547,677
Accumulated depreciation
and impairment (901,089) – (3,158,465) (31,905) (151,960) – (29,700) (4,273,119)
Carrying amounts 4,086,238 169,245 5,540,560 21,140 146,517 2,171,985 138,873 12,274,558
(i) As at December 31, 2023 and 2024, the management of the Group identified impairment indicators
of certain machinery and office equipment and carried out an impairment review on these assets.
The recoverable amounts were determined by the higher of fair value less cost to sell and its
value-in-use. The valuation models used to estimate the fair values of certain assets were with
reference to recent prices of similar assets of similar conditions when such prices could be reliably
obtained, where applicable. As a result of the assessment, the Group provided impairment losses
for machinery and office equipment amounting to RMB13,333,000 and RMB31,000 respectively
for the year ended December 31, 2023 and RMB20,849,000 and RMB33,000 respectively for the
year ended December 31, 2024.
(a) Except freehold lands account no depreciation, property, plant, and equipment are stated at
historical cost less accumulated depreciation and accumulated impairment losses. Historical cost
includes expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated using the straight-line method to allocate their cost, net of their
residual values, over their estimated useful lives or, in the case of leasehold improvements, the
shorter of lease term as follows:
Buildings 20-30 years
Machinery and equipment 5-12 years
Motor vehicles 5-8 years
Office equipment 5-8 years
Leasehold improvements Shorter of their useful life and lease term
See Note 39 for the other accounting policies relevant to property, plant and equipment.
APPENDIX I ACCOUNTANT’S REPORT
– I-56 –


--- page 493 ---
(b) Depreciation of the Group’s property, plant and equipment has been recognized as follows:
Year ended December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Cost of revenue 434,512 558,511 666,906
Selling and marketing expenses 933 1,018 771
General and administrative expenses 69,811 98,954 128,951
Research and development expenses 38,796 40,176 52,038
544,052 698,659 848,666
The Company
Buildings
Machinery
and
equipment
Motor
vehicles
Office
equipment
Construction
in progress
Leasehold
improvement Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At January 1, 2022
Cost 1,118,616 1,438,013 11,619 77,403 73,592 – 2,719,243
Accumulated
depreciation and
impairment (288,400) (765,183) (10,139) (55,326) – – (1,119,048)
Carrying amounts 830,216 672,830 1,480 22,077 73,592 – 1,600,195
Opening carrying
amounts 830,216 672,830 1,480 22,077 73,592 – 1,600,195
Additions – 72,714 829 2,253 122,933 573 199,302
Transfers from
construction in
progress 81,070 75,505 – – (156,575) – –
Transfer out to
other assets –––– (3,923) – (3,923)
Disposals (15,295) (1,410) (10) (9) – – (16,724)
Depreciation
charges (33,530) (109,459) (613) (5,537) – (72) (149,211)
Closing carrying
amounts 862,461 710,180 1,686 18,784 36,027 501 1,629,639
At December 31,
2022
Cost 1,170,483 1,577,262 12,241 77,051 36,027 573 2,873,637
Accumulated
depreciation and
impairment (308,022) (867,082) (10,555) (58,267) – (72) (1,243,998)
Carrying amounts 862,461 710,180 1,686 18,784 36,027 501 1,629,639
APPENDIX I ACCOUNTANT’S REPORT
– I-57 –


--- page 494 ---
Buildings
Machinery
and
equipment
Motor
vehicles
Office
equipment
Construction
In progress
Leasehold
improvement Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At January 1, 2023
Cost 1,170,483 1,577,262 12,241 77,051 36,027 573 2,873,637
Accumulated
depreciation and
impairment (308,022) (867,082) (10,555) (58,267) – (72) (1,243,998)
Carrying amounts 862,461 710,180 1,686 18,784 36,027 501 1,629,639
Opening carrying
amounts 862,461 710,180 1,686 18,784 36,027 501 1,629,639
Additions – 126,102 1,984 3,940 75,028 2,364 209,418
Transfers from
construction in
progress 50,50 8––– (50,508) – –
Transfer out to
other assets –––– (6,676) – (6,676)
Disposals – (5,530) (72) (171) – – (5,773)
Depreciation
charges (35,680) (105,028) (475) (5,358) – (1,030) (147,571)
Closing carrying
amounts 877,289 725,724 3,123 17,195 53,871 1,835 1,679,037
At December 31,
2023
Cost 1,220,991 1,666,067 12,793 78,053 53,871 2,937 3,034,712
Accumulated
depreciation and
impairment (343,702) (940,343) (9,670) (60,858) – (1,102) (1,355,675)
Carrying amounts 877,289 725,724 3,123 17,195 53,871 1,835 1,679,037
APPENDIX I ACCOUNTANT’S REPORT
– I-58 –


--- page 495 ---
Buildings
Machinery
and
equipment
Motor
vehicles
Office
equipment
Construction
In progress
Leasehold
improvement Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At January 1, 2024
Cost 1,220,991 1,666,067 12,793 78,053 53,871 2,937 3,034,712
Accumulated
depreciation and
impairment (343,702) (940,343) (9,670) (60,858) – (1,102) (1,355,675)
Carrying amounts 877,289 725,724 3,123 17,195 53,871 1,835 1,679,037
Opening carrying
amounts 877,289 725,724 3,123 17,195 53,871 1,835 1,679,037
Additions –––– 268,487 2,133 270,620
Transfers from
construction in
progress 63,960 174,396 743 15,018 (254,117) – –
Transfer out to
other assets –––– (13,250) – (13,250)
Disposals – (9,459) (10) (1,814) – – (11,283)
Depreciation
charges (43,262) (109,718) (636) (14,813) – (2,069) (170,498)
Impairment
charges – (217) –––– (217)
Closing carrying
amounts 897,987 780,726 3,220 15,586 54,991 1,899 1,754,409
At December 31,
2024
Cost 1,284,951 1,788,539 13,327 84,934 54,991 5,070 3,231,812
Accumulated
depreciation and
impairment (386,964) (1,007,813) (10,107) (69,348) – (3,171) (1,477,403)
Carrying amounts 897,987 780,726 3,220 15,586 54,991 1,899 1,754,409
APPENDIX I ACCOUNTANT’S REPORT
– I-59 –


--- page 496 ---
17. LEASE
This note provides information for leases where the Group is a lessee.
(a) Amounts Recognized in the Consolidated Statements of Financial Position
The Group
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Right-of-use assets
Land use right 609,886 710,571 868,746
Buildings 280,647 306,588 331,340
Motor vehicles 3,630 6,667 5,245
894,163 1,023,826 1,205,331
Lease liabilities
Current 67,661 68,898 90,574
Non-current 202,028 221,295 237,913
269,689 290,193 328,487
Additions to the right-of-use assets during the years ended December 31, 2022, 2023 and 2024
were approximately RMB204,356,000, RMB222,856,000 and RMB366,606,000, respectively.
The Company
As at December 31, 2022, 2023 and 2024, the net carrying amounts of right-of- use assets of the
Company were approximately RMB142,126,000, RMB136,623,000 and RMB128,793,000
respectively. The balances mainly composed land use rights.
APPENDIX I ACCOUNTANT’S REPORT
– I-60 –


--- page 497 ---
(b) Amounts Recognized in the Consolidated Statements of Profit or Loss
The consolidated statements of profit or loss and the consolidated statements of cash flows
contain the following amounts relating to leases:
Year ended December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Depreciation charge of right-of-use assets:
– Land use right 15,628 16,723 18,450
– Buildings 68,510 83,207 117,072
– Motor vehicles 46 797 89
84,184 100,727 135,611
Interest expense (including in finance cost) 1,334 5,127 18,704
Expense relating to short-term and low value
leases not included in lease liabilities 22,190 37,500 20,592
23,524 42,627 39,296
The total cash outflows for lease payments during the years ended December 31, 2022, 2023 and
2024 were approximately RMB85,715,000, RMB143,310,000, RMB144,601,000, respectively.
The Group leases properties, offices, land-use-right and automobile as lessee. Lease contracts are
typically made for fixed periods from 1 to 10 years. They are stated at cost less accumulated
depreciation and accumulated impairment losses.
See Note 39 for the other accounting policies relevant to lease.
APPENDIX I ACCOUNTANT’S REPORT
– I-61 –


--- page 498 ---
18. INTANGIBLE ASSETS
The Group
Software
Intellectual
properties Goodwill Total
RMB’000 RMB’000 RMB’000 RMB’000
At January 1, 2022
Cost 38,713 61,702 39,551 139,966
Accumulated amortization and impairment (28,026) (30,927) (31,959) (90,912)
Carrying amounts 10,687 30,775 7,592 49,054
Year ended December 31, 2022
Opening carrying amounts 10,687 30,775 7,592 49,054
Additions 5,243 3,923 – 9,166
Currency translation differences 102 – – 102
Amortization charges (4,432) (8,064) – (12,496)
Closing carrying amounts 11,600 26,634 7,592 45,826
At December 31, 2022
Cost 44,529 65,625 39,551 149,705
Accumulated amortization and impairment (32,929) (38,991) (31,959) (103,879)
Carrying amounts 11,600 26,634 7,592 45,826
Software
Intellectual
properties Goodwill Total
RMB’000 RMB’000 RMB’000 RMB’000
At January 1, 2023
Cost 44,529 65,625 39,551 149,705
Accumulated amortization and impairment (32,929) (38,991) (31,959) (103,879)
Carrying amounts 11,600 26,634 7,592 45,826
Year ended December 31, 2023
Opening carrying amounts 11,600 26,634 7,592 45,826
Additions 15,810 – – 15,810
Disposals (357) – – (357)
Currency translation differences 2,238 – – 2,238
Impairment charges – – (807) (807)
Amortization charges (5,296) (4,460) – (9,756)
Closing carrying amounts 23,995 22,174 6,785 52,954
APPENDIX I ACCOUNTANT’S REPORT
– I-62 –


--- page 499 ---
Software
Intellectual
properties Goodwill Total
RMB’000 RMB’000 RMB’000 RMB’000
At December 31, 2023
Cost 59,243 52,825 39,551 151,619
Accumulated amortization and impairment (35,248) (30,651) (32,766) (98,665)
Carrying amounts 23,995 22,174 6,785 52,954
Software
Intellectual
properties Goodwill Total
RMB’000 RMB’000 RMB’000 RMB’000
At January 1, 2024
Cost 59,243 52,825 39,551 151,619
Accumulated amortization and impairment (35,248) (30,651) (32,766) (98,665)
Carrying amounts 23,995 22,174 6,785 52,954
Year ended December 31, 2024
Opening carrying amounts 23,995 22,174 6,785 52,954
Additions 18,869 – – 18,869
Disposals (609) – – (609)
Currency translation differences (173) – – (173)
Impairment charges – – (6,785) (6,785)
Amortization charges (16,154) (11,582) – (27,736)
Closing carrying amounts 25,928 10,592 – 36,520
At December 31, 2024
Cost 76,630 36,681 39,551 152,862
Accumulated amortization and impairment (50,702) (26,089) (39,551) (116,342)
Carrying amounts 25,928 10,592 – 36,520
APPENDIX I ACCOUNTANT’S REPORT
– I-63 –


--- page 500 ---
Amortization expenses have been charged to the consolidated statements of profit or loss as follows:
Year ended December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
General and administrative expenses 11,820 7,709 15,883
Research and development expenses 676 2,047 11,853
12,496 9,756 27,736
The Company
Software
Intellectual
properties Total
RMB’000 RMB’000 RMB’000
At January 1, 2022
Cost 12,127 13,206 25,333
Accumulated amortization (9,424) (5,339) (14,763)
Carrying amounts 2,703 7,867 10,570
Year ended December 31, 2022
Opening carrying amounts 2,703 7,867 10,570
Additions – 3,923 3,923
Amortization charges (1,081) (1,321) (2,402)
Closing carrying amounts 1,622 10,469 12,091
At December 31, 2022
Cost 12,127 17,129 29,256
Accumulated amortization (10,505) (6,660) (17,165)
Carrying amounts 1,622 10,469 12,091
APPENDIX I ACCOUNTANT’S REPORT
– I-64 –


--- page 501 ---
Software
Intellectual
properties Total
RMB’000 RMB’000 RMB’000
At January 1, 2023
Cost 12,127 17,129 29,256
Accumulated amortization (10,505) (6,660) (17,165)
Carrying amounts 1,622 10,469 12,091
Year ended December 31, 2023
Opening carrying amounts 1,622 10,469 12,091
Additions 6,676 – 6,676
Amortization charges (2,568) (1,321) (3,889)
Closing carrying amounts 5,730 9,148 14,878
At December 31, 2023
Cost 18,803 17,129 35,932
Accumulated amortization (13,073) (7,981) (21,054)
Carrying amounts 5,730 9,148 14,878
Software
Intellectual
properties Total
RMB’000 RMB’000 RMB’000
At January 1, 2024
Cost 18,803 17,129 35,932
Accumulated amortization (13,073) (7,981) (21,054)
Carrying amounts 5,730 9,148 14,878
Year ended December 31, 2024
Opening carrying amounts 5,730 9,148 14,878
Additions 13,250 – 13,250
Disposals (227) – (227)
Amortization charges (3,768) (1,321) (5,089)
Closing carrying amounts 14,985 7,827 22,812
At December 31, 2024
Cost 31,749 17,129 48,878
Accumulated amortization (16,764) (9,302) (26,066)
Carrying amounts 14,985 7,827 22,812
(a) Impairment Tests for Goodwill
Goodwill is not subject to amortization and is tested for impairment annually, or more frequently
if events or changes in circumstances indicate that they might be impaired. An impairment loss is
APPENDIX I ACCOUNTANT’S REPORT
– I-65 –


--- page 502 ---
recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in
use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash inflows which are largely independent of the cash inflows
from other assets or groups of assets.
The carrying amount of goodwill allocated to the cash generating units or group of cash
generating units (“ CGU”o r“ CGUs ”) are as follows:
Opening Addition Impairment Closing
RMB’000 RMB’000 RMB’000 RMB’000
Year ended December 31, 2024
Microchannel CGUs
(“MHE CGUs”) (i) ––––
Board Replacement CGU
(“BRT CGU”) (ii) 6,785 – (6,785) –
Year ended December 31, 2023
Microchannel CGUs ––––
Board Replacement CGU 7,592 – (807) 6,785
Year ended December 31, 2022
Microchannel CGUs ––––
Board Replacement CGU 7,592 – – 7,592
(i) The goodwill of MHE CGUs is generated from business combination of R-Squared Puckett
Inc. in 2014 and allocated to Zhejiang Sanhua Microchannel Heat Exchanger Co., Ltd. ( ए
ʮ̡ ) and its subsidiaries (collectively, the “ Microchannel
Group ”). Management regards Microchannel Group as a separate group of CGUs and
reviews the business performance and monitors the goodwill on the CGUs basis.
As at December 31, 2021, as the performance was less than expected, according to the
management’s estimation of the recoverable amount of Microchannel Group with the
assistance of an independent valuer, which was calculated based on its value-in-use, an
impairment of goodwill approximately RMB31,959,000 was recognized, resulting in a
reduction in the carrying amount of the goodwill of Microchannel Group to zero. The key
assumptions used to determine the recoverable amount include revenue growth rate,
profit rate, terminal growth rate and pre-tax discount rate. The pre-tax discount rate used
for the assessment is 13.13%.
(ii) The goodwill of BRT CGU is generated from business combination of Zhejiang Sanhua
Board Replacement Technology Co., Ltd. (ʮ̡ )( “ Board
Replacement ”). Management regards Board Replacement as a separate CGU and reviews
the business performance and monitors the goodwill on a CGU basis.
As at December 31, 2024, as the performance was less than expected, according to the
management’s estimation of the recoverable amount of Board Replacement with the
assistance of an independent valuer, which was calculated based on its value-in-use, an
impairment of RMB6,785,000 was recognized, resulting in a reduction in the carrying
amount of goodwill of Board Replacement to Zero.
APPENDIX I ACCOUNTANT’S REPORT
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The key assumptions used by management for VIU calculation for the impairment test of Board
Replacement goodwill as at December 31, 2022, 2023 and 2024, included:
As at December 31,
2022 2023 2024
Revenue annual growth rates (i) 1.99% 10.10% 36.17%
Operating profit margin (i) 16.29%-17.47% 3.06%-10.77% 0.41%-10.00%
Perpetual annual growth rates 0.00% 0.00% 0.00%
Pre-tax discount rates 13.06% 10.90% 10.99%
(i) The expected revenue annual growth rates increased significantly mainly due to the
business expansion exceeds the expectation. Meanwhile, the operating profit margin
decreased significantly due to the increased expenditure on research and development
activities.
Management has determined the values assigned to each of the above key assumptions as
follows:
Assumption Approach used to determine values
Revenue annual
growth rates
Revenue annual growth rate is estimated over the five-year forecast
period. The management of the Group used a five-year period as the
projection period for the cash flow forecast, which was in line with the
period length used in the corresponding strategic planning and
long-term budgeting purpose.
Operating profit
margin
Based on past performance and management’s expectations for the
future.
Perpetual annual
growth rates
This is the weighted average growth rate used to extrapolate cash flows
beyond the forecast period. The rates are determined after making
reference to long term inflation rate of the countries in which they
operate. The perpetual annual growth rates remained stable which was
due to the fact that the long-term inflation rates of the relevant
countries were relatively stable during the Track Record Period.
Pre-tax discount rates Estimated by using the weighted average cost of capital (“ WACC”)
method. The WACC was calculated by referring to public market data
including risk free rate, market return, beta of comparable public
companies etc. and the specific risk of the business.
As impairment was fully provided against goodwill of Microchannel CGUs before Track Record
Period, no sensitivity analysis is needed.
For Board Replacement CGU, as at December 31, 2022 and 2023, the recoverable amount
approximately amounting to RMB74,193,000 and RMB87,968,000, calculated based on
value-in-use calculation, exceeded the carrying amount of the tested CGU (including goodwill) of
Board Replacement by approximately RMB13,353,000 and RMB4,032,000. If the expected pre-tax
discount rate had been 5% higher than management estimates as at December 31, 2022, the
recoverable amount calculated would be higher than the carrying amount by approximately
RMB9,990,000. If the expected pre-tax discount rate had been 5% higher than management
estimates as at December 31, 2023, the recoverable amount calculated would be lower than the
carrying amount by approximately RMB484,000. The directors of the Company have considered
and assessed reasonably possible changes for other key assumptions and have not identified any
instances that would have resulted in a significant impairment against the goodwill of the Group.
As at December 31, 2024, as impairment was fully provided against goodwill of Board
Replacement CGU, no sensitivity analysis is needed.
APPENDIX I ACCOUNTANT’S REPORT
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(b) Amortization Methods and Periods
(i) Intellectual properties
Separately acquired licensed technologies are shown at historical cost. They have limited
useful lives and are subsequently carried at cost less accumulated amortization and
impairment losses.
(ii) Computer software
Acquired computer software licenses are capitalized on the basis of the costs incurred to
acquire the specific software.
The Group amortizes intangible assets with a limited useful life using the straight-line
method over the following periods:
Intellectual properties 1-4 years
Computer software 5-10 years
(c) Research and Development
Research expenditure is recognized as an expense as incurred. Costs incurred on development
projects (relating to the design and testing of new and improved products) are recognized as
intangible assets when the following criteria are met:
• It is technically feasible to complete the product so that it will be available for use;
• Management intends to complete the product and use or sell it;
• There is an ability to use or sell the product;
• It can be demonstrated how the product will generate probable future economic benefits;
• Adequate technical, financial and other resources to complete the development and to use
or sell the product are available; and
• The expenditure attributable to the product during its development can be reliably
measured.
Other development expenditures that do not meet these criteria are recognized as an expense as
incurred. Development costs previously recognized as an expense are not recognized as an asset
in a subsequent period.
APPENDIX I ACCOUNTANT’S REPORT
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19. INVESTMENT PROPERTIES
Buildings
Freehold
land Total
RMB’000 RMB’000 RMB’000
At January 1, 2022
Cost 11,514 3,184 14,698
Accumulated depreciation (6,167) – (6,167)
Carrying amounts 5,347 3,184 8,531
Year ended December 31, 2022
Opening carrying amounts 5,347 3,184 8,531
Currency translation differences 274 89 363
Depreciation charges (690) – (690)
Closing carrying amounts 4,931 3,273 8,204
At December 31, 2022
Cost 11,996 3,273 15,269
Accumulated depreciation (7,065) – (7,065)
Carrying amounts 4,931 3,273 8,204
Buildings
Freehold
land Total
RMB’000 RMB’000 RMB’000
At January 1, 2023
Cost 11,996 3,273 15,269
Accumulated depreciation (7,065) – (7,065)
Carrying amounts 4,931 3,273 8,204
Year ended December 31, 2023
Opening carrying amounts 4,931 3,273 8,204
Currency translation differences 578 193 771
Depreciation charges (809) – (809)
Closing carrying amounts 4,700 3,466 8,166
Buildings
Freehold
land Total
RMB’000 RMB’000 RMB’000
At December 31, 2023
Cost 12,989 3,466 16,455
Accumulated depreciation (8,289) – (8,289)
Carrying amounts 4,700 3,466 8,166
APPENDIX I ACCOUNTANT’S REPORT
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--- page 506 ---
Buildings
Freehold
land Total
RMB’000 RMB’000 RMB’000
At January 1, 2024
Cost 12,989 3,466 16,455
Accumulated depreciation (8,289) – (8,289)
Carrying amounts 4,700 3,466 8,166
Year ended December 31, 2024
Opening carrying amounts 4,700 3,466 8,166
Currency translation differences 545 (147) 398
Depreciation charges (1,511) – (1,511)
Closing carrying amounts 3,734 3,319 7,053
At December 31, 2024
Cost 12,472 3,319 15,791
Accumulated depreciation (8,738) – (8,738)
Carrying amounts 3,734 3,319 7,053
(a) Amounts Recognized in Profit or Loss for Investment Properties
Year ended December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Rental income from operating leases 2,213 2,493 2,603
Direct operating expenses from property that
generated rental income 690 809 1,511
Except for freehold land, the investment properties are stated at cost less accumulated
depreciation. Depreciation is calculated using the straight-line method to write off the cost to its
residual value over its estimated useful life. The estimated useful lives are as follows:
Buildings 10 to 20 years
See Note 39 for the other accounting policies relevant to investment properties.
(b) Fair Value Disclosure
For disclosure purpose, the fair value of the investment properties as at December 31, 2024 was
approximately RMB8,232,000 and fair value hierarchy is as below:
Description Valuation Technique
Significant
unobservable input
Range of significant
unobservable input
Property unit located in
Slovakia
Income Capitalization
Approach (level 3)
Prevailing market rents RMB1,093,000 to
RMB1,344,000 per
unit per year
Capitalization rates 10.00%
APPENDIX I ACCOUNTANT’S REPORT
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20. FINANCIAL INSTRUMENTS BY CATEGORY
The detail information of financial instruments by category during the Track Record Period is as below:
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Financial assets
Financial assets measured at FVPL:
Wealth management products measured at fair value
(Note 3.6) 100,026 – –
Derivative financial assets (Note 3.6) 8,939 22,636 6,237
Financial assets measured at amortized cost:
Trade and notes receivables (Note 22) 7,432,066 8,250,831 9,628,337
Other receivables (Note 23) 726,642 227,793 258,059
Term deposits and restricted cash (Note 25) 3,827,915 2,959,729 1,805,065
Cash and cash equivalents (Note 25) 2,050,329 3,624,955 3,443,503
Wealth management products measured at amortized
cost (Note 23) – – 1,499,928
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Financial liabilities
Financial liabilities measured at FVPL:
Derivative financial liabilities (Note 3.6) 45,171 10,719 79,678
Contingent consideration 3,500 3,500 –
Financial liabilities measured at amortized cost:
Trade and notes payables (Note 27) 6,464,878 7,866,652 9,777,262
Accruals and other payables (excluding non-financial
liabilities) (Note 28) 354,255 250,643 545,413
Lease liabilities (Note 17) 269,689 290,193 328,487
Borrowings (Note 26) 6,372,887 3,614,147 4,099,539
APPENDIX I ACCOUNTANT’S REPORT
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21. DEFERRED TAX
Deferred tax assets and liabilities are offset when there is a legally enforceable right of offsetting and
when the deferred income taxes relate to the same authority.
The Group
The net amounts of deferred tax assets and liabilities after offsetting are as follows:
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Gross deferred tax assets 221,159 221,749 281,725
Offsetting against deferred tax liabilities – (65,317) (169,026)
Net deferred tax assets 221,159 156,432 112,699
Gross deferred tax liabilities 288,758 372,828 427,290
Offsetting against deferred tax assets – (65,317) (169,026)
Net deferred tax liabilities 288,758 307,511 258,264
The movements in deferred tax assets and liabilities before offsetting are as follows:
(a) Deferred Tax Assets
Impairment
provisions
and loss
allowances
Unrealized
profits
Government
grants Tax losses
Share-based
payment
expenses Others Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At January 1, 2022 33,480 32,618 25,653 26,365 24,462 10,685 153,263
Credited to profit or
loss (Note 11) 18,504 193 16,948 32,281 2,077 7,317 77,320
Debited to equity –––– (8,334) (1,090) (9,424)
At December 31, 2022 51,984 32,811 42,601 58,646 18,205 16,912 221,159
Impairment
provisions
and loss
allowances
Unrealized
profits
Government
grants Tax losses
Share-based
payment
expenses Others Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At January 1, 2023 51,984 32,811 42,601 58,646 18,205 16,912 221,159
Credited/(debited) to
profit or loss
(Note 11) 13,898 1,735 25,533 (40,160) (5,016) 5,917 1,907
Credited/(debited) to
equity –––– 4,552 (5,869) (1,317)
At December 31, 2023 65,882 34,546 68,134 18,486 17,741 16,960 221,749
APPENDIX I ACCOUNTANT’S REPORT
– I-72 –


--- page 509 ---
Impairment
provisions
and loss
allowances
Unrealized
profits
Government
grants Tax losses
Share-based
payment
expenses Others Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At January 1, 2024 65,882 34,546 68,134 18,486 17,741 16,960 221,749
Credited/(debited) to
profit or loss
(Note 11) 16,683 (126) 27,439 (2,911) 9,468 12,387 62,940
Credited/(debited) to
equity –––– (2,964) – (2,964)
At December 31, 2024 82,565 34,420 95,573 15,575 24,245 29,347 281,725
(b) Deferred Tax Liabilities
Business
combination Depreciation Others Total
RMB’000 RMB’000 RMB’000 RMB’000
At January 1, 2022 2,504 161,524 8,882 172,910
(Credited)/debited to profit or loss
(Note 11) (802) 102,417 14,233 115,848
At December 31, 2022 1,702 263,941 23,115 288,758
Business
combination Depreciation Others Total
RMB’000 RMB’000 RMB’000 RMB’000
At January 1, 2023 1,702 263,941 23,115 288,758
(Credited)/debited to profit or loss
(Note 11) (351) 60,273 24,148 84,070
At December 31, 2023 1,351 324,214 47,263 372,828
Business
combination Depreciation Others Total
RMB’000 RMB’000 RMB’000 RMB’000
At January 1, 2024 1,351 324,214 47,263 372,828
(Credited)/debited to profit or loss
(Note 11) (1,351) 64,728 (8,915) 54,462
At December 31, 2024 – 388,942 38,348 427,290
APPENDIX I ACCOUNTANT’S REPORT
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(c) Deferred Tax Assets Not Recognized
The Group has not recognized deferred tax assets in respect of the items below, which were
incurred by certain subsidiaries that were not likely to generate taxable profit:
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Tax losses 137,112 280,085 343,484
Deductible temporary differences 210,575 169,107 232,330
347,687 449,192 575,814
The tax losses not recognized deferred tax assets can be carried forward in future years. As at
December 31, 2022, 2023 and 2024, the following table shows unused tax losses based on its
expected expiry date:
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
2025 1,177 1,161 1,161
2026 674 522 522
2027 20,123 23,055 18,275
2028 10,478 74,714 71,352
2029 7,488 16,716 77,950
2030 16,606 12,550 12,550
2031 66,880 69,321 69,321
2032 13,686 6,336 3,108
2033 – 75,710 58,953
2034 – – 30,292
137,112 280,085 343,484
The Company
The net amounts of deferred tax assets and liabilities after offsetting are as follows:
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Gross deferred tax assets 33,318 21,386 50,830
Offsetting against deferred tax liabilities – (15,799) (50,830)
Net deferred tax assets 33,318 5,587 –
Gross deferred tax liabilities 85,516 97,403 91,598
Offsetting against deferred tax assets – (15,799) (50,830)
Net deferred tax liabilities 85,516 81,604 40,768
APPENDIX I ACCOUNTANT’S REPORT
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--- page 511 ---
(a) Deferred Tax Assets
Impairment
provisions
and loss
allowances
Government
grants Others Total
RMB’000 RMB’000 RMB’000 RMB’000
At January 1, 2022 2,162 5,371 20,204 27,737
Credited to profit or loss 2 2,005 7,034 9,041
Debited to equity – – (3,460) (3,460)
At December 31, 2022 2,164 7,376 23,778 33,318
Impairment
provisions
and loss
allowances
Government
grants Others Total
RMB’000 RMB’000 RMB’000 RMB’000
At January 1, 2023 2,164 7,376 23,778 33,318
Credited/(debited) to profit
or loss 1,353 (276) (16,381) (15,304)
Credited to equity – – 3,372 3,372
At December 31, 2023 3,517 7,100 10,769 21,386
Impairment
provisions
and loss
allowances
Government
grants Others Total
RMB’000 RMB’000 RMB’000 RMB’000
At January 1, 2024 3,517 7,100 10,769 21,386
Credited to profit or loss 27,051 1,347 3,181 31,579
Debited to equity – – (2,135) (2,135)
At December 31, 2024 30,568 8,447 11,815 50,830
(b) Deferred Tax Liabilities
Depreciation Others Total
RMB’000 RMB’000 RMB’000
At January 1, 2022 55,712 3,633 59,345
Debited to profit or loss 16,038 10,133 26,171
At December 31, 2022 71,750 13,766 85,516
APPENDIX I ACCOUNTANT’S REPORT
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--- page 512 ---
Depreciation Others Total
RMB’000 RMB’000 RMB’000
At January 1, 2023 71,750 13,766 85,516
Debited to profit or loss 4,332 7,555 11,887
At December 31, 2023 76,082 21,321 97,403
Depreciation Others Total
RMB’000 RMB’000 RMB’000
At January 1, 2024 76,082 21,321 97,403
Debited/(credited) to profit or loss 9,574 (15,379) (5,805)
At December 31, 2024 85,656 5,942 91,598
22. TRADE AND NOTES RECEIVABLES
The Group
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Notes receivables 2,204,582 2,484,458 2,685,890
Trade receivables 5,508,846 6,085,908 7,317,720
Less: credit loss allowance (281,362) (319,535) (375,273)
7,432,066 8,250,831 9,628,337
(a) As at January 1, 2022, the carrying amounts of trade and notes receivables from contracts with
customers is amounting to RMB5,660,486,000 (net of expected credit loss amounting to
RMB188,083,000).
(b) The Group generally grant credit terms ranging from 60 to 120 days to the customers. The aging
analysis of trade receivables based on revenue recognition date is as follows:
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Up to 3 months 4,146,495 4,242,921 5,800,080
3 to 6 months 1,084,733 1,003,798 784,254
6 to 12 months 266,034 792,882 697,599
1 to 2 years 7,808 45,653 26,881
2 to 3 years 2,798 388 8,523
Over 3 years 978 266 383
5,508,846 6,085,908 7,317,720
APPENDIX I ACCOUNTANT’S REPORT
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--- page 513 ---
(c) As at December 31, 2022, 2023 and 2024, trade receivables amounting to RMB296,551,000,
RMB66,621,000 and RMB84,120,000 were pledged for bank borrowings while notes receivables
amounting to RMB2,015,272,000, RMB2,214,364,000 and RMB1,839,462,000 were pledged for bank
acceptance notes and bank borrowings.
The Company
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Notes receivables 1,108,679 1,293,652 106,531
Trade receivables 814,707 718,471 1,091,980
Less: credit loss allowance (10,449) (15,025) (13,626)
1,912,937 1,997,098 1,184,885
The aging analysis of trade receivables based on revenue recognition date is as follows:
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Up to 3 months 794,189 687,531 1,057,260
3 to 6 months 12,445 19,439 28,362
6 to 12 months 8,052 5,654 255
1 to 2 years 21 5,847 327
2 to 3 years – – 5,776
814,707 718,471 1,091,980
APPENDIX I ACCOUNTANT’S REPORT
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23. PREPAYMENTS, OTHER RECEIVABLES AND OTHER ASSETS
The Group
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Prepayments:
Prepayments for materials 117,887 133,793 158,980
Other receivables:
Deposits and warranties 36,247 45,695 58,761
Tax refund receivables 123,916 164,713 172,315
Other receivables in relation to the land
reserves (Note 7(i)) 546,217 – –
Others 25,468 25,466 35,318
849,735 369,667 425,374
Less: provision for impairment (5,206) (8,081) (8,335)
844,529 361,586 417,039
Other current assets:
Wealth management products measured at
amortized cost (i) – – 1,499,928
Deductible input VAT 133,303 186,255 188,134
Prepaid corporate income tax 22,470 61,993 20,736
Capitalization of listing expenses – – 8,727
Others 1,252 2,826 3,015
157,025 251,074 1,720,540
(i) As at December 31, 2024, wealth management products mainly represent the principal and
interests guaranteed income vouchers issued by the securities companies and reverse repurchase
of government bond.
Other non-current assets:
Prepayments for non-current assets 457,306 564,023 311,121
Others 14,198 30,813 65,910
471,504 594,836 377,031
Less: provision for impairment – – (206)
471,504 594,836 376,825
APPENDIX I ACCOUNTANT’S REPORT
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The Company
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Prepayments:
Prepayments for materials 9,471 7,502 8,132
Other receivables:
Due from subsidiaries 532,760 1,708,501 477,261
Tax refund receivables 18,983 6,387 70,714
Dividend receivables – 550,000 16,559
Other receivables in relation to the land
reserves (Note 7(i)) 90,383 – –
Others 9,004 5,207 13,238
660,601 2,277,597 585,904
Less: provision for impairment (338) (504) (34,610)
660,263 2,277,093 551,294
Other current assets:
Wealth management products measured at
amortized cost – – 1,309,640
Capitalization of listing expenses – – 8,727
Others – – 266
– – 1,318,633
Other non-current assets:
Prepayments for non-current assets 40,289 99,458 65,585
Others 2,315 14,542 14,885
42,604 114,000 80,470
Less: provision for impairment – – (35)
42,604 114,000 80,435
APPENDIX I ACCOUNTANT’S REPORT
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24. INVENTORIES
The Group
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Finished goods 2,696,034 3,179,557 3,833,666
Work in progress 711,593 596,410 787,733
Raw materials 1,050,007 932,170 774,517
Others 4,886 6,872 10,127
4,462,520 4,715,009 5,406,043
Less: provision for impairment (127,645) (114,280) (125,601)
4,334,875 4,600,729 5,280,442
The cost of inventories carried forward to the profit or loss during the year is mainly recognized as the
cost of revenue. For the years ended December 31, 2022, 2023 and 2024, the cost of inventories carried
forward to the cost of revenue amounted to approximately RMB15,873,850,000, RMB17,793,313,000 and
RMB20,287,311,000, respectively.
The provision/(reversal) for impairment of inventories recorded as cost of revenue during the years
ended December 31, 2022, 2023 and 2024 were RMB93,592,000, RMB41,206,000 and RMB35,254,000,
respectively.
The Company
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Finished goods 579,545 666,396 987,512
Work in progress 82,906 62,467 74,271
Raw materials 55,662 40,841 49,221
Others 3,645 3,093 4
721,758 772,797 1,111,008
Less: provision for impairment (2,079) (368) (1,738)
719,679 772,429 1,109,270
APPENDIX I ACCOUNTANT’S REPORT
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25. CASH AND CASH EQUIVALENTS, TERM DEPOSITS AND RESTRICTED CASH
(a) Cash and Cash Equivalents
The Group
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Cash and bank balances 5,878,244 6,584,684 5,248,568
Less: term deposits over three months (i) (3,740,432) (2,883,252) (1,739,651)
Less: restricted cash (ii) (87,483) (76,477) (65,414)
Cash and cash equivalents 2,050,329 3,624,955 3,443,503
(i) As at December 31, 2022, 2023 and 2024, the Group’s term deposits amounting to
RMB209,827,000, RMB281,570,000 and nil were pledged as a guarantee for the bank
acceptance notes.
(ii) As at December 31, 2022, 2023 and 2024, the Group’s demand deposits of RMB16,304,000,
RMB35,074,000 and RMB18,152,000 were pledged as a guarantee for the bank acceptance
notes.
As at December 31, 2022, 2023 and 2024, the Group’s bank balances of RMB71,179,000,
RMB41,403,000 and RMB44,063,000 were deposited as a guarantee for the future contracts,
letter of guarantee or bank borrowings.
As at December 31, 2024, another RMB3,199,000 deposits placed with banks were
temporarily frozen for pending litigations.
(b) Cash and Bank Balances are Denominated in:
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
RMB 5,240,438 5,815,187 4,141,574
USD 375,489 497,478 764,447
EUR 180,704 193,022 139,453
Other currencies 81,613 78,997 203,094
5,878,244 6,584,684 5,248,568
The Company
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Cash and bank balances 3,453,269 3,755,111 1,281,822
Less: term deposits over three months (2,440,308) (1,948,300) (1,067,202)
Less: restricted cash (16,304) (13,604) (10,053)
Cash and cash equivalents 996,657 1,793,207 204,567
APPENDIX I ACCOUNTANT’S REPORT
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26. BORROWINGS
The Group
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Secured
Bank loans 3,493,102 3,608,200 918,745
Unsecured
Bank loans 100,000 – 3,174,000
Convertible bonds (c) 2,776,764 – –
2,876,764 – 3,174,000
Interest payables 3,021 5,947 6,794
Less: current-portion for long-term borrowings (500,465) (1,371,195) (500,420)
Less: short-term borrowings (1,294,084) (1,212,151) (1,553,346)
4,578,338 1,030,801 2,045,773
(a) As at December 31, 2022, 2023 and 2024, the annual interest rate of short-term borrowings was
ranged from 1.99% to 5.12%, 2.51% to 6.31%, and 2.15% to 5.21%, respectively.
As at December 31, 2022, 2023 and 2024, the annual interest rate range of long-term borrowings
were ranged from 2.80% to 3.35%, 2.80% to 3.35% and 2.62% to 2.92%, respectively.
(b) As at December 31, 2022, secured bank loans mainly included: (i) borrowings with a principal
equivalent to approximately RMB2,300,000,000 guaranteed by the Holding Company (Note
37(c)); (ii) borrowings with a principal equivalent to approximately RMB943,525,000 guaranteed
by the Company; (iii) borrowings with a principal equivalent to approximately RMB249,357,000
secured by the Group’s certain notes receivables; (iv) borrowings with a principal equivalent to
approximately RMB220,000 secured by the Group’s certain bank deposits.
As at December 31, 2023, secured bank loans mainly included: (i) borrowings with a principal
equivalent to approximately RMB2,400,000,000 guaranteed by the Holding Company (Note
37(c)); (ii) borrowings with a principal equivalent to approximately RMB1,002,451,000
guaranteed by the Company; (iii) borrowings with a principal equivalent to approximately
RMB5,749,000 secured by the Group’s certain notes receivables; (iv) borrowings with a principal
equivalent to approximately RMB200,000,000 secured by the trade receivables from certain
subsidiaries.
As at December 31, 2024, guaranteed bank borrowings mainly included: (i) borrowings with a
principal equivalent to approximately RMB896,729,000 guaranteed by the Company; (ii)
borrowings with a principal equivalent to approximately RMB22,016,000 secured by the Group’s
certain notes receivables.
APPENDIX I ACCOUNTANT’S REPORT
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(c) As at June 1, 2021, the Company issued unsecured RMB denominated RMB settled convertible
bonds (referred to as “Sanhua Convertible Bonds”) in an aggregate principal amount of
RMB3,000,000,000 with a face value of RMB100 yuan per bond. As at June 30, 2021, pursuant to the
approval from the China Securities Regulatory Commission, Sanhua Convertible Bonds were
listed on the Shenzhen Stock Exchange.
The conversion period for Sanhua Convertible Bonds is from December 7, 2021 to May 31, 2027,
with an initial conversion price of RMB21.55 yuan per share subject to anti-dilution clauses.
Sanhua Convertible Bonds will be redeemed on maturity at a value of the aggregate of 110% of the
outstanding RMB principal amount and all amounts accrued thereon.
The fair value of the liability component of Sanhua Convertible Bonds is estimated using cash
flows discounted at an effective interest rate for an equivalent non-convertible bond of the
Company and subsequently measured at amortized cost basis until it is extinguished on
conversion or redemption, while the fair value of the equity component is the residual amount of
the proceeds attributable to the bonds and is recognized in the “Equity reserves — convertible
bonds”.
24,610 shares, 47,697 shares (Note 30) and 141,926,470 shares (Note 30), totaling 141,998,777
shares were converted during the years ended December 31, 2021, 2022 and 2023, respectively.
The remaining 37,663 bonds were redeemed in full during the year ended December 31, 2023.
(d) As at December 31, 2022, 2023 and 2024, the Group’s borrowings were repayable as follows:
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Within 1 year 1,794,549 2,583,346 2,053,766
Between 1 and 2 years 1,371,574 430,801 1,396,236
Between 2 and 5 years 3,206,764 600,000 649,537
6,372,887 3,614,147 4,099,539
(e) Fair value
For the majority of the borrowings, the fair values are not materially different from their carrying
amounts, since either the interest payable on those borrowings is close to current market rates, or
the borrowings are of a short-term nature.
APPENDIX I ACCOUNTANT’S REPORT
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The Company
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Secured
Bank loans 2,399,643 2,600,000 –
Unsecured
Bank loans 100,000 – 3,174,000
Debentures 2,776,764 – –
2,876,764 – 3,174,000
Interest payables 2,140 4,381 4,447
Less: current-portion for long-term borrowings (500,465) (1,371,195) (500,420)
Less: short-term borrowings (199,744) (202,385) (632,254)
4,578,338 1,030,801 2,045,773
27. TRADE AND NOTES PAYABLES
The Group
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Trade and notes payables
– Trade payables 3,884,603 4,449,940 5,985,427
– Notes payables 2,580,275 3,416,712 3,791,835
6,464,878 7,866,652 9,777,262
(a) As at December 31, 2022, 2023 and 2024, trade payables include payables for constructions and
equipment were RMB416,796,000, RMB517,915,000 and RMB1,147,490,000.
APPENDIX I ACCOUNTANT’S REPORT
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An aging analysis of the trade payables based on the invoice date as at the end of the reporting period
was as follows:
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Within 3 months 3,583,659 4,024,590 5,516,132
Between 3 and 6 months 185,067 259,112 137,789
Between 6 months and 1 year 82,957 121,525 225,306
Over 1 year 32,920 44,713 106,200
3,884,603 4,449,940 5,985,427
The Company
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Trade and notes payables
– Trade payables 1,384,664 1,465,144 1,208,365
– Notes payables 510,878 559,658 560,445
1,895,542 2,024,802 1,768,810
An aging analysis of the trade payables based on the invoice date as at the end of the reporting period
was as follows:
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Within 3 months 1,314,709 1,363,694 1,157,508
Between 3 and 6 months 44,750 75,432 30,304
Between 6 months and 1 year 13,975 16,505 10,930
Over 1 year 11,230 9,513 9,623
1,384,664 1,465,144 1,208,365
APPENDIX I ACCOUNTANT’S REPORT
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28. ACCRUALS AND OTHER PAYABLES
The Group
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Salaries, wages and benefits 475,157 598,801 726,001
Warranty provisions 15,271 19,371 22,692
Restricted share repurchase obligation 214,660 118,010 354,074
Deposits payables 13,673 41,717 40,069
Taxes other than income tax payables 75,514 119,665 135,706
Accrued listing expenses – – 9,242
Dividend payables – – 2,528
Other accruals 110,651 71,545 116,808
904,926 969,109 1,407,120
The Company
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Due to subsidiaries 1,616,574 4,169,525 555,840
Restricted share repurchase obligation 214,660 118,010 354,074
Salaries, wages and benefits 111,391 127,818 164,621
Taxes other than income tax payables 21,443 98,690 19,982
Deposits payables 2,358 7,458 28,151
Accrued listing expenses – – 9,242
Others 19,255 20,107 19,140
1,985,681 4,541,608 1,151,050
29. OTHER CURRENT AND NON-CURRENT LIABILITIES
The Group
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Other current liabilities
Other tax to be recognized 2,008 2,100 1,274
Other non-current liabilities
Deferred income in relation to government
grants 254,045 379,140 607,754
Long-term salaries, wages and bonuses (a) 34,260 39,840 33,943
Construction agency fees 23,730 18,154 18,154
Deposits 4,831 11,291 –
316,866 448,425 659,851
APPENDIX I ACCOUNTANT’S REPORT
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(a) Long-Term Salaries, Wages and Bonuses
Long-term salaries, wages and bonuses mainly consists of pension obligations and termination
obligations which are measured as defined benefit plans as follows:
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Pension obligations (i) 10,013 11,058 10,069
Clearance (ii) 15,158 17,495 13,652
Anniversary benefits (ii) 3,400 3,772 3,131
Other long-term benefits to employees (iii) 5,689 7,515 7,091
34,260 39,840 33,943
(i) Pension Obligations
A subsidiary of the Group, AWECO Appliance Systems GmbH & Co. KG, located in
Germany, established a performance-oriented pension plan for the family members of the
former owners (refer to as “ Old Shareholders ”). The performance-based pension plan
defines the amount that the Old Shareholders receive when they retire and the entitlement
of the Old Shareholders to monthly pension payments is defined. The
performance-oriented pension plan was assigned to a value that an independent actuary
expert has calculated using the business value method. A corresponding update was made
on the balance sheet date.
The actuarial assumptions used to determine the present value of pension obligations are
as follows:
As at December 31,
2022 2023 2024
Discount rate (%) 3.68% 3.05% 3.29%
Rate of pension increase (%) 0.00% 0.00% 0.00%
The pension increases of 0.0% is justified by the fact that there are no legal or contractual
obligations to increase pensions after the persons in consideration are no longer
employees or shareholders. No adjustments were made in all previous periods either.
The movement of the pension obligations are as follows:
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
At the beginning of the year 16,555 10,013 11,058
Net interest 146 367 322
Remeasurement (gains)/losses (5,974) 749 (178)
Benefits payments (1,084) (672) (677)
Foreign currency exchange differences 370 601 (456)
At the end of the year 10,013 11,058 10,069
APPENDIX I ACCOUNTANT’S REPORT
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The sensitivity of the pension obligations to changes in the principal assumptions is as
below:
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Discount rate (%)
– Decreased by 0.50% 10,563 11,671 10,604
Rate of pension increase
– Increased by 0.50% 10,555 11,655 10,596
(ii) Clearances and Anniversary Benefits
In Austria, the Group grants its employees, in accordance with the local laws, benefits
after termination of the employment relationship (clearances) and other long-term
benefits depending on the years of service (anniversaries benefits).
The calculation of performance-related obligations for clearances and anniversaries
benefits is carried out by an independent actuary. The performance-related commitments
include the years of service as well as the expected salary developments and were
determined using the entitlement present value method.
According to Austrian labor law, the settlements are one-off severance payments, which
are paid at the termination of the employment relationship or in the event of retirement.
As in the previous year, the amount paid depends on the time of service and the salary.
These provisions apply to employees who joined the Group before the end of 2002.
Due to changes in the law, a contribution-oriented pension plan is applicable to employees
who joined after this date. In accordance with these provisions, the Group pays a
contribution of 1.53% of the monthly salary including additional remuneration (e.g.
bonuses) to a pension insurance after the employee’s second month of service. The
pension is paid by the pension insurance after reaching retirement age.
The actuarial assumptions used to calculate the clearances and anniversaries benefits are
as follows:
As at December 31,
2022 2023 2024
Discount rate (%) 4.10% 3.60% 3.25%
Rate of salary increase (%) 2.50% 2.50% 2.50%
Employee fluctuation anniversary (%) 3.20% 3.00% 3.00%
APPENDIX I ACCOUNTANT’S REPORT
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Clearance
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
At the beginning of the year 20,735 15,158 17,495
Net interest 190 627 564
Remeasurement (gains)/losses (3,170) 1,926 1,514
Current services costs 622 497 487
Benefits payments (3,719) (1,643) (5,747)
Foreign currency differences 500 930 (661)
At the end of the year 15,158 17,495 13,652
Anniversaries benefits
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
At the beginning of the year 3,920 3,400 3,772
Net interest 29 138 124
Remeasurement (gains)/losses (622) 92 (201)
Current services costs 168 138 147
Benefits payments (198) (199) (564)
Foreign currency differences 103 203 (147)
At the end of the year 3,400 3,772 3,131
The sensitivity of the clearance and anniversaries benefits to changes in the principal
assumptions is:
Clearance
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Discount rate (%)
– Decreased by 0.50% 16,115 17,958 14,532
– Increased by 0.50% 14,972 16,811 13,546
Rate of salary increase
– Decreased by 0.50% 14,957 16,803 13,539
– Increased by 0.50% 16,123 17,958 14,532
APPENDIX I ACCOUNTANT’S REPORT
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Anniversaries benefits
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Discount rate (%)
– Decreased by 0.50% 3,348 3,717 3,078
– Increased by 0.50% 3,132 3,482 2,852
Rate of salary increase
– Decreased by 0.50% 3,132 3,482 2,852
– Increased by 0.50% 3,348 3,717 3,078
(iii) Other Long-Term Benefits to employees
Other long-term benefits to the employees mainly represents employees from Poland that
are entitled to a one-off pension, a disability benefit, a post-employment benefit and, since
2017, to a benefit depending on the years of service worked (anniversaries benefits).
The Company
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Other non-current liabilities
Deferred income in relation to
government grants 49,179 47,332 56,310
30. SHARE CAPITAL
The Group and The Company
Year ended December 31,
2022 2023 2024
Share
capital
Number
of shares
Share
capital
Number
of shares
Share
capital
Number
of shares
RMB’000 ’000 RMB’000 ’000 RMB’000 ’000
At the beginning of
the year 3,591,090 3,591,090 3,590,869 3,590,869 3,732,616 3,732,616
Shares issued upon the
conversion of
convertible bonds
(Note 26) 48 48 141,926 141,926 – –
Cancellation of shares
under share schemes (269) (269) (179) (179) (226) (226)
At the end of the year 3,590,869 3,590,869 3,732,616 3,732,616 3,732,390 3,732,390
APPENDIX I ACCOUNTANT’S REPORT
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31. TREASURY SHARES
The Group and The Company
Year ended December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
At the beginning of the year 411,950 330,023 423,469
Repurchase of shares (i) 104,578 190,095 299,978
Exercise of restricted shares (30,870) (90,948) (48,250)
Treasury shares transferred to the
grantees (ii) (325,674) – (577,663)
Recognition of restricted share repurchase
obligation (ii) 175,850 – 292,693
Redemption of dividends on restricted shares (3,942) (4,128) (6,255)
Cancellation of shares under share schemes (1,869) (1,573) (2,124)
At the end of the year 330,023 423,469 381,848
(i) For the years ended December 31, 2022, 2023 and 2024, the Group repurchased treasury shares
amounting to approximately RMB104,578,000, RMB190,095,000 and RMB299,978,000.
(ii) For the years ended December 31, 2022, the Group granted 17,585,000 restricted shares to certain
incentive participants at RMB10.00 per share with a total cash consideration of RMB175,850,000,
of which RMB149,824,000 were debited to “share premium” (Note 34) and RMB325,674,000 were
credited to “treasury shares”. Correspondingly, RMB175,850,000 were also debited to “treasury
shares” and credited to “accruals and other payables” (Note 28) to recognize the repurchase
obligation.
For the year ended December 31, 2024, the Group granted 24,910,000 restricted shares to certain
incentive participants at RMB11.75 per share with a total cash consideration of RMB292,693,000,
of which RMB284,970,000 were debited to “share premium” (Note 34) and RMB577,663,000 were
credited to “treasury shares”. Correspondingly, RMB292,693,000 were also debited to “treasury
shares” and credited to “accruals and other payables” (Note 28) to recognize the repurchase
obligation.
32. SHARE INCENTIVE SCHEME
Pursuant to the restricted share unit incentive scheme and share appreciation right incentive scheme
approved at the interim shareholders’ meeting on May 25, 2022 (the “ 2022 Restricted Share Incentive
Scheme ” and “ 2022 Share Appreciation Right Incentive Scheme ”), the Company granted 17,585,000
restricted shares to 1,366 incentive participants and 485,000 shares appreciation rights to 41 incentive
participants. The grant date was May 31, 2022, and the granted price was RMB10.00 per share. Under
these schemes, the shares are vested based on the service conditions and performance conditions.
The restricted shares and shares appreciation rights shall be subject to different vesting service periods
from the vesting commencement date: i) 30% of the granted shares and rights are vested on each
anniversary from the vesting commencement date; ii) 30% of the granted share and right are vested on
the second anniversary from the vesting commencement date; and iii) 40% of granted shares and rights
are vested on the third anniversary from the vesting commencement date.
APPENDIX I ACCOUNTANT’S REPORT
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Pursuant to the restricted share unit incentive scheme and share appreciation right incentive scheme
approved at the interim shareholders’ meeting on May 6, 2024 (the “ 2024 Restricted Share Incentive
Scheme ” and “ 2024 Share Appreciation Right Incentive Scheme ”), the Company granted 24,910,000
restricted shares to 1,933 incentive participants and 560,000 share appreciation rights to 47 incentive
participants. The grant date was May 13, 2024, and the granted price was RMB11.75 per share. Under
these schemes, the shares are vested based on service conditions and performance conditions.
The restricted shares and shares appreciation rights shall be subject to different vesting service periods
from the vesting commencement date: i) 30% of the granted shares and rights are vested on each
anniversary from the vesting commencement date; ii) 30% of the granted share and right are vested on
the second anniversary from the vesting commencement date; and iii) 40% of granted shares and rights
are vested on the third anniversary from the vesting commencement date.
The number of restricted shares and share appreciation rights granted to the Group’s incentive
participants is summarized as follows:
Year ended December 31,
2022 2023 2024
(’000) (’000) (’000)
At the beginning of the year 10,342 23,772 12,452
Granted 18,070 – 25,470
Vested (4,434) (11,227) (5,272)
Lapsed (206) (92) (504)
At the end of the year 23,772 12,453 32,146
The fair value of the restricted shares was determined on the basis of the single-day closing price of the
circulating shares on the date when the equity instruments are granted, less the exercise price. The fair
value of the share appreciation rights was determined on the basis of the closing price at each balance
sheet date, less the exercise price.
The weighted average remaining contractual life of restricted shares outstanding as at December 31,
2022, 2023 and 2024 was 1.20 years, 0.99 years and 1.24 years, respectively. The weighted average
remaining contractual life of share appreciation rights outstanding as at December 31, 2022, 2023 and
2024 was 1.52 years, 0.99 years and 1.22 years, respectively.
The total expenses arising from share-based payments during the Track Record Period are recorded as
part of employee benefit expenses (Note 9).
APPENDIX I ACCOUNTANT’S REPORT
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33. RETAINED EARNINGS
The Group
Year ended December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
At the beginning of the year 6,615,690 8,133,336 10,002,942
Net profit 2,573,344 2,920,993 3,099,165
Dividends (Note 12) (893,959) (902,996) (1,299,745)
Appropriation to statutory reserves (161,739) (148,391) (152,050)
At the end of the year 8,133,336 10,002,942 11,650,312
The Company
Year ended December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
At the beginning of the year 768,647 1,335,689 1,768,214
Net profit 1,623,335 1,483,912 1,520,506
Dividends (Note 12) (893,959) (902,996) (1,299,745)
Appropriation to statutory reserves (162,334) (148,391) (152,050)
At the end of the year 1,335,689 1,768,214 1,836,925
APPENDIX I ACCOUNTANT’S REPORT
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34. OTHER RESERVES
The Group
Share
premium
Surplus
reserve
Foreign
currency
differences
Other
reserves Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Balance at January 1, 2022 188,318 701,785 (129,411) 185,101 945,793
Currency translation differences – – 120,868 – 120,868
Conversion of convertible bonds 1,021 – – – 1,021
Share-based payment scheme:
– Share-based compensation
expenses – – – 66,803 66,803
– Treasury shares transferred to
the grantees (149,824) – – – (149,824)
– Exercise of restricted shares 39,704 – – (39,704) –
– Cancellation of shares under
share scheme (1,600) – – – (1,600)
– Others 1,117 – – (8,334) (7,217)
Appropriation to statutory
reserve – 161,739 – – 161,739
Balance at December 31, 2022 78,736 863,524 (8,543) 203,866 1,137,583
Share
premium
Surplus
reserve
Foreign
currency
differences
Other
reserves Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Balance at January 1, 2023 78,736 863,524 (8,543) 203,866 1,137,583
Currency translation differences – – 123,300 – 123,300
Conversion of convertible bonds 3,104,717 – – – 3,104,717
Share-based payment scheme:
– Share-based compensation
expenses – – – 51,168 51,168
– Exercise of restricted shares 95,331 – – (95,331) –
– Cancellation of shares under
share scheme (1,392) – – – (1,392)
– Others 13,996 – – 4,552 18,548
Appropriation to statutory
reserve – 148,391 – – 148,391
Balance at December 31, 2023 3,291,388 1,011,915 114,757 164,255 4,582,315
APPENDIX I ACCOUNTANT’S REPORT
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Share
premium
Surplus
reserve
Foreign
currency
differences
Other
reserves Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Balance at January 1, 2024 3,291,388 1,011,915 114,757 164,255 4,582,315
Currency translation differences – – (253,120) – (253,120)
Capital contribution –––––
Share-based payment scheme:
– Share-based compensation
expenses – – – 109,071 109,071
– Treasury shares transferred to
the grantees (284,970) – – – (284,970)
– Exercise of restricted shares 38,190 – – (38,190) –
– Cancellation of shares under
share scheme (1,898) – – – (1,898)
– Others 1,134 – – (2,964) (1,830)
Transaction with non-controlling
interests (4,702) – – – (4,702)
Appropriation to statutory
reserve – 152,050 – – 152,050
Balance at December 31, 2024 3,039,142 1,163,965 (138,363) 232,172 4,296,916
The Company
Share
premium
Surplus
reserve
Other
reserves Total
RMB’000 RMB’000 RMB’000 RMB’000
Balance at January 1, 2022 1,074,775 573,096 192,833 1,840,704
Conversion of convertible bonds 1,021 – – 1,021
Share-based payment scheme:
– Share-based compensation expenses – – 66,803 66,803
– Treasury shares transferred to the grantees (149,824) – – (149,824)
– Exercise of restricted shares 39,704 – (39,704) –
– Cancellation of shares under share scheme (1,600) – – (1,600)
– Others 279 – (3,460) (3,181)
Appropriation to statutory reserve – 162,334 – 162,334
Balance at December 31, 2022 964,355 735,430 216,472 1,916,257
APPENDIX I ACCOUNTANT’S REPORT
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Share
premium
Surplus
reserve
Other
reserves Total
RMB’000 RMB’000 RMB’000 RMB’000
Balance at January 1, 2023 964,355 735,430 216,472 1,916,257
Conversion of convertible bonds 3,104,717 – – 3,104,717
Share-based payment scheme:
– Share-based compensation expenses – – 51,168 51,168
– Exercise of restricted shares 95,331 – (95,331) –
– Cancellation of shares under share scheme (1,392) – – (1,392)
– Others 12,586 – 3,372 15,958
Appropriation to statutory reserve – 148,391 – 148,391
Balance at December 31, 2023 4,175,597 883,821 175,681 5,235,099
Share
premium
Surplus
reserve
Other
reserves Total
RMB’000 RMB’000 RMB’000 RMB’000
Balance at January 1, 2024 4,175,597 883,821 175,681 5,235,099
Share-based payment scheme:
– Share-based compensation expenses – – 109,071 109,071
– Treasury shares transferred to the grantees (284,970) – – (284,970)
– Exercise of restricted shares 38,190 – (38,190) –
– Cancellation of shares under share scheme (1,898) – – (1,898)
– Others 556 – (2,135) (1,579)
Appropriation to statutory reserve – 152,050 – 152,050
Balance at December 31, 2024 3,927,475 1,035,871 244,427 5,207,773
APPENDIX I ACCOUNTANT’S REPORT
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35. NOTES TO CONSOLIDATED STATEMENTS OF CASH FLOWS
(a) Reconciliation of Profit Before Income Tax to Net Cash Generated from Operations:
Year ended December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Profit before income tax for the year 3,051,258 3,553,264 3,691,687
Adjustments for:
Interest income (188,128) (159,145) (130,316)
Finance cost 235,671 229,583 132,384
Depreciation and amortization of non-current
assets 641,422 809,951 1,013,524
Net (gains)/losses on disposal of property,
plant and equipment and other non-current
assets (445,368) 1,157 14,595
Net impairment losses on financial assets 97,762 51,478 56,379
Impairment provision for inventories and
other non-current assets 93,592 55,377 62,921
Share of profit of associates, net (7,732) (7,986) (8,925)
Net losses on financial instruments 197,927 88,148 129,217
Net foreign exchange gains (230,937) (149,886) (62,261)
Share-based compensation expenses 66,803 51,168 109,071
Change in working capital:
Increase in receivables (1,663,712) (1,381,815) (1,554,411)
Increase in payables 1,616,251 1,056,489 1,908,077
Increase in inventories (790,662) (343,251) (718,017)
Cash generated from operations 2,674,147 3,854,532 4,643,925
(b) Non-Cash Activities
Year ended December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Purchase of inventories and long-term assets
by acceptance notes 153,096 190,928 281,580
Convertible bonds converted to shares (Note
35(c)) – 2,837,347 –
Additions of right-of-use assets by way of
leasing liabilities (Note 17) 204,356 222,856 427,606
APPENDIX I ACCOUNTANT’S REPORT
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(c) Net Debt Reconciliation
Bank
borrowings
and other
borrowings Debentures
Lease
liabilities Total
RMB’000 RMB’000 RMB’000 RMB’000
At January 1, 2022 3,265,422 2,652,036 195,555 6,113,013
Financing cash flows 331,018 – (62,191) 268,827
Interest paid (113,639) (5,999) (1,334) (120,972)
Interest accrued 99,315 132,563 1,334 233,212
Other non-cash movements 14,007 (1,836) 136,325 148,496
At December 31, 2022 3,596,123 2,776,764 269,689 6,642,576
At January 1, 2023 3,596,123 2,776,764 269,689 6,642,576
Financing cash flows 275,623 (3,553) (98,683) 173,387
Interest paid (126,148) (11,994) (5,127) (143,269)
Interest accrued 130,824 76,130 5,127 212,081
Other non-cash movements (i) (262,275) (2,837,347) 119,187 (2,980,435)
At December 31, 2023 3,614,147 – 290,193 3,904,340
At January 1, 2024 3,614,147 – 290,193 3,904,340
Financing cash flows 537,730 – (105,305) 432,425
Interest paid (131,871) – (18,704) (150,575)
Interest accrued 133,563 – 18,704 152,267
Other non-cash movements (54,030) – 143,599 89,569
At December 31, 2024 4,099,539 – 328,487 4,428,026
(i) Other non-cash movements mainly include conversion of Sanhua Convertible Bonds for
the year ended December 31, 2023 (Note 26).
APPENDIX I ACCOUNTANT’S REPORT
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36. CONTINGENCIES AND COMMITMENTS
36.1 Contingencies
The Group and the Company have contingent liabilities in respect of claims or other legal
procedures arising in its ordinary course of business from time to time. As at December 31, 2022,
2023 and 2024, the directors of the Company did not anticipate that any material liabilities will
arise from the contingent liabilities other than those provided for in the Financial Information.
36.2 Capital Commitments
The following shows the major capital commitments of the Group:
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Property, plant and equipment
commitments:
– Contracted, but not provided for 752,899 1,457,415 1,525,863
– Authorized, but not contracted 2,354,399 5,652,048 5,457,978
3,107,298 7,109,463 6,983,841
On January 4, 2024, the Group and its subsidiary Hangzhou Xiantu Electronics Co., Ltd. (ψ΋௄
ʮ̡ ) (hereinafter referred to as “ Xiantu Electronics ”) signed an investment agreement
with Hangzhou Qiantang New Area Management Committee (ึ ) for the
Sanhua Intelligent Control Future Industrial Center project. The project consists of two
sub-projects with a planned total investment of no less than RMB5,000,000,000. Up to December
31, 2024, about RMB4,799,502,000 was authorized but not contracted yet.
37. RELATED PARTY TRANSACTIONS
(a) Parent Entities
Name
Place of
incorporation Ownership interest
As at December 31,
2022 2023 2024
Sanhua Holding Group Co., Ltd. Zhejiang, PRC 47.83% 45.31% 45.31%
The Company’s ultimate holding company is Sanhua Holding Group Co., Ltd. and the ultimate
controlling person are Mr. Zhang Daocai, Mr. Zhang Yabo and Mr. Zhang Shaobo.
APPENDIX I ACCOUNTANT’S REPORT
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(b) Names and Relationship with Related Parties
Related parties are those parties that have the ability, directly and indirectly, to control, jointly
control or exercise significant influence over the other party in making financial and operating
decisions. Parties are also considered to be related because they are subject to common control
and common joint control in the controlling shareholder’s families. Members of key management
and their close family member of the Group are also considered as related parties.
The directors of the Company are of the view that the following parties were significant related
parties of the Group that had transactions or balances with the Group for the years ended
December 31, 2022, 2023 and 2024:
Name of the related parties Relationship with the Group
Zhejiang Sanhua Green Energy
Industrial Group Co., Ltd.
(ʮ̡ )
A shareholder of the Company
A fellow subsidiary of the parent company
Hangzhou Tongchan Machinery Co., Ltd.
(ʮ̡ )
A fellow subsidiary of the parent company
Hangzhou Sanhua Research Institute Co., Ltd.
(ʮ̡ )
A fellow subsidiary of the parent company
Hangzhou Lvneng New Energy Vehicle Parts
Co., Ltd. (ʮ̡ )
A fellow subsidiary of the ultimate
controlling shareholder before March 2022
Hangzhou Sanhua International Building Co.,
Ltd. (ʮ̡ )
A fellow subsidiary of the parent company
Xinchang County Sanhua Property
Management Co., Ltd.
(ʮ̡ )
A fellow subsidiary of the parent company
Shanghai Sanhua Electric Co., Ltd.
(ʮ̡ )
A fellow subsidiary of the parent company
Zhejiang Sanhua Zhicheng Real Estate
Development Co., Ltd.
(ʮ̡ )
A fellow subsidiary of the parent company
Zhejiang Haoyuan Technology Co., Ltd.
(ʮ̡ )
A fellow subsidiary of the parent company
Ningbo Fuerda Intelligent technology Co., Ltd.
(ʮ̡ )
A fellow subsidiary of the parent company
Wuhu Alda Technology Co., Ltd.
(ப΂ʮ̡ )
An associate of the parent company
Hangzhou Formost Material Technology Co.,
Ltd. (ʮ̡ )
An associate of the parent company
Ningbo Jiaerling Pneumatic Machinery Co.,
Ltd. (ʮ̡ )
A fellow subsidiary of the parent company
Tianjin Sanhua Industrial Park Management
Co., Ltd. (ʮ̡ )
A fellow subsidiary of the parent company
Shaoxing Sanhua Zhiyue Real Estate
Development Co., Ltd.
(ʮ̡ )
A fellow subsidiary of the parent company
APPENDIX I ACCOUNTANT’S REPORT
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Name of the related parties Relationship with the Group
Shanghai Shijia Technology Co., Ltd.
(ʮ̡ )
A non-executive director of the Company is
a director of this entity
Chongqing Tainuo Machinery Co., Ltd.
(ʮ̡ )
An associate of the Group
Qingdao Sanhua Jinlifeng Machinery Co., Ltd.
(ʮ̡ )
An associate of the Group
Zhongshan Xuanyi Pipe Making Co., Ltd.
(ʮ̡ )
An associate of the Group
Ningbo Jinlifeng Machinery Co., Ltd.
(ʮ̡ )
An associate of the Group
Xinchang Jiaerling Technology Co., Ltd.
(ʮ̡ )
A fellow subsidiary of the parent company
Fuerda Smartech S DE RL DE CV A fellow subsidiary of the parent company
Ningbo Hongrong Business Managing
Partnership Enterprise
(Υྫ)
A key management personnel of the
Company is the controlling shareholder of
this entity
The following transactions and balances were carried out between the Group and its related
parties during the Track Record Period. In the opinion of the directors of the Company, the related
party transactions were carried out in the normal course of business and at terms negotiated
between the Group and the respective related parties. In addition to those disclosed elsewhere in
the Historical Financial Information, the Group has the following transactions with related
parties:
(c) Material Transactions with Related Parties
Year ended December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Purchase of goods and services:
Fellow subsidiaries of the parent company 56,075 67,590 56,599
Associates of the Group 2,214 4,471 17,890
Fellow subsidiaries of the ultimate controlling
shareholder 310 – –
Parent company 117 590 1,495
Associates of the parent company 22 148 63
58,738 72,799 76,047
APPENDIX I ACCOUNTANT’S REPORT
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Year ended December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Sales of goods and rendering of services:
Fellow subsidiaries of the parent company 6,319 940 4,590
Associates of the Group 1,679 831 669
Fellow subsidiaries of the ultimate controlling
shareholder 21,471 4,168 –
Parent company 1,705 1,687 1,888
Associates of the parent company 249 287 374
Others – 308 359
31,423 8,221 7,880
Year ended December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Rental income:
Fellow subsidiaries of the parent company – 48 2,295
Parent company 5,309 5,309 5,360
Associates of the parent company 1,237 1,255 1,287
6,546 6,612 8,942
Year ended December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Rental expenses:
Fellow subsidiaries of the parent company 6,383 10,249 10,174
For the year ended December 31, 2024, additions of right-of-use assets is RMB14,782,000. As at
December 31, 2024, the balance of lease liabilities is RMB17,170,000.
APPENDIX I ACCOUNTANT’S REPORT
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Year ended December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Utility cost reallocation – received from:
Fellow subsidiaries of the parent company 2,555 26,717 30,784
Parent company 854 831 815
Associates of the parent company 1,262 985 646
4,671 28,533 32,245
Utility cost reallocation – paid to:
Fellow subsidiaries of the parent company 22,921 10,122 9,326
Year ended December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Purchase of property, plant and equipment:
Fellow subsidiaries of the parent company 2,055 1,121 392
Parent company – 132 –
2,055 1,253 392
Disposal of property, plant and equipment:
Fellow subsidiaries of the parent company 205 – 322
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Guarantee provided by the parent company
– Bank borrowings 2,300,000 2,400,000 –
– Letter of guarantee – 3,000 –
2,300,000 2,403,000 –
APPENDIX I ACCOUNTANT’S REPORT
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(d) Balance with Related Parties
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Trade and notes receivables
– Fellow subsidiaries of the parent
company 578 3 7,765
– Associates of the Group – 10 80
– Fellow subsidiaries of the ultimate
controlling shareholder 9,075 – –
– Associates of the parent company 6 – –
– Others – 48 125
9,659 61 7,970
Less: credit loss allowance (483) (3) (398)
9,176 58 7,572
For the years ended December 31, 2022 and 2024, the amount of expense recognized in the year in
respect of bad and doubtful debts are RMB206,000 and RMB395,000, respectively. For the year
ended December 31, 2023, the amount of expense reversed in the year in respect of bad and
doubtful debts are RMB480,000.
Trade and notes payables
– Fellow subsidiaries of the parent
company 1,072 658 4,937
– Associates of the Group 14,796 – 9,565
15,868 658 14,502
As at December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Prepayments, other receivables and
other assets:
– Fellow subsidiaries of the parent
company 670 670 670
– Associates of the Group – 68 –
– Others – – 458
670 738 1,128
Less: provision for impairment (51) (67) (67)
619 671 1,061
APPENDIX I ACCOUNTANT’S REPORT
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For the years ended December 31, 2022, 2023 and 2024, the amount of expense recognized in the
year in respect of bad and doubtful debts are RMB18,000, RMB16,000 and nil, respectively.
Accruals and other payables:
– Fellow subsidiaries of the parent
company 20 1,093 4,763
– Associates of the parent company 100 100 100
120 1,193 4,863
All the balances with the related parties are trade in nature.
(e) Key Management Compensation
Compensation of the key management personnel of the Group, including amounts paid to the
Company’s directors and supervisors as disclosed in Note 9(a), was as follows:
Year ended December 31,
2022 2023 2024
RMB’000 RMB’000 RMB’000
Fees 357 324 324
Salaries, wages and bonuses 16,363 16,853 20,870
Share-based compensation expenses 1,951 1,374 2,197
Pension costs, housing fund, medical
insurance and other social benefits 348 387 432
19,019 18,938 23,823
As at December 31, 2022, 2023 and 2024, approximately RMB5,283,000, RMB4,383,000 and
RMB7,140,000 of payroll payables which were unpaid as at year end and are included in accruals
and other payables. The share-based payments provided to key management personnel consist of
restricted share incentive schemes which are equity-settled, see Note 32.
38. EVENTS AFTER THE REPORTING PERIOD
On March 25, 2025, a final dividend in respect of the year ended December 31, 2024 of RMB2.5 per 10
shares (tax inclusive) has been proposed by the Board of Directors. On April 16, 2025, the proposed final
dividend in respect of 2024 is approved by the Shareholders' meeting. These financial statements do not
reflect this dividend payable as it was not approved as at the balance sheet date.
39. SUMMARY OF OTHER ACCOUNTING POLICIES
(1) Principles of Consolidation
The Historical Financial Information incorporate the financial statements of the Company and
entities (including structured entities) controlled by the Company and its subsidiaries. Control is
achieved when the Company:
• has power over the investee;
• is exposed, or has rights, to variable returns from its involvement with the investee; and
• has the ability to use its power to affect its returns.
The Group reassesses whether or not it controls an investee if facts and circumstances indicate
that there are changes to one or more of the three elements of control listed above.
APPENDIX I ACCOUNTANT’S REPORT
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When the Group has less than a majority of the voting rights of an investee, it has power over the
investee when the voting rights are sufficient to give it the practical ability to direct the relevant
activities of the investee unilaterally. The Group considers all relevant facts and circumstances in
assessing whether or not the Group’s voting rights in an investee are sufficient to give it power,
including:
• the size of the Group’s holding of voting rights relative to the size and dispersion of
holdings of the other vote holders;
• potential voting rights held by the Group, other vote holders or other parties;
• rights arising from other contractual arrangements; and
• any additional facts and circumstances that indicate that the Group has, or does not have,
the current ability to direct the relevant activities at the time that decisions need to be
made, including voting patterns at previous shareholders’ meetings.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and
ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a
subsidiary acquired or disposed of during the year are included in the consolidated statement of
profit or loss and consolidated statement of comprehensive income from the date the Company
gains control until the date when the Company ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income are attributed to the owners of
the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is
attributed to the owners of the Company and to the non-controlling interests even if this results in
the non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their
accounting policies into line with the Group’s accounting policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to
transactions between members of the Group are eliminated in full on consolidation.
Non-controlling interests in subsidiaries are presented separately from the Group’s equity
therein, which represent present ownership interests entitling their holders to a proportionate
share of net assets of the relevant subsidiaries upon liquidation.
Changes in the Group’s ownership interests in existing subsidiaries
Changes in the Group’s ownership interests in existing subsidiaries that do not result in the
Group losing control over the subsidiaries are accounted for as equity transactions. The carrying
amounts of the Group’s relevant components of equity and the non-controlling interests are
adjusted to reflect the changes in their relative interests in the subsidiaries, including
re-attribution of relevant reserves between the Group and the non-controlling interests according
to the Group’s and the non-controlling interests’ proportionate interests.
Any difference between the amount by which the non-controlling interests are adjusted, and the
fair value of the consideration paid or received is recognized directly in equity and attributed to
owners of the Company.
When the Group loses control of a subsidiary, the assets and liabilities of that subsidiary and
non-controlling interests (if any) are derecognized. A gain or loss is recognized in profit or loss
and is calculated as the difference between (i) the aggregate of the fair value of the consideration
received and the fair value of any retained interest and (ii) the carrying amount of the assets
(including goodwill), and liabilities of the subsidiary attributable to the owners of the Company.
All amounts previously recognized in other comprehensive income in relation to that subsidiary
are accounted for as if the Group had directly disposed of the related assets or liabilities of the
subsidiary. The fair value of any investment retained in the former subsidiary at the date when
control is lost is regarded as the fair value on initial recognition for subsequent accounting under
IFRS 9 or, when applicable, the cost on initial recognition of an investment in an associate.
APPENDIX I ACCOUNTANT’S REPORT
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(2) Investments in Associates
An associate is an entity over which the Group has significant influence. Significant influence is
the power to participate in the financial and operating policy decisions of the investee but is not
control or joint control over those policies.
The results and assets and liabilities of associates are incorporated in these Historical Financial
Information using the equity method of accounting. The financial statements of associates used
for equity accounting purposes are prepared using uniform accounting policies as those of the
Group like transactions and events in similar circumstances, unless allowed by other standards.
Under the equity method, an investment in an associate is initially recognized in the consolidated
statement of financial position at cost and adjusted thereafter to recognize the Group’s share of
the profit or loss and other comprehensive income of the associate. When the Group’s share of
losses of an associate exceeds the Group’s interest in that associate (which includes any long-term
interests that, in substance, form part of the Group’s net investment in the associate), the Group
discontinues recognising its share of further losses. Additional losses are recognized only to the
extent that the Group has incurred legal or constructive obligations or made payments on behalf
of the associate.
An investment in an associate is accounted for using the equity method from the date on which
the investee becomes an associate. On acquisition of the investment in an associate, any excess of
the cost of the investment over the Group’s share of the net fair value of the identifiable assets and
liabilities of the investee is recognized as goodwill, which is included within the carrying amount
of the investment. Any excess of the Group’s share of the net fair value of the identifiable assets
and liabilities over the cost of the investment, after reassessment, is recognized immediately in
profit or loss in the period in which the investment is acquired.
The Group assesses whether there is objective evidence that the interest in an associate may be
impaired. When any objective evidence exists, the entire carrying amount of the investment
(including goodwill) is tested for impairment in accordance with IAS 36 Impairment of Assets as
a single asset by comparing its recoverable amount (higher of value in use and fair value less costs
of disposal) with its carrying amount. Any impairment loss recognized is not allocated to any
asset, including goodwill that forms part of the carrying amount of the investment. Any reversal
of that impairment loss is recognized in accordance with IAS 36 to the extent that the recoverable
amount of the investment subsequently increases.
When the Group ceases to have significant influence over an associate, it is accounted for as a
disposal of the entire interest in the investee with a resulting gain or loss being recognized in
profit or loss. When the Group retains an interest in the former associate and the retained interest
is a financial asset within the scope of IFRS 9, the Group measures the retained interest at fair
value at that date and the fair value is regarded as its fair value on initial recognition. The
difference between the carrying amount of the associate and the fair value of any retained interest
and any proceeds from disposing the relevant interest in the associate is included in the
determination of the gain or loss on disposal of the associate. In addition, the Group accounts for
all amounts previously recognized in other comprehensive income in relation to that associate on
the same basis as would be required if that associate had directly disposed of the related assets or
liabilities. Therefore, if a gain or loss previously recognized in other comprehensive income by
that associate would be reclassified to profit or loss on the disposal of the related assets or
liabilities, the Group reclassifies the gain or loss from equity to profit or loss (as a reclassification
adjustment) upon disposal/partial disposal of the relevant associate.
When a group entity transacts with an associate of the Group, profits and losses resulting from the
transactions with the associate are recognized in the Group’s historical financial information only
to the extent of interests in the associate that are not related to the Group.
The investments in associates are stated at cost less impairment in the consolidated statement of
financial position. The results of associates are accounted for by the Group on the basis of
dividends received and receivable.
APPENDIX I ACCOUNTANT’S REPORT
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Changes in the Group’s interests in associates
When the Group reduces its ownership interests in an associate but the Group continues to use
the equity method (including situations that change of ownership interest in an associate due to
capital increase of other shareholders to the associate), the Group reclassifies to profit or loss the
proportion of the gain or loss that had previously been recognized in other comprehensive
income relating to that reduction in ownership interests if that gain or loss would have been
reclassified to profit or loss on the disposal of the related assets or liabilities.
The Group continues to use the equity method when an investment in an associate becomes an
investment in a joint venture or an investment in a joint venture becomes an investment in an
associate. There is no remeasurement to fair value upon such changes in ownership interests.
(3) Business Combinations
(i) Business Combination not Under Common Controls
The acquisition method of accounting is used to account for all business combinations
(except for the business combinations under common controls), regardless of whether
equity instruments or other assets are acquired. The consideration transferred for the
acquisition of a subsidiary comprises the:
• fair values of the assets transferred
• liabilities incurred to the former owners of the acquired business
• equity interests issued by the Group
• fair value of any asset or liability resulting from a contingent consideration
arrangement, and
• fair value of any pre-existing equity interest in the subsidiary.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business
combination are, with limited exceptions, measured initially at their fair values at the
acquisition date. The Group recognizes any non-controlling interest in the acquired entity
on an acquisition-by-acquisition basis either at fair value or at the non-controlling
interest’s proportionate share of the acquired entity’s net identifiable assets.
Acquisition-related costs are expensed as incurred.
The excess of the consideration transferred, amount of any non-controlling interest in the
acquired entity, and acquisition date fair value of any previous equity interest in the
acquired entity over the fair value of the net identifiable assets acquired is recorded as
goodwill. If those amounts are less than the fair value of the net identifiable assets of the
business acquired, the difference is recognized directly in profit or loss as a bargain
purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the
future are discounted to their present value as at the date of exchange. The discount rate
used is the entity’s incremental borrowing rate, being the rate at which a similar
borrowing could be obtained from an independent financier under comparable terms and
conditions. Contingent consideration is classified either as equity or a financial liability.
Amounts classified as a financial liability are subsequently remeasured to fair value, with
changes in fair value recognized in profit or loss.
APPENDIX I ACCOUNTANT’S REPORT
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(ii) Business Combination Under Common Controls
An acquisition of a business which is a business combination under common control is
accounted for in a manner similar to a uniting of interests whereby the assets and
liabilities acquired are accounted for at carryover predecessor values to the other party to
the business combination with all periods presented as if the operations of the Group and
the business acquired have always been combined. The difference between the
consideration paid by the Group and the net assets or liabilities of the business acquired is
adjusted against equity.
(4) Separate Financial Statements
Investments in subsidiaries are accounted for at cost less impairment. Cost includes direct
attributable costs of investment. The results of subsidiaries are accounted for by the Company on
the basis of dividend received and receivable.
Impairment test of the investments in subsidiaries is required upon receiving a dividend from
these investments if the dividend exceeds the total comprehensive income of the subsidiary in the
period the dividend is declared or if the carrying amount of the investment in the separate
financial statements exceeds the carrying amount of the investee’s net assets including goodwill.
(5) Foreign Currencies
(i) Functional and Presentation Currency
Items included in the financial statements of each of the Group’s entities are measured
using the currency of the primary economic environment in which the entity operates
(“the functional currency ”). Since the majority of the assets and operations of the Group
are located in the PRC, the Historical Financial Information are presented in RMB, which
is also the Company’s functional and the Group’s presentation currency.
(ii) Transactions and Balances
Foreign currency transactions are translated into the functional currency using the
exchange rates at the dates of the transactions. Foreign exchange gains and losses
resulting from the settlement of such transactions and from the translation of monetary
assets and liabilities denominated in foreign currencies at year end exchange rates are
generally recognized in profit or loss. They are deferred in equity if they relate to
qualifying cash flow hedges.
Foreign exchange gains and losses that relate to borrowings are presented in the
consolidated statements of profit or loss, within finance costs. All other foreign exchange
gains and losses are presented in the consolidated statements of profit or loss on a net
basis within other gains/(losses), net.
Non-monetary items that are measured at fair value in a foreign currency are translated
using the exchange rates at the date when the fair value was determined. Translation
differences on assets and liabilities carried at fair value are reported as part of the fair
value gain or loss. For example, translation differences on non-monetary assets and
liabilities such as equities held at FVPL are recognized in profit or loss as part of the fair
value gain or loss and translation differences on non-monetary assets such as equities
classified as fair value through other comprehensive income are recognized in other
comprehensive income.
APPENDIX I ACCOUNTANT’S REPORT
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(iii) Group Companies
The results and financial position of all the Group entities that have a functional currency
different from the presentation currency are translated into the presentation currency as
follows:
• assets and liabilities for each statement of financial position of the Group’s entities
are translated at the closing rate at the end of the reporting period;
• income and expenses for each statement of profit or loss of the Group’s entities are
translated at average exchange rates (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on the transaction
dates, in which case income and expenses are translated at the dates of the
transactions); and
• all resulting exchange differences are recognized in other comprehensive income.
On consolidation, exchange differences arising from the translation of the net investment
in foreign operations are taken to other comprehensive income. When a foreign operation
is partially disposed of or sold, exchange differences that were recorded in equity are
reclassified to profit or loss, as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as
assets and liabilities of the foreign entity and translated at the closing rate.
(6) Investment Properties
Investment properties are properties held to earn rentals and/or for capital appreciation
(including properties under construction for such purposes). Investment properties include land
held for undetermined future use, which is regarded as held for capital appreciation purpose.
Investment properties are initially measured at cost, including any directly attributable
expenditure. Subsequent to initial recognition, investment properties are stated at cost less
subsequent accumulated depreciation and any accumulated impairment losses. Depreciation is
recognized so as to write-off the cost of investment properties over their estimated useful lives
and after taking into account of their estimate residual value, using the straight-line method.
An investment property is derecognized upon disposal or when the investment property is
permanently withdrawn from use and no future economic benefits are expected from its disposal.
Any gain or loss arising on derecognition of the property (calculated as the difference between the
net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the
period in which the property is derecognized.
(7) Property, Plant and Equipment
Property, plant and equipment are tangible assets that are held for use in the production or supply
of goods or services, or for administrative purposes, other than construction in progress, are
stated at cost less accumulated depreciation and any impairment losses. The cost of an item of
property and equipment comprises its purchase price and any directly attributable costs of
bringing the asset to its working condition and location for its intended use.
Expenditure incurred after items of property, plant and equipment have been put into operation,
such as repairs and maintenance, is normally charged to the statement of profit or loss in the
period in which it is incurred. In situations where the recognition criteria are satisfied, the
expenditure for a major inspection is capitalized in the carrying amount of the asset as a
replacement. Where significant parts of property and equipment are required to be replaced at
intervals, the Group recognizes such parts as individual assets with specific useful lives and
depreciates them accordingly.
APPENDIX I ACCOUNTANT’S REPORT
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Where parts of an item of property and equipment have different useful lives, the cost of that item
is allocated on a reasonable basis among the parts and each part is depreciated separately.
Residual values, useful lives and the depreciation method are reviewed, and adjusted if
appropriate, at least at each financial year end.
An item of property and equipment including any significant part initially recognized is
derecognized upon disposal or when no future economic benefits are expected from its use or
disposal. Any gain or loss on disposal or retirement recognized in the statement of profit or loss in
the year the asset is derecognized is the difference between the net sales proceeds and the
carrying amount of the relevant asset.
Construction in progress mainly represents buildings under construction, which is stated at cost
less any impairment losses, and is not depreciated. Cost comprises the direct costs of construction
and capitalized borrowing costs on related borrowed funds during the period of construction.
Construction in progress is reclassified to the appropriate category of property and equipment
when completed and ready for use.
(8) Impairment of Non-Financial Assets
Intangible assets that have an indefinite useful life or are not yet available for use are not subject
to amortization and are tested annually for impairment, or more frequently if events or changes in
circumstances indicate that they might be impaired. Other assets are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be fully
recoverable. An impairment loss is recognized for the amount by which the asset’s carrying
amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair
value less costs of disposal and value in use. For the purpose of assessing impairment, assets are
grouped at the lowest levels for which there are separately identifiable cash flows
(cash-generating units). Non-financial assets other than goodwill that suffered impairment are
reviewed for possible reversal of the impairment at each reporting date.
(9) Cash and Cash Equivalents
For the purpose of the consolidated statement of cash flows, cash and cash equivalents comprise
cash on hand and demand deposits, and short term highly liquid investments that are readily
convertible into known amounts of cash, which are subject to an insignificant risk of changes in
value, and have a short maturity of generally within three months when acquired.
(10) Financial Assets
(i) Classification
The Group classifies its financial assets in the following measurement categories:
• those to be measured subsequently at fair value (either through other
comprehensive income, or through profit or loss), and
• those to be measured at amortized cost.
The classification depends on the entity’s business model for managing the financial
assets and the contractual terms of the cash flows.
For assets measured at fair value through profit or loss, gains and losses will be recorded
in profit or loss.
(ii) Recognition and Derecognition
Regular way purchases and sales of financial assets are recognized on trade-date, the date
on which the Group commits to purchase or sell the asset. Financial assets are
derecognized when the rights to receive cash flows from the financial assets have expired
or have been transferred and the Group has transferred substantially all the risks and
rewards of ownership.
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(iii) Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case
of a financial asset not at FVPL, transaction costs that are directly attributable to the
acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are
expensed in profit or loss.
Debt instruments
Subsequent measurement of debt instruments depends on the Group’s business model for
managing the asset and the cash flow characteristics of the asset. There are three
measurement categories into which the Group classifies its debt instruments:
• Amortized cost: Assets that are held for collection of contractual cash flows, where
those cash flows represent solely payments of principal and interest, are measured
at amortized cost. Interest income from these financial assets is included in finance
income using the effective interest rate method. Any gain or loss arising on
derecognition is recognized directly in profit or loss and presented in other
gains/(losses), net together with foreign exchange gains and losses. Impairment
losses are presented as separate line item in the statement of profit or loss.
• FVPL: Assets that do not meet the criteria for amortized cost or FVOCI are
measured at FVPL. A gain or loss on a debt investment that is subsequently
measured at FVPL is recognized in profit or loss and presented net within other
gains/(losses), net in the period in which it arises.
(iv) Impairment of Financial Assets
The Group recognizes an allowance for expected credit losses (“ ECLs ”) for all debt
instruments not held at fair value through profit or loss. ECLs are based on the difference
between the contractual cash flows due in accordance with the contract and all the cash
flows that the Group expects to receive, discounted at an approximation of the original
effective interest rate. The expected cash flows will include cash flows from the sale of
collateral held or other credit enhancements that are integral to the contractual terms.
Details, please refer to credit risks in Note 3.2.
(11) Derivative Financial Instruments and Hedging Activities
Derivatives are initially recognized at fair value on the date a derivative contract is entered into
and are subsequently remeasured to their fair value at the end of each reporting period. The
accounting for subsequent changes in fair value depends on whether the derivative is designated
as a hedging instrument, and if so, the nature of the item being hedged. The Group designates
certain derivatives as either:
• hedges of the fair value of recognized assets or liabilities or a firm commitment (fair value
hedges)
• hedges of a particular risk associated with the cash flows of recognized assets and
liabilities and highly probable forecast transactions (cash flow hedges), or
• hedges of a net investment in a foreign operation (net investment hedges).
At the inception of the hedging, the Group documents the economic, relationship between
hedging instruments and hedged items, including whether changes in the cash flows of the
hedging instruments are expected to offset changes in the cash flows of hedges items. The Group
documents its risk management objective and strategy for undertaking its hedge transactions.
APPENDIX I ACCOUNTANT’S REPORT
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Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of
any derivative instrument that does not qualify for hedge accounting are recognized immediately
in profit or loss and are included in other gains/(losses), net.
(12) Financial Liabilities
Financial liabilities are classified as financial liabilities at amortized cost and financial liabilities
at FVPL at initial recognition.
Financial liabilities of the Group mainly comprise financial liabilities at amortized cost, including
trade and note payables, accruals and other payables, borrowings and customer deposit. Such
financial liabilities are initially recognized at fair value, net of transaction costs incurred, and
subsequently measured using the effective interest method. Financial liabilities that are due
within one year (inclusive) are classified as current liabilities; those with maturities over one year
but are due within one year (inclusive) as from the balance sheet date are classified as current
portion of non-current liabilities. Others are classified as non-current liabilities.
A financial liability is derecognized or partly derecognized when the underlying present
obligation is discharged or partly discharged. The difference between the carrying amount of the
derecognized part of the financial liability and the consideration paid is recognized in profit or
loss for the current period.
(13) Inventories
Raw materials, work in progress and finished goods are stated at the lower of cost and net
realizable value. Costs of inventories are determined on the month-end weighted average
method. Cost comprises direct materials, direct labor and an appropriate proportion of variable
and fixed overhead expenditure, the latter being allocated on the basis of normal operating
capacity. Cost includes the reclassification from equity of any gains or losses on qualifying cash
flow hedges relating to purchases of raw material but excludes borrowing costs. Costs of
purchased inventory are determined after deducting rebates and discounts. Net realizable value
is the estimated selling price in the ordinary course of business less the estimated costs of
completion and the estimated costs necessary to make the sale.
(14) Share Capital and Capital Reserve
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new
shares are shown in equity as a deduction, net of tax, from the proceeds.
Where any group company purchases the Company’s equity instruments, for example as the
result of a share buy-back or a share-based payment plan, the consideration paid, including any
directly attributable incremental costs (net of income taxes) is deducted from equity attributable
to the owners of the Company as treasury shares until the shares are canceled or reissued. Where
such ordinary shares are subsequently reissued, any consideration received, net of any directly
attributable incremental transaction costs and the related income tax effects, is included in equity
attributable to the owners of the Company.
(15) Trade and Other Payables
These amounts represent liabilities for goods and services provided to the Group prior to the end
of financial period which are unpaid. Trade and other payables are presented as current liabilities
unless payment is not due within 12 months after the reporting period. They are recognized
initially at fair value and subsequently measured at amortized cost using the effective interest
method.
APPENDIX I ACCOUNTANT’S REPORT
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--- page 550 ---
(16) Borrowings
Borrowings are initially recognized at fair value, net of transaction costs incurred. Borrowings are
subsequently measured at amortized cost. Any difference between the proceeds (net of
transaction costs) and the redemption amount is recognized in profit or loss over the period of the
borrowings using the effective interest method. Fees paid on the establishment of loan facilities
are recognized as transaction costs of the loan to the extent that it is probable that some or all of
the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To
the extent there is no evidence that it is probable that some or all of the facility will be drawn
down, the fee is capitalized as a prepayment for liquidity services and amortized over the period
of the facility to which it relates.
Borrowings are derecognized when the obligation specified in the contract is discharged,
canceled or expired. The difference between the carrying amount of a financial liability that has
been extinguished or transferred to another party and the consideration paid, including any
non-cash assets transferred or liabilities assumed, is recognized in profit or loss as other income
or finance costs.
Where the terms of a financial liability are renegotiated and the entity issues equity instruments
to a creditor to extinguish all or part of the liability (debt for equity swap), a gain or loss is
recognized in profit or loss, which is measured as the difference between the carrying amount of
the financial liability and the fair value of the equity instruments issued.
Borrowings are classified as current liabilities unless the Group has an unconditional right to
defer settlement of the liability for at least 12 months after the reporting period.
Covenants that the Group is required to comply with, on or before the end of reporting period, are
considered in classifying loan arrangements with covenants as current or non-current. Covenants
that the Group is required to comply with after the reporting period do not affect the classification
at the reporting date.
(17) Convertible Bonds
Convertible bonds that can be converted into equity share capital at the option of the holder,
where the number of shares that would be issued on conversion and the value of the
consideration that would be received do not vary, are accounted for as compound financial
instruments, which contain both a liability component (together with the early redemption option
which is closely related to the host liability component) and an equity component.
At initial recognition the liability component of the convertible bonds is determined using a
market interest rate for an equivalent non-convertible instrument. The remainder of the proceeds
is allocated to the conversion option as equity component. Transaction costs that relate to the
issue of a compound financial instrument are allocated to the liability and equity components in
proportion to the allocation of proceeds.
The liability component is subsequently carried at amortized cost, calculated using the effective
interest method, until extinguished on conversion or maturity. The equity component is
recognized in equity, net of any tax effects, until either the bonds are converted or redeemed.
If the bonds are converted, the relevant equity component and the carrying amount of the liability
component at the time of conversion are transferred to share capital and share premium for the
shares issued. If the bonds are redeemed, the equity component is transferred to retained profits.
APPENDIX I ACCOUNTANT’S REPORT
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--- page 551 ---
(18) Provisions
Provisions for legal claims, service warranties and make good obligations are recognized when
the Group has a present legal or constructive obligation as a result of past events, it is probable
that an outflow of resources will be required to settle the obligation, and the amount can be
reliably estimated. Provisions are not recognized for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in
settlement is determined by considering the class of obligations as a whole. A provision is
recognized even if the likelihood of an outflow with respect to any one item included in the same
class of obligations may be small.
Provisions are measured at the present value of management’s best estimate of the expenditure
required to settle the present obligation at the end of the reporting period. The discount rate used
to determine the present value is a pre-tax rate that reflects current market assessments of the
time value of money and the risks specific to the liability. The increase in the provision due to the
passage of time is recognized as interest expense.
(19) Employee Benefits
(i) Short-Term Obligations
Liabilities for wages and salaries, including non-monetary benefits, annual leave and
accumulating sick leave that are expected to be settled wholly within 12 months after the
end of the period in which the employees render the related service are recognized in
respect of employees’ services up to the end of the reporting period and are measured at
the amounts expected to be paid when the liabilities are settled. The liabilities are
presented as current employee benefit obligations in the statement of financial position.
(ii) Housing Funds, Medical Insurances and Other Social Insurances
Employees of the Group in the PRC are entitled to participate in various
government-supervised housing funds, medical insurance and other employee social
insurance plan. The Group contributes on a monthly basis to these funds based on certain
percentages of the salaries of the employees, subject to certain ceiling. The Group’s
liability in respect of these funds is limited to the contributions payable in each year.
Contributions to the housing funds, medical insurances and other social insurances are
expensed as incurred.
(iii) Post-Employment Benefits
The Group classifies post-employment benefit plans as either defined contribution plans
or defined benefit plans. Defined contribution plans are post-employment benefit plans
under which the Group pays fixed contributions into a separate fund and will have no
obligation to pay further contributions; and defined benefit plans are post-employment
benefit plans other than defined contribution plans. During the reporting period, the
Group’s defined contribution plans mainly include basic pensions and unemployment
insurance, while the defined benefit plans are certain oversea subsidiaries provide
supplemental retirement benefits beyond the national regulatory insurance system.
(iv) Basic Pensions
The Group’s employees participate in the basic pension plan set up and administered by
local authorities of Ministry of Human Resource and Social Security. Monthly payments of
premiums on the basic pensions are calculated according to prescribed bases and
percentage by the relevant local authorities. When employees retire, the relevant local
authorities are obliged to pay the basic pensions to them. The amounts based on the above
calculations are recognized as liabilities in the accounting period in which the service has
been rendered by the employees, with a corresponding charge to the profit or loss for the
current period or the cost of relevant assets.
APPENDIX I ACCOUNTANT’S REPORT
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--- page 552 ---
(20) 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
Group settled through the payment of shares or other equity instruments in consideration for
receiving services.
Equity-settled share-based payments made in exchange for services rendered by employees are
measured at the fair value of equity instruments granted to employees. Instruments which are
vested immediately upon the grant are charged to relevant costs or expenses at the fair value on
the date of grant and the capital reserve is credited accordingly. Instruments of which vesting is
conditional upon completion of services or fulfillment of performance conditions are measured
by recognizing services rendered during the period in relevant costs or expenses and crediting the
capital reserve accordingly at the fair value on the date of grant according to the best estimates
conducted by the Group at each date of the end of the reporting period during the pending
period. For details see Note 32.
No expense is recognized for awards that do not ultimately vest due to non-fulfillment of
non-market conditions and/or vesting conditions. For the market or non-vesting condition under
the share-based payments agreement, it should be treated as vesting irrespective of whether or
not the market or non-vesting condition is satisfied, provided that other performance condition
and/or vesting conditions are satisfied.
Where the terms of an equity-settled share-based payment are modified, as a minimum, services
obtained are recognized as if the terms had not been modified. In addition, an expense is
recognized for any modification which increases the total fair value of the instrument ranted or is
otherwise beneficial to the employee as measured at the date of modification.
(21) Dividend Distribution
Dividend distribution to the shareholders is recognized as a liability in the Historical Financial
Information in the period in which the dividends are approved by the entities’ shareholders or
directors, where appropriate.
(22) Interest Income
Interest income from financial assets at FVPL is included in the net fair value gains/(losses) on
these assets. Interest income on financial assets at amortized cost and financial assets at FVOCI
calculated using the effective interest method is recognized in profit or loss as part of other
income.
Interest income from financial instruments is calculated by effective interest method and
recognized in profit or loss for the current period. Interest income comprises premiums or
discounts, or the amortization based on effective rates of other difference between the initial
carrying amount and the due amount of interest-earning assets.
The effective interest method is a method of calculating the amortized cost of a financial asset or
liability and the interest income or interest costs based on effective rates. The effective interest
rate is the rate at which the estimated future cash flows during the period of expected duration of
the financial instruments or applicable shorter period are discounted to the current carrying
amount of the financial instruments. When calculating the effective interest rate, the Group
estimates cash flows by considering all contractual terms of the financial instrument (e.g., early
repayment options, similar options, etc.), but without considering future credit losses. The
calculation includes all fees and interest paid or received that are an integral part of the effective
interest rate, transaction costs, and all other premiums or discounts.
Interest income from impaired financial assets is calculated at the interest rate that is used for
discounting estimated future cash flow when measuring the impairment loss.
APPENDIX I ACCOUNTANT’S REPORT
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--- page 553 ---
(23) Dividend Income
Dividend income is recognized when the right to receive dividend payment is established.
(24) Earnings Per Share
Basic earnings per share
Basic earnings per share is calculated by dividing:
• the profit attributable to owners of the Company, excluding any costs of servicing equity
other than ordinary shares
• by the weighted average number of ordinary shares outstanding during the financial year,
adjusted for bonus elements in ordinary shares issued during the year and excluding
treasury shares.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per
share to take into account:
• the after-income tax effect of interest and other financing costs associated with dilutive
potential ordinary shares, and
• the weighted average number of additional ordinary shares that would have been
outstanding assuming the conversion of all dilutive potential ordinary shares.
(25) Government Grant
Government grants relating to costs are deferred and recognized in profit or loss over the period
necessary to match them with the costs that they are intended to compensate.
Government grants relating to the purchase of property, plant and equipment are included in
non-current liabilities as deferred income and they are credited to profit or loss on a straight-line
basis over the expected lives of the related assets.
(26) Current and Deferred Income Tax
The income tax expense or credit for the period is the tax payable on the current period’s taxable
income, based on the applicable income tax rate for each jurisdiction, adjusted by changes in
deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.
(i) Current Income Tax
The current income tax charge is calculated on the basis of the tax laws enacted or
substantively enacted at the end of the reporting period in the countries where the
Company and its subsidiaries and associates operate and generate taxable income.
Management periodically evaluates positions taken in tax returns with respect to
situations in which applicable tax regulation is subject to interpretation and considers
whether it is probable that a taxation authority will accept an uncertain tax treatment. The
Group measures its tax balances either based on the most likely amount or the expected
value, depending on which method provides a better prediction of the resolution of the
uncertainty.
APPENDIX I ACCOUNTANT’S REPORT
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--- page 554 ---
(ii) Deferred Income Tax
Deferred income tax is provided in full, using the liability method, on temporary
differences arising between the tax bases of assets and liabilities and their carrying
amounts in the Historical Financial Information. However, deferred tax liabilities are not
recognized if they arise from the initial recognition of goodwill. Deferred income tax is
also not accounted for if it arises from initial recognition of an asset or liability in a
transaction other than a business combination that at the time of the transaction affects
neither accounting nor taxable profit or loss and does not give rise to equal taxable and
deductible temporary differences. Deferred income tax is determined using tax rates (and
laws) that have been enacted or substantively enacted by the end of the reporting period
and are expected to apply when the related deferred income tax asset is realized or the
deferred income tax liability is settled.
Deferred tax assets are recognized only if it is probable that future taxable amounts will be
available to utilize those temporary differences and losses.
Deferred tax liabilities and assets are not recognized for temporary differences between
the carrying amount and tax bases of investments in foreign operations where the
Company is able to control the timing of the reversal of the temporary differences and it is
probable that the differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset where there is a legally enforceable right to
offset current tax assets and liabilities and where the deferred tax balances relate to the
same taxation authority. Current tax assets and tax liabilities are offset where the entity
has a legally enforceable right to offset and intends either to settle on a net basis, or to
realize the asset and settle the liability simultaneously.
Current and deferred tax is recognized in profit or loss, except to the extent that it relates
to items recognized in other comprehensive income or directly in equity. In this case, the
tax is also recognized in other comprehensive income or directly in equity, respectively.
For the purposes of measuring deferred tax for leasing transactions in which the Group
recognizes the right-of-use assets and the related lease liabilities, the Group first
determines whether the tax deductions are attributable to the right-of-use assets or the
lease liabilities.
For leasing transactions in which the tax deductions are attributable to the lease liabilities,
the Group applies IAS 12 Income Taxes requirements to right-of-use assets and lease
liabilities separately. Temporary differences on initial recognition of the relevant
right-of-use assets and lease liabilities are not recognized due to application of the initial
recognition exemption. Temporary differences arising from subsequent revision to the
carrying amounts of right-of-use assets and lease liabilities, resulting from
remeasurement of lease liabilities and lease modification, that are not subject to initial
recognition exemption are recognized on the date of remeasurement or modification.
Current and deferred tax are recognized in profit or loss, except when they relate to items
that are recognized in other comprehensive income or directly in equity, in which case, the
current and deferred tax are also recognized in other comprehensive income or directly in
equity respectively. Where current tax or deferred tax arises from the initial accounting for
a business combination, the tax effect is included in the accounting for the business
combination.
In assessing any uncertainty over income tax treatments, the Group considers whether it is
probable that the relevant tax authority will accept the uncertain tax treatment used, or
proposed to be use by individual group entities in their income tax filings. If it is probable,
the current and deferred taxes are determined consistently with the tax treatment in the
income tax filings. If it is not probable that the relevant taxation authority will accept an
uncertain tax treatment, the effect of each uncertainty is reflected by using either the most
likely amount or the expected value.
APPENDIX I ACCOUNTANT’S REPORT
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--- page 555 ---
(27) Leases
(i) Definition of a Lease
A contract is, or contains, a lease if the contract conveys the right to control the use of an
identified asset for a period of time in exchange for consideration.
For contracts entered into or modified on or after the date of initial application or arising
from business combinations, the Group assesses whether a contract is or contains a lease
based on the definition under IFRS 16 at inception or modification date. Such contract will
not be reassessed unless the terms and conditions of the contract are subsequently
changed.
(ii) The Group as a Lessee
As a practical expedient, leases with similar characteristics are accounted on a portfolio
basis when the Group reasonably expects that the effects on the financial statements
would not differ materially from individual leases within the portfolio.
Short-Term Leases and Leases of Low-Value Assets
The Group applies the short-term lease recognition exemption to leases that have a lease
term of 12 months or less from the commencement date and do not contain a purchase
option. It also applies the recognition exemption for lease of low-value assets. Lease
payments on short-term leases and leases of low-value assets are recognized as expense on
a straight-line basis over the lease term.
Right-of-Use Assets
The cost of right-of-use asset includes:
• the amount of the initial measurement of the lease liability;
• any lease payments made at or before the commencement date, less any lease
incentives received;
• any initial direct costs incurred by the Group; and
• an estimate of costs to be incurred by the Group in dismantling and removing the
underlying assets, restoring the site on which it is located or restoring the
underlying asset to the condition required by the terms and conditions of the lease.
Right-of-use assets are measured at cost, less any accumulated depreciation and
impairment losses, and adjusted for any remeasurement of lease.
Right-of-use assets in which the Group is reasonably certain to obtain ownership of the
underlying leased assets at the end of the lease term are depreciated from commencement
date to the end of the useful life. Otherwise, right-of-use assets are depreciated on a
straight-line basis over the shorter of its estimated useful life and the lease term.
The Group presents right-of-use assets as a separate line item on the consolidated
statement of financial position.
For payments of a property interest which includes both leasehold land and building
elements, the entire property is presented as property, plant and equipment of the Group
when the payments cannot be allocated reliably between the leasehold land and building
elements, except for those that are classified and accounted for as investment properties.
APPENDIX I ACCOUNTANT’S REPORT
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--- page 556 ---
Land leases are also in the scope of IFRS 16. The Group recognizes any prepaid premium
for leasehold lands as right-of-use assets which are depreciated over the relevant lease
terms.
Refundable rental deposits paid are accounted under IFRS 9 and initially measured at fair
value. Adjustments to fair value at initial recognition are considered as additional lease
payments and included in the cost of right-of-use assets.
Lease Liabilities
At the commencement date of a lease, the Group recognizes and measures the lease
liability at the present value of lease payments that are unpaid at that date. In calculating
the present value of lease payments, the Group uses the incremental borrowing rate at the
lease commencement date if the interest rate implicit in the lease is not readily
determinable. The lease payments are discounted using the interest rate implicit in the
lease. If that rate cannot be readily determined, which is generally the case for leases of the
Group, the lessee’s incremental borrowing rate is used, being the rate that the individual
lessee would have to pay to borrow the funds necessary to obtain an asset of similar value
to the right-of-use asset in a similar economic environment with similar terms, security
and conditions.
Assets and liabilities arising from a lease are initially measured on a present value basis.
Lease liabilities include the net present value of the following lease payments:
• fixed payments (including in-substance fixed payments), less any lease incentives
receivable;
• variable lease payments that are based on an index or a rate, initially measured
using the index or rate as at the commencement date;
• amounts expected to be payable by the Group under residual value guarantees;
• the exercise price of a purchase option if the Group is reasonably certain to exercise
that option;
• payments of penalties for terminating the lease, if the lease term reflects the Group
exercising that option; and
• lease payments to be made under reasonably certain extension options are also
included in the measurement of lease liabilities.
After the commencement date, lease liabilities are adjusted by interest accretion and lease
payments.
The Group presents lease liabilities as a separate line item in the consolidated statement of
financial position.
APPENDIX I ACCOUNTANT’S REPORT
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--- page 557 ---
(iii) The Group as a Lessor
Classification and measurement of leases
Leases for which the Group is a lessor are classified as finance or operating leases.
Whenever the terms of the lease transfer substantially all the risks and rewards incidental
to ownership of an underlying asset to the lessee, the contract is classified as a finance
lease. All other leases are classified as operating leases.
Rental income from operating leases is recognized in profit or loss on a straight-line basis
over the term of the relevant lease. Initial direct costs incurred in negotiating and
arranging an operating lease are added to the carrying amount of the leased asset, and
such costs are recognized as an expense on a straight-line basis over the lease term.
Refundable rental deposits received are accounted under IFRS 9 and initially measured at
fair value. Adjustments to fair value at initial recognition are considered as additional
lease payments from lessees.
III. SUBSEQUENT FINANCIAL STATEMENTS
No audited financial statements have been prepared by the Company or any of the
companies now comprising the Group in respect of any period subsequent to December
31, 2024 and up to the date of this report.
APPENDIX I ACCOUNTANT’S REPORT
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The following is the text of a report set out on pages IA-1 to IA-2, received from the
Company’s reporting accountant, Confucius International CP A Limited, Certified Public
Accountants, Hong Kong, for the purpose of incorporation in this prospectus. This information set
out below is the unaudited interim condensed consolidated financial information of the Group for
the three months ended March 31, 2025 and does not form part of the Accountant’s Report from the
reporting accountant, Confucius International CP A Limited, Certified Public Accountants, Hong
Kong, as set out in Appendix I to this prospectus, and is included herein for information purpose
only.
ಥᝄ˺୿ɻ౱༸181໮ɽϞɽข15ᅽ1501-1508܃
Rooms 1501-8, 15/F., Tai Yau Building,
181 Johnston Road, Wanchai, Hong Kong
ཥ༑ Tel: (852) 3103 6980
ෂॆ Fax: (852) 3104 0170
ཥඉEmail: info@pccpa.hkREPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION
TOTHEDIRECTORSOFZHEJIANGSANHUAINTELLIGENTCONTROLSCO.,LTD.
Introduction
We have reviewed the interim financial information set out on pages IA-3 to IA-37,
which comprises the interim condensed consolidated statement of financial position of
Zhejiang Sanhua Intelligent Controls Co., Ltd. (the “ Company ”) and its subsidiaries
(together, the “ Group ”) as at March 31, 2025 and the related interim condensed
consolidated statement of profit or loss, the interim condensed consolidated statement of
comprehensive income, the interim condensed consolidated statement of changes in
equity and the interim condensed consolidated statement of cash flows for the
three-month period then ended and selected explanatory notes (together, the “ Interim
Financial Information ”). The directors of the Company are responsible for the
preparation and presentation of the Interim Financial Information in accordance with
International Accounting Standard 34 “Interim Financial Reporting”. Our responsibility is
to express a conclusion on the Interim Financial Information based on our review and to
report our conclusion solely to you, as a body, in accordance with our agreed terms of
engagement and for no other purpose. We do not assume responsibility towards or accept
liability to any other person for the contents of this report.
Scope of Review
We conducted our review in accordance with Hong Kong Standard on Review
Engagements 2410 “Review of Interim Financial Information Performed by the
Independent Auditor of the Entity” as issued by the Hong Kong Institute of Certified
Public Accountants. A review of the Interim Financial Information consists of making
inquiries, primarily of persons responsible for financial and accounting matters, and
applying analytical and other review procedures. A review is substantially less in scope
than an audit conducted in accordance with Hong Kong Standards on Auditing and
consequently does not enable us to obtain assurance that we would become aware of all
APPENDIX IA UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
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significant matters that might be identified in an audit. Accordingly, we do not express an
audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that
the Interim Financial Information of the Group is not prepared, in all material respects, in
accordance with International Accounting Standard 34 “Interim Financial Reporting”.
Other Matter
The comparative information for the interim condensed consolidated statement of
financial position is based on the audited financial statements as at December 31, 2024.
The comparative information for the interim condensed consolidated statement of profit
or loss, the interim condensed consolidated statement of comprehensive income, the
interim condensed consolidated statement of changes in equity and the interim condensed
consolidated statement of cash flows, and related explanatory notes, for the period ended
March 31, 2024 has not been audited or reviewed.
Confucius International CPA Limited
Certified Public Accountants
Hong Kong
13 June 2025
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CONSOLIDATED FINANCIAL INFORMATION
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Interim condensed consolidated statements of profit or loss
Three months ended March 31,
Notes 2025 2024
RMB’000 RMB’000
(Unaudited) (Unaudited)
Revenue 4 7,669,450 6,439,559
Cost of revenue 7 (5,614,188) (4,698,917)
Gross profit 2,055,262 1,740,642
General and administrative expenses 7 (504,010) (457,175)
Selling and marketing expenses 7 (143,037) (127,299)
Research and development expenses 7 (359,855) (317,015)
Net impairment losses on financial assets (46,316) (48,569)
Other income 5 77,685 65,587
Other gains/(losses), net 6 54,665 (39,390)
Operating profit 1,134,394 816,781
Finance income 8 8,503 17,495
Finance costs 8 (37,252) (34,676)
Finance costs, net 8 (28,749) (17,181)
Share of profit or loss of investments
accounted for using the equity method 11 2,414 1,252
Profit before income tax 1,108,059 800,852
Income tax expenses 9 (184,589) (154,698)
Profit for the period 923,470 646,154
Attributable to:
– Owners of the Company 903,416 647,743
– Non-controlling interests 20,054 (1,589)
923,470 646,154
Earnings per share for profit attributable
to owners of the Company (expressed
in RMB per share)
• Basic 10 0.24 0.17
• Diluted 10 0.24 0.17
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CONSOLIDATED FINANCIAL INFORMATION
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Interim condensed consolidated statements of comprehensive income
Three months ended March 31,
2025 2024
RMB’000 RMB’000
(Unaudited) (Unaudited)
Profit for the period 923,470 646,154
Other comprehensive income
Items that may be reclassified to profit or loss
in subsequent periods, net of tax:
– Currency translation differences of
foreign operations (13,540) (17,346)
Other comprehensive income for the period,
net of tax (13,540) (17,346)
Total comprehensive income for the period 909,930 628,808
Attributable to:
– Owners of the Company 889,876 630,397
– Non-controlling interests 20,054 (1,589)
909,930 628,808
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CONSOLIDATED FINANCIAL INFORMATION
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Interim condensed consolidated statements of financial position
As at
March 31,
As at
December 31,
Notes 2025 2024
RMB’000 RMB’000
(Unaudited)
ASSETS
Non-current assets
Property, plant and equipment 12 12,651,910 12,274,558
Investment properties 7,099 7,053
Right-of-use assets 13 1,179,818 1,205,331
Deferred tax assets 109,083 112,699
Intangible assets 14 37,800 36,520
Investments accounted for using the
equity method 11 39,314 40,600
Other non-current assets 16 455,310 376,825
Total non-current assets 14,480,334 14,053,586
Current assets
Inventories 17 5,086,082 5,280,442
Prepayments and other receivables 16 319,603 417,039
Trade and notes receivables 15 10,536,425 9,628,337
Financial assets at fair value through
profit or loss 3.3 10,797 6,237
Term deposits and restricted cash 18 1,640,313 1,805,065
Cash and cash equivalents 18 3,103,328 3,443,503
Other current assets 16 1,983,842 1,720,540
Total current assets 22,680,390 22,301,163
Total assets 37,160,724 36,354,749
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As at
March 31,
As at
December 31,
Notes 2025 2024
RMB’000 RMB’000
(Unaudited)
LIABILITIES
Non-current liabilities
Borrowings 19 1,762,193 2,045,773
Lease liabilities 13 216,337 237,913
Deferred tax liabilities 263,141 258,264
Other non-current liabilities 22 698,712 659,851
Total non-current liabilities 2,940,383 3,201,801
Current liabilities
Borrowings 19 2,466,406 2,053,766
Trade and notes payables 20 9,823,794 9,777,262
Contract liabilities 4 56,612 49,462
Lease liabilities 13 95,523 90,574
Current income tax liabilities 185,264 174,168
Financial liabilities at fair value through
profit or loss 3.3 24,481 79,678
Accruals and other payables 21 1,093,488 1,407,120
Other current liabilities 22 1,298 1,274
Total current liabilities 13,746,866 13,633,304
Total liabilities 16,687,249 16,835,105
EQUITY
Equity attributable to owners of
the Company
– Share capital 3,732,390 3,732,390
– Other reserves 25 4,333,990 4,296,916
– Treasury shares 23 (387,661) (381,848)
– Retained earnings 24 12,553,728 11,650,312
20,232,447 19,297,770
Non-controlling interests 241,028 221,874
TOTAL EQUITY 20,473,475 19,519,644
TOTAL LIABILITIES AND EQUITY 37,160,724 36,354,749
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CONSOLIDATED FINANCIAL INFORMATION
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Interim condensed consolidated statements of changes in equity
Attributable to owners of the Company
Three months ended
at March 31, 2025
(Unaudited)
Share
capital
Treasury
shares
Other
reserves
Retained
earnings Sub-total
Non-
controlling
interests
Total
equity
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Note 23) (Note 25) (Note 24)
Balance at January 1,
2025 3,732,390 (381,848) 4,296,916 11,650,312 19,297,770 221,874 19,519,644
Profit for the period – – – 903,416 903,416 20,054 923,470
Other comprehensive
income – – (13,540) – (13,540) – (13,540)
Total comprehensive
income – – (13,540) 903,416 889,876 20,054 909,930
Share-based payment
(Note 25) – – 50,614 – 50,614 – 50,614
Dividends declared ––––– (900) (900)
Repurchase of shares
(Note 23(i)) – (5,813) – – (5,813) – (5,813)
Balance at March 31,
2025 3,732,390 (387,661) 4,333,990 12,553,728 20,232,447 241,028 20,473,475
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CONSOLIDATED FINANCIAL INFORMATION
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Attributable to owners of the Company
Three months ended
at March 31, 2024
(Unaudited)
Share
capital
Treasury
shares
Other
reserves
Retained
earnings Sub-total
Non-
controlling
interests
Total
equity
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Note 23) (Note 25) (Note 24)
Balance at January 1,
2024 3,732,616 (423,469) 4,582,315 10,002,942 17,894,404 169,304 18,063,708
Profit for the period – – – 647,743 647,743 (1,589) 646,154
Other comprehensive
income – – (17,346) – (17,346) – (17,346)
Total comprehensive
income – – (17,346) 647,743 630,397 (1,589) 628,808
Capital injection ––––– 1 1,171 11,171
Share-based payment
(Note 25) – – 6,341 – 6,341 – 6,341
Dividends declared ––––– (1,200) (1,200)
Repurchase of shares
(Note 23(i)) – (285,997) – – (285,997) – (285,997)
Transaction with
non-controlling
interests – – (6,363) – (6,363) 6,363 –
Balance at March 31,
2024 3,732,616 (709,466) 4,564,947 10,650,685 18,238,782 184,049 18,422,831
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CONSOLIDATED FINANCIAL INFORMATION
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Interim condensed consolidated statements of cash flows
Three months ended March 31,
Notes 2025 2024
RMB’000 RMB’000
(Unaudited) (Unaudited)
Cash flows from operating activities
Cash generated from operations 26(a) 562,097 271,338
Interest received 8,503 17,495
Income tax paid (158,664) (212,490)
Net cash generated from operating
activities 411,936 76,343
Cash flows from investing activities
Proceeds from return on investments 7,165 6,250
Proceeds from disposal of property, plant
and equipment, intangible assets and
other non-current assets 100 41
Withdraw of term deposits and wealth
management products 591,304 281,185
Government grant received in relation to
assets 52,357 14,322
Payments for purchase of property, plant
and equipment, intangible assets and
other non-current assets (752,140) (889,062)
Placement of term deposits and wealth
management products (675,501) (30,000)
Payments for settlement of derivative
financial instruments (28,783) (13,635)
Others 18,366 162
Net cash used in investing activities (787,132) (630,737)
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CONSOLIDATED FINANCIAL INFORMATION
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Three months ended March 31,
Notes 2025 2024
RMB’000 RMB’000
(Unaudited) (Unaudited)
Cash flows from financing activities
Capital contributions from the
non-controlling interests – 10,500
Proceeds from borrowings 958,848 1,123,736
Repayments of borrowings (829,062) (923,736)
Principal elements of lease payments (21,658) (17,023)
Interests paid (38,363) (33,563)
Dividends paid to the non-controlling
interests (3,428) (1,200)
Payments for repurchase of shares (5,814) (285,998)
Payments for listing expenses (9,931) –
Others (2,032) (20,000)
Net cash generated from/(used in)
financing activities 48,560 (147,284)
Net decrease in cash and cash equivalents (326,636) (701,678)
Cash and cash equivalents at beginning of
the period 3,443,503 3,624,955
Effects of exchange rate changes on cash
and cash equivalents (13,539) (6,846)
Cash and cash equivalents at the end of
the period 18 3,103,328 2,916,431
APPENDIX IA UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
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II. NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
1. GENERAL INFORMATION
Zhejiang Sanhua Intelligent Controls Co., Ltd. (hereinafter referred to as “ the Company ”) is a joint stock
company with limited liability incorporated in the People’s Republic of China (the “ PRC”). The former
entity of the Company, Sanhua-Fujikoki Co., Ltd., (ʮ̡ ), was incorporated as a
Sino-Japanese joint venture on September 10, 1994. On December 19, 2001, the Company was established
through converting Sanhua-Fujikoki Co., Ltd., to a joint stock company, which later changed its name to
Zhejiang Sanhua Intelligent Controls Co., Ltd. The registered office and principal place of business of the
Company is located at No. 219 Woxi Avenue, Chengtan Street, Xinchang, Shaoxing, Zhejiang Province
PRC. The Company is listed on the Shenzhen Stock Exchange (stock code: 002050) on June 7, 2005. The
parent and the ultimate holding company of the Company is Sanhua Holding Group Co., Ltd. (ٰ
ʮ̡ ) (hereinafter referred to as “ the Holding Company ”), which is also incorporated in the
PRC.
The Company and its subsidiaries (hereinafter collectively referred to as “ the Group ”) are principally
engaged in research and development (“ R&D ”), production and sales of refrigeration and
air-conditioning product components and automotive components, which are widely used in the
refrigeration and air-conditioning product market and the automotive market, including both of new
energy vehicles (“ NEVs ”) and traditional fuel vehicles.
2. BASIS OF PREPARATION AND PRESENTATION
2.1 Basis of preparation
This interim condensed consolidated financial information, comprising interim condensed
consolidated statement of financial position as at March 31, 2025, the interim condensed
consolidated statement of profit or loss, the interim condensed consolidated statement of
comprehensive income, the interim condensed consolidated statement of changes in equity and
the interim condensed consolidated statement of cash flows for the three months ended March 31,
2025 (collectively referred to as the “ Interim Financial Information ”), has been prepared in
accordance with International Accounting Standard (“ IAS”) 34, “Interim Financial Reporting”
issued by the International Accounting Standards Board (“ IASB ”).
The Interim Financial Information has been prepared in accordance with the same accounting
policies adopted in the historical financial information for the years ended December 31, 2022,
2023 and 2024 (the “ Historical Financial Information ”) as disclosed in Appendix IA to the
prospectus issued by the Company.
This Interim Financial Information contains consolidated financial statements and selected
explanatory notes. The selected notes are included to explain events and transactions that are
significant to an understanding of the changes in financial position and performance of the Group
since the latest annual consolidated financial statements as at and for the year ended December
31, 2024. The condensed consolidated interim financial statements and notes thereon do not
include all of the information required for a full set of financial statements prepared in accordance
with IFRS Accounting Standards (“ IFRS ”). Accordingly, these unaudited condensed consolidated
financial statements should be read in conjunction with the Historical Financial Information and
notes thereto.
APPENDIX IA UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
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2.2 New Standards and Amendments to Standards Not Yet Adopted
Standards and amendments to standards that have been issued but not yet effective and not been
early adopted by the Group are as follows:
Standards and amendments
Effective for accounting
periods beginning
on or after
Amendments to IFRS 10 and IAS 28 ‘Sale or Contribution of
Assets between an Investor and its Associate or Joint Venture’
To be determined
Amendments to IFRS 9 and IFRS 7 ‘Amendments to the
Classification and Measurement of Financial Instruments’
January 1, 2026
Amendments to IFRS 9 and IFRS 7 ‘Contracts Referencing
Nature-dependent Electricity’
January 1, 2026
Annual Improvements – Volume 11 IFRS accounting standards January 1, 2026
IFRS 18 ‘Presentation and Disclosure in Financial Statements’ January 1, 2027
The Group has already commenced an assessment of the impact of these new standards and
amendments. IFRS 18 will replace IAS 1 ‘Presentation of Financial Statements’ to introduce the
new requirements mainly for presentation of the statement of profit or loss and new disclosures to
the future financial statements. Except for the impact of IFRS 18 above, other new/amended
standards are either not relevant to the Group or not expected to have a material impact on the
Group’s consolidated financial statements when they become effective.
2.3 Critical Accounting Estimates and Judgements
The preparation of the interim financial information in conformity with IAS 34 requires
management to make judgements, estimates and assumptions that affect the application of
policies and reported amounts of assets and liabilities, income and expenses on a year-to-date
basis. Actual results may differ from these estimates.
In preparing the Interim Financial Information, the significant judgments made by management
in applying the Group’s accounting policies and the key sources of estimation uncertainty are the
same as those applied to the Historical Financial Information.
3. FINANCIAL RISK MANAGEMENT
3.1 Financial Risk Factors
The Group’s activities expose it to a variety of financial risks: market risk (including foreign
exchange risk and interest rate risk), credit risk, liquidity risk and price risk. The Group’s overall
risk management focuses on the unpredictability of financial markets, seeks a balance between
risk and return and minimizes the adverse impact of risk on the Group’s finance performance.
Based on this risk management objective, the basic strategy of the Group’s risk management is to
identify and analyze the various risks faced by the Group, establish appropriate risk tolerance
thresholds and timely and reliably supervise various risks to control them within a limited range.
The Interim Financial Information does not include all financial risk management information
and disclosures required in the annual consolidated financial statements and should be read in
conjunction with the Historical Financial Information. There were no significant changes in any
material risk management policies during the three months ended March 31, 2025.
APPENDIX IA UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
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3.2 Capital Management
The primary objectives of the Group’s capital management are to safeguard the Group’s ability to
continue as a going concern and to maintain healthy capital ratios in order to support its business
and maximize shareholders’ value.
The Group manages its capital structure in light of changes in economic conditions and the risk
characteristics of the underlying assets. To maintain or adjust the capital structure, the Group
may adjust the dividend payment to shareholders, return capital to shareholders or issue new
shares. The Group is not subject to any externally imposed capital requirements. No changes were
made in the objectives, policies or processes for managing capital during the year ended
December 31, 2024 and the three months ended March 31, 2025.
The Group monitors capital on the basis of the debt to asset ratio as at March 31, 2025 and
December 31, 2024 are as follows:
As at
March 31,
As at
December 31,
2025 2024
RMB’000 RMB’000
(Unaudited)
Total assets 37,160,724 36,354,749
Total liabilities 16,687,249 16,835,105
Debt to asset ratio 44.9% 46.3%
3.3 Fair Value Estimation
(a) Determination of Fair Value and the Fair Value Hierarchy of Financial Instruments
This note provides information on how the Group determines the fair values of various
financial assets and liabilities.
For financial reporting purposes, fair value measurements are categorized into Level 1, 2
or 3 based on the degree to which the inputs to the fair value measurements are observable
and the significance of the inputs to the fair value measurement in its entirety, which are
described as follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or
liabilities that the entity can access at the measurement date;
Level 2 inputs are inputs, other than quoted prices included within Level 1, that are
observable for the asset or liability, either directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability.
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CONSOLIDATED FINANCIAL INFORMATION
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As at March 31, 2025 Level 1 Level 2 Level 3 Total
(Unaudited) RMB’000 RMB’000 RMB’000 RMB’000
Financial assets at fair value
through profit or loss
– Derivative financial
assets 9,298 1,499 – 10,797
Financial liabilities at fair
value through profit or loss
– Derivative financial
liabilities 98 24,383 – 24,481
As at December 31, 2024 Level 1 Level 2 Level 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
Financial assets at fair value
through profit or loss
– Derivative financial
assets 6,237 – – 6,237
Financial liabilities at fair
value through profit or loss
– Derivative financial
liabilities 2,819 76,859 – 79,678
The timing of transfers is determined at the date of the event or change in circumstances
that caused the transfers. During the period, there was no transfer between Level 1 and
Level 2.
(b) Valuation Techniques Used to Determine Fair Values
The fair value of financial instruments traded in an active market is determined using
quoted market price; and the fair value of those not traded in an active market is
determined by the Group using valuation technique. Valuation techniques include the use
of recent transaction prices, discounted cash flow analysis, option pricing models and
others commonly used by market participants. These valuation techniques include the use
of observable and/or unobservable inputs.
4. OPERATING SEGMENT INFORMATION
(a) Description of Segments and Principal Activities
Operating segments are reported in a manner consistent with the internal reporting provided to
the chief operating decision maker (“ CODM ”). The executive directors assess the financial
performance and position of the Group and makes strategic decisions. The executive directors,
which has been identified as being the CODM, consists of the chief executive officer, the chief
financial officer and the managers for each business unit. The CODM review the Group’s internal
reporting in order to assess performance, allocate resources, and determine the operating
segments based on these reports.
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CONSOLIDATED FINANCIAL INFORMATION
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For the three months ended March 31, 2025 and 2024, the CODM have identified the following
reportable segments from a product perspective:
• Refrigeration and air-conditioning product components business
• Automotive components business
(b) Segment Information
For the three months ended March 31, 2025 and 2024, the CODM assess the performance of the
operating segments mainly based on segment revenue and gross profit of each operating
segment. The selling and marketing expenses, general and administrative expenses and research
and development expenses are common costs incurred for these operating segments as a whole
and therefore, they are not included in the measure of the segments’ performance which is used
by the CODM as a basis for the purpose of resource allocation and assessment of segment
performance. Net impairment losses on financial assets, other income, other gains/(losses), net,
finance costs, net and income tax expenses are also not allocated to individual operating segment.
Segment information for the three months ended March 31, 2025 is as follows:
Refrigeration
and
air-conditioning
product
components
Automotive
components
Inter
segment
elimination Total
RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenue from contracts with
external customers 4,960,078 2,707,225 – 7,667,303
Inter-segment revenue ––––
Other revenue (i) – 2,147 – 2,147
Operating costs (3,647,252) (1,966,936) – (5,614,188)
Segment profit 1,312,826 742,436 – 2,055,262
Other profit or loss (947,203)
Total profit before income tax 1,108,059
Total assets 22,613,222 14,547,502 – 37,160,724
Total liabilities 10,338,644 6,348,605 – 16,687,249
Investments in associates 39,314 – – 39,314
Share of profit of associates, net 2,414 – – 2,414
Net impairment losses on financial
assets 58,816 (12,500) – 46,316
Depreciation and amortization 169,259 122,448 – 291,707
APPENDIX IA UNAUDITED INTERIM CONDENSED
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Segment information for the three months ended March 31, 2024 is as follows:
Refrigeration
and
air-conditioning
product
components
Automotive
components
Inter
segment
elimination Total
RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenue from contracts with
external customers 3,868,717 2,567,581 – 6,436,298
Inter-segment revenue ––––
Other revenue (i) – 3,261 – 3,261
Operating costs (2,828,922) (1,869,995) – (4,698,917)
Segment profit 1,039,795 700,847 – 1,740,642
Other profit or loss (939,790)
Total profit before income tax 800,852
Share of profit of associates, net 1,252 – – 1,252
Net impairment losses on financial
assets 45,310 3,259 – 48,569
Depreciation and amortization 126,749 92,191 – 218,940
(i) Other revenue mainly represents lease income.
The timing of revenue recognition is shown in the table below:
Three months ended March 31,
2025 2024
RMB’000 RMB’000
(Unaudited) (Unaudited)
Revenue from contracts with external customers
recognized at a point in time
– Refrigeration and air-conditioning product
components 4,960,078 3,868,717
– Automotive components 2,707,225 2,567,581
7,667,303 6,436,298
APPENDIX IA UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
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The Company is domiciled in Mainland China. The amount of the Group’s revenue from contracts
with external customers by locations is shown in the table below:
Three months ended March 31,
2025 2024
RMB’000 RMB’000
(Unaudited) (Unaudited)
Mainland China 4,146,384 3,503,944
Other countries or regions 3,523,066 2,935,615
7,669,450 6,439,559
(c) Contract Liabilities
During the three months ended March 31, 2025 and 2024, the additions to the contract liabilities
were primarily due to cash collections in advance of fulfilling performance obligations, while the
reductions to the contract liabilities were primarily due to the recognition of revenues upon
fulfilment of performance obligations.
As at
March 31,
As at
December 31,
2025 2024
RMB’000 RMB’000
(Unaudited)
Contract liabilities 56,612 49,462
Three months ended March 31,
2025 2024
RMB’000 RMB’000
(Unaudited) (Unaudited)
Revenue recognized that was included in the beginning
balance 49,462 51,789
Management expects that the unsatisfied obligation of RMB56,612,000 and RMB49,462,000 as at
March 31, 2025 and December 31, 2024, respectively, will be recognized as revenue during the next
twelve months.
APPENDIX IA UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
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5. OTHER INCOME
Three months ended March 31,
2025 2024
RMB’000 RMB’000
(Unaudited) (Unaudited)
Government grants 45,668 32,427
Additional deduction for VAT (i) 17,027 6,016
Interest income (ii) 12,726 25,182
Others 2,264 1,962
77,685 65,587
(i) Pursuant to the Announcement [2023] No.43 “Notice on the Additional Value-Added Tax (“ VAT”)
Deduction Policy for Advanced Manufacturing Enterprises (ಯ
ʮѓ)” issued in 2023 by the Ministry of Finance and the State Taxation Administration,
advanced manufacturing enterprises are eligible for a 5% additional VAT deduction based on
deductible input VAT from January 1, 2023 to December 31, 2027.
(ii) The amount mainly comprises interest income on the Group’s term deposits classified as financial
assets at amortized cost calculated using the effective interest method. Interest income from cash
and cash equivalent is included in “Finance costs, net” (Note 8).
6. OTHER GAINS/(LOSSES), NET
Three months ended March 31,
2025 2024
RMB’000 RMB’000
(Unaudited) (Unaudited)
Net losses on disposal of financial instruments (22,632) (14,806)
Fair value changes on derivative financial instruments 64,003 (39,318)
Net foreign exchange differences 17,485 16,672
Net losses on disposal of property, plant and equipment and other
long-term assets (4,698) (2,727)
Others 507 789
54,665 (39,390)
APPENDIX IA UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
– IA-18 –


--- page 576 ---
7. EXPENSE BY NATURE
Expenses included in cost of revenue, general and administrative expenses, selling and marketing
expenses and research and development expenses are analyzed as follows:
Three months ended March 31,
2025 2024
RMB’000 RMB’000
(Unaudited) (Unaudited)
Raw materials and consumables used 4,310,415 3,574,147
Employee benefit expenses 1,283,254 1,056,594
Depreciation and amortisation 291,707 218,940
Utility costs 145,838 134,722
Office expenses 69,363 64,744
Professional services and other consulting fees 26,890 30,809
Surplus taxes 41,053 34,568
Marketing, conference and traveling expenses 21,506 21,301
Impairment losses on inventories 1,850 5,968
Listing expenses 2,567 –
Other expenses 426,647 458,613
6,621,090 5,600,406
8. FINANCE COSTS, NET
Three months ended March 31,
2025 2024
RMB’000 RMB’000
(Unaudited) (Unaudited)
Finance income:
Interest income from financial assets held for cash management
purposes 8,503 17,495
Finance costs:
Interest expenses on lease liabilities (5,262) (724)
Interest expenses on borrowings (33,461) (33,739)
Net exchange gains/(losses) on foreign currency borrowings and
others 1,471 (213)
Finance costs total (37,252) (34,676)
Finance costs, net (28,749) (17,181)
APPENDIX IA UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
– IA-19 –


--- page 577 ---
9. INCOME TAX EXPENSES
The income tax expenses of the Group during the three months ended March 31, 2025 and 2024 are
analyzed as follows:
Three months ended March 31,
2025 2024
RMB’000 RMB’000
(Unaudited) (Unaudited)
Current income tax 161,687 160,729
Deferred income tax 22,902 (6,031)
184,589 154,698
The Group is subject to income tax on an entity basis on profits arising in or derived from the
jurisdictions in which members of the Group are domiciled and operate.
(a) PRC Corporate Income Tax
Certain subsidiaries of the Group have obtained High and New Technology Enterprises
certification (“ HNTE ”) and hence they are entitled to a preferential corporate income tax rate of
15% for a valid period of 3 years. Other subsidiaries established and operated in Mainland China
are subject to the PRC corporate income tax at the rate of 25%.
According to the relevant laws and regulations promulgated by the State Taxation Administration
of the PRC, enterprises engaging in research and development activities are entitled to claim
175% from 2018 onwards (subsequently raised to 200% from 2022 onwards) of their research and
development expenses incurred as tax deductible expenses when determining their assessable
profits for that year (the “ Super Deduction for research and development ”).
(b) US Corporate Income Tax
The applicable income tax rate of United States where the Company’s subsidiaries having
significant operations is 0%-10% and 21%, which is a blended state rate and federal rate
respectively.
(c) Corporate Income Tax in Other Jurisdictions
The income tax rates of the subsidiaries from other jurisdictions, including Germany, Singapore,
Mexico and Japan, had been calculated on the estimated assessable profit at the respective rates
prevailing in the relevant jurisdictions.
(d) OECD Pillar Two Model Rules
The Group is within the scope of the Global Anti-Base Erosion (GloBE) model rules (hereinafter
referred to as “ the Pillar Two model rules ”). The Group has temporarily exempted the
recognition and disclosure of deferred tax assets and liabilities arising from Pillar Two income
taxes, and will account for the Pillar Two income taxes as current tax when incurred. As at March
31, 2025, Pillar Two legislation has been enacted or substantively enacted and has taken effect
from January 1, 2024, in nine jurisdictions where the Group operates. Additionally, it has newly
taken effect from January 1, 2025 in four jurisdictions where the Group operates.
APPENDIX IA UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
– IA-20 –


--- page 578 ---
Based on the assessment of the full-year 2024 financial data, the Group expects to benefit from the
transitional Country-by-Country Reporting (CbCR) safe harbour in all jurisdictions where Pillar
Two legislation has been enacted for 2024, with no top-up tax liabilities arising. As the impact of
Pillar Two requires full-year financial data, based solely on the financial data of the first quarter,
it is neither complete nor accurate to quantify the annual impact of Pillar Two for year 2025. The
Group will continue to monitor relevant legislative developments in its operating jurisdictions
and is progressing on the assessment based on the expected reasonable quantification criteria to
evaluate the potential future impact of Pillar Two on its financial statements.
10. EARNINGS PER SHARE
(a) Basic Earnings Per Share
The calculation of basic earnings per share is based on the following:
Three months ended March 31,
2025 2024
(Unaudited) (Unaudited)
Profit attributable to ordinary shareholders of the
Company used in calculating basic EPS (RMB’000) 903,416 647,743
Weighted average number of ordinary shares in issue
(thousands) 3,699,933 3,713,773
Basic EPS (RMB per share) 0.24 0.17
(b) Diluted Earnings Per Share
The calculation of diluted earnings per share is based on the following:
Three months ended March 31,
2025 2024
(Unaudited) (Unaudited)
Adjusted profit attributable to owners of the Company
used in calculating diluted EPS (RMB’000) 903,416 647,743
Weighted average number of ordinary shares in issue
(thousands) 3,699,933 3,713,773
Adjustments for potential shares arising from share
schemes (thousands) 15,570 5,000
Weighted average number of ordinary shares used in
calculating diluted EPS (thousands) 3,715,503 3,718,773
Diluted EPS (RMB per share) 0.24 0.17
APPENDIX IA UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
– IA-21 –


--- page 579 ---
11. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
The amounts of investments accounted for using the equity method recognized in the Interim Financial
Information are as follows:
As at
March 31,
As at
December 31,
2025 2024
RMB’000 RMB’000
(Unaudited)
Associates 39,314 40,600
The movements of investments in associates during the three months ended March 31, 2025 and 2024 are
as follows:
Three months ended March 31,
2025 2024
RMB’000 RMB’000
(Unaudited) (Unaudited)
At the beginning of the period 40,600 37,924
Share of results of associates 2,414 1,252
Dividends (3,700) (6,250)
At the end of the period 39,314 32,926
The associates of the Group have been accounted based on the financial information prepared under the
accounting policies consistent with the Group.
There was no associate of the Group as at March 31, 2025 which, in the opinion of the directors, was
material to the Group.
12. PROPERTY, PLANT AND EQUIPMENT
As at
March 31,
As at
December 31,
2025 2024
RMB’000 RMB’000
(Unaudited)
Buildings 4,150,698 4,086,238
Freehold land 170,735 169,245
Machinery and equipment 5,658,063 5,540,560
Motor vehicles 21,285 21,140
Office equipment 148,429 146,517
Construction in progress 2,345,241 2,171,985
Leasehold improvement 157,459 138,873
12,651,910 12,274,558
APPENDIX IA UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
– IA-22 –


--- page 580 ---
(a) Depreciation of the Group’s property, plant and equipment has been recognized as follows:
Three months ended March 31,
2025 2024
RMB’000 RMB’000
(Unaudited) (Unaudited)
Cost of revenue 207,651 148,772
Selling and marketing expenses 312 65
General and administrative expenses 35,592 29,573
Research and development expenses 13,974 12,329
257,529 190,739
13. LEASE
This note provides information for leases where the Group is a lessee.
(a) Amounts Recognized in the Consolidated Statement of Financial Position
As at
March 31,
As at
December 31,
2025 2024
RMB’000 RMB’000
(Unaudited)
Right-of-use assets
Land use right 865,838 868,746
Buildings 308,443 331,340
Motor vehicles 5,537 5,245
1,179,818 1,205,331
Lease liabilities
Current 95,523 90,574
Non-current 216,337 237,913
311,860 328,487
APPENDIX IA UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
– IA-23 –


--- page 581 ---
(b) Amounts Recognized in the Consolidated Statements of Profit or Loss
The consolidated statements of profit or loss and the consolidated statements of cash flows
contain the following amounts relating to leases:
Three months ended March 31,
2025 2024
RMB’000 RMB’000
(Unaudited) (Unaudited)
Depreciation charge of right-of-use assets:
– Land use right 5,268 4,663
– Buildings 25,985 19,230
– Motor vehicles 258 280
31,511 24,173
Three months ended March 31,
2025 2024
RMB’000 RMB’000
(Unaudited) (Unaudited)
Interest expense (including in finance cost) 5,262 724
Expense relating to short-term and low value leases not
included in lease liabilities 4,562 4,871
9,824 5,595
The total cash outflows for lease payments during the three months ended March 31, 2025 and
2024 were approximately RMB31,482,000 and RMB22,618,000 respectively.
14. INTANGIBLE ASSETS
As at
March 31,
As at
December 31,
2025 2024
RMB’000 RMB’000
(Unaudited)
Software 27,704 25,928
Intellectual properties 10,096 10,592
37,800 36,520
APPENDIX IA UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
– IA-24 –


--- page 582 ---
Amortization expenses have been charged to the consolidated statements of profit or loss as follows:
Three months ended March 31,
2025 2024
RMB’000 RMB’000
(Unaudited) (Unaudited)
General and administrative expenses 1,806 3,112
Research and development expenses 654 538
2,460 3,650
15. TRADE AND NOTES RECEIVABLES
As at
March 31,
As at
December 31,
2025 2024
RMB’000 RMB’000
(Unaudited)
Notes receivables 2,756,765 2,685,890
Trade receivables 8,207,936 7,317,720
Less: credit loss allowance (428,276) (375,273)
10,536,425 9,628,337
(a) The Group generally grant credit terms ranging from 60 to 285 days to the customers. The aging
analysis of trade receivables based on revenue recognition date is as follows:
As at
March 31,
As at
December 31,
2025 2024
RMB’000 RMB’000
(Unaudited)
Up to 3 months 6,329,306 5,800,080
3 to 6 months 1,194,630 784,254
6 to 12 months 657,865 697,599
1 to 2 years 18,094 26,881
2 to 3 years 6,210 8,523
Over 3 years 1,831 383
8,207,936 7,317,720
(b) As at March 31, 2025 and December 31, 2024, trade receivables amounting to RMB69,823,000 and
RMB84,120,000 were pledged for bank borrowings while notes receivables amounting to
RMB2,390,925,000 and RMB1,839,462,000 were pledged for bank acceptance notes.
APPENDIX IA UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
– IA-25 –


--- page 583 ---
16. PREPAYMENTS, OTHER RECEIVABLES AND OTHER ASSETS
As at
March 31,
As at
December 31,
2025 2024
RMB’000 RMB’000
(Unaudited)
Prepayments:
Prepayments for materials 130,994 158,980
Other receivables:
Tax refund receivables 90,861 172,315
Deposits and warranties 73,450 58,761
Others 33,629 35,318
328,934 425,374
Less: provision for impairment (9,331) (8,335)
319,603 417,039
Other current assets:
Wealth management products measured at amortized cost (i) 1,741,403 1,499,928
Deductible input VAT 197,619 188,134
Prepaid corporate income tax 18,046 20,736
Capitalization of listing expenses 19,123 8,727
Others 7,651 3,015
1,983,842 1,720,540
(i) As at March 31, 2025 and December 31, 2024, wealth management products mainly represent the
principal and interests guaranteed income vouchers issued by the securities companies and
reverse repurchase of government bond.
Other non-current assets:
Prepayments for non-current assets 378,416 311,121
Others 77,103 65,910
455,519 377,031
Less: provision for impairment (209) (206)
455,310 376,825
APPENDIX IA UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
– IA-26 –


--- page 584 ---
17. INVENTORIES
As at
March 31,
As at
December 31,
2025 2024
RMB’000 RMB’000
(Unaudited)
Finished goods 3,251,933 3,833,666
Work in progress 755,020 787,733
Raw materials 1,188,501 774,517
Others 9,437 10,127
5,204,891 5,406,043
Less: provision for impairment (118,809) (125,601)
5,086,082 5,280,442
18. CASH AND CASH EQUIVALENTS, TERM DEPOSITS AND RESTRICTED CASH
As at
March 31,
As at
December 31,
2025 2024
RMB’000 RMB’000
(Unaudited)
Cash and bank balances 4,743,641 5,248,568
Less: term deposits over three months (1,597,074) (1,739,651)
Less: restricted cash (i) (43,239) (65,414)
Cash and cash equivalents 3,103,328 3,443,503
(i) As at March 31, 2025 and December 31, 2024, the Group’s demand deposits of RMB12,871,000 and
RMB18,152,000 were pledged as a guarantee for the bank acceptance notes.
As at March 31, 2025 and December 31, 2024, the Group’s bank balances of RMB27,169,000 and
RMB44,063,000 were deposited as a guarantee for the future contracts.
As at March 31, 2025 and December 31,2024, another RMB3,199,000 deposits placed with banks
were temporarily frozen for pending litigations.
APPENDIX IA UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
– IA-27 –


--- page 585 ---
19. BORROWINGS
As at
March 31,
As at
December 31,
2025 2024
RMB’000 RMB’000
(Unaudited)
Secured
Bank loans 1,032,838 918,745
Unsecured
Bank loans 3,189,000 3,174,000
Interest payables 6,761 6,794
Less: current-portion for long-term borrowings (798,825) (500,420)
Less: short-term borrowings (1,667,581) (1,553,346)
1,762,193 2,045,773
(a) As at March 31, 2025 and December 31, 2024, the annual interest rate range of short-term
borrowings was ranged from 2.15% to 5.17%, and 2.15% to 5.21%, respectively.
As at March 31, 2025 and December 31, 2024, the annual interest rate range of long-term
borrowings was ranged from 1.95% to 2.80% and 2.62% to 2.92%, respectively.
(b) As at March 31, 2025, secured bank loans mainly included: (i) borrowings with a principal
equivalent to approximately RMB1,029,979,000 guaranteed by the Company; (ii) borrowings with
a principal equivalent to approximately RMB2,859,000 secured by the Group’s certain notes
receivables.
As at December 31, 2024, secured bank loans mainly included: (i) borrowings with a principal
equivalent to approximately RMB896,729,000 guaranteed by the Company; (ii) borrowings with a
principal equivalent to approximately RMB22,016,000 secured by the Group’s certain notes
receivables.
(c) As at March 31, 2025 and December 31, 2024, the Group’s borrowings were repayable as follows:
As at
March 31,
As at
December 31,
2025 2024
RMB’000 RMB’000
(Unaudited)
Within 1 year 2,466,406 2,053,766
Between 1 and 2 years 1,664,193 1,396,236
Between 2 and 5 years 98,000 649,537
4,228,599 4,099,539
APPENDIX IA UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
– IA-28 –


--- page 586 ---
(d) Fair value
For the majority of the borrowings, the fair values are not materially different from their carrying
amounts, since either the interest payable on those borrowings is close to current market rates, or
the borrowings are of a short-term nature.
20. TRADE AND NOTES PAYABLES
As at
March 31,
As at
December 31,
2025 2024
RMB’000 RMB’000
(Unaudited)
Trade and notes payables
– Trade payables 5,809,693 5,985,427
– Notes payables 4,014,101 3,791,835
9,823,794 9,777,262
An aging analysis of the trade payables based on the invoice date as at the end of the reporting period
was as follows:
As at
March 31,
As at
December 31,
2025 2024
RMB’000 RMB’000
(Unaudited)
Within 3 months 4,751,520 5,516,132
Between 3 and 6 months 497,066 137,789
Between 6 months and 1 year 371,778 225,306
Over 1 year 189,329 106,200
5,809,693 5,985,427
APPENDIX IA UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
– IA-29 –


--- page 587 ---
21. ACCRUALS AND OTHER PAYABLES
As at
March 31,
As at
December 31,
2025 2024
RMB’000 RMB’000
(Unaudited)
Salaries, wages and benefits 483,974 726,001
Restricted share repurchase obligation 354,074 354,074
Taxes other than income tax payables 68,416 135,706
Deposits payables 40,956 40,069
Warranty provisions 18,330 22,692
Accrued listing expenses 11,320 9,242
Dividend payables – 2,528
Other accruals 116,418 116,808
1,093,488 1,407,120
22. OTHER CURRENT AND NON-CURRENT LIABILITIES
As at
March 31,
As at
December 31,
2025 2024
RMB’000 RMB’000
(Unaudited)
Other current liabilities
Other tax to be recognized 1,298 1,274
Other non-current liabilities
Deferred income in relation to government grants 645,687 607,754
Long-term salaries, wages and bonuses 34,871 33,943
Construction agency fees 18,154 18,154
698,712 659,851
23. TREASURY SHARES
Three months ended March 31,
2025 2024
RMB’000 RMB’000
(Unaudited) (Unaudited)
At the beginning of the period 381,848 423,469
Repurchase of shares (i) 5,813 285,997
At the end of the period 387,661 709,466
(i) For three months ended March 31, 2025 and 2024, the Group repurchased treasury shares
amounting to approximately RMB5,813,000 and RMB285,997,000.
APPENDIX IA UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
– IA-30 –


--- page 588 ---
24. RETAINED EARNINGS
Three months ended March 31,
2025 2024
RMB’000 RMB’000
(Unaudited) (Unaudited)
At the beginning of the period 11,650,312 10,002,942
Net profit 903,416 647,743
At the end of the period 12,553,728 10,650,685
25. OTHER RESERVES
Share
premium
Surplus
reserve
Foreign
currency
differences
Other
reserves Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Balance at January 1, 2025 3,039,142 1,163,965 (138,363) 232,172 4,296,916
Currency translation differences – – (13,540) – (13,540)
Share-based payment scheme:
– Share-based compensation expenses – – – 36,206 36,206
– Others – – – 14,408 14,408
Balance at March 31, 2025
(unaudited) 3,039,142 1,163,965 (151,903) 282,786 4,333,990
Share
premium
Surplus
reserve
Foreign
currency
differences
Other
reserves Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Balance at January 1, 2024 3,291,388 1,011,915 114,757 164,255 4,582,315
Currency translation differences – – (17,346) – (17,346)
Share-based payment scheme:
– Share-based compensation expenses – – – 6,341 6,341
Transaction with non-controlling
interests (6,363) – – – (6,363)
Balance at March 31, 2024
(unaudited) 3,285,025 1,011,915 97,411 170,596 4,564,947
APPENDIX IA UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
– IA-31 –


--- page 589 ---
26. NOTES TO INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(a) Reconciliation of Profit Before Income Tax to Net Cash Generated from Operations:
Three months ended March 31,
2025 2024
RMB’000 RMB’000
(Unaudited) (Unaudited)
Profit before income tax for the period 1,108,059 800,852
Adjustments for:
Interest income (21,229) (42,677)
Finance cost 37,252 34,676
Depreciation and amortization of non-current assets 291,707 218,940
Net losses on disposal of property, plant and equipment
and other non-current assets 3,030 2,727
Net impairment losses on financial assets 46,316 48,569
Impairment provision for inventories and other
non-current assets 3,704 6,069
Share of profit of associates, net (2,414) (1,252)
Net (gains)/losses on financial instruments (41,371) 54,124
Net foreign exchange gains (17,485) (16,672)
Share-based compensation expenses 36,206 6,341
Change in working capital:
Increase in receivables (685,713) (508,809)
(Decrease)/Increase in payables (397,117) 43,698
Decrease/(Increase) in inventories 201,152 (375,248)
Cash generated from operations 562,097 271,338
27. CONTINGENCIES AND COMMITMENTS
27.1 Contingencies
The Group and the Company have contingent liabilities in respect of claims or other legal
procedures arising in its ordinary course of business from time to time. As at March 31, 2025, the
directors of the Company did not anticipate that any material liabilities will arise from the
contingent liabilities other than those provided for in the Financial Information.
APPENDIX IA UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
– IA-32 –


--- page 590 ---
27.2 Capital Commitments
The following shows the major capital commitments of the Group:
As at
March 31,
As at
December 31,
2025 2024
RMB’000 RMB’000
(Unaudited)
Property, plant and equipment commitments:
– Contracted, but not provided for 1,550,345 1,525,863
– Authorized, but not contracted 5,797,364 5,457,978
7,347,709 6,983,841
28. RELATED PARTY TRANSACTIONS
(a) Parent Entities
Name
Place of
incorporation Ownership interest
As at
March 31,
As at
December
31,
2025 2024
RMB’000 RMB’000
(Unaudited)
Sanhua Holding Group Co., Ltd. Zhejiang, PRC 43.57% 45.31%
The Company’s ultimate holding company is Sanhua Holding Group Co., Ltd. and the ultimate
controlling person are Mr. Zhang Daocai, Mr. Zhang Yabo and Mr. Zhang Shaobo.
(b) Names and Relationship with Related Parties
Related parties are those parties that have the ability, directly and indirectly, to control, jointly
control or exercise significant influence over the other party in making financial and operating
decisions. Parties are also considered to be related because they are subject to common control
and common joint control in the controlling shareholder’s families. Members of key management
and their close family member of the Group are also considered as related parties.
The directors of the Company are of the view that the following parties were significant related
parties of the Group that had transactions or balances with the Group during the period:
Name of the related parties Relationship with the Group
Zhejiang Sanhua Green Energy Industrial
Group Co., Ltd. (ࠢ
ʮ̡)
A shareholder of the Company
A fellow subsidiary of the parent company
Hangzhou Tongchan Machinery Co., Ltd. (ψ
ʮ̡ )
A fellow subsidiary of the parent company
Hangzhou Sanhua Research Institute Co., Ltd.
(ʮ̡ )
A fellow subsidiary of the parent company
APPENDIX IA UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
– IA-33 –


--- page 591 ---
Name of the related parties Relationship with the Group
Hangzhou Sanhua International Building Co.,
Ltd. (ʮ̡ )
A fellow subsidiary of the parent company
Xinchang County Sanhua Property
Management Co., Ltd. (ุ၍ଣϞ
ʮ̡)
A fellow subsidiary of the parent company
Shanghai Sanhua Electric Co., Ltd. (ཥ
ʮ̡ )
A fellow subsidiary of the parent company
Zhejiang Sanhua Zhicheng Real Estate
Development Co., Ltd. (ήପක
ʮ̡ )
A fellow subsidiary of the parent company
Zhejiang Haoyuan Technology Co., Ltd. ( एϪ㒊
ʮ̡ )
A fellow subsidiary of the parent company
Ningbo Fuerda Intelligent technology Co., Ltd.
(ʮ̡ )
A fellow subsidiary of the parent company
Wuhu Alda Technology Co., Ltd. (߅
ப΂ʮ̡ )
An associate of the parent company
Hangzhou Formost Material Technology Co.,
Ltd. (ʮ̡ )
An associate of the parent company
Ningbo Jiaerling Pneumatic Machinery Co.,
Ltd. (ʮ̡ )
A fellow subsidiary of the parent company
Tianjin Sanhua Industrial Park Management
Co., Ltd. (ʮ̡ )
A fellow subsidiary of the parent company
Shaoxing Sanhua Zhiyue Real Estate
Development Co., Ltd. (ήପක
ʮ̡ )
A fellow subsidiary of the parent company
Shanghai Shijia Technology Co., Ltd. (ቷ
ʮ̡ )
A non-executive director of the Company is
a director of this Company
Chongqing Tainuo Machinery Co., Ltd. (ᅅइ
ʮ̡ )
An associate of the Group
Qingdao Sanhua Jinlifeng Machinery Co., Ltd.
(ʮ̡ )
An associate of the Group
Zhongshan Xuanyi Pipe Making Co., Ltd. ( ʕʆ
ʮ̡ )
An associate of the Group
Ningbo Jinlifeng Machinery Co., Ltd. (ᎀл
ʮ̡ )
An associate of the Group
Xinchang Jiaerling Technology Co., Ltd. ( Գဧᜳ
ʮ̡ )
A fellow subsidiary of the parent company
Fuerda Smartech S DE RL DE CV A fellow subsidiary of the parent company
Ningbo Hongrong Business Managing
Partnership Enterprise (ᒿ࿰Άุ၍ଣΥྫ
Υྫ)
A key management personnel of the
Company is the controlling shareholder of
this entity
APPENDIX IA UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
– IA-34 –


--- page 592 ---
(c) Material Transactions with Related Parties
The following transactions and balances were carried out between the Group and its related
parties during the three months ended March 31, 2025 and 2024. In the opinion of the directors of
the Company, the related party transactions were carried out in the normal course of business and
at terms negotiated between the Group and the respective related parties.
Three months ended March 31,
2025 2024
RMB’000 RMB’000
(Unaudited) (Unaudited)
Purchase of goods and services:
Fellow subsidiaries of the parent company 16,170 20,427
Associates of the Group 6,790 4,484
Associates of the parent company 27 36
22,987 24,947
Sales of goods and rendering of services:
Fellow subsidiaries of the parent company 985 20
Associates of the Group – 45
Parent company 154 204
Associates of the parent company 67 60
1,206 329
Rental income:
Associates of the parent company 75 320
Rental expenses:
Fellow subsidiaries of the parent company 1,696 555
Utility cost reallocation – received from:
Fellow subsidiaries of the parent company 8,235 7,338
Parent company 176 231
Associates of the parent company 135 239
8,546 7,808
Utility cost reallocation – paid to:
Fellow subsidiaries of the parent company 2,708 2,471
APPENDIX IA UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
– IA-35 –


--- page 593 ---
(d) Balance with Related Parties
As at
March 31,
As at
December 31,
2025 2024
RMB’000 RMB’000
(Unaudited)
Trade and notes receivables
– Fellow subsidiaries of the parent company 1,017 7,765
– Associates of the Group – 80
– Associates of the parent company 41 –
– Others – 125
1,058 7,970
Less: credit loss allowance (52) (398)
1,006 7,572
For three months ended March 31, 2025, the amount of expense reserved in respect of bad and
doubtful debts is RMB346,000. For three months ended March 31, 2024, the amount of expense
recognized in respect of bad and doubtful debts is RMB43,000.
As at
March 31,
As at
December 31,
2025 2024
RMB’000 RMB’000
(Unaudited)
Prepayments, other receivables and other assets:
– Fellow subsidiaries of the parent company 3,639 670
– Others – 458
3,639 1,128
Less: provision for impairment (178) (67)
3,461 1,061
For three months ended March 31, 2025 and 2024, the amount of expense recognized in respect of
bad and doubtful debts are RMB111,000 and nil, respectively.
APPENDIX IA UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
– IA-36 –


--- page 594 ---
As at
March 31,
As at
December 31,
2025 2024
RMB’000 RMB’000
(Unaudited)
Trade and notes payables:
– Fellow subsidiaries of the parent company 685 4,937
– Associates of the Group 12,602 9,565
13,287 14,502
Accruals and other payables:
– Fellow subsidiaries of the parent company 3,247 4,763
– Associates of the parent company – 100
3,247 4,863
All the balances with the related parties are trade in natures.
29. EVENTS AFTER REPORTING PERIOD
A final dividend in respect of the year ended December 31, 2024 of RMB2.5 per 10 shares (tax inclusive)
was approved by the Shareholders’ meeting on April 16, 2025. The dividend was not recognized as a
liability as at March 31, 2025.
APPENDIX IA UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
– IA-37 –


--- page 595 ---
The information set out in this Appendix does not form part of the Accountant’s Report from
Confucius International CP A Limited, Hong Kong, the reporting accountant of the Company, as
set out in Appendix I in this prospectus, and is included herein for illustrative purposes only.
The unaudited pro forma financial information should be read in conjunction with the
section headed “Financial Information” in this prospectus and the Accountant’s Report set out in
Appendix I to this prospectus.
A. UNAUDITED PRO FORMA ADJUSTED CONSOLIDATED NET TANGIBLE
ASSETS
The following is the unaudited pro forma statement of adjusted consolidated net
tangible assets of the Group as at December 31, 2024 (the “ UnauditedProFormaFinancial
Information ”) which has been prepared by the Directors in accordance with Rule 4.29 of
the Listing Rules to illustrate the effects of the Global Offering as if it had taken place on
December 31, 2024 and based on the audited consolidated net tangible assets of the Group
attributable to the owners of the Company as at December 31, 2024, assuming the offer
size adjustment option and the Over-allotment Option is not exercised.
The Unaudited Pro Forma Financial Information is prepared for illustrative purpose
only, and because of its hypothetical nature, it may not give a true picture of the
consolidated net tangible assets of the Group attributable to the owners of the Company
immediately after completion of the Global Offering or any future date after completion of
the Global Offering.
Audited
consolidated
net tangible
assets of the
Group
attributable to
owners of
the Company
as at
December 31,
2024
Estimated net
proceeds from
the Global
Offering
Unaudited pro
forma adjusted
consolidated
net tangible
assets
attributable to
the owners of
the Company
as at
December 31,
2024
Unaudited pro forma adjusted
consolidated net tangible assets
per Share as at
December 31, 2024
(Note 1) (Note 2) (Note 3) (Note 4)
RMB’000 RMB’000 RMB’000 RMB HK$
Based on an Offer
Price of HK$21.21
per share 19,262,391 6,879,405 26,141,796 6.39 6.97
Based on an Offer
Price of HK$22.53
per share 19,262,391 7,309,460 26,571,851 6.49 7.09
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-1 –


--- page 596 ---
Notes:
(1) The audited consolidated net tangible assets of the Group attributable to the owners of the
Company as at December 31, 2024 is extracted from the Accountant’s Report set out in Appendix
I to this document, which is based on the audited consolidated net assets of the Group
attributable to the owners of the Company as at December 31, 2024 of RMB19,297,770,000 with
adjustments for the intangible assets of RMB35,379,000 attributable to the owners of the
Company.
(2) The estimated net proceeds from the Global Offering are based on 360,330,000 Shares at the
indicative Offer Price of HK$21.21, and HK$22.53 per share, respectively, after deduction of the
underwriting fees and other related expenses payable by the Company (excluding listing
expenses of RMB1,311,000 which have been accounted for in the consolidated statements of profit
or loss prior to 31 December 2024) and takes no account of any Shares which may be allotted and
issued by the Company pursuant to the exercise of the offer size adjustment option and the
Over-allotment Option, any Shares that may be issued by the Company pursuant to the exercise of
options or the vesting of restricted shares or other awards that have been or may be granted from
time to time under the Restricted Share Incentive Schemes or any Shares which may be issued or
repurchased by the Company after the Latest Practicable Date.
(3) The unaudited pro forma adjusted consolidated net tangible assets per Share is arrived at after the
adjustments referred to in the preceding paragraphs and on the basis that 4,092,719,535 Shares
(including 1,200,921 treasury shares) were in issue assuming that the Global Offering has been
completed on December 31, 2024 but takes no account of any Shares which may be allotted and
issued by the Company pursuant to the exercise of the offer size adjustment option and the
Over-allotment Option, any Shares that may be issued by the Company pursuant to the exercise of
options or the vesting of restricted shares or other awards that have been or may be granted from
time to time under the Restricted Share Incentive Schemes or any Shares which may be issued or
repurchased by the Company after the Latest Practicable Date.
(4) For the purpose of this unaudited pro forma adjusted consolidated net tangible assets per Share,
the amounts stated in Hong Kong dollars are converted into Renminbi at the rate of RMB1.00 to
HK$1.0913. No representation is made that Hong Kong dollars has been, could have been or may
be converted to Renminbi, or vice versa, at that rate.
(5) Except as disclosed above, no adjustment has been made to reflect any trading results or other
transactions of the Group entered into subsequent to December 31, 2024. In particular, the
unaudited pro forma adjusted consolidated net tangible assets of the Group attributable to
owners of the Company have not been adjusted to illustrate the effect of the following:
Pursuant to a shareholders’ resolution dated 16 April, 2025, it was resolved that a dividend of
RMB0.25 per share totaling RMB932.75 million would be paid for year 2024. This dividend is not
recorded in the financial statements of the Company for the year ended 31 December 2024 or this
unaudited pro forma financial information. Had this dividend been adjusted in the unaudited pro
forma financial information, the net tangible assets of the Group would decrease by RMB932.75
million and the net tangible assets per share would decrease by RMB0.2279 (equivalent to
HK$0.2487).
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-2 –


--- page 597 ---
ಥᝄ˺୿ɻ౱༸181໮ɽϞɽข15ᅽ1501-1508܃
Rooms 1501-8, 15/F., Tai Yau Building,
181 Johnston Road, Wanchai, Hong Kong
ཥ༑ Tel: (852) 3103 6980
ෂॆ Fax: (852) 3104 0170
ཥඉEmail: info@pccpa.hk
INDEPENDENT REPORTING ACCOUNTANT’S ASSURANCE REPORT ON THE
COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION
To the Directors of Zhejiang Sanhua Intelligent Controls Co., Ltd.
We have completed our assurance engagement to report on the compilation of
unaudited pro forma financial information of Zhejiang Sanhua Intelligent Controls Co.,
Ltd. (the “ Company ”) and its subsidiaries (collectively the “ Group ”) by the directors of
the Company (the “ Directors ”) for illustrative purposes only. The unaudited pro forma
financial information consists of the unaudited pro forma statement of adjusted
consolidated net tangible assets of the Group as at December 31, 2024 and related notes
(the “Unaudited Pro Forma Financial Information ”) as set out on pages II-1 to II-2 of the
Company’s prospectus dated 13 June 2025, in connection with the proposed initial public
offering of the H shares of the Company (the “ Prospectus ”). The applicable criteria on the
basis of which the Directors have compiled the Unaudited Pro Forma Financial
Information are described on pages II-1 to II-2 of the Prospectus.
The Unaudited Pro Forma Financial Information has been compiled by the Directors
to illustrate the impact of the proposed initial public offering on the Group’s consolidated
financial position as at December 31, 2024 as if the proposed initial public offering had
taken place at December 31, 2024. As part of this process, information about the Group’s
consolidated financial position has been extracted by the Directors from the Group’s
audited consolidated financial statements for the year ended December 31, 2024, on which
an accountant’s report has been published.
Directors’Responsibility for the Unaudited Pro Forma Financial Information
The Directors are responsible for compiling the Unaudited Pro Forma Financial
Information in accordance with paragraph 4.29 of the Rules Governing the Listing of
Securities on The Stock Exchange of Hong Kong Limited (the “ Listing Rules ”) and with
reference to Accounting Guideline 7, Preparation of Pro Forma Financial Information for
Inclusion in Investment Circulars, (“AG 7”) issued by the Hong Kong Institute of Certified
Public Accountants (“ HKICPA ”).
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-3 –


--- page 598 ---
Our Independence and Quality Management
We have complied with the independence and other ethical requirements of the Code
of Ethics for Professional Accountants issued by the HKICPA, which is founded on
fundamental principles of integrity, objectivity, professional competence and due care,
confidentiality and professional behaviour.
Our firm applies Hong Kong Standard on Quality Management (HKSQM) 1, Quality
Management for Firms that Perform Audits or Reviews of Financial Statements, or Other
Assurance or Related Services Engagements , issued by the HKICPA, which requires the firm
to design, implement and operate a system of quality management including policies or
procedures regarding compliance with ethical requirements, professional standards and
applicable legal and regulatory requirements.
Reporting Accountant’s Responsibilities
Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the
Listing Rules, on the Unaudited Pro Forma Financial Information and to report our
opinion to you. We do not accept any responsibility for any reports previously given by us
on any financial information used in the compilation of the Unaudited Pro Forma
Financial Information beyond that owed to those to whom those reports were addressed
by us at the dates of their issue.
We conducted our engagement in accordance with Hong Kong Standard on
Assurance Engagements 3420, Assurance Engagements to Report on the Compilation of Pro
Forma Financial Information Included in a Prospectus , issued by the HKICPA. This standard
requires that the reporting accountant plans and performs procedures to obtain
reasonable assurance about whether the Directors have compiled the Unaudited Pro
Forma Financial Information in accordance with paragraph 4.29 of the Listing Rules and
with reference to AG 7 issued by the HKICPA.
For purposes of this engagement, we are not responsible for updating or reissuing
any reports or opinions on any historical financial information used in compiling the
Unaudited Pro Forma Financial Information, nor have we, in the course of this
engagement, performed an audit or review of the financial information used in compiling
the Unaudited Pro Forma Financial Information.
The purpose of unaudited pro forma financial information included in a prospectus
is solely to illustrate the impact of a significant event or transaction on unadjusted
financial information of the entity as if the event had occurred or the transaction had been
undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do
not provide any assurance that the actual outcome of the proposed initial public offering
at December 31, 2024 would have been as presented.
A reasonable assurance engagement to report on whether the unaudited pro forma
financial information has been properly compiled on the basis of the applicable criteria
involves performing procedures to assess whether the applicable criteria used by the
Directors in the compilation of the Unaudited Pro Forma Financial Information provide a
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-4 –


--- page 599 ---
reasonable basis for presenting the significant effects directly attributable to the event or
transaction, and to obtain sufficient appropriate evidence about whether:
• The related unaudited pro forma adjustments give appropriate effect to those
criteria; and
• The unaudited pro forma financial information reflects the proper application
of those adjustments to the unadjusted financial information.
The procedures selected depend on the reporting accountant’s judgment, having
regard to the reporting accountant’s understanding of the nature of the Group, the event
or transaction in respect of which the Unaudited Pro Forma Financial Information has
been compiled, and other relevant engagement circumstances.
The engagement also involves evaluating the overall presentation of the Unaudited
Pro Forma Financial Information.
We believe that the evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Our work has not been carried out in accordance with auditing standards or other
standards and practices generally accepted in the United States of America or auditing
standards of the Public Company Accounting Oversight Board (United States) or
standards and practices of any professional body in any other overseas jurisdiction and
accordingly should not be relied upon as if it had been carried out in accordance with
those standards and practices.
Opinion
In our opinion:
(a) the Unaudited Pro Forma Financial Information has been properly compiled
by the Directors on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma
Financial Information as disclosed pursuant to paragraph 4.29(1) of the
Listing Rules.
Confucius International CPA Limited
Certified Public Accountants
Hong Kong,
13 June 2025
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-5 –


--- page 600 ---
This Appendix mainly provides investors with an overview of the Articles of
Association. As the following information is in summary form, it does not contain all the
information that may be important to investors.
SHARES AND REGISTERED CAPITAL
The shares of the Company shall be issued in an open, fair and equal manner. Each
share of the same class shall rank pari passu with each other. Shares of a class in each
issuance shall be issued under the same terms and at the same price. Each of the shares
shall be subscribed for at the same price by any entity or individual.
INCREASE, DECREASE, REPURCHASE AND TRANSFER OF SHARES
Increase and Decrease of Shares
Based on the operation and development needs of the Company and subject to laws
and regulations, the Company may increase its share capital via the following methods
upon approval by resolutions at general meeting:
(I) Public offering of shares;
(II) Non-public offering of shares;
(III) Issuing bonus shares to existing shareholders;
(IV) Converting capital reserve into share capital;
(V) Other methods permitted by laws, administrative regulations and the CSRC.
The Company may reduce its registered share capital in accordance with the Articles
of Association. The Company shall reduce its registered share capital in accordance with
the Company Law and other relevant requirements and the procedures required by the
Articles of Association.
Repurchase of Shares
The Company shall not purchase its own shares, save as under one of the following
circumstances:
(I) Reduce its registered share capital;
(II) Merge with other companies which hold shares in the Company;
(III) For the purpose of employee stock ownership plans or share incentive
schemes;
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
– III-1 –


--- page 601 ---
(IV) Repurchase its shares held by the shareholders who vote against any
resolution proposed at any general meeting on the merger or division of the
Company upon their request;
(V) Use shares for the conversion of the convertible corporate bonds issued by the
Company;
(VI) Necessary for the Company to maintain its value and safeguard the interests
of shareholders.
A resolution at a general meeting is required when the Company repurchases its
shares under the circumstances set out in (I) or (II) set out above. Where the Company
repurchases its shares under the circumstances set out in (III), (V) or (VI) above, a board
resolution shall be passed by more than two-thirds of the directors attending the board
meeting, provided that it complies with the applicable securities regulatory rules of the
places where the Company’s shares are listed. After the Company has repurchased its own
shares in accordance with the circumstances (I) to (VI) set out above, the shares
repurchased under the circumstance set out in (I) above shall be canceled within 10 days
from the date of repurchase, the shares repurchased under the circumstances set out in (II)
or (IV) above shall be transferred or canceled within six months, and for the shares
repurchased under the circumstances set out in (III), (V) or (VI) above, the total number of
the Company’s shares held by the Company shall not exceed 10% of the total issued shares
of the Company, and the shares so repurchased shall be transferred or canceled within
three years. If a share repurchase shall be made under the circumstances stipulated in (III),
(V) or (VI) above, it shall be conducted by way of public centralized bidding transactions.
The Company may purchase its own shares by centralized bidding transactions or
other means approved by laws, administrative regulations and the securities regulatory
authorities, provided that it complies with the applicable securities regulatory rules of the
places where the Company’s shares are listed.
Transfer of Shares
The shares of the Company may be transferred in accordance with laws.
The shares of the Company issued prior to a public offering shall not be transferred
within one year from the date on which the shares of the Company are listed and traded
on a stock exchange.
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
– III-2 –


--- page 602 ---
The directors, supervisors, and senior management of the Company shall regularly
declare the number of shares held by them and the relevant changes, the number of shares
transferred each year during their term of office shall not exceed 25% of the total number
of shares of the Company held by them. The shares of the Company held by them shall not
be transferred within one year from the date on which shares of the Company are listed
and traded on a stock exchange. The shares in the Company held by them shall not be
transferred within half a year from the date on which they cease to be employed by the
Company. For any directors, supervisors and senior management who leave before the
expiration of their terms of service shall continue to comply with the requirements on
sell-down as required under relevant laws and regulations including the Company Law
and the securities regulatory rules of the places where the Company’s shares are listed
within their defined terms of service and within six months after the expiration of their
terms of service.
For any transfers in respect of the shares of the Company held by promoters,
directors, supervisors, or senior management of the Company above, where the securities
regulatory rules of the places where the Company’s shares are listed provide otherwise in
respect of the restrictions on transfer of shares, such rules shall prevail.
Any gains from sale of the Company’s shares or other securities with equity nature
by the Company’s directors, supervisors and senior management or shareholders holding
more than 5% of its shares within six months after their purchase of the same, and any
gains from the purchase of the shares or other securities with equity nature by any of the
aforesaid parties within six months after their sale of the same, shall belong to the
Company, and the board of directors of the Company shall recover such gains from the
abovementioned parties, except for the circumstance that a securities company holds
more than 5% of the Company’s shares as a result of purchase of all the unsold
underwritten shares and other circumstances stipulated by the securities regulatory
authorities under the State Council.
If the board of directors of the Company fails to comply with the provisions as set
out above, shareholders are entitled to request the board of directors to satisfy the same
within 30 days. If the board of directors of the Company fails to satisfy the same within the
aforesaid period, the shareholders are entitled to initiate legal proceedings directly in the
people’s court in their personal capacity for the benefit of the Company. If the board of
directors of the Company fails to comply with the provisions as set out above, the
responsible directors shall bear joint liabilities in accordance with laws.
Transfer of any H Shares shall be executed with a written instrument of transfer in
usual or common form or any other forms accepted by the board of directors (including
the standard transfer format or transfer form specified from time to time by the Hong
Kong Stock Exchange), which may only be signed by hand or (if the transferor or
transferee is a company) affixed with an effective corporate seal. If the transferor or
transferee is a recognized clearing house or its agent thereof defined in the relevant
provisions in force from time to time of the Hong Kong laws, the instrument of transfer
may be signed by hand or by machine imprinted signatures. All instruments of transfer
shall be kept at the legal address of the Company or other place designated by the board of
directors from time to time.
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
– III-3 –


--- page 603 ---
SHAREHOLDERS AND SHAREHOLDERS’GENERAL MEETINGS
Shareholders
The register of members shall be the sufficient evidence to prove that the
shareholders hold the shares of the Company. The Company shall establish a register of
members based on the certificates provided by the securities registration authorities. The
original H Share register shall be kept in Hong Kong for inspection by shareholders. The
Company may close the register of members in accordance with applicable laws and
regulations and the securities regulatory rules of the places where the Company’s shares
are listed. Where a shareholder listed in the register of members or a person requesting to
have his/her name entered in the register of members lose his/her share certificates, the
said shareholder or person may apply to the Company for the replacement of share
certificates in respect of the said shares. The domestic unlisted shareholders whose share
certificates have been lost shall apply for replacement of the share certificates pursuant to
the relevant provisions of the Company Law. The shareholders of overseas listed foreign
shares shall apply for replacement of the share certificates pursuant to the laws, rules of
the stock exchange or other relevant requirements of the place where the original register
of the holders of overseas listed foreign shares is maintained. The shareholders shall enjoy
rights and assume obligations according to the class of shares they hold; shareholders
holding the same class of shares shall enjoy the same rights and assume the same
obligations.
Shareholders of the Company shall be entitled to:
(I) receiving dividends and benefit distributions in other forms pro rata to the
number of shares held;
(II) requesting, convening, presiding over, attending or appointing proxies to
attend general meeting in accordance with laws;
(III) exercising voting rights pro rata to their shareholding;
(IV) supervising, advising on or making inquiries about the business operations of
the Company;
(V) transferring, granting or pledging their shares in accordance with the
provisions of the laws, administrative regulations, the securities regulatory
rules of the places where the Company’s shares are listed and the Articles of
Association;
(VI) inspecting and copying the Articles of Association, the register of members,
minutes of general meetings, resolutions of the board of directors, resolutions
of the board of supervisors, financial and accounting reports;
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
– III-4 –


--- page 604 ---
(VII) participating in the distribution of the remaining properties of the Company
pro rata to their shareholdings in the event of the termination or liquidation of
the Company;
(VIII) requesting the Company to repurchase the shares from the dissenting
shareholders who vote against the Company’s resolution on merger or
division proposed at a general meeting;
(IX) other rights conferred by laws, administrative regulations, the securities
regulatory rules of the places where the Company’s shares are listed and the
Articles of Association.
If any resolution of a general meeting or a board meeting is in violation of the laws
and administrative regulations, shareholders shall have the right to petition a people’s
court for invalidating the said resolution. Where the procedures for convening or the
method of voting at a general meeting or a board meeting are in violation of the laws,
administrative regulations or the Articles, or the contents of any resolution are in breach
of the Articles, shareholders shall have the right to petition the people’s court for
revocation of such resolution within 60 days from the date of the resolution.
The shareholders of the Company shall assume the following obligations:
(I) to comply with the laws, administrative regulations and the Articles;
(II) to pay subscription monies based on the shares subscribed and the method of
subscription;
(III) no share capital shall be withdrawn except in circumstances stipulated by
laws and regulations;
(IV) not to abuse shareholders’ rights to the detriment of the interests of the
Company or other shareholders; not to abuse the Company’s status as an
independent legal person or abuse of the limited liability of a shareholder to
jeopardize the interests of the Company’s creditors;
(V) other obligations stipulated by laws, administrative regulations and the
Articles.
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
– III-5 –


--- page 605 ---
In the event of any loss caused to the Company or other shareholders arising from
any abuse of the shareholder’s right, such shareholder shall be liable for compensation in
accordance with laws. In the event of any material damage caused to the interests of the
creditors of the Company arising from any abuse of the Company’s independent legal
person status and the limited liability of the shareholders by any shareholder to evade
from debts, such shareholder shall be jointly and severally liable for the Company’s debts.
General Provisions for Shareholders’General Meetings
General meeting is the organ of authority of the Company, which exercises the
following powers in accordance with the law:
(I) decide on the Company’s operational policies and investment plans;
(II) elect and replace directors and supervisors who are not employee
representatives, and determine on matters concerning their remuneration;
(III) consider and approve reports of the board;
(IV) consider and approve reports of the board of supervisors;
(V) consider and approve the Company’s annual financial budget and final
accounting proposals;
(VI) consider and approve the Company’s profit distribution and loss recovery
proposals;
(VII) resolve on the increase or reduction of the Company’s registered capital;
(VIII) resolve on the issuance of corporate bonds;
(IX) resolve on matters concerning the merger, division, dissolution, liquidation or
change of corporate form of the Company;
(X) amend the Articles of Association;
(XI) resolve on the engagement or dismissal of accounting firms;
(XII) consider and approve the guarantee matters stipulated in Article 43 of the
Articles of Association;
(XIII) consider matters concerning the purchase or sale of major assets over the past
year that exceeds 30% of the Company’s latest audited total assets;
(XIV) consider and approve matters relating to the change of use of proceeds;
(XV) consider equity incentive plans and employee stock ownership plans;
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
– III-6 –


--- page 606 ---
(XVI) consider other matters required to be resolved at a general meeting pursuant
to laws, regulations, securities regulatory rules of the places where the shares
of the Company are listed and the Articles of Association.
The following external guarantees of the Company shall be subject to the
consideration and approval at the general meeting.
(I) any single guarantee with an amount exceeds 10% of the latest audited net
assets;
(II) any guarantee to be provided after the total amount of external guarantees
provided by the Company and its holding subsidiaries exceeds 50% of the
Company’s latest audited net assets;
(III) any guarantee to be provided to a party whose asset-liability ratio exceeds
70% according to its latest financial statements;
(IV) any guarantee where the cumulative guarantee amounts over the past 12
months exceeds 30% of the Company’s latest audited total assets;
(V) any guarantee to be provided after the total amount of external guarantees
provided by Company and its holding subsidiaries exceeds 30% of the
Company’s latest audited total assets;
(VI) any guarantee to be provided to shareholders, de facto controllers and their
related parties;
(VII) other guarantee circumstances stipulated in the Articles of Association or the
securities regulatory rules of the places where the Company’s shares are
listed.
When a guarantee mentioned in paragraph (IV) above is considered at the general
meeting, it shall be passed by more than two-thirds of the voting rights held by the
shareholders present at the meeting.
When a proposal on providing a guarantee for any shareholder, any de facto
controller and their related parties is considered at the general meeting, the said
shareholder or the shareholders controlled by the said de facto controller shall abstain
from voting on the proposal, and the proposal shall be subject to approval by a simple
majority of the voting rights of the other shareholders present at the meeting.
General meetings shall be categorized as annual general meetings and
extraordinary general meetings. Annual general meeting shall be convened once a year
and shall be held within six months from the end of the preceding financial year.
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
– III-7 –


--- page 607 ---
The Company shall convene an extraordinary general meeting within two months
upon the occurrence of any of the following circumstances:
(I) when the number of directors is less than the quorum required by the
Company Law or less than two-thirds of the number stipulated in the Articles;
(II) when the Company’s unrecovered losses amount to one-third of the total
share capital;
(III) when shareholders who individually or collectively hold more than 10% of
total number of the Company’s voting shares make a written request;
(IV) when the board of directors deems it necessary;
(V) when the board of supervisors proposes to convene;
(VI) other circumstances stipulated by laws, administrative regulations,
departmental rules, the securities regulatory rules of the places where the
Company’s shares are listed or the Articles of Association.
Convening of Shareholders’General Meetings
Shareholders individually or jointly holding more than 10% of the shares of the
Company shall be entitled to request the board of directors to convene an extraordinary
general meeting, and such request shall be made in writing. The board of directors shall,
in accordance with the laws, administrative regulations and the Articles, furnish a written
reply stating whether it agrees or disagrees with the convening of the extraordinary
general meeting within ten days after receiving such request.
In the event that the board of directors agrees to convene an extraordinary general
meeting, the notice of the meeting shall be issued within five days after the board passes
the relevant resolution. Any changes to the original request made in the notice shall be
agreed by the relevant shareholders. In the event that the board of directors disagrees to
convene an extraordinary general meeting or does not furnish any reply within ten days
after receiving such request, shareholders individually or jointly holding more than 10%
of the shares of the Company shall be entitled to propose to the board of supervisors to
convene an extraordinary general meeting, and such proposal shall be made in writing.
In the event that the board of supervisors agrees to convene an extraordinary
general meeting, the notice of the meeting shall be issued within five days after receiving
such request. Any changes to the original request made in the notice shall be agreed by the
relevant shareholders. Failure of the board of supervisors to issue the notice of general
meeting within the prescribed time limit shall be deemed as failure of the board of
supervisors to convene and preside over a general meeting, and shareholders individually
or jointly holding more than 10% of the Company’s shares for more than 90 consecutive
days are entitled to convene and preside over a general meeting on their own accord.
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
– III-8 –


--- page 608 ---
Where the board of supervisors or shareholders decide(s) to convene a general
meeting on their own accord, the board of directors shall be notified in writing, and
records shall be filed with the CSRC branch at the location of the Company and the stock
exchanges. Prior to announcement on the resolutions passed at the general meeting, the
shareholding of the shareholders convening such meeting shall not be less than 10%. The
shareholders convening the meeting shall submit the relevant materials as a proof to the
CSRC branch at the location of the Company and the stock exchanges at the time of
issuance of notice of the meeting and announcement on the resolutions passed at the
meeting.
For the general meetings convened by the board of supervisors or the shareholders
on their own accord, the necessary expenses in relation to the meetings shall be borne by
the Company.
A general meeting shall be presided over by the chairman of the board of directors.
If the chairman is unable to or fails to perform his/her duties, a director jointly elected by
more than half of the directors shall preside over the meeting.
For general meetings convened by the board of supervisors, the convener of the
board of supervisors shall preside over the meeting. If the convener of the board of
supervisors is unable to or fails to perform his/her duties, a supervisor jointly elected by
more than half of the supervisors shall preside over the meeting. A general meeting
convened by the shareholders shall be presided over by a representative elected by the
conveners. Where the chairman of the general meeting violates the Articles and the rules
of procedure when holding the meeting and as a result, the general meeting is unable to
continue, subject to the consent of the shareholders with more than half of voting rights of
all the shareholders attending the general meeting, the general meeting may nominate a
person to act as the chairman of the meeting and such meeting may continue.
Notice of Shareholders’General Meeting
The convener shall inform each shareholder of the forthcoming annual general
meeting in writing (including by way of announcement) 21 days before the meeting, and
shall inform each shareholder of the forthcoming extraordinary general meeting in
writing (including by way of announcement) 15 days before the meeting. When
calculating the starting date and ending date of the above notice, the date of the meeting
shall be excluded.
The notice of general meeting shall include the following:
(I) time, venue and duration of the meeting;
(II) the matters and proposals submitted to the meeting for consideration;
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
– III-9 –


--- page 609 ---
(III) the notice shall state clearly that all ordinary shareholders (including
preferred shareholders with voting rights resumed) are entitled to attend the
general meeting or appoint proxies in writing to attend and vote at such
meeting on their behalf and that such proxies need not to be a shareholder of
the Company;
(IV) the record date for share registration to determine shareholders who are
entitled to attend the general meeting;
(V) the names and telephone numbers of the contact person in relation to the
meeting;
(VI) the time and procedures for online voting or voting by other means.
Proposals at Shareholders’General Meetings
When the Company convenes a general meeting, the board of directors, the board of
supervisors, as well as shareholder(s) individually or jointly holding more than 1% of the
shares of the Company, shall be entitled to put forward proposals to the Company.
Shareholder(s) individually or jointly holding more than 1% of the shares of the Company
may put forward provisional proposals and submit the same in writing to the convener
ten days prior to the date of the general meeting. The convener shall issue a supplemental
notice of the general meeting within two days after receiving such proposals and
announce the content of the provisional proposals. If the securities regulatory rules of the
places where the Company’s shares are listed require the general meeting to be postponed
as a result of the supplemental notice, the convening of the general meeting shall be
postponed in accordance with the requirements of such securities regulatory rules.
Save for the circumstances referred to in the preceding paragraph, after the
convener issues the notice of the general meeting, no changes shall be made to the
proposals set forth in the notice of the general meeting and no further proposals shall be
added. The general meeting shall not vote or resolve on proposals not set forth in the
notice of the shareholders’ general meeting or not in compliance with the provisions of
Article 54 of the Articles.
Proxy for the Shareholders’General Meeting
A shareholder may attend, speak and vote at the general meeting in person or by
proxy. A proxy does not need to be a shareholder of the Company.
Individual shareholders attending meeting in person shall produce their identity
cards or other valid documents or proof and stock account cards to prove their identity. In
the case of attending by proxies, the proxies shall produce valid documents and the proxy
forms from the shareholders to prove their identity.
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
– III-10 –


--- page 610 ---
Where a shareholder is a legal entity, its legal representative or a proxy entrusted by
such legal representative shall attend the meeting. If the meeting is attended by the legal
representatives, they shall produce their identity cards and valid proof of their status as
legal representatives; if the meeting is attended by agents of such legal representatives,
such agents shall produce their identity cards and the written authorization letter legally
issued by the legal representative of the legal entity shareholder (except for shareholders
who are recognized clearing houses as defined by the relevant regulations in force from
time to time under the Hong Kong laws or the securities regulatory rules of the places
where the Company’s shares are listed (the “ Recognized Clearing Houses ”) and their
agents).
If the shareholder is a Recognized Clearing House (or its agent), such shareholder
shall be entitled to authorize one or more persons it thinks fit to act as its proxy at any
general meeting or creditors’ meeting. However, if more than one person is appointed as
proxies, the proxy form shall clearly state the number and the class of shares represented
by each of the proxies. The proxy forms shall be signed by the person authorized by the
Recognized Clearing House. The proxies so appointed may represent the Recognized
Clearing House (or its agent) in exercising its rights (without being required to present
share certificate, notarized proxy forms and/or further evidence to prove they are duly
authorized), and shall be entitled to the legal rights equivalent to those of other
shareholders, including the right to speak and vote, as if that proxy is an individual
shareholder of the Company.
Where a proxy form for appointing a voting proxy is signed by a person authorized
by the appointing shareholder, the signed authorization letter or other authorization
documents shall be notarized. The notarized authorization letter or other authorization
documents and the proxy form shall be kept at the domicile of the Company or at such
other places as designated in the notice of the meeting.
Where the appointing shareholder is a legal entity, its legal representative or the
person authorized by a resolution of its board of directors or other decision-making body
shall attend the Company’s general meetings as the representative of such appointing
shareholder.
The proxy form for appointing a proxy to attend the general meeting issued by a
shareholder shall include the following:
(I) the name of the proxy;
(II) whether the proxy has the right to vote;
(III) the instructions on voting for, against or abstaining from voting on each item
on the agenda to be considered at the general meeting;
(IV) the date of the proxy form and its validity period;
(V) signature (or seal) of the principal. Where the principal is a corporate
shareholder, the corporate seal shall be affixed or the proxy form shall be
signed by the legal authorized person.
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
– III-11 –


--- page 611 ---
The proxy form shall state whether the proxy may vote as he/she thinks fit in the
absence of specific instructions from the shareholder.
Voting at the Shareholders’General Meeting
Resolutions of a general meeting shall be classified as ordinary resolutions and
special resolutions. Ordinary resolutions of a general meeting shall be passed by votes
representing more than 1/2 of the voting rights held by the shareholders (including their
proxies) attending the general meeting. Special resolutions of a general meeting shall be
passed by votes representing more than 2/3 of the voting rights held by the shareholders
(including their proxies) attending the general meeting.
Shareholders (including their proxies) shall exercise their voting rights in respect of
the number of voting shares they represent, and each share shall have one vote. When a
poll is held, shareholders (including their proxies) having the right to cast two or more
votes need not use all of their voting rights in the same way as “for”, “against” or
“abstain”. When material matters affecting the interests of the small and medium-sized
investors are considered at a general meeting, the votes of the small and medium-sized
investors shall be counted separately. The separate voting results shall be disclosed to the
public in a timely manner. The shares of the Company held by the Company do not have
voting rights, and such shares shall not be included in the total number of voting shares
present at the general meeting.
When a related party transaction is considered at a general meeting, the related
shareholders shall abstain from voting, and the voting shares represented by them shall
not be included in the total number of valid voting shares. The announcement of
resolutions of the general meeting shall fully disclose the voting results of non-related
shareholders. If a related shareholder is unable to abstain from voting due to any special
circumstances, voting may proceed according to the normal procedures after the
Company obtains an approval from relevant authorities, provided that a detailed
explanation shall be included in the announcement of resolutions of the general meeting.
Pursuant to the applicable laws and regulations and the Hong Kong Listing Rules, if
any shareholder is required to abstain from voting on a particular resolution or restricted
to voting only for (or against) a particular resolution, the number of votes cast by such
shareholder or his/her proxy in breach of the relevant requirements or restrictions shall
not be included in the total number of voting shares.
If a shareholder’s purchase of the voting shares of the Company violates paragraphs
1 and 2 of Article 63 of the Securities Law, voting rights of the shares in excess of the
prescribed proportion shall not be exercised within 36 months after the purchase and shall
not be included in the total number of voting shares present at the general meeting.
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
– III-12 –


--- page 612 ---
The board of directors, independent directors and shareholders holding more than
1% of the voting shares or the investor protection institutions established in accordance
with laws, administrative regulations or the requirements of the securities regulatory
authorities of the State Council may act as solicitors, and publicly solicit the shareholders
of the listed company, either by themselves or through an entrusted securities firm or
securities service provider, to engage them as proxies to attend the general meeting and
exercise shareholder’s rights such as rights to propose or vote on their behalf.
Any public solicitation of shareholders’ rights shall comply with laws,
administrative regulations, relevant requirements of the CSRC and relevant provisions of
the Articles, make sufficient disclosure of solicitation documents containing information
on specific proposals and voting preference to the shareholders from whom the voting
rights are being solicited, and shall be prohibited if it is for the purpose of any
compensation or disguised compensation. The Company shall not impose any
inappropriate obstacles that impair the legitimate rights and interests of the shareholders,
such as limitation in respect of the minimum shareholding proportion, on the solicitation
of voting rights.
The following matters shall be approved by ordinary resolutions at a general
meeting:
(I) work reports of the board of directors and the board of supervisors;
(II) profit distribution plan and loss make-up plan formulated by the board of
directors;
(III) appointment and dismissal of members of the board of directors and the
board of supervisors, their remuneration and payment terms;
(IV) annual financial budgets and final accounts of the Company;
(V) the Company’s annual report;
(VI) matters other than those to be approved by special resolutions as stipulated in
the laws, administrative regulations, securities regulatory rules of the places
where the Company’s shares are listed or the Articles.
The following matters shall be approved by special resolutions at a general meeting:
(I) increase or reduction of the registered capital of the Company;
(II) division, merger, dissolution or change of corporate form of the Company;
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
– III-13 –


--- page 613 ---
(III) amendments to the Articles of Association and its appendixes (including rules
of procedure for the general meeting, rules of procedure for the board of
directors and rules of procedure for the board of supervisors);
(IV) purchase or disposal of material assets by the Company within one year, or
any guarantee with an amount exceeding 30% of the latest audited total assets
of the Company;
(V) equity incentive plans;
(VI) spin-off of its subsidiaries for the purpose of listing;
(VII) the issuance of shares, convertible corporate bonds, preferred shares and
other classes of securities approved by the CSRC;
(VIII) repurchase shares for the purpose of reducing registered capital;
(IX) material asset restructuring;
(X) a resolution of a general meeting of the listed company to voluntarily
withdraw the listing and trading of its shares on the Shenzhen Stock Exchange
and/or the Hong Kong Stock Exchange, and its decision to cease trading on
stock exchanges or application for trading or transferring on another stock
exchange;
(XI) other matters that would have a material impact on the Company and
therefore need to be approved by a special resolution as determined by a
general meeting with an ordinary resolution;
(XII) other matters that need to be approved by special resolutions as stipulated by
laws and regulations, securities regulatory rules of the places where the
Company’s shares are listed, the Articles of Association and the rules of
procedure for the general meeting.
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
– III-14 –


--- page 614 ---
DIRECTORS AND THE BOARD OF DIRECTORS
Directors
Directors of the Company may include executive directors, non-executive directors
and independent directors. Non-executive directors refer to directors who do not hold
operational management positions in the Company, and independent directors refer to
persons who meet the provisions of Article 107 of the Articles (consistent with the
meaning of “independent non-executive director” in the Hong Kong Listing Rules).
Directors shall be elected or replaced at a general meeting. Each term of office of a
director shall be three years. Upon the expiry of a director’s term of office, the director
may be re-elected and re-appointed in accordance with the provisions of the securities
regulatory rules of the places where the Company’s shares are listed.
A director shall continue to perform his/her duties as a director in accordance with
the laws, administrative regulations, departmental rules and the Articles until a re-elected
director takes office, if re-election is not conducted in a timely manner upon the expiry of
his/her term of office. The chief executive officer or other senior management may
concurrently serve as a director, provided that the aggregate number of the directors who
concurrently serve as the chief executive officer or senior management and directors who
are employee representatives, shall not exceed 1/2 of all the directors of the Company.
A director may resign before expiry of his/her term of office. A resigning director
shall submit a written resignation report to the board of directors. The board of directors
shall make disclosure of relevant information within two days. Where the number of
members of the board of directors falls below the minimum requirement due to the
resignation of any director, or the proportion of independent directors in the board of
directors or its special committees does not meet the requirements of the laws and
regulations as well as securities regulatory rules of the places where the Company’s shares
are listed or the Articles as a result of resignation of any independent director, or there is
no accounting professional among independent directors, before a newly elected director
takes office, the original director shall perform his/her duties as a director in accordance
with laws, administrative regulations, departmental rules and the Articles. Save for the
circumstances set out in the preceding paragraph, the resignation of a director shall take
effect when the resignation report is delivered to the board of directors.
Chairman
The board of directors shall have one chairman. The chairman shall be elected by
more than half of all the members of the board of directors.
The chairman shall exercise the following functions and authority:
(I) preside over the general meetings and convene and preside over the board
meetings;
(II) supervise and inspect the implementation of resolutions of the board of
directors;
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
– III-15 –


--- page 615 ---
(III) sign on the shares, corporate bonds and other securities issued by the
Company;
(IV) sign on the important documents of the board of directors and other
documents to be signed by the legal representative of the Company;
(V) exercise the functions and authority of the legal representative;
(VI) when a force majeure emergency such as an extreme natural disaster occurs,
exercise the special authority to handle company affairs in compliance with
legal provisions and in the interests of the Company, and report to the board
of directors of the Company and the general meeting subsequently;
(VII) the chairman shall have the right to decide on external loans, external
investments and asset acquisitions that account for less than 10% of the
Company’s latest total audited net assets;
(VIII) the chairman shall have the right to decide on the leasing, entrusted
operation, joint operation with others, purchase, sale, loss reporting,
replacement, pledge or liquidation of assets that account for less than 10% of
the Company’s latest total audited net assets;
(IX) other functions and authority conferred by the board of directors.
If the chairman is unable to perform his/her duties or fails to perform his/her
duties, a director jointly nominated by more than half of the directors shall perform such
duties.
Board of Directors
The Company shall have a board of directors, which shall be accountable to the
general meeting. The board of directors shall consist of nine directors, comprising four
executive directors, two non-executive directors and three independent non-executive
directors. The Company shall have one chairman.
The board of directors shall exercise the following functions and authority:
(I) convene general meetings and submit work reports to the general meetings;
(II) implement resolutions of the general meetings;
(III) determine the business plans and investment plans of the Company;
(IV) formulate the Company’s annual financial budget plan and final accounts
plan;
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
– III-16 –


--- page 616 ---
(V) formulate the Company’s profit distribution plan and loss recovery plan;
(VI) formulate plans for the Company for increase or reduction of registered
capital, issuance of bonds or other securities and listing;
(VII) formulate plans for major acquisitions of the Company, acquisition of the
Company’s shares, or plans for merger, division, dissolution and change of
corporate form;
(VIII) within the scope authorized by the general meeting or the Articles, decide on
matters such as the Company’s external investment, acquisition and sale of
assets, asset pledges, external guarantees, entrusted financial management
and related transactions; matters beyond the scope of authorization shall be
submitted to the general meetings for consideration;
(IX) decide on the establishment of the Company’s internal management body;
(X) appoint or dismiss the Company’s chief executive officer and secretary to the
board of directors; appoint or dismiss the Company’s president, technology
director, financial director and other senior management based on the
nomination of the chief executive officer, and decide on the matters in relation
to their remuneration, rewards and punishments;
(XI) formulate the Company’s basic management system;
(XII) formulate proposed amendments to the Articles;
(XIII) manage the Company’s information disclosure matters;
(XIV) make proposal to the general meeting on the engagement or change of the
accounting firm performing audits for the Company;
(XV) listen to the work reports from the chief executive officer of the Company and
review the work of the chief executive officer;
(XVI) subject to compliance with the provisions of the securities regulatory rules of
the places where the Company’s shares are listed, decide on the acquisition of
the Company’s own shares by the Company under the circumstances
stipulated in Article 23(III), (V) and (VI) of the Articles as passed by a
resolution by more than two-thirds of the directors attending the board
meeting;
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
– III-17 –


--- page 617 ---
(XVII) the board of directors of the Company shall establish special committees for
audit, strategic management and ESG, nomination, remuneration and
evaluation, and formulate the working procedures for special committees.
Special committees shall be accountable to the board of directors and perform
their duties in accordance with the Articles and the authorization by the board
of directors, and the proposals shall be submitted to the board of directors for
consideration and approval. The members of the special committees shall be
entirely composed of directors, among which independent directors
constitute the majority of the audit committee, nomination committee,
remuneration and evaluation committee and serves as the conveners. The
conveners of the audit committee shall be an accounting professional, and the
members of the audit committee shall be directors who do not serve as a
senior management of the Company. The board of directors shall be
responsible for formulating the working procedures of the special committees
and regulating the operation of the special committees;
(XVIII) other functions and authority conferred by laws, administrative regulations,
departmental rules, securities regulatory rules of the places where the
Company’s shares are listed or the Articles.
The board of directors shall hold at least four meetings each year, which shall be
convened by the chairman and shall notify all directors and supervisors in writing 14 days
prior to the meeting.
Shareholders representing more than one-tenth of the voting rights, more than
one-third of the directors and more than half of the independent directors or the
supervisory committee may propose to hold an extraordinary meeting of the board of
directors. The chairman shall convene and preside over a board meeting within ten days
after receiving the proposal.
The board of directors shall notify all directors in writing three days prior to the
extraordinary meeting of the board of directors.
The board meetings shall be held only when more than half of the directors are
present. Resolutions made by the board of directors must be passed by more than half of
all directors. Resolutions of the board of directors are voted by way of poll with each
director having one vote.
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
– III-18 –


--- page 618 ---
If any director is related to the enterprise involved in the resolution at a board
meeting, the said director shall not exercise his/her voting rights on the said resolution
for himself/herself or on behalf of another director. Such board meeting may be held
when more than half of the non-related directors attend the meeting. The resolution of
such board meeting shall be passed by more than half of the non-related directors. If the
number of non-related directors attending the board meetings is fewer than three, the
matters shall be submitted to the general meeting for consideration. Where the laws and
regulations and securities regulatory rules of the places where the Company’s shares are
listed have any additional restrictions in respect of the participation and voting by
directors in board meetings, such provisions shall prevail.
Directors shall attend the meetings of the board of directors in person. Where a
director is unable to attend a meeting for any reason, he/she may authorize another
director to attend the meeting on his/her behalf in writing. The authorization letter shall
set out the name of the authorized person, the matters to be authorized, scope of
authorization and valid period, which shall be signed or sealed by the director who
authorizes. The directors who attend the meeting on behalf of another director shall
exercise the rights as directors within the scope of authorization. If a director fails to
attend a board meeting and does not authorize a representative to attend on his/her
behalf, he/she shall be deemed to have waived his/her voting rights at such meeting.
Special Committees under the Board
The board of directors of the Company shall establish special committees for audit,
strategic management and ESG, nomination, remuneration and evaluation, and formulate
the working procedures for special committees. Special committees shall be accountable
to the board of directors and perform their duties in accordance with the Articles and the
authorization by the board of directors, and the proposals shall be submitted to the board
of directors for consideration and approval. The members of the special committees shall
be entirely composed of directors, among which independent directors constitute the
majority of the audit committee, nomination committee, remuneration and evaluation
committee and serve as the conveners. The convener of the audit committee shall be an
accounting professional, and the members of the audit committee shall be directors who
do not serve as a senior management of the Company. The board of directors shall be
responsible for formulating the working procedures of the special committees and
regulating the operation of the special committees.
Secretary to the Board
The Company shall have a secretary to the board of directors, who is responsible for
the organization of the Company’s general meetings and meetings of the board of
directors, custody of documents as well as information management regarding the
shareholders of the Company, dealing with information disclosure and other matters. The
secretary to the board of directors shall comply with relevant requirements under the
laws, administrative regulations, departmental rules and the Articles.
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
– III-19 –


--- page 619 ---
CHIEF EXECUTIVE OFFICER AND OTHER SENIOR MANAGEMENT
The Company has one chief executive officer who is appointed or dismissed by the
board of directors. The Company’s chief executive officer, president, technical officer,
board secretary and financial officer are the senior management of the Company.
The term of office of a chief executive officer shall be three years, and renewable
upon re-election.
The chief executive officer shall be accountable to the board of directors and shall
exercise the following functions and authority:
(I) be in charge of the production, operation and management of the Company,
organize the implementation of the resolutions of the board of directors, and
report to the board of directors;
(II) arrange the implementation of the Company’s annual business plans and
investment plans;
(III) draft plans for the establishment of the internal management structure of the
Company;
(IV) propose the basic management system of the Company;
(V) formulate detailed rules and regulations of the Company;
(VI) pr opose the appointment or dismissal by the board of directors of the
Company’s president, technical officer and financial officer;
(VII) decide on the appointment or dismissal of the executive officers other than
those who shall be appointed or dismissed by the board of directors;
(VIII) other functions and authority conferred by the Articles or the board of
directors.
The chief executive officer shall attend meetings of the board of directors.
If a senior management member violates the laws, administrative regulations,
departmental rules or the Articles when performing his/her duties that result in loss to
the Company, he/she shall be liable for compensation.
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
– III-20 –


--- page 620 ---
SUPERVISORS AND BOARD OF SUPERVISORS
Supervisors
The board of supervisors shall consist of shareholder representatives and an
appropriate ratio of the Company’s employee representatives, of which no less than
one-third, i.e., one employee representative, shall be included in the board of supervisors.
The employee representatives of the board of supervisors shall be democratically elected
by employees of the Company at the employee representatives’ meeting, employee
meeting or otherwise.
The term of office of a supervisor shall be three years. A supervisor may be
renewable by re-election upon the expiration of his/her term of office. Directors and
senior management of the Company, as well as their spouses and immediate family
members shall not serve as supervisors during the term of office of such directors and
senior management.
A supervisor may be present at the meetings of the board of directors, and make
enquiries or recommendations regarding resolutions of the board of directors.
If a supervisor is in breach of the requirements under the laws, administrative
regulations, departmental rules or the Articles when performing his/her duties and
causes losses to the Company, he/she shall be liable for compensation.
Board of Supervisors
The Company shall have a board of supervisors, which shall consist of three
supervisors, one of whom shall act as convener. The convener of the board of supervisors
shall be elected by the votes of more than half of all supervisors. The convener of the board
of supervisors shall convene and preside over the meetings of the board of supervisors; if
the convener of the board of supervisors is unable to or fails to perform his/her duties, a
supervisor shall be nominated by more than a half of the supervisors to convene and
preside over the meetings of the board of supervisors.
The board of supervisors shall exercise the following functions and authority:
(I) review the securities issuance documents and regular reports of the Company
prepared by the board of directors and to provide written review opinions,
and the supervisors shall sign a written confirmation. Supervisors shall
ensure that the Company discloses information in a timely and fair manner
and the information disclosed is true, accurate and complete. In the event that
the truthfulness, accuracy, completeness of the securities issuance documents
and regular reports cannot be guaranteed or is disputed, the supervisors shall
express their opinions and state reasons in the written confirmation which the
Company shall disclose. Where the Company refuses to disclose, the
supervisors may directly apply for disclosure;
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
– III-21 –


--- page 621 ---
(II) inspect the financial condition of the Company;
(III) supervise the performance of duties in the Company by the directors and
senior management, and propose dismissal of directors and senior
management who are in violation of laws, administrative regulations, the
Articles or resolutions of the general meetings;
(IV) demand rectifications to be made by a director and senior management when
his/her acts impair the Company’s interests;
(V) propose the convening of extraordinary general meetings and, in cases where
the board of directors does not perform the obligations to convene and preside
over the general meetings as stipulated by the Company Law, to convene and
preside over the general meetings;
(VI) put forward proposals to the general meetings;
(VII) initiate legal proceedings against the directors and senior management in
accordance with relevant requirements under the Company Law;
(VIII) conduct investigations upon discovery of abnormality in the Company’s
operations; and where necessary, engage an accounting firm, law firm or other
professional institution to assist in its work at the Company’s expense.
Meetings of the Board of Supervisors
The board of supervisors shall convene a meeting at least once every six months.
The supervisors may propose to hold an extraordinary meeting of the board of
supervisors. Resolutions of the board of supervisors shall be passed by more than half of
the supervisors.
QUALIFICATIONS AND RESPONSIBILITIES OF DIRECTORS, SUPERVISORS AND
SENIOR MANAGEMENT OF THE COMPANY
A person may not serve as a director, supervisor, chief executive officer or other
member of senior management of the Company in any of the following circumstances:
(I) persons who have no or restricted capacity for civil conduct;
(II) persons who were sentenced to criminal punishment for corruption, bribery,
embezzlement of property, misappropriation of property or disrupting the
socialist market economic order, where less than five years have lapsed since
the expiration of the execution period, or who have been deprived of political
rights due to any criminal offenses, where less than five years have lapsed
since the expiration of the execution period, and less than two years have
lapsed since the date of the expiration of the probation period if probation is
announced;
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
– III-22 –


--- page 622 ---
(III) persons who served as a director, factory manager or manager of a company
or an enterprise that declared insolvent and liquidated and were personally
liable for the insolvency of such company or enterprise, and less than three
years have lapsed since the date of completion of the insolvency and
liquidation of that company or enterprise;
(IV) persons who served as the legal representative of a company or an enterprise
of which the business license was revoked and was ordered to close down due
to violation of laws and who was personally liable for such revocation and
order, where less than three years have lapsed since the date of the revocation
of the business license and closure, as ordered, of that company or enterprise;
(V) persons who are listed as defaulters by a people’s court since he/she has a
substantial amount of personal debts due and unsettled;
(VI) persons who are penalized by CSRC to be prohibited from participating in the
securities markets by serving as directors, supervisors or senior management
of a listed company with a period yet to be expired;
(VII) persons who are publicly determined by a stock exchange as unsuitable to
serve as directors, supervisors or senior management of a listed company with
a period yet to be expired;
(VIII) other circumstances stipulated in laws, administrative regulations,
departmental rules or the listing rules of the places where the Company’s
shares are listed.
If the election or appointment of a director is in violation of this article, such
election, appointment or employment shall be invalid. If any of the circumstances under
this article occurs during the period of employment of a director, the Company shall
dismiss the director from his/her duties and re-elect a director in accordance with the
provisions of the Articles.
FINANCIAL AND ACCOUNTING SYSTEM
The Company shall formulate its financial accounting system in accordance with the
laws, administrative regulations and the requirements of relevant state departments.
The Company shall submit to the CSRC and the stock exchanges where the
Company’s shares are listed the annual financial and accounting report as required within
four months from the end of a fiscal year, and the CSRC branch and the stock exchanges
the interim financial and accounting report within two months from the end of the first six
months of a fiscal year, as well as the CSRC branch and the places where the Company’s
shares are listed the quarterly financial and accounting report within one month from the
end of the first three months and the first nine months of a fiscal year.
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
– III-23 –


--- page 623 ---
The aforesaid financial and accounting report shall be prepared in accordance with
the relevant laws, administrative regulations, departmental rules, the securities
regulatory rules of the places where the shares are listed.
The Company shall not establish account books other than the statutory account
books. The assets of the Company shall not be deposited into any personal account.
The Company shall, when allocating its after-tax profits for the current year, allocate
10% of its profits to the Company’s statutory reserve. When the accumulated amount of
the statutory reserve of the Company reaches 50% of its registered capital, no further
allocations is required. If the statutory reserve of the Company is insufficient to make up
for its losses for the previous years, the profits for the current year shall first be used to
cover the losses before any statutory reserve is allocated according to the preceding
paragraph.
After allocating the statutory reserve out of its after-tax profits, the Company may
also, subject to the resolution at a general meeting, allocate its after-tax profits to its
discretionary reserve. The remaining after-tax profits shall, after covering the losses and
making allocations to the reserve, be distributed to the shareholders in proportion to their
respective shareholdings, except those which shall not be distributed in accordance with
the shareholding proportion under the Articles.
The Company’s shares held by the Company are not entitled to any profit
distribution.
Reserves of the Company are used for covering the Company’s losses, expanding
the Company’s production and operation or being converted to increase the capital of the
Company. However, the capital reserve shall not be used to cover the Company’s losses.
When the statutory reserve is converted into capital, the balance of the statutory reserve
shall not fall below 25% of the Company’s registered capital before the conversion.
The Company may distribute dividends in the form of cash, stocks, or a combination
of both, or other methods permitted by laws and regulations. Subject to the principles of
profit distribution and the above conditions for cash dividends, the Company shall, in
principle, distribute cash dividends once a year. Within any three consecutive years, the
cumulative profits distributed by the Company in cash shall not be less than 30% of the
average distributable profits realized in the most recent three years. The specific dividend
ratios shall be determined by the board of directors of the Company according to relevant
regulations and the Company’s operating conditions, and considered and resolved at the
general meeting of the Company.
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
– III-24 –


--- page 624 ---
The Company shall appoint one or more payment receiving agent(s) in Hong Kong
for shareholders of H Shares. The payment receiving agent(s) shall, on behalf of relevant
shareholders of H Shares, receive dividends and other amounts payable by the Company
in respect of H Shares and keep such payments for future payments to such shareholders
of H Shares. The payment receiving agent(s) appointed by the Company shall satisfy the
requirements under the laws and regulations and the securities regulatory rules of the
places where the Company’s shares are listed.
INTERNAL AUDIT
The Company shall implement an internal audit system and have dedicated audit
personnel to perform internal audit and supervision on the Company’s financial income
and expenses and economic activities.
The internal audit system and the responsibilities of the audit personnel of the
Company shall take effect upon approval by the board of directors. The head of audit shall
be accountable to and report to the board of directors.
APPOINTMENT OF ACCOUNTING FIRM
The Company shall appoint an accounting firm which complies with the Securities
Law to conduct financial statements audit, net assets verification and other related
consulting services, etc. The term of appointment is one year and can be renewed.
The appointment of an accounting firm by the Company shall be agreed by a
majority of all members of the audit committee before being submitted to the board of
directors for consideration, and shall be determined by the general meeting, and the board
of directors shall not appoint an accounting firm before the decision of the general
meeting is made.
The Company shall guarantee to provide the accounting firm it appoints with true
and complete accounting vouchers, accounting books, financial accounting reports and
other accounting information, and shall not refuse, conceal or make false statements.
The audit fees payable to the accounting firm shall be determined by the general
meeting.
The Company shall notify the accounting firm 30 days in advance when it dismisses
or no longer renews the accounting firm. The accounting firm may express its opinions
when the resolution regarding the dismissing of the accounting firm is voted at the
general meeting of the Company.
Where the accounting firm proposes to resign, it shall explain to the general meeting
whether the Company has any improper situation.
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
– III-25 –


--- page 625 ---
MERGER, DIVISION, CAPITAL INCREASE AND REDUCTION OF THE COMPANY
A merger may be in the form of merger by absorption or merger by establishment of
a new company.
In the case of merger by absorption, the company being absorbed shall be dissolved.
Merger by establishment of a new company shall refer to the establishment of a new
company as a result of merger of two or more companies and the merger parties shall be
dissolved.
In the event of merger, the merger parties shall enter into a merger agreement, and
prepare a balance sheet and an inventory list of assets. The Company shall notify its
creditors within ten days from passing of the resolution on merger, and make an
announcement on the newspaper(s) and website(s) (including the HKEXnews website of
Hong Kong Stock Exchange ( www.hkexnews.hk )) designated by securities regulatory
authorities within 30 days. Creditors may require the Company to repay the debts or to
provide corresponding guarantee within 30 days from receipt of notification or within 45
days from the day of announcement if they do not receive the notification.
Upon merger, the creditor’s rights and debts of the merger parties shall be
succeeded by the company which subsists after the merger or the newly-established
company.
In the event of division, assets of the Company shall be divided correspondingly.
In the event of a division, a balance sheet and an inventory list of assets shall be
prepared. The Company shall notify its creditors within ten days from passing of the
resolution on division, and make an announcement on the newspaper(s) and website(s)
(including the HKEX news website of Hong Kong Stock Exchange ( www.hkexnews.hk ))
designated by securities regulatory authorities within 30 days.
The companies after division shall jointly assume liabilities for debts of the
Company prior to the division, save as otherwise agreed in the written agreement
between the Company and its creditors on repayment of debts prior to the division.
If the Company needs to reduce its registered capital, it shall prepare a balance sheet
and an inventory list of assets.
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
– III-26 –


--- page 626 ---
The Company shall notify its creditors within ten days from passing of the
resolution on reduction of registered capital, and make an announcement on the
newspaper(s) and website(s) (including the HKEX news website of Hong Kong Stock
Exchange ( www.hkexnews.hk )) designated by securities regulatory authorities within 30
days. Creditors are entitled to demand the Company to repay the debts or to provide
corresponding guarantee within 30 days from receipt of notification or within 45 days
from the day of announcement if they do not receive the notification.
The reduced registered capital of the Company shall not be lower than the minimum
statutory amount.
Changes in particulars of the companies as a result of merger or division shall be
registered with the company registration authorities in accordance with the laws.
Deregistration of a company shall be performed in accordance with the laws when the
Company is dissolved. Incorporation registration of a company shall be performed in
accordance with the laws when a new company is incorporated.
When increasing or reducing the registered capital, the Company shall register such
changes with company registration authorities in accordance with the laws.
DISSOLUTION AND LIQUIDATION OF THE COMPANY
The Company shall be dissolved for the following reasons:
(I) Expiry of term of business stipulated in the Articles or occurrence of any other
causes for dissolution stipulated in the Articles;
(II) A general meeting has resolved on the dissolution of the Company;
(III) As a result of the merger or division of the Company;
(IV) The Company’s business license is revoked, or the Company is ordered to
close down or dissolve in accordance with the laws;
(V) When the Company has serious difficulties in its operation and management
and the Company’s subsistence will cause material damages to the interests of
its shareholders, and where the Company is unable to resolve the difficulties
through any other means, the shareholders who hold more than 10% of the
voting rights of the Company may apply to the People’s Court for dissolution
of the Company.
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
– III-27 –


--- page 627 ---
Under the circumstances set out in item (I) above, the Company may subsist through
amendments to the Articles.
Where amendments to the Articles are made in accordance with the preceding
paragraph, such amendments shall be passed by votes representing more than two-thirds
of the voting rights held by shareholders attending the general meeting.
Where the Company is dissolved pursuant to items (I), (II), (IV) or (V) above, a
liquidation team shall be set up within 15 days from the date of occurrence of event that
causes dissolution and shall commence liquidation. The liquidation team shall consist of
members determined by the directors or the general meeting. In case no such liquidation
team is established to timely proceed with liquidation, the creditors may make an
application to the People’s Court for the appointment of relevant persons to form the
liquidation team for liquidation.
The liquidation team shall exercise the following authority during the liquidation
period:
(I) liquidate the Company’s assets and prepare a balance sheet and an inventory
list of assets respectively;
(II) notify creditors and publish announcement;
(III) handle outstanding businesses of the Company related to liquidation;
(IV) settle all taxes in arrears and taxes arising in the course of liquidation;
(V) liquidate creditor’s rights and debts;
(VI) dispose of the Company’s remaining assets after the debts are paid off;
(VII) conduct civil lawsuits on behalf of the Company.
The liquidation team shall, within ten days from its establishment, notify the
creditors, and make an announcement on the newspaper(s) and website(s) (including the
HKEX news website of Hong Kong Stock Exchange ( www.hkexnews.hk )) designated by
securities regulatory authorities within 60 days. The creditors shall declare their creditors’
rights to the liquidation team within 30 days from receipt of notification or within 45 days
from the day of announcement if they do not receive the notification.
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
– III-28 –


--- page 628 ---
Creditors declaring creditors’ rights shall state the relevant information of the
creditors’ rights and provide proof materials. The liquidation team shall register the
creditors’ rights.
During the period for declaration of creditors’ rights, the liquidation team shall not
make repayment to creditors.
Upon sorting of the Company’s assets and preparation of balance sheet and
inventory list of assets, the liquidation team shall formulate a liquidation plan and submit
it to the general meeting or the People’s Court for confirmation.
The Company’s assets, after being used respectively for payment of liquidation
expenses, employees’ wages, social insurance premiums and statutory compensation,
payment of tax in arrears and the Company’s debts, shall be distributed in proportion to
the shareholding of the shareholders.
During the liquidation period, the Company shall subsist but shall not engage in
business activities unrelated to liquidation. The Company’s assets shall not be distributed
to shareholders prior to making repayment pursuant to the provisions of the preceding
paragraph.
Upon sorting of the Company’s assets and preparation of balance sheet and
inventory list of assets, if the liquidation team is aware that the Company’s assets are
inadequate for repayment of debts, it shall apply to the People’s Court for declaration of
insolvency.
Upon declaration of the Company’s insolvency pursuant to the ruling of the
People’s Court, the liquidation team shall hand over the liquidation matters to the
People’s Court.
Upon completion of liquidation, the liquidation team shall formulate a liquidation
report and shall submit the same to the general meeting or the People’s Court for
confirmation and submit to the company registration authorities and apply for
deregistration, and announce the termination of the Company.
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
– III-29 –


--- page 629 ---
AMENDMENT TO THE ARTICLES OF ASSOCIATION
Under any of the following circumstances, the Company shall amend the Articles:
(I) Following the amendment of the Company Law, the relevant laws,
administrative regulations or the securities regulatory rules of the places
where the Company’s shares are listed, the matters stipulated in the Articles
of Association are in conflict with the provisions of the amended laws,
administrative regulations or the securities regulatory rules of the places
where the Company’s shares are listed;
(II) There is any change to the Company’s particulars which result in
inconsistency with the matters set out in the Articles of Association;
(III) A general meeting has decided on making amendments to the Articles of
Association.
Where the approval from the competent authority is required for the amendments to
the Articles resolved by the general meeting, such amendments shall be submitted to the
competent authority for approval. Where an amendment to the Articles involves the
particulars of the Company’s registration, changes shall be made to the registration
pursuant to the laws.
Appendixes to the Articles include the rules of procedure for general meetings, the
rules of procedure for meetings of the board of directors and the rules of procedure for
meetings of the board of supervisors. In case of any conflict between the Articles and the
laws, administrative regulations, normative documents and securities regulatory rules of
the places where the Company’s shares are listed that are promulgated from time to time,
such laws, administrative regulations, normative documents and securities regulatory
rules of the places where the Company’s shares are listed shall prevail.
APPENDIX III SUMMARY OF THE ARTICLES OF ASSOCIATION
– III-30 –


--- page 630 ---
1. FURTHER INFORMATION ABOUT OUR GROUP
A. Incorporation
Our former entity, Sanhua-Fujikoki Co., Ltd., (ʮ̡ ), was
incorporated as a Sino-Japanese joint venture on September 10, 1994, marking the
establishment of our Company. On December 19, 2001, it was converted to a joint
stock company, which later changed its name to Zhejiang Sanhua Intelligent
Controls Co., Ltd. Our Company completed the listing of the A Shares on the
Shenzhen Stock Exchange (stock code: 002050) on June 7, 2005 (the “ A-Shares
Listing ”). For further details of the A-Shares Listing, see “History and Corporate
Structure — Major Shareholding Changes of Our Company — Conversion into Joint
Stock Limited Company and Listing on the Shenzhen Stock Exchange” in this
prospectus.
Our registered office is located at No. 219 Woxi Avenue, Chengtan Street,
Xinchang, Shaoxing, Zhejiang Province, China. We were registered as a non-Hong
Kong company in Hong Kong under Part 16 of the Companies Ordinance on
January 8, 2025, and our principal place of business in Hong Kong is at 46/F,
Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong. Ms. Ho Wing Nga
(О൘ඩ) has been appointed as the authorised representative of our Company for
the acceptance of service of process and notices on behalf of our Company in Hong
Kong. The address for service of process on our Company in Hong Kong is the same
as our principal place of business in Hong Kong as set out above.
As our Company was established in PRC, its operations are subject to the
relevant laws and regulations of mainland China. A summary of the relevant aspects
of laws and regulations of mainland China and the Articles of Association is set out
in this prospectus.
B. Changes in Share Capital of our Company
Save as disclosed below, there has been no alteration in our share capital
within two years immediately preceding the date of this prospectus.
As approved by the Board on June 20, 2023 and by the shareholders on July 6,
2023, 180,400 A Shares repurchased by our Company under the repurchase mandate
for 2020 Restricted Share Incentive Scheme and 2022 Restricted Share Incentive
Scheme were canceled on September 20, 2023. The total registered capital of our
Company was then decreased from RMB3,590,797,158 comprising 3,590,797,158 A
Shares of nominal value of RMB1.00 each to RMB3,590,616,758 comprising
3,590,616,758 A Shares of nominal value of RMB1.00 each.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 1–


--- page 631 ---
Pursuant to the convertible notes issued by our Company and listed on the
Shenzhen Stock Exchange on June 30, 2021 (stock code: 127036, the “ Convertible
Bonds ”), the period for conversion by way of our Company issuing new Shares was
between December 7, 2021 and May 31, 2027. As approved by the 13th interim
meeting of the seventh session of the Board on July 7, 2023, all outstanding
Convertible Bonds on July 31, 2023 were redeemed by our Company. During the
conversion period between December 7, 2021 and July 31, 2023, a total of 141,998,777
A Shares were converted into from the Convertible Bonds. The total registered
capital of our Company was then increased to RMB3,732,615,535 comprising
3,732,615,535 A Shares of nominal value of RMB1.00. The Convertible Bonds were
delisted on August 9, 2023.
As approved by the 23rd interim meeting of the seventh session of the Board
convened on June 3, 2024 and the second 2024 interim shareholders meeting
convened on June 20, 2024, 226,000 A Shares repurchased by our Company under the
repurchase mandate for 2022 Restricted Share Incentive Scheme were canceled on
September 25, 2024. The total registered capital of our Company was then decreased
to RMB3,732,389,535 comprising 3,732,389,535 A Shares of nominal value of
RMB1.00 each.
A repurchase mandate for the repurchase of A Shares for the purpose of our
Company’s employee share incentive scheme was approved by the 30th meeting of
the seventh session of the Board on December 30, 2024. The repurchase mandate was
valid for 12 months from the date of approval of the repurchase mandate by the
Board. Upon repurchase, the repurchased A Shares are held under our Company
stock repurchase account and do not carry any shareholders’ rights, including but
not limited to voting rights at the Shareholders’ meeting and dividend rights. Any
repurchased A Shares not granted to employees within 36 months after the
completion of the repurchase shall be canceled.
According to the repurchase mandate, the amount could be used for the
repurchase will be no more than RMB600 million and no less than RMB300 million.
Calculating based on the repurchase price of no higher than RMB35.75 per A Share
as of the Latest Practicable Date (adjusted from the initial repurchase price of no
higher than RMB35.75 per A Share due to dividends distribution for the year ended
December 31, 2024), the amount of A Shares could be repurchased under the
repurchase mandate will be no more than 16,800,000 shares and no fewer than
8,390,000 shares.
As of the Latest Practicable Date, the Company has repurchased 1,506,800 A
Shares under the mandate.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 2–


--- page 632 ---
C. Further Information about Our Major Subsidiaries
We have applied for, and the Stock Exchange has granted, a waiver from strict
compliance with the requirements of paragraph 26 of Appendix D1A to the Listing
Rules in relation to the disclosure of information relating to the changes in the share
capital of any member of our Group within the two years immediately preceding the
date of this prospectus. For details, see “Waivers from Strict Compliance with the
Listing Rules — Waiver in respect of alteration in share capital” in this prospectus.
The following Major Subsidiaries have been incorporated within two years
immediately preceding the date of this prospectus:
Name of Subsidiary
Place of
Incorporation
Date of
Incorporation
Sanhua Automotive
Investment
Singapore November 20, 2023
On October 13, 2023, February 2, 2024 and May 29, 2024, the registered capital
of Sanhua International Singapore was increased from USD150,580,583.00 to
USD151,513,249.00, from USD151,513,249.00 to USD173,151,245.40 and from
USD173,151,245.40 to USD175,151,245.40, respectively.
On December 28, 2023, the registered capital of Sanhua Automotive Thermal
Management was increased from RMB550 million to RMB1.35 billion.
On November 29, 2024, the registered capital of Guangdong Sanhua was
increased from RMB300 million to RMB1 billion.
On May 24, 2024, the registered capital of Sanhua Mexico was increased from
MXN46,311,239 to MXN1,044,741,239.
On June 4, 2024, the registered capital of Sanhua Thailand was increased from
150,000,000 Thai Baht to 369,185,190 Thai Baht.
Save as disclosed above, no alteration in the registered capital of our Major
Subsidiaries has taken place within the two years preceding the date of this
prospectus.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 3–


--- page 633 ---
D. ResolutionsPassedbyOurShareholders’GeneralMeetingofOurCompany
in Relation to the Global Offering
Pursuant to the shareholders’ meeting held on December 30, 2024, the
following resolutions, among others, were duly passed:
(a) the issue by our Company of H Shares of nominal value of RMB1.00
each and such H Shares be listed on the Hong Kong Stock Exchange;
(b) the number of H Shares to be issued before the exercise of the
Over-allotment Option shall not exceed 10% of the enlarged share
capital of our Company upon completion of the Global Offering and
granting the Underwriters the Over-allotment Option of no more than
15% of the above number of H Shares to be issued;
(c) subject to the completion of the Global Offering, the conditional
adoption of the Articles of Association, which shall become effective on
Listing Date; and
(d) authorization of the Board and its authorized person to handle relevant
matters relating to, among other things, the Global Offering, the issue
and listing of the H Shares.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 4–


--- page 634 ---
2. FURTHER INFORMATION ABOUT OUR BUSINESS
A. Summary of Our Material Contracts
The following are contracts (not being contracts entered into in the ordinary
course of business) entered into by any member of our Group within the two years
immediately preceding the date of this prospectus that are or may be material:
(a) a cornerstone investment agreement dated June 10, 2025 entered into
among our Company, Schroder Investment Management Limited,
Schroder Investment Management (Singapore) Ltd, Schroder
Investment Management (Hong Kong) Limited, and China International
Capital Corporation Hong Kong Securities Limited, with respect to a
subscription of H Shares at the Offer Price in the aggregate amount of
the Hong Kong dollar equivalent of US dollar 142,000,000;
(b) a cornerstone investment agreement dated June 10, 2025 entered into
among our Company, GIC Private Limited, China International Capital
Corporation Hong Kong Securities Limited and Huatai Financial
Holdings (Hong Kong) Limited, with respect to a subscription of H
Shares at the Offer Price in the aggregate amount of the Hong Kong
dollar equivalent of US dollar 90,000,000;
(c) a cornerstone investment agreement dated June 10, 2025 entered into
among our Company, Greenwoods Asset Management Hong Kong
Limited, China International Capital Corporation Hong Kong Securities
Limited and Huatai Financial Holdings (Hong Kong) Limited, with
respect to a subscription of H Shares at the Offer Price in the aggregate
amount of the Hong Kong dollar equivalent of US dollar 20,000,000;
(d) a cornerstone investment agreement dated June 10, 2025 entered into
among our Company, Huatai Capital Investment Limited, China
International Capital Corporation Hong Kong Securities Limited and
Huatai Financial Holdings (Hong Kong) Limited, with respect to a
subscription of H Shares at the Offer Price in the aggregate amount of
the Hong Kong dollar equivalent of US dollar 20,000,000;
(e) a cornerstone investment agreement dated June 10, 2025 entered into
among our Company, Green Better Limited, China International Capital
Corporation Hong Kong Securities Limited and Huatai Financial
Holdings (Hong Kong) Limited, with respect to a subscription of H
Shares at the Offer Price in the aggregate amount of the Hong Kong
dollar equivalent of US dollar 30,000,000;
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 5–


--- page 635 ---
(f) a cornerstone investment agreement dated June 10, 2025 entered into
among our Company, Verition Multi-Strategy Master Fund Ltd., China
International Capital Corporation Hong Kong Securities Limited and
Huatai Financial Holdings (Hong Kong) Limited, with respect to a
subscription of H Shares at the Offer Price in the aggregate amount of
the Hong Kong dollar equivalent of US dollar 30,000,000;
(g) a cornerstone investment agreement dated June 10, 2025 entered into
among our Company, Eastern Bell Capital VIII Investment Limited,
China International Capital Corporation Hong Kong Securities Limited
and Huatai Financial Holdings (Hong Kong) Limited, with respect to a
subscription of H Shares at the Offer Price in the aggregate amount of
the Hong Kong dollar equivalent of US dollar 30,000,000;
(h) a cornerstone investment agreement dated June 10, 2025 entered into
among our Company, Mirae Asset Securities Co., Ltd., China
International Capital Corporation Hong Kong Securities Limited and
Huatai Financial Holdings (Hong Kong) Limited, with respect to a
subscription of H Shares at the Offer Price in the aggregate amount of
the Hong Kong dollar equivalent of US dollar 20,000,000;
(i) a cornerstone investment agreement dated June 10, 2025 entered into
among our Company, ICBC Wealth Management Co., Ltd. (ࠢ
ப΂ʮ̡ ), Invesco Great Wall Fund Management Co., Ltd. (ਿ
ʮ̡ ), China International Capital Corporation Hong Kong
Securities Limited and Huatai Financial Holdings (Hong Kong)
Limited, with respect to a subscription of H Shares at the Offer Price in
the aggregate amount of the Hong Kong dollar equivalent of US dollar
20,000,000;
(j) a cornerstone investment agreement dated June 10, 2025 entered into
among our Company, PSBC Wealth Management Co., Ltd. ( ʕඉଣৌϞ
ப΂ʮ̡ ), China International Capital Corporation Hong Kong
Securities Limited and Huatai Financial Holdings (Hong Kong)
Limited, with respect to a subscription of H Shares at the Offer Price in
the aggregate amount of the Hong Kong dollar equivalent of US dollar
20,000,000;
(k) a cornerstone investment agreement dated June 10, 2025 entered into
among our Company, TAIKANG LIFE INSURANCE CO., LTD, China
International Capital Corporation Hong Kong Securities Limited and
Huatai Financial Holdings (Hong Kong) Limited, with respect to a
subscription of H Shares at the Offer Price in the aggregate amount of
the Hong Kong dollar equivalent of US dollar 20,000,000;
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 6–


--- page 636 ---
(l) a cornerstone investment agreement dated June 10, 2025 entered into
among our Company, GREATER BAY AREA DEVELOPMENT FUND
MANAGEMENT LIMITED (ʮ̡ ) acting for and
on behalf of the managed account of MEGA PRIME DEVELOPMENT
LIMITED, China International Capital Corporation Hong Kong
Securities Limited and Huatai Financial Holdings (Hong Kong)
Limited, with respect to a subscription of H Shares at the Offer Price in
the aggregate amount of the Hong Kong dollar equivalent of US dollar
20,000,000;
(m) a cornerstone investment agreement dated June 10, 2025 entered into
among our Company, Wind Sabre Fund SPC acting on behalf of and for
the account of Wind Sabre Opportunities Fund SP , China International
Capital Corporation Hong Kong Securities Limited and Huatai
Financial Holdings (Hong Kong) Limited, with respect to a subscription
of H Shares at the Offer Price in the aggregate amount of the Hong Kong
dollar equivalent of US dollar 20,000,000;
(n) a cornerstone investment agreement dated June 10, 2025 entered into
among our Company, Martis Fund, L.P ., China International Capital
Corporation Hong Kong Securities Limited and Huatai Financial
Holdings (Hong Kong) Limited, with respect to a subscription of H
Shares at the Offer Price in the aggregate amount of the Hong Kong
dollar equivalent of US dollar 20,000,000;
(o) a cornerstone investment agreement dated June 10, 2025 entered into
among our Company, Morgan Stanley & Co. International plc, China
International Capital Corporation Hong Kong Securities Limited and
Huatai Financial Holdings (Hong Kong) Limited, with respect to a
subscription of H Shares at the Offer Price in the aggregate amount of
the Hong Kong dollar equivalent of US dollar 20,000,000;
(p) a cornerstone investment agreement dated June 10, 2025 entered into
among our Company, Jane Street Asia Trading Limited, China
International Capital Corporation Hong Kong Securities Limited and
Huatai Financial Holdings (Hong Kong) Limited, with respect to a
subscription of H Shares at the Offer Price in the aggregate amount of
the Hong Kong dollar equivalent of US dollar 20,000,000;
(q) a cornerstone investment agreement dated June 10, 2025 entered into
among our Company, 3W Fund Management Limited, China
International Capital Corporation Hong Kong Securities Limited and
Huatai Financial Holdings (Hong Kong) Limited, with respect to a
subscription of H Shares at the Offer Price in the aggregate amount of
the Hong Kong dollar equivalent of US dollar 20,000,000; and
(r) the Hong Kong Underwriting Agreement.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 7–


--- page 637 ---
B. Our Material Intellectual Property Rights
Save as disclosed below, as of the Latest Practicable Date, there were no other
intellectual property rights which are or may be material in relation to our business.
(a) Trademarks
(i) Registered Trademarks
As of the Latest Practicable Date, our Group had registered the
following trademarks which we consider to be or may be material to our
business:
No. Trademark Registered owner
Place of
registration
1.
the Company PRC
2.
 the Company PRC
3.
 the Company PRC
4.
 the Company PRC
5.
 the Company PRC
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 8–


--- page 638 ---
No. Trademark Registered owner
Place of
registration
6.
 the Company PRC
7.
 the Company PRC
8.
 the Company PRC
9.
 the Company PRC
10.
 the Company PRC
11.
 the Company PRC
12.
 the Company PRC
13.
 the Company PRC
14.
 the Company PRC
15.
 the Company PRC
16.
 the Company PRC
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 9–


--- page 639 ---
No. Trademark Registered owner
Place of
registration
17.
 the Company PRC
18.
 the Company PRC
19.
 the Company PRC
20.
 the Company PRC
21.
 the Company PRC
22.
 the Company PRC
23.
 the Company PRC
24.
 the Company PRC
25.
 the Company PRC
26.
 the Company PRC
27.
 the Company PRC
28.
 the Company PRC
29.
 the Company PRC
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-10 –


--- page 640 ---
No. Trademark Registered owner
Place of
registration
30.
 the Company PRC
31.
 the Company PRC
32. the Company PRC (Hong
Kong)
33.
 Sanhua Micro Channel Heat
Exchanger
PRC
34.
 Sanhua Automotive
Components
PRC
35.
 Sanhua Automotive
Components
PRC
(b) Patents
(i) Registered Patents
As of the Latest Practicable Date, we had registered the ownership
of and/or had the right to use the following patents which we consider
to be or may be material to our business:
No. Patent Patent Owner Patent category
Place of
Registration Patent number
1. An electric control valve
and its valve body
device
the Company Invention patent PRC 201010111743.8
2. A heat exchange device
and an electric valve
the Company Invention patent PRC 201110123524.6
3. An electronic expansion
valve
Sanhua
Commercial
Refrigeration
Invention patent PRC 201110175336.8
4. An electric valve device the Company Invention patent PRC 201110184918.2
APPENDIX IV STATUTORY AND GENERAL INFORMATION
–I V - 1 1–


--- page 641 ---
No. Patent Patent Owner Patent category
Place of
Registration Patent number
5. An electric driven valve
and a manufacturing
method thereof
the Company Invention patent PRC 201110374268.8
6. An electronic expansion
valve
the Company Invention patent PRC 201210284810.5
7. Heat exchanger Sanhua Micro
Channel Heat
Exchanger
Invention patent PRC 201210479036.3
8. The refrigerant
distribution device
and the heat
exchanger with it
Sanhua Micro
Channel Heat
Exchanger
Invention patent PRC 201310340612.0
9. Heat exchanger Sanhua Micro
Channel Heat
Exchanger
Invention patent PRC 201310381531.5
10. Heat exchanger Sanhua Micro
Channel Heat
Exchanger
Invention patent PRC 201510689627.7
11. An electronic expansion
valve and its coil
device
the Company Invention patent PRC 201310465007.6
12. A seat assembly of an
electronic expansion
valve and its method
of manufacture
the Company Invention patent PRC 201410113974.0
13. Fin and bent heat
exchanger with the fin
Sanhua Micro
Channel Heat
Exchanger
Invention patent PRC 201410154301.X
14. Bending heat exchanger Sanhua Micro
Channel Heat
Exchanger
Invention patent PRC 201410188198.0
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-12 –


--- page 642 ---
No. Patent Patent Owner Patent category
Place of
Registration Patent number
15. An adjustable
refrigerant dispensing
device and a heat
exchanger with it
Sanhua Micro
Channel Heat
Exchanger
Invention patent PRC 201410229143.X
16. A thermal expansion
valve with a
unidirectional control
function
Sanhua
Commercial
Refrigeration
Invention patent PRC 201510266833.7
17. Electronic expansion
valve and its seat
assembly
the Company Invention patent PRC 201510423990.4
18. Double-row bent heat
exchanger and its
manufacturing
method
Sanhua Micro
Channel Heat
Exchanger
Invention patent PRC 201511027379.6
19. A thermostat and a
temperature control
system
Sanhua
Automotive
Components
Invention patent PRC 201610257372.1
20. Fluid pump Sanhua
Automotive
Components
Invention patent PRC 201610435981.1
21. Electronic expansion
valve
Sanhua
Automotive
Components
Invention patent PRC 202010106026.X
22. Heat exchanger core and
heat exchanger with
its
Sanhua Micro
Channel Heat
Exchanger
Invention patent PRC 201610841633.4
23. Electronic expansion
valve
the Company Invention patent PRC 201710056865.3
24. A heat exchange device Sanhua
Automotive
Components
Invention patent PRC 201710992920.X
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-13 –


--- page 643 ---
No. Patent Patent Owner Patent category
Place of
Registration Patent number
25. Electronic expansion
valve and has its
refrigeration system
the Company Invention patent PRC 201711029773.2
26. Fluid management
components and
thermal management
system
the Company Invention patent PRC 201711230865.7
27. Electronic oil pump the Company Invention patent PRC 201810519275.4
28. A temperature
regulating valve and a
thermal management
system with the
temperature
regulating valve
Sanhua
Automotive
Components
Invention patent PRC 201810536002.0
29. Infrared gas sensor the Company Invention patent PRC 201810670505.7
30. Infrared gas sensor the Company Invention patent PRC 202111655582.3
31. An electronic expansion
valve and its assembly
method
the Company Invention patent PRC 201810745173.4
32. An electric ball valve
and a manufacturing
method thereof
Sanhua
Commercial
Refrigeration
Invention patent PRC 201810781935.6
33. An electric valve Sanhua
Commercial
Refrigeration
Invention patent PRC 202210032861.2
34. Heat exchanger the Company Invention patent PRC 201811155652.7
35. A heat exchange device Sanhua
Automotive
Components
Invention patent PRC 201811290988.4
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-14 –


--- page 644 ---
No. Patent Patent Owner Patent category
Place of
Registration Patent number
36. An electric valve and a
thermal management
assembly
the Company Invention patent PRC 201811435988.9
37. Fluid heat exchange
device and thermal
management system
Sanhua
Automotive
Components
Invention patent PRC 201811479055.X
38. Heat exchanger the Company Invention patent PRC 201811474620.3
39. Heat exchanger Sanhua Micro
Channel Heat
Exchanger
Invention patent PRC 201811639355.X
40. Gas and liquid
separation device
the Company Invention patent PRC 201910198325.8
41. Heat exchanger and heat
exchange system
the Company Invention patent PRC 201910265996.1
42. Microchannel flat tube
and microchannel heat
exchanger
the Company Invention patent PRC 201910366880.7
43. Device for bending of
heat exchanger and
bending method of
heat exchanger
Sanhua Micro
Channel Heat
Exchanger
Invention patent PRC 201910470365.3
44. An electric ball valve
and a manufacturing
method thereof
Sanhua
Commercial
Refrigeration
Invention patent PRC 201980045089.4
45. Gas and liquid
separation device
the Company Invention patent PRC 201710992920.X
46. Heat exchanger and
its processing method
Sanhua Micro
Channel Heat
Exchanger
Invention patent PRC 202010481352.9
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-15 –


--- page 645 ---
No. Patent Patent Owner Patent category
Place of
Registration Patent number
47. The heat exchange
assembly and the heat
exchange system with
the heat exchange
component
Sanhua Micro
Channel Heat
Exchanger
Invention patent PRC 202010665060.0
48. Plate heat exchanger the Company Invention patent PRC 202010982825.3
49. An electric valve the Company Invention patent PRC 202110176835.2
50. Fluid control
components and their
manufacturing
methods
Sanhua
Automotive
Components
Invention patent PRC 202110345642.5
51. A connection device and
an integrated
assembly
Sanhua
Automotive
Components
Invention patent PRC 202110409751.9
52. A connection device and
an integrated
assembly
Sanhua
Automotive
Components
Invention patent PRC 202110482766.8
53. An electric valve the Company Invention patent PRC 202111307370.6
54. Electronic expansion
valve and its
fabrication method
Sanhua
Commercial
Refrigeration
Invention patent PRC 201310304567.3
55. An electric valve and a
heat exchanger
assembly having the
electric valve
the Company Invention patent PRC 201711181362.5
56. Oil pump the Company Invention patent PRC 201910529395.7
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-16 –


--- page 646 ---
(c) Software Copyrights
As of the Latest Practicable Date, our Group had registered the
following software copyrights which we consider to be material to our
business:
No. Software name
Place of
Registration Registered owner
1. Sanhua Electronic Expansion Valve
Control Software with Current
Holding Function V1.0
PRC Sanhua Automotive
Components
2. Sanhua Three-Phase Motor Water Pump
Control Software V1.0
PRC Sanhua Automotive
Components
3. Sanhua Water Valve Control Software
V1.0
PRC Sanhua Automotive
Components
4. Sanhua Electronic Expansion Valve
Control Software V1.0
PRC Sanhua Automotive
Components
5. Sanhua Single-Phase Motor Water Pump
Control Software V1.3.0
PRC Sanhua Automotive
Components
6. Sanhua Electronic Valve Control
Software V1.0
PRC Sanhua Automotive
Components
7. Sanhua Electronic Pump A6 Control
Software V1.0
PRC Sanhua Automotive
Components
8. Sanhua Electronic Valve A5 Control
Software V1.0
PRC Sanhua Automotive
Components
9. Sanhua Electronic Valve A2 Control
Software V1.0
PRC Sanhua Automotive
Components
10. Sanhua Electronic Valve A3 Control
Software V1.0
PRC Sanhua Automotive
Components
11. Sanhua Electronic Valve A4 Control
Software V1.0
PRC Sanhua Automotive
Components
12. Sanhua Electronic Pump A7 Control
Software V1.0
PRC Sanhua Automotive
Components
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-17 –


--- page 647 ---
No. Software name
Place of
Registration Registered owner
13. Sanhua Electronic Pump A9 Control
Software V1.0
PRC Sanhua Automotive
Components
14. Sanhua Electronic Pump A5 Control
Software V1.0
PRC Sanhua Automotive
Components
15. Sanhua Electronic Pump A8 Control
Software V1.0
PRC Sanhua Automotive
Components
16. Sanhua Electronic Pump A10 Control
Software V1.0
PRC Sanhua Automotive
Components
17. Sanhua Electronic Pump A3 Control
Software V1.0
PRC Sanhua Automotive
Components
18. Sanhua Electronic Pump A2 Control
Software V1.0
PRC Sanhua Automotive
Components
19. Sanhua Electronic Valve A7 Control
Software V1.0
PRC Sanhua Automotive
Components
20. Sanhua Electronic Valve A6 Control
Software V1.0
PRC Sanhua Automotive
Components
21. Sanhua Domain Controller A1 Control
Software V1.0
PRC Sanhua Automotive
Components
22. Server Automatic Detection and
Connection PLC Application Software
V1.0
PRC Sanhua Automotive
Components
23. SEC Series Electronic Expansion Valve
Controller System V1.0
PRC Sanhua Commercial
Refrigeration
24. Wuhu Sanhua Automatic Production
Control System V1.0
PRC Wuhu Sanhua
Auto-Control
25. Workshop Management System
Based on U9 V1.0
PRC Sanhua Micro Channel
Heat Exchanger
26. Hangzhou WMS Android System
Based on SAP V1.0
PRC Sanhua Micro Channel
Heat Exchanger
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-18 –


--- page 648 ---
No. Software name
Place of
Registration Registered owner
27. WMS Android System Based on U9
System V1.0
PRC Sanhua Micro Channel
Heat Exchanger
28. Workshop Management System
Based on SAP (B1) V1.0
PRC Sanhua Micro Channel
Heat Exchanger
29. Automated Master Data Maintenance
System Based on SAP V1.0
PRC Sanhua Micro Channel
Heat Exchanger
(d) Domain Name
As of the Latest Practicable Date, our Group had registered the
following domain names which we consider to be or may be material to our
business:
No Registered owner Domain name
1 the Company zjshc.com
2 the Company sanhuashop.com
3 Sanhua Automotive Components sanhuaautomotive.com
4 Sanhua Micro Channel Heat
Exchanger
sanhuamc.com
3. FURTHER INFORMATION ABOUT OUR DIRECTORS AND SUPERVISORS
A. Particulars of Directors’ and Supervisors’ Service Contracts and
Appointment Letters
We have entered into a service contract or appointment letter with each of the
Directors and Supervisors. The principal particulars of these service contracts and
appointment letters comprise (a) the term of the service; (b) subject to termination in
accordance with their respective term; and (c) a dispute resolution provision. The
service contracts and appointment letters may be renewed in accordance with our
Articles of Association and the applicable laws, rules and regulations from time to
time.
Save as disclosed above, none of the Directors or Supervisors has or is
proposed to have a service contract with any member of our Group (other than
contracts expiring or determinable by the relevant employer within one year
without the payment of compensation (other than statutory compensation)).
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-19 –


--- page 649 ---
B. Remuneration of Directors and Supervisors
Save as disclosed in the sections headed “Directors, Supervisors and Senior
Management” and in the “Appendix I — Accountant’s Report” in this prospectus,
no Director or Supervisor received other remuneration or benefits in kind from our
Company in respect of each of the three financial years ended December 31, 2022,
2023 and 2024.
C. Disclosure of Interests
Save as disclosed below, immediately following the completion of the Global
Offering and assuming that the Offer Size Adjustment Option is not exercised and
no new Shares are issued under the Over-allotment Option, and no other changes
are made to the issued share capital of our Company between the Latest Practicable
Date and Listing, none of our Directors or Supervisors has any interest and/or short
position in the Shares, underlying Shares and debentures of our Company or our
associated corporations (within the meaning of Part XV of the SFO) which will be
required to be notified to our Company and the Stock Exchange pursuant to
Divisions 7 and 8 of Part XV of the SFO (including interest or short position which
they were taken or deemed to have under such provisions of the SFO) or which will
be required, pursuant to section 352 of the SFO, to be entered in the register referred
to therein, or which will be required, pursuant to the Model Code for Securities
Transactions by Directors of Listed Issuers as set out in Appendix C3 to the Listing
Rules to be notified to our Company, once the H Shares are listed on the Hong Kong
Stock Exchange.
(i) Interest in Shares of our Company
Name of Director or
Supervisor Position
Shares to be
held after the
Global Offering Nature of interest
Number of
Shares
Approximate %
interest in
Shares of our
Company
immediately
after the Global
Offering
(1)
Mr. Zhang Yabo Executive Director,
Chairman of the
Board and Chief
Executive Officer
A Shares Beneficial Owner
and Interest in
controlled
corporation
(1)
1,668,070,478 (1) 40.76%
Mr. Wang Dayong Executive Director
and President
A Shares Beneficial Owner 352,562 0.0086%
Mr. Ni Xiaoming Executive Director A Shares Beneficial Owner 325,062 0.0079%
Mr. Chen Yuzhong Executive Director
and Chief Engineer
A Shares Beneficial Owner 416,750 0.01%
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-20 –


--- page 650 ---
Name of Director or
Supervisor Position
Shares to be
held after the
Global Offering Nature of interest
Number of
Shares
Approximate %
interest in
Shares of our
Company
immediately
after the Global
Offering
(1)
Mr. Zhang Shaobo Non-executive
Director
A Shares Interest in
controlled
corporation and
held jointly
with other
persons
(1)
1,668,070,478 (1) 40.76%
Mr. Mo Yang Supervisor A Shares Beneficial Owner 14,568 0.0004%
Mr. Chen Xiaoming Employee Supervisor A Shares Beneficial Owner 11,100 0.0003%
Note:
(1) The 1,668,070,478 A Shares comprise 39,024,200 A Shares directly held by Mr.
Zhang Yabo, 1,629,046,278 A Shares held through Sanhua Holding (out of which,
155,103,526 A Shares held through Sanhua Green Energy were pledged and placed
in a security and trust account maintained in respect of the Sanhua Green Energy
Exchangeable Bonds, see “History and Corporate Structure — Exchangeable
Bonds Issued by Sanhua Green Energy”) and the 2,707,721 A Shares repurchased
by our Company as treasury shares as of the Latest Practicable Date. Mr. Zhang
Daocai, Mr. Zhang Yabo and Mr. Zhang Shaobo are parties acting in concert in
respect of their shareholding interests in the Company. Therefore, each of Mr.
Zhang Daocai, Mr. Zhang Yabo and Mr. Zhang Shaobo is deemed to be interested
in the interest of each other under the SFO. As of the Latest Practicable Date,
Sanhua Holding was held as to (i) 28.77% by Xinchang Huaqing Investment, which
was held as to 51% by Mr. Zhang Daocai, 6% by Ms. Yu Qingjuan, who is the
spouse of Mr. Zhang Daocai, 22% by Mr. Zhang Yabo, and 21% by Mr. Zhang
Shaobo, (ii) 11.78% by Mr. Zhang Yabo, (iii) 10.04% by Mr. Zhang Shaobo, (iv)
12.35% by Xinchang Huaxin Industrial, which was held as to 38.84% by Mr. Zhang
Yabo, and (v) 9.04% by Zhejiang Huateng Industrial, which was held as to 45.45%
by Mr. Zhang Shaobo. Therefore, the A Shares held by Sanhua Holding are deemed
to be held by Mr. Zhang Yabo and Mr. Zhang Shaobo.
(ii) Interest in our Associated Corporations
Name of Director or
Supervisor
Position in our
Company Nature of Interest
Approximate %
of Shareholding
Sanhua Holding
Mr. Zhang Yabo Executive Director,
Chairman of the
Board and Chief
Executive Officer
Beneficial Owner and
Interest held jointly
with other persons
(1)
71.98% (1)
Mr. Wang Dayong Executive Director and
President
Beneficial Owner 2.60%
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-21 –


--- page 651 ---
Name of Director or
Supervisor
Position in our
Company Nature of Interest
Approximate %
of Shareholding
Mr. Ren Jintu Non-executive
Director
Beneficial Owner 2.19%
Mr. Ni Xiaoming Executive Director Beneficial Owner 2.05%
Mr. Chen Yuzhong Executive Director and
Chief Engineer
Beneficial Owner 1.92%
Mr. Zhang Shaobo Non-executive
Director
Beneficial Owner and
Interest held jointly
with other persons
(1)
71.98% (1)
Ningbo Fuerda Smartech Co., Ltd. (ʮ̡ )
Mr. Wang Dayong Executive Director and
President
Beneficial Owner 0.46%
Mr. Ren Jintu Non-executive
Director
Beneficial Owner 0.69%
Mr. Ni Xiaoming Executive Director Beneficial Owner 0.14%
Mr. Chen Yuzhong Executive Director and
Chief Engineer
Beneficial Owner 0.40%
Mr. Zhang Shaobo Non-executive
Director
Beneficial Owner 5.70%
Mr. Zhao Yajun Supervisor and
Chairman of the
Supervisory
Committee
Beneficial Owner 0.05%
Note:
(1) Mr. Zhang Daocai, Mr. Zhang Yabo and Mr. Zhang Shaobo are parties acting in concert in respect of their
shareholding interests in the Company. Therefore, each of Mr. Zhang Daocai, Mr. Zhang Yabo and Mr.
Zhang Shaobo is deemed to be interested in the interest of each other under the SFO. As of the Latest
Practicable Date, Sanhua Holding was held as to (i) 28.77% by Xinchang Huaqing Investment, which was
held as to 51% by Mr. Zhang Daocai, 6% by Ms. Yu Qingjuan, who is the spouse of Mr. Zhang Daocai, 22%
by Mr. Zhang Yabo, and 21% by Mr. Zhang Shaobo, (ii) 11.78% by Mr. Zhang Yabo, (iii) 10.04% by Mr.
Zhang Shaobo, (iv) 12.35% by Xinchang Huaxin Industrial, which was held as to 38.84% by Mr. Zhang
Yabo, and (v) 9.04% by Zhejiang Huateng Industrial, which was held as to 45.45% by Mr. Zhang Shaobo.
Therefore, the A Shares held by Sanhua Holding are deemed to be held by Mr. Zhang Yabo and Mr. Zhang
Shaobo.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-22 –


--- page 652 ---
(iii) Interests of substantial shareholders in Members of Our Group
(Excluding Our Company)
As of the Latest Practicable Date, save as disclosed below, our Directors
are not aware of any other person (other than our Directors or Chief Executive
Officer of our Company) who will, immediately following completion of the
Global Offering, assuming that the Offer Size Adjustment Option is not
exercised and no new Shares are issued under the Over-allotment Option, and
no other changes are made to the issued share capital of our Company
between the Latest Practicable Date and Listing, have an interest or short
position in our Shares or underlying Shares which would fall to be disclosed
to us under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, will
be, directly or indirectly, interested in 10% or more of the issued voting shares
of any other member of our Group.
Member of our Group Name of substantial shareholder
Approximate
% held by the
substantial
shareholder
Suzhou Sanhua Air-conditioning
Components Co., Ltd.
(ʮ̡ )
Xinyi Enterprise Management Partnership
Enterprise (General Partnership) in
Xinchang County (ጤτूΆุ၍ଣ
ΥྫΆุ౷ஷΥྫ)
30%
Wuhan Sanhua Refrigeration
Components Co., Ltd.
(ʮ̡ )
Pan Xinjiang ( ᆙอϪ) 25%
Xinchang Runjin Enterprise Management
Partnership Enterprise (General
Partnership)Άุ၍ଣΥྫΆุ
౷ஷΥྫ
10%
Sanhua Refrigerating Parts Co., Ltd.
(ʮ̡ )
Wuhu Xinglianchen Trading Co., Ltd.
(ப΂ʮ̡ )
30%
Zhongshan Sanhua Air-Conditioner
Cooling Parts Co., Ltd.
(ʮ̡ )
Average Enterprise Management
Partnership Enterprise (General
Partnership) in Xinchang County
(ጤ̻ѩΆุ၍ଣΥྫΆุ౷ஷΥྫ)
40%
Shaoxing Shangyu Sanli Copper
Co., Ltd. ( ୗጳ̹ɪ໬ɧͭზุ
ʮ̡ )
Zhang Liusong (ؒݣ20%
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-23 –


--- page 653 ---
Member of our Group Name of substantial shareholder
Approximate
% held by the
substantial
shareholder
Xinchang County Sitong
Electromechanical Co., Ltd.
(ʮ̡ )
Xinchang County Sixin Enterprise
Management Partnership Enterprise
(General Partnership) (ጤ̬อΆุ၍
ଣΥྫΆุ౷ஷΥྫ)
12%
Zhejiang Sanhua Board Exchange
Technology Co., Ltd.
(ʮ̡ )
Su Jun ( ᘽᒺ) 30%
Zhejiang Sanhua Minshi Automotive
Parts Co., Ltd. (ઽྼӛԓ
ʮ̡ )
Minth Automotive Technology Research &
Development Co., Ltd.
(ʮ̡ )
49%
Zhejiang Shengtai Paper Co., Ltd.
(ʮ̡ )
Song Xiaobo (ت30%
D. Disclaimer
Save as disclosed in this section and the section headed “Business” in this
prospectus:
(i) none of our Directors or the Chief Executive Officer of our Company has
any interest or short position in the shares, underlying shares or
debentures of our Company or any of its associated corporation (within
the meaning of Part XV of the SFO) which will have to be notified to our
Company and the Hong Kong Stock Exchange pursuant to Divisions 7
and 8 of Part XV of the SFO or which will be required, pursuant to
section 352 of the SFO, to be entered in the register referred to therein, or
which will be required to be notified to our Company and the Hong
Kong Stock Exchange pursuant to the Model Code for Securities
Transactions by Directors of Listed Issuers once the H Shares are listed;
(ii) none of our Directors, Supervisors or any of the experts referred to
under the paragraph headed “— 5. Other Information — E.
Qualification of Experts” has any direct or indirect interest in the
promotion of our Company, or in any assets which have within the two
years immediately preceding the date of this prospectus been acquired
or disposed of by or leased to any member of our Group, or are
proposed to be acquired or disposed of by or leased to any member of
our Group;
(iii) none of our Directors or Supervisors is materially interested in any
contract or arrangement subsisting at the date of this prospectus which
is significant in relation to the business of our Group taken as a whole;
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-24 –


--- page 654 ---
(iv) none of our Directors or Supervisors is materially interested in any
contract or arrangement subsisting at the date of this prospectus which
is significant in relation to the business of our Group taken as a whole;
(v) none of our Directors or Supervisors has any existing or proposed
service contracts with any member of our Group (excluding contracts
expiring or determinable by the employer within one year without
payment of compensation (other than statutory compensation));
(vi) so far as is known to our Directors, no person (not being a Director or
Chief Executive Officer of our Company or any member of our Group)
will, immediately following the completion of the Global Offering, have
an interest or short position in the Shares or underlying Shares of our
Company which would fall to be disclosed to our Company under the
provisions of Divisions 2 and 3 of Part XV of SFO or be interested,
directly or indirectly, in 10% or more of the nominal value of any class of
share capital carrying rights to vote in all circumstances at general
meetings of any member of our Group; and
(vii) none of our Directors, Supervisors or their respective close associates
(as defined under the Listing Rules) or our Shareholders who are
interested in more than 5% of the issued share capital of our Company
has any interest in the five largest customers of our Group in each year
during the Track Record Period or the five largest suppliers of our
Group in each year during the Track Record Period.
4. OUR INCENTIVE SCHEMES
A. Restricted Share Incentive Schemes
The following is a summary of the principal terms of 2022 Restricted Share
Incentive Scheme and 2024 Restricted Share Incentive Scheme (collectively, the
“Restricted Share Incentive Schemes ”) which were outstanding as of the Latest
Practicable Date. No further Shares can be granted under the Restricted Share
Incentive Schemes after listing. The terms of Restricted Share Incentive Schemes are
not subject to the provisions of Chapter 17 of the Listing Rules as they do not
involve any grant of restricted Shares by our Company after our Listing. Save as
otherwise disclosed, the terms of each of the Restricted Share Incentive Schemes are
substantially similar and are summarized below.
(i) Purpose
The purpose of the Restricted Share Incentive Schemes is to improve our
Group’s corporate governance structure, establish and enhance the long-term
incentive mechanism of the Company, attract and retain talents, and
incentivize the Directors, senior management and other key employees to
achieve a sustained and healthy development of our Group in order to realize
our Group’s long-term objectives. The Restricted Share Incentive Schemes are
implemented under the premise of protecting shareholders’ interests and with
a principle of evaluating the benefits according to contribution.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-25 –


--- page 655 ---
(ii) Administration
The Restricted Share Incentive Schemes are subject to the approval of
the Shareholders’ meeting, administration of the Board and the supervision of
the Supervisory Committee and Independent Non-executive Directors of the
Company.
(iii) Participants
The participants of the Restricted Share Incentive Schemes include
Directors, senior management and other key personnels of our Group who
have significant contributions to the business operation and development of
the Group. The scope of participants excludes independent directors,
supervisors and shareholders or actual controller who individually or
collectively hold 5% or more of the shares of our Company and their spouse,
parents and children.
(iv) Source and maximum number of Shares
The Shares underlying the Restricted Share Incentive Schemes shall be
A Shares purchased by our Company from the secondary market. Each
restricted Share granted represents the right to purchase one A Share within
the agreed period at the grant price. The restricted Shares are subject to a
lock-up period and will only be unlocked upon fulfilling the unlocking
conditions stipulated. The maximum number of restricted Shares that can be
granted under each of the Restricted Shares Incentive Schemes are as follows:
Restricted Share Incentive Scheme
Total number of
restricted Shares
granted
Number of
grantees
2022 Restricted Share Incentive Scheme 17,585,000 1,366
2024 Restricted Share Incentive Scheme 24,910,000 1,933
(v) Date of grant and term of the Scheme
The date on which the restricted Shares are granted shall be determined
by the Board within 60 days after the date of approval of the Restricted Share
Incentive Schemes by the shareholders’ meeting. The grant of restricted
Shares shall be approved by the Board, registered and announced within 60
days after the approval of the Restricted Share Incentive Schemes by the
Shareholders’ meeting. The Restricted Share Incentive Schemes shall be
effective from the date of completion of the grant of restricted Shares under
the Schemes up to the date when the restricted Shares granted under the
Schemes are no longer under any lock-ups or have been repurchased and
canceled, provided that the term of the Schemes shall not each exceed 48
months.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-26 –


--- page 656 ---
(vi) Lock-up for Directors and the senior management team
If the grantee is a Director or a senior management of our Company who
terminates the employment before expiry of the term, during the period of the
original term of employment, the Shares to be transferred in each year shall
not exceed 25% of the total Shares he or she holds. No share held by such
Director or senior management can be transferred within six months after
termination of his or her employment. If the grantee is a Director or senior
management of our Company, income gained through sale of Shares within
six months of the purchase or purchase of Shares within six months of the sale
shall belong to our Company and will be forfeited by the Board. If there is any
change in the applicable laws and regulations on the foregoing lock-up
requirements, the grantee shall comply with the amended laws and
regulations.
(vii) Conditions to the grant of restricted Shares
The restricted Shares under the Restricted Share Incentive Schemes will
only be granted to selected participants when the following conditions are
fulfilled:
(a) With respect to our Company, none of the following
circumstances having occurred:
(1) An audit report with an adverse opinion or a disclaimer of
opinion has been issued by the reporting accountant with
respect to our Company’s accountant’s report for the most
recent fiscal year;
(2) An audit report with an adverse opinion or a disclaimer of
opinion has been issued by the reporting accountant with
respect to the internal control report contained in
accountant’s report for the most recent fiscal year;
(3) The Company has not distributed dividends in accordance
with the laws and regulations, the Articles of Association or
the public commitment within the last 36 months after its
listing;
(4) Applicable laws and regulations prohibit the
implementation of any share incentive scheme; or
(5) Any other circumstances determined by the CSRC.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-27 –


--- page 657 ---
(b) With respect to a grantee, none of the following circumstances
having occurred:
(1) The grantee has been regarded as an inappropriate person
by the relevant stock exchange within the last 12 months;
(2) The grantee has been regarded as an inappropriate person
by the CSRC or its local office within the last 12 months;
(3) The grantee has been punished or prohibited from entering
into the securities market by the CSRC or its local office
within the last 12 months;
(4) The grantee is not qualified to serve as a director or senior
management according to the PRC Company Law;
(5) The grantee is prohibited from participating in any
incentive plan of listed companies according to applicable
laws and regulations; or
(6) Any other circumstances determined by the CSRC.
(viii) Unlocking of restricted Shares
The lock-up period for restricted Shares commences from date of grant
of restricted Shares to the grantee. The lock-up periods of the restricted Shares
are divided into three schedules: 12 months, 24 months and 36 months.
During the lock-up period, the restricted Shares granted to the grantee shall
not be transferred, used as guarantee or for repayment of debt. In addition,
the restricted Shares will only be unlocked when (i) the conditions set out
under paragraph (vii) above are fulfilled; and (ii) the annual assessment and
performance targets as set out under the Schemes are achieved.
The restricted Shares will be unlocked after the lock-up period in
accordance with the unlocking schedule as set out under the scheme during a
period of 12 to 36 months as follows:
(a) unlocked in tranche of 30% in each of the three unlocking periods
that occur between the first trading date after the 12-month
anniversary from the date of grant and the last trading day up to
the 24-month anniversary of the date of grant;
(b) unlocked in tranche of 30% in each of the three unlocking periods
that occur between the first trading date after the 24-month
anniversary from the date of grant and the last trading day up to
the 36-month anniversary of the date of grant; or
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-28 –


--- page 658 ---
(c) unlocked in tranche of 40% in each of the three unlocking periods
that occur between the first trading date after the 36-month
anniversary from the date of grant and the last trading day up to
the 48-month anniversary of the date of grant.
The grantees shall pay the grant price upon fulfillment of all the
conditions of the restricted Shares to purchase the A Shares from our
Company. The grant price of each restricted Shares under the 2022 Restricted
Share Incentive Scheme shall not be lower than the higher of (1) 50% of the
average trading price of the A Shares on the trading date before the
announcement of the draft scheme; and (2) 50% of the average trading price of
the A Shares during the 20 trading dates before the announcement of the draft
2022 Restricted Share Incentive Scheme; the grant price of each restricted
Shares under the 2024 Restricted Share Incentive Scheme shall not be lower
than the higher of (1) 50% of the average trading price of the A Shares on the
trading date before the announcement of the draft scheme; and (2) 50% of the
average trading price of the A Shares during the 60 trading dates before the
announcement of the draft 2024 Restricted Share Incentive Scheme.
The number of restricted Shares granted and/or the grant prices will be
adjusted upon the occurrence of certain events, including payment of
dividend, rights issue, increase in the share capital by way of capitalization of
capital reserves, issue of bonus shares, subdivision of shares and issue of new
shares. The Company may repurchase the restricted Shares upon occurrence
of certain events as set out in the Schemes, including but not limited to the
change of the positions of the grantee or termination of employment. Subject
to the price adjustment mechanisms and other terms and conditions as set out
under the Schemes, the price payable by our Company for the repurchase of
restricted Shares shall be equivalent to the grant price of the relevant
restricted Shares.
(ix) Dividend and voting rights
Upon transfer of the A Shares by our Company, the grantees of restricted
Shares will be entitled to exercise the right of Shareholders, including but not
limited to the right to receive dividends and voting rights. Before the
unlocking of the restricted Shares, the restricted Shares (including the right to
receive dividends) shall be locked and such restricted Shares shall not be
transferred or used to guarantee or repay debts.
(x) Outstanding restricted Shares
As of the Latest Practicable Date, the number of restricted Shares
granted under the Restricted Share Incentive Schemes was 31,780,000,
representing approximately 0.85% of the issued Shares immediately following
the completion of the Listing (assuming no changes to our issued and
outstanding shares between the Latest Practicable Date and the Listing).
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-29 –


--- page 659 ---
The following table sets forth the number of outstanding restricted
Shares granted to Directors and senior management under the Restricted
Share Incentive Schemes as of the Latest Practicable Date:
Name of grantee Position Date of grant
Number of
outstanding
restricted
Shares
Grant
Price Lock-up period
Approximate
percentage of
issued Shares
immediately after
completion of the
Global Offering (1)
Mr. Wang Dayong Executive Director
and President
May 31, 2022 32,000 10.00 30%, 30% and 40% of the share
awards granted under the
Restricted Share Incentive
Schemes will be released from
lock-up in each of the three
periods that occur between the
first trading date after the
12-month anniversary from the
date of grant and the last trading
day up to the 48-month
anniversary of the date of grant,
respectively
0.0008%
June 3, 2024 100,000 11.75 0.0024%
Mr. Ni Xiaoming Executive Director May 31, 2022 28,000 10.00 0.0007%
June 3, 2024 80,000 11.75 0.0020%
Mr. Chen Yuzhong Executive Director
and Chief Engineer
May 31,2022 32,000 10.00 0.0008%
May 13, 2024 80,000 11.75 0.0020%
Mr. Hu Kaicheng Vice President and
Board Secretary
May 31, 2022 32,000 10.00 0.0008%
June 3, 2024 80,000 11.75 0.0020%
Mr. Yu Yingkui Vice President and
Chief Financial
Officer
May 31, 2022 32,000 10.00 0.0008%
June 3, 2024 80,000 11.75 0.0020%
Note:
(1) The calculation is based on the assumption that the Offer Size Adjustment Option
is not exercised and no new Shares are issued under the Over-allotment Option
and no other changes are made to the issued share capital of our Company
between the Latest Practicable Date and Listing.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-30 –


--- page 660 ---
The table below sets forth the details of outstanding restricted Shares
granted to connected persons of the Company and other grantees under the
Restricted Share Incentive Schemes as of the Latest Practicable Date:
Restricted Share
Incentive Scheme Position Date of grant
Number of
outstanding
restricted
Shares
Grant
Price Lock-up period
Approximate
percentage of
issued Shares
immediately after
completion of the
Global Offering (1)
2022 Restricted
Share Incentive
Scheme
connected persons May 31, 2022 250,000 10.00 30%, 30% and 40% of the share
awards granted under the
Restricted Share Incentive
Schemes will be released from
lock-up in each of the three
periods that occur between the
first trading date after the
12-month anniversary from the
date of grant and the last
trading day up to the 48-month
anniversary of the date of
grant, respectively
0.0061%
other grantees 6,628,000 0.1619%
2024 Restricted
Share Incentive
Scheme
connected persons May 13 and
June 3, 2024
690,000 11.75 0.0169%
other grantees 23,800,000 0.5815%
Note:
(1) The calculation is based on the assumption that the Offer Size Adjustment Option
is not exercised and no new Shares are issued under the Over-allotment Option
and no other changes are made to the issued share capital of our Company
between the Latest Practicable Date and Listing.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-31 –


--- page 661 ---
B. Stock Appreciation Right Incentive Plan
The Company adopted the 2022 Stock Appreciation Right Incentive Plan and
2024 Stock Appreciation Right Incentive Plan, (collectively, the “ StockAppreciation
Right Incentive Plans ”) which were outstanding as of the Latest Practicable Date.
Given the Stock Appreciation Right Incentive Plans does not involve issue of new
Shares by the Company and is not funded by any existing Shares, the terms of the
Stock Appreciation Right Incentive Plans are not subject to the provisions of
Chapter 17 of the Listing Rules.
(i) Participants of the plans
The participants of the Stock Appreciation Right Incentive Plans include
key talents of the Company who make important contribution to the operation
and development of the Company and key talents who are PRC citizens
employed by the Group and work outside the PRC. The scope of participants
excludes independent directors, supervisors and shareholders or actual
controller who individually or collectively hold 5% or more of the shares of
our Company and their spouse, parents and children. All participants must be
engaged or have entered into employment contracts with the Group when the
stock appreciation rights were granted and during the appraisal period.
(ii) Source of shares and participants’ interest
The Stock Appreciation Right Incentive Plans do not involve actual
Shares of the Company. Instead, they anchor at the Shares as virtual stock
targets.
(iii) Term of the plans
Each Stock Appreciation Right Incentive Plan is valid from the date of
completion of the grant of stock appreciation rights under the Stock
Appreciation Right Incentive Plans up to the date when all the stock
appreciation rights are vested or deregistered, provided that the term of each
Stock Appreciation Right Incentive Plans shall not exceed 48 months.
(iv) Administration of the scheme
The Stock Appreciation Right Incentive Plans are subject to the approval
of the Shareholders’ meeting, administration of the Board, and supervision of
the Supervisory Committee. Independent Non-executive Directors of the
Company should seek from all shareholders proxy voting rights.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-32 –


--- page 662 ---
(v) Waiting period and exercising period of the stock appreciation rights
The stock appreciation rights held by the Stock Appreciation Right
Incentive Plans are subject to a waiting period of 12 months, commencing
from date of grant of the stock appreciation rights and the date when the
rights can be vested. After the waiting period, subject to the exercising of
rights during 12 months, 24 months, and 36 months, respectively, and the
attainment of performance targets and personal evaluation, the participants’
entitlement to the corresponding portion of the stock appreciation rights will
be exercised in three tranches in the proportion of 30%, 30% and 40%
respectively. The vesting price of each stock appreciation right under 2022 and
2024 Stock Appreciation Right Incentive Plan equals the 2022 and 2024
Restricted Shares Incentive Scheme, respectively. When vesting, the Company
will pay for each stock appreciation right the difference between the price of
each Share of the day of vesting and the vesting price.
(vi) Total number of stock appreciation rights held by the Stock
Appreciation Right Incentive Plans
As of the Latest Practicable Date, the total number of stock appreciation
rights granted by the Stock Appreciation Right Incentive Plans was 742,000,
equals to approximately 0.02% of the issued Shares immediately following the
completion of the Listing (assuming no changes to our issued Shares between
the Latest Practicable Date and the Listing Date).
The table below sets forth the details of the stock appreciation rights
held by the Stock Appreciation Right Incentive Plans as of the Latest
Practicable Date:
Name of Stock Ownership
Scheme
Number of
Grantees
Number of stock
appreciation
rights as of the
Latest Practicable
Date
Approximate
percentage of
issued Shares as
of the Latest
Practicable Date
Approximate
percentage of
issued Shares
immediately after
completion of the
Global
Offering (1)
2022 Stock Appreciation
Right Incentive Plan 38 182,000 0.005% 0.004%
2024 Stock Appreciation
Right Incentive Plan 47 560,000 0.015% 0.014%
Note:
(1) The calculation is based on the assumption that the Offer Size Adjustment Option
is not exercised and no new Shares are issued under the Over-allotment Option
and no other changes are made to the issued share capital of our Company
between the Latest Practicable Date and Listing.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-33 –


--- page 663 ---
5. OTHER INFORMATION
A. Estate Duty
Our Directors have been advised that no material liability for estate duty
under PRC laws is likely to fall upon any member of our Group.
B. Litigation
Save as disclosed in the sections headed “Business” and “Financial
Information” in this prospectus, no member of our Group is engaged in any
litigation, arbitration or claim of material importance, and no litigation, arbitration
or claim of material importance is known to our Directors to be pending or
threatened by or against our Company that would have a material adverse effect on
our Company’s results of operations or financial condition.
C. Joint Sponsors
The Joint Sponsors have made an application on behalf of our Company to the
Listing Committee for listing of, and permission to deal in, the H Shares of our
Company. All necessary arrangements have been made enabling the H Shares to be
admitted into CCASS.
Each of Joint Sponsors satisfies the independence criteria applicable to
sponsors set out in Rule 3A.07 of the Listing Rules.
Pursuant to the engagement letter entered into between our Company and the
Joint Sponsors, we have agreed to pay each Joint Sponsor a fee of US$400,000 to act
as a sponsor of our Company in connection with the proposed listing on the Stock
Exchange.
D. Compliance Adviser
Our Company has appointed Huatai Financial Holdings (Hong Kong) Limited
as our compliance adviser in compliance with Rules 3A.19 of the Listing Rules.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-34 –


--- page 664 ---
E. Qualification of Experts
The qualification of the experts, as defined under the Listing Rules, who have
given opinions in this prospectus are as follows:
Name Qualification
China International Capital
Corporation Hong Kong
Securities Limited
Licensed to conduct type 1 (dealing in
securities), type 2 (dealing in futures
contracts), type 4 (advising on securities),
type 5 (advising on futures contracts) and
type 6 (advising on corporate finance)
regulated activities as defined under the SFO
Huatai Financial Holdings
(Hong Kong) Limited
A licensed corporation under the SFO for
type 1 (dealing in securities), type 2 (dealing
in futures contracts), type 4 (advising on
securities), type 6 (advising on corporate
finance), type 7 (providing automated
trading services) and type 9 (asset
management) of the regulated activities as
defined under the SFO
T&C Law Firm Legal adviser to our Company as to PRC
laws
Confucius International CPA
Limited
Certified Public Accountants under
Professional Accountants Ordinance
(Chapter 50 of the Laws of Hong Kong) and
Registered Public Interest Entity Auditor
under Accounting and Financial Reporting
Council Ordinance (Chapter 588 of the Laws
of Hong Kong)
Frost & Sullivan (Beijing)
Inc., Shanghai Branch Co.
Independent industry consultant
F. Consents of Experts
Each of the experts as referred to in “— 5. Other Information — E.
Qualification of Experts” in this Appendix has given and has not withdrawn its
consent to the issue of this prospectus with the inclusion of its view, report and/or
letter and/or legal opinion (as the case may be) and references to its name included
herein in the form and context in which it respectively appears.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-35 –


--- page 665 ---
None of the experts named above has any shareholding interest in any
member of our Group or the right (whether legally enforceable or not) to subscribe
for or to nominate persons to subscribe for securities in any member of our Group.
G. Binding Effect
This prospectus shall have the effect, if an application is made in pursuance
hereof, of rendering all persons concerned bound by all the provisions (other than
the penal provisions) of sections 44A and 44B of the Companies (Winding Up and
Miscellaneous Provisions) Ordinance so far as applicable.
H. No Material Adverse Change
Our Directors confirm that, there has been no material adverse change in our
business, financial condition and results of operations since December 31, 2024,
being the latest balance sheet date of our consolidated financial statements as set out
in the Accountant’s Report in Appendix I to this prospectus, and up to the date of
this prospectus.
I. Taxation of Holders of H Shares
The sale, purchase and transfer of H Shares are subject to Hong Kong stamp
duty if such sale, purchase and transfer are affected on the H Share register of
members of our Company, including in circumstances where such transactions are
effected on the Stock Exchange. The current rate of Hong Kong stamp duty for such
sale, purchase and transfer on each of the purchaser and the seller is 0.1% of the
consideration or, if higher, the fair value of the H Shares being sold or transferred.
J. Restriction on Share Repurchases
For details of the restrictions on share repurchases by our Company, please
refer to “Increase, Decrease, Repurchase and Transfer of Shares” in Appendix III to
this prospectus.
K. Preliminary Expenses
We have not incurred any material preliminary expenses.
L. Promoters
Within two years immediately preceding the date of this prospectus, no cash,
securities or other benefit has been paid, allotted or given nor is any proposed to be
paid, allotted or given to any promoters in connection with the Global Offering and
the related transactions described in this prospectus.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-36 –


--- page 666 ---
M. Related Party Transactions
Our Group entered into the related party transactions within the two years
immediately preceding the date of this prospectus as mentioned in “Appendix I —
Accountant’s Report — 37. Related Party Transactions.”
N. Miscellaneous
Save as disclosed in this section and in the section headed “Financial
Information” in this prospectus:
(i) within the two years immediately preceding the date of this prospectus:
(a) no share or loan capital of our Company or any of our subsidiaries
had been issued or agreed to be issued or proposed to be fully or
partly paid either for cash or a consideration other than cash;
(b) no share or loan capital of our Company or any of our subsidiaries
had been under option or is agreed conditionally or
unconditionally to be put under option;
(c) no commissions, discounts, brokerages or other special terms had
been granted or agreed to be granted in connection with the issue
or sale of any share or loan capital of our Company or any of our
subsidiaries; and
(d) no commission had been paid or payable for subscription,
agreeing to subscribe, procuring subscription or agreeing to
procure subscription of any share in our Company or any of our
subsidiaries;
(ii) there are no founder, management or deferred shares, convertible debt
securities nor any debentures in our Company or any of our
subsidiaries;
(iii) there has not been any interruption in the business of our Group which
may have or has had a significant effect on the financial position of our
Group in the 12 months preceding the date of this prospectus;
(iv) our Company has no outstanding convertible debt securities or
debentures;
(v) there is no arrangement under which future dividends are waived or
agreed to be waived;
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-37 –


--- page 667 ---
(vi) save for the A Shares of our Company that are listed on the Shenzhen
Stock Exchange, and save for the H Shares to be issued in connection
with the Global Offering, none of the equity and debt securities of our
Company, if any, is listed or dealt with in any other stock exchange nor
is any listing or permission to deal being or proposed to be sought; and
(vii) all necessary arrangements have been made to enable the H shares to be
admitted into CCASS for clearing and settlement.
O. Bilingual Document
The English language and Chinese language versions of this prospectus are
being published separately in reliance upon the exemption provided by section 4 of
the Companies (Exemption of Companies and Prospectuses from Compliance with
Provisions) Notice (Chapter 32L of the Laws of Hong Kong).
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-38 –


--- page 668 ---
A. DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES IN HONG
KONG
The documents attached to the copy of this prospectus delivered to the Registrar of
Companies in Hong Kong for registration were:
(a) a copy of each of the material contracts referred to in “Appendix IV —
Statutory and General Information — 2. Further Information about our
Business — A. Summary of Our Material Contracts” in this prospectus; and
(b) the written consents referred to in the section headed “Appendix IV —
Statutory and General Information — 5. Other Information — F. Consents of
Experts” in this prospectus.
B. DOCUMENTS AVAILABLE ON DISPLAY
Electronic copies of the following documents will be available on display on the
website of our Company at https://zjshc.com and on the website of the Hong Kong Stock
Exchange at www.hkexnews.hk during a period of 14 days from the date of this
prospectus:
(a) the Articles of Association;
(b) the accountant’s report from Confucius International CPA Limited, the text of
which is set out in Appendix I to this prospectus;
(c) the audited consolidated financial statements of our Group for the years
ended December 31, 2022, 2023 and 2024;
(d) the report from Confucius International CPA Limited on review of the interim
financial information of our Group for the three months ended 31 March 2025,
the text of which is set out in the section headed “Unaudited Interim
Condensed Consolidated Financial Information” in Appendix IA to this
prospectus;
(e) the report from Confucius International CPA Limited on the unaudited pro
forma financial information of our Group, the text of which is set out in the
section headed “Appendix II — Unaudited Pro Forma Financial Information”
in this prospectus;
(f) the industry report issued by Frost & Sullivan referred to in “Industry
Overview” in this prospectus;
(g) the PRC legal opinions issued by T&C Law Firm in respect of certain aspects
and property interests in Mainland China of our Group;
APPENDIX V DOCUMENTS DELIVERED TO THE REGISTRAR OF
COMPANIES AND AVAILABLE ON DISPLAY
–V - 1–


--- page 669 ---
(h) the material contracts referred to in “Appendix IV — Statutory and General
Information — 2. Further Information about our Business — A. Summary of
Our Material Contracts” in this prospectus;
(i) the written consents referred to in “Appendix IV — Statutory and General
Information — 5. Other Information — F. Consents of Experts” in this
prospectus;
(j) the service contracts or letters of appointment referred to in the section
headed “Appendix IV — Statutory and General Information — 3. Further
Information About Our Directors and Supervisors — A. Particulars of
Directors’ and Supervisors’ Service Contracts and Appointment Letters” in
this prospectus; and
(k) the PRC Company Law, PRC Securities Law, and the Trial Measures for the
Administration Related to the Overseas Securities Offering and Listing by
Domestic Companies, together with unofficial English translations thereof.
APPENDIX V DOCUMENTS DELIVERED TO THE REGISTRAR OF
COMPANIES AND AVAILABLE ON DISPLAY
–V - 2–


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